FIRST DIVISION

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

COMMISSIONER OF INTERNAL REVENUE, petitioner, 

vs.

CEBU PORTLAND CEMENT COMPANY and COURT OF TAX APPEALS, respondents.

CRUZ, J.:
By virtue of a decision of the Court of Tax Appeals rendered on June 21, 1961, as modified on
appeal by the Supreme Court on February 27, 1965, the Commissioner of Internal Revenue was
ordered to refund to the Cebu Portland Cement Company the amount of P 359,408.98, representing
overpayments of ad valorem taxes on cement produced and sold by it after October 1957. 1
On March 28, 1968, following denial of motions for reconsideration filed by both the petitioner and
the private respondent, the latter moved for a writ of execution to enforce the said judgment . 2
The motion was opposed by the petitioner on the ground that the private respondent had an
outstanding sales tax liability to which the judgment debt had already been credited. In fact, it was
stressed, there was still a balance owing on the sales taxes in the amount of P 4,789,279.85 plus
28% surcharge. 3
On April 22, 1968, the Court of Tax Appeals * granted the motion, 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. 4

In his petition to review the said resolution, the Commissioner of Internal Revenue claims that the
refund should be charged against the tax deficiency of the private respondent on the sales of cement
under Section 186 of the Tax Code. His position is that cement is a manufactured and not a mineral
product and therefore not exempt from sales taxes. He adds that enforcement of the said tax
deficiency was properly effected through his power of distraint of personal property under Sections
316 and 318 5 of the said Code and, moreover, the collection of any national internal revenue tax
may not be enjoined under Section 305, 6 subject only to the exception prescribed in Rep. Act No.
1125. 7 This is not applicable to the instant case. The petitioner also denies that the sales tax
assessments have already prescribed because the prescriptive period should be counted from the
filing of the sales tax returns, which had not yet been done by the private respondent.
For its part, the private respondent disclaims liability for the sales taxes, on the ground that cement
is not a manufactured product but a mineral product. 8 As such, it was exempted from sales taxes
under Section 188 of the Tax Code after the effectivity of Rep. Act No. 1299 on June 16, 1955, in
accordance with Cebu Portland Cement Co. v. Collector of Internal Revenue, 9 decided in 1968.
Here Justice Eugenio Angeles declared that "before the effectivity of Rep. Act No. 1299, amending
Section 246 of the National Internal Revenue Code, cement was taxable as a manufactured product
under Section 186, in connection with Section 194(4) of the said Code," thereby implying that it was
not considered a manufactured product afterwards. Also, the alleged sales tax deficiency could not
as yet be enforced against it because the tax assessment was not yet final, the same being still
under protest and still to be definitely resolved on the merits. Besides, the assessment had already
prescribed, not having been made within the reglementary five-year period from the filing of the tax
returns. 10
Our ruling is that the sales tax was properly imposed upon the private respondent for the reason that
cement has always been considered a manufactured product and not a mineral product. This matter
was extensively discussed and categorically resolved in Commissioner of Internal Revenue v.
Republic Cement Corporation, 11 decided on August 10, 1983, where Justice Efren L. Plana, after an exhaustive review of the
pertinent cases, declared for a unanimous Court:

From all the foregoing cases, it is clear that cement qua cement was never
considered as a mineral product within the meaning of Section 246 of the Tax Code,
notwithstanding that at least 80% of its components are minerals, for the simple
 reason that cement is the product of a manufacturing process and is no longer the
mineral product contemplated in the Tax Code (i.e.; minerals subjected to simple
treatments) for the purpose of imposing the ad valorem tax.
What has apparently encouraged the herein respondents to maintain their present
posture is the case of Cebu Portland Cement Co. v. Collector of Internal Revenue,
L-20563, Oct. 29, 1968 (28 SCRA 789) penned by Justice Eugenio Angeles. For
some portions of that decision give the impression that Republic Act No. 1299, which
amended Section 246, reclassified cement as a mineral product that was not subject
to sales tax. ...
xxx xxx xxx
After a careful study of the foregoing, we conclude that reliance on the decision
penned by Justice Angeles is misplaced. The said decision is no authority for the
proposition that after the enactment of Republic Act No. 1299 in 1955 (defining
mineral product as things with at least 80% mineral content), cement became a
'mineral product," as distinguished from a "manufactured product," and therefore
ceased to be subject to sales tax. It was not necessary for the Court to so rule. It was
enough for the Court to say in effect that even assuming Republic Act No. 1299 had
reclassified cement was a mineral product, the reclassification could not be given
retrospective application (so as to justify the refund of sales taxes paid before
Republic Act 1299 was adopted) because laws operate prospectively only, unless the
legislative intent to the contrary is manifest, which was not so in the case of Republic
Act 1266. [The situation would have been different if the Court instead had ruled in
favor of refund, in which case it would have been absolutely necessary (1) to make
an unconditional ruling that Republic Act 1299 re-classified cement as a mineral
product (not subject to sales tax), and (2) to declare the law retroactive, as a basis
for granting refund of sales tax paid before Republic Act 1299.]
In any event, we overrule the CEPOC decision of October 29, 1968 (G.R. No.
L-20563) insofar as its pronouncements or any implication therefrom conflict with the
instant decision.
The above views were reiterated in the resolution 12 denying reconsideration of the said decision, thus:
The nature of cement as a "manufactured product" (rather than a "mineral product")
is well-settled. The issue has repeatedly presented itself as a threshold question for
determining the basis for computing the ad valorem mining tax to be paid by cement
Companies. No pronouncement was made in these cases that as a "manufactured
product" cement is subject to sales tax because this was not at issue.
The decision sought to be reconsidered here referred to the legislative history of
Republic Act No. 1299 which introduced a definition of the terms "mineral" and
"mineral products" in Sec. 246 of the Tax Code. Given the legislative intent, the
holding in the CEPOC case (G.R. No. L-20563) that cement was subject to sales tax
prior to the effectivity f Republic Act No. 1299 cannot be construed to mean that, after
the law took effect, cement ceased to be so subject to the tax. To erase any and all
misconceptions that may have been spawned by reliance on the case of Cebu
Portland Cement Co. v. Collector of Internal Revenue, L-20563, October 29, 1968
(28 SCRA 789) penned by Justice Eugenio Angeles, the Court has expressly
overruled it insofar as it may conflict with the decision of August 10, 1983, now
subject of these motions for reconsideration.
On the question of prescription, the private respondent claims that the five-year reglementary period
for the assessment of its tax liability started from the time it filed its gross sales returns on June 30,
1962. Hence, the assessment for sales taxes made on January 16, 1968 and March 4, 1968, were
already out of time. We disagree. This contention must fail for what CEPOC filed was not the sales
returns required in Section 183(n) but the ad valorem tax returns required under Section 245 of the
Tax Code. As Justice Irene R. Cortes emphasized in the aforestated resolution:
In order to avail itself of the benefits of the five-year prescription period under Section
331 of the Tax Code, the taxpayer should have filed the required return for the tax
involved, that is, a sales tax return. (Butuan Sawmill, Inc. v. CTA, et al., G.R. No.
L-21516, April 29, 1966, 16 SCRA 277). Thus CEPOC should have filed sales tax
returns of its gross sales for the subject periods. Both parties admit that returns were
made for the ad valorem mining tax. CEPOC argues that said returns contain the
information necessary for the assessment of the sales tax. The Commissioner does
not consider such returns as compliance with the requirement for the filing of tax
returns so as to start the running of the five-year prescriptive period.
We agree with the Commissioner. It has been held in Butuan Sawmill Inc. v. CTA,
supra, that the filing of an income tax return cannot be considered as substantial
compliance with the requirement of filing sales tax returns, in the same way that an
income tax return cannot be considered as a return for compensating tax for the
purpose of computing the period of prescription under Sec. 331. (Citing Bisaya Land
Transportation Co., Inc. v. Collector of Internal Revenue, G.R. Nos. L-12100 and
L-11812, May 29, 1959). There being no sales tax returns filed by CEPOC, the
statute of stations in Sec. 331 did not begin to run against the government. The
assessment made by the Commissioner in 1968 on CEPOC's cement sales during
the period from July 1, 1959 to December 31, 1960 is not barred by the five-year
prescriptive period. Absent a return or when the return is false or fraudulent, the
applicable period is ten (10) days from the discovery of the fraud, falsity or omission.
The question in this case is: When was CEPOC's omission to file tha return deemed
discovered by the government, so as to start the running of said period? 13
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 already noted, the Tax Code provides:
Sec. 291. Injunction not available to restrain collection of tax. — No court shall have
authority to grant an injunction to restrain the collection of any national internal
revenue tax, fee or charge imposed by this Code.
It goes without saying that this injunction is available not only when the assessment is already being
questioned in a court of justice but more so if, as in the instant case, the challenge to the
assessment is still-and only-on the administrative level. There is all the more reason to apply the rule
here because it appears that even after crediting of the refund against the tax deficiency, a balance
of more than P 4 million is still due from the private respondent.
To require the petitioner to actually refund to the private respondent the amount of the judgment
debt, which he will later have the right to distrain for payment of its sales tax liability is in our view an
Idle ritual. We hold that the respondent Court of Tax Appeals erred in ordering such a charade.
WHEREFORE, the petition is GRANTED. The resolution dated April 22, 1968, in CTA Case No. 786
is SET ASIDE, without any pronouncement as to costs.
SO ORDERED.
Teehankee, C.J., Narvasa, Paras and Gancayco, JJ., concur.
 THIRD DIVISION

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

MUNICIPALITY OF MAKATI, petitioner, 

vs.

THE HONORABLE COURT OF APPEALS, HON. SALVADOR P. DE GUZMAN, JR., as Judge
RTC of Makati, Branch CXLII ADMIRAL FINANCE CREDITORS CONSORTIUM, INC., and
SHERIFF SILVINO R. PASTRANA, respondents.
Defante & Elegado for petitioner.
Roberto B. Lugue for private respondent Admiral Finance Creditors' Consortium, Inc.
RESOLUTION

CORTÉS, J.:
The present petition for review is an off-shoot of expropriation proceedings initiated by petitioner Municipality of Makati against private
respondent Admiral Finance Creditors Consortium, Inc., Home Building System & Realty Corporation and one Arceli P. Jo, involving a parcel
of land and improvements thereon located at Mayapis St., San Antonio Village, Makati and registered in the name of Arceli P. Jo under TCT
No. S-5499.

It appears that the action for eminent domain was filed on May 20, 1986, docketed as Civil Case No.
13699. Attached to petitioner's complaint was a certification that a bank account (Account No. S/A
265-537154-3) had been opened with the PNB Buendia Branch under petitioner's name containing
the sum of P417,510.00, made pursuant to the provisions of Pres. Decree No. 42. After due hearing
where the parties presented their respective appraisal reports regarding the value of the property,
respondent RTC judge rendered a decision on June 4, 1987, fixing the appraised value of the
property at P5,291,666.00, and ordering petitioner to pay this amount minus the advanced payment
of P338,160.00 which was earlier released to private respondent.
After this decision became final and executory, private respondent moved for the issuance of a writ
of execution. This motion was granted by respondent RTC judge. After issuance of the writ of
execution, a Notice of Garnishment dated January 14, 1988 was served by respondent sheriff Silvino
R. Pastrana upon the manager of the PNB Buendia Branch. However, respondent sheriff was
informed that a "hold code" was placed on the account of petitioner. As a result of this, private
respondent filed a motion dated January 27, 1988 praying that an order be issued directing the bank
to deliver to respondent sheriff the amount equivalent to the unpaid balance due under the RTC
decision dated June 4, 1987.
Petitioner filed a motion to lift the garnishment, on the ground that the manner of payment of the
expropriation amount should be done in installments which the respondent RTC judge failed to state
in his decision. Private respondent filed its opposition to the motion.
Pending resolution of the above motions, petitioner filed on July 20, 1988 a "Manifestation" informing
the court that private respondent was no longer the true and lawful owner of the subject property
because a new title over the property had been registered in the name of Philippine Savings Bank,
Inc. (PSB) Respondent RTC judge issued an order requiring PSB to make available the documents
pertaining to its transactions over the subject property, and the PNB Buendia Branch to reveal the
amount in petitioner's account which was garnished by respondent sheriff. In compliance with this
order, PSB filed a manifestation informing the court that it had consolidated its ownership over the
property as mortgagee/purchaser at an extrajudicial foreclosure sale held on April 20, 1987. After
several conferences, PSB and private respondent entered into a compromise agreement whereby
they agreed to divide between themselves the compensation due from the expropriation
proceedings.
Respondent trial judge subsequently issued an order dated September 8, 1988 which: (1) approved
the compromise agreement; (2) ordered PNB Buendia Branch to immediately release to PSB the
sum of P4,953,506.45 which corresponds to the balance of the appraised value of the subject
property under the RTC decision dated June 4, 1987, from the garnished account of petitioner; and,
(3) ordered PSB and private respondent to execute the necessary deed of conveyance over the
subject property in favor of petitioner. Petitioner's motion to lift the garnishment was denied.
Petitioner filed a motion for reconsideration, which was duly opposed by private respondent. On the
other hand, for failure of the manager of the PNB Buendia Branch to comply with the order dated
September 8, 1988, private respondent filed two succeeding motions to require the bank manager to
show cause why he should not be held in contempt of court. During the hearings conducted for the
above motions, the general manager of the PNB Buendia Branch, a Mr. Antonio Bautista, informed
the court that he was still waiting for proper authorization from the PNB head office enabling him to
make a disbursement for the amount so ordered. For its part, petitioner contended that its funds at
the PNB Buendia Branch 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 [G.R. No. L-20322, May 29, 1968, 23 SCRA
899].
Respondent trial judge issued an order dated December 21, 1988 denying petitioner's motion for
reconsideration on the ground that the doctrine enunciated in Republic v. Palacio did not apply to the
case because petitioner's PNB Account No. S/A 265-537154-3 was an account specifically opened
for the expropriation proceedings of the subject property pursuant to Pres. Decree No. 42.
Respondent RTC judge likewise declared Mr. Antonio Bautista guilty of contempt of court for his
inexcusable refusal to obey the order dated September 8, 1988, and thus ordered his arrest and
detention until his compliance with the said order.
Petitioner and the bank manager of PNB Buendia Branch then filed separate petitions
for certiorari with the Court of Appeals, which were eventually consolidated. In a decision
promulgated on June 28, 1989, the Court of Appeals dismissed both petitions for lack of merit,
sustained the jurisdiction of respondent RTC judge over the funds contained in petitioner's PNB
Account No. 265-537154-3, and affirmed his authority to levy on such funds.
Its motion for reconsideration having been denied by the Court of Appeals, petitioner now files the
present petition for review with prayer for preliminary injunction.
On November 20, 1989, the Court resolved to issue a temporary restraining order enjoining
respondent RTC judge, respondent sheriff, and their representatives, from enforcing and/or carrying
out the RTC order dated December 21, 1988 and the writ of garnishment issued pursuant thereto.
Private respondent then filed its comment to the petition, while petitioner filed its reply.
Petitioner not only reiterates the arguments adduced in its petition before the Court of Appeals, but
also alleges for the first time that it has actually two accounts with the PNB Buendia Branch, to wit:
xxx xxx xxx
(1) Account No. S/A 265-537154-3 — exclusively for the expropriation of the subject
property, with an outstanding balance of P99,743.94.
(2) Account No. S/A 263-530850-7 — for statutory obligations and other purposes of
the municipal government, with a balance of P170,098,421.72, as of July 12, 1989.
xxx xxx xxx
[Petition, pp. 6-7; Rollo, pp. 11-12.]
Because the petitioner has belatedly alleged only in this Court the existence of two bank accounts, it
may fairly be asked whether the second account was opened only for the purpose of undermining
the legal basis of the assailed orders of respondent RTC judge and the decision of the Court of
Appeals, and strengthening its reliance on the doctrine that public funds are exempted from
garnishment or execution as enunciated in Republic v. Palacio [supra.] At any rate, the Court will
give petitioner the benefit of the doubt, and proceed to resolve the principal issues presented based
on the factual circumstances thus alleged by petitioner.
Admitting that its PNB Account No. S/A 265-537154-3 was specifically opened for expropriation
proceedings it had initiated over the subject property, petitioner poses no objection to the
garnishment or the levy under execution of the funds deposited therein amounting to P99,743.94.
However, it is petitioner's main contention that inasmuch as the assailed orders of respondent RTC
judge involved the net amount of P4,965,506.45, the funds garnished by respondent sheriff in
excess of P99,743.94, which are public funds earmarked for the municipal government's other
statutory obligations, are exempted from execution without the proper appropriation required under
the law.
There is merit in this contention. The funds deposited in the second PNB Account No. S/A
263-530850-7 are public funds of the municipal government. In this jurisdiction, well-settled is the
rule that public funds are not subject to levy and execution, unless otherwise provided for by statute
[Republic v. Palacio, supra.; The Commissioner of Public Highways v. San Diego, G.R. No. L-30098,
February 18, 1970, 31 SCRA 616]. More particularly, the properties of a municipality, whether real or
personal, which are necessary for public use cannot be attached and sold at execution sale to
satisfy a money judgment against the municipality. 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 [See Viuda De
Tan Toco v. The Municipal Council of Iloilo, 49 Phil. 52 (1926): The Municipality of Paoay, Ilocos
Norte v. Manaois, 86 Phil. 629 (1950); Municipality of San Miguel, Bulacan v. Fernandez, G.R. No.
61744, June 25, 1984, 130 SCRA 56]. The foregoing rule finds application in the case at bar. Absent
a showing that the municipal council of Makati has passed an ordinance appropriating from its public
funds an amount corresponding to the balance due under the RTC decision dated June 4, 1987, less
the sum of P99,743.94 deposited in Account No. S/A 265-537154-3, no levy under execution may be
validly effected on the public funds of petitioner deposited in Account No. S/A 263-530850-7.
Nevertheless, this is not to say that private respondent and PSB are left with no legal recourse.
Where a municipality fails or refuses, without justifiable reason, to effect payment of a final money
judgment rendered against it, the claimant may avail of the remedy of mandamus in order to compel
the enactment and approval of the necessary appropriation ordinance, and the corresponding
disbursement of municipal funds therefor [See Viuda De Tan Toco v. The Municipal Council of
Iloilo, supra; Baldivia v. Lota, 107 Phil. 1099 (1960); Yuviengco v. Gonzales, 108 Phil. 247 (1960)].
In the case at bar, the validity of the RTC decision dated June 4, 1987 is not disputed by petitioner.
No appeal was taken therefrom. For three years now, petitioner has enjoyed possession and use of
the subject property notwithstanding its inexcusable failure to comply with its legal obligation to pay
just compensation. Petitioner has benefited from its possession of the property since the same has
been the site of Makati West High School since the school year 1986-1987. This Court will not
condone petitioner's blatant refusal to settle its legal obligation arising from expropriation
proceedings it had in fact initiated. It cannot be over-emphasized that, within the context of the
State's inherent power of eminent domain,
. . . [j]ust compensation means not only the correct determination of the amount to be
paid to the owner of the land but also the payment of the land within a reasonable
time from its taking. Without prompt payment, compensation cannot be considered
"just" for the property owner is made to suffer the consequence of being immediately
deprived of his land while being made to wait for a decade or more before actually
receiving the amount necessary to cope with his loss [Cosculluela v. The Honorable
Court of Appeals, G.R. No. 77765, August 15, 1988, 164 SCRA 393, 400. See also
Provincial Government of Sorsogon v. Vda. de Villaroya, G.R. No. 64037, August 27,
1987, 153 SCRA 291].
The State's power of eminent domain should be exercised within the bounds of fair play and justice.
In the case at bar, considering that valuable property has been taken, the compensation to be paid
fixed and the municipality is in full possession and utilizing the property for public purpose, for three
(3) years, the Court finds that the municipality has had more than reasonable time to pay full
compensation.
WHEREFORE, the Court Resolved to ORDER petitioner Municipality of Makati to immediately pay
Philippine Savings Bank, Inc. and private respondent the amount of P4,953,506.45. Petitioner is
hereby required to submit to this Court a report of its compliance with the foregoing order within a
non-extendible period of SIXTY (60) DAYS from the date of receipt of this resolution.
The order of respondent RTC judge dated December 21, 1988, which was rendered in Civil Case
No. 13699, is SET ASIDE and the temporary restraining order issued by the Court on November 20,
1989 is MADE PERMANENT.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.
 FIRST DIVISION
G.R. No. L-28896 February 17, 1988
COMMISSIONER OF INTERNAL REVENUE, petitioner, 

vs.

ALGUE, INC., and THE COURT OF TAX APPEALS, respondents.
CRUZ, J.:
Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance On the other hand, such collection
should be made in accordance with law as any arbitrariness will negate the very reason for government itself. It is therefore necessary to
reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxation, which is the promotion
of the common good, may be achieved.

The main issue in this case is whether or not the Collector of Internal Revenue correctly disallowed
the P75,000.00 deduction claimed by private respondent Algue as legitimate business expenses in
its income tax returns. The corollary issue is whether or not the appeal of the private respondent
from the decision of the Collector of Internal Revenue was made on time and in accordance with law.
We deal first with the procedural question.
The record shows that on January 14, 1965, the private respondent, a domestic corporation
engaged in engineering, construction and other allied activities, received a letter from the petitioner
assessing it in the total amount of P83,183.85 as delinquency income taxes for the years 1958 and
1959.1 On January 18, 1965, Algue flied a letter of protest or request for reconsideration, which letter
was stamp received on the same day in the office of the petitioner. 2 On March 12, 1965, a warrant of
distraint and levy was presented to the private respondent, through its counsel, Atty. Alberto
Guevara, Jr., who refused to receive it on the ground of the pending protest. 3 A search of the protest
in the dockets of the case proved fruitless. Atty. Guevara produced his file copy and gave a photostat
to BIR agent Ramon Reyes, who deferred service of the warrant. 4 On April 7, 1965, Atty. Guevara
was finally informed that the BIR was not taking any action on the protest and it was only then that
he accepted the warrant of distraint and levy earlier sought to be served.5 Sixteen days later, on April
23, 1965, Algue filed a petition for review of the decision of the Commissioner of Internal Revenue
with the Court of Tax Appeals.6
The above chronology shows that the petition was filed seasonably. According to Rep. Act No. 1125,
the appeal may be made within thirty days after receipt of the decision or ruling challenged.7 It is true
that as a rule the warrant of distraint and levy is "proof of the finality of the assessment" 8 and
renders hopeless a request for reconsideration," 9 being "tantamount to an outright denial thereof
and makes the said request deemed rejected." 10 But there is a special circumstance in the case at
bar that prevents application of this accepted doctrine.
The proven fact is that four days after the private respondent received the petitioner's notice of
assessment, it filed its letter of protest. This was apparently not taken into account before the
warrant of distraint and levy was issued; indeed, such protest could not be located in the office of the
petitioner. It was only after Atty. Guevara gave the BIR a copy of the protest that it was, if at all,
considered by the tax authorities. During the intervening period, the warrant was premature and
could therefore not be served.
As the Court of Tax Appeals correctly noted," 11 the protest filed by private respondent was not pro
forma and was based on strong legal considerations. It thus had the effect of suspending on January
18, 1965, when it was filed, the reglementary period which started on the date the assessment was
received, viz., January 14, 1965. The period started running again only on April 7, 1965, when the
private respondent was definitely informed of the implied rejection of the said protest and the warrant
was finally served on it. Hence, when the appeal was filed on April 23, 1965, only 20 days of the
reglementary period had been consumed.
Now for the substantive question.
The petitioner contends that the claimed deduction of P75,000.00 was properly disallowed because
it was not an ordinary reasonable or necessary business expense. The Court of Tax Appeals had
seen it differently. Agreeing with Algue, it held that the said amount had been legitimately paid by the
private respondent for actual services rendered. The payment was in the form of promotional fees.
These were collected by the Payees for their work in the creation of the Vegetable Oil Investment
Corporation of the Philippines and its subsequent purchase of the properties of the Philippine Sugar
Estate Development Company.
Parenthetically, it may be observed that the petitioner had Originally claimed these promotional fees
to be personal holding company income 12 but later conformed to the decision of the respondent
court rejecting this assertion.13 In fact, as the said court found, the amount was earned through the
joint efforts of the persons among whom it was distributed It has been established that the Philippine
Sugar Estate Development Company had earlier appointed Algue as its agent, authorizing it to sell
its land, factories and oil manufacturing process. Pursuant to such authority, Alberto Guevara, Jr.,
Eduardo Guevara, Isabel Guevara, Edith, O'Farell, and Pablo Sanchez, worked for the formation of
the Vegetable Oil Investment Corporation, inducing other persons to invest in it.14 Ultimately, after its
incorporation largely through the promotion of the said persons, this new corporation purchased the
PSEDC properties.15 For this sale, Algue received as agent a commission of P126,000.00, and it was
from this commission that the P75,000.00 promotional fees were paid to the aforenamed individuals.
16

There is no dispute that the payees duly reported their respective shares of the fees in their income
tax returns and paid the corresponding taxes thereon.17 The Court of Tax Appeals also found, after
examining the evidence, that no distribution of dividends was involved.18
The petitioner claims that these payments are fictitious because most of the payees are members of
the same family in control of Algue. It is argued that no indication was made as to how such
payments were made, whether by check or in cash, and there is not enough substantiation of such
payments. In short, the petitioner suggests a tax dodge, an attempt to evade a legitimate
assessment by involving an imaginary deduction.
We find that these suspicions were adequately met by the private respondent when its President,
Alberto Guevara, and the accountant, Cecilia V. de Jesus, testified that the payments were not made
in one lump sum but periodically and in different amounts as each payee's need arose. 19 It should be
remembered that this was a family corporation where strict business procedures were not applied
and immediate issuance of receipts was not required. Even so, at the end of the year, when the
books were to be closed, each payee made an accounting of all of the fees received by him or her,
to make up the total of P75,000.00. 20 Admittedly, everything seemed to be informal. This
arrangement was understandable, however, in view of the close relationship among the persons in
the family corporation.
We agree with the respondent court that the amount of the promotional fees was not excessive. The
total commission paid by the Philippine Sugar Estate Development Co. to the private respondent
was P125,000.00. 21After deducting the said fees, Algue still had a balance of P50,000.00 as clear
profit from the transaction. The amount of P75,000.00 was 60% of the total commission. This was a
reasonable proportion, considering that it was the payees who did practically everything, from the
formation of the Vegetable Oil Investment Corporation to the actual purchase by it of the Sugar
Estate properties. This finding of the respondent court is in accord with the following provision of the
Tax Code:
SEC. 30. Deductions from gross income.--In computing net income there shall be
allowed as deductions —
(a) Expenses:
(1) In general.--All the ordinary and necessary expenses paid or incurred during the
taxable year in carrying on any trade or business, including a reasonable allowance
for salaries or other compensation for personal services actually rendered; ... 22
and Revenue Regulations No. 2, Section 70 (1), reading as follows:
 SEC. 70. Compensation for personal services.--Among the ordinary and necessary
expenses paid or incurred in carrying on any trade or business may be included a
reasonable allowance for salaries or other compensation for personal services
actually rendered. The test of deductibility in the case of compensation payments is
whether they are reasonable and are, in fact, payments purely for service. This test
and deductibility in the case of compensation payments is whether they are
reasonable and are, in fact, payments purely for service. This test and its practical
application may be further stated and illustrated as follows:
Any amount paid in the form of compensation, but not in fact as the purchase price of
services, is not deductible. (a) An ostensible salary paid by a corporation may be a
distribution of a dividend on stock. This is likely to occur in the case of a corporation
having few stockholders, Practically all of whom draw salaries. If in such a case the
salaries are in excess of those ordinarily paid for similar services, and the excessive
payment correspond or bear a close relationship to the stockholdings of the officers
of employees, it would seem likely that the salaries are not paid wholly for services
rendered, but the excessive payments are a distribution of earnings upon the
stock. . . . (Promulgated Feb. 11, 1931, 30 O.G. No. 18, 325.)
It is worth noting at this point that most of the payees were not in the regular employ of Algue nor
were they its controlling stockholders. 23
The Solicitor General is correct when he says that the burden is on the taxpayer to prove the validity
of the claimed deduction. In the present case, however, we find that the onus has been discharged
satisfactorily. The private respondent has proved that the payment of the fees was necessary and
reasonable in the light of the efforts exerted by the payees in inducing investors and prominent
businessmen to venture in an experimental enterprise and involve themselves in a new business
requiring millions of pesos. This was no mean feat and should be, as it was, sufficiently
recompensed.
It is said that taxes are what we pay for civilization society. Without taxes, the government would be
paralyzed for lack of the motive power to activate and operate it. Hence, despite the natural
reluctance to surrender part of one's hard earned income to the taxing authorities, every person who
is able to must contribute his share in the running of the government. The government for its part, is
expected to respond in the form of tangible and intangible benefits intended to improve the lives of
the people and enhance their moral and material values. This symbiotic relationship is the rationale
of taxation and should dispel the erroneous notion that it is an arbitrary method of exaction by those
in the seat of power.
But even as we concede the inevitability and indispensability of taxation, it is a requirement in all
democratic regimes that it be exercised reasonably and in accordance with the prescribed
procedure. If it is not, then the taxpayer has a right to complain and the courts will then come to his
succor. For all the awesome power of the tax collector, he may still be stopped in his tracks if the
taxpayer can demonstrate, as it has here, that the law has not been observed.
We hold that the appeal of the private respondent from the decision of the petitioner was filed on
time with the respondent court in accordance with Rep. Act No. 1125. And we also find that the
claimed deduction by the private respondent was permitted under the Internal Revenue Code and
should therefore not have been disallowed by the petitioner.
ACCORDINGLY, the appealed decision of the Court of Tax Appeals is AFFIRMED in toto, without
costs.
SO ORDERED.
Teehankee, C.J., Narvasa, Gancayco and Griño-Aquino, JJ., concur.
 THIRD DIVISION
G.R. No. 122480 April 12, 2000
BPI-FAMILY SAVINGS BANK, Inc., petitioner, 

vs.

COURT OF APPEALS, COURT OF TAX APPEALS and the COMMISSIONER OF INTERNAL
REVENUE,respondents.
PANGANIBAN, J.:
If the State expects its taxpayers to observe fairness and honesty in paying their taxes, so must it
apply the same standard against itself in refunding excess payments. When it is undisputed that a
taxpayer is entitled to a refund, the State should not invoke technicalities to keep money not
belonging to it. No one, not even the State, should enrich oneself at the expense of another.
The Case
Before us is a Petition for Review assailing the March 31, 1995 Decision of the Court of
Appeals1 (CA) in CA-GR SP No. 34240, which affirmed the December 24, 1993 Decision2 of the Court
of Tax Appeals (CTA). The CA disposed as follows:
WHEREFORE, foregoing premises considered, the petition is hereby DISMISSED for lack of
merit.3
On the other hand, the dispositive portion of the CTA Decision affirmed by the CA reads as follows:
WHEREFORE, in [view of] all the foregoing, Petitioner's claim for refund is hereby DENIED
and this Petition for Review is DISMISSED for lack of merit.4
Also assailed is the November 8, 1995 CA Resolution5 denying reconsideration.
The Facts
The facts of this case were summarized by the CA in this wise:
This case involves a claim for tax refund in the amount of P112,491.00 representing
petitioner's tax withheld for the year 1989.
In its Corporate Annual Income Tax Return for the year 1989, the following items are
reflected:
Income P1,017,931,831.00
Deductions P1,026,218,791.00
Net Income (Loss) (P8,286,960.00)
Taxable Income (Loss) (P8,286,960.00)
Less:
1988 Tax Credit P185,001.00
1989 Tax Credit P112,491.00
TOTAL AMOUNT P297,492.00
REFUNDABLE
It appears from the foregoing 1989 Income Tax Return that petitioner had a total
refundable amount of P297,492 inclusive of the P112,491.00 being claimed as tax
refund in the present case. However, petitioner declared in the same 1989 Income
 Tax Return that the said total refundable amount of P297,492.00 will be applied
as tax credit to the succeeding taxable year.
On October 11, 1990, petitioner filed a written claim for refund in the amount of
P112,491.00 with the respondent Commissioner of Internal Revenue alleging that it
did not apply the 1989 refundable amount of P297,492.00 (including P112,491.00) to
its 1990 Annual Income Tax Return or other tax liabilities due to the alleged business
losses it incurred for the same year.
Without waiting for respondent Commissioner of Internal Revenue to act on the claim
for refund, petitioner filed a petition for review with respondent Court of Tax Appeals,
seeking the refund of the amount of P112,491.00.
The respondent Court of Tax Appeals dismissed petitioner's petition on the ground
that petitioner failed to present as evidence its corporate Annual Income Tax Return
for 1990 to establish the fact that petitioner had not yet credited the amount of
P297,492.00 (inclusive of the amount P112,491.00 which is the subject of the
present controversy) to its 1990 income tax liability.
Petitioner filed a motion for reconsideration, however, the same was denied by
respondent court in its Resolution dated May 6, 1994.6
As earlier noted, the CA affirmed the CTA. Hence, this Petition.7
Ruling of the Court of Appeals
In affirming the CTA, the Court of Appeals ruled as follows:
It is incumbent upon the petitioner to show proof that it has not credited to its 1990
Annual income Tax Return, the amount of P297,492.00 (including P112,491.00), so
as to refute its previous declaration in the 1989 Income Tax Return that the said
amount will be applied as a tax credit in the succeeding year of 1990. Having failed
to submit such requirement, there is no basis to grant the claim for refund. . . .
Tax refunds are in the nature of tax exemptions. As such, they are regarded as in
derogation of sovereign authority and to be construed strictissimi juris against the
person or entity claiming the exemption. In other words, the burden of proof rests
upon the taxpayer to establish by sufficient and competent evidence its entitlement to
the claim for refund.8
Issue
In their Memorandum, respondents identify the issue in this wise:
The sole issue to be resolved is whether or not petitioner is entitled to the refund of
P112,491.90, representing excess creditable withholding tax paid for the taxable year 1989.9
The Court's Ruling
The Petition is meritorious.
Main Issue:
Petitioner Entitled to Refund
It is undisputed that petitioner had excess withholding taxes for the year 1989 and was thus entitled
to a refund amounting to P112,491. Pursuant to Section 69 10 of the 1986 Tax Code which states that
a corporation entitled to a refund may opt either (1) to obtain such refund or (2) to credit said amount
for the succeeding taxable year, petitioner indicated in its 1989 Income Tax Return that it would apply
the said amount as a tax credit for the succeeding taxable year, 1990. Subsequently, petitioner
informed the Bureau of Internal Revenue (BIR) that it would claim the amount as a tax refund,
instead of applying it as a tax credit. When no action from the BIR was forthcoming, petitioner filed
its claim with the Court of Tax Appeals.
The CTA and the CA, however, denied the claim for tax refund. Since petitioner declared in its 1989
Income Tax Return that it would apply the excess withholding tax as a tax credit for the following
year, the Tax Court held that petitioner was presumed to have done so. The CTA and the CA ruled
that petitioner failed to overcome this presumption because it did not present its 1990 Return, which
would have shown that the amount in dispute was not applied as a tax credit. Hence, the CA
concluded that petitioner was not entitled to a tax refund.
We disagree with the Court of Appeals. As a rule, the factual findings of the appellate court are
binding on this Court. This rule, however, does not apply where, inter alia, the judgment is premised
on a misapprehension of facts, or when the appellate court failed to notice certain relevant facts
which if considered would justify a different conclusion. 11 This case is one such exception.
In the first place, petitioner presented evidence to prove its claim that it did not apply the amount as
a tax credit. During the trial before the CTA, Ms. Yolanda Esmundo, the manager of petitioner's
accounting department, testified to this fact. It likewise presented its claim for refund and a
certification issued by Mr. Gil Lopez, petitioner's vice-president, stating that the amount of P112,491
"has not been and/or will not be automatically credited/offset against any succeeding quarters'
income tax liabilities for the rest of the calendar year ending December 31, 1990." Also presented
were the quarterly returns for the first two quarters of 1990.
The Bureau of Internal Revenue, for its part, failed to controvert petitioner's claim. In fact, it
presented no evidence at all. Because it ought to know the tax records of all taxpayers, the CIR
could have easily disproved petitioner's claim. To repeat, it did not do so.
More important, a copy of the Final Adjustment Return for 1990 was attached to petitioner's Motion
for Reconsideration filed before the CTA. 12 A final adjustment return shows whether a corporation
incurred a loss or gained a profit during the taxable year. In this case, that Return clearly showed
that petitioner incurred P52,480,173 as net loss in 1990. Clearly, it could not have applied the
amount in dispute as a tax credit.
Again, the BIR did not controvert the veracity of the said return. It did not even file an opposition to
petitioner's Motion and the 1990 Final Adjustment Return attached thereto. In denying the Motion for
Reconsideration, however, the CTA ignored the said Return. In the same vein, the CA did not pass
upon that significant document.
True, strict procedural rules generally frown upon the submission of the Return after the trial. The
1âwphi1

law creating the Court of Tax Appeals, however, specifically provides that proceedings before it "shall
not be governed strictly by the technical rules of evidence." 13 The paramount consideration remains
the ascertainment of truth. Verily, the quest for orderly presentation of issues is not an absolute. It
should not bar courts from considering undisputed facts to arrive at a just determination of a
controversy.
In the present case, the Return attached to the Motion for Reconsideration clearly showed that
petitioner suffered a net loss in 1990. Contrary to the holding of the CA and the CTA, petitioner could
not have applied the amount as a tax credit. In failing to consider the said Return, as well as the
other documentary evidence presented during the trial, the appellate court committed a reversible
error.
It should be stressed that the rationale of the rules of procedure is to secure a just determination of
every action. They are tools designed to facilitate the attainment of justice. 14 But there can be no just
determination of the present action if we ignore, on grounds of strict technicality, the Return
submitted before the CTA and even before this Court. 15 To repeat, the undisputed fact is that
petitioner suffered a net loss in 1990; accordingly, it incurred no tax liability to which the tax credit
could be applied. Consequently, there is no reason for the BIR and this Court to withhold the tax
refund which rightfully belongs to the petitioner.
Public respondents maintain that what was attached to petitioner's Motion for Reconsideration was
not the final adjustment Return, but petitioner's first two quarterly returns for 1990. 16 This allegation is
wrong. An examination of the records shows that the 1990 Final Adjustment Return was attached to
the Motion for Reconsideration. On the other hand, the two quarterly returns for 1990 mentioned by
respondent were in fact attached to the Petition for Review filed before the CTA. Indeed, to rebut
respondents' specific contention, petitioner submitted before us its Surrejoinder, to which was
attached the Motion for Reconsideration and Exhibit "A" thereof, the Final Adjustment Return for
1990. 17
CTA Case No. 4897
Petitioner also calls the attention of this Court, as it had done before the CTA, to a Decision rendered
by the Tax Court in CTA Case No. 4897, involving its claim for refund for the year 1990. In that case,
the Tax Court held that "petitioner suffered a net loss for the taxable year 1990 . . . ." 18 Respondent,
however, urges this Court not to take judicial notice of the said case. 19
As a rule, "courts are not authorized to take judicial notice of the contents of the records of other
cases, even when such cases have been tried or are pending in the same court, and
notwithstanding the fact that both cases may have been heard or are actually pending before the
same judge." 20
Be that as it may, Section 2, Rule 129 provides that courts may take judicial notice of matters ought
to be known to judges because of their judicial functions. In this case, the Court notes that a copy of
the Decision in CTA Case No. 4897 was attached to the Petition for Review filed before this Court.
Significantly, respondents do not claim at all that the said Decision was fraudulent or nonexistent.
Indeed, they do not even dispute the contents of the said Decision, claiming merely that the Court
cannot take judicial notice thereof.
To our mind, respondents' reasoning underscores the weakness of their case. For if they had really
believed that petitioner is not entitled to a tax refund, they could have easily proved that it did not
suffer any loss in 1990. Indeed, it is noteworthy that respondents opted not to assail the fact
appearing therein — that petitioner suffered a net loss in 1990 — in the same way that it refused to
controvert the same fact established by petitioner's other documentary exhibits.
In any event, the Decision in CTA Case No. 4897 is not the sole basis of petitioner's case. It is
merely one more bit of information showing the stark truth: petitioner did not use its 1989 refund to
pay its taxes for 1990.
Finally, respondents argue that tax refunds are in the nature of tax exemptions and are to be
construed strictissimi juris against the claimant. Under the facts of this case, we hold that petitioner
has established its claim. Petitioner may have failed to strictly comply with the rules of procedure; it
may have even been negligent. These circumstances, however, should not compel the Court to
disregard this cold, undisputed fact: that petitioner suffered a net loss in 1990, and that it could not
have applied the amount claimed as tax credits.
Substantial justice, equity and fair play are on the side of petitioner. Technicalities and legalisms,
however exalted, should not be misused by the government to keep money not belonging to it and
thereby enrich itself at the expense of its law-abiding citizens. If the State expects its taxpayers to
observe fairness and honesty in paying their taxes, so must it apply the same standard against itself
in refunding excess payments of such taxes. Indeed, the State must lead by its own example of
honor, dignity and uprightness.
WHEREFORE, the Petition is hereby GRANTED and the assailed Decision and Resolution of the
Court of Appeals REVERSED and SET ASIDE. The Commissioner of Internal Revenue is ordered to
refund to petitioner the amount of P112,491 as excess creditable taxes paid in 1989. No costs. 1âwphi1.nêt

SO ORDERED.
Melo, Purisima and Gonzaga-Reyes, JJ., concur.

Vitug, J., abroad on official business.
 SECOND DIVISION

G.R. No. L-68252 May 26, 1995

COMMISSIONER OF INTERNAL REVENUE, petitioner, 

vs.

TOKYO SHIPPING CO. LTD., represented by SORIAMONT STEAMSHIP AGENCIES INC., and
COURT OF TAX APPEALS, respondents.

PUNO, J.:
For resolution is whether or not private respondent Tokyo Shipping Co. Ltd., is entitled to a refund or
tax credit for amounts representing pre-payment of income and common carrier's taxes under the
National Internal Revenue Code, section 24 (b) (2), as amended.1
Private respondent is a foreign corporation represented in the Philippines by Soriamont Steamship
Agencies, Incorporated. It owns and operates tramper vessel M/V Gardenia. In December 1980,
NASUTRA2 chartered M/V Gardenia to load 16,500 metric tons of raw sugar in the Philippines.3 On
December 23, 1980, Mr. Edilberto Lising, the operations supervisor of Soriamont Agency,4 paid the
required income and common carrier's taxes in the respective sums of FIFTY-NINE THOUSAND
FIVE HUNDRED TWENTY-THREE PESOS and SEVENTY-FIVE CENTAVOS (P59,523.75) and
FORTY-SEVEN THOUSAND SIX HUNDRED NINETEEN PESOS (P47,619.00), or a total of ONE
HUNDRED SEVEN THOUSAND ONE HUNDRED FORTY-TWO PESOS and SEVENTY-FIVE
CENTAVOS (P107,142.75) based on the expected gross receipts of the vessel.5 Upon arriving,
however, at Guimaras Port of Iloilo, the vessel found no sugar for loading. On January 10, 1981,
NASUTRA and private respondent's agent mutually agreed to have the vessel sail for Japan without
any cargo.
Claiming the pre-payment of income and common carrier's taxes as erroneous since no receipt was
realized from the charter agreement, private respondent instituted a claim for tax credit or refund of
the sum ONE HUNDRED SEVEN THOUSAND ONE HUNDRED FORTY-TWO PESOS and
SEVENTY-FIVE CENTAVOS (P107,142.75) before petitioner Commissioner of Internal Revenue on
March 23, 1981. Petitioner failed to act promptly on the claim, hence, on May 14, 1981, private
respondent filed a petition for review6 before public respondent Court of Tax Appeals.
Petitioner contested the petition. As special and affirmative defenses, it alleged the following: that
taxes are presumed to have been collected in accordance with law; that in an action for refund, the
burden of proof is upon the taxpayer to show that taxes are erroneously or illegally collected, and the
taxpayer's failure to sustain said burden is fatal to the action for refund; and that claims for refund
are construed strictly against tax claimants.7
After trial, respondent tax court decided in favor of the private respondent. It held:
It has been shown in this case that 1) the petitioner has complied with the mentioned
statutory requirement by having filed a written claim for refund within the two-year
period from date of payment; 2) the respondent has not issued any deficiency
assessment nor disputed the correctness of the tax returns and the corresponding
amounts of prepaid income and percentage taxes; and 3) the chartered vessel sailed
 out of the Philippine port with absolutely no cargo laden on board as cleared and
certified by the Customs authorities; nonetheless 4) respondent's apparent bit of
reluctance in validating the legal merit of the claim, by and large, is tacked upon the
"examiner who is investigating petitioner's claim for refund which is the subject
matter of this case has not yet submitted his report. Whether or not respondent will
present his evidence will depend on the said report of the examiner." (Respondent's
Manifestation and Motion dated September 7, 1982). Be that as it may the case was
submitted for decision by respondent on the basis of the pleadings and records and
by petitioner on the evidence presented by counsel sans the respective
memorandum.
An examination of the records satisfies us that the case presents no dispute as to
relatively simple material facts. The circumstances obtaining amply justify petitioner's
righteous indignation to a more expeditious action. Respondent has offered no
reason nor made effort to submit any controverting documents to bash that patina of
legitimacy over the claim. But as might well be, towards the end of some two and a
half years of seeming impotent anguish over the pendency, the respondent
Commissioner of Internal Revenue would furnish the satisfaction of ultimate solution
by manifesting that "it is now his turn to present evidence, however, the Appellate
Division of the BIR has already recommended the approval of petitioner's claim for
refund subject matter of this petition. The examiner who examined this case has also
recommended the refund of petitioner's claim. Without prejudice to withdrawing this
case after the final approval of petitioner's claim, the Court ordered the resetting to
September 7, 1983." (Minutes of June 9, 1983 Session of the Court) We need not
fashion any further issue into an apparently settled legal situation as far be it from a
comedy of errors it would be too much of a stretch to hold and deny the refund of the
amount of prepaid income and common carrier's taxes for which petitioner could no
longer be made accountable.
On August 3, 1984, respondent court denied petitioner's motion for reconsideration, hence, this
petition for review on certiorari.
Petitioner now contends: (1) private respondent has the burden of proof to support its claim of
refund; (2) it failed to prove that it did not realize any receipt from its charter agreement; and (3) it
suppressed evidence when it did not present its charter agreement.
We find no merit in the petition.
There is no dispute about the applicable law. It is section 24 (b) (2) of the National Internal Revenue
Code which at that time provides as follows:
A corporation organized, authorized, or existing under the laws of any foreign
country, engaged in trade or business within the Philippines, shall be taxable as
provided in subsection (a) of this section upon the total net income derived in the
preceding taxable year from all sources within the Philippines: Provided, however,
That international carriers shall pay a tax of two and one-half per cent (2 1/2%) on
their gross Philippine billings: "Gross Philippine Billings" include gross revenue
realized from uplifts anywhere in the world by any international carrier doing business
in the Philippines of passage documents sold therein, whether for passenger, excess
baggage or mail, provided the cargo or mail originates from the Philippines. The
gross revenue realized from the said cargo or mail include the gross freight charge
up to final destination. Gross revenue from chartered flights originating from the
Philippines shall likewise form part of "Gross Philippine Billings" regardless of the
place or payment of the passage documents . . . . .
Pursuant to this provision, a resident foreign corporation engaged in the transport of cargo is liable
for taxes depending on the amount of income it derives from sources within the Philippines. Thus,
before such a tax liability can be enforced the taxpayer must be shown to have earned income
sourced from the Philippines.
We agree with petitioner that a claim for refund is in the nature of a claim for exemption8 and should
be construed in strictissimi juris against the taxpayer.9 Likewise, there can be no disagreement with
petitioner's stance that private respondent has the burden of proof to establish the factual basis of its
claim for tax refund.
The pivotal issue involves a question of fact — whether or not the private respondent was able to
prove that it derived no receipts from its charter agreement, and hence is entitled to a refund of the
taxes it pre-paid to the government.
The respondent court held that sufficient evidence has been adduced by the private respondent
proving that it derived no receipt from its charter agreement with NASUTRA. This finding of fact rests
on a rational basis, and hence must be sustained. Exhibits "E", "F," and "G" positively show that the
tramper vessel M/V "Gardenia" arrived in Iloilo on January 10, 1981 but found no raw sugar to load
and returned to Japan without any cargo laden on board. Exhibit "E" is the Clearance Vessel to a
Foreign Port issued by the District Collector of Customs, Port of Iloilo while Exhibit "F" is the
Certification by the Officer-in-Charge, Export Division of the Bureau of Customs Iloilo. The
correctness of the contents of these documents regularly issued by officials of the Bureau of
Customs cannot be doubted as indeed, they have not been contested by the petitioner. The records
also reveal that in the course of the proceedings in the court a quo, petitioner hedged and hawed
when its turn came to present evidence. At one point, its counsel manifested that the BIR examiner
and the appellate division of the BIR have both recommended the approval of private respondent's
claim for refund. The same counsel even represented that the government would withdraw its
opposition to the petition after final approval of private respondents' claim. The case dragged on but
petitioner never withdrew its opposition to the petition even if it did not present evidence at all. The
insincerity of petitioner's stance drew the sharp rebuke of respondent court in its Decision and for
good reason. Taxpayers owe honesty to government just as government owes fairness to taxpayers.
In its last effort to retain the money erroneously prepaid by the private respondent, petitioner
contends that private respondent suppressed evidence when it did not present its charter agreement
with NASUTRA. The contention cannot succeed. It presupposes without any basis that the charter
agreement is prejudicial evidence against the private respondent. 10 Allegedly, it will show that private
respondent earned a charter fee with or without transporting its supposed cargo from Iloilo to Japan.
The allegation simply remained an allegation and no court of justice will regard it as truth. Moreover,
the charter agreement could have been presented by petitioner itself thru the proper use of
a subpoena duces tecum. It never did either because of neglect or because it knew it would be of no
help to bolster its position. 11 For whatever reason, the petitioner cannot take to task the private
respondent for not presenting what it mistakenly calls "suppressed evidence."
We cannot but bewail the unyielding stance taken by the government in refusing to refund the sum of
ONE HUNDRED SEVEN THOUSAND ONE HUNDRED FORTY TWO PESOS AND SEVENTY FIVE
CENTAVOS (P107,142.75) erroneously prepaid by private respondent. The tax was paid way back
in 1980 and despite the clear showing that it was erroneously paid, the government succeeded in
delaying its refund for fifteen (15) years. After fifteen (15) long years and the expenses of litigation,
the money that will be finally refunded to the private respondent is just worth a damaged nickel. This
is not, however, the kind of success the government, especially the BIR, needs to increase its
collection of taxes. Fair deal is expected by our taxpayers from the BIR and the duty demands that
BIR should refund without any unreasonable delay what it has erroneously collected. Our ruling
in Roxas v. Court of Tax Appeals 12 is apropos to recall:
The power of taxation is sometimes called also the power to destroy. Therefore it
should be exercised with caution to minimize injury to the proprietary rights of a
taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill
the "hen that lays the golden egg." And, in order to maintain the general public's trust
 and confidence in the Government this power must be used justly and not
treacherously.
IN VIEW HEREOF, the assailed decision of respondent Court of Tax Appeals, dated September 15,
1983, is AFFIRMED in toto. No costs.
SO ORDERED.
Narvasa, C.J., Regalado and Mendoza, JJ., concur.
 SECOND DIVISION
G.R. No. L-54908 January 22, 1990
COMMISSIONER OF INTERNAL REVENUE, petitioner, 

vs.

MITSUBISHI METAL CORPORATION, ATLAS CONSOLIDATED MINING AND DEVELOPMENT
CORPORATION and the COURT OF TAX APPEALS, respondents.
G.R. No. 80041 January 22, 1990
COMMISSIONER OF INTERNAL REVENUE, petitioner, 

vs.

MITSUBISHI METAL CORPORATION, ATLAS CONSOLIDATED MINING AND DEVELOPMENT
CORPORATION and the COURT OF TAX APPEALS, respondents.
Gadioma Law Offices for respondents.



REGALADO, J.:
These cases, involving the same issue being contested by the same parties and having originated
from the same factual antecedents generating the claims for tax credit of private respondents, the
same were consolidated by resolution of this Court dated May 31, 1989 and are jointly decided
herein.
The records reflect that on April 17, 1970, Atlas Consolidated Mining and Development Corporation
(hereinafter, Atlas) entered into a Loan and Sales Contract with Mitsubishi Metal Corporation
(Mitsubishi, for brevity), a Japanese corporation licensed to engage in business in the Philippines,
for purposes of the projected expansion of the productive capacity of the former's mines in Toledo,
Cebu. Under said contract, Mitsubishi agreed to extend a loan to Atlas 'in the amount of
$20,000,000.00, United States currency, for the installation of a new concentrator for copper
production. Atlas, in turn undertook to sell to Mitsubishi all the copper concentrates produced from
said machine for a period of fifteen (15) years. It was contemplated that $9,000,000.00 of said loan
was to be used for the purchase of the concentrator machinery from Japan. 1
Mitsubishi thereafter applied for a loan with the Export-Import Bank of Japan (Eximbank for short)
obviously for purposes of its obligation under said contract. Its loan application was approved on
May 26, 1970 in the sum of ¥4,320,000,000.00, at about the same time as the approval of its loan for
¥2,880,000,000.00 from a consortium of Japanese banks. The total amount of both loans is
equivalent to $20,000,000.00 in United States currency at the then prevailing exchange rate. The
records in the Bureau of Internal Revenue show that the approval of the loan by Eximbank to
Mitsubishi was subject to the condition that Mitsubishi would use the amount as a loan to Atlas and
as a consideration for importing copper concentrates from Atlas, and that Mitsubishi had to pay back
the total amount of loan by September 30, 1981. 2
Pursuant to the contract between Atlas and Mitsubishi, interest payments were made by the former
to the latter totalling P13,143,966.79 for the years 1974 and 1975. The corresponding 15% tax
thereon in the amount of P1,971,595.01 was withheld pursuant to Section 24 (b) (1) and Section 53
(b) (2) of the National Internal Revenue Code, as amended by Presidential Decree No. 131, and duly
remitted to the Government. 3
On March 5, 1976, private respondents filed a claim for tax credit requesting that the sum of
P1,971,595.01 be applied against their existing and future tax liabilities. Parenthetically, it was later
noted by respondent Court of Tax Appeals in its decision that on August 27, 1976, Mitsubishi
executed a waiver and disclaimer of its interest in the claim for tax credit in favor of Atlas. 4
The petitioner not having acted on the claim for tax credit, on April 23, 1976 private respondents filed
a petition for review with respondent court, docketed therein as CTA Case No. 2801. 5 The petition
was grounded on the claim that Mitsubishi was a mere agent of Eximbank, which is a financing
institution owned, controlled and financed by the Japanese Government. Such governmental status
of Eximbank, if it may be so called, is the basis for private repondents' claim for exemption from
paying the tax on the interest payments on the loan as earlier stated. It was further claimed that the
interest payments on the loan from the consortium of Japanese banks were likewise exempt
because said loan supposedly came from or were financed by Eximbank. The provision of the
National Internal Revenue Code relied upon is Section 29 (b) (7) (A), 6 which excludes from gross
income:
(A) Income received from their investments in the Philippines in loans, stocks, bonds or other
domestic securities, or from interest on their deposits in banks in the Philippines by (1)
foreign governments, (2) financing institutions owned, controlled, or enjoying refinancing
from them, and (3) international or regional financing institutions established by
governments.
Petitioner filed an answer on July 9, 1976. The case was set for hearing on April 6, 1977 but was
later reset upon manifestation of petitioner that the claim for tax credit of the alleged erroneous
payment was still being reviewed by the Appellate Division of the Bureau of Internal Revenue. The
records show that on November 16, 1976, the said division recommended to petitioner the approval
of private respondent's claim. However, before action could be taken thereon, respondent court
scheduled the case for hearing on September 30, 1977, during which trial private respondents
presented their evidence while petitioner submitted his case on the basis of the records of the
Bureau of Internal Revenue and the pleadings. 7
On April 18, 1980, respondent court promulgated its decision ordering petitioner to grant a tax credit
in favor of Atlas in the amount of P1,971,595.01. Interestingly, the tax court held that petitioner
admitted the material averments of private respondents when he supposedly prayed "for judgment
on the pleadings without off-spring proof as to the truth of his allegations." 8 Furthermore, the court
declared that all papers and documents pertaining to the loan of ¥4,320,000,000.00 obtained by
Mitsubishi from Eximbank show that this was the same amount given to Atlas. It also observed that
the money for the loans from the consortium of private Japanese banks in the sum of
¥2,880,000,000.00 "originated" from Eximbank. From these, respondent court concluded that the
ultimate creditor of Atlas was Eximbank with Mitsubishi acting as a mere "arranger or conduit
through which the loans flowed from the creditor Export-Import Bank of Japan to the debtor Atlas
Consolidated Mining & Development Corporation." 9
A motion for reconsideration having been denied on August 20, 1980, petitioner interposed an
appeal to this Court, docketed herein as G.R. No. 54908.
While CTA Case No. 2801 was still pending before the tax court, the corresponding 15% tax on the
amount of P439,167.95 on the P2,927,789.06 interest payments for the years 1977 and 1978 was
withheld and remitted to the Government. Atlas again filed a claim for tax credit with the petitioner,
repeating the same basis for exemption.
On June 25, 1979, Mitsubishi and Atlas filed a petition for review with the Court of Tax Appeals
docketed as CTA Case No. 3015. Petitioner filed his answer thereto on August 14, 1979, and, in a
letter to private respondents dated November 12, 1979, denied said claim for tax credit for lack of
factual or legal basis. 10
On January 15, 1981, relying on its prior ruling in CTA Case No. 2801, respondent court rendered
judgment ordering the petitioner to credit Atlas the aforesaid amount of tax paid. A motion for
reconsideration, filed on March 10, 1981, was denied by respondent court in a resolution dated
September 7, 1987. A notice of appeal was filed on September 22, 1987 by petitioner with
respondent court and a petition for review was filed with this Court on December 19, 1987. Said later
case is now before us as G.R. No. 80041 and is consolidated with G.R. No. 54908.
The principal issue in both petitions is whether or not the interest income from the loans extended to
Atlas by Mitsubishi is excludible from gross income taxation pursuant to Section 29 b) (7) (A) of the
tax code and, therefore, exempt from withholding tax. Apropos thereto, the focal question is whether
or not Mitsubishi is a mere conduit of Eximbank which will then be considered as the creditor whose
investments in the Philippines on loans are exempt from taxes under the code.
Prefatorily, it must be noted that respondent court erred in holding in CTA Case No. 2801 that
petitioner should be deemed to have admitted the allegations of the private respondents when it
submitted the case on the basis of the pleadings and records of the bureau. There is nothing to
indicate such admission on the part of petitioner nor can we accept respondent court's
pronouncement that petitioner did not offer to prove the truth of its allegations. The records of the
Bureau of Internal Revenue relevant to the case were duly submitted and admitted as petitioner's
supporting evidence. Additionally, a hearing was conducted, with presentation of evidence, and the
findings of respondent court were based not only on the pleadings but on the evidence adduced by
the parties. There could, therefore, not have been a judgment on the pleadings, with the theorized
admissions imputed to petitioner, as mistakenly held by respondent court.
Time and again, we have ruled that findings of fact of the Court of Tax Appeals are entitled to the
highest respect and can only be disturbed on appeal if they are not supported by substantial
evidence or if there is a showing of gross error or abuse on the part of the tax court. 11 Thus,
ordinarily, we could give due consideration to the holding of respondent court that Mitsubishi is a
mere agent of Eximbank. Compelling circumstances obtaining and proven in these cases, however,
warrant a departure from said general rule since we are convinced that there is a misapprehension
of facts on the part of the tax court to the extent that its conclusions are speculative in nature.
The loan and sales contract between Mitsubishi and Atlas does not contain any direct or inferential
reference to Eximbank whatsoever. The agreement is strictly between Mitsubishi as creditor in the
contract of loan and Atlas as the seller of the copper concentrates. From the categorical language
used in the document, one prestation was in consideration of the other. The specific terms and the
reciprocal nature of their obligations make it implausible, if not vacuous to give credit to the cavalier
assertion that Mitsubishi was a mere agent in said transaction.
Surely, Eximbank had nothing to do with the sale of the copper concentrates since all that Mitsubishi
stated in its loan application with the former was that the amount being procured would be used as a
loan to and in consideration for importing copper concentrates from Atlas. 12 Such an innocuous
statement of purpose could not have been intended for, nor could it legally constitute, a contract of
agency. If that had been the purpose as respondent court believes, said corporations would have
specifically so stated, especially considering their experience and expertise in financial transactions,
not to speak of the amount involved and its purchasing value in 1970.
A thorough analysis of the factual and legal ambience of these cases impels us to give weight to the
following arguments of petitioner:
The nature of the above contract shows that the same is not just a simple contract of loan. It
is not a mere creditor-debtor relationship. It is more of a reciprocal obligation between ATLAS
and MITSUBISHI where the latter shall provide the funds in the installation of a new
concentrator at the former's Toledo mines in Cebu, while ATLAS in consideration of which,
shall sell to MITSUBISHI, for a term of 15 years, the entire copper concentrate that will be
produced by the installed concentrator.
Suffice it to say, the selling of the copper concentrate to MITSUBISHI within the specified
term was the consideration of the granting of the amount of $20 million to ATLAS.
MITSUBISHI, in order to fulfill its part of the contract, had to obtain funds. Hence, it had to
secure a loan or loans from other sources. And from what sources, it is immaterial as far as
ATLAS in concerned. In this case, MITSUBISHI obtained the $20 million from the
EXIMBANK, of Japan and the consortium of Japanese banks financed through the
EXIMBANK, of Japan.
When MITSUBISHI therefore secured such loans, it was in its own independent capacity as
a private entity and not as a conduit of the consortium of Japanese banks or the EXIMBANK
 of Japan. While the loans were secured by MITSUBISHI primarily "as a loan to and in
consideration for importing copper concentrates from ATLAS," the fact remains that it was a
loan by EXIMBANK of Japan to MITSUBISHI and not to ATLAS.
Thus, the transaction between MITSUBISHI and EXIMBANK of Japan was a distinct and
separate contract from that entered into by MITSUBISHI and ATLAS. Surely, in the latter
contract, it is not EXIMBANK, that was intended to be benefited. It is MITSUBISHI which
stood to profit. Besides, the Loan and Sales Contract cannot be any clearer. The only
signatories to the same were MITSUBISHI and ATLAS. Nowhere in the contract can it be
inferred that MITSUBISHI acted for and in behalf of EXIMBANK, of Japan nor of any entity,
private or public, for that matter.
Corollary to this, it may well be stated that in this jurisdiction, well-settled is the rule that
when a contract of loan is completed, the money ceases to be the property of the former
owner and becomes the sole property of the obligor (Tolentino and Manio vs. Gonzales Sy,
50 Phil. 558).
In the case at bar, when MITSUBISHI obtained the loan of $20 million from EXIMBANK, of
Japan, said amount ceased to be the property of the bank and became the property of
MITSUBISHI.
The conclusion is indubitable; MITSUBISHI, and NOT EXIMBANK, is the sole creditor of
ATLAS, the former being the owner of the $20 million upon completion of its loan contract
with EXIMBANK of Japan.
The interest income of the loan paid by ATLAS to MITSUBISHI is therefore entirely different
from the interest income paid by MITSUBISHI to EXIMBANK, of Japan. What was the
subject of the 15% withholding tax is not the interest income paid by MITSUBISHI to
EXIMBANK, but the interest income earned by MITSUBISHI from the loan to ATLAS. . . . 13
To repeat, the contract between Eximbank and Mitsubishi is entirely different. It is complete in itself,
does not appear to be suppletory or collateral to another contract and is, therefore, not to be
distorted by other considerations aliunde. The application for the loan was approved on May 20,
1970, or more than a month after the contract between Mitsubishi and Atlas was entered into on April
17, 1970. It is true that under the contract of loan with Eximbank, Mitsubishi agreed to use the
amount as a loan to and in consideration for importing copper concentrates from Atlas, but all that
this proves is the justification for the loan as represented by Mitsubishi, a standard banking practice
for evaluating the prospects of due repayment. There is nothing wrong with such stipulation as the
parties in a contract are free to agree on such lawful terms and conditions as they see fit. Limiting
the disbursement of the amount borrowed to a certain person or to a certain purpose is not unusual,
especially in the case of Eximbank which, aside from protecting its financial exposure, must see to it
that the same are in line with the provisions and objectives of its charter.
Respondents postulate that Mitsubishi had to be a conduit because Eximbank's charter prevents it
from making loans except to Japanese individuals and corporations. We are not impressed. Not only
is there a failure to establish such submission by adequate evidence but it posits the unfair and
unexplained imputation that, for reasons subject only of surmise, said financing institution would
deliberately circumvent its own charter to accommodate an alien borrower through a manipulated
subterfuge, but with it as a principal and the real obligee.
The allegation that the interest paid by Atlas was remitted in full by Mitsubishi to Eximbank,
assuming the truth thereof, is too tenuous and conjectural to support the proposition that Mitsubishi
is a mere conduit. Furthermore, the remittance of the interest payments may also be logically viewed
as an arrangement in paying Mitsubishi's obligation to Eximbank. Whatever arrangement was
agreed upon by Eximbank and Mitsubishi as to the manner or procedure for the payment of the
latter's obligation is their own concern. It should also be noted that Eximbank's loan to Mitsubishi
imposes interest at the rate of 75% per annum, while Mitsubishis contract with Atlas merely states
that the "interest on the amount of the loan shall be the actual cost beginning from and including
other dates of releases against loan." 14
It is too settled a rule in this jurisdiction, as to dispense with the need for citations, that laws granting
exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the
taxing power. Taxation is the rule and exemption is the exception. The burden of proof rests upon the
party claiming exemption to prove that it is in fact covered by the exemption so claimed, which onus
petitioners have failed to discharge. Significantly, private respondents are not even among the
entities which, under Section 29 (b) (7) (A) of the tax code, are entitled to exemption and which
should indispensably be the party in interest in this case.
Definitely, the taxability of a party cannot be blandly glossed over on the basis of a supposed "broad,
pragmatic analysis" alone without substantial supportive evidence, lest governmental operations
suffer due to diminution of much needed funds. Nor can we close this discussion without taking
cognizance of petitioner's warning, of pervasive relevance at this time, that while international comity
is invoked in this case on the nebulous representation that the funds involved in the loans are those
of a foreign government, scrupulous care must be taken to avoid opening the floodgates to the
violation of our tax laws. Otherwise, the mere expedient of having a Philippine corporation enter into
a contract for loans or other domestic securities with private foreign entities, which in turn will
negotiate independently with their governments, could be availed of to take advantage of the tax
exemption law under discussion.
WHEREFORE, the decisions of the Court of Tax Appeals in CTA Cases Nos. 2801 and 3015, dated
April 18, 1980 and January 15, 1981, respectively, are hereby REVERSED and SET ASIDE.
SO ORDERED.Melencio-Herrera, Paras, Padilla and Sarmiento, JJ., concur.
SECOND DIVISION

G.R. No. 112024 January 28, 1999

PHILIPPINE BANK OF COMMUNICATIONS, petitioner, 

vs.

COMMISSIONER OF INTERNAL REVENUE, COURT OF TAX APPEALS and COURT OF
APPEALS, respondent.

QUISUMBING, J.:
This petition for review assails the Resolution 1 of the Court of Appeals dated September 22,
1993 affirming the Decision2 and a Resolution 3 of the Court Of Tax Appeals which denied the claims
of the petitioner for tax refund and tax credits, and disposing as follows:
IN VIEW OF ALL, THE FOREGOING, the instant petition for review, is DENIED due
course. The Decision of the Court of Tax Appeals dated May 20, 1993 and its
resolution dated July 20, 1993, are hereby AFFIRMED in toto.
SO ORDERED.4
The Court of Tax Appeals earlier ruled as follows:
WHEREFORE, Petitioner's claim for refund/tax credits of overpaid income tax for
1985 in the amount of P5,299,749.95 is hereby denied for having been filed beyond
the reglementary period. The 1986 claim for refund amounting to P234,077.69 is
likewise denied since petitioner has opted and in all likelihood automatically credited
the same to the succeeding year. The petition for review is dismissed for lack of
merit.
SO ORDERED.5
The facts on record show the antecedent circumstances pertinent to this case.
Petitioner, Philippine Bank of Communications (PBCom), a commercial banking corporation duly
organized under Philippine laws, filed its quarterly income tax returns for the first and second
quarters of 1985, reported profits, and paid the total income tax of P5,016,954.00. The taxes due
were settled by applying PBCom's tax credit memos and accordingly, the Bureau of Internal
Revenue (BIR) issued Tax Debit Memo Nos. 0746-85 and 0747-85 for P3,401,701.00 and
P1,615,253.00, respectively.
Subsequently, however, PBCom suffered losses so that when it filed its Annual Income Tax Returns
for the year-ended December 31, 1986, the petitioner likewise reported a net loss of
P14,129,602.00, and thus declared no tax payable for the year.
But during these two years, PBCom earned rental income from leased properties. The lessees
withheld and remitted to the BIR withholding creditable taxes of P282,795.50 in 1985 and
P234,077.69 in 1986.
On August 7, 1987, petitioner requested the Commissioner of Internal Revenue, among others, for a
tax credit of P5,016,954.00 representing the overpayment of taxes in the first and second quarters of
1985.
Thereafter, on July 25, 1988, petitioner filed a claim for refund of creditable taxes withheld by their
lessees from property rentals in 1985 for P282,795.50 and in 1986 for P234,077.69.
Pending the investigation of the respondent Commissioner of Internal Revenue, petitioner instituted
a Petition for Review on November 18, 1988 before the Court of Tax Appeals (CTA). The petition
was docketed as CTA Case No. 4309 entitled: "Philippine Bank of Communications vs.
Commissioner of Internal Revenue."
The losses petitioner incurred as per the summary of petitioner's claims for refund and tax credit for
1985 and 1986, filed before the Court of Tax Appeals, are as follows:
1985 1986
——— ———
Net Income (Loss) (P25,317,288.00) (P14,129,602.00)
Tax Due NIL NIL
Quarterly tax.
Payments Made 5,016,954.00 —
Tax Withheld at Source 282,795.50 234,077.69
———————— ———————
Excess Tax Payments P5,299,749.50* P234,077.69
=============== =============
* CTA's decision reflects PBCom's 1985 tax claim as P5,299,749.95.
A forty five centavo difference was noted.
On May 20, 1993, the CTA rendered a decision which, as stated on the outset, denied the request of
petitioner for a tax refund or credit in the sum amount of P5,299,749.95, on the ground that it was
filed beyond the two-year reglementary period provided for by law. The petitioner's claim for refund in
1986 amounting to P234,077.69 was likewise denied on the assumption that it was automatically
credited by PBCom against its tax payment in the succeeding year.
On June 22, 1993, petitioner filed a Motion for Reconsideration of the CTA's decision but the same
was denied due course for lack of merit. 6
Thereafter, PBCom filed a petition for review of said decision and resolution of the CTA with the
Court of Appeals. However on September 22, 1993, the Court of Appeals affirmed in toto the CTA's
resolution dated July 20, 1993. Hence this petition now before us.
The issues raised by the petitioner are:
I. Whether taxpayer PBCom — which relied in good faith on the
formal assurances of BIR in RMC No. 7-85 and did not immediately
file with the CTA a petition for review asking for the refund/tax credit
of its 1985-86 excess quarterly income tax payments — can be
prejudiced by the subsequent BIR rejection, applied retroactivity, of its
assurances in RMC No. 7-85 that the prescriptive period for the
refund/tax credit of excess quarterly income tax payments is not two
years but ten (10).7
II. Whether the Court of Appeals seriously erred in affirming the CTA
decision which denied PBCom's claim for the refund of P234,077.69
income tax overpaid in 1986 on the mere speculation, without proof,
that there were taxes due in 1987 and that PBCom availed of tax-
crediting that year.8
Simply stated, the main question is: Whether or not the Court of Appeals erred in denying the plea
for tax refund or tax credits on the ground of prescription, despite petitioner's reliance on RMC No.
7-85, changing the prescriptive period of two years to ten years?
Petitioner argues that its claims for refund and tax credits are not yet barred by prescription relying
on the applicability of Revenue Memorandum Circular No. 7-85 issued on April 1, 1985. The circular
states that overpaid income taxes are not covered by the two-year prescriptive period under the tax
Code and that taxpayers may claim refund or tax credits for the excess quarterly income tax with the
BIR within ten (10) years under Article 1144 of the Civil Code. The pertinent portions of the circular
reads:
REVENUE MEMORANDUM CIRCULAR NO. 7-85
SUBJECT: PROCESSING OF REFUND OR TAX
CREDIT OF EXCESS CORPORATE INCOME TAX
RESULTING FROM THE FILING OF THE FINAL
ADJUSTMENT RETURN.
TO: All Internal Revenue Officers and Others Concerned.
Sec. 85 And 86 Of the National Internal Revenue Code provide:
xxx xxx xxx
The foregoing provisions are implemented by Section 7 of Revenue Regulations
Nos. 10-77 which provide;
xxx xxx xxx
It has been observed, however, that because of the excess tax payments,
corporations file claims for recovery of overpaid income tax with the Court of Tax
Appeals within the two-year period from the date of payment, in accordance with
sections 292 and 295 of the National Internal Revenue Code. It is obvious that the
filing of the case in court is to preserve the judicial right of the corporation to claim
the refund or tax credit.
It should he noted, however, that this is not a case of erroneously or illegally paid tax
under the provisions of Sections 292 and 295 of the Tax Code.
In the above provision of the Regulations the corporation may request for the refund
of the overpaid income tax or claim for automatic tax credit. To insure prompt action
on corporate annual income tax returns showing refundable amounts arising from
overpaid quarterly income taxes, this Office has promulgated Revenue Memorandum
Order No. 32-76 dated June 11, 1976, containing the procedure in processing said
returns. Under these procedures, the returns are merely pre-audited which consist
 mainly of checking mathematical accuracy of the figures of the return. After which,
the refund or tax credit is granted, and, this procedure was adopted to facilitate
immediate action on cases like this.
In this regard, therefore, there is no need to file petitions for review in the Court of
Tax Appeals in order to preserve the right to claim refund or tax credit the two year
period. As already stated, actions hereon by the Bureau are immediate after only a
cursory pre-audit of the income tax returns. Moreover, a taxpayer may recover from
the Bureau of Internal Revenue excess income tax paid under the provisions of
Section 86 of the Tax Code within 10 years from the date of payment considering that
it is an obligation created by law (Article 1144 of the Civil Code).9 (Emphasis
supplied.)
Petitioner argues that the government is barred from asserting a position contrary to its declared
circular if it would result to injustice to taxpayers. Citing ABS CBN Broadcasting Corporation vs.
Court of Tax Appeals 10 petitioner claims that rulings or circulars promulgated by the Commissioner of
Internal Revenue have no retroactive effect if it would be prejudicial to taxpayers, In ABS-CBN case,
the Court held that the government is precluded from adopting a position inconsistent with one
previously taken where injustice would result therefrom or where there has been a misrepresentation
to the taxpayer.
Petitioner contends that Sec. 246 of the National Internal Revenue Code explicitly provides for this
rules as follows:
Sec. 246 Non-retroactivity of rulings— Any revocation, modification or reversal of any
of the rules and regulations promulgated in accordance with the preceding section or
any of the rulings or circulars promulgated by the Commissioner shall not be given
retroactive application if the revocation, modification or reversal will be prejudicial to
the taxpayers except in the following cases:
a). where the taxpayer deliberately misstates or omits
material facts from his return or in any document
required of him by the Bureau of Internal Revenue;
b). where the facts subsequently gathered by the
Bureau of Internal Revenue are materially different
from the facts on which the ruling is based;
c). where the taxpayer acted in bad faith.
Respondent Commissioner of Internal Revenue, through Solicitor General, argues that the two-year
prescriptive period for filing tax cases in court concerning income tax payments of Corporations is
reckoned from the date of filing the Final Adjusted Income Tax Return, which is generally done on
April 15 following the close of the calendar year. As precedents, respondent Commissioner cited
cases which adhered to this principle, to wit ACCRA Investments Corp. vs. Court of Appeals, et
al., 11 and Commissioner of Internal Revenue vs. TMX Sales, Inc., et al.. 12 Respondent
Commissioner also states that since the Final Adjusted Income Tax Return of the petitioner for the
taxable year 1985 was supposed to be filed on April 15, 1986, the latter had only until April 15, 1988
to seek relief from the court. Further, respondent Commissioner stresses that when the petitioner
filed the case before the CTA on November 18, 1988, the same was filed beyond the time fixed by
law, and such failure is fatal to petitioner's cause of action.
After a careful study of the records and applicable jurisprudence on the matter, we find that, contrary
to the petitioner's contention, the relaxation of revenue regulations by RMC 7-85 is not warranted as
it disregards the two-year prescriptive period set by law.
Basic is the principle that "taxes are the lifeblood of the nation." The primary purpose is to generate
funds for the State to finance the needs of the citizenry and to advance the common weal. 13 Due
process of law under the Constitution does not require judicial proceedings in tax cases. This must
necessarily be so because it is upon taxation that the government chiefly relies to obtain the means
to carry on its operations and it is of utmost importance that the modes adopted to enforce the
collection of taxes levied should be summary and interfered with as little as possible. 14
From the same perspective, claims for refund or tax credit should be exercised within the time fixed
by law because the BIR being an administrative body enforced to collect taxes, its functions should
not be unduly delayed or hampered by incidental matters.
Sec. 230 of the National Internal Revenue Code (NIRC) of 1977 (now Sec. 229, NIRC of 1997)
provides for the prescriptive period for filing a court proceeding for the recovery of tax erroneously or
illegally collected, viz.:
Sec. 230. Recovery of tax erroneously or illegally collected. — No suit or proceeding
shall be maintained in any court for the recovery of any national internal revenue tax
hereafter alleged to have been erroneously or illegally assessed or collected, or of
any penalty claimed to have been collected without authority, or of any sum alleged
to have been excessive or in any manner wrongfully collected, until a claim for refund
or credit has been duly filed with the Commissioner; but such suit or proceeding may
be maintained, whether or not such tax, penalty, or sum has been paid under protest
or duress.
In any case, no such suit or proceedings shall begun after the expiration of two years
from the date of payment of the tax or penalty regardless of any supervening cause
that may arise after payment; Provided however, That the Commissioner may, even
without a written claim therefor, refund or credit any tax, where on the face of the
return upon which payment was made, such payment appears clearly to have been
erroneously paid. (Emphasis supplied)
The rule states that the taxpayer may file a claim for refund or credit with the Commissioner of
Internal Revenue, within two (2) years after payment of tax, before any suit in CTA is commenced.
The two-year prescriptive period provided, should be computed from the time of filing the Adjustment
Return and final payment of the tax for the year.
In Commissioner of Internal Revenue vs. Philippine American Life Insurance Co., 15 this Court
explained the application of Sec. 230 of 1977 NIRC, as follows:
Clearly, the prescriptive period of two years should commence to run only from the
time that the refund is ascertained, which can only be determined after a final
adjustment return is accomplished. In the present case, this date is April 16, 1984,
and two years from this date would be April 16, 1986. . . . As we have earlier said in
the TMX Sales case, Sections 68. 16 69, 17 and 70 18 on Quarterly Corporate Income
Tax Payment and Section 321 should be considered in conjunction with it 19
When the Acting Commissioner of Internal Revenue issued RMC 7-85, changing the prescriptive
period of two years to ten years on claims of excess quarterly income tax payments, such circular
created a clear inconsistency with the provision of Sec. 230 of 1977 NIRC. In so doing, the BIR did
not simply interpret the law; rather it legislated guidelines contrary to the statute passed by
Congress.
It bears repeating that Revenue memorandum-circulars are considered administrative rulings (in the
sense of more specific and less general interpretations of tax laws) which are issued from time to
time by the Commissioner of Internal Revenue. It is widely accepted that the interpretation placed
upon a statute by the executive officers, whose duty is to enforce it, is entitled to great respect by the
courts. Nevertheless, such interpretation is not conclusive and will be ignored if judicially found to be
erroneous. 20 Thus, courts will not countenance administrative issuances that override, instead of
remaining consistent and in harmony with the law they seek to apply and implement. 21
In the case of People vs. Lim, 22 it was held that rules and regulations issued by administrative
officials to implement a law cannot go beyond the terms and provisions of the latter.
 Appellant contends that Section 2 of FAO No. 37-1 is void because it is not only
inconsistent with but is contrary to the provisions and spirit of Act. No 4003 as
amended, because whereas the prohibition prescribed in said Fisheries Act was for
any single period of time not exceeding five years duration, FAO No 37-1 fixed no
period, that is to say, it establishes an absolute ban for all time. This discrepancy
between Act No. 4003 and FAO No. 37-1 was probably due to an oversight on the
part of Secretary of Agriculture and Natural Resources. Of course, in case of
discrepancy, the basic Act prevails, for the reason that the regulation or rule issued to
implement a law cannot go beyond the terms and provisions of the 

latter. . . . In this connection, the attention of the technical men in the offices of
Department Heads who draft rules and regulation is called to the importance and
necessity of closely following the terms and provisions of the law which they intended
to implement, this to avoid any possible misunderstanding or confusion as in the
present case.23
Further, fundamental is the rule that the State cannot be put in estoppel by the mistakes or errors of
its officials or agents. 24 As pointed out by the respondent courts, the nullification of RMC No. 7-85
issued by the Acting Commissioner of Internal Revenue is an administrative interpretation which is
not in harmony with Sec. 230 of 1977 NIRC. for being contrary to the express provision of a statute.
Hence, his interpretation could not be given weight for to do so would, in effect, amend the statute.
It is likewise argued that the Commissioner of Internal Revenue, after promulgating
RMC No. 7-85, is estopped by the principle of non-retroactively of BIR rulings. Again
We do not agree. The Memorandum Circular, stating that a taxpayer may recover the
excess income tax paid within 10 years from date of payment because this is an
obligation created by law, was issued by the Acting Commissioner of Internal
Revenue. On the other hand, the decision, stating that the taxpayer should still file a
claim for a refund or tax credit and corresponding petition fro review within the 

two-year prescription period, and that the lengthening of the period of limitation on
refund from two to ten years would be adverse to public policy and run counter to the
positive mandate of Sec. 230, NIRC, - was the ruling and judicial interpretation of the
Court of Tax Appeals. Estoppel has no application in the case at bar because it was
not the Commissioner of Internal Revenue who denied petitioner's claim of refund or
tax credit. Rather, it was the Court of Tax Appeals who denied (albeit correctly) the
claim and in effect, ruled that the RMC No. 7-85 issued by the Commissioner of
Internal Revenue is an administrative interpretation which is out of harmony with or
contrary to the express provision of a statute (specifically Sec. 230, NIRC), hence,
cannot be given weight for to do so would in effect amend the statute.25
Art. 8 of the Civil Code 26 recognizes judicial decisions, applying or interpreting statutes as part of the
legal system of the country. But administrative decisions do not enjoy that level of recognition. A
memorandum-circular of a bureau head could not operate to vest a taxpayer with shield against
judicial action. For there are no vested rights to speak of respecting a wrong construction of the law
by the administrative officials and such wrong interpretation could not place the Government in
estoppel to correct or overrule the same. 27 Moreover, the non-retroactivity of rulings by the
Commissioner of Internal Revenue is not applicable in this case because the nullity of RMC No. 7-85
was declared by respondent courts and not by the Commissioner of Internal Revenue. Lastly, it must
be noted that, as repeatedly held by this Court, a claim for refund is in the nature of a claim for
exemption and should be construed in strictissimi juris against the taxpayer.28
On the second issue, the petitioner alleges that the Court of Appeals seriously erred in affirming
CTA's decision denying its claim for refund of P234,077.69 (tax overpaid in 1986), based on mere
speculation, without proof, that PBCom availed of the automatic tax credit in 1987.
Sec. 69 of the 1977 NIRC 29 (now Sec. 76 of the 1997 NIRC) provides that any excess of the total
quarterly payments over the actual income tax computed in the adjustment or final corporate income
tax return, shall either(a) be refunded to the corporation, or (b) may be credited against the
estimated quarterly income tax liabilities for the quarters of the succeeding taxable year.
The corporation must signify in its annual corporate adjustment return (by marking the option box
provided in the BIR form) its intention, whether to request for a refund or claim for an automatic tax
credit for the succeeding taxable year. To ease the administration of tax collection, these remedies
are in the alternative, and the choice of one precludes the other.
As stated by respondent Court of Appeals:
Finally, as to the claimed refund of income tax over-paid in 1986 — the Court of Tax
Appeals, after examining the adjusted final corporate annual income tax return for
taxable year 1986, found out that petitioner opted to apply for automatic tax credit.
This was the basis used (vis-avis the fact that the 1987 annual corporate tax return
was not offered by the petitioner as evidence) by the CTA in concluding that
petitioner had indeed availed of and applied the automatic tax credit to the
succeeding year, hence it can no longer ask for refund, as to [sic] the two remedies
of refund and tax credit are alternative. 30
That the petitioner opted for an automatic tax credit in accordance with Sec. 69 of the 1977 NIRC, as
specified in its 1986 Final Adjusted Income Tax Return, is a finding of fact which we must respect.
Moreover, the 1987 annual corporate tax return of the petitioner was not offered as evidence to
contovert said fact. Thus, we are bound by the findings of fact by respondent courts, there being no
showing of gross error or abuse on their part to disturb our reliance thereon. 31
WHEREFORE, the, petition is hereby DENIED, The decision of the Court of Appeals appealed from
is AFFIRMED, with COSTS against the petitioner. 1âwphi1.nêt

SO ORDERED.
Bellosillo, Puno, Mendoza, and Buena, JJ., concur.
 EN BANC
G.R. No. L-59431 July 25, 1984
ANTERO M. SISON, JR., petitioner, 

vs.

RUBEN B. ANCHETA, Acting Commissioner, Bureau of Internal Revenue; ROMULO VILLA,
Deputy Commissioner, Bureau of Internal Revenue; TOMAS TOLEDO Deputy Commissioner,
Bureau of Internal Revenue; MANUEL ALBA, Minister of Budget, FRANCISCO TANTUICO,
Chairman, Commissioner on Audit, and CESAR E. A. VIRATA, Minister of
Finance, respondents.
Antero Sison for petitioner and for his own behalf.
The Solicitor General for respondents.

FERNANDO, C.J.:
The success of the challenge posed in this suit for declaratory relief or prohibition proceeding 1 on the
validity of Section I of Batas Pambansa Blg. 135 depends upon a showing of its constitutional infirmity. The assailed provision further amends
Section 21 of the National Internal Revenue Code of 1977, which provides for rates of tax on citizens or residents on (a) taxable
compensation income, (b) taxable net income, (c) royalties, prizes, and other winnings, (d) interest from bank deposits and yield or any other
monetary benefit from deposit substitutes and from trust fund and similar arrangements, (e) dividends and share of individual partner in the
net profits of taxable partnership, (f) adjusted gross income. 2 Petitioner 3 as taxpayer alleges that by virtue thereof, "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-visthose which
are imposed upon fixed income or salaried individual taxpayers. 4 He characterizes the above sction as arbitrary amounting to class
legislation, oppressive and capricious in character 5 For petitioner, therefore, there is a transgression of both the equal protection and due
process clauses 6 of the Constitution as well as of the rule requiring uniformity in taxation. 7

The Court, in a resolution of January 26, 1982, required respondents to file an answer within 10 days
from notice. Such an answer, after two extensions were granted the Office of the Solicitor General,
was filed on May 28, 1982. 8The facts as alleged were admitted but not the allegations which to their
mind are "mere arguments, opinions or conclusions on the part of the petitioner, the truth [for them]
being those stated [in their] Special and Affirmative Defenses." 9 The answer then affirmed: "Batas
Pambansa Big. 135 is a valid exercise of the State's power to tax. The authorities and cases cited
while correctly quoted or paraghraph do not support petitioner's stand." 10 The prayer is for the dismissal of the
petition for lack of merit.

This Court finds such a plea more than justified. The petition must be dismissed.
1. It is manifest that the field of state activity has assumed a much wider scope, The reason was so
clearly set forth by retired Chief Justice Makalintal thus: "The areas which used to be left to private
enterprise and initiative and which the government was called upon to enter optionally, and only
'because it was better equipped to administer for the public welfare than is any private individual or
group of individuals,' continue to lose their well-defined boundaries and to be absorbed within
activities that the government must undertake in its sovereign capacity if it is to meet the increasing
social challenges of the times." 11 Hence the need for more revenues. The power to tax, an inherent prerogative, has to be
availed of to assure the performance of vital state functions. It is the source of the bulk of public funds. To praphrase a recent decision, taxes
being the lifeblood of the government, their prompt and certain availability is of the essence. 12
2. The power to tax moreover, to borrow from Justice Malcolm, "is an attribute of sovereignty. It is the strongest of all the powers of of
government." 13 It is, of course, to be admitted that for all its plenitude 'the power to tax is not unconfined. There are restrictions. The
Constitution sets forth such limits . Adversely affecting as it does properly rights, both the due process and equal protection clauses inay
properly be invoked, all petitioner does, to invalidate in appropriate cases a revenue measure. if it were otherwise, there would -be truth to
the 1803 dictum of Chief Justice Marshall that "the power to tax involves the power to destroy." 14 In a separate opinion in Graves v. New
York, 15 Justice Frankfurter, after referring to it as an 1, unfortunate remark characterized it as "a flourish of rhetoric [attributable to] the
intellectual fashion of the times following] a free use of absolutes." 16 This is merely to emphasize that it is riot and there cannot be such a
constitutional mandate. Justice Frankfurter could rightfully conclude: "The web of unreality spun from Marshall's famous dictum was brushed
away by one stroke of Mr. Justice Holmess pen: 'The power to tax is not the power to destroy while this Court sits." 17 So it is in the
Philippines.

3. This Court then is left with no choice. The Constitution as the fundamental law overrides any
legislative or executive, act that runs counter to it. In any case therefore where it can be
demonstrated that the challenged statutory provision — as petitioner here alleges — fails to abide by
its command, then this Court must so declare and adjudge it null. The injury thus is centered on the
question of whether the imposition of a higher tax rate on taxable net income derived from business
or profession than on compensation is constitutionally infirm.
4, The difficulty confronting petitioner is thus apparent. He alleges arbitrariness. A mere allegation,
as here. does not suffice. There must be a factual foundation of such unconstitutional taint.
Considering that petitioner here would condemn such a provision as void or its face, he has not
made out a case. This is merely to adhere to the authoritative doctrine that were the due process
and equal protection clauses are invoked, considering that they arc not fixed rules but rather broad
standards, there is a need for of such persuasive character as would lead to such a conclusion.
Absent such a showing, the presumption of validity must prevail. 18
5. It is undoubted that the due process clause 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. That would be a clear abuse of power. It
then becomes the duty of this Court to say that such an arbitrary act amounted to the exercise of an authority not conferred. That properly
calls for the application of the Holmes dictum. It has also been held that where the assailed tax measure is beyond the jurisdiction of the
state, or is not for a public purpose, or, in case of a retroactive statute is so harsh and unreasonable, it is subject to attack on due process
grounds. 19
6. Now for equal protection. The applicable standard to avoid the charge that there is a denial of this constitutional mandate whether the
assailed act is in the exercise of the lice power or the power of eminent domain is to demonstrated that the governmental act assailed, far
from being inspired by the attainment of the common weal was prompted by the spirit of hostility, or at the very least, discrimination that finds
no support in reason. It suffices then that the laws operate equally and uniformly on all persons under similar circumstances or that all
persons must be treated in the same manner, the conditions not being different, both in the privileges conferred and the liabilities imposed.
Favoritism and undue preference cannot be allowed. For the principle is that equal protection and security shall be given to every person
under circumtances which if not Identical are analogous. If law be looked upon in terms of burden or charges, those that fall within a class
should be treated in the same fashion, whatever restrictions cast on some in the group equally binding on the rest." 20 That same formulation
applies as well to taxation measures. The equal protection clause is, of course, inspired by the noble concept of approximating the Ideal of
the laws benefits being available to all and the affairs of men being governed by that serene and impartial uniformity, which is of the very
essence of the Idea of law. There is, however, wisdom, as well as realism in these words of Justice Frankfurter: "The equality at which the
'equal protection' clause aims is not a disembodied equality. The Fourteenth Amendment enjoins 'the equal protection of the laws,' and laws
are not abstract propositions. They do not relate to abstract units A, B and C, but are expressions of policy arising out of specific difficulties,
address to the attainment of specific ends by the use of specific remedies. The Constitution does not require things which are different in fact
or opinion to be treated in law as though they were the same." 21 Hence the constant reiteration of the view that classification if rational in
character is allowable. As a matter of fact, in a leading case of Lutz V. Araneta, 22 this Court, through Justice J.B.L. Reyes, went so far as to
hold "at any rate, it is inherent in the power to tax that a state be free to select the subjects of taxation, and it has been repeatedly held that
'inequalities which result from a singling out of one particular class for taxation, or exemption infringe no constitutional limitation.'" 23

7. Petitioner likewise invoked the kindred concept of uniformity. According to the Constitution: "The
rule of taxation shag be uniform and equitable." 24 This requirement is met according to Justice
Laurel in Philippine Trust Company v. Yatco,25 decided in 1940, when the tax "operates with the same
force and effect in every place where the subject may be found. " 26 He likewise added: "The rule of
uniformity does not call for perfect uniformity or perfect equality, because this is hardly
attainable." 27 The problem of classification did not present itself in that case. It did not arise until nine
years later, when the Supreme Court held: "Equality and uniformity in taxation means that all taxable
articles or kinds of property of the same class shall be taxed at the same rate. The taxing power has
the authority to make reasonable and natural classifications for purposes of taxation, ... . 28 As
clarified by Justice Tuason, where "the differentiation" 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." 29 There is quite a similarity then to the standard of equal protection for all that is
required is that the tax "applies equally to all persons, firms and corporations placed in similar
situation."30
8. Further on this point. Apparently, what misled petitioner is his failure to take into consideration the
distinction between a tax rate and a tax base. There is no legal objection to a broader tax base or
taxable income by eliminating all deductible items and at the same time reducing the applicable tax
rate. Taxpayers may be classified into different categories. To repeat, it. is enough that the
classification must rest upon substantial distinctions that make real differences. In the case of the
gross income taxation embodied in Batas Pambansa Blg. 135, the, discernible basis of classification
is the susceptibility of the income to the application of generalized rules removing all deductible
items for all taxpayers within the class and fixing a set of reduced tax rates to be applied to all of
them. Taxpayers who are recipients of compensation income are set apart as a class. As there is
practically no overhead expense, these taxpayers are e not entitled to make deductions for income
tax purposes because they are in the same situation more or less. On the other hand, in the case of
professionals in the practice of their calling and businessmen, there is no uniformity in the costs or
expenses necessary to produce their income. It would not be just then to disregard the disparities by
giving all of them zero deduction and indiscriminately impose on all alike the same tax rates on the
basis of gross income. There is ample justification then for the Batasang Pambansa to adopt the
gross system of income taxation to compensation income, while continuing the system of net income
taxation as regards professional and business income.
9. Nothing can be clearer, therefore, than that the petition is without merit, considering the (1) lack of
factual foundation to show the arbitrary character of the assailed provision; 31 (2) the force of
controlling doctrines on due process, equal protection, and uniformity in taxation and (3) the
reasonableness of the distinction between compensation and taxable net income of professionals
and businessman certainly not a suspect classification,
WHEREFORE, the petition is dismissed. Costs against petitioner.
Makasiar, Concepcion, Jr., Guerero, Melencio-Herrera, Escolin, Relova, Gutierrez, Jr., De la Fuente
and Cuevas, JJ., concur.
Teehankee, J., concurs in the result.
Plana, J., took no part.

Separate Opinions

AQUINO, J., concurring:

I concur in the result. The petitioner has no cause of action for prohibition.
ABAD SANTOS, J., dissenting:
This is a frivolous suit. While the tax rates for compensation income are lower than those for net
income such circumtance does not necessarily result in lower tax payments for these receiving
compensation income. In fact, the reverse will most likely be the case; those who file returns on the
basis of net income will pay less taxes because they claim all sort of deduction justified or not I vote
for dismissal.

Separate Opinions
AQUINO, J., concurring:
I concur in the result. The petitioner has no cause of action for prohibition.
ABAD SANTOS, J., dissenting:
This is a frivolous suit. While the tax rates for compensation income are lower than those for net
income such circumtance does not necessarily result in lower tax payments for these receiving
compensation income. In fact, the reverse will most likely be the case; those who file returns on the
basis of net income will pay less taxes because they claim all sort of deduction justified or not I vote
for dismissal.

EN BANC
G.R. Nos. L-49839-46 April 26, 1991
JOSE B. L. REYES and EDMUNDO A. REYES, petitioners, 

vs.

PEDRO ALMANZOR, VICENTE ABAD SANTOS, JOSE ROÑO, in their capacities as appointed
and Acting Members of the CENTRAL BOARD OF ASSESSMENT APPEALS; TERESITA H.
NOBLEJAS, ROMULO M. DEL ROSARIO, RAUL C. FLORES, in their capacities as appointed
and Acting Members of the BOARD OF ASSESSMENT APPEALS of Manila; and NICOLAS
CATIIL in his capacity as City Assessor of Manila,respondents.
Barcelona, Perlas, Joven & Academia Law Offices for petitioners.



PARAS, J.:
This is a petition for review on certiorari to reverse the June 10, 1977 decision of the Central Board
of Assessment Appeals1 in CBAA Cases Nos. 72-79 entitled "J.B.L. Reyes, Edmundo Reyes, et al. v.
Board of Assessment Appeals of Manila and City Assessor of Manila" which affirmed the March 29,
1976 decision of the Board of Tax Assessment Appeals2 in BTAA Cases Nos. 614, 614-A-J, 615,
615-A, B, E, "Jose Reyes, et al. v. City Assessor of Manila" and "Edmundo Reyes and Milagros
Reyes v. City Assessor of Manila" upholding the classification and assessments made by the City
Assessor of Manila.
The facts of the case are as follows:
Petitioners J.B.L. Reyes, Edmundo and Milagros Reyes are owners of parcels of land situated in
Tondo and Sta. Cruz Districts, City of Manila, which are leased and entirely occupied as dwelling
sites by tenants. Said tenants were paying monthly rentals not exceeding three hundred pesos
(P300.00) in July, 1971. On July 14, 1971, the National Legislature enacted Republic Act No. 6359
prohibiting for one year from its effectivity, an increase in monthly rentals of dwelling units or of lands
on which another's dwelling is located, where such rentals do not exceed three hundred pesos
(P300.00) a month but allowing an increase in rent by not more than 10% thereafter. The said Act
also suspended paragraph (1) of Article 1673 of the Civil Code for two years from its effectivity
thereby disallowing the ejectment of lessees upon the expiration of the usual legal period of lease.
On October 12, 1972, Presidential Decree No. 20 amended R.A. No. 6359 by making absolute the
prohibition to increase monthly rentals below P300.00 and by indefinitely suspending the
aforementioned provision of the Civil Code, excepting leases with a definite period. Consequently,
the Reyeses, petitioners herein, were precluded from raising the rentals and from ejecting the
tenants. In 1973, respondent City Assessor of Manila re-classified and reassessed the value of the
subject properties based on the schedule of market values duly reviewed by the Secretary of
Finance. The revision, as expected, entailed an increase in the corresponding tax rates prompting
petitioners to file a Memorandum of Disagreement with the Board of Tax Assessment Appeals. They
averred that the reassessments made were "excessive, unwarranted, inequitable, confiscatory and
unconstitutional" considering that the taxes imposed upon them greatly exceeded the annual income
derived from their properties. They argued that the income approach should have been used in
determining the land values instead of the comparable sales approach which the City Assessor
adopted (Rollo, pp. 9-10-A). The Board of Tax Assessment Appeals, however, considered the
assessments valid, holding thus:
WHEREFORE, and considering that the appellants have failed to submit concrete evidence
which could overcome the presumptive regularity of the classification and assessments
appear to be in accordance with the base schedule of market values and of the base
schedule of building unit values, as approved by the Secretary of Finance, the cases should
be, as they are hereby, upheld.
SO ORDERED. (Decision of the Board of Tax Assessment Appeals, Rollo, p. 22).
The Reyeses appealed to the Central Board of Assessment Appeals. They submitted, among
1âwphi1

others, the summary of the yearly rentals to show the income derived from the properties.
Respondent City Assessor, on the other hand, submitted three (3) deeds of sale showing the
different market values of the real property situated in the same vicinity where the subject properties
of petitioners are located. To better appreciate the locational and physical features of the land, the
Board of Hearing Commissioners conducted an ocular inspection with the presence of two
representatives of the City Assessor prior to the healing of the case. Neither the owners nor their
authorized representatives were present during the said ocular inspection despite proper notices
served them. It was found that certain parcels of land were below street level and were affected by
the tides (Rollo, pp. 24-25).
On June 10, 1977, the Central Board of Assessment Appeals rendered its decision, the dispositive
portion of which reads:
WHEREFORE, the appealed decision insofar as the valuation and assessment of the lots
covered by Tax Declaration Nos. (5835) PD-5847, (5839), (5831) PD-5844 and PD-3824 is
affirmed.
For the lots covered by Tax Declaration Nos. (1430) PD-1432, PD-1509, 146 and (1)
PD-266, the appealed Decision is modified by allowing a 20% reduction in their respective
market values and applying therein the assessment level of 30% to arrive at the
corresponding assessed value.
SO ORDERED. (Decision of the Central Board of Assessment Appeals, Rollo, p. 27)
Petitioner's subsequent motion for reconsideration was denied, hence, this petition.
The Reyeses assigned the following error:
THE HONORABLE BOARD ERRED IN ADOPTING THE "COMPARABLE SALES
APPROACH" METHOD IN FIXING THE ASSESSED VALUE OF APPELLANTS'
PROPERTIES.
The petition is impressed with merit.
The crux of the controversy is in the method used in tax assessment of the properties in question.
Petitioners maintain that the "Income Approach" method would have been more realistic for in
disregarding the effect of the restrictions imposed by P.D. 20 on the market value of the properties
affected, respondent Assessor of the City of Manila unlawfully and unjustifiably set increased new
assessed values at levels so high and successive that the resulting annual real estate taxes would
admittedly exceed the sum total of the yearly rentals paid or payable by the dweller tenants under
P.D. 20. Hence, petitioners protested against the levels of the values assigned to their properties as
revised and increased on the ground that they were arbitrarily excessive, unwarranted, inequitable,
confiscatory and unconstitutional (Rollo, p. 10-A).
On the other hand, while respondent Board of Tax Assessment Appeals admits in its decision that
the income approach is used in determining land values in some vicinities, it maintains that when
income is affected by some sort of price control, the same is rejected in the consideration and study
of land values as in the case of properties affected by the Rent Control Law for they do not project
the true market value in the open market (Rollo, p. 21). Thus, respondents opted instead for the
"Comparable Sales Approach" on the ground that the value estimate of the properties predicated
upon prices paid in actual, market transactions would be a uniform and a more credible standards to
use especially in case of mass appraisal of properties (Ibid.). Otherwise stated, public respondents
would have this Court completely ignore the effects of the restrictions of P.D. No. 20 on the market
value of properties within its coverage. In any event, it is unquestionable that both the "Comparable
Sales Approach" and the "Income Approach" are generally acceptable methods of appraisal for
taxation purposes (The Law on Transfer and Business Taxation by Hector S. De Leon, 1988 Edition).
However, it is conceded that the propriety of one as against the other would of course depend on
several factors. Hence, as early as 1923 in the case of Army & Navy Club, Manila v. Wenceslao
Trinidad, G.R. No. 19297 (44 Phil. 383), it has been stressed that the assessors, in finding the value
of the property, have to consider all the circumstances and elements of value and must exercise a
prudent discretion in reaching conclusions.
Under Art. VIII, Sec. 17 (1) of the 1973 Constitution, then enforced, the rule of taxation must not only
be uniform, but must also be equitable and progressive.
Uniformity has been defined as that principle by which all taxable articles or kinds of property of the
same class shall be taxed at the same rate (Churchill v. Concepcion, 34 Phil. 969 [1916]).
Notably in the 1935 Constitution, there was no mention of the equitable or progressive aspects of
taxation required in the 1973 Charter (Fernando "The Constitution of the Philippines", p. 221,
Second Edition). Thus, the need to examine closely and determine the specific mandate of the
Constitution.
Taxation is said to be equitable when its burden falls on those better able to pay. Taxation is
progressive when its rate goes up depending on the resources of the person affected (Ibid.).
The power to tax "is an attribute of sovereignty". In fact, it is the strongest of all the powers of
government. But for all its plenitude the power to tax is not unconfined as there are restrictions.
Adversely effecting as it does property rights, both the due process and equal protection clauses of
the Constitution may properly be invoked to invalidate in appropriate cases a revenue measure. If it
were otherwise, there would be truth to the 1903 dictum of Chief Justice Marshall that "the power to
tax involves the power to destroy." The web or unreality spun from Marshall's famous dictum was
brushed away by one stroke of Mr. Justice Holmes pen, thus: "The power to tax is not the power to
destroy while this Court sits. So it is in the Philippines " (Sison, Jr. v. Ancheta, 130 SCRA 655 [1984];
Obillos, Jr. v. Commissioner of Internal Revenue, 139 SCRA 439 [1985]).
In the same vein, the due process clause 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
confiscation of property. That would be a clear abuse of power (Sison v. Ancheta, supra).
The taxing power has the authority to make a reasonable and natural classification for purposes of
taxation but the government's act must not be prompted by a spirit of hostility, or at the very least
discrimination that finds no support in reason. It suffices then that the laws operate equally and
uniformly on all persons under similar circumstances or that all persons must be treated in the same
manner, the conditions not being different both in the privileges conferred and the liabilities imposed
(Ibid., p. 662).
Finally under the Real Property Tax Code (P.D. 464 as amended), it is declared that the first
Fundamental Principle to guide the appraisal and assessment of real property for taxation purposes
is that the property must be "appraised at its current and fair market value."
By no strength of the imagination can the market value of properties covered by P.D. No. 20 be
equated with the market value of properties not so covered. The former has naturally a much lesser
market value in view of the rental restrictions.
Ironically, in the case at bar, not even the factors determinant of the assessed value of subject
properties under the "comparable sales approach" were presented by the public respondents,
namely: (1) that the sale must represent a bonafide arm's length transaction between a willing seller
and a willing buyer and (2) the property must be comparable property (Rollo, p. 27). Nothing can
justify or support their view as it is of judicial notice that for properties covered by P.D. 20 especially
during the time in question, there were hardly any willing buyers. As a general rule, there were no
takers so that there can be no reasonable basis for the conclusion that these properties were
comparable with other residential properties not burdened by P.D. 20. Neither can the given
circumstances be nonchalantly dismissed by public respondents as imposed under distressed
conditions clearly implying that the same were merely temporary in character. At this point in time,
the falsity of such premises cannot be more convincingly demonstrated by the fact that the law has
existed for around twenty (20) years with no end to it in sight.
Verily, taxes are the lifeblood of the government and so should be collected without unnecessary
hindrance. However, such collection should be made in accordance with law as any arbitrariness will
negate the very reason for government itself It is therefore necessary to reconcile the apparently
conflicting interests of the authorities and the taxpayers so that the real purpose of taxations, which
is the promotion of the common good, may be achieved (Commissioner of Internal Revenue v. Algue
Inc., et al., 158 SCRA 9 [1988]). Consequently, it stands to reason that petitioners who are burdened
by the government by its Rental Freezing Laws (then R.A. No. 6359 and P.D. 20) under the principle
of social justice should not now be penalized by the same government by the imposition of
excessive taxes petitioners can ill afford and eventually result in the forfeiture of their properties.
By the public respondents' own computation the assessment by income approach would amount to
only P10.00 per sq. meter at the time in question.
PREMISES CONSIDERED, (a) the petition is GRANTED; (b) the assailed decisions of public
respondents are REVERSED and SET ASIDE; and (e) the respondent Board of Assessment
Appeals of Manila and the City Assessor of Manila are ordered to make a new assessment by the
income approach method to guarantee a fairer and more realistic basis of computation (Rollo, p. 71).
SO ORDERED.
Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Feliciano, Gancayco, Padilla, Bidin,
Sarmiento, Griño-Aquino, Medialdea, Regalado and Davide, Jr., JJ., concur.
 EN BANC
G.R. No. 78780 July 23, 1987
DAVID G. NITAFAN, WENCESLAO M. POLO, and MAXIMO A. SAVELLANO, JR., petitioners, 

vs.

COMMISSIONER OF INTERNAL REVENUE and THE FINANCIAL OFFICER, SUPREME COURT
OF THE PHILIPPINES, respondents.
RESOLUTION
MELENCIO-HERRERA, J.:
Petitioners, the duly appointed and qualified Judges presiding over Branches 52, 19 and 53,
respectively, of the Regional Trial Court, National Capital Judicial Region, all with stations in Manila,
seek to prohibit and/or perpetually enjoin respondents, the Commissioner of Internal Revenue and
the Financial Officer of the Supreme Court, from making any deduction of withholding taxes from
their salaries.
In a nutshell, they submit that "any tax withheld from their emoluments or compensation as judicial
officers constitutes a decrease or diminution of their salaries, contrary to the provision of Section 10,
Article VIII of the 1987 Constitution mandating that "(d)uring their continuance in office, their salary
shall not be decreased," even as it is anathema to the Ideal of an independent judiciary envisioned in
and by said Constitution."
It may be pointed out that, early on, the Court had dealt with the matter administratively in response
to representations that the Court direct its Finance Officer to discontinue the withholding of taxes
from salaries of members of the Bench. Thus, on June 4, 1987, the Court en banc had reaffirmed the
Chief Justice's directive as follows:
RE: Question of exemption from income taxation. — The Court REAFFIRMED the Chief
Justice's previous and standing directive to the Fiscal Management and Budget Office of this
Court to continue with the deduction of the withholding taxes from the salaries of the Justices
of the Supreme Court as well as from the salaries of all other members of the judiciary.
That should have resolved the question. However, with the filing of this petition, the Court has
deemed it best to settle the legal issue raised through this judicial pronouncement. As will be shown
hereinafter, the clear intent of the Constitutional Commission was to delete the proposed express
grant of exemption from payment of income tax to members of the Judiciary, so as to "give
substance to equality among the three branches of Government" in the words of Commissioner
Rigos. In the course of the deliberations, it was further expressly made clear, specially with regard to
Commissioner Joaquin F. Bernas' accepted amendment to the amendment of Commissioner Rigos,
that the salaries of members of the Judiciary would be subject to the general income tax applied to
all taxpayers.
This intent was somehow and inadvertently not clearly set forth in the final text of the Constitution as
approved and ratified in February, 1987 (infra, pp. 7-8). Although the intent may have been obscured
by the failure to include in the General Provisions a proscription against exemption of any public
officer or employee, including constitutional officers, from payment of income tax, the Court since
then has authorized the continuation of the deduction of the withholding tax from the salaries of the
members of the Supreme Court, as well as from the salaries of all other members of the Judiciary.
The Court hereby makes of record that it had then discarded the ruling in Perfecto vs. Meer and
Endencia vs. David, infra, that declared the salaries of members of the Judiciary exempt from
payment of the income tax and considered such payment as a diminution of their salaries during
their continuance in office. The Court hereby reiterates that the salaries of Justices and Judges are
properly subject to a general income tax law applicable to all income earners and that the payment
of such income tax by Justices and Judges does not fall within the constitutional protection against
decrease of their salaries during their continuance in office.
A comparison of the Constitutional provisions involved is called for. The 1935 Constitution provided:
 ... (The members of the Supreme Court and all judges of inferior courts) shall receive such
compensation as may be fixed by law, which shall not be diminished during their continuance
in office ... 1 (Emphasis supplied).
Under the 1973 Constitution, the same provision read:
The salary of the Chief Justice and of the Associate Justices of the Supreme court, and of
judges of inferior courts shall be fixed by law, which shall not be decreased during their
continuance in office. ... 2 (Emphasis ours).
And in respect of income tax exemption, another provision in the same 1973 Constitution specifically
stipulated:
No salary or any form of emolument of any public officer or employee, including
constitutional officers, shall be exempt from payment of income tax. 3
The provision in the 1987 Constitution, which petitioners rely on, reads:
The salary of the Chief Justice and of the Associate Justices of the Supreme Court, and of
judges of lower courts shall be fixed by law. During their continuance in office, their salary
shall not be decreased. 4(Emphasis supplied).
The 1987 Constitution does not contain a provision similar to Section 6, Article XV of the 1973
Constitution, for which reason, petitioners claim that the intent of the framers is to revert to the
original concept of "non-diminution "of salaries of judicial officers.
The deliberations of the 1986 Constitutional Commission relevant to Section 10, Article VIII, negate
such contention.
The draft proposal of Section 10, Article VIII, of the 1987 Constitution read:
Section 13. The salary of the Chief Justice and the Associate Justices of the Supreme Court
and of judges of the lower courts shall be fixed by law. During their continuance in office,
their salary shall not be diminished nor subjected to income tax. Until the National Assembly
shall provide otherwise, the Chief Justice shall receive an annual salary of _____________
and each Associate Justice ______________ pesos. 5(Emphasis ours)
During the debates on the draft Article (Committee Report No. 18), two Commissioners presented
their objections to the provision on tax exemption, thus:
MS. AQUINO. Finally, on the matter of exemption from tax of the salary of justices, does this
not violate the principle of the uniformity of taxation and the principle of equal protection of
the law? After all, tax is levied not on the salary but on the combined income, such that when
the judge receives a salary and it is comingled with the other income, we tax the income, not
the salary. Why do we have to give special privileges to the salary of justices?
MR. CONCEPCION. It is the independence of the judiciary. We prohibit the increase or
decrease of their salary during their term. This is an indirect way of decreasing their salary
and affecting the independence of the judges.
MS. AQUINO. I appreciate that to be in the nature of a clause to respect tenure, but the
special privilege on taxation might, in effect, be a violation of the principle of uniformity in
taxation and the equal protection clause. 6
xxx xxx xxx
MR. OPLE. x x x
Of course, we share deeply the concern expressed by the sponsor, Commissioner Roberto
Concepcion, for whom we have the highest respect, to surround the Supreme Court and the
judicial system as a whole with the whole armor of defense against the executive and
legislative invasion of their independence. But in so doing, some of the citizens outside,
especially the humble government employees, might say that in trying to erect a bastion of
 justice, we might end up with the fortress of privileges, an island of extra territoriality under
the Republic of the Philippines, because a good number of powers and rights accorded to
the Judiciary here may not be enjoyed in the remotest degree by other employees of the
government.
An example is the exception from income tax, which is a kind of economic immunity, which
is, of course, denied to the entire executive department and the legislative. 7
And during the period of amendments on the draft Article, on July 14, 1986, Commissioner Cirilo A.
Rigos proposed that the term "diminished" be changed to "decreased" and that the words "nor
subjected to income tax" be deleted so as to "give substance to equality among the three branches
in the government.
Commissioner Florenz D. Regalado, on behalf of the Committee on the Judiciary, defended the
original draft and referred to the ruling of this Court in Perfecto vs. Meer 8 that "the independence of
the judges is of far greater importance than any revenue that could come from taxing their salaries."
Commissioner Rigos then moved that the matter be put to a vote. Commissioner Joaquin G. Bernas
stood up "in support of an amendment to the amendment with the request for a modification of the
amendment," as follows:
FR. BERNAS. Yes. I am going to propose an amendment to the amendment saying that it is
not enough to drop the phrase "shall not be subjected to income tax," because if that is all
that the Gentleman will do, then he will just fall back on the decision in Perfecto vs. Meer and
in Dencia vs. David [should be Endencia and Jugo vs. David, etc., 93 Phil. 696[ which
excludes them from income tax, but rather I would propose that the statement will read:
"During their continuance in office, their salary shall not be diminished BUT MAY BE
SUBJECT TO GENERAL INCOME TAX."IN support of this position, I would say that the
argument seems to be that the justice and judges should not be subjected to income tax
because they already gave up the income from their practice. That is true also of Cabinet
members and all other employees. And I know right now, for instance, there are many people
who have accepted employment in the government involving a reduction of income and yet
are still subject to income tax. So, they are not the only citizens whose income is reduced by
accepting service in government.
Commissioner Rigos accepted the proposed amendment to the amendment. Commissioner Rustico
F. de los Reyes, Jr. then moved for a suspension of the session. Upon resumption, Commissioner
Bernas announced:
During the suspension, we came to an understanding with the original proponent,
Commissioner Rigos, that his amendment on page 6,. line 4 would read: "During their
continuance in office, their salary shall not be DECREASED."But this is on the understanding
that there will be a provision in the Constitution similar to Section 6 of Article XV, the General
Provisions of the 1973 Constitution, which says:
No salary or any form of emolument of any public officer or employee, including
constitutional officers, shall be exempt from payment of income tax.
So, we put a period (.) after "DECREASED" on the understanding that the salary of justices
is subject to tax.
When queried about the specific Article in the General Provisions on non-exemption from tax of
salaries of public officers, Commissioner Bernas replied:
FR BERNAS. Yes, I do not know if such an article will be found in the General Provisions.
But at any rate, when we put a period (.) after "DECREASED," it is on the understanding that
the doctrine in Perfecto vs. Meer and Dencia vs. David will not apply anymore.
The amendment to the original draft, as discussed and understood, was finally approved without
objection.
 THE PRESIDING OFFICER (Mr. Bengzon). The understanding, therefore, is that there will
be a provision under the Article on General Provisions. Could Commissioner Rosario Braid
kindly take note that the salaries of officials of the government including constitutional
officers shall not be exempt from income tax? The amendment proposed herein and
accepted by the Committee now reads as follows: "During their continuance in office, their
salary shall not be DECREASED"; and the phrase "nor subjected to income tax" is deleted.9
The debates, interpellations and opinions expressed regarding the constitutional provision in
question until it was finally approved by the Commission disclosed that the true intent of the framers
of the 1987 Constitution, in adopting it, was to make the salaries of members of the Judiciary
taxable. The ascertainment of that intent is but in keeping with the fundamental principle of
constitutional construction that the intent of the framers of the organic law and of the people adopting
it should be given effect.10 The primary task in constitutional construction is to ascertain and
thereafter assure the realization of the purpose of the framers and of the people in the adoption of
the Constitution.11it may also be safely assumed that the people in ratifying the Constitution were
guided mainly by the explanation offered by the framers.12 1avvphi1

Besides, construing Section 10, Articles VIII, of the 1987 Constitution, which, for clarity, is again
reproduced hereunder:
The salary of the Chief Justice and of the Associate Justices of the Supreme Court, and of
judges of lower courts shall be fixed by law. During their continuance in office, their salary
shall not be decreased. (Emphasis supplied).
it is plain that the Constitution authorizes Congress to pass a law fixing another rate of compensation
of Justices and Judges but such rate must be higher than that which they are receiving at the time of
enactment, or if lower, it would be applicable only to those appointed after its approval. It would be a
strained construction to read into the provision an exemption from taxation in the light of the
discussion in the Constitutional Commission.
With the foregoing interpretation, and as stated heretofore, the ruling that "the imposition of income
tax upon the salary of judges is a dimunition thereof, and so violates the Constitution" in Perfecto vs.
Meer,13 as affirmed in Endencia vs. David 14 must be declared discarded. The framers of the
fundamental law, as the alter ego of the people, have expressed in clear and unmistakable terms the
meaning and import of Section 10, Article VIII, of the 1987 Constitution that they have adopted
Stated otherwise, we accord due respect to the intent of the people, through the discussions and
deliberations of their representatives, in the spirit that all citizens should bear their aliquot part of the
cost of maintaining the government and should share the burden of general income taxation
equitably.
WHEREFORE, the instant petition for Prohibition is hereby dismissed.
Teehankee, C.J., Fernan, Narvasa, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin,
Sarmiento and Cortes, JJ., concur.

Yap, J., is on leave.
 EN BANC

G.R. No. 115455 August 25, 1994

ARTURO M. TOLENTINO, petitioner, 

vs.

THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL
REVENUE, respondents.
G.R. No. 115525 August 25, 1994
JUAN T. DAVID, petitioner, 

vs.

TEOFISTO T. GUINGONA, JR., as Executive Secretary; ROBERTO DE OCAMPO, as Secretary
of Finance; LIWAYWAY VINZONS-CHATO, as Commissioner of Internal Revenue; and their
AUTHORIZED AGENTS OR REPRESENTATIVES, respondents.
G.R. No. 115543 August 25, 1994
RAUL S. ROCO and the INTEGRATED BAR OF THE PHILIPPINES, petitioners, 

vs.

THE SECRETARY OF THE DEPARTMENT OF FINANCE; THE COMMISSIONERS OF THE
BUREAU OF INTERNAL REVENUE AND BUREAU OF CUSTOMS, respondents.
G.R. No. 115544 August 25, 1994
PHILIPPINE PRESS INSTITUTE, INC.; EGP PUBLISHING CO., INC.; PUBLISHING
CORPORATION; PHILIPPINE JOURNALISTS, INC.; JOSE L. PAVIA; and OFELIA L.
DIMALANTA, petitioners, 

vs.

HON. LIWAYWAY V. CHATO, in her capacity as Commissioner of Internal Revenue; HON.
TEOFISTO T. GUINGONA, JR., in his capacity as Executive Secretary; and HON. ROBERTO B.
DE OCAMPO, in his capacity as Secretary of Finance, respondents.
G.R. No. 115754 August 25, 1994
CHAMBER OF REAL ESTATE AND BUILDERS ASSOCIATIONS, INC., (CREBA), petitioner, 

vs.

THE COMMISSIONER OF INTERNAL REVENUE, respondent.
G.R. No. 115781 August 25, 1994
KILOSBAYAN, INC., JOVITO R. SALONGA, CIRILO A. RIGOS, ERME CAMBA, EMILIO C.
CAPULONG, JR., JOSE T. APOLO, EPHRAIM TENDERO, FERNANDO SANTIAGO, JOSE
ABCEDE, CHRISTINE TAN, FELIPE L. GOZON, RAFAEL G. FERNANDO, RAOUL V.
VICTORINO, JOSE CUNANAN, QUINTIN S. DOROMAL, MOVEMENT OF ATTORNEYS FOR
BROTHERHOOD, INTEGRITY AND NATIONALISM, INC. ("MABINI"), FREEDOM FROM DEBT
COALITION, INC., PHILIPPINE BIBLE SOCIETY, INC., and WIGBERTO TAÑADA, petitioners, 

vs.

THE EXECUTIVE SECRETARY, THE SECRETARY OF FINANCE, THE COMMISSIONER OF
INTERNAL REVENUE and THE COMMISSIONER OF CUSTOMS, respondents.
G.R. No. 115852 August 25, 1994
PHILIPPINE AIRLINES, INC., petitioner, 

vs.

THE SECRETARY OF FINANCE, and COMMISSIONER OF INTERNAL REVENUE, respondents.
G.R. No. 115873 August 25, 1994
COOPERATIVE UNION OF THE PHILIPPINES, petitioners, 

vs.

HON. LIWAYWAY V. CHATO, in her capacity as the Commissioner of Internal Revenue, HON.
TEOFISTO T. GUINGONA, JR., in his capacity as Executive Secretary, and HON. ROBERTO B.
DE OCAMPO, in his capacity as Secretary of Finance, respondents.
G.R. No. 115931 August 25, 1994
PHILIPPINE EDUCATIONAL PUBLISHERS ASSOCIATION, INC., and ASSOCIATION OF
PHILIPPINE BOOK-SELLERS, petitioners, 

vs.

HON. ROBERTO B. DE OCAMPO, as the Secretary of Finance; HON. LIWAYWAY V. CHATO, as
the Commissioner of Internal Revenue and HON. GUILLERMO PARAYNO, JR., in his capacity
as the Commissioner of Customs, respondents.
Arturo M. Tolentino for and in his behalf.
Donna Celeste D. Feliciano and Juan T. David for petitioners in G.R. No. 115525.
Roco, Bunag, Kapunan, Migallos and Jardeleza for petitioner R.S. Roco.
Villaranza and Cruz for petitioners in G.R. No. 115544.
Carlos A. Raneses and Manuel M. Serrano for petitioner in G.R. No. 115754.
Salonga, Hernandez & Allado for Freedon From Debts Coalition, Inc. & Phil. Bible Society.
Estelito P. Mendoza for petitioner in G.R. No. 115852.
Panganiban, Benitez, Parlade, Africa & Barinaga Law Offices for petitioners in G.R. No. 115873.
R.B. Rodriguez & Associates for petitioners in G.R. No. 115931.
Reve A.V. Saguisag for MABINI.

MENDOZA, J.:
The value-added tax (VAT) is levied on the sale, barter or exchange of goods and properties as well
as on the sale or exchange of services. It is equivalent to 10% of the gross selling price or gross
value in money of goods or properties sold, bartered or exchanged or of the gross receipts from the
sale or exchange of services. Republic Act No. 7716 seeks to widen the tax base of the existing VAT
system and enhance its administration by amending the National Internal Revenue Code.
These are various suits for certiorari and prohibition, challenging the constitutionality of Republic Act
No. 7716 on various grounds summarized in the resolution of July 6, 1994 of this Court, as follows:
I. Procedural Issues:
A. Does Republic Act No. 7716 violate Art. VI, § 24 of the Constitution?
B. Does it violate Art. VI, § 26(2) of the Constitution?
C. What is the extent of the power of the Bicameral Conference Committee?
II. Substantive Issues:
A. Does the law violate the following provisions in the Bill of Rights (Art. III)?
1. §1
2. § 4
3. § 5
4. § 10
B. Does the law violate the following other provisions of the Constitution?
1. Art. VI, § 28(1)
2. Art. VI, § 28(3)
These questions will be dealt in the order they are stated above. As will presently be explained not
all of these questions are judicially cognizable, because not all provisions of the Constitution are self
executing and, therefore, judicially enforceable. The other departments of the government are
equally charged with the enforcement of the Constitution, especially the provisions relating to them.
I. PROCEDURAL ISSUES
The contention of petitioners is that in enacting Republic Act No. 7716, or the Expanded Value-
Added Tax Law, Congress violated the Constitution because, although H. No. 11197 had originated
in the House of Representatives, it was not passed by the Senate but was simply consolidated with
the Senate version (S. No. 1630) in the Conference Committee to produce the bill which the
President signed into law. The following provisions of the Constitution are cited in support of the
proposition that because Republic Act No. 7716 was passed in this manner, it did not originate in the
House of Representatives and it has not thereby become a law:
Art. VI, § 24: All appropriation, revenue or tariff bills, bills authorizing increase of the
public debt, bills of local application, and private bills shall originate exclusively in the
House of Representatives, but the Senate may propose or concur with amendments.
Id., § 26(2): No bill passed by either House shall become a law unless it has passed
three readings on separate days, and printed copies thereof in its final form have
been distributed to its Members three days before its passage, except when the
President certifies to the necessity of its immediate enactment to meet a public
calamity or emergency. Upon the last reading of a bill, no amendment thereto shall
be allowed, and the vote thereon shall be taken immediately thereafter, and
the yeas and nays entered in the Journal.
It appears that on various dates between July 22, 1992 and August 31, 1993, several bills 1 were
introduced in the House of Representatives seeking to amend certain provisions of the National
Internal Revenue Code relative to the value-added tax or VAT. These bills were referred to the
House Ways and Means Committee which recommended for approval a substitute measure, H. No.
11197, entitled
AN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT) SYSTEM TO WIDEN
ITS TAX BASE AND ENHANCE ITS ADMINISTRATION, AMENDING FOR THESE
PURPOSES SECTIONS 99, 100, 102, 103, 104, 105, 106, 107, 108 AND 110 OF
TITLE IV, 112, 115 AND 116 OF TITLE V, AND 236, 237 AND 238 OF TITLE IX, AND
REPEALING SECTIONS 113 AND 114 OF TITLE V, ALL OF THE NATIONAL
INTERNAL REVENUE CODE, AS AMENDED
The bill (H. No. 11197) was considered on second reading starting November 6, 1993 and, on
November 17, 1993, it was approved by the House of Representatives after third and final reading.
It was sent to the Senate on November 23, 1993 and later referred by that body to its Committee on
Ways and Means.
On February 7, 1994, the Senate Committee submitted its report recommending approval of S. No.
1630, entitled
AN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT) SYSTEM TO WIDEN
ITS TAX BASE AND ENHANCE ITS ADMINISTRATION, AMENDING FOR THESE
PURPOSES SECTIONS 99, 100, 102, 103, 104, 105, 107, 108, AND 110 OF TITLE
IV, 112 OF TITLE V, AND 236, 237, AND 238 OF TITLE IX, AND REPEALING
SECTIONS 113, 114 and 116 OF TITLE V, ALL OF THE NATIONAL INTERNAL
REVENUE CODE, AS AMENDED, AND FOR OTHER PURPOSES
It was stated that the bill was being submitted "in substitution of Senate Bill No. 1129, taking into
consideration P.S. Res. No. 734 and H.B. No. 11197."
On February 8, 1994, the Senate began consideration of the bill (S. No. 1630). It finished debates on
the bill and approved it on second reading on March 24, 1994. On the same day, it approved the bill
on third reading by the affirmative votes of 13 of its members, with one abstention.
H. No. 11197 and its Senate version (S. No. 1630) were then referred to a conference committee
which, after meeting four times (April 13, 19, 21 and 25, 1994), recommended that "House Bill No.
11197, in consolidation with Senate Bill No. 1630, be approved in accordance with the attached copy
of the bill as reconciled and approved by the conferees."
The Conference Committee bill, entitled "AN ACT RESTRUCTURING THE VALUE-ADDED TAX
(VAT) SYSTEM, WIDENING ITS TAX BASE AND ENHANCING ITS ADMINISTRATION AND FOR
THESE PURPOSES AMENDING AND REPEALING THE RELEVANT PROVISIONS OF THE
NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER PURPOSES," was
thereafter approved by the House of Representatives on April 27, 1994 and by the Senate on May 2,
1994. The enrolled bill was then presented to the President of the Philippines who, on May 5, 1994,
signed it. It became Republic Act No. 7716. On May 12, 1994, Republic Act No. 7716 was published
in two newspapers of general circulation and, on May 28, 1994, it took effect, although its
implementation was suspended until June 30, 1994 to allow time for the registration of business
entities. It would have been enforced on July 1, 1994 but its enforcement was stopped because the
Court, by the vote of 11 to 4 of its members, granted a temporary restraining order on June 30, 1994.
First. Petitioners' contention is that Republic Act No. 7716 did not "originate exclusively" in the House
of Representatives as required by Art. VI, §24 of the Constitution, because it is in fact the result of
the consolidation of two distinct bills, H. No. 11197 and S. No. 1630. In this connection, petitioners
point out that although Art. VI, SS 24 was adopted from the American Federal Constitution, 2 it is
notable in two respects: the verb "shall originate" is qualified in the Philippine Constitution by the
word "exclusively" and the phrase "as on other bills" in the American version is omitted. This means,
according to them, that to be considered as having originated in the House, Republic Act No. 7716
must retain the essence of H. No. 11197.
This argument will not bear analysis. To begin with, it is not the law — but the revenue bill — which is
required by the Constitution to "originate exclusively" in the House of Representatives. It is important
to emphasize this, because a bill originating in the House may undergo such extensive changes in
the Senate that the result may be a rewriting of the whole. The possibility of a third version by the
conference committee will be discussed later. At this point, what is important to note is that, as a
result of the Senate action, a distinct bill may be produced. To insist that a revenue statute — and
not only the bill which initiated the legislative process culminating in the enactment of the law —
must substantially be the same as the House bill would be to deny the Senate's power not only to
"concur with amendments" but also to "propose amendments." It would be to violate the coequality
of legislative power of the two houses of Congress and in fact make the House superior to the
Senate.
The contention that the constitutional design is to limit the Senate's power in respect of revenue bills
in order to compensate for the grant to the Senate of the treaty-ratifying power 3 and thereby
equalize its powers and those of the House overlooks the fact that the powers being compared are
different. We are dealing here with the legislative power which under the Constitution is vested not in
any particular chamber but in the Congress of the Philippines, consisting of "a Senate and a House
of Representatives." 4 The exercise of the treaty-ratifying power is not the exercise of legislative
power. It is the exercise of a check on the executive power. There is, therefore, no justification for
comparing the legislative powers of the House and of the Senate on the basis of the possession of
such nonlegislative power by the Senate. The possession of a similar power by the U.S.
Senate 5 has never been thought of as giving it more legislative powers than the House of
Representatives.
In the United States, the validity of a provision (§ 37) imposing an ad valorem tax based on the
weight of vessels, which the U.S. Senate had inserted in the Tariff Act of 1909, was upheld against
the claim that the provision was a revenue bill which originated in the Senate in contravention of Art.
I, § 7 of the U.S. Constitution. 6 Nor is the power to amend limited to adding a provision or two in a
revenue bill emanating from the House. The U.S. Senate has gone so far as changing the whole of
bills following the enacting clause and substituting its own versions. In 1883, for example, it struck
out everything after the enacting clause of a tariff bill and wrote in its place its own measure, and the
House subsequently accepted the amendment. The U.S. Senate likewise added 847 amendments to
what later became the Payne-Aldrich Tariff Act of 1909; it dictated the schedules of the Tariff Act of
1921; it rewrote an extensive tax revision bill in the same year and recast most of the tariff bill of
1922. 7 Given, then, the power of the Senate to propose amendments, the Senate can propose its
own version even with respect to bills which are required by the Constitution to originate in the
House.
It is insisted, however, that S. No. 1630 was passed not in substitution of H. No. 11197 but of another
Senate bill (S. No. 1129) earlier filed and that what the Senate did was merely to "take [H. No. 11197]
into consideration" in enacting S. No. 1630. There is really no difference between the Senate
preserving H. No. 11197 up to the enacting clause and then writing its own version following the
enacting clause (which, it would seem, petitioners admit is an amendment by substitution), and, on
the other hand, separately presenting a bill of its own on the same subject matter. In either case the
result are two bills on the same subject.
Indeed, what the Constitution simply means is that the initiative for filing revenue, tariff, or tax bills,
bills authorizing an increase of the public debt, private bills and bills of local application must come
from the House of Representatives on the theory that, elected as they are from the districts, the
members of the House can be expected to be more sensitive to the local needs and problems. On
the other hand, the senators, who are elected at large, are expected to approach the same problems
from the national perspective. Both views are thereby made to bear on the enactment of such laws.
Nor does the Constitution prohibit the filing in the Senate of a substitute bill in anticipation of its
receipt of the bill from the House, so long as action by the Senate as a body is withheld pending
receipt of the House bill. The Court cannot, therefore, understand the alarm expressed over the fact
that on March 1, 1993, eight months before the House passed H. No. 11197, S. No. 1129 had been
filed in the Senate. After all it does not appear that the Senate ever considered it. It was only after
the Senate had received H. No. 11197 on November 23, 1993 that the process of legislation in
respect of it began with the referral to the Senate Committee on Ways and Means of H. No. 11197
and the submission by the Committee on February 7, 1994 of S. No. 1630. For that matter, if the
question were simply the priority in the time of filing of bills, the fact is that it was in the House that a
bill (H. No. 253) to amend the VAT law was first filed on July 22, 1992. Several other bills had been
filed in the House before S. No. 1129 was filed in the Senate, and H. No. 11197 was only a substitute
of those earlier bills.
Second. Enough has been said to show that it was within the power of the Senate to propose S. No.
1630. We now pass to the next argument of petitioners that S. No. 1630 did not pass three readings
on separate days as required by the Constitution 8 because the second and third readings were done
on the same day, March 24, 1994. But this was because on February 24, 1994 9 and again on March
22, 1994, 10 the President had certified S. No. 1630 as urgent. The presidential certification
dispensed with the requirement not only of printing but also that of reading the bill on separate days.
The phrase "except when the President certifies to the necessity of its immediate enactment, etc." in
Art. VI, § 26(2) qualifies the two stated conditions before a bill can become a law: (i) the bill has
passed three readings on separate days and (ii) it has been printed in its final form and distributed
three days before it is finally approved.
In other words, the "unless" clause must be read in relation to the "except" clause, because the two
are really coordinate clauses of the same sentence. To construe the "except" clause as simply
dispensing with the second requirement in the "unless" clause (i.e., printing and distribution three
days before final approval) would not only violate the rules of grammar. It would also negate the very
premise of the "except" clause: the necessity of securing the immediate enactment of a bill which is
certified in order to meet a public calamity or emergency. For if it is only the printing that is dispensed
with by presidential certification, the time saved would be so negligible as to be of any use in
insuring immediate enactment. It may well be doubted whether doing away with the necessity of
printing and distributing copies of the bill three days before the third reading would insure speedy
enactment of a law in the face of an emergency requiring the calling of a special election for
President and Vice-President. Under the Constitution such a law is required to be made within seven
days of the convening of Congress in emergency session. 11
That upon the certification of a bill by the President the requirement of three readings on separate
days and of printing and distribution can be dispensed with is supported by the weight of legislative
practice. For example, the bill defining the certiorari jurisdiction of this Court which, in consolidation
with the Senate version, became Republic Act No. 5440, was passed on second and third readings
in the House of Representatives on the same day (May 14, 1968) after the bill had been certified by
the President as urgent. 12
There is, therefore, no merit in the contention that presidential certification dispenses only with the
requirement for the printing of the bill and its distribution three days before its passage but not with
the requirement of three readings on separate days, also.
It is nonetheless urged that the certification of the bill in this case was invalid because there was no
emergency, the condition stated in the certification of a "growing budget deficit" not being an unusual
condition in this country.
It is noteworthy that no member of the Senate saw fit to controvert the reality of the factual basis of
the certification. To the contrary, by passing S. No. 1630 on second and third readings on March 24,
1994, the Senate accepted the President's certification. Should such certification be now reviewed
by this Court, especially when no evidence has been shown that, because S. No. 1630 was taken up
on second and third readings on the same day, the members of the Senate were deprived of the
time needed for the study of a vital piece of legislation?
The sufficiency of the factual basis of the suspension of the writ of habeas corpus or declaration of
martial law under Art. VII, § 18, or the existence of a national emergency justifying the delegation of
extraordinary powers to the President under Art. VI, § 23(2), is subject to judicial review because
basic rights of individuals may be at hazard. But the factual basis of presidential certification of bills,
which involves doing away with procedural requirements designed to insure that bills are duly
considered by members of Congress, certainly should elicit a different standard of review.
Petitioners also invite attention to the fact that the President certified S. No. 1630 and not H. No.
11197. That is because S. No. 1630 was what the Senate was considering. When the matter was
before the House, the President likewise certified H. No. 9210 the pending in the House.
Third. Finally it is contended that the bill which became Republic Act No. 7716 is the bill which the
Conference Committee prepared by consolidating H. No. 11197 and S. No. 1630. It is claimed that
the Conference Committee report included provisions not found in either the House bill or the Senate
bill and that these provisions were "surreptitiously" inserted by the Conference Committee. Much is
made of the fact that in the last two days of its session on April 21 and 25, 1994 the Committee met
behind closed doors. We are not told, however, whether the provisions were not the result of the give
and take that often mark the proceedings of conference committees.
Nor is there anything unusual or extraordinary about the fact that the Conference Committee met in
executive sessions. Often the only way to reach agreement on conflicting provisions is to meet
behind closed doors, with only the conferees present. Otherwise, no compromise is likely to be
made. The Court is not about to take the suggestion of a cabal or sinister motive attributed to the
conferees on the basis solely of their "secret meetings" on April 21 and 25, 1994, nor read anything
into the incomplete remarks of the members, marked in the transcript of stenographic notes by
ellipses. The incomplete sentences are probably due to the stenographer's own limitations or to the
incoherence that sometimes characterize conversations. William Safire noted some such lapses in
recorded talks even by recent past Presidents of the United States.
In any event, in the United States conference committees had been customarily held in executive
sessions with only the conferees and their staffs in attendance. 13 Only in November 1975 was a new
rule adopted requiring open sessions. Even then a majority of either chamber's conferees may vote
in public to close the meetings. 14
As to the possibility of an entirely new bill emerging out of a Conference Committee, it has been
explained:
Under congressional rules of procedure, conference committees are not expected to
make any material change in the measure at issue, either by deleting provisions to
which both houses have already agreed or by inserting new provisions. But this is a
difficult provision to enforce. Note the problem when one house amends a proposal
originating in either house by striking out everything following the enacting clause
and substituting provisions which make it an entirely new bill. The versions are now
altogether different, permitting a conference committee to draft essentially a new
bill. . . . 15
The result is a third version, which is considered an "amendment in the nature of a substitute," the
only requirement for which being that the third version be germane to the subject of the House and
Senate bills. 16
Indeed, this Court recently held that it is within the power of a conference committee to include in its
report an entirely new provision that is not found either in the House bill or in the Senate bill. 17 If the
committee can propose an amendment consisting of one or two provisions, there is no reason why it
cannot propose several provisions, collectively considered as an "amendment in the nature of a
substitute," so long as such amendment is germane to the subject of the bills before the committee.
After all, its report was not final but needed the approval of both houses of Congress to become valid
as an act of the legislative department. The charge that in this case the Conference Committee
acted as a third legislative chamber is thus without any basis. 18
Nonetheless, it is argued that under the respective Rules of the Senate and the House of
Representatives a conference committee can only act on the differing provisions of a Senate bill and
a House bill, and that contrary to these Rules the Conference Committee inserted provisions not
found in the bills submitted to it. The following provisions are cited in support of this contention:
Rules of the Senate
Rule XII:
§ 26. In the event that the Senate does not agree with the House of Representatives
on the provision of any bill or joint resolution, the differences shall be settled by a
conference committee of both Houses which shall meet within ten days after their
composition.
The President shall designate the members of the conference committee in
accordance with subparagraph (c), Section 3 of Rule III.
 Each Conference Committee Report shall contain a detailed and sufficiently explicit
statement of the changes in or amendments to the subject measure, and shall be
signed by the conferees.
The consideration of such report shall not be in order unless the report has been filed
with the Secretary of the Senate and copies thereof have been distributed to the
Members.
(Emphasis added)
Rules of the House of Representatives
Rule XIV:
§ 85. Conference Committee Reports. — In the event that the House does not agree
with the Senate on the amendments to any bill or joint resolution, the differences may
be settled by conference committees of both Chambers.
The consideration of conference committee reports shall always be in order, except
when the journal is being read, while the roll is being called or the House is dividing
on any question. Each of the pages of such reports shall be signed by the
conferees. Each report shall contain a detailed, sufficiently explicit statement of the
changes in or amendments to the subject measure.
The consideration of such report shall not be in order unless copies thereof are
distributed to the Members: Provided, That in the last fifteen days of each session
period it shall be deemed sufficient that three copies of the report, signed as above
provided, are deposited in the office of the Secretary General.
(Emphasis added)
To be sure, nothing in the Rules limits a conference committee to a consideration of conflicting
provisions. But Rule XLIV, § 112 of the Rules of the Senate is cited to the effect that "If there is no
Rule applicable to a specific case the precedents of the Legislative Department of the Philippines
shall be resorted to, and as a supplement of these, the Rules contained in Jefferson's Manual." The
following is then quoted from the Jefferson's Manual:
The managers of a conference must confine themselves to the differences
committed to them. . . and may not include subjects not within disagreements, even
though germane to a question in issue.
Note that, according to Rule XLIX, § 112, in case there is no specific rule applicable, resort must be
to the legislative practice. The Jefferson's Manual is resorted to only as supplement. It is common
place in Congress that conference committee reports include new matters which, though germane,
have not been committed to the committee. This practice was admitted by Senator Raul S. Roco,
petitioner in G.R. No. 115543, during the oral argument in these cases. Whatever, then, may be
provided in the Jefferson's Manual must be considered to have been modified by the legislative
practice. If a change is desired in the practice it must be sought in Congress since this question is
not covered by any constitutional provision but is only an internal rule of each house. Thus, Art. VI, §
16(3) of the Constitution provides that "Each House may determine the rules of its proceedings. . . ."
This observation applies to the other contention that the Rules of the two chambers were likewise
disregarded in the preparation of the Conference Committee Report because the Report did not
contain a "detailed and sufficiently explicit statement of changes in, or amendments to, the subject
measure." The Report used brackets and capital letters to indicate the changes. This is a standard
practice in bill-drafting. We cannot say that in using these marks and symbols the Committee
violated the Rules of the Senate and the House. Moreover, this Court is not the proper forum for the
enforcement of these internal Rules. To the contrary, as we have already ruled, "parliamentary rules
are merely procedural and with their observance the courts have no concern." 19 Our concern is with
the procedural requirements of the Constitution for the enactment of laws. As far as these
requirements are concerned, we are satisfied that they have been faithfully observed in these cases.
Nor is there any reason for requiring that the Committee's Report in these cases must have
undergone three readings in each of the two houses. If that be the case, there would be no end to
negotiation since each house may seek modifications of the compromise bill. The nature of the bill,
therefore, requires that it be acted upon by each house on a "take it or leave it" basis, with the only
alternative that if it is not approved by both houses, another conference committee must be
appointed. But then again the result would still be a compromise measure that may not be wholly
satisfying to both houses.
Art. VI, § 26(2) must, therefore, be construed as referring only to bills introduced for the first time in
either house of Congress, not to the conference committee report. For if the purpose of requiring
three readings is to give members of Congress time to study bills, it cannot be gainsaid that H. No.
11197 was passed in the House after three readings; that in the Senate it was considered on first
reading and then referred to a committee of that body; that although the Senate committee did not
report out the House bill, it submitted a version (S. No. 1630) which it had prepared by "taking into
consideration" the House bill; that for its part the Conference Committee consolidated the two bills
and prepared a compromise version; that the Conference Committee Report was thereafter
approved by the House and the Senate, presumably after appropriate study by their members. We
cannot say that, as a matter of fact, the members of Congress were not fully informed of the
provisions of the bill. The allegation that the Conference Committee usurped the legislative power of
Congress is, in our view, without warrant in fact and in law.
Fourth. Whatever doubts there may be as to the formal validity of Republic Act No. 7716 must be
resolved in its favor. Our cases 20 manifest firm adherence to the rule that an enrolled copy of a bill is
conclusive not only of its provisions but also of its due enactment. Not even claims that a proposed
constitutional amendment was invalid because the requisite votes for its approval had not been
obtained 21 or that certain provisions of a statute had been "smuggled" in the printing of the bill 22 have
moved or persuaded us to look behind the proceedings of a coequal branch of the government.
There is no reason now to depart from this rule.
No claim is here made that the "enrolled bill" rule is absolute. In fact in one case 23 we "went behind"
an enrolled bill and consulted the Journal to determine whether certain provisions of a statute had
been approved by the Senate in view of the fact that the President of the Senate himself, who had
signed the enrolled bill, admitted a mistake and withdrew his signature, so that in effect there was no
longer an enrolled bill to consider.
But where allegations that the constitutional procedures for the passage of bills have not been
observed have no more basis than another allegation that the Conference Committee
"surreptitiously" inserted provisions into a bill which it had prepared, we should decline the invitation
to go behind the enrolled copy of the bill. To disregard the "enrolled bill" rule in such cases would be
to disregard the respect due the other two departments of our government.
Fifth. An additional attack on the formal validity of Republic Act No. 7716 is made by the Philippine
Airlines, Inc., petitioner in G.R. No. 11582, namely, that it violates Art. VI, § 26(1) which provides that
"Every bill passed by Congress shall embrace only one subject which shall be expressed in the title
thereof." It is contended that neither H. No. 11197 nor S. No. 1630 provided for removal of exemption
of PAL transactions from the payment of the VAT and that this was made only in the Conference
Committee bill which became Republic Act No. 7716 without reflecting this fact in its title.
The title of Republic Act No. 7716 is:
AN ACT RESTRUCTURING THE VALUE- ADDED TAX (VAT) SYSTEM, WIDENING
ITS TAX BASE AND ENHANCING ITS ADMINISTRATION, AND FOR THESE
PURPOSES AMENDING AND REPEALING THE RELEVANT PROVISIONS OF THE
NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER
PURPOSES.
Among the provisions of the NIRC amended is § 103, which originally read:
 § 103. Exempt transactions. — The following shall be exempt from the value-added
tax:
....
(q) Transactions which are exempt under special laws or international agreements to
which the Philippines is a signatory. Among the transactions exempted from the VAT
were those of PAL because it was exempted under its franchise (P.D. No. 1590) from
the payment of all "other taxes . . . now or in the near future," in consideration of the
payment by it either of the corporate income tax or a franchise tax of 2%.
As a result of its amendment by Republic Act No. 7716, § 103 of the NIRC now provides:
§ 103. Exempt transactions. — The following shall be exempt from the value-added
tax:
....
(q) Transactions which are exempt under special laws, except those granted under
Presidential Decree Nos. 66, 529, 972, 1491, 1590. . . .
The effect of the amendment is to remove the exemption granted to PAL, as far as the VAT is
concerned.
The question is whether this amendment of § 103 of the NIRC is fairly embraced in the title of
Republic Act No. 7716, although no mention is made therein of P.D. No. 1590 as among those which
the statute amends. We think it is, since the title states that the purpose of the statute is to expand
the VAT system, and one way of doing this is to widen its base by withdrawing some of the
exemptions granted before. To insist that P.D. No. 1590 be mentioned in the title of the law, in
addition to § 103 of the NIRC, in which it is specifically referred to, would be to insist that the title of a
bill should be a complete index of its content.
The constitutional requirement that every bill passed by Congress shall embrace only one subject
which shall be expressed in its title is intended to prevent surprise upon the members of Congress
and to inform the people of pending legislation so that, if they wish to, they can be heard regarding it.
If, in the case at bar, petitioner did not know before that its exemption had been withdrawn, it is not
because of any defect in the title but perhaps for the same reason other statutes, although
published, pass unnoticed until some event somehow calls attention to their existence. Indeed, the
title of Republic Act No. 7716 is not any more general than the title of PAL's own franchise under P.D.
No. 1590, and yet no mention is made of its tax exemption. The title of P.D. No. 1590 is:
AN ACT GRANTING A NEW FRANCHISE TO PHILIPPINE AIRLINES, INC. TO
ESTABLISH, OPERATE, AND MAINTAIN AIR-TRANSPORT SERVICES IN THE
PHILIPPINES AND BETWEEN THE PHILIPPINES AND OTHER COUNTRIES.
The trend in our cases is to construe the constitutional requirement in such a manner that courts do
not unduly interfere with the enactment of necessary legislation and to consider it sufficient if the title
expresses the general subject of the statute and all its provisions are germane to the general subject
thus expressed. 24
It is further contended that amendment of petitioner's franchise may only be made by special law, in
view of § 24 of P.D. No. 1590 which provides:
This franchise, as amended, or any section or provision hereof may only be modified,
amended, or repealed expressly by a special law or decree that shall specifically
modify, amend, or repeal this franchise or any section or provision thereof.
This provision is evidently intended to prevent the amendment of the franchise by mere implication
resulting from the enactment of a later inconsistent statute, in consideration of the fact that a
franchise is a contract which can be altered only by consent of the parties. Thus in Manila Railroad
Co. v.

Rafferty, 25 it was held that an Act of the U.S. Congress, which provided for the payment of tax on
certain goods and articles imported into the Philippines, did not amend the franchise of plaintiff,
which exempted it from all taxes except those mentioned in its franchise. It was held that a special
law cannot be amended by a general law.
In contrast, in the case at bar, Republic Act No. 7716 expressly amends PAL's franchise (P.D. No.
1590) by specifically excepting from the grant of exemptions from the VAT PAL's exemption under
P.D. No. 1590. This is within the power of Congress to do under Art. XII, § 11 of the Constitution,
which provides that the grant of a franchise for the operation of a public utility is subject to
amendment, alteration or repeal by Congress when the common good so requires.
II. SUBSTANTIVE ISSUES
A. Claims of Press Freedom, Freedom of Thought
and Religious Freedom
The Philippine Press Institute (PPI), petitioner in G.R. No. 115544, is a nonprofit organization of
newspaper publishers established for the improvement of journalism in the Philippines. On the other
hand, petitioner in G.R. No. 115781, the Philippine Bible Society (PBS), is a nonprofit organization
engaged in the printing and distribution of bibles and other religious articles. Both petitioners claim
violations of their rights under § § 4 and 5 of the Bill of Rights as a result of the enactment of the VAT
Law.
The PPI questions the law insofar as it has withdrawn the exemption previously granted to the press
under § 103 (f) of the NIRC. Although the exemption was subsequently restored by administrative
regulation with respect to the circulation income of newspapers, the PPI presses its claim because of
the possibility that the exemption may still be removed by mere revocation of the regulation of the
Secretary of Finance. On the other hand, the PBS goes so far as to question the Secretary's power
to grant exemption for two reasons: (1) The Secretary of Finance has no power to grant tax
exemption because this is vested in Congress and requires for its exercise the vote of a majority of
all its members 26 and (2) the Secretary's duty is to execute the law.
§ 103 of the NIRC contains a list of transactions exempted from VAT. Among the transactions
previously granted exemption were:
(f) Printing, publication, importation or sale of books and any newspaper, magazine,
review, or bulletin which appears at regular intervals with fixed prices for subscription
and sale and which is devoted principally to the publication of advertisements.
Republic Act No. 7716 amended § 103 by deleting ¶ (f) with the result that print media became
subject to the VAT with respect to all aspects of their operations. Later, however, based on a
memorandum of the Secretary of Justice, respondent Secretary of Finance issued Revenue
Regulations No. 11-94, dated June 27, 1994, exempting the "circulation income of print media
pursuant to § 4 Article III of the 1987 Philippine Constitution guaranteeing against abridgment of
freedom of the press, among others." The exemption of "circulation income" has left income from
advertisements still subject to the VAT.
It is unnecessary to pass upon the contention that the exemption granted is beyond the authority of
the Secretary of Finance to give, in view of PPI's contention that even with the exemption of the
circulation revenue of print media there is still an unconstitutional abridgment of press freedom
because of the imposition of the VAT on the gross receipts of newspapers from advertisements and
on their acquisition of paper, ink and services for publication. Even on the assumption that no
exemption has effectively been granted to print media transactions, we find no violation of press
freedom in these cases.
To be sure, we are not dealing here with a statute that on its face operates in the area of press
freedom. The PPI's claim is simply that, as applied to newspapers, the law abridges press freedom.
Even with due recognition of its high estate and its importance in a democratic society, however, the
press is not immune from general regulation by the State. It has been held:
 The publisher of a newspaper has no immunity from the application of general laws.
He has no special privilege to invade the rights and liberties of others. He must
answer for libel. He may be punished for contempt of court. . . . Like others, he must
pay equitable and nondiscriminatory taxes on his business. . . . 27
The PPI does not dispute this point, either.
What it contends is that by withdrawing the exemption previously granted to print media transactions
involving printing, publication, importation or sale of newspapers, Republic Act No. 7716 has singled
out the press for discriminatory treatment and that within the class of mass media the law
discriminates against print media by giving broadcast media favored treatment. We have carefully
examined this argument, but we are unable to find a differential treatment of the press by the law,
much less any censorial motivation for its enactment. If the press is now required to pay a value-
added tax on its transactions, it is not because it is being singled out, much less targeted, for special
treatment but only because of the removal of the exemption previously granted to it by law. The
withdrawal of exemption is all that is involved in these cases. Other transactions, likewise previously
granted exemption, have been delisted as part of the scheme to expand the base and the scope of
the VAT system. The law would perhaps be open to the charge of discriminatory treatment if the only
privilege withdrawn had been that granted to the press. But that is not the case.
The situation in the case at bar is indeed a far cry from those cited by the PPI in support of its claim
that Republic Act No. 7716 subjects the press to discriminatory taxation. In the cases cited, the
discriminatory purpose was clear either from the background of the law or from its operation. For
example, in Grosjean v. American Press Co., 28 the law imposed a license tax equivalent to 2% of the
gross receipts derived from advertisements only on newspapers which had a circulation of more
than 20,000 copies per week. Because the tax was not based on the volume of advertisement alone
but was measured by the extent of its circulation as well, the law applied only to the thirteen large
newspapers in Louisiana, leaving untaxed four papers with circulation of only slightly less than
20,000 copies a week and 120 weekly newspapers which were in serious competition with the
thirteen newspapers in question. It was well known that the thirteen newspapers had been critical of
Senator Huey Long, and the Long-dominated legislature of Louisiana respondent by taxing what
Long described as the "lying newspapers" by imposing on them "a tax on lying." The effect of the tax
was to curtail both their revenue and their circulation. As the U.S. Supreme Court noted, the tax was
"a deliberate and calculated device in the guise of a tax to limit the circulation of information to which
the public is entitled in virtue of the constitutional guaranties." 29 The case is a classic illustration of
the warning that the power to tax is the power to destroy.
In the other case 30 invoked by the PPI, the press was also found to have been singled out because
everything was exempt from the "use tax" on ink and paper, except the press. Minnesota imposed a
tax on the sales of goods in that state. To protect the sales tax, it enacted a complementary tax on
the privilege of "using, storing or consuming in that state tangible personal property" by eliminating
the residents' incentive to get goods from outside states where the sales tax might be lower.
The Minnesota Star Tribune was exempted from both taxes from 1967 to 1971. In 1971, however,
the state legislature amended the tax scheme by imposing the "use tax" on the cost of paper and ink
used for publication. The law was held to have singled out the press because (1) there was no
reason for imposing the "use tax" since the press was exempt from the sales tax and (2) the "use
tax" was laid on an "intermediate transaction rather than the ultimate retail sale." Minnesota had a
heavy burden of justifying the differential treatment and it failed to do so. In addition, the U.S.
Supreme Court found the law to be discriminatory because the legislature, by again amending the
law so as to exempt the first $100,000 of paper and ink used, further narrowed the coverage of the
tax so that "only a handful of publishers pay any tax at all and even fewer pay any significant amount
of tax." 31 The discriminatory purpose was thus very clear.
More recently, in Arkansas Writers' Project, Inc. v. Ragland, 32 it was held that a law which taxed
general interest magazines but not newspapers and religious, professional, trade and sports journals
was discriminatory because while the tax did not single out the press as a whole, it targeted a small
group within the press. What is more, by differentiating on the basis of contents (i.e., between
general interest and special interests such as religion or sports) the law became "entirely
incompatible with the First Amendment's guarantee of freedom of the press."
These cases come down to this: that unless justified, the differential treatment of the press creates
risks of suppression of expression. In contrast, in the cases at bar, the statute applies to a wide
range of goods and services. The argument that, by imposing the VAT only on print media whose
gross sales exceeds P480,000 but not more than P750,000, the law discriminates 33 is without merit
since it has not been shown that as a result the class subject to tax has been unreasonably
narrowed. The fact is that this limitation does not apply to the press along but to all sales. Nor is
impermissible motive shown by the fact that print media and broadcast media are treated differently.
The press is taxed on its transactions involving printing and publication, which are different from the
transactions of broadcast media. There is thus a reasonable basis for the classification.
The cases canvassed, it must be stressed, eschew any suggestion that "owners of newspapers are
immune from any forms of ordinary taxation." The license tax in the Grosjean case was declared
invalid because it was "one single in kind, with a long history of hostile misuse against the freedom
of the

press." 34 On the other hand, Minneapolis Star acknowledged that "The First Amendment does not
prohibit all regulation of the press [and that] the States and the Federal Government can subject
newspapers to generally applicable economic regulations without creating constitutional problems." 35
What has been said above also disposes of the allegations of the PBS that the removal of the
exemption of printing, publication or importation of books and religious articles, as well as their
printing and publication, likewise violates freedom of thought and of conscience. For as the U.S.
Supreme Court unanimously held in Jimmy Swaggart Ministries v. Board of Equalization, 36 the Free
Exercise of Religion Clause does not prohibit imposing a generally applicable sales and use tax on
the sale of religious materials by a religious organization.
This brings us to the question whether the registration provision of the law, 37 although of general
applicability, nonetheless is invalid when applied to the press because it lays a prior restraint on its
essential freedom. The case of American Bible Society v. City of Manila 38 is cited by both the PBS
and the PPI in support of their contention that the law imposes censorship. There, this Court held
that an ordinance of the City of Manila, which imposed a license fee on those engaged in the
business of general merchandise, could not be applied to the appellant's sale of bibles and other
religious literature. This Court relied on Murdock v. Pennsylvania, 39 in which it was held that, as a
license fee is fixed in amount and unrelated to the receipts of the taxpayer, the license fee, when
applied to a religious sect, was actually being imposed as a condition for the exercise of the sect's
right under the Constitution. For that reason, it was held, the license fee "restrains in advance those
constitutional liberties of press and religion and inevitably tends to suppress their exercise." 40
But, in this case, the fee in § 107, although a fixed amount (P1,000), is not imposed for the exercise
of a privilege but only for the purpose of defraying part of the cost of registration. The registration
requirement is a central feature of the VAT system. It is designed to provide a record of tax credits
because any person who is subject to the payment of the VAT pays an input tax, even as he collects
an output tax on sales made or services rendered. The registration fee is thus a mere administrative
fee, one not imposed on the exercise of a privilege, much less a constitutional right.
For the foregoing reasons, we find the attack on Republic Act No. 7716 on the ground that it offends
the free speech, press and freedom of religion guarantees of the Constitution to be without merit. For
the same reasons, we find the claim of the Philippine Educational Publishers Association (PEPA) in
G.R. No. 115931 that the increase in the price of books and other educational materials as a result of
the VAT would violate the constitutional mandate to the government to give priority to education,
science and technology (Art. II, § 17) to be untenable.
 B. Claims of Regressivity, Denial of Due Process,
Equal Protection, and Impairment

of Contracts
There is basis for passing upon claims that on its face the statute violates the guarantees of freedom
of speech, press and religion. The possible "chilling effect" which it may have on the essential
freedom of the mind and conscience and the need to assure that the channels of communication are
open and operating importunately demand the exercise of this Court's power of review.
There is, however, no justification for passing upon the claims that the law also violates the rule that
taxation must be progressive and that it denies petitioners' right to due process and that equal
protection of the laws. The reason for this different treatment has been cogently stated by an
eminent authority on constitutional law thus: "[W]hen freedom of the mind is imperiled by law, it is
freedom that commands a momentum of respect; when property is imperiled it is the lawmakers'
judgment that commands respect. This dual standard may not precisely reverse the presumption of
constitutionality in civil liberties cases, but obviously it does set up a hierarchy of values within the
due process clause." 41
Indeed, the absence of threat of immediate harm makes the need for judicial intervention less
evident and underscores the essential nature of petitioners' attack on the law on the grounds of
regressivity, denial of due process and equal protection and impairment of contracts as a mere
academic discussion of the merits of the law. For the fact is that there have even been no notices of
assessments issued to petitioners and no determinations at the administrative levels of their claims
so as to illuminate the actual operation of the law and enable us to reach sound judgment regarding
so fundamental questions as those raised in these suits.
Thus, the broad argument against the VAT is that it is regressive and that it violates the requirement
that "The rule of taxation shall be uniform and equitable [and] Congress shall evolve a progressive
system of taxation." 42 Petitioners in G.R. No. 115781 quote from a paper, entitled "VAT Policy Issues:
Structure, Regressivity, Inflation and Exports" by Alan A. Tait of the International Monetary Fund, that
"VAT payment by low-income households will be a higher proportion of their incomes (and
expenditures) than payments by higher-income households. That is, the VAT will be regressive."
Petitioners contend that as a result of the uniform 10% VAT, the tax on consumption goods of those
who are in the higher-income bracket, which before were taxed at a rate higher than 10%, has been
reduced, while basic commodities, which before were taxed at rates ranging from 3% to 5%, are now
taxed at a higher rate.
Just as vigorously as it is asserted that the law is regressive, the opposite claim is pressed by
respondents that in fact it distributes the tax burden to as many goods and services as possible
particularly to those which are within the reach of higher-income groups, even as the law exempts
basic goods and services. It is thus equitable. The goods and properties subject to the VAT are those
used or consumed by higher-income groups. These include real properties held primarily for sale to
customers or held for lease in the ordinary course of business, the right or privilege to use industrial,
commercial or scientific equipment, hotels, restaurants and similar places, tourist buses, and the
like. On the other hand, small business establishments, with annual gross sales of less than
P500,000, are exempted. This, according to respondents, removes from the coverage of the law
some 30,000 business establishments. On the other hand, an occasional paper 43 of the Center for
Research and Communication cities a NEDA study that the VAT has minimal impact on inflation and
income distribution and that while additional expenditure for the lowest income class is only P301 or
1.49% a year, that for a family earning P500,000 a year or more is P8,340 or 2.2%.
Lacking empirical data on which to base any conclusion regarding these arguments, any discussion
whether the VAT is regressive in the sense that it will hit the "poor" and middle-income group in
society harder than it will the "rich," as the Cooperative Union of the Philippines (CUP) claims in G.R.
No. 115873, is largely an academic exercise. On the other hand, the CUP's contention that
Congress' withdrawal of exemption of producers cooperatives, marketing cooperatives, and service
cooperatives, while maintaining that granted to electric cooperatives, not only goes against the
constitutional policy to promote cooperatives as instruments of social justice (Art. XII, § 15) but also
denies such cooperatives the equal protection of the law is actually a policy argument. The
legislature is not required to adhere to a policy of "all or none" in choosing the subject of taxation. 44
Nor is the contention of the Chamber of Real Estate and Builders Association (CREBA), petitioner in
G.R. 115754, that the VAT will reduce the mark up of its members by as much as 85% to 90% any
more concrete. It is a mere allegation. On the other hand, the claim of the Philippine Press Institute,
petitioner in G.R. No. 115544, that the VAT will drive some of its members out of circulation because
their profits from advertisements will not be enough to pay for their tax liability, while purporting to be
based on the financial statements of the newspapers in question, still falls short of the establishment
of facts by evidence so necessary for adjudicating the question whether the tax is oppressive and
confiscatory.
Indeed, regressivity is not a negative standard for courts to enforce. What Congress is required by
the Constitution to do is to "evolve a progressive system of taxation." This is a directive to Congress,
just like the directive to it to give priority to the enactment of laws for the enhancement of human
dignity and the reduction of social, economic and political inequalities (Art. XIII, § 1), or for the
promotion of the right to "quality education" (Art. XIV, § 1). These provisions are put in the
Constitution as moral incentives to legislation, not as judicially enforceable rights.
At all events, our 1988 decision in Kapatiran 45 should have laid to rest the questions now raised
against the VAT. There similar arguments made against the original VAT Law (Executive Order No.
273) were held to be hypothetical, with no more basis than newspaper articles which this Court
found to be "hearsay and [without] evidentiary value." As Republic Act No. 7716 merely expands the
base of the VAT system and its coverage as provided in the original VAT Law, further debate on the
desirability and wisdom of the law should have shifted to Congress.
Only slightly less abstract but nonetheless hypothetical is the contention of CREBA that the
imposition of the VAT on the sales and leases of real estate by virtue of contracts entered into prior
to the effectivity of the law would violate the constitutional provision that "No law impairing the
obligation of contracts shall be passed." It is enough to say that the parties to a contract cannot,
through the exercise of prophetic discernment, fetter the exercise of the taxing power of the State.
For not only are existing laws read into contracts in order to fix obligations as between parties, but
the reservation of essential attributes of sovereign power is also read into contracts as a basic
postulate of the legal order. The policy of protecting contracts against impairment presupposes the
maintenance of a government which retains adequate authority to secure the peace and good order
of society. 46
In truth, the Contract Clause has never been thought as a limitation on the exercise of the State's
power of taxation save only where a tax exemption has been granted for a valid
consideration. 47 Such is not the case of PAL in G.R. No. 115852, and we do not understand it to
make this claim. Rather, its position, as discussed above, is that the removal of its tax exemption
cannot be made by a general, but only by a specific, law.
The substantive issues raised in some of the cases are presented in abstract, hypothetical form
because of the lack of a concrete record. We accept that this Court does not only adjudicate private
cases; that public actions by "non-Hohfeldian" 48 or ideological plaintiffs are now cognizable provided
they meet the standing requirement of the Constitution; that under Art. VIII, § 1, ¶ 2 the Court has a
"special function" of vindicating constitutional rights. Nonetheless the feeling cannot be escaped that
we do not have before us in these cases a fully developed factual record that alone can impart to our
adjudication the impact of actuality 49 to insure that decision-making is informed and well grounded.
Needless to say, we do not have power to render advisory opinions or even jurisdiction over petitions
for declaratory judgment. In effect we are being asked to do what the Conference Committee is
precisely accused of having done in these cases — to sit as a third legislative chamber to review
legislation.
We are told, however, that the power of judicial review is not so much power as it is duty imposed on
this Court by the Constitution and that we would be remiss in the performance of that duty if we
decline to look behind the barriers set by the principle of separation of powers. Art. VIII, § 1, ¶ 2 is
cited in support of this view:
Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of the Government.
To view the judicial power of review as a duty is nothing new. Chief Justice Marshall said so in 1803,
to justify the assertion of this power in Marbury v. Madison:
It is emphatically the province and duty of the judicial department to say what the law
is. Those who apply the rule to particular cases must of necessity expound and
interpret that rule. If two laws conflict with each other, the courts must decide on the
operation of each. 50
Justice Laurel echoed this justification in 1936 in Angara v. Electoral Commission:
And when the judiciary mediates to allocate constitutional boundaries, it does not
assert any superiority over the other departments; it does not in reality nullify or
invalidate an act of the legislature, but only asserts the solemn and sacred obligation
assigned to it by the Constitution to determine conflicting claims of authority under
the Constitution and to establish for the parties in an actual controversy the rights
which that instrument secures and guarantees to them. 51
This conception of the judicial power has been affirmed in several

cases 52 of this Court following Angara.
It does not add anything, therefore, to invoke this "duty" to justify this Court's intervention in what is
essentially a case that at best is not ripe for adjudication. That duty must still be performed in the
context of a concrete case or controversy, as Art. VIII, § 5(2) clearly defines our jurisdiction in terms
of "cases," and nothing but "cases." That the other departments of the government may have
committed a grave abuse of discretion is not an independent ground for exercising our power.
Disregard of the essential limits imposed by the case and controversy requirement can in the long
run only result in undermining our authority as a court of law. For, as judges, what we are called
upon to render is judgment according to law, not according to what may appear to be the opinion of
the day.
_______________________________
In the preceeding pages we have endeavored to discuss, within limits, the validity of Republic Act
No. 7716 in its formal and substantive aspects as this has been raised in the various cases before
us. To sum up, we hold:
(1) That the procedural requirements of the Constitution have been complied with by Congress in the
enactment of the statute;
(2) That judicial inquiry whether the formal requirements for the enactment of statutes — beyond
those prescribed by the Constitution — have been observed is precluded by the principle of
separation of powers;
(3) That the law does not abridge freedom of speech, expression or the press, nor interfere with the
free exercise of religion, nor deny to any of the parties the right to an education; and
(4) That, in view of the absence of a factual foundation of record, claims that the law is regressive,
oppressive and confiscatory and that it violates vested rights protected under the Contract Clause
are prematurely raised and do not justify the grant of prospective relief by writ of prohibition.
WHEREFORE, the petitions in these cases are DISMISSED.
Bidin, Quiason, and Kapunan, JJ., concur.
 Separate Opinions

NARVASA, C.J.:
I fully concur with the conclusions set forth in the scholarly opinion of my learned colleague, Mr.
Justice Vicente V. Mendoza. I write this separate opinion to express my own views relative to the
procedural issues raised by the various petitions and death with by some other Members of the
Court in their separate opinions.
By their very nature, it would seem, discussions of constitutional issues prove fertile ground for a not
uncommon phenomenon: debate marked by passionate partisanship amounting sometimes to
impatience with adverse views, an eagerness on the part of the proponents on each side to assume
the role of, or be perceived as, staunch defenders of constitutional principles, manifesting itself in
flights of rhetoric, even hyperbole. The peril in this, obviously, is a diminution of objectivity — that
quality which, on the part of those charged with the duty and authority of interpreting the
fundamental law, is of the essence of their great function. For the Court, more perhaps than for any
other person or group, it is necessary to maintain that desirable objectivity. It must make certain that
on this as on any other occasion, the judicial function is meticulously performed, the facts
ascertained as comprehensively and as accurately as possible, all the issues particularly identified,
all the arguments clearly understood; else, it may itself be accused, by its own members or by
others, of a lack of adherence to, or a careless observance of, its own procedures, the signatures of
its individual members on its enrolled verdicts notwithstanding.
In the matter now before the Court, and whatever reservations some people may entertain about
their intellectual limitations or moral scruples, I cannot bring myself to accept the thesis which
necessarily implies that the members of our august Congress, in enacting the expanded VAT law,
exposed their ignorance, or indifference to the observance, of the rules of procedure set down by the
Constitution or by their respective chambers, or what is worse, deliberately ignored those rules for
some yet undiscovered purpose nefarious in nature, or at least some purpose other than the public
weal; or that a few of their fellows, acting as a bicameral conference committee, by devious schemes
and cunning maneuvers, and in conspiracy with officials of the Executive Department and others,
succeeded in "pulling the wool over the eyes" of all their other colleagues and foisting on them a bill
containing provisions that neither chamber of our bicameral legislature conceived or contemplated.
This is the thesis that the petitioners would have this Court approve. It is a thesis I consider bereft of
any factual or logical foundation.
Other than the bare declarations of some of the petitioners, or arguments from the use and import of
the language employed in the relevant documents and records, there is no evidence before the
Court adequate to support a finding that the legislators concerned, whether of the upper or lower
chamber, acted otherwise than in good faith, in the honest discharge of their functions, in the sincere
belief that the established procedures were being regularly observed or, at least, that there occurred
no serious or fatal deviation therefrom. There is no evidence on which reasonably to rest a
conclusion that any executive or other official took part in or unduly influenced the proceedings
before the bicameral conference committee, or that the members of the latter were motivated by a
desire to surreptitiously introduce improper revisions in the bills which they were required to
reconcile, or that after agreement had been reached on the mode and manner of reconciliation of the
"disagreeing provisions," had resorted to stratragems or employed under-handed ploys to ensure
their approval and adoption by either House. Neither is there any proof that in voting on the
Bicameral Conference Committee (BCC) version of the reconciled bills, the members of the Senate
and the House did so in ignorance of, or without understanding, the contents thereof or the bills
therein reconciled.
Also unacceptable is the theory that since the Constitution requires appropriation and revenue bills
to originate exclusively in the House of Representatives, it is improper if not unconstitutional for the
Senate to formulate, or even think about formulating, its own draft of this type of measure in
anticipation of receipt of one transmitted by the lower Chamber. This is specially cogent as regards
much-publicized suggestions for legislation (like the expanded VAT Law) emanating from one or
more legislators, or from the Executive Department, or the private sector, etc. which understandably
could be expected to forthwith generate much Congressional cogitation.
Exclusive origination, I submit, should have no reference to time of conception. As a practical matter,
origination should refer to the affirmative act which effectively puts the bicameral legislative
procedure in motion, i.e., the transmission by one chamber to the other of a bill for its adoption. This
is the purposeful act which sets the legislative machinery in operation to effectively lead to the
enactment of a statute. Until this transmission takes place, the formulation and discussions, or the
reading for three or more times of proposed measures in either chamber, would be meaningless in
the context of the activity leading towards concrete legislation. Unless transmitted to the other
chamber, a bill prepared by either house cannot possibly become law. In other words, the first
affirmative, efficacious step, the operative act as it were, leading to actual enactment of a statute, is
the transmission of a bill from one house to the other for action by the latter. This is the origination
that is spoken of in the Constitution in its Article VI, Section 24, in reference to appropriation,
revenue, or tariff bills, etc.
It may be that in the Senate, revenue or tax measures are discussed, even drafted, and this before a
similar activity takes place in the House. This is of no moment, so long as those measures or bill
remain in the Senate and are not sent over the House. There is no origination of revenue or tax
measures by the Senate in this case. However, once the House completes the drawing up of a
similar tax measure in accordance with the prescribed procedure, ven if this is done subsequent to
the Senate’s own measure — indeed, even if this be inspired by information that measure of the
Senate — and after third reading transmits its bill to the Senate, there is origination by (or in) the
House within the contemplation of the Constitution.
So it is entirely possible, as intimated, that in expectation of the receipt of a revenue or tax bill from
the House of Representatives, the Senate commences deliberations on its own concept of such a
legislative measure. This, possibly to save time, so that when the House bill raches it, its thoughts
and views on the matter are already formed and even reduced to writing in the form of a draft
statute. This should not be thought ilegal, as interdicted by the Constitution. What the Constitution
prohibits is for the Senate to begin the legislative process first, by sending its own revenue bill to the
House of Representatives for its consideration and action. This is the initiation that is prohibited to
the Senate.
But petitioners claims that this last was what in fact happened, that the went through the legislative
mill and was finally approved as R.A. No. 7716, was the Senate version, SB 1630. This is disputed
by the respondents. They claim it was House Bill 11197 that, after being transmitted to the Senate,
was referred after first reading to its Committee on Ways and Means; was reported out by said
Committee; underwent second and third readings, was sent to the bicameral conference committee
and then, after appropriate proceedings therein culminating in extensive amendments thereof, was
finally approved by both Houses and became the Expanded VAT Law.
On whose side does the truth lie? If it is not possible to make that determination from the pleadings
and records before this Court, shall it require evidence to be presented? No, on both law and
principle. The Court will reject a case where the legal issues raised, whatever they may be, depend
for their resolution on still unsettled questions of fact. Petitioners may not, by raising what are Court
to assume the role of a trier of facts. It is on the contrary their obligation, before raising those
questions to this Court, to see to it that all issues of fact are settled in accordance with the
procedures laid down by law for proof of facts. Failing this, petitioners would have only themselves to
blame for a peremptory dismissal.
Now, what is really proven about what happened to HB 11197 after it was transmitted to the Senate?
It seems to be admitted on all sides that after going through first reading, HB 11197 was referred to
the Committee on Ways and Means chaired by Senator Ernesto Herrera.
It is however surmised that after this initial step, HB 11197 was never afterwards deliberated on in
the Senate, that it was there given nothing more than a "passing glance," and that it never went
through a proper second and third reading. There is no competent proof to substantiate this claim.
What is certain is that on February 7, 1994, the Senate Committee on Ways and Means submitted
its Report (No. 349) stating that HB 11197 was considered, and recommending that SB 1630 be
approved "in substitution of S.B. No. 1129, taking into consideration P.S. Res. No. 734 1 and H.B. No.
11197." This Report made known to the Senate, and clearly indicates, that H.B. No. 11197 was
indeed deliberated on by the Committee; in truth, as Senator Herrera pointed out, the BCC later
"agreed to adopt (a broader coverage of the VAT) which is closely adhering to the Senate version **
** with some new provisions or amendments." The plain implication is that the Senate Committee
had indeed discussed HB 11197 in comparison with the inconsistent parts of SB 1129 and
afterwards proposed amendments to the former in the form of a new bill (No. 1630) more closely
akin to the Senate bill (No. 1129).
And it is as reasonable to suppose as not that later, during the second and third readings on March
24, 1994, the Senators, assembled as a body, had before them copies of HB 11197 and SB 1129, as
well as of the Committee's new "SB 1630" that had been recommended for their approval, or at the
very least were otherwise perfectly aware that they were considering the particular provisions of
these bills. That there was such a deliberation in the Senate on HB 11197 in light of inconsistent
portions of SB 1630, may further be necessarily inferred from the request, made by the Senate on
the same day, March 24, 1994, for the convocation of a bicameral conference committee to reconcile
"the disagreeing provisions of said bill (SB 1630) and House Bill No. 11197," a request that could not
have been made had not the Senators more or less closely examined the provisions of HB 11197
and compared them with those of the counterpart Senate measures.
Were the proceedings before the bicameral conference committee fatally flawed? The affirmative is
suggested because the committee allegedly overlooked or ignored the fact that SB 1630 could not
validly originate in the Senate, and that HB 11197 and SB 1630 never properly passed both
chambers. The untenability of these contentions has already been demonstrated. Now,
demonstration of the indefensibility of other arguments purporting to establish the impropriety of the
BCC proceedings will be attempted.
There is the argument, for instance, that the conference committee never used HB 11197 even as
"frame of reference" because it does not appear that the suggestion therefor (made by House Penal
Chairman Exequiel Javier at the bicameral conference committee's meeting on April 19, 1994, with
the concurrence of Senator Maceda) was ever resolved, the minutes being regrettably vague as to
what occurred after that suggestion was made. It is, however, as reasonable to assume that it was,
as it was not, given the vagueness of the minutes already alluded to. In fact, a reading of the BCC
Report persuasively demonstrates that HB 11197 was not only utilized as a "frame of reference" but
actually discussed and deliberated on.
Said BCC Report pertinently states: 2
CONFERENCE COMMITTEE REPORT
The Conference Committee on the disagreeing provisions of House Bill No. 11197,
entitled:
AN ACT RESTRUCTURING THE VALUE ADDED TAX (VAT) SYSTEM TO WIDEN
ITS TAX BASE AND ENHANCE ITS ADMINISTRATION, AMENDING FOR THESE
PURPOSES SECTIONS 99, 100, 102, 1013, 104, 105, 106, 107, 108 AND 110 OF
TITLE IV, 112, 115 AND 116 OF TITLE V, AND 236, 237, AND 238 OF TITLE IX, AND
REPEALING SECTIONS 113SD AND 114 OF TITLE V, ALL OF THE NATIONAL
INTERNAL REVENUE CODE, AS AMENDED
 and Senate Bill No. 1630 entitled:
AN ACT RESTRUCTURING THE VALUE ADDED TAX (VAT) SYSTEM TO WIDEN
ITS TAX BASE AND ENHANCE ITS ADMINISTRATION, AMENDING FOR THESE
PURPOSES SECTIONS 99, 100, 102, 103, 104, 1 106, 107, 108 AND 110 OF TITLE
IV, 112, 115, 117 AND 121 OF TITLE V, ACND 236, 237, AND 238 OF TITLE IX, AND
REPEALING SECTIONS 1113, 114, 116, 119 AND 120 OF TITLE V, ALL OF THE
NATIONAL INTERNAL REVENUE CODE, AS AMENDED AND FOR OTHER
PURPOSES
having met, after full and free conference, has agreed to recommend and do hereby
recommend to their respective Houses that House Bill No. 11197, in consolidation
with Senate Bill No. 1630, be approved in accordance with the attached copy of the
bill as reconciled and approved by the conferees.
Approved.
The Report, it will be noted, explicitly adverts to House Bill No. 11197, it being in fact mentioned
ahead of Senate Bill No. 1630; graphically shows the very close identity of the subjects of both bills
(indicated in their respective titles); and clearly says that the committee met in "full and free
conference" on the "disagreeing provisions" of both bills (obviously in an effort to reconcile them);
and that reconciliation of said "disagreeing provisions" had been effected, the BCC having agreed
that "House Bill No. 11197, in consolidation with Senate Bill No. 1630, be approved in accordance
with the attached copy of the bill as reconciled and approved by the conferees."
It may be concluded, in other words, that, conformably to the procedure provided in the Constitution
with which all the Members of the bicameral conference committee cannot but be presumed to be
familiar, and no proof to the contrary having been adduced on the point, it was the original bill (HB
11197) which said body had considered and deliberated on in detail, reconciled or harmonized with
SB 1630, and used as basis for drawing up the amended version eventually reported out and
submitted to both houses of Congress.
It is further contended that the BCC was created and convoked prematurely, that SB 1630 should
first have been sent to the House of Representatives for concurrence It is maintained, in other
words, that the latter chamber should have refused the Senate request for a bicameral conference
committee to reconcile the "disagreeing provisions" of both bills, and should have required that SB
1630 be first transmitted to it. This, seemingly, is nit-picking given the urgency of the proposed
legislation as certified by the President (to both houses, in fact). Time was of the essence, according
to the President's best judgment — as regards which absolutely no one in either chamber of
Congress took exception, general acceptance being on the contrary otherwise manifested — and
that judgment the Court will not now question. In light of that urgency, what was so vital or
indispensable about such a transmittal that its absence would invalidate all else that had been done
towards enactment of the law, completely escapes me, specially considering that the House had
immediately acceded without demur to the request for convocation of the conference committee.
What has just been said should dispose of the argument that the statement in the enrolled bill, that
"This Act which is a consolidation of House Bill No. 11197 and Senate Bill No. 11630 was finally
passed by the House of Representatives and the Senate on April 27, 1994 and May 2, 1994,"
necessarily signifies that there were two (2) bills separately introduced, retaining their independent
existence until they reached the bicameral conference committee where they were consolidated, and
therefore, the VAT law did not originate exclusively in the House having originated in part in the
Senate as SB 1630, which bill was not embodied in but merely merged with HB 11197, retaining its
separate identity until it was joined by the BCC with the house measure. The more logical, and fairer,
course is to construe the expression, "consolidation of House Bill No. 11197 and Senate Bill No.
11630" in the context of accompanying and contemporaneous statements, i.e.: (a) the declaration in
the BCC Report, supra, that the committee met to reconcile the disagreeing provisions of the two
bills, "and after full and free conference" on the matter, agreed and so recommended that "House Bill
No. 11197, in consolidation with Senate Bill No. 1630, be approved in accordance with the attached
copy of the bill as reconciled and approved by the conferees;" and (b) the averment of Senator
Herrera, in the Report of the Ways and Means Committee, supra, that the committee had actually
"considered" (discussed) HB No. 11197 and taken it "into consideration" in recommending that its
own version of the measure (SB 1630) be the one approved.
That the Senate might have drawn up its own version of the expanded VAT bill, contemporaneously
with or even before the House did, is of no moment. It bears repeating in this connection that no VAT
bill ever originated in the Senate; neither its SB 1129 or SB 1630 or any of its drafts was ever
officially transmitted to the House as an initiating bill which, as already pointed out, is what the
Constitution forbids; it was HB 11197 that was first sent to the Senate, underwent first reading, was
referred to Committee on Ways and Means and there discussed in relation to and in comparison with
the counterpart Senate version or versions — the mere formulation of which was, as also already
discussed, not prohibited to it — and afterwards considered by the Senate itself, also in connection
with SB 1630, on second and third readings. HB 11197 was in the truest sense, the originating bill.
An issue has also arisen respecting the so-called "enrolled bill doctrine" which, it is said, whatever
sacrosanct status it might originally have enjoyed, is now in bad odor with modern scholars on
account of its imputed rigidity and unrealism; it being also submitted that the ruling in Mabanag v.
Lopez Vito (78 Phil. 1) and the cases reaffirming it, is no longer good law, it being based on a
provision of the Code of Civil Procedure 3 long since stricken from the statute books.
I would myself consider the "enrolled bill" theory as laying down a presumption of so strong a
character as to be well nigh absolute or conclusive, fully in accord with the familiar and fundamental
philosophy of separation of powers. The result, as far as I am concerned, is to make discussion of
the enrolled bill principle purely academic; for as already pointed out, there is no proof worthy of the
name of any facts to justify its reexamination and, possibly, disregard.
The other question is, what is the nature of the power given to a bicameral conference committee of
reconciling differences between, or "disagreeing provisions" in, a bill originating from the House in
relation to amendments proposed by the Senate — whether as regards some or all of its provisions?
Is the mode of reconciliation, subject to fixed procedure and guidelines? What exactly can the
committee do, or not do? Can it only clarify or revise provisions found in either Senate or House bill?
Is it forbidden to propose additional or new provisions, even on matters necessarily or reasonably
connected with or germane to items in the bills being reconciled?
In answer, it is postulated that the reconciliation function is quite limited. In these cases, the
conference committee should have confined itself to reconciliation of differences or inconsistencies
only by (a) restoring provisions of HB11197 aliminated by SB 1630, or (b) sustaining wholly or partly
the Senate amendments, or (c) as a compromise, agreeing that neither provisions nor amendments
be carried into the final form of HB 11197 for submission to both chambers of the legislature.
The trouble is, it is theorized, the committee incorporated activities or transactions which were not
within the contemplation of both bills; it made additions and deletions which did not enjoy the
enlightenment of initial committee studies; it exercised what is known as an "ex post veto power"
granted to it by no law, rule or regulation, a power that in truth is denied to it by the rules of both the
Senate and the House. In substantiation, the Senate rule is cited, similar to that of the House,
providing that "differences shall be settled by a conference committee" whose report shall contain
"detailed and sufficiently explicit statement of the changes in or amendments to the subject measure,
** (to be) signed by the conferees;" as well as the "Jefferson's Manual," adopted by the Senate as
supplement to its own rules, directing that the managers of the conference must confine themselves
to differences submitted to them; they may not include subjects not within the disagreements even
though germane to a question in issue."
It is significant that the limiting proviso in the relevant rules has been construed and applied as
directory, not mandatory. During the oral argument, counsel for petitioners admitted that the practice
for decades has been for bicameral conference committees to include such provisions in the
reconciled bill as they believed to be germane or necessary and acceptable to both chambers, even
if not within any of the "disagreeing provisions," and the reconciled bills, containing such provisions
had invariably been approved and adopted by both houses of Congress. It is a practice, they say,
that should be stopped. But it is a practice that establishes in no uncertain manner the prevailing
concept in both houses of Congress of the permissible and acceptable modes of reconciliation that
their conference committees may adopt, one whose undesirability is not all that patent if not, indeed,
incapable of unquestionable demonstration. The fact is that conference committees only take up bills
which have already been freely and fully discussed in both chambers of the legislature, but as to
which there is need of reconciliation in view of "disagreeing provisions" between them; and both
chambers entrust the function of reconciling the bills to their delegates at a conference committee
with full awareness, and tacit consent, that conformably with established practice unquestioningly
observed over many years, new provisions may be included even if not within the "disagreeing
provisions" but of which, together with other changes, they will be given detailed and sufficiently
explicit information prior to voting on the conference committee version.
In any event, a fairly recent decision written for the Court by Senior Associate Justice Isagani A.
Cruz, promulgated on November 11, 1993 (G.R. No. 105371, The Philippine Judges Association,
etc., et al. v. Hon. Pete Prado, etc., et al.), should leave no doubt of the continuing vitality of the
enrolled bill doctrine and give an insight into the nature of the reconciling function of bicameral
conference committees. In that case, a bilateral conference committee was constituted and met to
reconcile Senate Bill No. 720 and House Bill No. 4200. It adopted a "reconciled" measure that was
submitted to and approved by both chambers of Congress and ultimately signed into law by the
President, as R.A. No. 7354. A provision in this statute (removing the franking privilege from the
courts, among others) was assailed as being an invalid amendment because it was not included in
the original version of either the senate or the house bill and hence had generated no disagreement
between them which had to be reconciled. The Court held:
While it is true that a conference committee is the mechanism for compromising
differences between the Senate and the House, it is not limited in its jurisdiction to
this question. Its broader function is described thus:
A conference committee may deal generally with the subject matter or
it may be limited to resolving the precise differences between the two
houses. Even where the conference committee is not by rule limited
in its jurisdiction, legislative custom severely limits the freedom with
which new subject matter can be inserted into the conference bill. But
occasionally a conference committee produces unexpected results,
results beyond its mandate. These excursions occur even where the
rules impose strict limitations on conference committee jurisdiction.
This is symptomatic of the authoritarian power of conference
committee (Davies, Legislative Law and Process: In A Nutshell, 1987
Ed., p. 81).
It is a matter of record that the Conference Committee Report on the bill in question
was returned to and duly approved by both the Senate and the House of
Representatives. Thereafter, the bill was enrolled with its certification by Senate
President Neptali A. Gonzales and Speaker Ramon V. Mitra of the House of
Representatives as having been duly passed by both Houses of Congress. It was
then presented to and approved by President Corazon C. Aquino on April 3, 1992.
Under the doctrine of separation of powers, the Court may not inquire beyond the
certification of the approval of a bill from the presiding officers of Congress. Casco
Philippine Chemical Co. v. Gimenez (7 SCRA 347) laid down the rule that the
enrolled bill is conclusive upon the Judiciary (except in matters that have to be
entered in the journals like the yeas and nays on the final reading of the bill)
(Mabanag v. Lopez Vito, 78 Phil. 1). The journals are themselves also binding on the
Supreme Court, as we held in the old (but still valid) case of U.S. v. Pons (34 Phil.
729), where we explained the reason thus:
 To inquire into the veracity of the journals of the Philippine legislature
when they are, as we have said, clear and explicit, would be to violate
both the letter and spirit of the organic laws by which the Philippine
Government was brought into existence, to invade a coordinate and
independent department of the Government, and to interfere with the
legitimate powers and functions of the Legislature. Applying these
principles, we shall decline to look into the petitioners' charges that
an amendment was made upon the last reading of the bill that
eventually R.A. No. 7354 and that copies thereof in its final form were
not distributed among the members of each House. Both the enrolled
bill and the legislative journals certify that the measure was duly
enacted i.e., in accordance with Article VI, Sec. 26 (2) of the
Constitution. We are bound by such official assurances from a
coordinate department of the government, to which we owe, at the
very least, a becoming courtesy.
Withal, an analysis of the changes made by the conference committee in HB 11197 and SB 1630 by
way of reconciling their "disagreeing provisions," — assailed by petitioners as unauthorized or
incongrouous — reveals that many of the changes related to actual "disagreeing provisions," and
that those that might perhaps be considered as entirely new are nevertheless necessarily or logically
connected with or germane to particular matters in the bills being reconciled.
For instance, the change made by the bicameral conference committee (BCC) concerning
amendments to Section 99 of the National Internal Revenue Code (NIRC) — the addition of "lessors
of goods or properties and importers of goods" — is really a reconciliation of disagreeing provisions,
for while HB 11197 mentions as among those subject to tax, "one who sells, barters, or exchanges
goods or properties and any person who leases personal properties," SB 1630 does not. The
change also merely clarifies the provision by providing that the contemplated taxpayers includes
"importers." The revision as regards the amendment to Section 100, NIRC, is also simple
reconciliation, being nothing more than the adoption by the BCC of the provision in HB 11197
governing the sale of gold to Bangko Sentral, in contrast to SB 1630 containing no such provision.
Similarly, only simple reconciliation was involved as regards approval by the BCC of a provision
declaring as not exempt, the sale of real properties primarily held for sale to customers or held for
lease in the ordinary course of trade or business, which provision is found in HB 11197 but not in SB
1630; as regards the adoption by the BCC of a provision on life insurance business, contained in SB
1630 but not found in HB 11197; as regards adoption by the BCC of the provision in SB 1630 for
deferment of tax on certain goods and services for no longer than 3 years, as to which there was no
counterpart provision in SB 11197; and as regards the fixing of a period for the adoption of
implementing rules, a period being prescribed in SB 1630 and none in HB 11197.
In respect of other revisions, it would seem that questions logically arose in the course of the
discussion of specific "disagreeing provisions" to which answers were given which, because believed
acceptable to both houses of Congress, were placed in the BCC draft. For example, during
consideration of radio and television time (Sec. 100, NIRC) dealt with in both House and Senate
bills, the question apparently came up, the relevance of which is apparent on its face, relative
to satellite transmission and cable television time. Hence, a provision in the BCC bill on the matter.
Again, while deliberating on the definition of goods or properties in relation to the provision
subjecting sales thereof to tax, a question apparently arose, logically relevant, about real properties
intended to be sold by a person in economic difficulties, or because he wishes to buy a car, i.e., not
as part of a business, the BCC evidently resolved to clarify the matter by excluding from the tax,
"real properties held primarily for sale to customers or held for lease in the ordinary course of
business." And in the course of consideration of the term, sale or exchange of services (Sec 102,
NIRC), the inquiry most probably was posed as to whether the term should be understood as
including other services: e.g., services of lessors of property whether real or personal, of
warehousemen, of keepers of resthouses, pension houses, inns, resorts, or of common carriers,
etc., and presumably the BCC resolved to clarify the matter by including the services just mentioned.
Surely, changes of this nature are obviously to be expected in proceedings before bicameral
conference committees and may even be considered grist for their mill, given the history of such
BCCs and their general practice here and abroad
In any case, all the changes and revisions, and deletions, made by the conference committee were
all subsequently considered by and approved by both the Senate and the House, meeting and voting
separately. It is an unacceptable theorization, to repeat, that when the BCC report and its proposed
bill were submitted to the Senate and the House, the members thereof did not bother to read, or
what is worse, having read did not understand, what was before them, or did not realize that there
were new provisions in the reconciled version unrelated to any "disagreeing provisions," or that said
new provisions or revisions were effectively concealed from them
Moreover, it certainly was entirely within the power and prerogative of either legislative chamber to
reject the BCC bill and require the organization of a new bicameral conference committee. That this
option was not exercised by either house only proves that the BCC measure was found to be
acceptable as in fact it was approved and adopted by both chambers.
I vote to DISMISS the petitions for lack of merit.

PADILLA, J.:
I
The original VAT law and the expanded VAT law
In Kapatiran v. Tan,1 where the ponente was the writer of this Separate Opinion,
a unanimous Supreme Court en banc upheld the validity of the original VAT law (Executive Order
No. 273, approved on 25 July 1987). It will, in my view, be pointless at this time to re-open
arguments advanced in said case as to why said VAT law was invalid, and it will be equally
redundant to re-state the principles laid down by the Court in the same case affirming the validity of
the VAT law as a tax measure. And yet, the same arguments are, in effect, marshalled against the
merits and substance of the expanded VAT law (Rep. Act. No. 7716, approved on 5 May 1994). The
same Supreme Court decision should therefore dispose, in the main, of such arguments, for the
expanded VAT law is predicated basically on the same principles as the original VAT law, except that
now the tax base of the VAT imposition has been expanded or broadened.
It only needs to be stated — what actually should be obvious — that a tax measure, like the
expanded VAT law (Republic Act. No. 7716), is enacted by Congress and approved by the President
in the exercise of the State's power to tax, which is an attribute of sovereignty. And while the power
to tax, if exercised without limit, is a power to destroy, and should, therefore, not be allowed in such
form, it has to be equally recognized that the power to tax is an essential right of government.
Without taxes, basic services to the people can come to a halt; economic progress will be stunted,
and, in the long run, the people will suffer the pains of stagnation and retrogression.
Consequently, upon careful deliberation, I have no difficulty in reaching the conclusion that the
expanded VAT law comes within the legitimate power of the state to tax. And as I had occasion to
previously state:
Constitutional Law, to begin with, is concerned with power not political convenience,
wisdom, exigency, or even necessity. Neither the Executive nor the legislative
(Commission on Appointments) can create power where the Constitution confers
none.2
Likewise, in the first VAT case, I said:
In any event, if petitioners seriously believe that the adoption and continued
application of the VAT are prejudicial to the general welfare or the interests of the
majority of the people, they should seek, recourse and relief from the political
 branches of the government. The Court, following the time-honored doctrine of
separation of powers, cannot substitute its judgment for that of the President (and
Congress) as to the wisdom, justice and advisability of the adoption of the VAT. 3
This Court should not, as a rule, concern itself with questions of policy, much less, economic policy.
That is better left to the two (2) political branches of government. That the expanded VAT law is
unwise, unpopular and even anti-poor, among other things said against it, are arguments and
considerations within the realm of policy-debate, which only Congress and the Executive have the
authority to decisively confront, alleviate, remedy and resolve.
II
The procedure followed in the approval of Rep. Act No. 7716
Petitioners however posit that the present case raises a far-reaching constitutional question which
the Court is duty-bound to decide under its expanded jurisdiction in the 1987 Constitution.
4 Petitioners more specifically question and impugn the manner by which the expanded VAT law

(Rep. Act. No. 7716) was approved by Congress. They contend that it was approved in violation of
the Constitution from which fact it follows, as a consequence, that the law is null and void. Main
reliance of the petitioners in their assault in Section 24, Art. VI of the Constitution which provides:
Sec. 24. All appropriation, revenue or tariff bills, bills authorizing increase of the
public debt, bill of local application, and private bills shall originate exclusively in the
House of Representatives, but the Senate may propose or concur with amendments.
While it should be admitted at the outset that there was no rigorous and strict adherence to the literal
command of the above provision, it may however be said, after careful reflection, that there
was substantial compliance with the provision.
There is no question that House Bill No. 11197 expanding the VAT law originated from the House of
Representatives. It is undeniably a House measure. On the other hand, Senate Bill No. 1129, also
expanding the VAT law, originated from the Senate. It is undeniably a Senate measure which, in
point of time, actually antedated House Bill No. 11197.
But it is of record that when House Bill No. 11197 was, after approval by the House, sent to the
Senate, it was referred to, and considered by the Senate Committee on Ways and Means (after first
reading) together with Senate Bill No. 1129, and the Committee came out with Senate Bill No. 1630
in substitution of Senate Bill No. 1129 but after expressly taking into consideration House Bill No.
11197.
Since the Senate is, under the above-quoted constitutional provision, empowered to concur with a
revenue measure exclusively originating from the House, or to propose amendments thereto, to the
extent of proposing amendments by SUBSTITUTION to the House measure, the approval by the
Senate of Senate Bill No. 1630, after it had considered House Bill No. 11197, may be taken, in my
view, as an AMENDMENT BY SUBSTITUTION by the Senate not only of Senate Bill No. 1129 but of
House Bill No. 11197 as well which, it must be remembered, originated exclusively from the House.
But then, in recognition of the fact that House Bill No. 11197 which originated exclusively from the
House and Senate Bill No. 1630 contained conflicting provisions, both bills (House Bill No. 11197
and Senate Bill No. 1630) were referred to the Bicameral Conference Committee for joint
consideration with a view to reconciling their conflicting provisions.
The Conference Committee came out eventually with a Conference Committee Bill which was
submitted to both chambers of Congress (the Senate and the House). The Conference Committee
reported out a bill consolidating provisions in House Bill No. 11197 and Senate Bill No. 1630. What
transpired in both chambers after the Conference Committee Report was submitted to them is not
clear from the records in this case. What is clear however is that both chambers voted separately on
the bill reported out by the Conference Committee and both chambers approved the bill of the
Conference Committee.
To me then, what should really be important is that both chambers of Congress approved the bill
reported out by the Conference Committee. In my considered view, the act of both chambers of
Congress in approving the Conference Committee bill, should put an end to any inquiry by this Court
as to how the bill came about. What is more, such separate approvals CURED whatever
constitutional infirmities may have arisen in the procedures leading to such approvals. For, if such
infirmities were serious enough to impugn the very validity of the measure itself, there would have
been an objection or objections from members of both chambers to the approval. The Court has
been shown no such objection on record in both chambers.
Petitioners contend that there were violations of Sec. 26 paragraph 2, Article VI of the Constitution
which provides:
Sec. 26. . . .
(2) No bill passed by either House shall become a law unless it has passed three
readings on separate days, and printed copies thereof in its final form have been
distributed to its Members three days before its passage, except when the President
certifies to the necessity of its immediate enactment to meet a public calamity or
emergency. Upon the last reading of a bill, no amendment thereto shall be allowed,
and the vote thereon shall be taken immediately thereafter, and the yeas and nays
entered in the Journal.
in that, when Senate Bill No. 1630 (the Senate counterpart of House Bill No. 11197) was approved
by the Senate, after it had been reported out by the Senate Committee on Ways and Means, the bill
went through second and third readings on the same day (not separate days) and printed copies
thereof in its final form were not distributed to the members of the Senate at least three (3) days
before its passage by the Senate. But we are told by the respondents that the reason for this "short
cut" was that the President had certified to the necessity of the bill's immediate enactment to meet
an emergency — a certification that, by leave of the same constitutional provision, dispensed with
the second and third readings on separate days and the printed form at least three (3) days before
its passage.
We have here then a situation where the President did certify to the necessity of Senate Bill No.
1630's immediate enactment to meet an emergency and the Senate responded accordingly. While I
would be the last to say that this Court cannot review the exercise of such power by the President in
appropriate cases ripe for judicial review, I am not prepared however to say that the President
gravely abused his discretion in the exercise of such power as to require that this Court overturn his
action. We have been shown no fact or circumstance which would impugn the judgment of the
President, concurred in by the Senate, that there was an emergency that required the immediate
enactment of Senate Bill No. 1630. On the other hand, a becoming respect for a co-equal and
coordinate department of government points that weight and credibility be given to such Presidential
judgment.
The authority or power of the Conference Committee to make insertions in and deletions from the
bills referred to it, namely, House Bill No. 11197 and Senate Bill No. 1630 is likewise assailed by
petitioners. Again, what appears important here is that both chambers approved and ratified the bill
as reported out by the Conference Committee (with the reported insertions and deletions). This is
perhaps attributable to the known legislative practice of allowing a Conference Committee to make
insertions in and deletions from bills referred to it for consideration, as long as they are germane to
the subject matter of the bills under consideration. Besides, when the Conference Committee made
the insertions and deletions complained of by petitioners, was it not actually performing the task
assigned to it of reconciling conflicting provisions in House Bill No. 11197 and Senate Bill No. 1630?
This Court impliedly if not expressly recognized the fact of such legislative practice in Philippine
Judges Association, etc. vs. Hon. Peter Prado, etc., 5 In said case, we stated thus:
The petitioners also invoke Sec. 74 of the Rules of the House of Representatives,
requiring that amendment to any bill when the House and the Senate shall have
 differences thereon may be settled by a conference committee of both chambers.
They stress that Sec. 35 was never a subject of any disagreement between both
Houses and so the second paragraph could not have been validly added as an
amendment.
These arguments are unacceptable.
While it is true that a conference committee is the mechanism for compromising
differences between the Senate and the House, it is not limited in its jurisdiction to
this question. Its broader function is described thus:
A conference committee may deal generally with the subject matter or
it may be limited to resolving the precise differences between the two
houses. Even where the conference committee is not by rule limited
in its jurisdiction, legislative custom severely limits the freedom with
which new subject matter can be inserted into the conference bill. But
occasionally a conference committee produces unexpected results,
results beyond its mandate. These excursions occurs even where the
rules impose strict limitations on conference committee jurisdiction.
This is symptomatic of the authoritarian power of conference
committee (Davies, Legislative Law and Process: In A Nutshell, 1986
Ed., p. 81).
It is a matter of record that the Conference Committee Report on the bill in question
was returned to and duly approved by both the Senate and the House of
Representatives. Thereafter, the bill was enrolled with its certification by Senate
President Neptali A. Gonzales and Speaker Ramon V. Mitra of the House of
Representatives as having been duly passed by both Houses of Congress. It was
then presented to and approved by President Corazon C. Aquino on April 3, 1992.
It would seem that if corrective measures are in order to clip the powers of the Conference
Committee, the remedy should come from either or both chambers of Congress, not from this Court,
under the time-honored doctrine of separation of powers.
Finally, as certified by the Secretary of the Senate and the Secretary General of the House of
Representatives —
This Act (Rep. Act No. 7716) is a consolidation of House Bill No. 11197 and Senate
Bill No. 1630 (w)as finally passed by the House of Representatives and the Senate
on April 27, 1994 and May 2, 1994 respectively.
Under the long-accepted doctrine of the "enrolled bill," the Court in deference to a co-equal and
coordinate branch of government is held to a recognition of Rep. Act No. 7716 as a law validly
enacted by Congress and, thereafter, approved by the President on 5 May 1994. Again, we quote
from out recent decision in Philippine Judges Association, supra:
Under the doctrine of separation of powers, the Court may not inquire beyond the
certification of the approval of a bill from the presiding officers of Congress. Casco
Philippine Chemical Co. v. Gimenezlaid down the rule that the enrolled bill is
conclusive upon the Judiciary (except in matters that have to be entered in the
journals like the yeas and nays on the finally reading of the bill). The journals are
themselves also binding on the Supreme Court, as we held in the old (but still valid)
case of U.S. vs. Pons,8 where we explained the reason thus:
To inquire into the veracity of the journals of the Philippine legislature
when they are, as we have said, clear and explicit, would be to violate
both the letter and spirit of the organic laws by which the Philippine
Government was brought into existence, to invade a coordinate and
 independent department of the Government, and to interfere with the
legitimate powers and functions of the Legislature.
Applying these principles, we shall decline to look into the petitioners' charges that an
amendment was made upon the last reading of the bill that eventually became R.A.
No. 7354 and that copies thereof in its final form were not distributed among the
members of each House. Both the enrolled bill and the legislative journals certify that
the measure was duly enacted i.e., in accordance with Article VI, Sec. 26(2) of the
Constitution. We are bound by such official assurances from a coordinate department
of the government, to which we owe, at the very least, a becoming courtesy.
III
Press Freedom and Religious Freedom and Rep. Act No. 7716
The validity of the passage of Rep. Act No. 7716 notwithstanding, certain provisions of the law have
to be examined separately and carefully.
Rep. Act. No. 7716 in imposing a value-added tax on circulation income of newspapers and similar
publications and on income derived from publishing advertisements in newspapers 9, to my mind,
violates Sec. 4, Art. III of the Constitution. Indeed, even the Executive Department has tried to cure
this defect by the issuance of the BIR Regulation No. 11-94 precluding implementation of the tax in
this area. It should be clear, however, that the BIR regulation cannot amend the law (Rep. Act No.
7716). Only legislation (as distinguished from administration regulation) can amend an existing law.
Freedom of the press was virtually unknown in the Philippines before 1900. In fact, a prime cause of
the revolution against Spain at the turn of the 19th century was the repression of the freedom of
speech and expression and of the press. No less than our national hero, Dr. Jose P. Rizal, in
"Filipinas Despues de Cien Anos" (The Philippines a Century Hence) describing the reforms sine
quibus non which the Filipinos were insisting upon, stated: "The minister . . . who wants his reforms
to be reforms, must begin by declaring the press in the Philippines free . . . ". 10
Press freedom in the Philippines has met repressions, most notable of which was the closure of
almost all forms of existing mass media upon the imposition of martial law on 21 September 1972.
Section 4, Art. III of the Constitution maybe traced to the United States Federal Constitution. The
guarantee of freedom of expression was planted in the Philippines by President McKinley in the
Magna Carta of Philippine Liberty, Instructions to the Second Philippine Commission on 7 April 1900.
The present constitutional provision which reads:
Sec. 4 No law shall be passed abridging the freedom of speech, of expression, or of
the press, or the right of the people peaceably to assemble and petition the
government for redress of grievances.
is essentially the same as that guaranteed in the U.S. Federal Constitution, for which reason,
American case law giving judicial expression as to its meaning is highly persuasive in the
Philippines.
The plain words of the provision reveal the clear intention that no prior restraint can be imposed on
the exercise of free speech and expression if they are to remain effective and meaningful.
The U.S. Supreme Court in the leading case of Grosjean v. American Press Co. Inc.11 declared a
statute imposing a gross receipts license tax of 2% on circulation and advertising income of
newspaper publishers as constituting a prior restraint which is contrary to the guarantee of freedom
of the press.
In Bantam Books, Inc. v. Sullivan 12, the U.S. Supreme Court stated: "Any system of prior restraint of
expression comes to this Court bearing a heavy presumption against its constitutionality."
In this jurisdiction, prior restraint on the exercise of free expression can be justified only on the
ground that there is a clear and present danger of a substantive evil which the State has the right to
prevent 13.
In the present case, the tax imposed on circulation and advertising income of newspaper publishers
is in the nature of a prior restraint on circulation and free expression and, absent a clear showing
that the requisite for prior restraint is present, the constitutional flaw in the law is at once apparent
and should not be allowed to proliferate.
Similarly, the imposition of the VAT on the sale and distribution of religious articles must be struck
down for being contrary to Sec. 5, Art. III of the Constitution which provides:
Sec. 5. No law shall be made respecting an establishment of religion, or prohibiting
the free exercise thereof. The free exercise and enjoyment of religious profession
and worship, without discrimination or preference, shall forever be allowed. No
religious test shall be required for the exercise of civil or political rights.
That such a tax on the sale and distribution of religious articles is unconstitutional, has been long
settled in American Bible Society, supra.
Insofar, therefore, as Rep. Act No. 7716 imposes a value-added tax on the exercise of the above-
discussed two (2) basic constitutional rights, Rep. Act No. 7716 should be declared unconstitutional
and of no legal force and effect.
IV
Petitions of CREBA and PAL and Rep. Act No. 7716
The Chamber of Real Estate and Builder's Association, Inc. (CREBA) filed its own petition (GR No.
11574) arguing that the provisions of Rep. Act No. 7716 imposing a 10% value-added tax on the
gross selling price or gross value in money of every sale, barter or exchange of goods or properties
(Section 2) and a 10% value-added tax on gross receipts derived from the sale or exchange of
services, including the use or lease of properties (Section 3), violate the equal protection, due
process and non-impairment provisions of the Constitution as well as the rule that taxation should be
uniform, equitable and progressive.
The issue of whether or not the value-added tax is uniform, equitable and progressive has been
settled in Kapatiran.
CREBA which specifically assails the 10% value-added tax on the gross selling price of real
properties, fails to distinguish between a sale of real properties primarily held for sale to customers
or held for lease in the ordinary course of trade or business and isolated sales by individual real
property owners (Sec. 103[s]). That those engaged in the business of real estate development
realize great profits is of common knowledge and need not be discussed at length here. The
qualification in the law that the 10% VAT covers only sales of real property primarily held for sale to
customers, i.e. for trade or business thus takes into consideration a taxpayer's capacity to pay. There
is no showing that the consequent distinction in real estate sales is arbitrary and in violation of the
equal protection clause of the Constitution. The inherent power to tax of the State, which is vested in
the legislature, includes the power to determine whom or what to tax, as well as how much to tax. In
the absence of a clear showing that the tax violates the due process and equal protection clauses of
the Constitution, this Court, in keeping with the doctrine of separation of powers, has to defer to the
discretion and judgment of Congress on this point.
Philippine Airlines (PAL) in a separate petition (G.R. No. 115852) claims that its franchise under PD
No. 1590 which makes it liable for a franchise tax of only 2% of gross revenues "in lieu of all the
other fees and charges of any kind, nature or description, imposed, levied, established, assessed or
collected by any municipal, city, provincial, or national authority or government agency, now or in the
future," cannot be amended by Rep. Act No. 7716 as to make it (PAL) liable for a 10% value-added
tax on revenues, because Sec. 24 of PD No. 1590 provides that PAL's franchise can only be
amended, modified or repealed by a special law specifically for that purpose.
The validity of PAL's above argument can be tested by ascertaining the true intention of Congress in
enacting Rep. Act No. 7716. Sec. 4 thereof dealing with Exempt Transactions states:
Sec. 103. Exempt Transactions. — The following shall be exempt from the value-
added tax:
xxx xxx xxx
(q) Transactions which are exempt under special laws, except those granted under
Presidential Decrees No. 66, 529, 972, 1491,

1590, . . . " (Emphasis supplied)
The repealing clause of Rep. Act No. 7716 further reads:
Sec. 20. Repealing clauses. — The provisions of any special law relative to the rate
of franchise taxes are hereby expressly repealed.
xxx xxx xxx
All other laws, orders, issuances, rules and regulations or parts thereof inconsistent
with this Act are hereby repealed, amended or modified accordingly (Emphasis
supplied)
There can be no dispute, in my mind, that the clear intent of Congress was to modify PAL's franchise
with respect to the taxes it has to pay. To this extent, Rep. Act No. 7716 can be considered as
a special law amending PAL's franchise and its tax liability thereunder. That Rep. Act. No. 7716
imposes the value-added taxes on other subjects does not make it a general law which cannot
amend PD No. 1590.
To sum up: it is my considered view that Rep. Act No. 7716 (the expanded value-added tax) is a
valid law, viewed from both substantive and procedural standards, except only insofar as it violates
Secs. 4 and 5, Art. III of the Constitution (the guarantees of freedom of expression and the free
exercise of religion). To that extent, it is, in its present form, unconstitutional.
I, therefore, vote to DISMISS the petitions, subject to the above qualification.

VITUG, J.:
Lest we be lost by a quagmire of trifles, the real threshold and prejudicial issue, to my mind, is
whether or not this Court is ready to assume and to take upon itself with an overriding authority the
awesome responsibility of overseeing the entire bureaucracy. Far from it, ours is merely to construe
and to apply the law regardless of its wisdom and salutariness, and to strike it down only when it
clearly disregards constitutional proscriptions. It is what the fundamental law mandates, and it is
what the Court must do.
I cannot yet concede to the novel theory, so challengingly provocative as it might be, that under the
1987 Constitution the Court may now at good liberty intrude, in the guise of the people's imprimatur,
into every affair of the government. What significance can still then remain, I ask, of the time honored
and widely acclaimed principle of separation of powers, if at every turn the Court allows itself to pass
upon, at will, the disposition of a co-equal, independent and coordinate branch in our system of
government. I dread to think of the so varied uncertainties that such an undue interference can lead
to. The respect for long standing doctrines in our jurisprudence, nourished through time, is one of
maturity not timidity, of stability rather than quiescence.
It has never occurred to me, and neither do I believe it has been intended, that judicial tyranny is
envisioned, let alone institutionalized, by our people in the 1987 Constitution. The test of tyranny is
not solely on how it is wielded but on how, in the first place, it can be capable of being exercised. It is
time that any such perception of judicial omnipotence is corrected.
Against all that has been said, I see, in actuality in these cases at bench, neither a constitutional
infringement of substance, judging from precedents already laid down by this Court in previous
cases, nor a justiciability even now of the issues raised, more than an attempt to sadly highlight the
perceived shortcomings in the procedural enactment of laws, a matter which is internal to Congress
and an area that is best left to its own basic concern. The fact of the matter is that the legislative
enactment, in its final form, has received the ultimate approval of both houses of Congress. The
finest rhetoric, indeed fashionable in the early part of this closing century, would still be a poor
substitute for tangibility. I join, nonetheless, some of my colleagues in respectfully inviting the kind
attention of the honorable members of our Congress in the suggested circumspect observance of
their own rules.
A final remark. I should like to make it clear that this opinion does not necessarily foreclose the right,
peculiar to any taxpayer adversely affected, to pursue at the proper time, in appropriate proceedings,
and in proper fora, the specific remedies prescribed therefor by the National Internal Revenue Code,
Republic Act 1125, and other laws, as well as rules of procedure, such as may be pertinent. Some
petitions filed with this Court are, in essence, although styled differently, in the nature of declaratory
relief over which this Court is bereft of original jurisdiction.
All considered, I, therefore, join my colleagues who are voting for the dismissal of the petitions.

CRUZ, J.:
It is a curious and almost incredible fact that at the hearing of these cases on July 7, 1994, the
lawyers who argued for the petitioners — two of them former presidents of the Senate and the third
also a member of that body — all asked this Court to look into the internal operations of their
Chamber and correct the irregularities they claimed had been committed there as well as in the
House of Representatives and in the bicameral conference committee.
While a member of the legislative would normally resist such intervention and invoke the doctrine of
separation of powers to protect Congress from what he would call judicial intrusion, these counsel
practically implored the Court to examine the questioned proceedings and to this end go beyond the
journals of each House, scrutinize the minutes of the committee, and investigate all other matters
relating to the passage of the bill (or bills) that eventually became R.A. No. 7716.
In effect, the petitioners would have us disregard the time-honored inhibitions laid down by the Court
upon itself in the landmark case of U.S. v. Pons (34 Phil. 725), where it refused to consider
extraneous evidence to disprove the recitals in the journals of the Philippine Legislature that it had
adjourned sine die at midnight of February 28, 1914. Although it was generally known then that the
special session had actually exceeded the deadline fixed by the Governor-General in his
proclamation, the Court chose to be guided solely by the legislative journals, holding significantly as
follows:
. . . From their very nature and object, the records of the legislature are as important
as those of the judiciary, and to inquire into the veracity of the journals of the
Philippine Legislature, when they are, as we have said, clear and explicit, would be
to violate both the letter and the spirit of the organic laws by which the Philippine
Government was brought into existence, to invade a coordinate and independent
department of the Government, and to interfere with the legitimate powers and
functions of the Legislature. But counsel in his argument says that the public knows
that the Assembly's clock was stopped on February 28, 1914, at midnight and left so
until the determination of the discussion of all pending matters. Or, in other words,
the hands of the clock were stayed in order to enable the Assembly to effect an
adjournment apparently within the fixed time by the Governor's proclamation for the
expiration of the special session, in direct violation of the Act of Congress of July 1,
1902. If the clock was, in fact, stopped, as here suggested, "the resultant evil might
be slight as compared with that of altering the probative force and character of
legislative records, and making the proof of legislative action depend upon uncertain
 oral evidence, liable to loss by death or absence, and so imperfect on account of the
treachery of memory.
. . . The journals say that the Legislature adjourned at 12 midnight on February 28,
1914. This settles the question, and the court did not err in declining to go beyond
the journals.
As one who has always respected the rationale of the separation of powers, I realize only too well
the serious implications of the relaxation of the doctrine except only for the weightiest of reasons.
The lowering of the barriers now dividing the three major branches of the government could lead to
individious incursions by one department into the exclusive domains of the other departments to the
detriment of the proper discharge of the functions assigned to each of them by the Constitution.
Still, while acknowledging the value of tradition and the reasons for judicial non-interference
announced in Pons, I am not disinclined to take a second look at the ruling from a more pragmatic
viewpoint and to tear down, if we must, the iron curtain it has hung, perhaps improvidently, around
the proceedings of the legislature.
I am persuaded even now that where a specific procedure is fixed by the Constitution itself, it should
not suffice for Congress to simply say that the rules have been observed and flatly consider the
matter closed. It does not have to be as final as that. I would imagine that the judiciary, and
particularly this Court, should be able to verify that statement and determine for itself, through the
exercise of its own powers, if the Constitution has, indeed, been obeyed.
In fact, the Court had already said that the question of whether certain procedural rules have been
followed is justiciable rather than political because what is involved is the legality and not
the wisdom of the act in question. So we ruled in Sanidad v. Commission on Elections (73 SCRA
333) on the amendment of the Constitution; in Daza v. Singson (180 SCRA 496) on the composition
of the Commission on Appointments; and in the earlier case of Tañada v. Cuenco (100 SCRA 1101)
on the organization of the Senate Electoral Tribunal, among several other cases.
By the same token, the ascertainment of whether a bill underwent the obligatory three readings in
both Houses of Congress should not be considered an invasion of the territory of the legislature as
this would not involve an inquiry into its discretion in approving the measure but only the manner in
which the measure was enacted.
These views may upset the conservatives among us who are most comfortable when they allow
themselves to be petrified by precedents instead of venturing into uncharted waters. To be sure,
there is much to be said of the wisdom of the past expressed by vanished judges talking to the
future. Via trita est tuttisima. Except when there is a need to revise them because of an altered
situation or an emergent idea, precedents should tell us that, indeed, the trodden path is the safest
path.
It could be that the altered situation has arrived to welcome the emergent idea. The jurisdiction of
this Court has been expanded by the Constitution, to possibly include the review the petitioners
would have us make of the congressional proceedings being questioned. Perhaps it is also time to
declare that the activities of Congress can no longer be smoke-screened in the inviolate recitals of
its journals to prevent examination of its sacrosanct records in the name of the separation of powers.
But then again, perhaps all this is not yet necessary at this time and all these observations are but
wishful musings for a more activist judiciary. For I find that this is not even necessary, at least for me,
to leave the trodden path in the search for new adventures in the byways of the law. The answer we
seek, as I see it, is not far afield. It seems to me that it can be found through a study of the enrolled
bill alone and that we do not have to go beyond that measure to ascertain if R.A. No. 7716 has been
validly enacted.
It is settled in this jurisdiction that in case of conflict between the enrolled bill and the legislative
journals, it is the former that should prevail except only as to matters that the Constitution requires to
be entered in the journals. (Mabanag v. Lopez Vito, 78 Phil. 1). These are the yeas and nays on the
final reading of a bill or on any question at the request of at least one-fifth of the member of the
House (Constitution, Art. VI, Sec. 16[4]), the objections of the President to a vetoed bill or item (Ibid,
Sec. 27 [1]), and the names of the members voting for or against the overriding of his veto
(Id. Section 27 [1]), The original of a bill is not specifically required by the Constitution to be entered
in the journals. Hence, on this particular manner, it is the recitals in the enrolled bill and not in the
journals that must control.
Article VI, Section 24, of the Constitution provides:
Sec. 24. All appropriation, revenue or tariff bills, bills authorizing increase of the
public debt, bills of local application, and private bills shall originate exclusively in the
House of Representatives, but the Senate may propose or concur with amendments.
The enrolled bill submitted to and later approved by the President of the Philippines as R.A. No.
7716 was signed by the President of the Senate and the Speaker of the House of Representatives. It
carried the following certification over the signatures of the Secretary of the Senate and the Acting
Secretary of the House of Representatives:
This Act which is a consolidation of House Bill No. 11197 and Senate Bill No. 11630
was finally passed by the House of Representative and the Senate on April 27, 1994,
and May 2, 1994.
Let us turn to Webster for the meaning of certain words,
To "originate" is "to bring into being; to create something (original); to invent; to begin; start." The
word "exclusively" means "excluding all others" and is derived from the word "exclusive," meaning
"not shared or divided; sole; single." Applying these meanings, I would read Section 24 as saying
that the bills mentioned therein must be brought into being, or created, or invented, or begun or
started, only or singly or by no other body than the house of Representatives.
According to the certification, R.A. No. 7716 "is a consolidation of House Bill No. 11197 and Senate
Bill No. 1630." Again giving the words used their natural and ordinary sense conformably to an
accepted canon of construction, I would read the word "consolidation" as a "combination or merger"
and derived from the word "consolidated," meaning "to combine into one; merge; unite."
The two bills were separately introduced in their respective Chambers. Both retained their
independent existence until they reached the bicameral conference committee where they were
consolidated. It was this consolidated measure that was finally passed by Congress and submitted
to the President of the Philippines for his approval.
House Bill No. 11197 originated in the House of Representatives but this was not the bill that
eventually became R.A. No. 7716. The measure that was signed into law by President Ramos was
the consolidation of that bill and another bill, viz., Senate Bill No. 1630, which was introduced in the
Senate. The resultant enrolled bill thus did not originate exclusively in the House of Representatives.
The enrolled bill itself says that part of it (and it does not matter to what extent) originated in the
Senate.
It would have been different if the only participation of the Senate was in the amendment of the
measure that was originally proposed in the House of Representatives. But this was not the case.
The participation of the Senate was not in proposing or concurring with amendments that would
have been incorporated in House Bill No. 11197. Its participation was in originating its own Senate
Bill No. 1630, which was not embodied in but merged with House Bill No. 11197.
Senate Bill No. 1630 was not even an amendment by substitution, assuming this was permissible. To
"substitute" means "to take the place of; to put or use in place of another." Senate Bill No. 1630 did
not, upon its approval replace (and thus eliminate) House Bill No. 11197. Both bills retained their
separate identities until they were joined or united into what became the enrolled bill and ultimately
R.A. No. 7716.
The certification in the enrolled bill says it all. It is clear that R.A. No. 7716 did not originate
exclusively in the House of Representatives.
To go back to my earlier observations, this conclusion does not require the reversal of U.S. vs.
Pons and an inquiry by this Court into the proceedings of the legislature beyond the recitals of its
journals. All we need to do is consider the certification in the enrolled bill and, without entering the
precincts of Congress, declare that by this own admission it has, indeed, not complied with the
Constitution.
While this Court respects the prerogatives of the other departments, it will not hesitate to rise to its
higher duty to require from them, if they go astray, full and strict compliance with the fundamental
law. Our fidelity to it must be total. There is no loftier principle in our democracy than the supremacy
of the Constitution, to which all must submit.
I vote to invalidate R.A. No. 7716 for violation of Article VI, Sec. 24, of the Constitution.

REGALADO, J.:
It would seem like an inconceivable irony that Republic Act No. 7716 which, so respondents claim,
was conceived by the collective wisdom of a bicameral Congress and crafted with sedulous care by
two branches of government should now be embroiled in challenges to its validity for having been
enacted in disregard of mandatory prescriptions of the Constitution itself. Indeed, such impugnment
by petitioners goes beyond merely the procedural flaws in the parturition of the law. Creating and
regulating as it does definite rights to property, but with its own passage having been violative of
explicit provisions of the organic law, even without going into the intrinsic merits of the provisions of
Republic Act No. 7716 its substantive invalidity is pro facto necessarily entailed.
How it was legislated into its present statutory existence is not in serious dispute and need not
detain us except for a recital of some salient and relevant facts. The House of Representatives
passed House Bill No. 11197 1 on third reading on November 17, 1993 and, the following day, It
transmitted the same to the Senate for concurrence. On its part, the Senate approved Senate Bill
No. 1630 on second and third readings on March 24, 1994. It is important to note in this regard that
on March 22, 1994, said S.B. No. 1630 had been certified by President Fidel V. Ramos for
immediate enactment to meet a public emergency, that is, a growing budgetary deficit. There was no
such certification for H.B. No. 11197 although it was the initiating revenue bill.
It is, therefore, not only a curious fact but, more importantly, an invalid procedure since that
Presidential certification was erroneously made for and confined to S.B. No. 1630 which was
indisputably a tax bill and, under the Constitution, could not validly originate in the Senate. Whatever
is claimed in favor of S.B. No. 1630 under the blessings of that certification, such as its alleged
exemption from the three separate readings requirement, is accordingly negated and rendered
inutile by the inefficacious nature of said certification as it could lawfully have been issued only for a
revenue measure originating exclusively from the lower House. To hold otherwise would be to
validate a Presidential certification of a bill initiated in the Senate despite the Constitutional
prohibition against its originating therefrom.
Equally of serious significance is the fact that S.B. No. 1630 was reported out in Committee Report
No. 349 submitted to the Senate on February 7, 1994 and approved by that body "in substitution of
S.B. No. 1129," while merely "taking into consideration P.S. No. 734 and H.B. No. 11197." 2 S.B. No.
1630, therefore, was never filed in substitution of either P.S. No. 734 or, more emphatically, of H.B.
No. 11197 as these two legislative issuances were merely taken account of, at the most, as
referential bases or materials.
This is not a play on misdirection for, in the first instance, the respondents assure us that H.B. No.
11197 was actually the sole source of and started the whole legislative process which culminated in
Republic Act No. 7716. The participation of the Senate in enacting S.B. No. 1630 was, it is claimed,
justified as it was merely in pursuance of its power to concur in or propose amendments to H.B. No.
11197. Citing the 83-year old case of Flint vs. Stone Tracy Co., 3 it is blithely announced that such
power to amend includes an amendment by substitution, that is, even the extent of substituting the
entire H.B. No. 11197 by an altogether completely new measure of Senate provenance. Ergo, so the
justification goes, the Senate acted perfectly in accordance with its amending power under Section
24, Article VI of the Constitution since it merely proposed amendments through a bill allegedly
prepared in advance.
This is a mode of argumentation which, by reason of factual inaccuracy and logical implausibility,
both astounds and confounds. For, it is of official record that S.B. No. 1630 was filed, certified and
enacted in substitution of S.B. No. 1129 which in itself was likewise in derogation of the
Constitutional prohibition against such initiation of a tax bill in the Senate. In any event, S.B. No.
1630 was neither intended as a bill to be adopted by the Senate nor to be referred to the bicameral
conference committee as a substitute for H.B. No. 11197. These indelible facts appearing in official
documents cannot be erased by any amount of strained convolutions or incredible pretensions that
S.B. No. 1630 was supposedly enacted in anticipation of H.B. No. 11197.
On that score alone, the invocation by the Solicitor General of the hoary concept of amendment by
substitution falls flat on its face. Worse, his concomitant citation of Flint to recover from that prone
position only succeeded in turning the same postulation over, this time supinely flat on its back. As
elsewhere noted by some colleagues, which I will just refer to briefly to avoid duplication,
respondents initially sought sanctuary in that doctrine supposedly laid down in Flint, thus: "It has, in
fact, been held that the substitution of an entirely new measure for the one originally proposed can
be supported as a valid amendment." 4 (Emphasis supplied.) During the interpellation by the writer at
the oral argument held in these cases, the attention of the Solicitor General was called to the fact
that the amendment in Flint consisted only of a single item, that its, the substitution of a corporate
tax for an inheritance tax proposed in a general revenue bill; and that the text of the decision therein
nowhere contained the supposed doctrines he quoted and ascribed to the court, as those were
merely summations of arguments of counsel therein. It is indeed a source of disappointment for us,
but an admission of desperation on his part, that, instead of making a clarification or a defense of his
contention, the Solicitor General merely reproduced all over again 5 the same quotations as they
appeared in his original consolidated comment, without venturing any explanation or justification.
The aforestated dissemblance, thus unmasked, has further undesirable implications on the
contentions advanced by respondents in their defense. For, even indulging respondents ex
gratia argumenti in their pretension that S.B. No. 1630 substituted or replaced H.B. No. 11197, aside
from muddling the issue of the true origination of the disputed law, this would further enmesh
respondents in a hopeless contradiction.
In a publication authorized by the Senate and from which the Solicitor General has liberally quoted, it
is reported as an accepted rule therein that "(a)n amendment by substitution when approved takes
the place of the principal bill. C.R. March 19, 1963, p. 943." 6 Stated elsewise, the principal bill is
supplanted and goes out of actuality. Applied to the present situation, and following respondents'
submission that H.B. No. 11197 had been substituted or replaced in its entirety, then in law it had no
further existence for purposes of the subsequent stages of legislation except, possibly, for referential
data.
Now, the enrolled bill thereafter submitted to the President of the Philippines, signed by the
President of the Senate and the Speaker of the House of Representatives, carried this solemn
certification over the signatures of the respective secretaries of both chambers: "This Act which is
a consolidation of House Bill No. 11197 and Senate Bill No. 1630 was finally passed by the House of
Representatives and the Senate on April 27, 1994, and May 2, 1994." (Emphasis mine.) In reliance
thereon, the Chief Executive signed the same into law as Republic Act No. 7716.
The confusion to which the writer has already confessed is now compounded by that official text of
the aforequoted certification which speaks, and this cannot be a mere lapsus calami, of
two independent and existing bills (one of them being H.B. No. 11197) which were consolidated to
produce the enrolled bill. In parliamentary usage, to consolidate two bills, is to unite them into
one 7 and which, in the case at bar, necessarily assumes that H.B. No. 11197 never became legally
inexistent. But did not the Solicitor General, under the theory of amendment by substitution of the
entire H.B. No. 11197 by S.B. No. 1630, thereby premise the same upon the replacement, hence the
total elimination from the legislative process, of H.B. 11197?
It results, therefore, that to prove compliance with the requirement for the exclusive origination of
H.B. No. 11197, two alternative but inconsistent theories had to be espoused and defended by
respondents' counsel. To justify the introduction and passage of S.B. No. 1630 in the Senate, it was
supposedly enacted only as an amendment by substitution, hence on that theory H.B. No. 11197 had
to be considered as displaced and terminated from its role or existence. Yet, likewise for the same
purpose but this time on the theory of origination by consolidation, H.B. No. 11197 had to be
resuscitated so it could be united or merged with S.B. No. 1630. This latter alternative theory,
unfortunately, also exacerbates the constitutional defect for then it is an admission of
a dual origination of the two tax bills, each respectively initiated in and coming from the lower and
upper chambers of Congress.
Parenthetically, it was also this writer who pointedly brought this baffling situation to the attention of
the Solicitor General during the aforesaid oral argument, to the extent of reading aloud the
certification in full. We had hoped thereby to be clarified on these vital issue in respondents'
projected memorandum, but we have not been favored with an explanation unraveling this delimma.
Verily, by passing sub silentio on these intriguing submissions, respondents have wreaked havoc on
both logic and law just to gloss over their non-compliance with the Constitutional mandate for
exclusive origination of a revenue bill. The procedure required therefor, we emphatically add, can be
satisfied only by complete and strict compliance since this is laid down by the Constitution itself and
not by a mere statute.
This writer consequently agrees with the clearly tenable proposition of petitioners that when the
Senate passed and approved S.B. No. 1630, had it certified by the Chief Executive, and thereafter
caused its consideration by the bicameral conference committee in total substitution of H.B. No.
11197, it clearly and deliberately violated the requirements of the Constitution not only in the
origination of the bill but in the very enactment of Republic Act No. 7716. Contrarily, the shifting
sands of inconsistency in the arguments adduced for respondents betray such lack of intellectual
rectitude as to give the impression of being mere rhetorics in defense of the indefensible.
We are told, however, that by our discoursing on the foregoing issues we are introducing into non-
justiciable areas long declared verboten by such time-honored doctrines as those on political
questions, the enrolled bill theory and the respect due to two co-equal and coordinate branches of
Government, all derived from the separation of powers inherent in republicanism. We appreciate the
lectures, but we are not exactly unaware of the teachings in U.S. vs. Pons, 8 Mabanag, vs. Lopez
Vito, 9 Casco Philippine Chemical Co., Inc. vs. Gimenez, etc., et al., 10 Morals vs.
Subido, etc., 11 and Philippine Judges Association, etc., et al. vs. Prado, etc., et al., 12 on the one
hand, and Tañada, et al. vs. Cuenco, et al., 13 Sanidad, et al., vs. Commission on Elections, et
al., 14 and Daza vs. Singson, et al., 15 on the other, to know which would be applicable to the present
controversy and which should be rejected.
But, first, a positional exordium. The writer of this opinion would be among the first to acknowledge
and enjoin not only courtesy to, but respect for, the official acts of the Executive and Legislative
departments, but only so long as the same are in accordance with or are defensible under the
fundamental charter and the statutory law. He would readily be numbered in the ranks of those who
would preach a reasoned sermon on the separation of powers, but with the qualification that the
same are not contained in tripartite compartments separated by empermeable membranes. He also
ascribes to the general validity of American constitutional doctrines as a matter of historical and legal
necessity, but not to the extent of being oblivious to political changes or unmindful of the fallacy of
undue generalization arising from myopic disregard of the factual setting of each particular case.
These ruminations have likewise been articulated and dissected by my colleagues, hence it is felt
that the only issue which must be set aright in this dissenting opinion is the so-called enrolled bill
doctrine to which we are urged to cling with reptilian tenacity. It will be preliminarily noted that the
official certification appearing right on the face of Republic Act No. 7716 would even render
unnecessary any further judicial inquiry into the proceedings which transpired in the two legislative
chambers and, on a parody of tricameralism, in the bicameral conference committee. Moreover, we
have the excellent dissertations of some of my colleagues on these matters, but respondents
insist en contra that the congressional proceedings cannot properly be inquired into by this Court.
Such objection confirms a suppressive pattern aimed at sacrificing the rule of law to the fiat of
expediency.
Respondents thus emplaced on their battlements the pronouncement of this Court in the aforecited
case of Philippine Judges Association vs. Prado. 16 Their reliance thereon falls into the same error
committed by their seeking refuge in the Flint case, ante. which, as has earlier been demonstrated
(aside from the quotational misrepresentation), could not be on par with the factual situation in the
present case. Flint, to repeat, involved a mere amendment on a single legislative item, that is,
substituting the proposal therein of an inheritance tax by one on corporate tax. Now, in their
submission based on Philippine Judges Association, respondents studiously avoid mention of the
fact that the questioned insertion referred likewise to a single item, that is, the repeal of the franking
privilege thretofore granted to the judiciary. That both cases cannot be equated with those at bar,
considering the multitude of items challenged and the plethora of constitutional violations involved, is
too obvious to belabor. Legal advocacy and judicial adjudication must have a becoming sense of
qualitative proportion, instead of lapsing into the discredited and maligned practice of yielding blind
adherence to precedents.
The writer unqualifiedly affirms his respect for valid official acts of the two branches of government
and eschews any unnecessary intrusion into their operational management and internal affairs.
These, without doubt, are matters traditionally protected by the republican principle of separation of
powers. Where, however, there is an overriding necessity for judicial intervention in light of the
pervasive magnitude of the problems presented and the gravity of the constitutional violations
alleged, but this Court cannot perform its constitutional duty expressed in Section 1, Article VIII of the
Constitution unless it makes the inescapable inquiry, then the confluence of such factors should
compel an exception to the rule as an ultimate recourse. The cases now before us present both the
inevitable challenge and the inescapable exigency for judicial review. For the Court to now shirk its
bounden duty would not only project it as a citadel of the timorous and the slothful, but could even
undermine its raison d'etre as the highest and ultimate tribunal.
Hence, this dissenting opinion has touched on events behind and which transpired prior to the
presentation of the enrolled bill for approval into law. The details of that law which resulted from the
legislative action followed by both houses of Congress, the substantive validity of whose provisions
and the procedural validity of which legislative process are here challenged as unconstitutional, have
been graphically presented by petitioners and admirably explained in the respective opinions of my
brethren. The writer concurs in the conclusions drawn therefrom and rejects the contention that we
have unjustifiably breached the dike of the enrolled bill doctrine.
Even in the land of its source, the so-called conclusive presumption of validity originally attributed to
that doctrine has long been revisited and qualified, if not altogether rejected. On the competency of
judicial inquiry, it has been held that "(u)nder the 'enrolled bill rule' by which an enrolled bill is sole
expository of its contents and conclusive evidence of its existence and valid enactment, it is
nevertheless competent for courts to inquire as to what prerequisites are fixed by the Constitution of
which journals of respective houses of Legislature are required to furnish the evidence." 17
In fact, in Gwynn vs. Hardee, etc., et al., 18 the Supreme Court of Florida declared:
(1) While the presumption is that the enrolled bill, as signed by the legislative officers
and filed with the secretary of state, is the bill as it passed, yet this presumption is not
conclusive, and when it is shown from the legislative journals that a bill though
engrossed and enrolled, and signed by the legislative officers, contains provisions
that have not passed both houses, such provisions will be held spurious and not a
part of the law. As was said by Mr. Justice Cockrell in the case of Wade vs. Atlantic
Lumber Co., 51 Fla. 628, text 633, 41 So. 72, 73:
 This Court is firmly committed to the holding that when the journals
speak they control, and against such proof the enrolled bill is not
conclusive.
More enlightening and apropos to the present controversy is the decision promulgated on May 13,
1980 by the Supreme Court of Kentucky in D & W Auto Supply, et al. vs. Department of Revenue, et
al., 19 pertinent exceprts wherefrom are extensively reproduced hereunder:
. . . In arriving at our decision we must, perforce, reconsider the validity of a long line
of decisions of this court which created and nurtured the so-called "enrolled bill"
doctrine.
xxx xxx xxx
[1] Section 46 of the Kentucky Constitution sets out certain procedures that the
legislature must follow before a bill can be considered for final passage. . . . .
xxx xxx xxx
. . . Under the enrolled bill doctrine as it now exists in Kentucky, a court may not look
behind such a bill, enrolled and certified by the appropriate officers, to determine if
there are any defects.
xxx xxx xxx
. . . In Lafferty, passage of the law in question violated this provision, yet the bill was
properly enrolled and approved by the governor. In declining to look behind the law to
determine the propriety of its enactment, the court enunciated three reasons for
adopting the enrolled bill rule. First, the court was reluctant to scrutinize the
processes of the legislature, an equal branch of government. Second, reasons of
convenience prevailed, which discouraged requiring the legislature to preserve its
records and anticipated considerable complex litigation if the court ruled otherwise.
Third, the court acknowledged the poor record-keeping abilities of the General
Assembly and expressed a preference for accepting the final bill as enrolled, rather
than opening up the records of the legislature. . . . .
xxx xxx xxx
Nowhere has the rule been adopted without reason, or as a result of judicial whim.
There are four historical bases for the doctrine. (1) An enrolled bill was a "record"
and, as such, was not subject to attack at common law. (2) Since the legislature is
one of the three branches of government, the courts, being coequal, must indulge in
every presumption that legislative acts are valid. (3) When the rule was originally
formulated, record-keeping of the legislatures was so inadequate that a balancing of
equities required that the final act, the enrolled bill, be given efficacy. (4) There were
theories of convenience as expressed by the Kentucky court in Lafferty.
The rule is not unanimous in the several states, however, and it has not been without
its critics. From an examination of cases and treaties, we can summarize the
criticisms as follows: (1) Artificial presumptions, especially conclusive ones, are not
favored. (2) Such a rule frequently (as in the present case) produces results which do
not accord with facts or constitutional provisions. (3) The rule is conducive to fraud,
forgery, corruption and other wrongdoings. (4) Modern automatic and electronic
record-keeping devices now used by legislatures remove one of the original reasons
for the rule. (5) The rule disregards the primary obligation of the courts to seek the
truth and to provide a remedy for a wrong committed by any branch of government.
In light of these considerations, we are convinced that the time has come to re-
examine the enrolled bill doctrine.
[2] This court is not unmindful of the admonition of the doctrine of stare decisis. The
maxim is "Stare decisis et non quieta movere," which simply suggests that we stand
 by precedents and not disturb settled points of law. Yet, this rule is not inflexible, nor
is it of such a nature as to require perpetuation of error or logic. As we stated
in Daniel's Adm'r v. Hoofnel, 287 Ky 834, 155 S.W. 2d 469, 471-72 (1941) (citations
omitted):
The force of the rule depends upon the nature of the question to be
decided and the extent of the disturbance of rights and practices
which a change in the interpretation of the law or the course of
judicial opinions may create. Cogent considerations are whether
there is clear error and urgent reasons "for neither justice nor wisdom
requires a court to go from one doubtful rule to another," and whether
or not the evils of the principle that has been followed will be more
injurious than can possibly result from a change.
Certainly, when a theory supporting a rule of law is not grounded on facts, or upon sound logic, or is
unjust, or has been discredited by actual experience, it should be discarded, and with it the rule it
supports.
[3] It is clear to us that the major premise of the Lafferty decision, the poor record-
keeping of the legislature, has disappeared. Modern equipment and technology are
the rule in record-keeping by our General Assembly. Tape recorders, electric
typewriters, duplicating machines, recording equipment, printing presses, computers,
electronic voting machines, and the like remove all doubts and fears as to the ability
of the General Assembly to keep accurate and readily accessible records.
It is also apparent that the "convenience" rule is not appropriate in today's modern
and developing judicial philosophy. The fact that the number and complexity of
lawsuits may increase is not persuasive if one is mindful that the overriding purpose
of our judicial system is to discover the truth and see that justice is done. The
existence of difficulties and complexities should not deter this pursuit and we reject
any doctrine or presumption that so provides.
Lastly, we address the premises that the equality of the various branches of
government requires that we shut our eyes to constitutional failings and other errors
of our coparceners in government. We simply do not agree. Section 26 of the
Kentucky Constitution provides that any law contrary to the constitution is "void." The
proper exercise of judicial authority requires us to recognize any law which is
unconstitutional and to declare it void. Without belaboring the point, we believe that
under section 228 of the Kentucky Constitution it is our obligation to "support . . . the
Constitution of the commonwealth." We are sworn to see that violations of the
constitution — by any person, corporation, state agency or branch of government —
are brought to light and corrected. To countenance an artificial rule of law that
silences our voices when confronted with violations of our constitution is not
acceptable to this court.
We believe that a more reasonable rule is the one which Professor Sutherland
describes as the "extrinsic evidence" rule . . . Under this approach there is a prima
facie presumption that an enrolled bill is valid, but such presumption may be
overcome by clear, satisfactory and convincing evidence establishing that
constitutional requirements have not been met.
We therefore overrule Lafferty v. Huffman and all other cases following the so-called
enrolled bill doctrine, to the extent that there is no longer a conclusive presumption
that an enrolled bill is valid. . . . (Emphasis mine.)
Undeniably, the value-added tax system may have its own merits to commend its continued
adoption, and the proposed widening of its base could achieve laudable governmental objectives if
properly formulated and conscientiously implemented. We would like to believe, however, that ours
is not only an enlightened democracy nurtured by a policy of transparency but one where the edicts
of the fundamental law are sacrosanct for all, barring none. While the realization of the lofty ends of
this administration should indeed be the devout wish of all, likewise barring none, it can never be
justified by methods which, even if unintended, are suggestive of Machiavellism.
Accordingly, I vote to grant the instant petitions and to invalidate Republic Act No. 7716 for having
been enacted in violation of Section 24, Article VI of the Constitution.

DAVIDE, JR., J.:

The legislative history of R.A. No. 7716, as highlighted in the Consolidated Memorandum for the
public respondents submitted by the Office of the Solicitor General, demonstrates beyond doubt that
it was passed in violation or deliberate disregard of mandatory provisions of the Constitution and of
the rules of both chambers of Congress relating to the enactment of bills.
I therefore vote to strike down R.A. No. 7716 as unconstitutional and as having been enacted with
grave abuse of discretion.
The Constitution provides for a bicameral Congress. Therefore, no bill can be enacted into law
unless it is approved by both chambers — the Senate and the House of Representatives
(hereinafter House). Otherwise stated, each chamber may propose and approve a bill, but until it is
submitted to the other chamber and passed by the latter, it cannot be submitted to the President for
its approval into law.
Paragraph 2, Section 26, Article VI of the Constitution provides:
No bill passed by either House shall become a law unless it has passed three
readings on separate days, and printed copies thereof in its final form have been
distributed to its Members three days before its passage, except when the President
certifies to the necessity of its immediate enactment to meet a public calamity or
emergency. Upon the last reading of a bill, no amendment thereto shall be allowed,
and the vote thereon shall be taken immediately thereafter, and
the yeas and nays entered in the journal.
The "three readings" refers to the three readings in both chambers.
There are, however, bills which must originate exclusively in the House. Section 24, Article VI of the
Constitution enumerates them:
Sec. 24. All appropriation, revenue or tariff bills, bills authorizing increase of the
public debt, bills of local application, and private bills shall originate exclusively in the
House of Representatives, but the Senate may propose or concur with amendments.
Webster's Third New International Dictionary 1 defines originate as follows:
vt 1: to cause the beginning of: give rise to: INITIATE . . . 2. to start (a person or
thing) on a course or journey . . . vi: to take or have origin: be derived: ARISE,
BEGIN, START . . .
Black's Law Dictionary 2 defines the word exclusively in this wise:
Apart from all others; only; solely; substantially all or for the greater part. To the
exclusion of all others; without admission of others to participation; in a manner to
exclude.
In City Mayor vs. The Chief of Philippine Constabulary,3 this Court said:
The term "exclusive" in its usual and generally accepted sense, means possessed to
the exclusion of others; appertaining to the subject alone, not including, admitting or
pertaining to another or others, undivided, sole. (15 Words and Phrases, p. 510,
citing Mitchel v. Tulsa Water, Light, Heat and Power Co., 95 P. 961, 21 Okl. 243; and
 p. 513, citing Commonwealth v. Superintendent of House of Correction, 64 Pa.
Super. 613, 615).
Indisputably then, only the House can cause the beginning or initiate the passage of any
appropriation, revenue, or tarriff bill, any bill increasing the public debt, any bill of local application, or
any private bill. The Senate can only "propose or concur with amendments."
Under the Rules of the Senate, the first reading is the reading of the title of the bill and its referral to
the corresponding committee; the second reading consists of the reading of the bill in the form
recommended by the corresponding committee; and the third reading is the reading of the bill in the
form it will be after approval on second reading. 4 During the second reading, the following takes
place:
(1) Second reading of the bill;
(2) Sponsorship by the Committee Chairman or any member designated by the
corresponding committee;
(3) If a debate ensues, turns for and against the bill shall be taken alternately;
(4) The sponsor of the bill closes the debate;
(5) After the close of the debate, the period of amendments follows;
(6) Then, after the period of amendments is closed, the voting on the bill on second
reading. 5
After approval on second readings, printed copies thereof in its final form shall be distributed to the
Members of the Senate at least three days prior to the third reading, except in cases of certified bills.
At the third reading, the final vote shall be taken and the yeas and nays shall be entered in the
Journal. 6
Under the Rules of the House, the first reading of a bill consists of a reading of the number, title, and
author followed by the referral to the appropriate committees; 7 the second reading consists of the
reading in full of the bill with the amendments proposed by the committee, it any; 8 and the third
reading is the reading of the bill in the form as approved on second reading and takes place only
after printed copies thereof in its final form have been distributed to the Members at least three days
before, unless the bill is

certified.9 At the second reading, the following takes place:
(1) Reading of the bill;
(2) Sponsorship;
(3) Debates;
(4) Period of Amendments; and
(5) Voting on Second Reading. 10
At the third reading, the votes shall be taken immediately and the yeas and nays entered in the
Journal. 11
Clearly, whether in the Senate or in the House, every bill must pass the three readings on separate
days, except when the bill is certified. Amendments to the bill on third reading are constitutionally
prohibited. 12
After its passage by one chamber, the bill should then be transmitted to the other chamber for its
concurrence. Section 83, Rule XIV of the Rules of the House expressly provides:
Sec. 83. Transmittal to Senate. — The Secretary General, without need of express
order, shall transmit to the Senate for its concurrence all the bills and joint or
concurrent resolutions approved by the House or the amendments of the House to
the bills or resolutions of the Senate, as the case may be. If the measures approved
without amendments are bills or resolutions of the Senate, or if amendments of the
 Senate to bills of the House are accepted, he shall forthwith notify the Senate of the
action taken.
Simplified, this rule means that:
1. As to a bill originating in the House:
(a) Upon its approval by the House, the bill shall be transmitted to the
Senate;
(b) The Senate may approve it with or without amendments;
(c) The Senate returns the bill to the House;
(d) The House may accept the Senate amendments; if it does not, the
Secretary General shall notify the Senate of that action. As
hereinafter be shown, a request for conference shall then be in order.
2. As to bills originating in the Senate;
(a) Upon its approval by the Senate, the bill shall be transmitted to
the House;
(b) The House may approve it with or without amendments;
(c) The House then returns it to the Senate, informing it of the action
taken;
(d) The Senate may accept the House amendements; if it does not, it
shall notify the House and make a request for conference.
The transmitted bill shall then pass three readings in the other chamber on separate days. Section
84, Rule XIV of the Rules of the House states:
Sec. 84. Bills from the Senate. — The bills, resolutions and communications of the
Senate shall be referred to the corresponding committee in the same manner as bills
presented by Members of the House.
and Section 51, Rule XXIII of the Rules of the Senate provides:
Sec. 51. Prior to their final approval, bills and joint resolutions shall be read at least
three times.
It is only when the period of disagreement is reached, i.e., amended proposed by one chamber to a
bill originating from the other are not accepted by the latter, that a request for conference is made or
is in order. The request for conference is specifically covered by Section 26, Rule XII of the Rules of
the Senate which reads:
Sec. 26. In the event that the Senate does not agree with the House of
Representatives on the provision of any bill or joint resolution, the differences shall
be settled by a conference committee of both Houses which shall meet within ten
days after its composition.
and Section 85, Rule XIV of the Rules of the House which reads:
Sec. 85. Conference Committee Reports. — In the event that the House does not
agree with the Senate on the amendments to any bill or joint resolution, the
differences may be settled by conference committees of both Chambers.
The foregoing provisions of the Constitution and the Rules of both chambers of Congress are
mandatory.
In his Treatise On the Constitutional Limitations, 13 more particularly on enactment of bill, Cooley
states:
 Where, for an instance, the legislative power is to be exercised by two houses, and
by settled and well-understood parliamentary law these two houses are to hold
separate sessions for their deliberations, and the determination of the one upon a
proposes law is to be submitted to the separate determination of the other, the
constitution, in providing for two houses, has evidently spoken in reference to this
settled custom, incorporating it as a rule of constitutional interpretation; so that it
would require no prohibitory clause to forbid the two houses from combining in one,
and jointly enacting laws by the vote of a majority of all. All those rules which are of
the essentials of law-making must be observed and followed; and it is only the
customary rules of order and routine, such as in every deliberative body are always
understood to be under its control, and subject to constant change at its will, that the
constitution can be understood to have left as matters of discretion, to be
established, modified, or abolished by the bodies for whose government in non-
essential matters they exist.
In respect of appropriation, revenue, or tariff bills, bills increasing the public debt, bills of local
application, or private bills, the return thereof to the House after the Senate shall have "proposed or
concurred with amendments" for the former either to accept or reject the amendments would not
only be in conformity with the foregoing rules but is also implicit from Section 24 of Article VI.
With the foregoing as our guiding light, I shall now show the violations of the Constitution and of the
Rules of the Senate and of the House in the passage of R.A. No. 7716.
VIOLATIONS OF SECTION 24, ARTICLE VI

OF THE CONSTITUTION:
First violation. — Since R.A. No. 7716 is a revenue measure, it must originate exclusively in the
House — not in the Senate. As correctly asserted by petitioner Tolentino, on the face of the enrolled
copy of R.A. No. 7716, it is a "CONSOLIDATION OF HOUSE BILL NO. 11197 AND SENATE BILL
NO. 1630." In short, it is an illicit marriage of a bill which originated in the House and a bill which
originated in the Senate. Therefore, R.A. No. 7716 did not originate exclusively in the House.
The only bill which could serve as a valid basis for R.A. No. 7716 is House Bill (HB) No. 11197. This
bill, which is the substitute bill recommended by the House Committee on Ways and Means in
substitution of House Bills Nos. 253, 771, 2450, 7033, 8086, 9030, 9210, 9397, 10012, and 10100,
and covered by its Committee Report No. 367, 14 was approved on third reading by the House on 17
November 1993. 15 Interestingly, HB No. 9210, 16 which was filed by Representative Exequiel B.
Javier on 19 May 1993, was certified by the President in his letter to Speaker Jose de Venecia, Jr. of
1 June 1993. 17 Yet, HB No. 11197, which substituted HB No. 9210 and the others above-stated, was
not. Its certification seemed to have been entirely forgotten.
On 18 November 1993, the Secretary-General of the House, pursuant to Section 83, Rule XIV of the
Rules of the House, transmitted to the President of the Senate HB No. 11197 and requested the
concurrence of the Senate therewith. 18
However, HB No. 11197 had passed only its first reading in that Senate by its referral to its
Committee on Ways and Means. That Committee never deliberated on HB No. 11197 as it should
have. It acted only on Senate Bill (SB) No. 1129 19 introduced by Senator Ernesto F. Herrera on 1
March 1993. It then prepared and proposed SB No. 1630, and in its Committee Report No.

349 20 which was submitted to the Senate on 7 February 1994, 21 it recommended that SB No. 1630
be approved "in substitution of S.B. No. 1129, taking into consideration P.S. Res. No. 734 and H.B.
No. 11197." 22 It must be carefully noted that SB No. 1630 was proposed and submitted for approval
by the Senate in SUBSTITUTION of SB No. 1129, and not HB No. 11197. Obviously, the principal
measure which the Committee deliberated on and acted upon was SB No. 1129 and not HB No.
11197. The latter, instead of being the only measure to be taken up, deliberated upon, and reported
back to the Senate for its consideration on second reading and, eventually, on third reading, was, at
the most, merely given by the Committee a passing glance.
This specific unequivocal action of the Senate Committee on Ways and Means, i.e., proposing and
recommending approval of SB No. 1630 as a substitute for or in substitution of SB No. 1129
demolishes at once the thesis of the Solicitor General that:
Assuming that SB 1630 is distinct from HB 11197, amendment by substitution is
within the purview of Section 24, Article VI of the Constitution.
because, according to him, (a) "Section 68, Rule XXIX of the Rules of the Senate authorizes an
amendment by substitution and the only condition required is that "the text thereof is submitted in
writing"; and (b) "[I]n Flint vs. Stone Tracy Co. (220 U.S. 107) the United Stated Supreme Court,
interpreting the provision in the United States Constitution similar to Section 24, Article VI of the
Philippine Constitution, stated that the power of the Senate to amend a revenue bill includes
substitution of an entirely new measure for the one originally proposed by the House of
Representatives." 23
This thesis is utterly without merit. In the first place, it reads into the Committee Report something
which it had not contemplated, that is, to propose SB No. 1630 in substitution of HB No. 11197; or
speculates that the Committee may have committed an error in stating that it is SB No. 1129, and not
HB No. 11197, which is to be substituted by SB No. 1630. Either, of course, is unwarranted because
the words of the Report, solemnly signed by the Chairman, Vice-Chairman (who dissented), seven
members, and three ex-officio

members, 24 leave no room for doubt that although SB No. 1129, P.S. Res No. 734, and HB No.
11197 were referred to and considered by the Committee, it had prepared the attached SB No. 1630
which it recommends for approval "in substitution of S.B. No. 11197, taking into consideration P.S.
No. 734 and H.B. No. 11197 with Senators Herrera, Angara, Romulo, Sotto, Ople and Shahani as
authors." To do as suggested would be to substitute the judgment of the Committee with another that
is completely inconsistent with it, or, simply, to capriciously ignore the facts.
In the second place, the Office of the Solicitor General intentionally made it appear, to mislead rather
than to persuade us, that in Flint vs. Stone Tracy

Co. 25 The U.S. Supreme Court ruled, as quoted by it in the Consolidated Memorandum for
Respondents, as follows: 26
The Senate has the power to amend a revenue bill. This power to amend is not
confined to the elimination of provisions contained in the original act, but embraces
as well the addition of such provisions thereto as may render the original act
satisfactory to the body which is called upon to support it. It has, in fact, been held
that the substitution of an entirely new measure for the one originally proposed can
be supported as a valid amendment.
xxx xxx xxx
It is contended in the first place that this section of the act is unconstitutional,
because it is a revenue measure, and originated in the Senate in violation of Section
7 of article 1 of the Constitution, providing that "all bills for raising revenue shall
originate in the House of Representatives, but the Senate may propose or concur
with the amendments, as on other bills."
The first part is not a statement of the Court, but a summary of the arguments of counsel in one of
the companion cases (No. 425, entitled, "Gay vs. Baltic Mining Co."). The second part is the second
paragraph of the opinion of the Court delivered by Mr. Justice Day. The misrepresentation that the
first part is a statement of the Court is highly contemptuous. To show such deliberate
misrepresentation, it is well to quote what actually are found in 55 L.Ed. 408, 410, to wit:
Messrs. Charles A. Snow and Joseph H. Knight filed a brief for appellees in No. 425:
xxx xxx xxx
The Senate has the power to amend a revenue bill. This power to amend is not
confined to the elimination of provisions contained in the original act, but embraces
 as well the addition of such provisions thereto as may render the original act
satisfactory to the body which is called upon to support it. It has, in fact, been held
that the substitution of an entirely new measure for the one originally proposed can
be supported as a valid amendment.
Brake v. Collison, 122 Fed. 722.
Mr. James L. Quackenbush filed a statement for appellees in No. 442.
Solicitor General Lehmann (by special leave) argued the cause for the United States
on reargument.
Mr. Justice Day delivered the opinion of the court:
These cases involve the constitutional validity of 38 of the act of
Congress approved August 5, 1909, known as "the corporation tax"
law. 36 Stat. at L. 11, 112-117, chap. 6, U.S. Comp. Stat. Supp. 1909,
pp. 659, 844-849.
It is contended in the first place that this section of the act is
unconstitutional, because it is a revenue measure, and originated in
the Senate in violation of 7 of article 1 of the Constitution, providing
the "all bills for raising revenue shall originate in the House of
Representatives, but the Senate may propose or concur with the
amendments, as on other bills." The history of the act is contained in
the government's brief, and is accepted as correct, no objection being
made to its accuracy.
This statement shows that the tariff bill of which the section under
consideration is a part, originated in the House of Representatives,
and was there a general bill for the collection of revenue. As originally
introduced, it contained a plan of inheritance taxation. In the Senate
the proposed tax was removed from the bill, and the corporation tax,
in a measure, substituted therefor. The bill having properly originated
in the House, we perceive no reason in the constitutional provision
relied upon why it may not be amended in the Senate in the manner
which it was in this case. The amendment was germane to the
subject-matter of the bill, and not beyond the power of the Senate to
propose. (Emphasis supplied)
xxx xxx xxx
As shown above, the underlined portions were deliberately omitted in the quotation made by the
Office of the Solicitor General.
In the third place, a Senate amendment by substitution with an entirely new bill of a bill, which under
Section 24, Article VI of the Constitution can only originate exclusively in the House, is not
authorized by said Section 24. Flint vs. Stone Tracy Co. cannot be invoked in favor of such a view.
As pointed out by Mr. Justice Florenz D. Regalado during the oral arguments of these cases and
during the initial deliberations thereon by the Court, Flint involves a Senate amendment to a revenue
bill which, under the United States Constitution, should originate from the House of Representatives.
The amendment consisted of the substitution of a corporation tax in lieu of the plan of inheritance
taxation contained in a general bill for the collection of revenue as it came from the House of
Representatives where the bill originated. The constitutional provision in question is Section 7, Article
I of the United States Constitution which reads:
Sec. 7. Bills and Resolutions. — All Bills for raising Revenue shall originate in the
House of Representatives; but the Senate may propose or concur with Amendments,
as on other Bills.
This provision, contrary to the misleading claim of the Solicitor General, is not similar to Section 24,
Article VI of our Constitution, which for easy comparison is hereunder quoted again:
All appropriation, revenue or tariff bills, bills authorizing increase of the public debt,
bills of local application, and private bills shall originate exclusively in the House of
Representatives, but the Senate may propose or concur with amendments.
Note that in the former the word exclusively does not appear. And, in the latter, the phrase "as on
other Bill," which is found in the former, does not appear. These are very significant in determining
the authority of the upper chamber over the bills enumerated in Section 24. Since the origination is
not exclusively vested in the House of Representatives of the United States, the Senate's authority
to propose or concur with amendments is necessarily broader. That broader authority is further
confirmed by the phrase "as on other Bills," i.e., its power to propose or concur with amendments
thereon is the same as in ordinary bills. The absence of this phrase in our Constitution was clearly
intended to restrict or limit the Philippine Senate's power to propose or concur with amendments. In
the light of the exclusivity of origination and the absence of the phrase "as on other Bills," the
Philippine Senate cannot amend by substitution with an entirely new bill of its own any bill covered
by Section 24 of Article VI which the House of Representatives transmitted to it because such
substitution would indirectly violate Section 24.
These obvious substantive differences between Section 7, Article I of the U.S. Constitution and
Section 24, Article VI of our Constitution are enough reasons why this Court should neither allow
itself to be misled by Flint vs. Stonenor be awed by Rainey vs. United States 27 and the opinion of
Messrs. Ogg and Ray 28 which the majority cites to support the view that the power of the U.S.
Senate to amend a revenue measure is unlimited. Rainey concerns the Tariff Act of 1909 of the
United States of America and specifically involved was its Section 37 which was an amendment
introduced by the U.S. Senate. It was claimed by the petitioners that the said section is a revenue
measure which should originate in the House of Representatives. The U.S. Supreme Court,
however, adopted and approved the finding of the court a quo that:
the section in question is not void as a bill for raising revenue originating in the
Senate, and not in the House of Representatives. It appears that the section was
proposed by the Senate as an amendment to a bill for raising revenue which
originated in the House. That is sufficient.
Messrs. Ogg and Ray, who are professors emeritus of political science, based their statement not
even on a case decided by the U.S. Supreme Court but on their perception of what Section 7, Article
I of the U.S. Constitution permits. In the tenth edition (1951) of their work, they state:
Any bill may make its first appearance in either house, except only that bills for
raising revenue are required by the constitution to "originate" in the House of
Representatives. Indeed, through its right to amend revenue bills, even to the extent
of substituting new ones, the Senate may, in effect, originate them also. 29
Their "in effect" conclusion is, of course, logically correct because the word exclusively does not
appear in said Section 7, Article I of the U.S. Constitution.
Neither can I find myself in agreement with the view of the majority that the Constitution does not
prohibit the filing in the Senate of a substitute bill in anticipation of its receipt of the bill from the
House so long as action by the Senate as a body is withheld pending receipt of the House bill,
thereby stating, in effect, that S.B. No. 1129 was such an anticipatory substitute bill, which,
nevertheless, does not seem to have been considered by the Senate except only after its receipt of
H.B. No. 11179 on 23 November 1993 when the process of legislation in respect of it began with a
referral to the Senate Committee on Ways and Means. Firstly, to say that the Constitution does not
prohibit it is to render meaningless Section 24 of Article VI or to sanction its blatant disregard through
the simple expedient of filing in the Senate of a so-called anticipatory substitute bill. Secondly, it
suggests that S.B. No. 1129 was filed as an anticipatory measure to substitute for H.B. No. 11179.
This is a speculation which even the author of S.B. No. 1129 may not have indulged in. S.B. No.
1129 was filed in the Senate by Senator Herrera on 1 March 1993. H.B. No. 11197 was approved by
the House on third reading only on 17 November 1993. Frankly, I cannot believe that Senator
Herrera was able to prophesy that the House would pass any VAT bill, much less to know its
provisions. That "it does not seem that the Senate even considered" the latter not until after its
receipt of H.B. No. 11179 is another speculation. As stated earlier, S.B. No. 1129 was filed in the
Senate on 1 March 1993, while H.B. No. 11197 was transmitted to the Senate only on 18 November
1993. There is no evidence on record to show that both were referred to the Senate Committee on
Ways and Means at the same time. Finally, in respect of H.B. No. 11197, its legislative process did
not begin with its referral to the Senate's Ways and Means Committee. It began upon its filing, as a
Committee Bill of the House of Committee on Ways and Means, in the House.
Second violation. — Since SB No. 1129 is a revenue measure, it could not even be validly
introduced or initiated in the Senate. It follows too, that the Senate cannot validly act thereon.
Third violation. — Since SB No. 1129 could not have been validly introduced in the Senate and could
not have been validly acted on by the Senate, then it cannot be substituted by another revenue
measure, SB No. 1630, which the Senate Committee on Ways and Means introduced in substitution
of SB No. 1129. The filing or introduction in the Senate of SB No. 1630 also violated Section 24,
Article VI of the Constitution.
VIOLATIONS OF SECTION 26(2), ARTICLE VI

OF THE CONSTITUTION:
First violation. — The Senate, despite its lack of constitutional authority to consider SB No. 1630 or
SB No. 1129 which the former substituted, opened deliberations on second reading of SB No. 1630
on 8 February 1994. On 24 March 1994, the Senate approved it on second reading and on third
reading. 30 That approval on the same day violated Section 26(2), Article VI of the Constitution. The
justification therefor was that on 24 February 1994 the President certified to "the necessity of the
enactment of SB No. 1630 . . . to meet a public emergency." 31
I submit, however, that the Presidential certification is void ab initio not necessarily for the reason
adduced by petitioner Kilosbayan, Inc., but because it was addressed to the Senate for a bill which is
prohibited from originating therein. The only bill which could be properly certified on permissible
constitutional grounds even if it had already been transmitted to the Senate is HB No. 11197. As
earlier observed, this was not so certified, although HB No. 9210 (one of those consolidated into HB
No. 11197) was certified on 1 June 1993. 32
Also, the certification of SB No. 1630 cannot, by any stretch of the imagination, be extended to HB
No. 11197 because SB No. 1630 did not substitute HB No. 11197 but SB No. 1129.
Considering that the certification of SB No. 1630 is void, its approval on second and third readings in
one day violated Section 26(2), Article VI of the Constitution.
Second violation. — It further appears that on 24 June 1994, after the approval of SB No. 1630, the
Secretary of the Senate, upon directive of the Senate President, formally notified the House Speaker
of the Senate's approval thereof and its request for a bicameral conference "in view of the
disagreeing provisions of said bill and House Bill No. 11197." 33
It must be stressed again that HB No. 11197 was never submitted for or acted on second and third
readings in the Senate, and SB No. 1630 was never sent to the House for its concurrence. Elsewise
stated, both were only half-way through the legislative mill. Their submission to a conference
committee was not only anomalously premature, but violative of the constitutional rule on three
readings.
The suggestion that SB No. 1630 was not required to be submitted to the House for otherwise the
procedure would be endless, is unacceptable for, firstly, it violates Section 26, Rule XII of the Rules
of the Senate and Section 85, Rule XIV of the Rules of the House, and, secondly, it is never endless.
If the chamber of origin refuses to accept the amendments of the other chamber, the request for
conference shall be made.
 VIOLATIONS OF THE RULES OF BOTH CHAMBERS;

GRAVE ABUSE OF DISCRETION.
The erroneous referral to the conference committee needs further discussion. Since S.B. No. 1630
was not a substitute bill for H.B. No. 11197 but for S.B. No. 1129, it (S.B. No. 1630) remained a bill
which originated in the Senate. Even assuming arguendo that it could be validly initiated in the
Senate, it should have been first transmitted to the House where it would undergo three readings.
On the other hand, since HB No. 11197 was never acted upon by the Senate on second and third
readings, no differences or inconsistencies could as yet arise so as to warrant a request for a
conference. It should be noted that under Section 83, Rule XIV of the Rules of the House, it is only
when the Senate shall have approved with amendments HB no. 11197 and the House declines to
accept the amendments after having been notified thereof that the request for a conference may be
made by the House, not by the Senate. Conversely, the Senate's request for a conference would
only be proper if, following the transmittal of SB No. 1630 to the House, it was approved by the latter
with amendments but the Senate rejected the amendments.
Indisputably then, when the request for a bicameral conference was made by the Senate, SB No.
1630 was not yet transmitted to the House for consideration on three readings and HB No. 11197
was still in the Senate awaiting consideration on second and third readings. Their referral to the
bicameral conference committee was palpably premature and, in so doing, both the Senate and the
House acted without authority or with grave abuse of discretion. Nothing, and absolutely nothing,
could have been validly acted upon by the bicameral conference committee.
GRAVE ABUSE OF DISCRETION COMMITTED BY

THE BICAMERAL CONFERENCE COMMITTEE.
Serious irregularities amounting to lack of jurisdiction or grave abuse of discretion were committed
by the bicameral conference committee.
First, it assumed, and took for granted that SB No. 1630 could validly originate in the Senate. This
assumption is erroneous.
Second, it assumed that HB No. 11197 and SB No. 1630 had properly passed both chambers of
Congress and were properly and regularly submitted to it. As earlier discussed, the assumption is
unfounded in fact.
Third, per the bicameral conference committee's proceedings of 19 April 1994, Representative
Exequiel Javier, Chairman of the panel from the House, initially suggested that HB No. 11197 should
be the "frame of reference," because it is a revenue measure, to which Senator Ernesto Maceda
concurred. However, after an incompletely recorded reaction of Senator Ernesto Herrera, Chairman
of the Senate panel, Representative Javier seemed to agree that "all amendments will be coming
from the Senate." The issue of what should be the "frame of reference" does not appear to have
been resolved. These facts are recorded in this wise, as quoted in the Consolidated Memorandum
for Respondents: 34
CHAIRMAN JAVIER.
First of all, what would be the basis, no, or framework para huwag naman mawala
yung personality namin dito sa bicameral, no, because the bill originates from the
House because this is a revenue bill, so we would just want to ask, we make the
House Bill as the frame of reference, and then everything will just be inserted?
HON. MACEDA.
Yes. That's true for every revenue measure. There's no other way. The House Bill
has got to be the base. Of course, for the record, we know that this is an
administration; this is certified by the President and I was about to put into the
records as I am saying now that your problem about the impact on prices on the
people was already decided when the President and the administration sent this to
 us and certified it. They have already gotten over that political implication of this bill
and the economic impact on prices.
CHAIRMAN HERRERA.
Yung concern mo about the bill as the reference in this discussion is something that
we can just . . .
CHAIRMAN JAVIER.
We will just . . . all the amendments will be coming from the Senate.
(BICAMERAL CONFERENCE ON MAJOR DIFFERENCES BETWEEN HB NO.
11197 AND SB NO. 1630 [Cte. on Ways & Means] APRIL 19, 1994, II-6 and II-7;
Emphasis supplied)
These exchanges would suggest that Representative Javier had wanted HB No. 11197 to be the
principal measure on which reconciliation of the differences should be based. However, since the
Senate did not act on this Bill on second and third readings because its Committee on Ways and
Means did not deliberate on it but instead proposed SB No. 1630 in substitution of SB No. 1129, the
suggestion has no factual basis. Then, when finally he agreed that "all amendments will be coming
from the Senate," he in fact withdrew the former suggestion and agreed that SB No. 1630, which is
the Senate version of the Value Added Tax (VAT) measure, should be the "frame of reference." But
then SB No. 1630 was never transmitted to the House for the latter's concurrence. Hence, it cannot
serve as the "frame of reference" or as the basis for deliberation. The posture taken by
Representative Javier also indicates that SB No. 1630 should be taken as the amendment to HB No.
11197. This, too, is unfounded because SB No. 1630 was not proposed in substitution of HB No.
11197.
Since SB No. 1630 did not pass three readings in the House and HB No. 11197 did not pass second
and third readings in the Senate, it logically follows that no disagreeing provisions had as yet arisen.
The bicameral conference committee erroneously assumed the contrary.
Even granting arguendo that both HB No. 11197 and SB No. 1630 had been validly approved by
both chambers of Congress and validly referred to the bicameral conference committee, the latter
had very limited authority thereon. It was created "in view of the disagreeing provisions of" the two
bills. 35 Its duty was limited to the reconciliation of disagreeing provisions or the resolution of
differences or inconsistencies. The committee recognized that limited authority in the opening
paragraph of its Report 36 when it said:
The Conference Committee on the disagreeing provisions of House Bill No.
11197 . . . and Senate Bill No. 1630 . . . .
Under such limited authority, it could only either (a) restore, wholly or partly, the specific provisions of
HB No. 11197 amended by SB No. 1630, (b) sustain, wholly or partly, the Senate's amendments, or
(c) by way of a compromise, to agree that neither provisions in HB No. 11197 amended by the
Senate nor the latter's amendments thereto be carried into the final form of the former.
But as pointed out by petitioners Senator Raul Roco and Kilosbayan, Inc., the bicameral conference
committee not only struck out non-disagreeing provisions of HB No. 11197 and SB No. 1630, i.e.,
provisions where both bills are in full agreement; it added more activities or transactions to be
covered by VAT, which were not within the contemplation of both bills.
Since both HB No. 11197 and SB No. 1630 were still half-cooked in the legislative vat, and were not
ready for referral to a conference, the bicameral conference committee clearly acted without
jurisdiction or with grave abuse of discretion when it consolidated both into one bill which became
R.A. No. 7716.
APPROVAL BY BOTH CHAMBERS OF CONFERENCE

COMMITTEE REPORT AND PROPOSED BILL DID

NOT CURE CONSTITUTIONAL INFIRMITIES.
I cannot agree with the suggestion that since both the Senate and the House had approved the
bicameral conference committee report and the bill proposed by it in substitution of HB No. 11197
and SB No. 1630, whatever infirmities may have been committed by it were cured by ratification.
This doctrine of ratification may apply to minor procedural flaws or tolerable breachs of the
parameters of the bicameral conference committee's limited powers but never to violations of the
Constitution. Congress is not above the Constitution. In the instant case, since SB No. 1630 was
introduced in violation of Section 24, Article VI of the Constitution, was passed in the Senate in
violation of the "three readings" rule, and was not transmitted to the House for the completion of the
constitutional process of legislation, and HB No. 11197 was not likewise passed by the Senate on
second and third readings, neither the Senate nor the House could validly approve the bicameral
conference committee report and the proposed bill.
In view of the foregoing, the conclusion is inevitable that for non-compliance with mandatory
provisions of the Constitution and of the Rules of the Senate and of the House on the enactment of
laws, R.A. No. 7716 is unconstitutional and, therefore, null and void. A discussion then of the
instrinsic validity of some of its provisions would be unnecessary.
The majority opinion, however, invokes the enrolled bill doctrine and wants this Court to desist from
looking behind the copy of the assailed measure as certified by the Senate President and the
Speaker of the House. I respectfully submit that the invocation is misplaced. First, as to the issue of
origination, the certification in this case explicitly states that R.A. No. 7716 is a "consolidation of
House Bill No. 11197 and Senate Bill No. 1630." This is conclusive evidence that the measure did
not originate exclusively in the House. Second, the enrolled bill doctrine is of American origin, and
unquestioned fealty to it may no longer be justified in view of the expanded jurisdiction 37 of this Court
under Section 1, Article VIII of our Constitution which now expressly grants authority to this Court to:
determine whether or not there has been a grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of any branch or instrumentality of the
Government.
Third, even under the regime of the 1935 Constitution which did not contain the above
provision, this Court, through Mr. Chief Justice Makalintal, in Astorga vs. Villegas, 38 declared
that it cannot be truly said that Mabanag vs. Lopez

Vito 39 has laid to rest the question of whether the enrolled bill doctrine or the journal entry
rule should be adhered to in this jurisdiction, and stated:
As far as Congress itself is concerned, there is nothing sacrosanct in the certification
made by the presiding officers. It is merely a mode of authentication. The lawmaking
process in Congress ends when the bill is approved by both Houses, and the
certification does not add to the validity of the bill or cure any defect already present
upon its passage. In other words, it is the approval of Congress and not the
signatures of the presiding officers that is essential. Thus the (1935) Constitution
says that "[e]very bill passed by the Congress shall, before it becomes law, be
presented to the President." In Brown vs. Morris, supra, the Supreme Court of
Missouri, interpreting a similar provision in the State Constitution, said that the same
"makes it clear that the indispensable step in the passage" and it follows that if a bill,
otherwise fully enacted as a law, is not attested by the presiding officer, other proof
that it has "passed both houses will satisfy the constitutional requirement."
Fourth, even in the United States, the enrolled bill doctrine has been substantially undercut. This is
shown in the disquisitions of Mr. Justice Reynato S. Puno in his dissenting opinion, citing Sutherland,
Statutory Construction.
Last, the pleadings of the parties have established beyond doubt that HB No. 11197 was not acted
on second and third readings in the Senate and SB No. 1630, which was approved by the Senate on
second and third readings in substitution of SB No. 1129, was never transmitted to the House for its
passage. Otherwise stated, they were only passed in their respective chamber of origin but not in the
other. In no way can each become a law under paragraph 2, Section 26, Article VI of the
Constitution. For the Court to close its eyes to this fact because of the enrolled bill doctrine is to
shrink its duty to hold "inviolate what is decreed by the Constitution." 40
I vote then to GRANT these petitions and to declare R.A. No. 7716 as unconstitutional.

ROMERO, J.:
Few issues brought before this Court for resolution have roiled the citizenry as much as the instant
case brought by nine petitioners which challenges the constitutionality of Republic Act No. 7716 (to
be referred to herein as the "Expanded Value Added Tax" or EVAT law to distinguish it from
Executive Order No. 273 which is the VAT law proper) that was enacted on May 5, 1994. A visceral
issue, it has galvanized the populace into mass action and strident protest even as the EVAT
proponents have taken to podia and media in a post facto information campaign.
The Court is confronted here with an atypical case. Not only is it a vatful of seething controversy but
some unlikely petitioners invoke unorthodox remedies. Three Senator-petitioners would nullify a
statute that bore the indispensable stamp of approval of their own Chamber with two of them publicly
repudiating what they had earlier endorsed. With two former colleagues, one of them an erstwhile
Senate President, making common cause with them, they would stay the implementation by the
Executive Department of a law which they themselves have initiated. They address a prayer to a co-
equal Department to probe their official acts for any procedural irregularities they have themselves
committed lest the effects of these aberrations inflict such damage or irreparable loss as would bring
down the wrath of the people on their heads.
To the extent that they perceive that a vital cog in the internal machinery of the Legislature has
malfunctioned from having operated in blatant violation of the enabling Rules they have themselves
laid down, they would now plead that this other Branch of Government step in, invoking the exercise
of what is at once a delicate and awesome power. Undoubtedly, the case at bench is as much a test
for the Legislature as it is for the Judiciary.
A backward glance on the Value Added Tax (VAT) is in order at this point.
The first codification of the country's internal revenue laws was effected with the enactment of
Commonwealth Act No. 466, commonly known as the 'National Internal Revenue Code' which was
approved on June 15, 1939 and took effect on July 1, 1939, although the provisions on the income
tax were made retroactive to January 1, 1939.
Since 1939 when the turnover tax was replaced by the manufacturer's sales tax, the
Tax Code had provided for a single-stage value-added tax on original sales by
manufacturers, producers and importers computed on the "cost deduction method"
and later, on the basis of the "tax credit method." The turnover tax was re-introduced
in 1985 by Presidential Decree No. 1991 (as amended by Presidential Decree No.
2006). 1
In 1986, a tax reform package was approved by the Aquino Cabinet. It contained twenty-nine
measures, one of which proposed the adoption of the VAT, as well as the simplification of the sales
tax structure and the abolition of the turnover tax.
Up until 1987, the system of taxing goods consisted of (a) an excise tax on certain
selected articles (b) fixed and percentage taxes on original and subsequent sales, on
importations and on milled articles and (c) mining taxes on mineral products.
Services were subjected to percentage taxes based mainly on gross receipts. 2
On July 25, 1987, President Corazon C. Aquino signed into law Executive Order No. 273 which
adopted the VAT. From the former single-stage value-added tax, it introduced the multi-stage VAT
system where "the value-added tax is imposed on the sale of and distribution process culminating in
sale, to the final consumer. Generally described, the taxpayer (the seller) determines his tax liability
by computing the tax on the gross selling price or gross receipt ("output tax") and subtracting or
crediting the earlier VAT on the purchase or importation of goods or on the sale of service ("input
tax") against the tax due on his own sale." 3
On January 1, 1988, implementing rules and regulations for the VAT were promulgated. President
Aquino then issued Proclamation No. 219 on February 12, 1988 urging the public and private
sectors to join the nationwide consumers' education campaign for VAT.
Soon after the implementation of Executive Order No. 273, its constitutionality was assailed before
this Court in the case of Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc., et al. v.
Tan. 4 The four petitioners sought to nullify the VAT law "for being unconstitutional in that its
enactment is not allegedly within the powers of the President; that the VAT is oppressive,
discriminatory, regressive, and violates the due process and equal protection clauses and other
provisions of the 1987 Constitution." 5 In dismissing the consolidated petitions, this Court stated:
The Court, following the time-honored doctrine of separation of powers cannot
substitute its judgment for that of the President as to the wisdom, justice and
advisability of the VAT. The Court can only look into and determine whether or not
Executive Order No. 273 was enacted and made effective as law, in the manner
required by and consistent with, the Constitution, and to make sure that it was not
issued in grave abuse of discretion amounting to lack or excess of jurisdiction; and,
in this regard, the Court finds no reason to impede its application or continued
implementation. 6
Although declared constitutional, the VAT law was sought to be amended from 1992 on by a series
of bills filed in both Houses of Congress. In chronological sequence, these were:

HB/SB No. Date Filed in Congress

HB No. 253 - July 22, 1992

HB No. 771 - August 10, 1992

HB No. 2450 - September 9, 1992

Senate Res. No. 7347 - September 10, 1992

HB No. 7033 - February 3, 1993

SB No. 11298 - March 1, 1993

HB No. 8086 - March 9, 1993

HB No. 9030 - May 11, 1993

HB No. 9210 9 - May 19, 1993

HB No. 9297 - May 25, 1993

HB No. 10012 - July 28, 1993

HB No. 10100 - August 3, 1993

HB No. 11197 in substitution of HB Nos. 253, 771, 2450,
7033, 8086, 9030, 9210, 9297, 10012 and

10100 10 - November 5, 1993
We now trace the course taken by H.B. No. 11197 and S.B. No. 1129.
HB/SB No.
HB No. 11197 was approved in the Lower House onsecond reading -
November 11, 1993
HB No. 11197 was approved in

the Lower House on third

reading and voted upon

with 114 Yeas and 12 Nays - November 17, 1993
HB No. 11197 was transmitted

to the Senate - November 18, 1993
 Senate Committee on Ways and

Means submitted Com.

Report No. 349 recommeding

for approval SB No. 1630 in

substitution of SB No. 1129,

taking into consideration PS Res. No.

734 and HB No. 11197 11 - February 7, 1994
Certification by President Fidel V.

Ramos of Senate Bill No.

1630 for immediate enactment

to meet a public emergency - March 22, 1994
SB No. 1630 was approved by

the Senate on second and third

readings and subsequently

voted upon with 13 yeas, none

against and one abstention - March 24, 1994
Transmittal by the Senate to the

Lower House of a request

for a conference in view of

disagreeing provisions of

SB No. 1630 and HB NO.

11197 - March 24, 1994
The Bicameral Conference Committee

conducted various meetings to

reconcile the proposals on the

VAT - April 13, 19, 20, 21, 25
The House agreed on the Conference

Committee Report - April 27, 1994
The Senate agreed on the Conference

Committee Report - May 2, 1994
The President signed Republic Act

No. 7716 - The Expanded

VAT Law 12 - May 5, 1994
Republic Act No. 7716 was

published in two newspapers

of general circulation - May 12, 1994
Republic Act No. 7716 became

effective - May 28, 1994

Republic Act No. 7716 merely expanded the base of the VAT law even as the tax retained its multi-
stage character.
At the oral hearing held on July 7, 1994, this Court delimited petitioners' arguments to the following
issues culled from their respective petitions.
PROCEDURAL ISSUES
Does Republic Act No. 7716 violate Article VI, Section 24, of the Constitution? 13
Does it violate Article VI, Section 26, paragraph 2, of the

Constitution? 14
What is the extent of the power of the Bicameral Conference Committee?
SUBSTANTIVE ISSUES
Does the law violate the following provisions in Article III (Bill of Rights) of the Constitution:
1. Section 1 15
2. Section 4 16
3. Section 5 17
4. Section 10 18
Does the law violate the following other provisions of the Constitution?
1. Article VI, Section 28, paragraph 1 19
2. Article VI, Section 28, paragraph 3 20
As a result of the unedifying experience of the past where the Court had the propensity to steer clear
of questions it perceived to be "political" in nature, the present Constitution, in contrast, has explicitly
expanded judicial power to include the duty of the courts, especially the Supreme Court, "to
determine whether or not there has been a grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of the Government." 21 I submit that under this
explicit mandate, the Court is empowered to rule upon acts of other Government entities for the
purpose of determining whether there may have been, in fact, irregularities committed tantamount to
violation of the Constitution, which case would clearly constitute a grave abuse of discretion on their
part.
In the words of the sponsor of the above-quoted Article of the Constitution on the Judiciary, the
former Chief Justice Roberto R. Concepcion, "the judiciary is the final arbiter on the question of
whether or not a branch of government or any of its officials has acted without jurisdiction or in
excess of jurisdiction, or so capriciously as to constitute an abuse of discretion amounting to excess
of jurisdiction or lack of jurisdiction. This is not only a judicial power but a duty to pass judgment on
matters of this nature.
This is the back ground of paragraph 2 of Section 1, which means that the courts cannot hereafter
exhibit its wonted reticence by claiming that such matters constitute a political question." 22
In the instant petitions, this Court is called upon, not so much to exercise its traditional power of
judicial review as to determine whether or not there has indeed been a grave abuse of discretion on
the part of the Legislature amounting to lack or excess of jurisdiction.
Where there are grounds to resolve a case without touching on its constitutionality, the Court will do
so with utmost alacrity in due deference to the doctrine of separation of powers anchored on the
respect that must be accorded to the other branches of government which are coordinate, coequal
and, as far as practicable, independent of one another.
Once it is palpable that the constitutional issue is unavoidable, then it is time to assume jurisdiction,
provided that the following requisites for a judicial inquiry are met: that there must be an actual and
appropriate case; a personal and substantial interest of the party raising the constitutional question;
the constitutional question must be raised at the earliest possible opportunity and the decision of the
constitutional question must be necessary to the determination of the case itself, the same being
the lis mota of the case. 23
Having assured ourselves that the above-cited requisites are present in the instant petitions, we
proceed to take them up.
ARTICLE VI, SECTION 24
Some petitioners assail the constitutionality of Republic Act No. 7716 as being in violation of Article
VI, Section 24 of the Constitution which provides:
 All appropriation, revenue or tariff bills, bills authorizing increase of the public debt,
bills of local application, and private bills, shall originate exclusively in the House of
Representatives, but the Senate may propose or concur with amendments.
In G.R. Nos. 115455 and 115781, petitioners argue:
(a) The bill which became Republic Act No. 7716 did not originate exclusively in the House of
Representatives. The Senate, after receiving H.B. No. 11197, submitted its own bill, S.B. No. 1630,
and proceeded to vote and approve the same after second and third readings.
(b) The Senate exceeded its authority to "propose or concur with amendments" when it submitted its
own bill, S.B. No. 1630, recommending its approval "in substitution of S.B. No. 1129, taking into
consideration P.S. Res. No. 734 and H.B. No. 11197."
(c) H.B. No. 11197 was not deliberated upon by the Senate. Neither was it voted upon by the Senate
on second and third readings, as what was voted upon was S.B. No. 1630.
Article VI, Section 24 is taken word for word from Article VI, Section 18 of the 1935 Constitution
which was, in turn, patterned after Article I, Section 7 (1) of the Constitution of the United States,
which states:
All bills for raising revenue shall originate in the House of Representatives, but the
Senate may propose or concur with amendments as on other bills.
The historical precedent for requiring revenue bills to originate in Congress is explained in the U.S.
case of Morgan v. Murray. 24
The constitutional requirement that all bills for raising revenue shall originate in the
House of Representatives stemmed from a remedial outgrowth of the historic conflict
between Parliament (i.e., Commons) and the Crown, whose ability to dominate the
monarchially appointive and hereditary Lords was patent. See 1 Story, Constitution,
S 875 et seq., 5th Ed.; 1 Cooley, Constitutional Limitations, pp. 267, 268, 8th Ed., 1
Sutherland, Statutory Construction, S 806, 3d Ed. There was a measure of like
justification for the insertion of the provision of article I, S 7, cl. 1, of the Federal
Constitution. At that time (1787) and thereafter until the adoption (in 1913) of the
Seventeenth Amendment providing for the direct election of senators, the members
of the United States Senate were elected for each state by the joint vote of both
houses of the Legislature of the respective states, and hence, were removed from
the people . . .
The legislative authority under the 1935 Constitution being unicameral, in the form of the National
Assembly, it served no purpose to include the subject provision in the draft submitted by the 1934
Constitutional Convention to the Filipino people for ratification.
In 1940, however, the Constitution was amended to establish a bicameral Congress of the
Philippines composed of a House of Representatives and a Senate.
In the wake of the creation of a new legislative machinery, new provisions were enacted regarding
the law-making power of Congress. The National Assembly explained how the final formulation of
the subject provision came about:
The concurrence of both houses would be necessary to the enactment of a law.
However, all appropriation, revenue or tariff bills, bills authorizing an increase of the
public debt, bills of local application, and private bills, should originate exclusively in
the House of Representatives, although the Senate could propose or concur with
amendments.
In one of the first drafts of the amendments, it was proposed to give both houses
equal powers in lawmaking. There was, however, much opposition on the part of
several members of the Assembly. In another draft; the following provision, more
 restrictive than the present provision in the amendment, was proposed and for
sometime was seriously considered:
All bills appropriating public funds, revenue or tariff bills, bills of local
application, and private bills shall originate exclusively in the
Assembly, but the Senate may propose or concur with amendments.
In case of disapproval by the Senate of any such bills, the Assembly
may repass the same by a two-thirds vote of all its members, and
thereupon, the bill so repassed shall be deemed enacted and may be
submitted to the President for corresponding action. In the event that
the Senate should fail to finally act on any such bills, the Assembly
may, after thirty days from the opening of the next regular sessions of
the same legislative term, reapprove the same with a vote of two-
thirds of all the members of the Assembly. And upon such reapproval,
the bill shall be deemed enacted and may be submitted to the
president for corresponding action.
However, the special committee voted finally to report the present amending
provision as it is now worded; and in that form it was approved by the National
Assembly with the approval of Resolution No. 38 and later of Resolution No.
73. 25 (Emphasis supplied)
Thus, the present Constitution is identically worded as its 1935 precursor: "All appropriation, revenue
or tariff bills, bills authorizing increase of the public debt, bills of local application, and private bills,
shall originate exclusively in the House of Representatives, but the Senate may propose or concur
with amendments." (Emphasis supplied)
That all revenue bills, such as Republic Act No. 7716, should "originate exclusively in the House of
Representatives" logically flows from the more representative and broadly-based character of this
Chamber.
It is said that the House of Representatives being the more popular branch of the
legislature, being closer to the people, and having more frequent contacts with them
than the Senate, should have the privilege of taking the initiative in the proposals of
revenue and tax project, the disposal of the people's money, and the contracting of
public indebtedness.
These powers of initiative in the raising and spending of public funds enable the
House of Representatives not only to implement but even to determine the fiscal
policies of the government. They place on its shoulders much of the responsibility of
solving the financial problems of the government, which are so closely related to the
economic life of the country, and of deciding on the proper distribution of revenues
for such uses as may best advance public interests. 26
The popular nature of the Lower House has been more pronounced with the inclusion of
Presidentially-appointed sectoral representatives, as provided in Article VI, Section 5 (2), of the
Constitution, thus: "The party-list representatives shall constitute twenty per centum of the total
number of representatives including those under the party list. For three consecutive terms after the
ratification of this Constitution, one-half of the seats allocated to party-list representatives shall be
filled, as provided by law, by selection or election from the labor, peasant, urban poor, indigenous
cultural communities, women, youth, and such other sectors as may be provided by law, except the
religious sector." (Emphasis supplied)
This novel provision which was implemented in the Batasang Pambansa during the martial law
regime 27 was eventually incorporated in the present Constitution in order to give those from the
marginalized and often deprived sector, an opportunity to have their voices heard in the halls of the
Legislature, thus giving substance and meaning to the concept of "people empowerment."
That the Congressmen indeed have access to, and consult their constituencies has been
demonstrated often enough by the fact that even after a House bill has been transmitted to the
Senate for concurrence, some Congressmen have been known to express their desire to change
their earlier official position or reverse themselves after having heard their constituents' adverse
reactions to their representations.
In trying to determine whether the mandate of the Constitution with regard to the initiation of revenue
bills has been preserved inviolate, we have recourse to the tried and tested method of definition of
terms. The term "originate" is defined by Webster's New International Dictionary (3rd Edition, 1986)
as follows: "v.i., to come into being; begin; to start."
On the other hand, the word "exclusively" is defined by the same Webster's Dictionary as "in an
exclusive manner; to the exclusion of all others; only; as, it is his, exclusively." Black's Law Dictionary
has this definition: "apart from all others; only; solely; substantially all or for the greater part. To the
exclusion of all other; without admission of others to participation; in a manner to exclude. Standard
Oil Co. of Texas v. State, Tex. Civ. App., 142 S.W. 2d 519, 521, 522, 523."
This Court had occasion to define the term "exclusive" as follows:
. . . In its usual and generally accepted sense, the term means possessed to the
exclusion of others; appertaining to the subject alone; not including, admitting or
pertaining to another or others; undivided, sole. 28
When this writer, during the oral argument of July 7, 1994, asked the petitioner in G.R. No. 115455
whether he considers the word "exclusively" to be synonymous with "solely," he replied in the
affirmative. 29
A careful examination of the legislative history traced earlier in this decision shows that the original
VAT law, Executive Order No. 273, was sought to be amended by ten House bills which finally
culminated in House Bill No. 11197, as well as two Senate bills. It is to be noted that the first House
Bill No. 253 was filed on July 22, 1992, and two other House bills followed in quick succession on
August 10 and September 9, 1992 before a Senate Resolution, namely, Senate Res. No. 734, was
filed on September 10, 1992 and much later, a Senate Bill proper, viz., Senate Bill No. 1129 on
March 1, 1993. Undoubtedly, therefore, these bills originated or had their start in the House and
before any Senate bill amending the VAT law was filed. In point of time and venue, the conclusion is
ineluctable that Republic Act No. 7716, which is indisputably a revenue measure, originated in the
House of Representatives in the form of House Bill No. 253, the first EVAT bill.
Additionally, the content and substance of the ten amendatory House Bills filed over the roughly one-
year period from July 1992 to August 1993 reenforce the position that these revenue bills, pertaining
as they do, to Executive Order No. 273, the prevailing VAT law, originated in the Lower House.
House Bill Nos. 253, 771, 2450, 7033, 8086, 9030, 9210, 9297, 10012 and 10100 were intended to
restructure the VAT system by exempting or imposing the tax on certain items or otherwise
introducing reforms in the mechanics of implementation. 30 Of these, House Bill No. 9210 was
favored with a Presidential certification on the need for its immediate enactment to meet a public
emergency. Easily the most comprehensive, it noted that the revenue performance of the VAT, being
far from satisfactory since the collections have always fallen short of projections, "the system is
rendered inefficient, inequitable and less comprehensive." Hence, the Bill proposed several
amendments designed to widen the tax base of the VAT and enhance its administration. 31
That House Bill No. 11197 being a revenue bill, originated from the Lower House was acknowledged,
in fact was virtually taken for granted, by the Chairmen of the Committee on Ways and Means of
both the House of Representatives and the Senate. Consequently, at the April 19, 1994 meeting of
the Bicameral Conference Committee, the Members agreed to make the House Bill as the "frame of
reference" or "base" of the discussions of the Bicameral Conference Committee with the
"amendments" or "insertions to emanate from the Senate." 32
As to whether the bills originated exclusively in the Lower House is altogether a different matter.
Obviously, bills amendatory of VAT did not originate solely in the House to the exclusion of all others
for there were P.S. Res. No. 734 filed in the Senate on September 10, 1992 followed by Senate Bill
No. 1129 which was filed on March 1, 1993. About a year later, this was substituted by Senate Bill
No. 1630 that eventually became the EVAT law, namely, Republic Act No. 7716.
Adverting to the passage of the amendatory VAT bills in the Lower House, it is to be noted that
House Bill No. 11197 which substituted all the prior bills introduced in said House complied with the
required readings, that is, the first reading consisting of the reading of the title and referral to the
appropriate Committee, approval on second reading on November 11, 1993 and on third reading on
November 17, 1993 before being finally transmitted to the Senate. In the Senate, its identity was
preserved and its provisions were taken into consideration when the Senate Committee on Ways
and Means submitted Com. Report No. 349 which recommended for approval "S.B. No. 1630 in
substitution of S.B. No. 1129, taking into consideration P.S. Res. No. 734 and H.B. No. 11197." At
this stage, the subject bill may be considered to have passed first reading in the Senate with the
submission of said Committee Report No. 349 by the Senate Committee on Ways and Means to
which it had been referred earlier. What remained, therefore, was no longer House Bill No. 11197 but
Senate Bill No. 1630. Thence, the Senate, instead of transmitting the bill to the Lower House for its
concurrence and amendments, if any, took a "shortcut," bypassed the Lower House and instead,
approved Senate Bill No. 1630 on both second and third readings on the same day, March 24, 1994.
The first irregularity, that is, the failure to return Senate Bill No. 1630 to the Lower House for its
approval is fatal inasmuch as the other chamber of legislature was not afforded the opportunity to
deliberate and make known its views. It is no idle dictum that no less than the Constitution ordains:
"The legislative power shall be vested in the Congress of the Philippines which shall consist of
a Senate and a House of Representatives . . ." 33 (Emphasis supplied)
It is to be pointed out too, that inasmuch as Senate Bill No. 1630 which had "taken into
consideration" House Bill No. 11197 was not returned to the Lower House for deliberation, the latter
Chamber had no opportunity at all to express its views thereon or to introduce any amendment. The
customary practice is, after the Senate has considered the Lower House Bill, it returns the same to
the House of origin with its amendments. In the event that there may be any differences between the
two, the same shall then be referred to a Conference Committee composed of members from both
Chambers which shall then proceed to reconcile said differences.
In the instant case, the Senate transmitted to the Lower House on March 24, 1994, a letter informing
the latter that it had "passed S. No. 1630

entitled . . . (and) in view of the disagreeing provisions of said bill and House Bill No. 11197, entitled .
. . the Senate requests a conference . . ." This, in spite of the fact that Com. Report No. 349 of the
Senate Committee on Ways and Means had already recommended for approval on February 7,
1994 "S.B. No. 1630 . . . taking into consideration H.B. No. 11197." Clearly, the Conference
Committee could only have acted upon Senate Bill No. 1630, for House Bill No. 11197 had already
been fused into the former.
At the oral hearing of July 7, 1994, petitioner in G.R. No. 115455 admitted, in response to this
writer's query, that he had attempted to rectify some of the perceived irregularities by presenting a
motion in the Senate to recall the bill from the Conference Committee so that it could revert to the
period of amendment, but he was outvoted, in fact "slaughtered." 34
In accordance with the Rules of the House of Representatives and the Senate, Republic Act No.
7716 was duly authenticated after it was signed by the President of the Senate and the Speaker of
the House of Representatives followed by the certifications of the Secretary of the Senate and the
Acting Secretary General of the House of Representatives. 35 With the signature of President Fidel V.
Ramos under the words "Approved: 5 May 1994," it was finally promulgated.
Its legislative journey ended, Republic Act No. 7716 attained the status of an enrolled bill which is
defined as one "which has been duly introduced, finally passed by both houses, signed by the proper
officers of each, approved by the governor (or president) and filed by the secretary of state." 36
Stated differently:
It is a declaration by the two houses, through their presiding officers, to the president,
that a bill, thus attested, has received in due form, the sanction of the legislative
branch of the government, and that it is delivered to him in obedience to the
constitutional requirement that all bills which pass Congress shall be presented to
him. And when a bill, thus attested, receives his approval, and is deposited in the
public archives, its authentication as a bill that has passed Congress should be
deemed complete and unimpeachable. As the President has no authority to approve
a bill not passed by Congress, an enrolled Act in the custody of the Secretary of
State, and having the official attestations of the Speaker of the House of
Representatives, of the President of the Senate, and of the President of the United
States, carries, on its face, a solemn assurance by the legislative and executive
departments of the government, charged, respectively, with the duty of enacting and
executing the laws, that it was passed by Congress. The respect due to coequal and
independent departments requires the judicial department to act upon that
assurance, and to accept, as having passed Congress, all bills authenticated in the
manner stated; leaving the courts to determine, when the question properly arises,
whether the Act, so authenticated, is in conformity with the Constitution. 37
The enrolled bill assumes importance when there is some variance between what actually transpired
in the halls of Congress, as reflected in its journals, and as shown in the text of the law as finally
enacted. But suppose the journals of either or both Houses fail to disclose that the law was passed
in accordance with what was certified to by their respective presiding officers and the President. Or
that certain constitutional requirements regarding its passage were not observed, as in the instant
case. Which shall prevail: the journal or the enrolled bill?
A word on the journal.
The journal is the official record of the acts of a legislative body. It should be a true
record of the proceedings arranged in chronological order. It should be a record of
what is done rather than what is said. The journal should be a clear, concise,
unembellished statement of all proposals made and all actions taken complying with
all requirements of constitutions, statutes, charters or rules concerning what is to be
recorded and how it is to be recorded. 38
Article VI, Section 16 (4) of the Constitution ordains:
Each house shall keep a Journal of its proceedings, and from time to time publish the
same, excepting such parts as may, in its judgment, affect national security; and
the yeas and nays on any question shall, at the request of one-fifth of the Members
present, be entered in the Journal.
Each House shall also keep a Record of its proceedings." (Emphasis supplied)
The rationale behind the above provision and of the "journal entry rule" is as follows:
It is apparent that the object of this provision is to make the legislature show what it
has done, leaving nothing whatever to implication. And, when the legislature says
what it has done, with regard to the passage of any bill, it negatives the idea that it
has done anything else in regard thereto. Silence proves nothing where one is
commanded to speak . . . . Our constitution commands certain things to be done in
regard to the passage of a bill, and says that no bill shall become a law unless these
things are done. It seems a travesty upon our supreme law to say that it guaranties
to the people the right to have their laws made in this manner only, and that there is
no way of enforcing this right, or for the court to say that this is law when the
constitution says it is not law. There is one safe course which is in harmony with the
constitution, and that is to adhere to the rule that the legislature must show, as
commanded by the constitution, that it has done everything required by the
 constitution to be done in the serious and important matter of making laws. This is
the rule of evidence provided by the constitution. It is not presumptuous in the courts,
nor disrespectful to the legislature, to judge the acts of the legislature by its own
evidence. 39
Confronted with a discrepancy between the journal proceedings and the law as duly enacted, courts
have indulged in different theories. The "enrolled bill" and "journal entry" rules, being rooted deep in
the Parliamentary practices of England where there is no written constitution, and then transplanted
to the United States, it may be instructive to examine which rule prevails in the latter country through
which, by a process of legislative osmosis, we adopted them in turn.
There seems to be three distinct and different rules as applicable to the enrolled bill
recognized by the various courts of this country. The first of these rules appears to be
that the enrolled bill is the ultimate proof and exclusive and conclusive evidence that
the bill passed the legislature in accordance with the provisions of the Constitution.
Such has been the holding in California, Georgia, Kentucky, Texas, Washington, New
Mexico, Mississippi, Indiana, South Dakota, and may be some others.
The second of the rules seems to be that the enrolled bill is a verity and resort cannot
be had to the journals of the Legislature to show that the constitutional mandates
were not complied with by the Legislature, except as to those provisions of the
Constitution, compliance with which is expressly required to be shown on the journal.
This rule has been adopted in South Carolina, Montana, Oklahoma, Utah, Ohio, New
Jersey, United States Supreme Court, and others.
The third of the rules seems to be that the enrolled bill raises only a prima
facie presumption that the mandatory provisions of the Constitution have been
complied with and that resort may be had to the journals to refute that presumption,
and if the constitutional provision is one, compliance with which is expressly required
by the Constitution to be shown on the journals, then the mere silence of the journals
to show a compliance therewith will refute the presumption. This rule has been
adopted in Illinois, Florida, Kansas, Louisiana, Tennessee, Arkansas, Idaho,
Minnesota, Nebraska, Arizona, Oregon, New Jersey, Colorado, and others. 40
In the 1980 case of D & W Auto Supply v. Department of Revenue, the Supreme Court of Kentucky
which had subscribed in the past to the first of the three theories, made the pronouncement that it
had shifted its stand and would henceforth adopt the third. It justified its changed stance, thus:
We believe that a more reasonable rule is the one which Professor Sutherland
describes as the "extrinsic evidence" rule . . . . Under this approach there is a prima
facie presumption that an enrolled bill is valid, but such presumption may be
overcome by clear satisfactory and convincing evidence establishing that
constitutional requirements have not been met. 41
What rule, if any, has been adopted in this jurisdiction?
Advocates of the "journal entry rule" cite the 1916 decision in U.S. v. Pons 42 where this Court placed
reliance on the legislative journals to determine whether Act No. 2381 was passed on February 28,
1914 which is what appears in the Journal, or on March 1, 1914 which was closer to the truth. The
confusion was caused by the adjournment sine die at midnight of February 28, 1914 of the Philippine
Commission.
A close examination of the decision reveals that the Court did not apply the "journal entry rule" vis-a-
vis the "enrolled bill rule" but the former as against what are "behind the legislative journals."
Passing over the question of whether the printed Act (No. 2381), published by
authority of law, is conclusive evidence as to the date when it was passed, we will
inquire whether the courts may go behind the legislative journals for the purpose of
determining the date of adjournment when such journals are clear and explicit. 43
It is to be noted from the above that the Court "passed over" the probative value to be accorded to
the enrolled bill.
Opting for the journals, the Court proceeded to explain:
From their very nature and object, the records of the Legislature are as important as
those of the judiciary, and to inquire into the veracity of the journals of the Philippine
Legislature, when they are, as we have said clear and explicit, would be to violate
both the letter and the spirit of the organic laws by which the Philippine Government
was brought into existence, to invade a coordinate and independent department of
the Government, and to interfere with the legitimate powers and functions of the
Legislature. 44
Following the courts in the United States since the Constitution of the Philippine Government is
modeled after that of the Federal Government, the Court did not hesitate to follow the courts in said
country, i.e., to consider the journals decisive of the point at issue. Thus: "The journals say that the
Legislature adjourned at 12 midnight on February 28, 1914. This settles the question and the court
did not err in declining to go behind these journals." 45
The Court made a categorical stand for the "enrolled bill rule" for the first time in the 1947 case
of Mabanag v. Lopez Vito 46 where it held that an enrolled bill imports absolute verity and is binding
on the courts. This Court held itself bound by an authenticated resolution, despite the fact that the
vote of three-fourths of the Members of the Congress (as required by the Constitution to approve
proposals for constitutional amendments) was not actually obtained on account of the suspension of
some members of the House of Representatives and the Senate. In this connection, the Court
invoked the "enrolled bill rule" in this wise: "If a political question conclusively binds the judges out of
respect to the political departments, a duly certified law or resolution also binds the judges under the
'enrolled bill rule' born of that respect." 47
Mindful that the U.S. Supreme Court is on the side of those who favor the rule and for no other
reason than that it conforms to the expressed policy of our law making body (i.e., Sec. 313 of the old
Code of Civil Procedure, as amended by Act No. 2210), the Court said that "duly certified copies
shall be conclusive proof of the provisions of such Acts and of the due enactment thereof." Without
pulling the legal underpinnings from U.S. v. Pons, it justified its position by saying that if the Court at
the time looked into the journals, "in all probability, those were the documents offered in evidence"
and that "even if both the journals and authenticated copy of the Act had been presented, the
disposal of the issue by the Court on the basis of the journals does not imply rejection of the enrolled
theory; for as already stated, the due enactment of a law may be proved in either of the two ways
specified in Section 313 of Act No. 190 as amended." 48 Three Justices voiced their dissent from the
majority decision.
Again, the Court made its position plain in the 1963 case of Casco Philippine Chemical Co., Inc. v.
Gimenez 49 when a unanimous Court ruled that: "The enrolled bill is conclusive upon the courts as
regards the tenor of the measure passed by Congress and approved by the President. If there has
been any mistake in the printing of a bill before it was certified by the officers of Congress and
approved by the Executive, the remedy is by amendment or curative legislation not by judicial
decree." According to Webster's New 20th Century Dictionary, 2nd ed., 1983, the word "tenor"
means, among others, "the general drift of something spoken or written; intent, purport, substance."
Thus, the Court upheld the respondent Auditor General's interpretation that Republic Act No. 2609
really exempted from the margin fee on foreign exchange transactions "urea formaldehyde" as found
in the law and not "urea and formaldehyde" which petitioner insisted were the words contained in the
bill and were so intended by Congress.
In 1969, the Court similarly placed the weight of its authority behind the conclusiveness of the
enrolled bill. In denying the motion for reconsideration, the Court ruled in Morales v. Subido that "the
enrolled Act in the office of the legislative secretary of the President of the Philippines shows that
Section 10 is exactly as it is in the statute as officially published in slip form by the Bureau of Printing
. . . Expressed elsewise, this is a matter worthy of the attention not of an Oliver Wendell Holmes but
of a Sherlock Holmes." 50 The alleged omission of a phrase in the final Act was made, not at any
stage of the legislative proceedings, but only in the course of the engrossment of the bill, more
specifically in the proofreading thereof.
But the Court did include a caveat that qualified the absoluteness of the "enrolled bill" rule stating:
By what we have essayed above we are not of course to be understood as holding
that in all cases the journals must yield to the enrolled bill. To be sure there are
certain matters which the Constitution (Art. VI, secs. 10 [4], 20 [1], and 21 [1])
expressly requires must be entered on the journal of each house. To what extent the
validity of a legislative act may be affected by a failure to have such matters entered
on the journal, is a question which we do not now decide (Cf. e.g., Wilkes Country
Comm'rs. v. Coler, 180 U.S. 506 [1900]). All we hold is that with respect to matters
not expressly required to be entered on the journal, the enrolled bill prevails in the
event of any discrepancy. 51
More recently, in the 1993 case of Philippine Judges Association v. Prado, 52 this Court, in ruling on
the unconstitutionality of Section 35 of Republic Act No. 7354 withdrawing the franking privilege from
the entire hierarchy of courts, did not so much adhere to the enrolled bill rule alone as to both
"enrolled bill and legislative journals." Through Mr. Justice Isagani A. Cruz, we stated: "Both the
enrolled bill and the legislative journals certify that the measure was duly enacted, i.e., in accordance
with Article VI, Sec. 26(2) of the Constitution. We are bound by such official assurances from a
coordinate department of the government, to which we owe, at the very least, a becoming courtesy."
Aware of the shifting sands on which the validity and continuing relevance of the "enrolled bill" theory
rests, I have taken pains to trace the history of its applicability in this jurisdiction, as influenced in
varying degrees by different Federal rulings.
As applied to the instant petition, the issue posed is whether or not the procedural irregularities that
attended the passage of House Bill No. 11197 and Senate Bill No. 1630, outside of the reading and
printing requirements which were exempted by the Presidential certification, may no longer be
impugned, having been "saved" by the conclusiveness on us of the enrolled bill. I see no cogent
reason why we cannot continue to place reliance on the enrolled bill, but only with respect to matters
pertaining to the procedure followed in the enactment of bills in Congress and their subsequent
engrossment, printing errors, omission of words and phrases and similar relatively minor matters
relating more to form and factual issues which do not materially alter the essence and substance of
the law itself.
Certainly, "courts cannot claim greater ability to judge procedural legitimacy, since constitutional
rules on legislative procedure are easily mastered. Procedural disputes are over facts — whether or
not the bill had enough votes, or three readings, or whatever — not over the meaning of the
constitution. Legislators, as eyewitnesses, are in a better position than a court to rule on the facts.
The argument is also made that legislatures would be offended if courts examined legislative
procedure. 53
Such a rationale, however, cannot conceivably apply to substantive changes in a bill introduced
towards the end of its tortuous trip through Congress, catching both legislators and the public
unawares and altering the same beyond recognition even by its sponsors.
This issue I wish to address forthwith.
EXTENT OF THE POWER OF THE BICAMERAL CONFERENCE COMMITTEE
One of the issues raised in these petitions, especially in G.R. Nos. 115781, 115543 and 115754,
respectively, is whether or not —
Congress violated Section 26, par. 2, Article VI (of the 1987 Constitution) when it
approved the Bicameral Conference Committee Report which embodied, in violation
of Rule XII of the Rules of the Senate, a radically altered tax measure containing
 provisions not reported out or discussed in either House as well as provisions on
which there was no disagreement between the House and the Senate and, worse,
provisions contrary to what the House and the Senate had approved after three
separate readings. 54
and
By adding or deleting provisions, when there was no conflicting provisions between
the House and Senate versions, the BICAM acted in excess of its jurisdiction or with
such grave abuse of discretion as to amount to loss of jurisdiction. . . . In adding to
the bill and thus subjecting to VAT, real properties, media and cooperatives despite
the contrary decision of both Houses, the BICAM exceeded its jurisdiction or acted
with such abuse of discretion as to amount to loss of jurisdiction. . . . 55
I wish to consider this issue in light of Article VIII, Sec. 1 of the Constitution which provides that
"(j)udicial power includes the duty of the courts of justice . . . to determine whether or not there has
been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any
branch or instrumentality of the Government." We are also guided by the principle that a court may
interfere with the internal procedures of its coordinate branch only to uphold the Constitution. 56
A conference committee has been defined:
. . . unlike the joint committee is two committees, one appointed by each house. It is
normally appointed for a specific bill and its function is to gain accord between the
two houses either by the recession of one house from its bill or its amendments or by
the further amendment of the existing legislation or by the substitution of an entirely
new bill. Obviously the conference committee is always a special committee and
normally includes the member who introduced the bill and the chairman of the
committee which considered it together with such other representatives of the house
as seem expedient. (Horack, Cases and Materials on Legislation [1940] 220. See
also Zinn, Conference Procedure in Congress, 38 ABAJ 864 [1952]; Steiner, The
Congressional Conference Committee [U of III. Press,

1951]). 57
From the foregoing definition, it is clear that a bicameral conference committee is a creature, not of
the Constitution, but of the legislative body under its power to determine rules of its proceedings
under Article VI, Sec. 16 (3) of the Constitution. Thus, it draws its life and vitality from the rules
governing its creation. The why, when, how and wherefore of its operations, in other words, the
parameters within which it is to function, are to be found in Section 26, Rule XII of the Rules of the
Senate and Section 85 of the Rules of the House of Representatives, respectively, which provide:
Rule XII, Rules of the Senate
Sec. 26. In the event that the Senate does not agree with the House of
Representatives on the provision of any bill or joint resolution, the differences shall
be settled by a conference committee of both Houses which shall meet within ten
days after their composition.
The President shall designate the members of the conference committee in
accordance with subparagraph (c), Section 8 of Rule III.
Each Conference Committee Report shall contain a detailed and sufficiently explicit
statement of the changes in or amendments to the subject measure, and shall be
signed by the conferees.
The consideration of such report shall not be in order unless the report has been filed
with the Secretary of the Senate and copies thereof have been distributed to the
Members.
Rules of the House of Representatives
 Sec. 85. Conference Committee Reports. — In the event that the House does not
agree with the Senate on the amendments to any bill or joint resolution, the
differences may be settled by conference committee of both Chambers.
The consideration of conference committee reports shall always be in order, except
when the journal is being read, while the roll is being called or the House is dividing
on any question. Each of the pages of such reports shall contain a detailed,
sufficiently explicit statement of the changes in or amendments to the subject
measure.
The consideration of such report shall not be in order unless copies thereof are
distributed to the Members: Provided, That in the last fifteen days of each session
period it shall be deemed sufficient that three copies of the report, signed as above
provided, are deposited in the office of the Secretary General.
Under these Rules, a bicameral conference committee comes into being only when there
are disagreements and differences between the Senate and the House with regard to certain
provisions of a particular legislative act which have to be reconciled.
Jefferson's Manual, which, according to Section 112, Rule XLIX of the Senate Rules, supplements it,
states that a conference committee is usually called "on the occasion of amendments between the
Houses" and "in all cases of difference of opinion between the two House on matters pending
between

them." 58 It further states:
The managers of a conference must confine themselves to the differences committed to them, and
may not include subjects not within the disagreements, even though germane to a question in issue.
But they may perfect amendments committed to them if they do not in so doing go beyond the
differences. . . . Managers may not change the text to which both Houses have agreed. 59 (Emphasis
supplied.)
Mason's Manual of Legislative Procedures which is also considered as controlling authority for any
situation not covered by a specific legislative

rule, 60 states that either House may "request a conference with the other on any matter of difference
or dispute between them" and that in such a request, "the subject of the conference should always
be stated." 61
In the Philippines, as in the United States, the Conference Committee exercises such a wide range
of authority that they virtually constitute a third House in the Legislature. As admitted by the Solicitor
General, "It was the practice in past Congresses for Conference Committees to insert in bills
approved by the two Houses new provisions that were not originally contemplated by them." 62
In Legislative Procedure, Robert Luce gives a graphic description of the milieu and the
circumstances which have conspired to transform an initially innocuous mechanism designed to
facilitate action into an all-powerful Frankenstein that brooks no challenge to its authority even from
its own members.
Their power lies chiefly in the fact that reports of conference committees must be
accepted without amendment or else rejected in toto. The impulse is to get done with
the matters and so the motion to accept has undue advantage, for some members
are sure to prefer swallowing unpalatable provisions rather than prolong controversy.
This is the more likely if the report comes in the rush of business toward the end of a
session, when to seek further conference might result in the loss of the measure
altogether. At any time in the session there is some risk of such a result following the
rejection of a conference report, for it may not be possible to secure a second
conference, or delay may give opposition to the main proposal chance to develop
more strength.
xxx xxx xxx
 Entangled in a network of rule and custom, the Representative who resents and
would resist this theft of his rights, finds himself helpless. Rarely can he vote, rarely
can he voice his mind, in the matter of any fraction of the bill. Usually he cannot even
record himself as protesting against some one feature while accepting the measure
as whole. Worst of all, he cannot by argument or suggested change, try to improve
what the other branch has done.
This means more than the subversion of individual rights. It means to a degree the
abandonment of whatever advantage the bicameral system may have. By so much it
in effect transfers the lawmaking power to a small group of members who work out in
private a decision that almost always prevails. What is worse, these men are not
chosen in a way to ensure the wisest choice. It has become the practice to name as
conferees the ranking members of the committee, so that the accident of seniority
determines. Exceptions are made, but in general it is not a question of who are most
competent to serve. Chance governs, sometimes giving way to favor, rarely to merit.
xxx xxx xxx
Speaking broadly, the system of legislating by conference committee is unscientific
and therefore defective. Usually it forfeits the benefit of scrutiny and judgment by all
the wisdom available. Uncontrolled, it is inferior to that process by which every
amendment is secured independent discussion and vote. . . . 63 (Emphasis supplied)
Not surprisingly has it been said: "Conference Committee action is the most undemocratic procedure
in the legislative process; it is an appropriate target for legislative critics." 64
In the case at bench, petitioners insist that the Conference Committee to which Senate Bill No. 1630
and House Bill No. 11197 were referred for the purpose of harmonizing their differences,
overreached themselves in not confining their "reconciliation" function to those areas of
disagreement in the two bills but actually making "surreptitious insertions" and deletions which
amounted to a grave abuse of discretion.
At this point, it becomes imperative to focus on the errant provisions which found their way into
Republic Act No. 7716. Below is a breakdown to facilitate understanding the grounds for petitioners'
objections:
INSERTIONS MADE BY BICAMERAL CONFERENCE COMMITTEE (BICAM) TO SENATE BILL
(SB) NO. 1630 AND HOUSE BILL (HB) NO. 11197
1. Sec. 99 of the National Internal Revenue Code (NIRC)
(1) Under the HB, this section includes any person who, in the course of trade or business, sells,
barters or exchanges goods OR PROPERTIES and any person who LEASES PERSONAL
PROPERTIES.
(2) The SB completely changed the said section and defined a number of words and phrases. Also,
Section 99-A was added which included one who sells, exchanges, barters PROPERTIES and one
who imports PROPERTIES.
(3) The BICAM version makes LESSORS of goods OR PROPERTIES and importers of goods
LIABLE to VAT (subject of petition in G.R. No. 115754).
2. Section 100 (VAT on Sale of Goods)
The term "goods" or "properties" includes the following, which were not found in either the HB or the
SB:
— In addition to radio and television time; SATTELITE TRANSMISSION AND CABLE
TELEVISION TIME.
— The term "Other similar properties" was deleted, which was present in the HB and
the SB.
 — Real properties held primarily for sale to customers or held for lease in the
ordinary course or business were included, which was neither in the HB nor the SB
(subject of petition in G.R. No. 115754).
3. Section 102
On what are included in the term "sale or exchange of services," as to make them subject to VAT, the
BICAM included/inserted the following (not found in either House or Senate Bills):
1. Services of lessors of property, whether personal or real (subject of petition in G.R.
No. 115754);
2. Warehousing services;
3. Keepers of resthouses, pension houses, inns, resorts;
4. Common carriers by land, air and sea;
5. Services of franchise grantees of telephone and telegraph;
6. Radio and television broadcasting;
7. All other franchise grantees except those under Section 117 of this Code (subject
of petition in G.R. No. 115852);
8. Services of surety, fidelity, indemnity, and bonding companies;
9. Also inserted by the BICAM (on page 8 thereof) is the lease or use of or the right
to use of satellite transmission and cable television time.
4. Section 103 (Exempt Transactions)
The BICAM deleted subsection (f) in its entirety, despite its inclusion in both the House and Senate
Bills. Therefore, under Republic Act No. 7716, the "printing, publication, importation or sale of books
and any newspaper, magazine, review, or bulletin which appears at regular intervals with fixed prices
for subscription and sale and which is not devoted principally to the publication of advertisements" is
subject to VAT (subject of petition in G.R. No. 115931 and G.R. No. 115544).
The HB and SB did not touch Subsection (g) but it was amended by the BICAM by changing the
word TEN to FIVE. Thus, importation of vessels with tonnage of more than five thousand tons is VAT
exempt.
Subsection L, which was identical in the HB and the SB that stated that medical, dental, hospital and
veterinary services were exempted from the VAT was amended by the BICAM by adding the
qualifying phrase: EXCEPT THOSE RENDERED BY PROFESSIONALS, thus subjecting doctors,
dentists and veterinarians to the VAT.
Subsection U which exempts from VAT "transactions which are exempt under special laws," was
amended by the BICAM by adding the phrase: EXCEPT THOSE GRANTED UNDER PD Nos. 66,
529, 972, 1491, AND 1590, AND NON-ELECTRIC COOPERATIVES UNDER RA 6938 (subject of
petition in G.R. No. 115873), not found in either the HB or the SB, resulting in the inclusion of all
cooperatives to the VAT, except non-electric cooperatives.
The sale of real properties was included in the exempt transactions under the House Bill, but the
BICAM qualified this with the provision:
(S) SALE OF REAL PROPERTIES NOT PRIMARILY HELD FOR SALE TO
CUSTOMERS OR HELD FOR LEASE IN THE ORDINARY COURSE OF TRADE OR
BUSINESS OR REAL PROPERTY UTILIZED FOR LOW-COST AND SOCIALIZED
HOUSING AS DEFINED BY RA NO. 7279 OTHERWISE KNOWN AS THE URBAN
DEVELOPMENT AND HOUSING ACT OF 1992 AND OTHER RELATED LAWS.
(subject of petition in G.R. No. 115754)
The BICAM also exempted the sale of properties, the receipts of which are not less than
P480,000.00 or more than P720,000.00. Under the SB, no amount was given, but in the HB it was
stated that receipts from the sale of properties not less than P350,000.00 nor more than
P600,000.00 were exempt.
It did not include, as VAT exempt, the sale or transfer of securities, as defined in the Revised
Securities Act (BP 178) which was contained in both Senate and House Bills.
5. Section 104
Not included in the HB or the SB is the phrase "INCLUDING PACKAGING MATERIALS" which was
inserted by the BICAM in Section 104 (A) (1) (B), thus excluding from creditable input tax packaging
materials and the phrase "ON WHICH A VALUE-ADDED TAX HAS BEEN ACTUALLY PAID" in
Section 104 (A) (2).
6. Section 107
Both House and Senate Bills provide for the payment of P500.00 VAT registration fee but this was
increased by BICAM to P1,000.00.
7. Section 112
Regarding a person whose sales or receipts are exempt under Section 103 (w), the BICAM inserted
the phrase: "THREE PERCENT UPON THE EFFECTIVITY OF THIS ACT AND FOUR PERCENT
(4%) TWO YEARS THEREAFTER," although the SB and the HB provide only "three percent of his
gross quarterly sales."
8. Section 115
The BICAM adopted the HB version which subjects common carriers by land, air or water for the
transport of passengers to 3% of their gross quarterly sales, which is not found in the SB.
9. Section 117
The BICAM amended this section by subjecting franchises on electric, gas and water utilities to a tax
of two percent (2%) on gross receipts

derived . . ., although neither the HB nor the SB has a similar provision.
10. Section 17 (d)
(a) The BICAM defers for only 2 years the VAT on services of actors and actresses, although the SB
defers it for 3 years.
(b) The BICAM uses the word "EXCLUDE" in the section on deferment of VAT collection on certain
goods and services. The HB does not contain any counterpart provision and SB only allows
deferment for no longer than 3 years.
11. Section 18 on the Tax Administration Development Fund is an entirely new provision not
contained in the House/Senate Bills. This fund is supposed to ensure effective implementation of
Republic Act No. 7716.
12. Section 19
No period within which to promulgate the implementing rules and regulations is found in the HB or
the SB but BICAM provided "within 90 days" which found its way in Republic Act No. 7716.
Even a cursory perusal of the above outline will convince one that, indeed, the Bicameral
Conference Committee (henceforth to be referred to as BICAM) exceeded the power and authority
granted in the Rules of its creation. Both Senate and House Rules limit the task of the Conference
Committee in almost identical language to the settlement of differences in the provisions or
amendments to any bill or joint resolution. If it means anything at all, it is that there are provisions in
subject bill, to start with, which differ and, therefore, need reconciliation. Nowhere in the Rules is it
authorized to initiate or propose completely new matter. Although under certain rules on legislative
procedure, like those in Jefferson's Manual, a conference committee may
introduce germane matters in a particular bill, such matters should be circumscribed by the
committee's sole authority and function to reconcile differences.
Parenthetically, in the Senate and in the House, a matter is "germane" to a particular bill if there is a
common tie between said matter and the provisions which tend to promote the object and purpose of
the bill it seeks to amend. If it introduces a new subject matter not within the purview of the bill, then
it is not "germane" to the bill. 65 The test is whether or not the change represented an amendment or
extension of the basic purpose of the original, or the introduction of an entirely new and different
subject matter. 66
In the BICAM, however, the germane subject matter must be within the ambit of the disagreement
between the two Houses. If the "germane" subject is not covered by the disagreement but it is
reflected in the final version of the bill as reported by the Conference Committee or, if what appears
to be a "germane" matter in the sense that it is "relevant or closely allied" 67 with the purpose of the
bill, was not the subject of a disagreement between the Senate and the House, it should be deemed
an extraneous matter or even a "rider" which should never be considered legally passed for not
having undergone the three-day reading requirement. Insertion of new matter on the part of the
BICAM is, therefore, an ultra vires act which makes the same void.
The determination of what is "germane" and what is not may appear to be a difficult task but the
Congress, having been confronted with the problem before, resolved it in accordance with the rules.
In that case, the Congress approved a Conference Committee's insertion of new provisions that
were not contemplated in any of the provisions in question between the Houses simply because of
the provision in Jefferson's Manual that conferees may report matters "which are germane
modifications of subjects in disagreement between the Houses and the committee. 68 In other words,
the matter was germane to the points of disagreement between the House and the Senate.
As regards inserted amendments in the BICAM, therefore, the task of determining what is germane
to a bill is simplified, thus: If the amendments are not circumscribed by the subjects of disagreement
between the two Houses, then they are not germane to the purpose of the bill.
In the instant case before us, the insertions and deletions made do not merely spell an effort at
settling conflicting provisions but have materially altered the bill, thus giving rise to the instant
petitions on the part of those who were caught unawares by the legislative legerdemain that took
place. Going by the definition of the word "amendment" in Black's Law Dictionary, 5th Ed., 1979,
which means "to change or modify for the better; to alter by modification, deletion, or addition," said
insertions and deletions constitute amendments. Consequently, these violated Article VI, Section 26
(2) which provides inter alia: "Upon the last reading of a bill, no amendment thereto shall be

allowed . . ." This proscription is intended to subject all bills and their amendments to intensive
deliberation by the legislators and the ample ventilation of issues to afford the public an opportunity
to express their opinions or objections issues to afford the public an opportunity to express their
opinions or objections thereon. The same rationale underlies the three-reading requirement to the
end that no surprises may be sprung on an unsuspecting citizenry.
Provisions of the "now you see it, now you don't" variety, meaning those which were either in the
House and/or Senate versions but simply disappeared or were "bracketed out" of existence in the
BICAM Report, were eventually incorporated in Republic Act No. 7716. Worse, some goods,
properties or services which were not covered by the two versions and, therefore, were never
intended to be so covered, suddenly found their way into the same Report. No advance notice of
such insertions prepared the rest of the legislators, much less the public who could be adversely
affected, so that they could be given the opportunity to express their views thereon. Well has the
final BICAM report been described, therefore, as an instance of "taxation without representation."
That the conferees or delegates in the BICAM representing the two Chambers could not possibly be
charged with bad faith or sinister motives or, at the very least, unseemly behavior, is of no moment.
The stark fact is that items not previously subjected to the VAT now fell under its coverage without
interested sectors or parties having been afforded the opportunity to be heard thereon. This is not to
say that the Conference Committee Report should have undergone the three readings required in
Article VI, Section 26 (2), for this clearly refers only to bills which, after having been initially filed in
either House, negotiated the labyrinthine passage therein until its approval. The composition of the
BICAM including as it usually does, the Chairman of the appropriate Committee, the sponsor of the
bill and other interested members ensures an informed discussion, at least with respect to the
disagreeing provisions. The same does not obtain as regards completely new matter which suddenly
spring on the legislative horizon.
It has been pointed out that such extraneous matters notwithstanding, all Congressman and
Senators were given the opportunity to approve or turn down the Committee Report in toto, thus
"curing" whatever defect or irregularity it bore.
Earlier in this opinion, I explained that the source of the acknowledged power of this ad
hoc committee stems from the precise fact that, the meetings, being scheduled "take it or leave it"
basis. It has not been uncommon for legislators who, for one reason or another have been frustrated
in their attempt to pass a pet bill in their own chamber, to work for its passage in the BICAM where it
may enjoy a more hospitable reception and faster approval. In the instant case, had there been full,
open and unfettered discussion on the bills during the Committee sessions, there would not have
been as much vociferous objections on this score. Unfortunately, however, the Committee held two
of the five sessions behind closed doors, sans stenographers, record-takers and interested
observers. To that extent, the proceedings were shrouded in mystery and the public's right to
information on matters of public concern as enshrined in Article III, Section 7 69 and the government's
policy of transparency in transactions involving public interest in Article II, Section 28 of the

Constitution 70 are undermined.
Moreover, that which is void ab initio such as the objectionable provisions in the Conference
Committee Report, cannot be "cured" or ratified. For all intents and purposes, these never
existed. Quae ab initio non valent, ex post facto convalescere non possunt. Things that are invalid
from the beginning are not made valid by a subsequent act.
Should this argument be unacceptable, the "enrolled bill" doctrine, in turn, is invoked to support the
proposition that the certification by the presiding officers of Congress, together with the signature of
the President, bars further judicial inquiry into the validity of the law. I reiterate my submission that
the "enrolled bill ruling" may be applicable but only with respect to questions pertaining to the
procedural enactment, engrossment, printing, the insertion or deletion of a word or phrase here and
there, but would draw a dividing line with respect to substantial substantive changes, such as those
introduced by the BICAM herein.
We have before us then the spectacle of a body created by the two Houses of Congress for the very
limited purpose of settling disagreements in provisions between bills emanating therefrom,
exercising the plenary legislative powers of the parent chambers but holding itself exempt from the
mandatory constitutional requirements that are the hallmarks of legislation under the aegis of a
democratic political system. From the initial filing, through the three readings which entail detailed
debates and discussions in Committee and plenary sessions, and on to the transmittal to the other
House in a repetition of the entire process to ensure exhaustive deliberations — all these have been
skipped over. In the proverbial twinkling of an eye, provisions that probably may not have seen the
light of day had they but run their full course through the legislative mill, sprang into existence and
emerged full-blown laws.
Yet our Constitution vests the legislative power in "the Congress of the Philippines which shall
consist of a Senate and a House of

Representatives . . ." 71 and not in any special, standing or super committee of its own creation, no
matter that these have been described, accurately enough, as "the eye, the ear, the hand, and very
often the brain of the house."
Firstly, that usage or custom has sanctioned this abbreviated, if questionable, procedure does not
warrant its being legitimized and perpetuated any longer. Consuetudo, contra rationem introducta,
potius usurpatio quam consuetudo appellari debet. A custom against reason is rather an usurpation.
In the hierarchy of sources of legislative procedure, constitutional rules, statutory provisions and
adopted rules (as for example, the Senate and House Rules), rank highest, certainly much ahead of
customs and usages.
Secondly, is this Court to assume the role of passive spectator or indulgent third party, timorous
about exercising its power or more importantly, performing its duty, of making a judicial determination
on the issue of whether there has been grave abuse of discretion by the other branches or
instrumentalities of government, where the same is properly invoked? The time is past when the
Court was not loathe to raise the bogeyman of the political question to avert a head-on collision with
either the Executive or Legislative Departments. Even the separation of powers doctrine was
burnished to a bright sheen as often as it was invoked to keep the judiciary within bounds. No longer
does this condition obtain. Article VIII, Section 2 of the Constitution partly quoted in this paragraph
has broadened the scope of judicial inquiry. This Court can now safely fulfill its mandate of delimiting
the powers of co-equal departments like the Congress, its officers or its committees which may have
no compunctions about exercising legislative powers in full.
Thirdly, dare we close our eyes to the presumptuous assumption by a runaway committee of its
progenitor's legislative powers in derogation of the rights of the people, in the process, subverting
the democratic principles we all are sworn to uphold, when a proper case is made out for our
intervention? The answers to the above queries are self-evident.
I call to mind this exhortation: "We are sworn to see that violations of the constitution — by any
person, corporation, state agency or branch of government — are brought to light and corrected. To
countenance an artificial rule of law that silences our voices when confronted with violations of our
Constitution is not acceptable to this Court." 72
I am not unaware that a rather recent decision of ours brushed aside an argument that a provision in
subject law regarding the withdrawal of the franking privilege from the petitioners and this Court
itself, not having been included in the original version of Senate Bill No. 720 or of House Bill No.
4200 but only in the Conference Committee Report, was violative of Article VI, Section 26 (2) of the
Constitution. Likewise, that said Section 35, never having been a subject of disagreement between
both Houses, could not have been validly added as an amendment before the Conference
Committee.
The majority opinion in said case explained:
While it is true that a conference committee is the mechanism for compromising differences between
the Senate and the House, it is not limited in its jurisdiction to this question. Its broader function is
described thus:
A conference committee may deal generally with the subject matter or it may be
limited to resolving the precise differences between the two houses. Even where the
conference committee is not by rule limited in its jurisdiction, legislative custom
severely limits the freedom with which new subject matter can be inserted into the
conference bill. But occasionally a conference committee produces unexpected
results, results beyond its mandate. These excursions occur even where the rules
impose strict limitations on conference committee jurisdiction. This is symptomatic of
the authoritarian power of conference committee (Davies, Legislative Law and
Process: In a Nutshell, 1986 Ed., p. 81). 73(Emphasis supplied)
At the risk of being repetitious, I wish to point out that the general rule, as quoted above, is: "Even
where the conference committee is not by rule limited in its jurisdiction, legislative custom severely
limits the freedom with which new subject matter can be inserted into the conference bill." What
follows, that is, "occasionally a conference committee produces unexpected results, results beyond
its mandate. . ." is the exception. Then it concludes with a declaration that: "This is symptomatic of
the authoritarian power of conference committee." Are we about to reinstall another institution that
smacks of authoritarianism which, after our past experience, has become anathema to the Filipino
people?
The ruling above can hardly be cited in support of the proposition that a provision in a BICAM report
which was not the subject of differences between the House and Senate versions of a bill cannot be
nullified. It submit that such is not authorized in our Basic Law. Moreover, this decision concerns
merely one provision whereas the BICAM Report that culminated in the EVAT law has a wider scope
as it, in fact, expanded the base of the original VAT law by imposing the tax on several items which
were not so covered prior to the EVAT.
One other flaw in most BICAM Reports, not excluding this one under scrutiny, is that, hastily drawn
up, it often fails to conform to the Senate and House Rules requiring no less than a "detailed" and
"sufficiently explicit statement of the changes in or amendments to the subject measure." The Report
of the committee, as may be gleaned from the preceding pages, was no more than the final version
of the bill as "passed" by the BICAM. The amendments or subjects of dissension, as well as the
reconciliation made by the committee, are not even pointed out, much less explained therein.
It may be argued that legislative rules of procedure may properly be suspended, modified, revoked
or waived at will by the legislators themselves. 74 This principle, however, does not come into play in
interpreting what the record of the proceedings shows was, or was not, done. It is rather designed to
test the validity of legislative action where the record shows a final action in violation or disregard of
legislative rules. 75 Utilizing the Senate and the House Rules as both guidelines and yardstick, the
BICAM here obviously did not adhere to the rule on what the Report should contain.
Given all these irregularities that have apparently been engrafted into the BICAM system, and which
have been tolerated, if not accorded outright acceptance by everyone involved in or conversant with,
the institution, it may be asked: Why not leave well enough alone?
That these practices have remained unchallenged in the past does not justify our closing our eyes
and turning a deaf ear to them. Writ large is the spectacle of a mechanism ensconced in the very
heart of the people's legislative halls, that now stands indicted with the charge of arrogating
legislative powers unto itself through the use of dubious "shortcuts." Here, for the people to judge, is
the "mother of all shortcuts."
In the petitions at bench, we are confronted with the enactment of a tax law which was designed to
broaden the tax base. It is rote learning for any law student that as an attribute of sovereignty, the
power to tax is "the strongest of all the powers of government." 76 Admittedly, "for all its plenitude, the
power to tax is not unconfined. There are restrictions." 77 Were there none, then the oft-quoted 1803
dictum of Chief Justice Marshall that "the power to tax involves the power to destroy" 78 would be a
truism. Happily, we can concur with, and the people can find comfort in, the reassuring words of Mr.
Justice Holmes: "The power to tax is not the power to destroy while this Court sits." 79
Manakanaka, mayroong dumudulog dito sa Kataastaasang Hukuman na may kamangha-manghang
hinaing. Angkop na halimbawa ay ang mga petisyong iniharap ngayon sa amin.
Ang ilan sa kanila ay mga Senador na nais mapawalang bisa ang isang batas ukol sa buwis na
ipinasa mismo nila. Diumano ito ay hindi tumalima sa mga itinatadhana ng Saligang Batas. Bukod
sa rito, tutol sila sa mga bagong talata na isiningit ng "Bicameral Conference Committee" na
nagdagdag ng mga bagong bagay bagay at serbisyo na papatawan ng buwis. Ayon sa kanila,
ginampanan ng komiteng iyan ang gawain na nauukol sa buong Kongreso. Kung kaya't ang
nararapat na mangyari ay ihatol ng Kataastaasang Hukuman na malabis na pagsasamantala sa
sariling pagpapasiya ang ginawa ng Kongreso.
Bagama't bantulot kaming makialam sa isang kapantay na sangay ng Pamahalaan, hindi naman
nararapat na kami ay tumangging gampanan ang tungkulin na iniatas sa amin ng Saligang Batas.
Lalu't-lalo nang ang batas na kinauukulan ay maaaring makapinsala sa nakararami sa sambayanan.
Sa ganang akin, itong batas na inihaharap sa amin ngayon, ay totoong labag sa Saligang Batas,
samakatuwid ay walang bisa. Nguni't ito ay nauukol lamang sa mga katiwalian na may kinalaman sa
paraan ng pagpapasabatas nito. Hindi namin patakaran ang makialam o humadlang sa itinakdang
gawain ng Saligang Batas sa Pangulo at sa Kongreso. Ang dalawang sangay na iyan ng
Pamahalaan ang higit na maalam ukol sa kung ang anumang panukalang batas ay nararapat,
kanais-nais o magagampanan; kung kaya't hindi kami nararapat na maghatol o magpapasiya sa
mga bagay na iyan. Ang makapapataw ng angkop na lunas sa larangan na iyan ay ang mismong
mga kinatawan ng sambayanan sa Kongreso.
Faced with this challenge of protecting the rights of the people by striking down a law that I submit is
unconstitutional and in the process, checking the wonted excesses of the Bicameral Conference
Committee system, I see in this case a suitable vehicle to discharge the Court's Constitutional
mandate and duty of declaring that there has indeed been a grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of the Legislature.
Republic Act No. 7716, being unconstitutional and void, I find no necessity to rule on the substantive
issues as dealt with in the majority opinion as they have been rendered moot and academic. These
issues pertain to the intrinsic merits of the law. It is axiomatic that the wisdom, desirability and
advisability of enacting certain laws lie, not within the province of the Judiciary but that of the political
departments, the Executive and the Legislative. The relief sought by petitioners from what they
perceive to be the harsh and onerous effect of the EVAT on the people is within their reach. For
Congress, of which Senator-petitioners are a part, can furnish the solution by either repealing or
amending the subject law.
For the foregoing reasons, I VOTE to GRANT the petition.

PUNO, J.:
Petitioners plead that we affirm the self-evident proposition that they who make law should not break
the law. There are many evils whose elimination can be trusted to time. The evil of lawlessness in
lawmaking cannot. It must be slain on sight for it subverts the sovereignty of the people.
First, a fast snapshot of the facts. On November 17, 1993, the House of Representatives passed on
third reading House Bill (H.B.) No. 11197 entitled "An Act Restructuring the Value Added Tax (VAT)
System to Widen its Tax Base and Enhance its Administration, Amending for These Purposes
Sections 99, 100, 102 to 108 and 110 Title V and 236, 237 and 238 of Title IX, and Repealing
Sections 113 and 114 of Title V, all of the National Internal Revenue Code as Amended." The vote
was 114 Yeas and 12 Nays. The next day, November 18, 1993, H.B. No. 11197 was transmitted to
the Senate for its concurrence by the Hon. Camilo L. Sabio, Secretary General of the House of
Representatives.
On February 7, 1994, the Senate Committee on Ways and Means submitted Senate Bill (S.B.) No.
1630, recommending its approval "in substitution of Senate Bill No. 1129 taking into consideration
P.S. Res. No. 734 and House Bill No. 11197." On March 24, 1994, S.B. No. 1630 was approved on
second and third readings. On the same day, the Senate, thru Secretary Edgardo E. Tumangan,
requested the House for a conference "in view of the disagreeing provisions of S.B. No. 1630 and
H.B. No. 11197." It designated the following as members of its Committee: Senators Ernesto F.
Herrera, Leticia R. Shahani, Alberto S. Romulo, John H. Osmeña, Ernesto M. Maceda, Blas F. Ople,
Francisco S. Tatad, Rodolfo G. Biazon, and Wigberto S. Tañada. On the part of the House, the
members of the Committee were: Congressmen Exequiel B. Javier, James L. Chiongbian, Renato V.
Diaz, Arnulfo P. Fuentebella, Mariano M. Tajon, Gregorio Andolong, Thelma Almario, and Catalino
Figueroa. After five (5) meetings, 1 the Bicameral Conference Committee submitted its Report to the
Senate and the House stating:
CONFERENCE COMMITTEE REPORT
The Conference Committee on the disagreeing provisions of House Bill No. 11197,
entitled:
AN ACT RESTRUCTURING THE VALUE ADDED TAX (VAT) SYSTEM TO WIDEN
ITS TAX BASE AND ENHANCE ITS ADMINISTRATION, AMENDING FOR THESE
PURPOSES SECTIONS 99, 100, 102, 103, 104, 105, 106, 107, 108 AND 110 OF
TITLE IV, 112, 115 AND 116 OF TITLE V, AND 236, 237, AND 238 OF TITLE IX, AND
REPEALING SECTIONS 113 AND 114 OF TITLE V, ALL OF THE NATIONAL
INTERNAL REVENUE CODE, AS AMENDED
and Senate Bill No. 1630 entitled:
 AN ACT RESTRUCTURING THE VALUE ADDED TAX (VAT) SYSTEM TO WIDEN
ITS TAX BASE AND ENHANCE ITS ADMINISTRATION, AMENDING FOR THESE
PURPOSES SECTIONS 99, 100, 102, 103, 104, 106, 107, 108 AND 110 OF TITLE
IV, 112, 115, 117 AND 121 OF TITLE V, AND 236, 237, AND 238 OF TITLE IX, AND
REPEALING SECTIONS 113, 114, 116, 119 AND 120 OF TITLE V, ALL OF THE
NATIONAL INTERNAL REVENUE CODE, AS AMENDED AND FOR OTHER
PURPOSES
having met, after full and free conference, has agreed to recommend and do hereby
recommend to their respective Houses that House Bill No. 11197, in consolidation
with Senate Bill No. 1630, be approved in accordance with the attached copy of the
bill as reconciled and approved by the conferees.
Approved.
The Report was approved by the House on April 27, 1994. The Senate approved it on May 2, 1994.
On May 5, 1994, the President signed the bill into law as R.A. No. 7716.
There is no question that the Bicameral Conference Committee did more than reconcile differences
between House Bill No. 11197 and Senate Bill No. 1630. In several instances, it either added new
provisions or deleted provisions already approved in House Bill No. 11197 and Senate Bill No. 1630.
These insertions/deletions numbering twenty four (24) are specified in detail by petitioner Tolentino
as follows: 2
SOME SALIENT POINTS ON THE

(AMENDMENTS TO THE VATE LAW [EO 273])

SHOWING ADDITIONS/INSERTIONS MADE BY BICAMERAL

CONFERENCE COMMITTEE TO SB 1630 & HB 11197
I On Sec. 99 of the NIRC
H.B. 11197 amends this section by including, as liable to VAT, any person who in the
course of trade of business, sells, barters, or exchanges goods or PROPERTIES and
any person who LEASES PERSONAL PROPERTIES.
Senate Bill 1630 deleted Sec. 99 to give way for a new Section 99 — DEFINITION
OF TERMS — where eleven (11) terms were defined. A new Section, Section 99-A
was incorporated which included as subject to VAT, one who sells, exchanges,
barters PROPERTIES and one who imports PROPERTIES.
The BCC version (R.A. 7716) makes LESSORS of goods OR PROPERTIES and
importers of goods LIABLE to VAT.
II On Section 100 (VAT on sale of goods)
A. The H.B., S.B., and the BCC (R.A. 7716) all included sale of PROPERTIES as
subject to VAT.
The term GOODS or PROPERTIES includes the following:
HB (pls. refer SB (pls. refer BCC (RA 7716
to Sec. 2) To Sec. 1(4) (Sec. 2)

1 . Right or the 1. The same 1. The same

privilege to use
patent, copyright,
design, or model,
plan, secret
formula or process,
goodwill trademark,
tradebrand or other
like property or
right.

2. Right or the 2. The same 2. The same

privilege to use
in the Philippines
of any industrial,
commercial, or
scientific equip-
ment.

3. Right or the 3. The same 3. The same

privilege to use
motion picture films,
films, tapes and
discs.

4. Radio and 4. The same 4. In addition

Television time to radio and
television time the
following were
included:
SATELLITE
TRANSMISSION
and CABLE
TELEVISION TIME

5. Other Similar 5. The Same 5. 'Other

properties similar properties'
 was deleted

6. - 6. - 6. Real
properties held
primarily for sale to
customers or held
for lease in the
ordinary course or
business

B. The HB and the BCC Bills has each a provision which includes THE SALE OF
GOLD TO BANGKO SENTRAL NG PILIPINAS as falling under the term Export
Sales, hence subject to 0% VAT. The Senate Bill does not contain such provision
(See Section 102-A thereof).
III. On Section 102
This section was amended to include as subject to a 10% VAT the gross receipts
derived from THE SALE OR EXCHANGE OF SERVICES, INCLUDING THE USE
OR LEASE OF PROPERTIES.
The SB, HB, and BCC have the same provisions on this.
However, on what are included in the term SALE OR EXCHANGE OF SERVICES,
the BCC included/inserted the following (not found in either the House or Senate
Bills):
1. Services of lessors of property WHETHER PERSONAL OR REAL;
(See BCC Report/Bill p. 7)
2. WAREHOUSING SERVICES (Ibid.,)
3. Keepers of RESTHOUSES, PENSION HOUSES, INNS,
RESORTS (Ibid.,)
4. Common carriers by LAND, AIR AND SEA (Ibid.,)
5. SERVICES OF FRANCHISE GRANTEES OF TELEPHONE AND
TELEGRAPH;
6. RADIO AND TELEVISION BROADCASTING
7. ALL OTHER FRANCHISE GRANTEES EXCEPT THOSE UNDER
SECTION 117 OF THIS CODE
8. SERVICES OF SURETY, FIDELITY, INDEMNITY, AND BONDING
COMPANIES.
9. Also inserted by the BCC (on page B thereof) is the LEASE OR
USE OF OR THE RIGHT TO USE OF SATTELITE TRANSMISSION
AND CABLE TELEVISION TIME
IV. On Section 103 (Exempt Transactions)
The BCC deleted subsection (f) in its entirety, despite its retention in both the House
and Senate Bills, thus under RA 7716, the "printing, publication, importation or sale of
books and any newspaper, magazine, review, or bulletin which appears at regular
intervals with fixed prices for subscription and sale and which is not devoted
principally to the publication of advertisements" is subject to VAT.
Subsection (g) was amended by the BCC (both Senate and House Bills did not) by
changing the word TEN to FIVE, thus: "Importation of passenger and/or cargo vessel
of more than five thousand ton to ocean going, including engine and spare parts of
said vessel to be used by the importer himself as operator thereof." In short,
importation of vessels with tonnage of more than 5 thousand is VAT exempt.
Subsection L, was amended by the BCC by adding the qualifying phrase: EXCEPT
THOSE RENDERED BY PROFESSIONALS.
Subsection U which exempts from VAT "Transactions which are exempt under
special laws", was amended by BCC by adding the phrase: EXCEPT THOSE
GRANTED UNDER PD NOS. 66, 529, 972, 1491, and 1590, and NON-ELECTRIC
COOPERATIVES under RA 6938. This is the reason why cooperatives are now
subject to VAT.
While the SALE OF REAL PROPERTIES was included in the exempt transactions
under the House Bill, the BCC made a qualification by stating:
(S) SALE OF REAL PROPERTIES NOT PRIMARILY HELD FOR
SALE TO CUSTOMERS OR HELD FOR LEASE IN THE ORDINARY
COURSE OF TRADE OR BUSINESS OR REAL PROPERTY
UTILIZED FOR LOW-COST AND SOCIALIZED HOUSING AS
DEFINED BY R.A. NO. 7279 OTHERWISE KNOWN AS THE URBAN
DEVELOPMENT AND HOUSING ACT OF 1992 AND OTHER
RELATED LAWS.
Under the Senate Bill, the sale of real property utilized for low-cost
and socialized housing as defined by RA 7279, is one of the exempt
transactions.
Under the House Bill, also exempt from VAT, is the SALE OF
PROPERTIES OTHER THAN THE TRANSACTIONS MENTIONED
IN THE FOREGOING PARAGRAPHS WITH A GROSS ANNUAL
SALES AND/OR RECEIPTS OF WHICH DOES NOT EXCEED THE
AMOUNT PRESCRIBED IN THE REGULATIONS TO BE
PROMULGATED BY THE SECRETARY OF FINANCE WHICH
SHALL NOT BE LESS THAN P350,000.00 OR HIGHER THAN
P600,000.00 . . . Under the Senate Bill, the amount is P240,000.00.
The BCC agreed at the amount of not less than P480,000.00 or more
than P720,000.00 SUBJECT TO TAX UNDER SEC. 112 OF THIS
CODE.
The BCC did not include, as VAT exempt, the sale or transfer of
securities as defined in the Revised Securities Act (BP 178) which
was contained in both Senate and House Bills.
V On Section 104
The phrase INCLUDING PACKAGING MATERIALS was included by the BCC on
Section 104 (A) (1) (B), and the phrase ON WHICH A VALUE-ADDED TAX HAS
BEEN ACTUALLY on Section 104 (A) (2).
These phrases are not contained in either House and Senate Bills.
VI On Section 107
Both House and Senate Bills provide for the payment of P500.00 VAT registration
fee. The BCC provides for P1,000.00 VAT fee.
VII On Section 112
While both the Senate and House Bills provide that a person whose sales or receipts
and are exempt under Section 103[w] of the Code, and who are not VAT registered
shall pay a tax equivalent to THREE (3) PERCENT of his gross quarterly sales or
receipts, the BCC inserted the phrase: THREE PERCENT UPON THE
EFFECTIVITY OF THIS ACT AND FOUR PERCENT (4%) TWO YEARS
THEREAFTER.
VIII On Section 115
Sec. 17 of SB 1630 Sec. 12 of House Bill 11197 amends this Section by clarifying
that common carriers by land, air or water FOR THE TRANSPORT OF
PASSENGERS are subject to Percentage Tax equivalent to 3% of their quarterly
gross sales.
The BCC adopted this and the House Bill's provision that the GROSS RECEIPTS OF
COMMON CARRIERS DERIVED FROM THEIR INCOMING AND OUTGOING
FREIGHT SHALL NOT BE SUBJECTED TO THE LOCAL TAXES IMPOSED UNDER
RA 7160. The Senate Bill has no similar provision.
IX On Section 117
This Section has not been touched by either Senate and House Bills. But the BCC
amended it by subjecting franchises on ELECTRIC, GAS and WATER UTILITIES A
TAX OF TWO PERCENT (2%) ON GROSS RECEIPTS DERIVED . . . .
X On Section 121
The BCC adopted the Senate Bills' amendment to this section by subjecting to 5%
premium tax on life insurance business.
The House Bill does not contain this provision.
XI Others
A) The House Bill does not contain any provision on the deferment of VAT collection
on Certain Goods and Services as does the Senate Bill (Section 19, SB 1630). But
although the Senate Bill authorizes the deferment on certain goods and services for
no longer than 3 years, there is no specific provision that authorizes the President to
EXCLUDE from VAT any of these. The BCC uses the word EXCLUDE.
B) Moreover, the Senate Bill defers the VAT on services of actors and actresses etc.
for 3 years but the BCC defers it for only 2 years.
C) Section 18 of the BCC Bill (RA 7716) is an entirely new provision not contained in
the House/Senate Bills.
D) The period within which to promulgate the implementing rules and regulations is
within 60 days under SB 1630; No specific period under the House Bill, within 90
days under RA 7716 (BCC).
E) The House Bill provides for a general repealing clause i.e., all inconsistent laws
etc. are repealed. Section 16 of the Senate Bill expressly repeals Sections 113, 114,
116, 119 and 120 of the code. The same Senate Bill however contains a general
repealing clause in Sec. 21 thereof.
RA 7716 (BCC's Bill) expressly repeals Sections 113, 114 and 116 of the NIRC;
Article 39 (c) (d) and (e) of EO 226 and provides the repeal of Sec. 119 and 120 of
 the NIRC upon the expiration of two (2) years unless otherwise excluded by the
President.
The charge that the Bicameral Conference Committee added new provisions in the bills of the two
chambers is hardly disputed by respondents. Instead, respondents justify them. According to
respondents: (1) the Bicameral Conference Committee has an ex post veto power or a veto after the
fact of approval of the bill by both Houses; (2) the bill prepared by the Bicameral Conference
Committee, with its additions and deletions, was anyway approved by both Houses; (3) it was the
practice in past Congresses for conference committees to insert in bills approved by the two Houses
new provisions that were not originally contemplated by them; and (4) the enrolled bill doctrine
precludes inquiry into the regularity of the proceedings that led to the enactment of R.A. 7716.
With due respect, I reject these contentions which will cave in on closer examination.
First. There is absolutely no legal warrant for the bold submission that a Bicameral Conference
Committee possesses the power to add/delete provisions in bills already approved on third reading
by both Houses or an ex post veto power. To support this postulate that can enfeeble Congress
itself, respondents cite no constitutional provision, no law, not even any rule or regulation. 3 Worse,
their stance is categorically repudiated by the rules of both the Senate and the House of
Representatives which define with precision the parameters of power of a Bicameral Conference
Committee. Thus, Section 209, Rule XII of the Rules of the Senate provides;
In the event that the Senate does not agree with the House of Representatives on
the provision of any bill or joint resolution, the differences shall be settled by a
conference committee of both Houses which shall meet within ten days after their
composition.
Each Conference Committee Report shall contain a detailed and sufficiently explicit
statement of the changes in or amendments to the subject measure, and shall be
signed by the conferees. (Emphasis supplied)
The counterpart rule of the House of Representatives is cast in near identical language. Section 85
of the Rules of the House of Representatives pertinently provides:
In the event that the House does not agree with the Senate on the amendments to
any bill or joint resolution, the differences may be settled by a conference committee
of both chambers.
. . . . Each report shall contain a detailed, sufficiently explicit statement of the
changes in or amendments to the subject measure. (Emphasis supplied)
The Jefferson's Manual has been adopted 4 as a supplement to our parliamentary rules and practice.
Section 456 of Jefferson's Manual similarly confines the powers of a conference committee, viz: 5
The managers of a conference must confine themselves to the differences
committed to them . . . and may not include subjects not within the disagreements,
even though germane to a question in issue.
This rule of antiquity has been honed and honored in practice by the Congress of the United States.
Thus, it is chronicled by Floyd Biddick, Parliamentarian Emeritus of the United States Senate, viz: 6
Committees of conference are appointed for the sole purpose of compromising and
adjusting the differing and conflicting opinions of the two Houses and the committees
of conference alone can grant compromises and modify propositions of either
Houses within the limits of the disagreement. Conferees are limited to the
consideration of differences between the two Houses.
Conferees shall not insert in their report matters not committed to them by either
House, nor shall they strike from the bill matters agreed to by both Houses. No
matter on which there is nothing in either the Senate or House passed versions of a
 bill may be included in the conference report and actions to the contrary would
subject the report to a point of order. (Emphasis ours)
In fine, there is neither a sound nor a syllable in the Rules of the Senate and the House of
Representative to support the thesis of the respondents that a bicameral conference committee is
clothed with an ex post veto power.
But the thesis that a Bicameral Conference Committee can wield ex post veto power does not only
contravene the rules of both the Senate and the House. It wages war against our settled ideals of
representative democracy. For the inevitable, catastrophic effect of the thesis is to install a Bicameral
Conference Committee as the Third Chamber of our Congress, similarly vested with the power to
make laws but with the dissimilarity that its laws are not the subject of a free and full discussion of
both Houses of Congress. With such a vagrant power, a Bicameral Conference Committee acting as
a Third Chamber will be a constitutional monstrosity.
It needs no omniscience to perceive that our Constitution did not provide for a Congress composed
of three chambers. On the contrary, section 1, Article VI of the Constitution provides in clear and
certain language: "The legislative power shall be vested in the Congress of the Philippines
which shall consist of a Senate and a House of Representatives . . ." Note that in vesting legislative
power exclusively to the Senate and the House, the Constitution used the word "shall." Its command
for a Congress of two houses is mandatory. It is not mandatory sometimes.
In vesting legislative power to the Senate, the Constitution means the Senate ". . . composed of
twenty-four Senators . . . elected at large by the qualified voters of the Philippines . . . ." 7 Similarly,
when the Constitution vested the legislative power to the House, it means the House ". . . composed
of not more than two hundred and fifty members . . . who shall be elected from legislative
districts . . . and those who . . . shall be elected through a party-list system of registered national,
regional, and sectoral parties or organizations." 8 The Constitution thus, did not vest on a Bicameral
Conference Committee with an ad hoc membership the power to legislate for it exclusively vested
legislative power to the Senate and the House as co-equal bodies. To be sure, the Constitution does
not mention the Bicameral Conference Committees of Congress. No constitutional status is
accorded to them. They are not even statutory creations. They owe their existence from the internal
rules of the two Houses of Congress. Yet, respondents peddle the disconcerting idea that they
should be recognized as a Third Chamber of Congress and with ex post veto power at that.
The thesis that a Bicameral Conference Committee can exercise law making power with ex
post veto power is freighted with mischief. Law making is a power that can be used for good or for ill,
hence, our Constitution carefully laid out a plan and a procedure for its exercise. Firstly, it
vouchsafed that the power to make laws should be exercised by no other body except the Senate
and the House. It ought to be indubitable that what is contemplated is the Senate acting as a full
Senate and the House acting as a full House. It is only when the Senate and the House act as whole
bodies that they truly represent the people. And it is only when they represent the people that they
can legitimately pass laws. Laws that are not enacted by the people's rightful representatives subvert
the people's sovereignty. Bicameral Conference Committees, with their ad hoc character and limited
membership, cannot pass laws for they do not represent the people. The Constitution does not allow
the tyranny of the majority. Yet, the respondents will impose the worst kind of tyranny — the tyranny
of the minority over the majority. Secondly, the Constitution delineated in deft strokes the steps to be
followed in making laws. The overriding purpose of these procedural rules is to assure that only bills
that successfully survive the searching scrutiny of the proper committees of Congress and the full
and unfettered deliberations of both Houses can become laws. For this reason, a bill has to undergo
three (3) mandatory separate readings in each House. In the case at bench, the additions and
deletions made by the Bicameral Conference Committee did not enjoy the enlightened studies of
appropriate committees. It is meet to note that the complexities of modern day legislations have
made our committee system a significant part of the legislative process. Thomas Reed called the
committee system as "the eye, the ear, the hand, and very often the brain of the house." President
Woodrow Wilson of the United States once referred to the government of the United States as "a
government by the Chairman of the Standing Committees of Congress. . . " 9 Neither did these
additions and deletions of the Bicameral Conference Committee pass through the coils of collective
deliberation of the members of the two Houses acting separately. Due to this shortcircuiting of the
constitutional procedure of making laws, confusion shrouds the enactment of R.A. No. 7716. Who
inserted the additions and deletions remains a mystery. Why they were inserted is a riddle. To use a
Churchillian phrase, lawmaking should not be a riddle wrapped in an enigma. It cannot be, for Article
II, section 28 of the Constitution mandates the State to adopt and implement a "policy of full public
disclosure of all its transactions involving public interest." The Constitution could not have
contemplated a Congress of invisible and unaccountable John and Mary Does. A law whose
rationale is a riddle and whose authorship is obscure cannot bind the people.
All these notwithstanding, respondents resort to the legal cosmetology that these additions and
deletions should govern the people as laws because the Bicameral Conference Committee Report
was anyway submitted to and approved by the Senate and the House of Representatives. The
submission may have some merit with respect to provisions agreed upon by the Committee in the
process of reconciling conflicts between S.B. No. 1630 and H.B. No. 11197. In these instances, the
conflicting provisions had been previously screened by the proper committees, deliberated upon by
both Houses and approved by them. It is, however, a different matter with respect to additions and
deletions which were entirely new and which were made not to reconcile inconsistencies between
S.B. No. 1630 and H.B. No. 11197. The members of the Bicameral Conference Committee did not
have any authority to add new provisions or delete provisions already approved by both Houses as it
was not necessary to discharge their limited task of reconciling differences in bills. At that late stage
of law making, the Conference Committee cannot add/delete provisions which can become laws
without undergoing the study and deliberation of both chambers given to bills on 1st, 2nd, and 3rd
readings. Even the Senate and the House cannot enact a law which will not undergo these
mandatory three (3) readings required by the Constitution. If the Senate and the House cannot enact
such a law, neither can the lesser Bicameral Conference Committee.
Moreover, the so-called choice given to the members of both Houses to either approve or
disapprove the said additions and deletions is more of an optical illusion. These additions and
deletions are not submitted separately for approval. They are tucked to the entire bill. The vote is on
the bill as a package, i.e., together with the insertions and deletions. And the vote is either "aye" or
"nay," without any further debate and deliberation. Quite often, legislators vote "yes" because they
approve of the bill as a whole although they may object to its amendments by the Conference
Committee. This lack of real choice is well observed by Robert Luce: 10
Their power lies chiefly in the fact that reports of conference committees must be
accepted without amendment or else rejected in toto. The impulse is to get done with
the matter and so the motion to accept has undue advantage, for some members are
sure to prefer swallowing unpalatable provisions rather than prolong controversy.
This is the more likely if the report comes in the rush of business toward the end of a
session, when to seek further conference might result in the loss of the measure
altogether. At any time in the session there is some risk of such a result following the
rejection of a conference report, for it may not be possible to secure a second
conference, or delay may give opposition to the main proposal chance to develop
more strength.
In a similar vein, Prof. Jack Davies commented that "conference reports are returned to assembly
and Senate on a take-it or leave-it-basis, and the bodies are generally placed in the position that to
leave-it is a practical impossibility." 11 Thus, he concludes that "conference committee action is the
most undemocratic procedure in the legislative process." 12
The respondents also contend that the additions and deletions made by the Bicameral Conference
Committee were in accord with legislative customs and usages. The argument does not persuade for
it misappreciates the value of customs and usages in the hierarchy of sources of legislative rules of
procedure. To be sure, every legislative assembly has the inherent right to promulgate its own
internal rules. In our jurisdiction, Article VI, section 16(3) of the Constitution provides that "Each
House may determine the rules of its proceedings . . ." But it is hornbook law that the sources of
Rules of Procedure are many and hierarchical in character. Mason laid them down as follows: 13
xxx xxx xxx
1. Rules of Procedure are derived from several sources. The principal sources are as
follows:
a. Constitutional rules.
b. Statutory rules or charter provisions.
c. Adopted rules.
d. Judicial decisions.
e. Adopted parliamentary authority.
f. Parliamentary law.
g. Customs and usages.
2. The rules from the different sources take precedence in the order listed
above except that judicial decisions, since they are interpretations of rules from one
of the other sources, take the same precedence as the source interpreted. Thus, for
example, an interpretation of a constitutional provision takes precedence over a
statute.
3. Whenever there is conflict between rules from these sources the rule from the
source listed earlier prevails over the rule from the source listed, later. Thus, where
the Constitution requires three readings of bills, this provision controls over any
provision of statute, adopted rules, adopted manual, or of parliamentary law, and a
rule of parliamentary law controls over a local usage but must give way to any rule
from a higher source of authority. (Emphasis ours)
As discussed above, the unauthorized additions and deletions made by the Bicameral Conference
Committee violated the procedure fixed by the Constitution in the making of laws. It is reasonless for
respondents therefore to justify these insertions as sanctioned by customs and usages.
Finally, respondents seek sanctuary in the conclusiveness of an enrolled bill to bar any judicial
inquiry on whether Congress observed our constitutional procedure in the passage of R.A. No. 7716.
The enrolled bill theory is a historical relic that should not continuously rule us from the fossilized
past. It should be immediately emphasized that the enrolled bill theory originated in England where
there is no written constitution and where Parliament is

supreme. 14 In this jurisdiction, we have a written constitution and the legislature is a body of limited
powers. Likewise, it must be pointed out that starting from the decade of the 40's, even American
courts have veered away from the rigidity and unrealism of the conclusiveness of an enrolled bill.
Prof. Sutherland observed: 15
xxx xxx xxx.
Where the failure of constitutional compliance in the enactment of statutes is not
discoverable from the face of the act itself but may be demonstrated by recourse to
the legislative journals, debates, committee reports or papers of the governor, courts
have used several conflicting theories with which to dispose of the issue. They have
held: (1) that the enrolled bill is conclusive and like the sheriff's return cannot be
attacked; (2) that the enrolled bill is prima facie correct and only in case the
legislative journal shows affirmative contradiction of the constitutional requirement
will the bill be held invalid, (3) that although the enrolled bill is prima facie correct,
evidence from the journals, or other extrinsic sources is admissible to strike the bill
 down; (4) that the legislative journal is conclusive and the enrolled bill is valid only if it
accords with the recital in the journal and the constitutional procedure.
Various jurisdictions have adopted these alternative approaches in view of strong dissent and
dissatisfaction against the philosophical underpinnings of the conclusiveness of an enrolled bill. Prof.
Sutherland further observed:
. . . Numerous reasons have been given for this rule. Traditionally, an enrolled bill
was "a record" and as such was not subject to attack at common law. Likewise, the
rule of conclusiveness was similar to the common law rule of the inviolability of the
sheriff's return. Indeed, they had the same origin, that is, the sheriff was an officer of
the king and likewise the parliamentary act was a regal act and no official might
dispute the king's word. Transposed to our democratic system of government, courts
held that as the legislature was an official branch of government the court must
indulge every presumption that the legislative act was valid. The doctrine of
separation of powers was advanced as a strong reason why the court should treat
the acts of a co-ordinate branch of government with the same respect as it treats the
action of its own officers; indeed, it was thought that it was entitled to even greater
respect, else the court might be in the position of reviewing the work of a supposedly
equal branch of government. When these arguments failed, as they frequently did,
the doctrine of convenience was advanced, that is, that it was not only an undue
burden upon the legislature to preserve its records to meet the attack of persons not
affected by the procedure of enactment, but also that it unnecessarily complicated
litigation and confused the trial of substantive issues.
Although many of these arguments are persuasive and are indeed the basis for the
rule in many states today, they are not invulnerable to attack. The rule most relied on
— the sheriff's return or sworn official rule — did not in civil litigation deprive the
injured party of an action, for always he could sue the sheriff upon his official bond.
Likewise, although collateral attack was not permitted, direct attack permitted raising
the issue of fraud, and at a later date attack in equity was also available; and that the
evidence of the sheriff was not of unusual weight was demonstrated by the fact that
in an action against the sheriff no presumption of its authenticity prevailed.
The argument that the enrolled bill is a "record" and therefore unimpeachable is
likewise misleading, for the correction of records is a matter of established judicial
procedure. Apparently, the justification is either the historical one that the king's word
could not be questioned or the separation of powers principle that one branch of the
government must treat as valid the acts of another.
Persuasive as these arguments are, the tendency today is to avoid reaching results
by artificial presumptions and thus it would seem desirable to insist that the enrolled
bill stand or fall on the basis of the relevant evidence which may be submitted for or
against it.

(Emphasis ours)
Thus, as far back as the 1940's, Prof. Sutherland confirmed that ". . . the tendency seems to be
toward the abandonment of the conclusive presumption rule and the adoption of the third rule
leaving only a prima faciepresumption of validity which may be attacked by any authoritative source
of information." 16
I am not unaware that this Court has subscribed to the conclusiveness of an enrolled bill as
enunciated in the 1947 lead case of Mabanag v. Lopez Vito, and reiterated in subsequent cases. 17
With due respect, I submit that these rulings are no longer good law. Part of the ratiocination
in Mabanag states:
xxx xxx xxx
 If for no other reason than that it conforms to the expressed policy of our law making
body, we choose to follow the rule. Section 313 of the old Code of Civil Procedure, as
amended by Act No. 2210, provides: "Official documents" may be proved as follows: .
. . (2) the proceedings of the Philippine Commission, or of any legislative body that
may be provided for in the Philippine Islands, or of Congress, by the journals of those
bodies or of either house thereof, or by published statutes or resolutions, or by
copies certified by the clerk or secretary, or printed by their order; Provided, That in
the case of Acts of the Philippine Commission or the Philippine Legislature, when
there is an existence of a copy signed by the presiding officers and secretaries of
said bodies, it shall be conclusive proof of the provisions of such Acts and of the due
enactment thereof.
Suffice to state that section 313 of the Old Code of Civil Procedure as amended by Act No. 2210 is
no longer in our statute books. It has long been repealed by the Rules of Court. Mabanag also relied
on jurisprudence and authorities in the United States which are under severe criticisms by modern
scholars. Hence, even in the United States the conclusiveness of an enrolled bill has been junked by
most of the States. It is also true that as late as last year, in the case of Philippine Judges
Association v. Prado, op. cit., this Court still relied on the conclusiveness of an enrolled bill as it
refused to invalidate a provision of law on the ground that it was merely inserted by the bicameral
conference committee of both Houses. Prado, however, is distinguishable. In Prado, the alleged
insertion of the second paragraph of section 35 of R.A. No. 7354 repealing the franking privilege of
the judiciary does not appear to be an uncontested fact. In the case at bench, the numerous
additions/deletions made by the Bicameral Conference Committee as detailed by petitioners
Tolentino and Salonga are not disputed by the respondents. In Prado, the Court was not also
confronted with the argument that it can no longer rely on the conclusiveness of an enrolled bill in
light of the new provision in the Constitution defining judicial power. More specifically, section 1 of
Article VIII now provides:
Sec. 1. The judicial power shall be vested in one Supreme Court and in such lower
courts as may be established by law.
Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of the
Government. (Emphasis supplied)
Former Chief Justice Roberto R. Concepcion, the sponsor of this provision in the Constitutional
Commission explained the sense and the reach of judicial power as follows: 18
xxx xxx xxx
. . . In other words, the judiciary is the final arbiter on the question of whether or not a
branch of government or any of its officials has acted without jurisdiction or in excess
of jurisdiction, or so capriciously as to constitute an abuse of discretion amounting to
excess of jurisdiction. This is not only a judicial power but a duty to pass judgment on
matters of this nature.
This is the background of paragraph 2 of Section 1, which means that the courts
cannot hereafter evade the duty to settle matters of this nature, by claiming that such
matters constitute political question. (Emphasis ours)
The Constitution cannot be any clearer. What it granted to this Court is not a mere power which it
can decline to exercise. Precisely to deter this disinclination, the Constitution imposed it as a duty of
this Court to strike down any act of a branch or instrumentality of government or any of its officials
done with grave abuse of discretion amounting to lack or excess of jurisdiction. Rightly or wrongly,
the Constitution has elongated the checking powers of this Court against the other branches of
government despite their more democratic character, the President and the legislators being elected
by the people.
It is, however, theorized that this provision is nothing new. 19 I beg to disagree for the view misses the
significant changes made in our constitutional canvass to cure the legal deficiencies we discovered
during martial law. One of the areas radically changed by the framers of the 1987 Constitution is the
imbalance of power between and among the three great branches of our government — the
Executive, the Legislative and the Judiciary. To upgrade the powers of the Judiciary, the
Constitutional Commission strengthened some more the independence of courts. Thus, it further
protected the security of tenure of the members of the Judiciary by providing "No law shall be
passed reorganizing the Judiciary when it undermines the security of tenure of its Members." 20 It
also guaranteed fiscal autonomy to the Judiciary. 21
More, it depoliticalized appointments in the judiciary by creating the Judicial and Bar Council which
was tasked with screening the list of prospective appointees to the judiciary. 22 The power of
confirming appointments to the judiciary was also taken away from Congress. 23 The President was
likewise given a specific time to fill up vacancies in the judiciary — ninety (90) days from the
occurrence of the vacancy in case of the Supreme Court 24 and ninety (90) days from the submission
of the list of recommendees by the Judicial and Bar Council in case of vacancies in the lower
courts. 25 To further insulate appointments in the judiciary from the virus of politics, the Supreme
Court was given the power to "appoint all officials and employees of the Judiciary in accordance with
the Civil Service Law." 26And to make the separation of the judiciary from the other branches of
government more watertight, it prohibited members of the judiciary to be " . . . designated to any
agency performing quasi judicial or administrative functions." 27 While the Constitution strengthened
the sinews of the Supreme Court, it reduced the powers of the two other branches of government,
especially the Executive. Notable of the powers of the President clipped by the Constitution is his
power to suspend the writ of habeas corpus and to proclaim martial law. The exercise of this power
is now subject to revocation by Congress. Likewise, the sufficiency of the factual basis for the
exercise of said power may be reviewed by this Court in an appropriate proceeding filed by any
citizen. 28
The provision defining judicial power as including the "duty of the courts of justice . . . to determine
whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction
on the part of any branch or instrumentality of the Government" constitutes the capstone of the
efforts of the Constitutional Commission to upgrade the powers of this Court vis-a-vis the other
branches of government. This provision was dictated by our experience under martial law which
taught us that a stronger and more independent judiciary is needed to abort abuses in government.
As sharply stressed by petitioner Salonga, this provision is distinctly Filipino and its interpretation
should not be depreciated by undue reliance on inapplicable foreign jurisprudence. It is thus crystal
clear that unlike other Supreme Courts, this Court has been mandated by our new Constitution to be
a more active agent in annulling acts of grave abuse of discretion committed by a branch of
government or any of its officials. This new role, however, will not compel the Court, appropriately
defined by Prof. A. Bickel as the least dangerous branch of government, to assume imperial powers
and run roughshod over the principle of separation of power for that is judicial tyranny by any
language. But while respecting the essential of the principle of separation of power, the Court is not
to be restricted by its non-essentials. Applied to the case at bench, by voiding R.A. No. 7716 on the
ground that its enactment violated the procedure imposed by the Constitution in lawmaking, the
Court is not by any means wrecking the wall separating the powers between the legislature and the
judiciary. For in so doing, the Court is not engaging in lawmaking which is the essence of legislative
power. But the Court's interposition of power should not be defeated by the conclusiveness of the
enrolled bill. A resort to this fiction will result in the enactment of laws not properly deliberated upon
and passed by Congress. Certainly, the enrolled bill theory was not conceived to cover up violations
of the constitutional procedure in law making, a procedure intended to assure the passage of good
laws. The conclusiveness of the enrolled bill can, therefore, be disregarded for it is not necessary to
preserve the principle of separation of powers.
In sum, I submit that in imposing to this Court the duty to annul acts of government committed with
grave abuse of discretion, the new Constitution transformed this Court from passivity to activism.
This transformation, dictated by our distinct experience as a nation, is not merely evolutionary but
revolutionary. Under the 1935 and 1973 Constitutions, this Court approached constitutional violations
by initially determining what it cannot do; under the 1987 Constitution, there is a shift in stress — this
Court is mandated to approach constitutional violations not by finding out what it should not do but
what it must do. The Court must discharge this solemn duty by not resuscitating a past that petrifies
the present.
I vote to declare R.A. No. 7716 unconstitutional.

BELLOSILLO, J.:
With a consensus already reached after due deliberations, silence perhaps should be the better part
of discretion, except to vote. The different views and opinions expressed are so persuasive and
convincing; they are more than enough to sway the pendulum for or against the subject petitions.
The penetrating and scholarly dissertations of my brethren should dispense with further arguments
which may only confound and confuse even the most learned of men.
But there is a crucial point, a constitutional issue which, I submit, has been belittled, treated lightly, if
not almost considered insignificant and purposeless. It is elementary, as much as it is fundamental. I
am referring to the word "exclusively" appearing in Sec. 24, Art. VI, of our 1987 Constitution. This is
regrettable, to say the least, as it involves a constitutional mandate which, wittingly or unwittingly,
has been cast aside as trivial and meaningless.
A comparison of the particular provision on the enactment of revenue bills in the U.S. Constitution
with its counterpart in the Philippine Constitution will help explain my position.
Under the U.S. Constitution, "[a]ll bills for raising revenue shall originate in the House of
Representatives; but the Senate may propose or concur with amendments as on other bills" (Sec. 7,
par. [1], Art. I). In contrast, our 1987 Constitution reads: "All appropriation, revenue or tariff bills, bills
authorizing increase of the public debt, bills of local application, and private bills shall
originate exclusively in the House of Representatives, but the Senate may propose or concur with
amendments" (Sec. 24, Art. VI; Emphasis supplied).
As may be gleaned from the pertinent provision of our Constitution, all revenue bills are required to
originate "exclusively" in the House of Representatives. On the other hand, the U.S. Constitution
does not use the word "exclusively;" it merely says, "[a]ll bills for raising revenue shall originate in the
House of Representatives."
Since the term "exclusively" has already been adequately defined in the various opinions, as to
which there seems to be no dispute, I shall no longer offer my own definition.
Verily, the provision in our Constitution requiring that all revenue bills shall originate exclusively from
the Lower House is mandatory. The word "exclusively" is an "exclusive word," which is indicative of
an intent that the provision is mandatory. 1 Hence, all American authorities expounding on the
meaning and application of Sec. 7, par. (1), Art. I, of the U.S. Constitution cannot be used in the
interpretation of Sec. 24, Art. VI, of our 1987 Constitution which has a distinct feature of
"exclusiveness" all its own. Thus, when our Constitution absolutely requires — as it is mandatory —
that a particular bill should exclusively emanate from the Lower House, there is no alternative to the
requirement that the bill to become valid law must originate exclusively from that House.
In the interpretation of constitutions, questions frequently arise as to whether particular sections are
mandatory or directory. The courts usually hesitate to declare that a constitutional provision is
directory merely in view of the tendency of the legislature to disregard provisions which are not said
to be mandatory. Accordingly, it is the general rule to regard constitutional provisions as mandatory,
and not to leave any discretion to the will of the legislature to obey or disregard them. This
presumption as to mandatory quality is usually followed unless it is unmistakably manifest that the
provisions are intended to be merely directory. So strong is the inclination in favor of giving obligatory
force to the terms of the organic law that it has even been said that neither by the courts nor by any
other department of the government may any provision of the Constitution be regarded as merely
directory, but that each and everyone of its provisions should be treated as imperative and
mandatory, without reference to the rules and distinguishing between the directory and the
mandatory statutes. 2
The framers of our 1987 Constitution could not have used the term "exclusively" if they only meant to
replicate and adopt in toto the U.S. version. By inserting "exclusively" in Sec. 24, Art. VI, of our
Constitution, their message is clear: they wanted it different, strong, stringent. There must be a
compelling reason for the inclusion of the word "exclusively," which cannot be an act of retrogression
but progression, an improvement on its precursor. Thus, "exclusively" must be given its true
meaning, its purpose observed and virtue recognized, for it could not have been conceived to be of
minor consequence. That construction is to be sought which gives effect to the whole of the statute
— its every word. Ut magis valeat quam pereat.
Consequently, any reference to American authorities, decisions and opinions, however wisely and
delicately put, can only mislead in the interpretation of our own Constitution. To refer to them in
defending the constitutionality of R.A. 7716, subject of the present petitions, is to argue on a false
premise, i.e., that Sec. 24, Art. VI, of our 1987 Constitution is, or means exactly, the same as Sec. 7,
par. (1), Art. I, of the U.S. Constitution, which is not correct. Hence, only a wrong conclusion can be
drawn from a wrong premise.
For example, it is argued that in the United States, from where our own legislature is patterned, the
Senate can practically substitute its own tax measure for that of the Lower House. Thus, according
to the Majority, citing an American case, "the validity of Sec. 37 which the Senate had inserted in the
Tariff Act of 1909 by imposing an ad valorem tax based on the weight of vessels, was upheld against
the claim that the revenue bill originated in the Senate in contravention of Art. I, Sec. 7, of the U.S.
Constitution." 3 In an effort to be more convincing, the Majority even quotes the footnote
in Introduction to American Government by F.A. Ogg and P.O. Ray which reads —
Thus in 1883 the upper house struck out everything after the enacting clause of a
tariff bill and wrote its own measure, which the House eventually felt obliged to
accept. It likewise added 847 amendments to the Payne-Aldrich tariff act of 1909,
dictated the schedules of the emergency tariff act of 1921, rewrote an extensive tax
revision bill in the same year, and recast most of the permanent tariff bill of 1922 4 —
which in fact suggests, very clearly, that the subject revenue bill actually originated from the Lower
House and was only amended, perhaps considerably, by the Senate after it was passed by the
former and transmitted to the latter.
In the cases cited, where the statutes passed by the U.S. Congress were upheld, the revenue bills
did not actually originate from the Senate but, in fact, from the Lower House. Thus, the Supreme
Court of the United States, speaking through Chief Justice White in Rainey v. United States 5 upheld
the revenue bill passed by Congress and adopted the ruling of the lower court that —
. . . the section in question is not void as a bill for raising revenue originating in the
Senate and not in the House of Representatives. It appears that the section was
proposed by the Senate as an amendment to a bill for raising revenue which
originated in the House. That is sufficient.
Flint v. Stone Tracy Co., 6 on which the Solicitor General heavily leans in his Consolidated Comment
as well as in his Memorandum, does not support the thesis of the Majority since the subject bill
therein actually originated from the Lower House and not from the Senate, and the amendment
merely covered a certain provision in the House bill.
In fine, in the cases cited which were lifted from American authorities, it appears that the revenue
bills in question actually originated from the House of Representatives and were amended by the
Senate only after they were transmitted to it. Perhaps, if the factual circumstances in those cases
were exactly the same as the ones at bench, then the subject revenue or tariff bill may be upheld in
this jurisdiction on the principle of substantial compliance, as they were in the United States, except
possibly in instances where the House bill undergoes what is now referred to as "amendment by
substitution," for that would be in derogation of our Constitution which vests solely in the House of
Representatives the power to initiate revenue bills. A Senate amendment by substitution simply
means that the bill in question did not in effect originate from the lower chamber but from the upper
chamber and not disguises itself as a mere amendment of the House version.
It is also theorized that in the U.S., amendment by substitution is recognized. That may be true. But
the process may be validly effective only under the U.S. Constitution. The cases before us present a
totally different factual backdrop. Several months before the Lower House could even pass HB No.
11197, P.S. Res. No. 734 and SB No. 1129 had already been filed in the Senate. Worse, the Senate
subsequently approved SB No. 1630 "in substitution of SB No. 1129, taking into consideration P.S.
Res. No. 734 and HB No. 11197," and not HB No. 11197 itself "as amended." Here, the Senate could
not have proposed or concurred with amendments because there was nothing to concur with or
amend except its own bill. It must be stressed that the process of concurring or amending
presupposes that there exists a bill upon which concurrence may be based or amendments
introduced. The Senate should have reported out HB No. 11197, as amended, even if in the
amendment it took into consideration SB No. 1630. It should not have submitted to the Bicameral
Conference Committee SB No. 1630 which, admittedly, did not originate exclusively from the Lower
House.
But even assuming that in our jurisdiction a revenue bill of the Lower House may be amended by
substitution by the Senate — although I am not prepared to accept it in view of Sec. 24, Art. VI, of
our Constitution — still R.A. 7716 could not have been the result of amendment by substitution since
the Senate had no House bill to speak of that it could amend when the Senate started deliberating
on its own version.
Be that as it may, I cannot rest easy on the proposition that a constitutional mandate calling for the
exclusive power and prerogative of the House of Representatives may just be discarded and ignored
by the Senate. Since the Constitution is for the observance of all — the judiciary as well as the other
departments of government — and the judges are sworn to support its provisions, the courts are not
at liberty to overlook or disregard its commands. And it is not fair and just to impute to them undue
interference if they look into the validity of legislative enactments to determine whether the
fundamental law has been faithfully observed in the process. It is their duty to give effect to the
existing Constitution and to obey all constitutional provisions irrespective of their opinion as to the
wisdom of such provisions.
The rule is fixed that the duty in a proper case to declare a law unconstitutional cannot be declined
and must be performed in accordance with the deliberate judgment of the tribunal before which the
validity of the enactment is directly drawn into question. When it is clear that a statute transgresses
the authority vested in the legislature by the Constitution, it is the duty of the courts to declare the act
unconstitutional because they cannot shirk from it without violating their oaths of office. This duty of
the courts to maintain the Constitution as the fundamental law of the state is imperative and
unceasing; and, as Chief Justice Marshal said, whenever a statute is in violation of the fundamental
law, the courts must so adjudge and thereby give effect to the Constitution. Any other course would
lead to the destruction of the Constitution. Since the question as to the constitutionality of a statute is
a judicial matter, the courts will not decline the exercise of jurisdiction upon the suggestion that
action might be taken by political agencies in disregard of the judgment of the judicial tribunals. 7
It is my submission that the power and authority to originate revenue bills under our Constitution is
vested exclusively in the House of Representatives. Its members being more numerous than those
of the Senate, elected more frequently, and more directly represent the people, are therefore
considered better aware of the economic life of their individual constituencies. It is just proper that
revenue bills originate exclusively from them.
In this regard, we do not have to devote much time delving into American decisions and opinions
and invoke them in the interpretation of our own Constitution which is different from the American
version, particularly on the enactment of revenue bills. We have our own Constitution couched in a
language our own legislators thought best. Insofar as revenue bills are concerned, our Constitution
is not American; it is distinctively Filipino. And no amplitude of legerdemain can detract from our
constitutional requirement that all appropriation, revenue or tariff bills, bills authorizing increase of
the public debt, bills of local application, and private bills shall originate exclusively in the House of
Representatives, although the Senate may propose or concur with amendments.
In this milieu, I am left no option but to vote to grant the petitions and strike down R.A. 7716 as
unconstitutional.

# Separate Opinions

NARVASA, C.J.:

I fully concur with the conclusions set forth in the scholarly opinion of my learned colleague, Mr
Justice Vicente V. Mendoza. I write this separate opinion to express my own views relative to the
procedural issues raised by the various petitions and death with by some other Members of the
Court in their separate opinions.
By their very nature, it would seem, discussions of constitutional issues prove fertile ground for a not
uncommon phenomenon: debate marked by passionate partisanship amounting sometimes to
impatience with adverse views, an eagerness on the part of the proponents on each side to assume
the role of, or be perceived as, staunch defenders of constitutional principles, manifesting itself in
flights of rhetoric, even hyperbole. The peril in this, obviously, is a diminution of objectivity — that
quality which, on the part of those charged with the duty and authority of interpreting the
fundamental law, is of the essence of their great function. For the Court, more perhaps than for any
other person or group, it is necessary to maintain that desirable objectivity. It must make certain that
on this as on any other occasion, the judicial function is meticulously performed, the facts
ascertained as comprehensively and as accurately as possible, all the issues particularly identified,
all the arguments clearly understood; else, it may itself be accused, by its own members or by
others, of a lack of adherence to, or a careless observance of, its own procedures, the signatures of
its individual members on its enrolled verdicts notwithstanding.
In the matter now before the Court, and whatever reservations some people may entertain about
their intellectual limitations or moral scruples, I cannot bring myself to accept the thesis which
necessarily implies that the members of our august Congress, in enacting the expanded VAT law,
exposed their ignorance, or indifference to the observance, of the rules of procedure set down by the
Constitution or by their respective chambers, or what is worse, deliberately ignored those rules for
some yet undiscovered purpose nefarious in nature, or at least some purpose other than the public
weal; or that a few of their fellows, acting as a bicameral conference committee, by devious schemes
and cunning maneuvers, and in conspiracy with officials of the Executive Department and others,
succeeded in "pulling the wool over the eyes" of all their other colleagues and foisting on them a bill
containing provisions that neither chamber of our bicameral legislature conceived or contemplated.
This is the thesis that the petitioners would have this Court approve. It is a thesis I consider bereft of
any factual or logical foundation.
Other than the bare declarations of some of the petitioners, or arguments from the use and import of
the language employed in the relevant documents and records, there is no evidence before the
Court adequate to support a finding that the legislators concerned, whether of the upper or lower
chamber, acted otherwise than in good faith, in the honest discharge of their functions, in the sincere
belief that the established procedures were being regularly observed or, at least, that there occurred
no serious or fatal deviation therefrom. There is no evidence on which reasonably to rest a
conclusion that any executive or other official took part in or unduly influenced the proceedings
before the bicameral conference committee, or that the members of the latter were motivated by a
desire to surreptitiously introduce improper revisions in the bills which they were required to
reconcile, or that after agreement had been reached on the mode and manner of reconciliation of the
"disagreeing provisions," had resorted to stratragems or employed under-handed ploys to ensure
their approval and adoption by either House. Neither is there any proof that in voting on the
Bicameral Conference Committee (BCC) version of the reconciled bills, the members of the Senate
and the House did so in ignorance of, or without understanding, the contents thereof or the bills
therein reconciled.
Also unacceptable is the theory that since the Constitution requires appropriation and revenue bills
to originate exclusively in the House of Representatives, it is improper if not unconstitutional for the
Senate to formulate, or even think about formulating, its own draft of this type of measure in
anticipation of receipt of one transmitted by the lower Chamber. This is specially cogent as regards
much-publicized suggestions for legislation (like the expanded VAT Law) emanating from one or
more legislators, or from the Executive Department, or the private sector, etc. which understandably
could be expected to forthwith generate much Congressional cogitation.
Exclusive origination, I submit, should have no reference to time of conception. As a practical matter,
origination should refer to the affirmative act which effectively puts the bicameral legislative
procedure in motion, i.e., the transmission by one chamber to the other of a bill for its adoption. This
is the purposeful act which sets the legislative machinery in operation to effectively lead to the
enactment of a statute. Until this transmission takes place, the formulation and discussions, or the
reading for three or more times of proposed measures in either chamber, would be meaningless in
the context of the activity leading towards concrete legislation. Unless transmitted to the other
chamber, a bill prepared by either house cannot possibly become law. In other words, the first
affirmative, efficacious step, the operative act as it were, leading to actual enactment of a statute, is
the transmission of a bill from one house to the other for action by the latter. This is the origination
that is spoken of in the Constitution in its Article VI, Section 24, in reference to appropriation,
revenue, or tariff bills, etc.
It may be that in the Senate, revenue or tax measures are discussed, even drafted, and this before a
similar activity takes place in the House. This is of no moment, so long as those measures or

MISSING PAGE 3

Report (No. 349) stating that HB 11197 was considered, and recommending that SB 1630 be
approved "in substitution of S.B. No. 1129, taking into consideration P.S. Res. No. 734 1 and H.B. No.
11197." This Report made known to the Senate, and clearly indicates, that H.B. No. 11197 was
indeed deliberated on by the Committee; in truth, as Senator Herrera pointed out, the BCC later
"agreed to adopt (a broader coverage of the VAT) which is closely adhering to the Senate version **
** with some new provisions or amendments." The plain implication is that the Senate Committee
had indeed discussed HB 11197 in comparison with the inconsistent parts of SB 1129 and
afterwards proposed amendments to the former in the form of a new bill (No. 1630) more closely
akin to the Senate bill (No. 1129).
And it is as reasonable to suppose as not that later, during the second and third readings on March
24, 1994, the Senators, assembled as a body, had before them copies of HB 11197 and SB 1129, as
well as of the Committee's new "SB 1630" that had been recommended for their approval, or at the
very least were otherwise perfectly aware that they were considering the particular provisions of
these bills. That there was such a deliberation in the Senate on HB 11197 in light of inconsistent
portions of SB 1630, may further be necessarily inferred from the request, made by the Senate on
the same day, March 24, 1994, for the convocation of a bicameral conference committee to reconcile
"the disagreeing provisions of said bill (SB 1630) and House Bill No. 11197," a request that could not
have been made had not the Senators more or less closely examined the provisions of HB 11197
and compared them with those of the counterpart Senate measures.
Were the proceedings before the bicameral conference committee fatally flawed? The affirmative is
suggested because the committee allegedly overlooked or ignored the fact that SB 1630 could not
validly originate in the Senate, and that HB 11197 and SB 1630 never properly passed both
chambers. The untenability of these contentions has already been demonstrated. Now,
demonstration of the indefensibility of other arguments purporting to establish the impropriety of the
BCC proceedings will be attempted.
There is the argument, for instance, that the conference committee never used HB 11197 even as
"frame of reference" because it does not appear that the suggestion therefor (made by House Penal
Chairman Exequiel Javier at the bicameral conference committee's meeting on April 19, 1994, with
the concurrence of Senator Maceda) was ever resolved, the minutes being regrettably vague as to
what occurred after that suggestion was made. It is, however, as reasonable to assume that it was,
as it was not, given the vagueness of the minutes already alluded to. In fact, a reading of the BCC
Report persuasively demonstrates that HB 11197 was not only utilized as a "frame of reference" but
actually discussed and deliberated on.
Said BCC Report pertinently states: 2
CONFERENCE COMMITTEE REPORT
The Conference Committee on the disagreeing provisions of House Bill No. 11197,
entitled:
AN ACT RESTRUCTURING THE VALUE ADDED TAX (VAT) SYSTEM TO WIDEN
ITS TAX BASE AND ENHANCE ITS ADMINISTRATION, AMENDING FOR THESE
PURPOSES SECTIONS 99, 100, 102, 1013, 104, 105, 106, 107, 108 AND 110 OF
TITLE IV, 112, 115 AND 116 OF TITLE V, AND 236, 237, AND 238 OF TITLE IX, AND
REPEALING SECTIONS 113SD AND 114 OF TITLE V, ALL OF THE NATIONAL
INTERNAL REVENUE CODE, AS AMENDED
and Senate Bill No. 1630 entitled:
AN ACT RESTRUCTURING THE VALUE ADDED TAX (VAT) SYSTEM TO WIDEN
ITS TAX BASE AND ENHANCE ITS ADMINISTRATION, AMENDING FOR THESE
PURPOSES SECTIONS 99, 100, 102, 103, 104, 1 106, 107, 108 AND 110 OF TITLE
IV, 112, 115, 117 AND 121 OF TITLE V, ACND 236, 237, AND 238 OF TITLE IX, AND
REPEALING SECTIONS 1113, 114, 116, 119 AND 120 OF TITLE V, ALL OF THE
NATIONAL INTERNAL REVENUE CODE, AS AMENDED AND FOR OTHER
PURPOSES
having met, after full and free conference, has agreed to recommend and do hereby
recommend to their respective Houses that House Bill No. 11197, in consolidation
with Senate Bill No. 1630, be approved in accordance with the attached copy of the
bill as reconciled and approved by the conferees.
Approved.
The Report, it will be noted, explicitly adverts to House Bill No. 11197, it being in fact mentioned
ahead of Senate Bill No. 1630; graphically shows the very close identity of the subjects of both bills
(indicated in their respective titles); and clearly says that the committee met in "full and free
conference" on the "disagreeing provisions" of both bills (obviously in an effort to reconcile them);
and that reconciliation of said "disagreeing provisions" had been effected, the BCC having agreed
that "House Bill No. 11197, in consolidation with Senate Bill No. 1630, be approved in accordance
with the attached copy of the bill as reconciled and approved by the conferees."
It may be concluded, in other words, that, conformably to the procedure provided in the Constitution
with which all the Members of the bicameral conference committee cannot but be presumed to be
familiar, and no proof to the contrary having been adduced on the point, it was the original bill (HB
11197) which said body had considered and deliberated on in detail, reconciled or harmonized with
SB 1630, and used as basis for drawing up the amended version eventually reported out and
submitted to both houses of Congress.
It is further contended that the BCC was created and convoked prematurely, that SB 1630 should
first have been sent to the House of Representatives for concurrence It is maintained, in other
words, that the latter chamber should have refused the Senate request for a bicameral conference
committee to reconcile the "disagreeing provisions" of both bills, and should have required that SB
1630 be first transmitted to it. This, seemingly, is nit-picking given the urgency of the proposed
legislation as certified by the President (to both houses, in fact). Time was of the essence, according
to the President's best judgment — as regards which absolutely no one in either chamber of
Congress took exception, general acceptance being on the contrary otherwise manifested — and
that judgment the Court will not now question. In light of that urgency, what was so vital or
indispensable about such a transmittal that its absence would invalidate all else that had been done
towards enactment of the law, completely escapes me, specially considering that the House had
immediately acceded without demur to the request for convocation of the conference committee.
What has just been said should dispose of the argument that the statement in the enrolled bill, that
"This Act which is a consolidation of House Bill No. 11197 and Senate Bill No. 11630 was finally
passed by the House of Representatives and the Senate on April 27, 1994 and May 2, 1994,"
necessarily signifies that there were two (2) bills separately introduced, retaining their independent
existence until they reached the bicameral conference committee where they were consolidated, and
therefore, the VAT law did not originate exclusively in the House having originated in part in the
Senate as SB 1630, which bill was not embodied in but merely merged with HB 11197, retaining its
separate identity until it was joined by the BCC with the house measure. The more logical, and fairer,
course is to construe the expression, "consolidation of House Bill No. 11197 and Senate Bill No.
11630" in the context of accompanying and contemporaneous statements, i.e.: (a) the declaration in
the BCC Report, supra, that the committee met to reconcile the disagreeing provisions of the two
bills, "and after full and free conference" on the matter, agreed and so recommended that "House Bill
No. 11197, in consolidation with Senate Bill No. 1630, be approved in accordance with the attached
copy of the bill as reconciled and approved by the conferees;" and (b) the averment of Senator
Herrera, in the Report of the Ways and Means Committee, supra, that the committee had actually
"considered" (discussed) HB No. 11197 and taken it "into consideration" in recommending that its
own version of the measure (SB 1630) be the one approved.
That the Senate might have drawn up its own version of the expanded VAT bill, contemporaneously
with or even before the House did, is of no moment. It bears repeating in this connection that no VAT
bill ever originated in the Senate; neither its SB 1129 or SB 1630 or any of its drafts was ever
officially transmitted to the House as an initiating bill which, as already pointed out, is what the
Constitution forbids; it was HB 11197 that was first sent to the Senate, underwent first reading, was
referred to Committee on Ways and Means and there discussed in relation to and in comparison with
the counterpart Senate version or versions — the mere formulation of which was, as also already
discussed, not prohibited to it — and afterwards considered by the Senate itself, also in connection
with SB 1630, on second and third readings. HB 11197 was in the truest sense, the originating bill.
An issue has also arisen respecting the so-called "enrolled bill doctrine" which, it is said, whatever
sacrosanct status it might originally have enjoyed, is now in bad odor with modern scholars on
account of its imputed rigidity and unrealism; it being also submitted that the ruling in Mabanag v.
Lopez Vito (78 Phil. 1) and the cases reaffirming it, is no longer good law, it being based on a
provision of the Code of Civil Procedure 3 long since stricken from the statute books.
I would myself consider the "enrolled bill" theory as laying down a presumption of so strong a
character as to be well nigh absolute or conclusive, fully in accord with the familiar and fundamental
philosophy of separation of powers. The result, as far as I am concerned, is to make discussion of
the enrolled bill principle purely academic; for as already pointed out, there is no proof worthy of the
name of any facts to justify its reexamination and, possibly, disregard.
The other question is, what is the nature of the power given to a bicameral conference committee of
reconciling differences between, or "disagreeing provisions" in, a bill originating from the House in
relation to amendments proposed by the Senate — whether as regards some or all of its provisions?
Is the mode of reconciliation, subject to fixed procedure and guidelines? What exactly can the
committee do, or not do? Can it only clarify or revise provisions found in either Senate or House bill?
Is it forbidden to propose additional or new provisions, even on matters necessarily or reasonably
connected with or germane to items in the bills being reconciled?
In answer, it is postulated that the reconciliation function is quite limited. In these cases, the
conference committee should have confined itself to reconciliation of differences or inconsistencies
only by (a) restoring provisions of HB11197 aliminated by SB 1630, or (b) sustaining wholly or partly
the Senate amendments, or (c) as a compromise, agreeing that neither provisions nor amendments
be carried into the final form of HB 11197 for submission to both chambers of the legislature.
The trouble is, it is theorized, the committee incorporated activities or transactions which were not
within the contemplation of both bills; it made additions and deletions which did not enjoy the
enlightenment of initial committee studies; it exercised what is known as an "ex post veto power"
granted to it by no law, rule or regulation, a power that in truth is denied to it by the rules of both the
Senate and the House. In substantiation, the Senate rule is cited, similar to that of the House,
providing that "differences shall be settled by a conference committee" whose report shall contain
"detailed and sufficiently explicit statement of the changes in or amendments to the subject measure,
** (to be) signed by the conferees;" as well as the "Jefferson's Manual," adopted by the Senate as
supplement to its own rules, directing that the managers of the conference must confine themselves
to differences submitted to them; they may not include subjects not within the disagreements even
though germane to a question in issue."
It is significant that the limiting proviso in the relevant rules has been construed and applied as
directory, not mandatory. During the oral argument, counsel for petitioners admitted that the practice
for decades has been for bicameral conference committees to include such provisions in the
reconciled bill as they believed to be germane or necessary and acceptable to both chambers, even
if not within any of the "disagreeing provisions," and the reconciled bills, containing such provisions
had invariably been approved and adopted by both houses of Congress. It is a practice, they say,
that should be stopped. But it is a practice that establishes in no uncertain manner the prevailing
concept in both houses of Congress of the permissible and acceptable modes of reconciliation that
their conference committees may adopt, one whose undesirability is not all that patent if not, indeed,
incapable of unquestionable demonstration. The fact is that conference committees only take up bills
which have already been freely and fully discussed in both chambers of the legislature, but as to
which there is need of reconciliation in view of "disagreeing provisions" between them; and both
chambers entrust the function of reconciling the bills to their delegates at a conference committee
with full awareness, and tacit consent, that conformably with established practice unquestioningly
observed over many years, new provisions may be included even if not within the "disagreeing
provisions" but of which, together with other changes, they will be given detailed and sufficiently
explicit information prior to voting on the conference committee version.
In any event, a fairly recent decision written for the Court by Senior Associate Justice Isagani A.
Cruz, promulgated on November 11, 1993 (G.R. No. 105371, The Philippine Judges Association,
etc., et al. v. Hon. Pete Prado, etc., et al.), should leave no doubt of the continuing vitality of the
enrolled bill doctrine and give an insight into the nature of the reconciling function of bicameral
conference committees. In that case, a bilateral conference committee was constituted and met to
reconcile Senate Bill No. 720 and House Bill No. 4200. It adopted a "reconciled" measure that was
submitted to and approved by both chambers of Congress and ultimately signed into law by the
President, as R.A. No. 7354. A provision in this statute (removing the franking privilege from the
courts, among others) was assailed as being an invalid amendment because it was not included in
the original version of either the senate or the house bill and hence had generated no disagreement
between them which had to be reconciled. The Court held:
While it is true that a conference committee is the mechanism for compromising
differences between the Senate and the House, it is not limited in its jurisdiction to
this question. Its broader function is described thus:
A conference committee may deal generally with the subject matter or it may be
limited to resolving the precise differences between the two houses. Even where the
conference committee is not by rule limited in its jurisdiction, legislative custom
severely limits the freedom with which new subject matter can be inserted into the
conference bill. But occasionally a conference committee produces unexpected
results, results beyond its mandate. These excursions occur even where the rules
impose strict limitations on conference committee jurisdiction. This is symptomatic of
the authoritarian power of conference committee (Davies, Legislative Law and
Process: In A Nutshell, 1987 Ed., p. 81).
It is a matter of record that the Conference Committee Report on the bill in question
was returned to and duly approved by both the Senate and the House of
Representatives. Thereafter, the bill was enrolled with its certification by Senate
President Neptali A. Gonzales and Speaker Ramon V. Mitra of the House of
Representatives as having been duly passed by both Houses of Congress. It was
then presented to and approved by President Corazon C. Aquino on April 3, 1992.
Under the doctrine of separation of powers, the Court may not inquire beyond the
certification of the approval of a bill from the presiding officers of Congress. Casco
Philippine Chemical Co. v. Gimenez (7 SCRA 347) laid down the rule that the
enrolled bill is conclusive upon the Judiciary (except in matters that have to be
entered in the journals like the yeas and nays on the final reading of the bill)
(Mabanag v. Lopez Vito, 78 Phil. 1). The journals are themselves also binding on the
Supreme Court, as we held in the old (but still valid) case of U.S. v. Pons (34 Phil.
729), where we explained the reason thus:
To inquire into the veracity of the journals of the Philippine legislature when they are,
as we have said, clear and explicit, would be to violate both the letter and spirit of the
organic laws by which the Philippine Government was brought into existence, to
invade a coordinate and independent department of the Government, and to interfere
with the legitimate powers and functions of the Legislature. Applying these principles,
we shall decline to look into the petitioners' charges that an amendment was made
upon the last reading of the bill that eventually R.A. No. 7354 and that copies thereof
in its final form were not distributed among the members of each House. Both the
enrolled bill and the legislative journals certify that the measure was duly
enacted i.e., in accordance with Article VI, Sec. 26 (2) of the Constitution. We are
bound by such official assurances from a coordinate department of the government,
to which we owe, at the very least, a becoming courtesy.
Withal, an analysis of the changes made by the conference committee in HB 11197 and SB 1630 by
way of reconciling their "disagreeing provisions," — assailed by petitioners as unauthorized or
incongrouous — reveals that many of the changes related to actual "disagreeing provisions," and
that those that might perhaps be considered as entirely new are nevertheless necessarily or logically
connected with or germane to particular matters in the bills being reconciled.
For instance, the change made by the bicameral conference committee (BCC) concerning
amendments to Section 99 of the National Internal Revenue Code (NIRC) — the addition of "lessors
of goods or properties and importers of goods" — is really a reconciliation of disagreeing provisions,
for while HB 11197 mentions as among those subject to tax, "one who sells, barters, or exchanges
goods or properties and any person who leases personal properties," SB 1630 does not. The
change also merely clarifies the provision by providing that the contemplated taxpayers includes
"importers." The revision as regards the amendment to Section 100, NIRC, is also simple
reconciliation, being nothing more than the adoption by the BCC of the provision in HB 11197
governing the sale of gold to Bangko Sentral, in contrast to SB 1630 containing no such provision.
Similarly, only simple reconciliation was involved as regards approval by the BCC of a provision
declaring as not exempt, the sale of real properties primarily held for sale to customers or held for
lease in the ordinary course of trade or business, which provision is found in HB 11197 but not in SB
1630; as regards the adoption by the BCC of a provision on life insurance business, contained in SB
1630 but not found in HB 11197; as regards adoption by the BCC of the provision in SB 1630 for
deferment of tax on certain goods and services for no longer than 3 years, as to which there was no
counterpart provision in SB 11197; and as regards the fixing of a period for the adoption of
implementing rules, a period being prescribed in SB 1630 and none in HB 11197.
In respect of other revisions, it would seem that questions logically arose in the course of the
discussion of specific "disagreeing provisions" to which answers were given which, because believed
acceptable to both houses of Congress, were placed in the BCC draft. For example, during
consideration of radio and television time (Sec. 100, NIRC) dealt with in both House and Senate
bills, the question apparently came up, the relevance of which is apparent on its face, relative
to satellite transmission and cable television time. Hence, a provision in the BCC bill on the matter.
Again, while deliberating on the definition of goods or properties in relation to the provision
subjecting sales thereof to tax, a question apparently arose, logically relevant, about real properties
intended to be sold by a person in economic difficulties, or because he wishes to buy a car, i.e., not
as part of a business, the BCC evidently resolved to clarify the matter by excluding from the tax,
"real properties held primarily for sale to customers or held for lease in the ordinary course of
business." And in the course of consideration of the term, sale or exchange of services (Sec 102,
NIRC), the inquiry most probably was posed as to whether the term should be understood as
including other services: e.g., services of lessors of property whether real or personal, of
warehousemen, of keepers of resthouses, pension houses, inns, resorts, or of common carriers,
etc., and presumably the BCC resolved to clarify the matter by including the services just mentioned.
Surely, changes of this nature are obviously to be expected in proceedings before bicameral
conference committees and may even be considered grist for their mill, given the history of such
BCCs and their general practice here and abroad
In any case, all the changes and revisions, and deletions, made by the conference committee were
all subsequently considered by and approved by both the Senate and the House, meeting and voting
separately. It is an unacceptable theorization, to repeat, that when the BCC report and its proposed
bill were submitted to the Senate and the House, the members thereof did not bother to read, or
what is worse, having read did not understand, what was before them, or did not realize that there
were new provisions in the reconciled version unrelated to any "disagreeing provisions," or that said
new provisions or revisions were effectively concealed from them
Moreover, it certainly was entirely within the power and prerogative of either legislative chamber to
reject the BCC bill and require the organization of a new bicameral conference committee. That this
option was not exercised by either house only proves that the BCC measure was found to be
acceptable as in fact it was approved and adopted by both chambers.
I vote to DISMISS the petitions for lack of merit.
PADILLA, J.:
I
The original VAT law and the expanded VAT law
In Kapatiran v. Tan,1 where the ponente was the writer of this Separate Opinion,
a unanimous Supreme Court en banc upheld the validity of the original VAT law (Executive Order
No. 273, approved on 25 July 1987). It will, in my view, be pointless at this time to re-open
arguments advanced in said case as to why said VAT law was invalid, and it will be equally
redundant to re-state the principles laid down by the Court in the same case affirming the validity of
the VAT law as a tax measure. And yet, the same arguments are, in effect, marshalled against the
merits and substance of the expanded VAT law (Rep. Act. No. 7716, approved on 5 May 1994). The
same Supreme Court decision should therefore dispose, in the main, of such arguments, for the
expanded VAT law is predicated basically on the same principles as the original VAT law, except that
now the tax base of the VAT imposition has been expanded or broadened.
It only needs to be stated - what actually should be obvious - that a tax measure, like the expanded
VAT law (Republic Act. No. 7716), is enacted by Congress and approved by the President in the
exercise of the State's power to tax, which is an attribute of sovereignty. And while the power to tax,
if exercised without limit, is a power to destroy, and should, therefore, not be allowed in such form, it
has to be equally recognized that the power to tax is an essential right of government. Without taxes,
basic services to the people can come to a halt; economic progress will be stunted, and, in the long
run, the people will suffer the pains of stagnation and retrogression.
Consequently, upon careful deliberation, I have no difficulty in reaching the conclusion that the
expanded VAT law comes within the legitimate power of the state to tax. And as I had occasion to
previously state:
Constitutional Law, to begin with, is concerned with power not political convenience,
wisdom, exigency, or even necessity. Neither the Executive nor the legislative
(Commission on Appointments) can create power where the Constitution confers
none."2
Likewise, in the first VAT case, I said:
In any event, if petitioners seriously believe that the adoption and continued
application of the VAT are prejudicial to the general welfare or the interests of the
majority of the people, they should seek, recourse and relief from the political
branches of the government. The Court, following the time-honored doctrine of
separation of powers, cannot substitute its judgment for that of the President (and
Congress) as to the wisdom, justice and advisability of the adoption of the VAT. 3
This Court should not, as a rule, concern itself with questions of policy, much less, economic policy.
That is better left to the two (2) political branches of government. That the expanded VAT law is
unwise, unpopular and even anti-poor, among other things said against it, are arguments and
considerations within the realm of policy-debate, which only Congress and the Executive have the
authority to decisively confront, alleviate, remedy and resolve.
II
The procedure followed in the approval of Rep. Act No. 7716
Petitioners however posit that the present case raises a far-reaching constitutional question which
the Court is duty-bound to decide under its expanded jurisdiction in the 1987 Constitution.
4 Petitioners more specifically question and impugn the manner by which the expanded VAT law

(Rep. Act. No. 7716) was approved by Congress. They contend that it was approved in violation of
the Constitution from which fact it follows, as a consequence, that the law is null and void. Main
reliance of the petitioners in their assault in Section 24, Art. VI of the Constitution which provides:
 Sec. 24. All appropriation, revenue or tariff bills, bills authorizing increase of the
public debt, bill of local application, and private bills shall originate exclusively in the
House of Representatives, but the Senate may propose or concur with amendments.
While it should be admitted at the outset that there was no rigorous and strict adherence to the literal
command of the above provision, it may however be said, after careful reflection, that there
was substantial compliance with the provision.
There is no question that House Bill No. 11197 expanding the VAT law originated from the House of
Representatives. It is undeniably a House measure. On the other hand, Senate Bill No. 1129, also
expanding the VAT law, originated from the Senate. It is undeniably a Senate measure which, in
point of time, actually antedated House Bill No. 11197.
But it is of record that when House Bill No. 11197 was, after approval by the House, sent to the
Senate, it was referred to, and considered by the Senate Committee on Ways and Means (after first
reading) together with Senate Bill No. 1129, and the Committee came out with Senate Bill No. 1630
in substitution of Senate Bill No. 1129 but after expressly taking into consideration House Bill No.
11197.
Since the Senate is, under the above-quoted constitutional provision, empowered to concur with a
revenue measure exclusively originating from the House, or to propose amendments thereto, to the
extent of proposing amendments by SUBSTITUTION to the House measure, the approval by the
Senate of Senate Bill No. 1630, after it had considered House Bill No. 11197, may be taken, in my
view, as an AMENDMENT BY SUBSTITUTION by the Senate not only of Senate Bill No. 1129 but of
House Bill No. 11197 as well which, it must be remembered, originated exclusively from the House.
But then, in recognition of the fact that House Bill No. 11197 which originated exclusively from the
House and Senate Bill No. 1630 contained conflicting provisions, both bills (House Bill No. 11197
and Senate Bill No. 1630) were referred to the Bicameral Conference Committee for joint
consideration with a view to reconciling their conflicting provisions.
The Conference Committee came out eventually with a Conference Committee Bill which was
submitted to both chambers of Congress (the Senate and the House). The Conference Committee
reported out a bill consolidating provisions in House Bill No. 11197 and Senate Bill No. 1630. What
transpired in both chambers after the Conference Committee Report was submitted to them is not
clear from the records in this case. What is clear however is that both chambers voted separately on
the bill reported out by the Conference Committee and both chambers approved the bill of the
Conference Committee.
To me then, what should really be important is that both chambers of Congress approved the bill
reported out by the Conference Committee. In my considered view, the act of both chambers of
Congress in approving the Conference Committee bill, should put an end to any inquiry by this Court
as to how the bill came about. What is more, such separate approvals CURED whatever
constitutional infirmities may have arisen in the procedures leading to such approvals. For, if such
infirmities were serious enough to impugn the very validity of the measure itself, there would have
been an objection or objections from members of both chambers to the approval. The Court has
been shown no such objection on record in both chambers.
Petitioners contend that there were violations of Sec. 26 paragraph 2, Article VI of the Constitution
which provides:
SEC. 26. ...
(2) No bill passed by either House shall become a law unless it has passed three
readings on separate days, and printed copies thereof in its final form have been
distributed to its Members three days before its passage, except when the President
certifies to the necessity of its immediate enactment to meet a public calamity or
emergency. Upon the last reading of a bill, no amendment thereto shall be allowed,
 and the vote thereon shall be taken immediately thereafter, and the yeas and nays
entered in the Journal.
in that, when Senate Bill No. 1630 (the Senate counterpart of House Bill No. 11197) was approved
by the Senate, after it had been reported out by the Senate Committee on Ways and Means, the bill
went through second and third readings on the same day (not separate days) and printed copies
thereof in its final form were not distributed to the members of the Senate at least three (3) days
before its passage by the Senate. But we are told by the respondents that the reason for this "short
cut" was that the President had certified to the necessity of the bill's immediate enactment to meet
an emergency - a certification that, by leave of the same constitutional provision, dispensed with the
second and third readings on separate days and the printed form at least three (3) days before its
passage.
We have here then a situation where the President did certify to the necessity of Senate Bill No.
1630's immediate enactment to meet an emergency and the Senate responded accordingly. While I
would be the last to say that this Court cannot review the exercise of such power by the President in
appropriate cases ripe for judicial review, I am not prepared however to say that the President
gravely abused his discretion in the exercise of such power as to require that this Court overturn his
action. We have been shown no fact or circumstance which would impugn the judgment of the
President, concurred in by the Senate, that there was an emergency that required the immediate
enactment of Senate Bill No. 1630. On the other hand, a becoming respect for a co-equal and
coordinate department of government points that weight and credibility be given to such Presidential
judgment.
The authority or power of the Conference Committee to make insertions in and deletions from the
bills referred to it, namely, House Bill No. 11197 and Senate Bill No. 1630 is likewise assailed by
petitioners. Again, what appears important here is that both chambers approved and ratified the bill
as reported out by the Conference Committee (with the reported insertions and deletions). This is
perhaps attributable to the known legislative practice of allowing a Conference Committee to make
insertions in and deletions from bills referred to it for consideration, as long as they are germane to
the subject matter of the bills under consideration. Besides, when the Conference Committee made
the insertions and deletions complained of by petitioners, was it not actually performing the task
assigned to it of reconciling conflicting provisions in House Bill No. 11197 and Senate Bill No. 1630?
This Court impliedly if not expressly recognized the fact of such legislative practice in Philippine
Judges Association, etc. vs. Hon. Peter Prado, etc., 5 In said case, we stated thus:
The petitioners also invoke Sec. 74 of the Rules of the House of Representatives,
requiring that amendment to any bill when the House and the Senate shall have
differences thereon may be settled by a conference committee of both chambers.
They stress that Sec. 35 was never a subject of any disagreement between both
Houses and so the second paragraph could not have been validly added as an
amendment.
These arguments are unacceptable.
While it is true that a conference committee is the mechanism for compromising
differences between the Senate and the House, it is not limited in its jurisdiction to
this question. Its broader function is described thus:
‘A conference committee may deal generally with the subject matter or it may be
limited to resolving the precise differences between the two houses. Even where the
conference committee is not by rule limited in its jurisdiction, legislative custom
severely limits the freedom with which new subject matter can be inserted into the
conference bill. But occasionally a conference committee produces unexpected
results, results beyond its mandate. These excursions occurs even where the rules
impose strict limitations on conference committee jurisdiction. This is symptomatic of
 the authoritarian power of conference committee (Davies, Legislative Law and
Process: In A Nutshell, 1986 Ed., p. 81).’
It is a matter of record that the Conference Committee Report on the bill in question
was returned to and duly approved by both the Senate and the House of
Representatives. Thereafter, the bill was enrolled with its certification by Senate
President Neptali A. Gonzales and Speaker Ramon V. Mitra of the House of
Representatives as having been duly passed by both Houses of Congress. It was
then presented to and approved by President Corazon C. Aquino on April 3, 1992.
It would seem that if corrective measures are in order to clip the powers of the Conference
Committee, the remedy should come from either or both chambers of Congress, not from this Court,
under the time-honored doctrine of separation of powers.
Finally, as certified by the Secretary of the Senate and the Secretary General of the House of
Representatives -
This Act (Rep. Act No. 7716) is a consolidation of House Bill No. 11197 and Senate
Bill No. 1630 (w)as finally passed by the House of Representatives and the Senate
on April 27, 1994 and May 2, 1994 respectively.
Under the long-accepted doctrine of the "enrolled bill," the Court in deference to a co-equal and
coordinate branch of government is held to a recognition of Rep. Act No. 7716 as a law validly
enacted by Congress and, thereafter, approved by the President on 5 May 1994. Again, we quote
from out recent decision in Philippine Judges Association, supra:
Under the doctrine of separation of powers, the Court may not inquire beyond the
certification of the approval of a bill from the presiding officers of Congress. Casco
Philippine Chemical Co. v. Gimenezlaid down the rule that the enrolled bill is
conclusive upon the Judiciary (except in matters that have to be entered in the
journals like the yeas and nays on the finally reading of the bill). The journals are
themselves also binding on the Supreme Court, as we held in the old (but still valid)
case of U.S. vs. Pons,8 where we explained the reason thus:
‘To inquire into the veracity of the journals of the Philippine legislature when they are,
as we have said, clear and explicit, would be to violate both the letter and spirit of the
organic laws by which the Philippine Government was brought into existence, to
invade a coordinate and independent department of the Government, and to interfere
with the legitimate powers and functions of the Legislature.’
Applying these principles, we shall decline to look into the petitioners' charges that an
amendment was made upon the last reading of the bill that eventually became R.A.
No. 7354 and that copies thereof in its final form were not distributed among the
members of each House. Both the enrolled bill and the legislative journals certify that
the measure was duly enacted i.e., in accordance with Article VI, Sec. 26(2) of the
Constitution. We are bound by such official assurances from a coordinate department
of the government, to which we owe, at the very least, a becoming courtesy.
III
Press Freedom and Religious Freedom and Rep. Act No. 7716
The validity of the passage of Rep. Act No. 7716 notwithstanding, certain provisions of the law have
to be examined separately and carefully.
Rep. Act. No. 7716 in imposing a value-added tax on circulation income of newspapers and similar
publications and on income derived from publishing advertisements in newspapers 9, to my mind,
violates Sec. 4, Art. III of the Constitution. Indeed, even the Executive Department has tried to cure
this defect by the issuance of the BIR Regulation No. 11-94 precluding implementation of the tax in
this area. It should be clear, however, that the BIR regulation cannot amend the law (Rep. Act No.
7716). Only legislation (as distinguished from administration regulation) can amend an existing law.
Freedom of the press was virtually unknown in the Philippines before 1900. In fact, a prime cause of
the revolution against Spain at the turn of the 19th century was the repression of the freedom of
speech and expression and of the press. No less than our national hero, Dr. Jose P. Rizal, in
"Filipinas Despues de Cien Anos" (The Philippines a Century Hence) describing the reforms sine
quibus non which the Filipinos were insisting upon, stated: "The minister ... who wants his reforms to
be reforms, must begin by declaring the press in the Philippines free ... ". 10
Press freedom in the Philippines has met repressions, most notable of which was the closure of
almost all forms of existing mass media upon the imposition of martial law on 21 September 1972.
Section 4, Art. III of the Constitution maybe traced to the United States Federal Constitution. The
guarantee of freedom of expression was planted in the Philippines by President McKinley in the
Magna Carta of Philippine Liberty, Instructions to the Second Philippine Commission on 7 April 1900.
The present constitutional provision which reads:
Sec. 4 No law shall be passed abridging the freedom of speech, of expression, or of
the press, or the right of the people peaceably to assemble and petition the
government for redress of grievances.
is essentially the same as that guaranteed in the U.S. Federal Constitution, for which reason,
American case law giving judicial expression as to its meaning is highly persuasive in the
Philippines.
The plain words of the provision reveal the clear intention that no prior restraint can be imposed on
the exercise of free speech and expression if they are to remain effective and meaningful.
The U.S. Supreme Court in the leading case of Grosjean v. American Press Co. Inc @=. 11 declared a
statute imposing a gross receipts license tax of 2% on circulation and advertising income of newspaper publishers as constituting a prior
restraint which is contrary to the guarantee of freedom of the press.

In Bantam Books, Inc. v. Sullivan 12, the U.S. Supreme Court stated: "Any system of prior restraint of
expression comes to this Court bearing a heavy presumption against its constitutionality."
In this jurisdiction, prior restraint on the exercise of free expression can be justified only on the
ground that there is a clear and present danger of a substantive evil which the State has the right to
prevent 13.
In the present case, the tax imposed on circulation and advertising income of newspaper publishers
is in the nature of a prior restraint on circulation and free expression and, absent a clear showing
that the requisite for prior restraint is present, the constitutional flaw in the law is at once apparent
and should not be allowed to proliferate.
Similarly, the imposition of the VAT on the sale and distribution of religious articles must be struck
down for being contrary to Sec. 5, Art. III of the Constitution which provides:
Sec. 5. No law shall be made respecting an establishment of religion, or prohibiting
the free exercise thereof. The free exercise and enjoyment of religious profession
and worship, without discrimination or preference, shall forever be allowed. No
religious test shall be required for the exercise of civil or political rights.
That such a tax on the sale and distribution of religious articles is unconstitutional, has been long
settled in American Bible Society, supra.
Insofar, therefore, as Rep. Act No. 7716 imposes a value-added tax on the exercise of the above-
discussed two (2) basic constitutional rights, Rep. Act No. 7716 should be declared unconstitutional
and of no legal force and effect.
IV
Petitions of CREBA and PAL and Rep. Act No. 7716
The Chamber of Real Estate and Builder's Association, Inc. (CREBA) filed its own petition (GR No.
11574) arguing that the provisions of Rep. Act No. 7716 imposing a 10% value-added tax on the
gross selling price or gross value in money of every sale, barter or exchange of goods or properties
(Section 2) and a 10% value-added tax on gross receipts derived from the sale or exchange of
services, including the use or lease of properties (Section 3), violate the equal protection, due
process and non-impairment provisions of the Constitution as well as the rule that taxation should be
uniform, equitable and progressive.
The issue of whether or not the value-added tax is uniform, equitable and progressive has been
settled in Kapatiran.
CREBA which specifically assails the 10% value-added tax on the gross selling price of real
properties, fails to distinguish between a sale of real properties primarily held for sale to customers
or held for lease in the ordinary course of trade or business and isolated sales by individual real
property owners (Sec. 103[s]). That those engaged in the business of real estate development
realize great profits is of common knowledge and need not be discussed at length here. The
qualification in the law that the 10% VAT covers only sales of real property primarily held for sale to
customers, i.e. for trade or business thus takes into consideration a taxpayer's capacity to pay. There
is no showing that the consequent distinction in real estate sales is arbitrary and in violation of the
equal protection clause of the Constitution. The inherent power to tax of the State, which is vested in
the legislature, includes the power to determine whom or what to tax, as well as how much to tax. In
the abseence o f a clear showing that the tax violates the due process and equal protection clauses
of the Constitution, this Court, in keeping with the doctrine of separation of powers, has to defer to
the discretion and judgment of Congress on this point.
Philippine Airlines (PAL) in a separate petition (G.R. No. 115852) claims that its franchise under PD
No. 1590 which makes it liable for a franchise tax of only 2% of gross revenues "in lieu of all the
other fees and charges of any kind, nature or description, imposed, levied, established, assessed or
collected by any municipal, city, provincial, or national authority or government agency, now or in the
future," cannot be amended by Rep. Act No. 7716 as to make it (PAL) liable for a 10% value-added
tax on revenues, because Sec. 24 of PD No. 1590 provides that PAL's franchise can only be
amended, modified or repealed by a special law specifically for that purpose.
The validity of PAL's above argument can be tested by ascertaining the true intention of Congress in
enacting Rep. Act No. 7716. Sec. 4 thereof dealing with Exempt Transactions states:
Section 103. Exempt Transactions. - The following shall be exempt from the value-
added tax:
xxx xxx xxx
(q) Transactions which are exempt under special laws, except those granted under
Presidential Decrees No. 66, 529, 972, 1491, 1590, ... " (Italics supplied)
The repealing clause of Rep. Act No. 7716 further reads:
Sec. 20. Repealing clauses. - The provisions of any special law relative to the rate of
franchise taxes are hereby expressly repealed.
xxx xxx xxx
All other laws, orders, issuances, rules and regulations or parts thereof inconsistent
with this Act are hereby repealed, amended or modified accordingly (italics supplied)
There can be no dispute, in my mind, that the clear intent of Congress was to modify PAL's franchise
with respect to the taxes it has to pay. To this extent, Rep. Act No. 7716 can be considered as
a special law amending PAL's franchise and its tax liability thereunder. That Rep. Act. No. 7716
imposes the value-added taxes on other subjects does not make it a general law which cannot
amend PD No. 1590.
To sum up: it is my considered view that Rep. Act No. 7716 (the expanded value-added tax) is a
valid law, viewed from both substantive and procedural standards, except only insofar as it violates
Secs. 4 and 5, Art. III of the Constitution (the guarantees of freedom of expression and the free
exercise of religion). To that extent, it is, in its present form, unconstitutional.
I, therefore, vote to DISMISS the petitions, subject to the above qualification.

VITUG, J.:
Lest we be lost by a quagmire of trifles, the real threshold and prejudicial issue, to my mind, is
whether or not this Court is ready to assume and to take upon itself with an overriding authority the
owesome responsibility of overseeing the entire bureaucracy. Far from it, ours is merely to construe
and to apply the law regardless of its wisdom and salutariness, and to strike it down only when it
clearly disregards constitutional proscriptions. It is what the fundamental law mandates, and it is
what the Court must do. I cannot yet concede to the novel theory, so challengingly provocative as it
might be, that under the 1987 Constitution the Court may now at good liberty intrude, in the guise of
the people's imprimatur, into every affair of the government. What significance can still then remain, I
ask, of the time honored and widely acclaimed principle of separation of powers, if at every turn the
Court allows itself to pass upon, at will, the disposition of a co-equal, independent and coordinate
branch in our system of government. I dread to think of the so varied uncertainties that such an
undue interference can lead to. The respect for long standing doctrines in our jurisprudence, a
nourished through time, is one of maturity not timidity, of stability rather than quiescence.
It has never occurred to me, and neither do I believe it has been intended, that judicial tyranny is
envisioned, let alone institutionalized, by our people in the 1987 Constitution. The test of tyranny is
not solely on how it is wielded but on how, in the first place, it can be capable of being exercised. It is
time that any such perception of judicial omnipotence is corrected.
Against all that has been said, I see, in actuality in these cases at bench, neither a constitutional
infringement of substance, judging from precedents already laid down by this Court in previous
cases, nor a justiciability even now of the issues raised, more than an attempt to sadly highlight the
perceived shortcomings in the procedural enactment of laws, a matter which is internal to Congress
and an area that is best left to its own basic concern. The fact of the matter is that the legislative
enactment, in its final form, has received the ultimate approval of both houses of Congress. The
finest rhetoric, indeed fashionable in the early part of this closing century, would still be a poor
substitute for tangibility. I join, nonetheless, some of my colleagues in respectfully inviting the kind
attention of the honorable members of our Congress in the suggested circumspect observance of
their own rules.
A final remark. I should like to make it clear that this opinion does not necessarily foreclose the right,
peculiar to any taxpayer adversely affected, to pursue at the proper time, in appropriate proceedings,
and in proper for a, the specific remedies prescribed therefor by the National Internal Revenue
Code, Republic Act 1125, and other laws, as well as rules of procedure, such as may be pertinent.
Some petitions filed with this Court are, in essence, although styled differently, in the nature of
declaratory relief over which this Court is bereft of original jurisdiction.
All considered, I, therefore, join my colleagues who are voting for the dismissal of the petitions.

CRUZ, J.:
It is a curious and almost incredible fact that at the hearing of these cases on July 7, 1994, the
lawyers who argued for the petitioners - two of them former presidents of the Senate and the third
also a member of that body - all asked this Court to look into the internal operations of their Chamber
and correct the irregularities they claimed had been committed there as well as in the House of
Representatives and in the bicameral conference committee.
While a member of the legislative would normally resist such intervention and invoke the doctrine of
separation of powers to protect Congress from what he would call judicial intrusion, these counsel
practically implored the Court to examine the questioned proceedings and to this end go beyond the
journals of each House, scrutinize the minutes of the committee, and investigate all other matters
relating to the passage of the bill (or bills) that eventually became R.A. No. 7716.
In effect, the petitioners would have us disregard the time-honored inhibitions laid down by the Court
upon itself in the landmark case of U.S. v. Pons (34 Phil. 725), where it refused to consider
extraneous evidence to disprove the recitals in the journals of the Philippine Legislature that it had
adjourned sine die at midnight of February 28, 1914. Although it was generally known then that the
special session had actually exceeded the deadline fixed by the Governor-General in his
proclamation, the Court chose to be guided solely by the legislative journals, holding significantly as
follows:
... From their very nature and object, the records of the legislature are as important
as those of the judiciary, and to inquire into the veracity of the journals of the
Philippine Legislature, when they are, as we have said, clear and explicit, would be
to violate both the letter and the spirit of the organic laws by which the Philippine
Government was brought into existence, to invade a coordinate and independent
department of the Government, and to interfere with the legitimate powers and
functions of the Legislature. But counsel in his argument says that the public knows
that the Assembly's clock was stopped on February 28, 1914, at midnight and left so
until the determination of the discussion of all pending matters. Or, in other words,
the hands of the clock were stayed in order to enable the Assembly to effect an
adjournment apparently within the fixed time by the Governor's proclamation for the
expiration of the special session, in direct violation of the Act of Congress of July 1,
1902. If the clock was, in fact, stopped, as here suggested, "the resultant evil might
be slight as compared with that of altering the probative force and character of
legislative records, and making the proof of legislative action depend upon uncertain
oral evidence, liable to loss by death or absence, and so imperfect on account of the
treachery of memory.
... The journals say that the Legislature adjourned at 12 midnight on February 28,
1914. This settles the question, and the court did not err in declining to go beyond
the journals.
As one who has always respected the rationale of the separation of powers, I realize only too well
the serious implications of the relaxation of the doctrine except only for the weightiest of reasons.
The lowering of the barriers now dividing the three major branches of the government could lead to
individious incursions by one department into the exclusive domains of the other departments to the
detriment of the proper discharge of the functions assigned to each of them by the Constitution.
Still, while acknowledging the value of tradition and the reasons for judicial non-interference
announced in Pons, I am not disinclined to take a second look at the ruling from a more pragmatic
viewpoint and to tear down, if we must, the iron curtain it has hung, perhaps improvidently, around
the proceedings of the legislature.
I am persuaded even now that where a specific procedure is fixed by the Constitution itself, it should
not suffice for Congress to simply say that the rules have been observed and flatly consider the
matter closed. It does not have to be as final as that. I would imagine that the judiciary, and
particularly this Court, should be able to verify that statement and determine for itself, through the
exercise of its own powers, if the Constitution has, indeed, been obeyed.
In fact, the Court had already said that the question of whether certain procedural rules have been
followed is justiciable rather than political because what is involved is the legality and not
the wisdom of the act in question. So we ruled in Sanidad v. Commission on Elections (73 SCRA
333) on the amendment of the Constitution; in Daza v. Singson (180 SCRA 496) on the composition
of the Commission on Appointments; and in the earlier case of Tañada v. Cuenco (100 SCRA 1101)
on the organization of the Senate Electoral Tribunal, among several other cases.
By the same token, the ascertainment of whether a bill underwent the obligatory three readings in
both Houses of Congress should not be considered an invasion of the territory of the legislature as
this would not involve an inquiry into its discretion in approving the measure but only the manner in
which the measure was enacted.
These views may upset the conservatives among us who are most comfortable when they allow
themselves to be petrified by precedents instead of venturing into uncharted waters. To be sure,
there is much to be said of the wisdom of the past expressed by vanished judges talking to the
future. Via trita est tuttisima. Except when there is a need to revise them because of an altered
situation or an emergent idea, precedents should tell us that, indeed, the trodden path is the safest
path.
It could be that the altered situation has arrived to welcome the emergent idea. The jurisdiction of
this Court has been expanded by the Constitution, to possibly include the review the petitioners
would have us make of the congressional proceedings being questioned. Perhaps it is also time to
declare that the activities of Congress can no longer be smoke-screened in the inviolate recitals of
its journals to prevent examination of its sacrosanct records in the name of the separation of powers.
But then again, perhaps all this is not yet necessary at this time and all these observations are but
wishful musings for a more activist judiciary. For I find that this is not even necessary, at least for me,
to leave the trodden path in the search for new adventures in the byways of the law. The answer we
seek, as I see it, is not far afield It seems to me that it can be found through a study of the enrolled
bill alone and that we do not have to go beyond that measure to ascertain if R.A. No. 7716 has been
validly enacted.
It is settled in this jurisdiction that in case of conflict between the enrolled bill and the legislative
journals, it is the former that should prevail except only as to matters that the Constitution requires to
be entered in the journals. (Mabanag v. Lopez Vito, 78 Phil. 1). These are the yeas and nays on the
final reading of a bill or on any question at the request of at least one-fifth of the member of the
House (Constitution, Art. VI, Sec. 16[4]), the objections of the President to a vetoed bill or item (Ibid,
Sec. 27 [1]), and the names of the members voting for or against the overriding of his veto
(Id. Section 27 [1]), The original of a bill is not specifically required by the Constitution to be entered
in the journals. Hence, on this particular manner, it is the recitals in the enrolled bill and not in the
journals that must control.
Article VI, Section 24, of the Constitution provides:
Sec. 24. All appropriation, revenue or tariff bills, bills authorizing increase of the
public debt, bills of local application, and private bills shall originate exclusively in the
House of Representatives, but the Senate may propose or concur with amendments.
The enrolled bill submitted to and later approved by the President of the Philippines as R.A. No.
7716 was signed by the President of the Senate and the Speaker of the House of Representatives. It
carried the following certification over the signatures of the Secretary of the Senate and the Acting
Secretary of the House of Representatives:
This Act which is a consolidation of House Bill No. 11197 and Senate Bill No. 11630
was finally passed by the House of Representative and the Senate on April 27, 1994,
and May 2, 1994.
Let us turn to Webster for the meaning of certain words,
To "originate" is "to bring into being; to create something (original); to invent; to begin; start." The
word "exclusively" means "excluding all others" and is derived from the word "exclusive," meaning
"not shared or divided; sole; single." Applying these meanings, I would read Section 24 as saying
that the bills mentioned therein must be brought into being, or created, or invented, or begun or
started, only or singly or by no other body than the house of Representatives.
According to the certification, R.A. No. 7716 "is a consolidation of House Bill No. 11197 and Senate
Bill No. 1630." Again giving the words used their natural and ordinary sense conformably to an
accepted canon of construction, I would read the word "consolidation" as a "combination or merger"
and derived from the word "consolidated," meaning "to combine into one; merge; unite."
The two bills were separately introduced in their respective Chambers. Both retained their
independent existence until they reached the bicameral conference committee where they were
consolidated. It was this consolidated measure that was finally passed by Congress and submitted
to the President of the Philippines for his approval.
House Bill No. 11197 originated in the House of Representatives but this was not the bill that
eventually became R.A. No. 7716. The measure that was signed into law by President Ramos was
the consolidation of that bill and another bill, viz., Senate Bill No. 1630, which was introduced in the
Senate. The resultant enrolled bill thus did not originate exclusively in the House of Representatives.
The enrolled bill itself says that part of it (and it does not matter to what extent) originated in the
Senate.
It would have been different if the only participation of the Senate was in the amendment of the
measure that was originally proposed in the House of Representatives. But this was not the case.
The participation of the Senate was not in proposing or concurring with amendments that would
have been incorporated in House Bill No. 11197. Its participation was in originating its own Senate
Bill No. 1630, which was not embodied in but merged with House Bill No. 11197.
Senate Bill No. 1630 was not even an amendment by substitution, assuming this was permissible. To
"substitute" means "to take the place of; to put or use in place of another." Senate Bill No. 1630 did
not, upon its approval replace (and thus eliminate) House Bill No. 11197. Both bills retained their
separate identities until they were joined or united into what became the enrolled bill and ultimately
R.A. No. 7716.
The certification in the enrolled bill says it all. It is clear that R.A. No. 7716 did not originate
exclusively in the House of Representatives.
To go back to my earlier observations, this conclusion does not require the reversal of U.S. vs.
Pons and an inquiry by this Court into the proceedings of the legislature beyond the recitals of its
journals. All we need to do is consider the certification in the enrolled bill and, without entering the
precincts of Congress, declare that by this own admission it has, indeed, not complied with the
Constitution.
While this Court respects the prerogatives of the other departments, it will not hesitate to rise to its
higher duty to require from them, if they go astray, full and strict compliance with the fundamental
law. Our fidelity to it must be total. There is no loftier principle in our democracy than the supremacy
of the Constitution, to which all must submit.
I vote to invalidate R.A. No. 7716 for violation of Article VI, Sec. 24, of the Constitution.

REGALADO, J.:
It would seem like an inconceivable irony that Republic Act No. 7716 which, so respondents claim,
was conceived by the collective wisdom of a bicameral Congress and crafted with sedulous care by
two branches of government should now be embroiled in challenges to its validity for having been
enacted in disregard of mandatory prescriptions of the Constitution itself. Indeed, such impugnment
by petitioners goes beyond merely the procedural flaws in the parturition of the law. Creating and
regulating as it does definite rights to property, but with its own passage having been violative of
explicit provisions of the organic law, even without going into the intrinsic merits of the provisions of
Republic Act No. 7716 its substantive invalidity is pro facto necessarily entailed.
How it was legislated into its present statutory existence is not in serious dispute and need not
detain us except for a recital of some salient and relevant facts. The House of Representatives
passed House Bill No. 11197 1 on third reading on November 17, 1993 and, the following day, It
transmitted the same to the Senate for concurrence. On its part, the Senate approved Senate Bill
No. 1630 on second and third readings on March 24, 1994. It is important to note in this regard that
on March 22, 1994, said S.B. No. 1630 had been certified by President Fidel V. Ramos for
immediate enactment to meet a public emergency, that is, a growing budgetary deficit. There was no
such certification for H.B. No. 11197 although it was the initiating revenue bill.
It is, therefore, not only a curious fact but, more importantly, an invalid procedure since that
Presidential certification was erroneously made for and confined to S.B. No. 1630 which was
indisputably a tax bill and, under the Constitution, could not validly originate in the Senate. Whatever
is claimed in favor of S.B. No. 1630 under the blessings of that certification, such as its alleged
exemption from the three separate readings requirement, is accordingly negated and rendered
inutile by the inefficacious nature of said certification as it could lawfully have been issued only for a
revenue measure originating exclusively from the lower House. To hold otherwise would be to
validate a Presidential certification of a bill initiated in the Senate despite the Constitutional
prohibition against its originating therefrom.
Equally of serious significance is the fact that S.B. No. 1630 was reported out in Committee Report
No. 349 submitted to the Senate on February 7, 1994 and approved by that body "in substitution of
S.B. No. 1129," while merely "taking into consideration P.S. No. 734 and H.B. No. 11197." 2 S.B. No.
1630, therefore, was never filed in substitution of either P.S. No. 734 or, more emphatically, of H.B.
No. 11197 as these two legislative issuances were merely taken account of, at the most, as
referential bases or materials.
This is not a play on misdirection for, in the first instance, the respondents assure us that H.B. No.
11197 was actually the sole source of and started the whole legislative process which culminated in
Republic Act No. 7716. The participation of the Senate in enacting S.B. No. 1630 was, it is claimed,
justified as it was merely in pursuance of its power to concur in or propose amendments to H.B. No.
11197. Citing the 83-year old case of Flint vs. Stone Tracy Co., 3 it is blithely announced that such
power to amend includes an amendment by substitution, that is, even the extent of substituting the
entire H.B. No. 11197 by an altogether completely new measure of Senate provenance. Ergo, so the
justification goes, the Senate acted perfectly in accordance with its amending power under Section
24, Article VI of the Constitution since it merely proposed amendments through a bill allegedly
prepared in advance.
This is a mode of argumentation which, by reason of factual inaccuracy and logical implausibility,
both astounds and confounds. For, it is of official record that S.B. No. 1630 was filed, certified and
enacted in substitution of S.B. No. 1129 which in itself was likewise in derogation of the
Constitutional prohibition against such initiation of a tax bill in the Senate. In any event, S.B. No.
1630 was neither intended as a bill to be adopted by the Senate nor to be referred to the bicameral
conference committee as a substitute for H.B. No. 11197. These indelible facts appearing in official
documents cannot be erased by any amount of strained convolutions or incredible pretensions that
S.B. No. 1630 was supposedly enacted in anticipation of H.B. No. 11197.
On that score alone, the invocation by the Solicitor General of the hoary concept of amendment by
substitution falls flat on its face. Worse, his concomitant citation of Flint to recover from that prone
position only succeeded in turning the same postulation over, this time supinely flat on its back. As
elsewhere noted by some colleagues, which I will just refers to briefly to avoid duplication,
respondents initially sought sanctuary in that doctrine supposedly laid down in Flint, thus: "It has, in
fact, been held that the substitution of an entirely new measure for the one originally proposed can
be supported as a valid amendment." 4 (Italics supplied.) During the interpellation by the writer at the
oral argument held in these cases, the attention of the Solicitor General was called to the fact that
the amendment in Flint consisted only of a single item, that its, the substitution of a corporate tax for
an inheritance tax proposed in a general revenue bill; and that the text of the decision therein
nowhere contained the supposed doctrines he quoted and ascribed to the court, as those were
merely summations of arguments of counsel therein. It is indeed a source of disappointment for us,
but an admission of desperation on his part, that, instead of making a clarification or a defense of his
contention, the Solicitor General merely reproduced all over again 5 the same quotations as they
appeared in his original consolidated comment, without venturing any explanation or justification.
The aforestated dissemblance, thus unmasked, has further undesirable implications on the
contentions advanced by respondents in their defense. For, even indulging respondents ex
gratia argumenti in their pretension that S.B. No. 1630 substituted or replaced H.B. No. 11197, aside
from muddling the issue of the true origination of the disputed law, this would further enmesh
respondents in a hopeless contradiction.
In a publication authorized by the Senate and from which the Solicitor General has liberally quoted, it
is reported as an accepted rule therein that "(a)n amendment by substitution when approved takes
the place of the principal bill. C.R. March 19, 1963." 6 Stated elsewise, the principal bill is supplanted
and goes out of actuality. Applied to the present situation, and following respondents' submission
that H.B. No. 11197 had been substituted or replaced in its entirety, then in law it had no further
existence for purposes of the subsequent stages of legislation except, possibly, for referential data.
Now, the enrolled bill thereafter submitted to the President of the Philippines, signed by the
President of the Senate and the Speaker of the House of Representatives, carried this solemn
certification over the signatures of the respective secretaries of both chambers: "This Act which is
a consolidation of House Bill No. 11197 and Senate Bill No. 1630 was finally passed by the House of
Representatives and the Senate on April 27, 1994, and May 2, 1994." (Italics mine.) In reliance
thereon, the Chief Executive signed the same into law as Republic Act No. 7716.
The confusion to which the writer has already confessed is now compounded by that official text of
the aforequoted certification which speaks, and this cannot be a mere lapsus calami, of
two independent and existing bills (one of them being H.B. No. 11197) which were consolidated to
produce the enrolled bill. In parliamentary usage, to consolidate two bills, is to unite them into
one 7 and which, in the case at bar, necessarily assumes that H.B. No. 11197 never became legally
inexistent. But did not the Solicitor General, under the theory of amendment by substitution of the
entire H.B. No. 11197 by S.B. No. 1630, thereby premise the same upon the replacement, hence the
total elimination from the legislative process, of H.B. 11197?
It results, therefore, that to prove compliance with the requirement for the exclusive origination of
H.B. No. 11197, two alternative but inconsistent theories had to be espoused and defended by
respondents' counsel. To justify the introduction and passage of S.B. No. 1630 in the Senate, it was
supposedly enacted only as an amendment by substitution, hence on that theory H.B. No. 11197 had
to be considered as displaced and terminated from its role or existence. Yet, likewise for the same
purpose but this time on the theory of origination by consolidation, H.B. No. 11197 had to be
resuscitated so it could be united or merged with S.B. No. 1630. This latter alternative theory,
unfortunately, also exacerbates the constitutional defect for then it is an admission of
a dual origination of the two tax bills, each respectively initiated in and coming from the lower and
upper chambers of Congress.
Parenthetically, it was also this writer who pointedly brought this baffling situation to the attention of
the Solicitor General during the aforesaid oral argument, to the extent of reading aloud the
certification in full. We had hoped thereby to be clarified on these vital issue in respondents'
projected memorandum, but we have not been favored with an explanation unraveling this delimma.
Verily, by passing sub silentio on these intriguing submissions, respondents have wreaked havoc on
both logic and law just to gloss over their non-compliance with the Constitutional mandate for
exclusive origination of a revenue bill. The procedure required therefor, we emphatically add, can be
satisfied only by complete and strict compliance since this is laid down by the Constitution itself and
not by a mere statute.
This writer consequently agrees with the clearly tenable proposition of petitioners that when the
Senate passed and approved S.B. No. 1630, had it certified by the Chief Executive, and thereafter
caused its consideration by the bicameral conference committee in total substitution of H.B. No.
11197, it clearly and deliberately violated the requirements of the Constitution not only in the
origination of the bill but in the very enactment of Republic Act No. 7716. Contrarily, the shifting
sands of inconsistency in the arguments adduced for respondents betray such lack of intellectual
rectitude as to give the impression of being mere rhetorics in defense of the indefensible.
We are told, however, that by our discoursing on the foregoing issues we are introducing into non-
justiciable areas long declared verboten by such time-honored doctrines as those on political
questions, the enrolled bill theory and the respect due to two co-equal and coordinate branches of
Government, all derived from the separation of powers inherent in republicanism. We appreciate the
lectures, but we are not exactly unaware of the teachings in U.S. vs. Pons, 8 Mabanag, vs. Lopez
Vito, 9 Casco Philippine Chemical Co.,. vs. Gimenez, etc., et al., 10 Morals vs.
Subido, etc., 11 and Philippine Judges Association, etc., et al. vs. Prado, etc., et al., 12 on the one
hand, and Tañada, et al. vs. Cuenco, et al., 13 Sanidad, et al., vs. Commission on Elections, et
al., 14 and Daza vs. Singson, et al., 15 on the other, to know which would be applicable to the present
controversy and which should be rejected.
But, first, a positional exordium. The writer of this opinion would be among the first to acknowledge
and enjoin not only courtesy to, but respect for, the official acts of the Executive and Legislative
departments, but only so long as the same are in accordance with or are defensible under the
fundamental charter and the statutory law. He would readily be numbered in the ranks of those who
would preach a reasoned sermon on the separation of powers, but with the qualification that the
same are not contained in tripartite compartments separated by empermeable membranes. He also
ascribes to the general validity of American constitutional doctrines as a matter of historical and legal
necessity, but not to the extent of being oblivious to political changes or unmindful of the fallacy of
undue generalization arising from myopic disregard of the factual setting of each particular case.
These ruminations have likewise been articulated and dissected by my colleagues, hence it is felt
that the only issue which must be set aright in this dissenting opinion is the so-called enrolled bill
doctrine to which we are urged to cling with reptilian tenacity. It will be preliminarily noted that the
official certification appearing right on the face of Republic Act No. 7716 would even render
unnecessary any further judicial inquiry into the proceedings which transpired in the two legislative
chambers and, on a parody of tricameralism, in the bicameral conference committee. Moreover, we
have the excellent dissertations of some of my colleagues on these matters, but respondents insist
en contra that the congressional proceedings cannot properly be inquired into by this Court. Such
objection confirms a suppressive pattern aimed at sacrificing the rule of law to the fiat of expediency.
Respondents thus emplaced on their battlements the pronouncement of this Court in the aforecited
case of Philippine Judges Association vs. Prado. 16 Their reliance thereon falls into the same error
committed by their seeking refuge in the Flint case, ante. which, as has earlier been demonstrated
(aside from the quotational misrepresentation), could not be on par with the factual situation in the
present case. Flint, to repeat, involved a mere amendment on a single legislative item, that is,
substituting the proposal therein of an inheritance tax by one on corporate tax. Now, in their
submission based on Philippine Judges Association, respondents studiously avoid mention of the
fact that the questioned insertion referred likewise to a single item, that is, the repeal of the franking
privilege thretofore granted to the judiciary. That both cases cannot be equated with those at bar,
considering the multitude of items challenged and the plethora of constitutional violations involved, is
too obvious to belabor. Legal advocacy and judicial adjudication must have a becoming sense of
qualitative proportion, instead of lapsing into the discredited and maligned practice of yielding blind
adherence to precedents.
The writer unqualifiedly affirms his respect for valid official acts of the two branches of government
and eschews any unnecessary intrusion into their operational management and internal affairs.
These, without doubt, are matters traditionally protected by the republican principle of separation of
powers. Where, however, there is an overriding necessity for judicial intervention in light of the
pervasive magnitude of the problems presented and the gravity of the constitutional violations
alleged, but this Court cannot perform its constitutional duty expressed in Section 1, Article VIII of the
Constitution unless it makes the inescapable inquiry, then the confluence of such factors should
compel an exception to the rule as an ultimate recourse. The cases now before us present both the
inevitable challenge and the inescapable exigency for judicial review. For the Court to now shirk its
bounden duty would not only project it as a citadel of the timorous and the slothful, but could even
undermine its raison d'etre as the highest and ultimate tribunal.
Hence, this dissenting opinion has touched on events behind and which transpired prior to the
presentation of the enrolled bill for approval into law. The details of that law which resulted from the
legislative action followed by both houses of Congress, the substantive validity of whose provisions
and the procedural validity of which legislative process are here challenged as unconstitutional, have
been graphically presented by petitioners and admirably explained in the respective opinions of my
brethren. The writer concurs in the conclusions drawn therefrom and rejects the contention that we
have unjustifiably breached the dike of the enrolled bill doctrine.
Even in the land of its source, the so-called conclusive presumption of validity originally attributed to
that doctrine has long been revisited and qualified, if not altogether rejected. On the competency of
judicial inquiry, it has been held that "(u)nder the 'enrolled bill rule' by which an enrolled bill is sole
expository of its contents and conclusive evidence of its existence and valid enactment, it is
nevertheless competent for courts to inquire as to what prerequisites are fixed by the Constitution of
which journals of respective houses of Legislature are required to furnish the evidence." 17
In fact, in Gwynn vs. Hardee, etc., et al., 18 the Supreme Court of Florida declared:
(1) While the presumption is that the enrolled bill, as signed by the legislative officers
and filed with the secretary of state, is the bill as it passed, yet this presumption is not
conclusive, and when it is shown from the legislative journals that a bill though
engrossed and enrolled, and signed by the legislative officers, contains provisions
that have not passed both houses, such provisions will be held spurious and not a
part of the law. As was said by Mr. Justice Cockrell in the case of Wade vs. Atlantic
Lumber Co., 51 Fla. 628, text 633, 41 So. 72, 73:
‘This Court is firmly committed to the holding that when the journals speak they
control, and against such proof the enrolled bill is not conclusive.'
More enlightening and apropos to the present controversy is the decision promulgated on May 13,
1980 by the Supreme Court of Kentucky in D & W Auto Supply, et al. vs. Department of Revenue, et
al., 19 pertinent exceprts wherefrom are extensively reproduced hereunder:
... In arriving at our decision we must, perforce, reconsider the validity of a long line
of decisions of this court which created and nurtured the so-called 'enrolled bill'
doctrine.
xxx xxx xxx
[1] Section 46 of the Kentucky Constitution sets out certain procedures that the
legislature must follow before a bill can be considered for final passage. ... .
xxx xxx xxx
... Under the enrolled bill doctrine as it now exists in Kentucky, a court may not look
behind such a bill, enrolled and certified by the appropriate officers, to determine if
there are any defects.
xxx xxx xxx
... In Lafferty, passage of the law in question violated this provision, yet the bill was
properly enrolled and approved by the governor. In declining to look behind the law to
determine the propriety of its enactment, the court enunciated three reasons for
adopting the enrolled bill rule. First, the court was reluctant to scrutinize the
processes of the legislature, an equal branch of government. Second, reasons of
convenience prevailed, which discouraged requiring the legislature to preserve its
records and anticipated considerable complex litigation if the court ruled otherwise.
Third, the court acknowledged the poor record-keeping abilities of the General
Assembly and expressed a preference for accepting the final bill as enrolled, rather
than opening up the records of the legislature. ... .
xxx xxx xxx
 Nowhere has the rule been adopted without reason, or as a result of judicial whim.
There are four historical bases for the doctrine. (1) An enrolled bill was a 'record' and,
as such, was not subject to attack at common law. (2) Since the legislature is one of
the three branches of government, the courts, being coequal, must indulge in every
presumption that legislative acts are valid. (3) When the rule was originally
formulated, record-keeping of the legislatures was so inadequate that a balancing of
equities required that the final act, the enrolled bill, be given efficacy. (4) There were
theories of convenience as expressed by the Kentucky court in Lafferty.
The rule is not unanimous in the several states, however, and it has not been without
its critics. From an examination of cases and treaties, we can summarize the
criticisms as follows: (1) Artificial presumptions, especially conclusive ones, are not
favored. (2) Such a rule frequently (as in the present case) produces results which do
not accord with facts or constitutional provisions. (3) The rule is conducive to fraud,
forgery, corruption and other wrongdoings. (4) Modern automatic and electronic
record-keeping devices now used by legislatures remove one of the original reasons
for the rule. (5) The rule disregards the primary obligation of the courts to seek the
truth and to provide a remedy for a wrong committed by any branch of government.
In light of these considerations, we are convinced that the time has come to re-
examine the enrolled bill doctrine.
[2] This court is not unmindful of the admonition of the doctrine of stare decisis. The
maxim is "Stare decisis et non quieta movere," which simply suggests that we stand
by precedents and not disturb settled points of law. Yet, this rule is not inflexible, nor
is it of such a nature as to require perpetuation of error or logic. As we stated
in Daniel's Adm'r v. Hoofnel, 287 Ky 834, 155 S.W. 2d 469, 471-72 (1941) (citations
omitted):
The force of the rule depends upon the nature of the question to be decided and the
extent of the disturbance of rights and practices which a change in the interpretation
of the law or the course of judicial opinions may create. Cogent considerations are
whether there is clear error and urgent reasons 'for neither justice nor wisdom
requires a court to go from one doubtful rule to another,' and whether or not the evils
of the principle that has been followed will be more injurious than can possibly result
from a change.
Certainly, when a theory supporting a rule of law is not grounded on facts, or upon sound logic, or is
unjust, or has been discredited by actual experience, it should be discarded, and with it the rule it
supports.
[3] It is clear to us that the major premise of the Lafferty decision, the poor record-
keeping of the legislature, has disappeared. Modern equipment and technology are
the rule in record-keeping by our General Assembly. Tape recorders, electric
typewriters, duplicating machines, recording equipment, printing presses, computers,
electronic voting machines, and the like remove all doubts and fears as to the ability
of the General Assembly to keep accurate and readily accessible records.
It is also apparent that the 'convenience' rule is not appropriate in today's modern
and developing judicial philosophy. The fact that the number and complexity of
lawsuits may increase is not persuasive if one is mindful that the overriding purpose
of our judicial system is to discover the truth and see that justice is done. The
existence of difficulties and complexities should not deter this pursuit and we reject
any doctrine or presumption that so provides.
Lastly, we address the premises that the equality of the various branches of
government requires that we shut our eyes to constitutional failings and other errors
of our coparceners in government. We simply do not agree. Section 26 of the
Kentucky Constitution provides that any law contrary to the constitution is 'void.' The
 proper exercise of judicial authority requires us to recognize any law which is
unconstitutional and to declare it void. Without belaboring the point, we believe that
under section 228 of the Kentucky Constitution it is our obligation to 'support ... the
Constitution of the commonwealth.' We are sworn to see that violations of the
constitution - by any person, corporation, state agency or branch of government - are
brought to light and corrected. To countenance an artificial rule of law that silences
our voices when confronted with violations of our constitution is not acceptable to this
court.
We believe that a more reasonable rule is the one which Professor Sutherland
describes as the 'extrinsic evidence' rule ... Under this approach there is a prima
facie presumption that an enrolled bill is valid, but such presumption may be
overcome by clear, satisfactory and convincing evidence establishing that
constitutional requirements have not been met.
We therefore overrule Lafferty v. Huffman and all other cases following the so-called
enrolled bill doctrine, to the extent that there is no longer a conclusive presumption
that an enrolled bill is valid. ... (Italics mine.)
Undeniably, the value-added tax system may have its own merits to commend its continued
adoption, and the proposed widening of its base could achieve laudable governmental objectives if
properly formulated and conscientiously implemented. We would like to believe, however, that ours
is not only an enlightened democracy nurtured by a policy of transparency but one where the edicts
of the fundamental law are sacrosanct for all, barring none. While the realization of the lofty ends of
this administration should indeed be the devout wish of all, likewise barring none, it can never be
justified by methods which, even if unintended, are suggestive of Machiavellism.
Accordingly, I vote to grant the instant petitions and to invalidate Republic Act No. 7716 for having
been enacted in violation of Section 24, Article VI of the Constitution.

DAVIDE, JR., J.:

The legislative history of R.A. No. 7716, as highlighted in the Consolidated Memorandum for the
public respondents submitted by the Office of the Solicitor General, demonstrates beyond doubt that
it was passed in violation or deliberate disregard of mandatory provisions of the Constitution and of
the rules of both chambers of Congress relating to the enactment of bills.
I therefore vote to strike down R.A. No. 7716 as unconstitutional and as having been enacted with
grave abuse of discretion.
The Constitution provides for a bicameral Congress. Therefore, no bill can be enacted into law
unless it is approved by both chambers -- the Senate and the House of Representatives
(hereinafter House). Otherwise stated, each chamber may propose and approve a bill, but until it is
submitted to the other chamber and passed by the latter, it cannot be submitted to the President for
its approval into law.
Paragraph 2, Section 26, Article VI of the Constitution provides:
No bill passed by either House shall become a law unless it has passed three
readings on separate days, and printed copies thereof in its final form have been
distributed to its Members three days before its passage, except when the President
certifies to the necessity of its immediate enactment to meet a public calamity or
emergency. Upon the last reading of a bill, no amendment thereto shall be allowed,
and the vote thereon shall be taken immediately thereafter, and the yeas and nays
entered in the journal.
The "three readings" refers to the three readings in both chambers.
There are, however, bills which must originate exclusively in the House. Section 24, Article VI of the
Constitution enumerates them:
SEC. 24. All appropriation, revenue or tariff bills, bills authorizing increase of the
public debt, bills of local application, and private bills shall originate exclusively in the
House of Representatives, but the Senate may propose or concur with amendments.
Webster's Third New International Dictionary 1 defines originate as follows:
vt 1: to cause the beginning of: give rise to: INITIATE ... 2. to start (a person or thing)
on a course or journey ... vi: to take or have origin: be derived: ARISE, BEGIN,
START ...
Black's Law Dictionary 2 defines the word exclusively in this wise:
Apart from all others; only; solely; substantially all or for the greater part. To the
exclusion of all others; without admission of others to participation; in a manner to
exclude.
In City Mayor vs. The Chief of Philippine Constabulary, @= 3 this Court said:
The term 'exclusive' in its usual and generally accepted sense, means possessed to
the exclusion of others; appertaining to the subject alone, not including, admitting or
pertaining to another or others, undivided, sole. (15 Words and Phrases, p. 510,
citing Mitchel v. Tulsa Water, Light, Heat and Power Co., 95 P. 961, 21 Okl. 243; and
p. 513, citing Commonwealth v. Superintendent of House of Correction, 64 Pa.
Super. 613, 615).
Indisputably then, only the House can cause the beginning or initiate the passage of any
appropriation, revenue, or tarriff bill, any bill increasing the public debt, any bill of local application, or
any private bill. The Senate can only "propose or concur with amendments."
Under the Rules of the Senate, the first reading is the reading of the title of the bill and its referral to
the corresponding committee; the second reading consists of the reading of the bill in the form
recommended by the corresponding committee; and the third reading is the reading of the bill in the
form it will be after approval on second reading. 4 During the second reading, the following takes
place;
(1) Second reading of the bill;
(2) Sponsorship by the Committee Chairman or any member designated by the
corresponding committee;
(3) If a debate ensues, turns for and against the bill shall be taken alternately;
(4) The sponsor of the bill closes the debate;
(5) After the close of the debate, the period of amendments follows:
(6) Then, after the period of amendments is closed, the voting the bill on second
reading. 5
After approval on second readings, printed copies thereof in its final form shall be distributed to the
Members of the Senate at least three days prior to the third reading, the final vote shall be taken and
the yeas and nays shall be entered in the Journal. 6
Under the Rules of the House, the first reading of a bill consists of a reading of the number, title, and
author followed by the referral to the appropriate committees; 7 the second reading consists of the
reading in full of the bill with the amendments proposed by the committee, it any; 8 and the third
reading is the reading of the bill in the form as approved on second reading and takes place only
after printed copies thereof in its final form have been distributed to the Members at least three days
before, unless the bill is certified. 9 At the second reading, the following takes place:
(1) Reading of the bill;
 (2) Sponsorship;
3) Debates;
(4) Period of Amendments; and
(5) Voting on Second Reading. 10
At the third reading, the votes shall be taken immediately and the yeas and nays entered in the
Journal. 11
Clearly, whether in the Senate or in the House, every bill must pass the three readings on separate
days, except when the bill is certified. Amendments to the bill on third reading are constitutionally
prohibited. 12
After its passage by one chamber, the bill should then be transmitted to the other chamber for its
concurrence. Section 83, Rule XIV of the Rules of the House expressly provides:
SEC. 83. Transmittal to Senate. -- The Secretary General, without need of express
order, shall transmit to the Senate for its concurrence all the bills and joint or
concurrent resolutions approved by the House or the amendments of the House to
the bills or resolutions of the Senate, or if amendments of the Senate to bills of the
House are accepted, he shall forthwith notify the Senate of the action taken.
Simplified, this rule means that:
1. As to a bill originating in the House:
(a) Upon its approval by the House, the bill shall be transmitted to the Senate;
(b) The Senate may approve it with or without amendments;
(c) The Senate returns the bill to the House;
(d) The House may accept the Senate amendments; if it does not, the Secretary
General shall notify the Senate of that action. As hereinafter be shown, a request for
conference shall then be in order.
2. As to bills originating in the Senate;
(a) Upon its approval by the Senate, the bill shall be transmitted to the House;
(b) The House may approve it with or without amendments;
(c) The House then returns it to the Senate, informing it of the action taken;
(d) The Senate may accept the House amendements; if it does not, it shall notify the
House and make a request for conference.
The transmitted bill shall then pass three readings in the other chamber on separate days. Section
84, Rule XIV of the Rules of the House states:
SEC. 84. Bills from the Senate. -- The bills, resolutions and communications of the
Senate shall be referred to the corresponding committee in the same manner as bills
presented by Members of the House.
and Section 51, Rule XXII of the Rules of the Senate provides:
SEC. 51. Prior to their final approval, bills and joint resolutions shall be read at least
three times." It is only when the period of disagreement is reached, i.e., amendments
proposed by one chamber to a bill originating from the other are not accepted by the
latter, that a request for conference is made or is in order. The request for conference
is specifically covered by Section 26, Rule XI of the Rules of the Senate which reads:
It is only when the period of disagreement is reached, i.e., amended proposed by one chamber to a
bill originating from the other are not accepted by their latter, that a request for conference is made
or is in order. The request for conference is specifically covered by Section 26, Rule XII of the Rules
of the Senate which reads:
SEC. 26. In the event that the Senate does not agree with the House of
Representatives on the provision of any bill or joint resolution, the differences shall
be settled by a conference committee of both Houses which shall meet within ten
days after its composition.
and Section 85, Rule XIV of the Rules of the House which reads:
SEC. 85. Conference Committee Reports. -- In the event that the House does not
agree with the Senate on the amendments to any bill or joint resolution, the
differences may be settled by conference committees of both Chambers.
The foregoing provisions of the Constitution and the Rules of both chambers of Congress are
mandatory.
In his Treatise On the Constitutional Limitations, 13 more particularly on enactment of bill, Cooley
states:
Where, for an instance, the legislative power is to be exercised by two houses, and
by settled and well-understood parliamentary law these two houses are to hold
separate sessions for their deliberations, and the determination of the one upon a
proposes law is to be submitted to the separate determination of the other, the
constitution, in providing for two houses, has evidently spoken in reference to this
settled custom, incorporating it as a rule of constitutional interpretation; so that it
would require no prohibitory clause to forbid the two houses from combining in one,
and jointly enacting laws by the vote of a majority of all. All those rules which are of
the essentials of law-making must be observed and followed; and it is only the
customary rules of order and routine, such as in every deliberative body are always
understood to be under its control, and subject to constant change at its will, that the
constitution can be understood to have left as matters of discretion, to be
established, modified, or abolished by the bodies for whose government in non-
essential matters they exist.
In respect of appropriation, revenue, or tariff bills, bills increasing the public debt, bills of local
application, or private bills, the return thereof to the House after the Senate shall have "proposed or
concurred with amendments" for the former either to accept or reject the amendments would not
only be in conformity with the foregoing rules but is also implicit from Section 24 of Article VI.
With the foregoing as our guiding light, I shall now show the violations of the Constitution and of the
Rules of the Senate and of the House in the passage of R.A. No. 7716.
VIOLATIONS OF SECTION 24, ARTICLE VI

OF THE CONSTITUTION:
First violation. -- Since R.A. No. 7716 is a revenue measure, it must originate exclusively in the
House -- not in the Senate. As correctly asserted by petitioner Tolentino, on the face of the enrolled
copy of R.A. No. 7716, it is a "CONSOLIDATION OF HOUSE BILL NO. 11197 AND SENATE BILL
NO. 1630." In short, it is an illicit marriage of a bill which originated in the House and a bill which
originated in the Senate. Therefore, R.A. No. 7716 did not originate exclusively in the House.
The only bill which could serve as a valid basis for R.A. No. 7716 is House Bill (HB) No. 11197. This
bill, which is the substitute bill recommended by the House Committee on Ways and Means in
substitution of House Bills Nos. 253, 771, 2450, 7033, 8086, 9030, 9210, 9397, 10012, and 10100,
and covered by its Committee Report No. 367, 14 was approved on third reading by the House on 17
November 1993. 15 Interestingly, HB No. 9210, 16 which was filed by Representative Exequiel B.
Javier on 19 May 1993, was certified by the President in his letter to Speaker Jose de Venecia, Jr. of
1 June 1993. 17 Yet, HB No. 11197, which substituted HB No. 9210 and the others above-stated, was
not. Its certification seemed to have been entirely forgotten.
On 18 November 1993, the Secretary-General of the House, pursuant to Section 83, Rule XIV of the
Rules of the House, transmitted to the President of the Senate HB No. 11197 and requested the
concurrence of the Senate therewith. 18
However, HB No. 11197 had passed only its first reading in that Senate by its referral to its
Committee on Ways and Means. That Committee never deliberated on HB No. 11197 as it should
have. It acted only on Senate Bill (SB) No. 1129 19 introduced by Senator Ernesto F. Herrera on 1
March 1993. It then prepared and proposed SB No. 1630, and in its Committee Report No.
349 20 which was submitted to the Senate on 7 February 1994, 21 it recommended that SB No. 1630
be approved "in substitution of S.B. No. 1129, taking into consideration P.S. Res. No. 734 and H.B.
No. 11197." 22 It must be carefully noted that SB No. 1630 was proposed and submitted for approval
by the Senate in SUBSTITUTION of SB No. 1129, and not HB No. 11197. Obviously, the principal
measure which the Committee deliberated on and acted upon was SB No. 1129 and not HB No.
11197. The latter, instead of being the only measure to be taken up, deliberated upon, and reported
back to the Senate for its consideration on second reading and, eventually, on third reading, was, at
the most, merely given by the Committee a passing glance.
This specific unequivocal action of the Senate Committee on Ways and Means, i.e., proposing and
recommending approval of SB No. 1630 as a substitute for or in substitution of SB No. 1129
demolishes at once the thesis of the Solicitor General that:
Assuming that SB 1630 is distinct from HB 11197, amendment by substitution is
within the purview of Section 24, Article VI of the Constitution.
because, according to him, (a) "Section 68, Rule XXIX of the Rules of the Senate authorizes an
amendment by substitution and the only condition required is that "the text thereof is submitted in
writing'; and (b) '[I]n Flint vs. Stone Tracy Co. (220 U.S. 107) the United Stated Supreme Court,
interpreting the provision in the United States Constitution similar to Section 24, Article VI of the
Philippine Constitution, stated that the power of the Senate to amend a revenue bill includes
substitution of an entirely new measure for the one originally proposed by the House of
Representatives.'" 23
This thesis is utterly without merit. In the first place, it reads into the Committee Report something
which it had not contemplated, that is, to propose SB No. 1630 in substitution of HB No. 11197; or
speculates that the Committee may have committed an error in stating that it is SB No. 1129, and not
HB No. 11197, which is to be substituted by SB No. 1630. Either, of course, is unwarranted because
the words of the Report, solemnly signed by the Chairman, Vice-Chairman (who dissented), seven
members, and three ex-officio members, 24 leave no room for doubt that although SB No. 1129, P.S.
Res No. 734, and HB No. 11197 were referred to and considered by the Committee, it had prepared
the attached SB No. 1630 which it recommends for approval "in substitution of S.B. No. 11197,
taking into consideration P.S. No. 734 and H.B. No. 11197 with Senators Herrera, Angara, Romulo,
Sotto, Ople and Shahani as authors." To do as suggested would be to substitute the judgment of the
Committee with another that is completely inconsistent with it, or, simply, to capriciously ignore the
facts.
In the second place, the Office of the Solicitor General intentionally made it appear, to mislead rather
than to persuade us, that in Flint vs. Stone Tracy Co. 25 The U.S. Supreme Court ruled, as quoted by
it in the Consolidated Memorandum for Respondents, as follows: 26
The Senate has the power to amend a revenue bill. This power to amend is not
confined to the elimination of provisions contained in the original act, but embraces
as well the addition of such provisions thereto as may render the original act
satisfactory to the body which is called upon to support it. It has, in fact, been held
that the substitution of an entirely new measure for the one originally proposed can
be supported as a valid amendment.
xxx xxx xxx
 It is contended in the first place that this section of the act is unconstitutional,
because it is a revenue measure, and originated in the Senate in violation of Section
7 of article 1 of the Constitution, providing that 'all bills for raising revenue shall
originate in the House of Representatives, but the Senate may propose or concur
with the amendments, as on other bills.'
The first part is not a statement of the Court, but a summary of the arguments of counsel in one of
the companion cases (No. 425, entitled, "Gay vs. Baltic Mining Co."). The second part is the second
paragraph of the opinion of the Court delivered by Mr. Justice Day. The misrepresentation that the
first part is a statement of the Court is highly contemptuous. To show such deliberate
misrepresentation, it is well to quote what actually are found in 55 L.Ed. 408, 410, to wit:
Messrs. Charles A. Snow and Joseph H. Knight filed a brief for appellees in No. 425:
xxx xxx xxx
The Senate has the power to amend a revenue bill. This power to amend is not
confined to the elimination of provisions contained in the original act, but embraces
as well the addition of such provisions thereto as may render the original act
satisfactory to the body which is called upon to support it. It has, in fact, been held
that the substitution of an entirely new measure for the one originally proposed can
be supported as a valid amendment.
Brake v. Collison, 122 Fed. 722.
Mr. James L. Quackenbush filed a statement for appellees in No. 442.
Solicitor General Lehmann (by special leave) argued the cause for the United States
on reargument.
Mr. Justice Day delivered the opinion of the court:
These cases involve the constitutional validity of 38 of the act of Congress approved
August 5, 1909, known as 'the corporation tax' law. 36 Stat. at L. 11, 112-117, chap.
6, U.S. Comp. Stat. Supp. 1909, pp. 659, 844-849.
It is contended in the first place that this section of the act is unconstitutional,
because it is a revenue measure, and originated in the Senate in violation of 7 of
article 1 of the Constitution, providing the 'all bills for raising revenue shall originate in
the House of Representatives, but the Senate may propose or concur with the
amendments, as on other bills.' The history of the act is contained in the
government's brief, and is accepted as correct, no objection being made to its
accuracy.
This statement shows that the tariff bill of which the section under consideration is a
part, originated in the House of Representatives, and was there a general bill for the
collection of revenue. As originally introduced, it contained a plan of inheritance
taxation. In the Senate the proposed tax was removed from the bill, and the
corporation tax, in a measure, substituted therefor. The bill having properly originated
in the House, we perceive no reason in the constitutional provision relied upon why it
may not be amended in the Senate in the manner which it was in this case. The
amendment was germane to the subject-matter of the bill, and not beyond the power
of the Senate to propose. (Italics supplied)
xxx xxx xxx
As shown above, the underlined portions were deliberately omitted in the quotation made by the
Office of the Solicitor General.
In the third place, a Senate amendment by substitution with an entirely new bill of a bill, which under
Section 24, Article VI of the Constitution can only originate exclusively in the House, is not
authorized by said Section 24. Flint vs. Stone Tracy Co. cannot be invoked in favor of such a view.
As pointed out by Mr. Justice Florenz D. Regalado during the oral arguments of these cases and
during the initial deliberations thereon by the Court, Flint involves a Senate amendment to a revenue
bill which, under the United States Constitution, should originate from the House of Representatives.
The amendment consisted of the substitution of a corporation tax in lieu of the plan of inheritance
taxation contained in a general bill for the collection of revenue as it came from the House of
Representatives where the bill originated. The constitutional provision in question is Section 7, Article
I of the United States Constitution which reads:
Section 7. Bills and Resolutions. -- All Bills for raising Revenue shall originate in the
House of Representatives; but the Senate may propose or concur with Amendments,
as on other Bills.
This provision, contrary to the misleading claim of the Solicitor General, is not similar to Section 24,
Article VI of our Constitution, which for easy comparison is hereunder quoted again:
All appropriation, revenue or tariff bills, bills authorizing increase of the public debt,
bills of local application, and private bills shall originate exclusively in the House of
Representatives, but the Senate may propose or concur with amendments.
Note that in the former the word exclusively does not appear. And, in the latter, the phrase "as on
other Bill," which is found in the former, does not appear. These are very significant in determining
the authority of the upper chamber over the bills enumerated in Section 24. Since the origination is
not exclusively vested in the House of Representatives of the United States, the Senate's authority
to propose or concur with amendments is necessarily broader. That broader authority is further
confirmed by the phrase "as on other Bills," i.e., its power to propose or concur with amendments
thereon is the same as in ordinary bills. The absence of this phrase in our Constitution was clearly
intended to restrict or limit the Philippine Senate's power to propose or concur with amendments. In
the light of the exclusivity of origination and the absence of the phrase "as on other Bills," the
Philippine Senate cannot amend by substitution with an entirely new bill of its own any bill covered
by Section 24 of Article VI which the House of Representatives transmitted to it because such
substitution would indirectly violate Section 24.
These obvious substantive differences between Section 7, Article I of the U.S. Constitution and
Section 24, Article VI of our Constitution are enough reasons why this Court should neither allow
itself to be misled by Flint vs. Stonenor be awed by Rainey vs. United States 27 and the opinion of
Messrs. Ogg and Ray 28 which the majority cites to support the view that the power of the U.S.
Senate to amend a revenue measure is unlimited. Rainey concerns the Tariff Act of 1909 of the
United States of America and specifically involved was its Section 37 which was an amendment
introduced by the U.S. Senate. It was claimed by the petitioners that the said section is a revenue
measure which should originate in the House of Representatives. The U.S. Supreme Court,
however, adopted and approved the finding of the court a quo that:
the section in question is not void as a bill for raising revenue originating in the
Senate, and not in the House of Representatives. It appears that the section was
proposed by the Senate as an amendment to a bill for raising revenue which
originated in the House. That is sufficient.
Messrs. Ogg and Ray, who are professors emeritus of political science, based their statement not
even on a case decided by the U.S. Supreme Court but on their perception of what Section 7, Article
I of the U.S. Constitution permits. In the tenth edition (1951) of their work, they state:
Any bill may make its first appearance in either house, except only that bills for
raising revenue are required by the constitution to 'originate' in the House of
Representatives. Indeed, through its right to amend revenue bills, even to the extent
of substituting new ones, the Senate may, in effect, originate them also. 29
Their "in effect" conclusion is, of course, logically correct because the word exclusively does not
appear in said Section 7, Article I of the U.S. Constitution.
Neither can I find myself in agreement with the view of the majority that the Constitution does not
prohibit the filing in the Senate of a substitute bill in anticipation of its receipt of the bill from the
House so long as action by the Senate as a body is withheld pending receipt of the House bill,
thereby stating, in effect, that S.B. No. 1129 was such an anticipatory substitute bill, which,
nevertheless, does not seem to have been considered by the Senate except only after its receipt of
H.B. No. 11179 on 23 November 1993 when the process of legislation in respect of it began with a
referral to the Senate Committee on Ways and Means. Firstly, to say that the Constitution does not
prohibit it is to render meaningless Section 24 of Article VI or to sanction its blatant disregard through
the simple expedient of filing in the Senate of a so-called anticipatory substitute bill. Secondly, it
suggests that S.B. No. 1129 was filed as an anticipatory measure to substitute for H.B. No. 11179.
This is a speculation which even the author of S.B. No. 1129 may not have indulged in. S.B. No.
1129 was filed in the Senate by Senator Herrera on 1 March 1993. H.B. No. 11197 was approved by
the House on third reading only on 17 November 1993. Frankly, I cannot believe that Senator
Herrera was able to prophesy that the House would pass any VAT bill, much less to know its
provisions. That "it does not seem that the Senate even considered" the latter not until after its
receipt of H.B. No. 11179 is another speculation. As stated earlier, S.B. No. 1129 was filed in the
Senate on 1 March 1993, while H.B. No. 11197 was transmitted to the Senate only on 18 November
1993. There is no evidence on record to show that both were referred to the Senate Committee on
Ways and Means at the same time. Finally, in respect of H.B. No. 11197, its legislative process did
not begin with its referral to the Senate's Ways and Means Committee. It began upon its filing, as a
Committee Bill of the House of Committee on Ways and Means, in the House.
Second violation. -- Since SB No. 1129 is a revenue measure, it could not even be validly introduced
or initiated in the Senate. It follows too, that the Senate cannot validly act thereon.
Third violation. -- Since SB No. 1129 could not have been validly introduced in the Senate and could
not have been validly acted on by the Senate, then it cannot be substituted by another revenue
measure, SB No. 1630, which the Senate Committee on Ways and Means introduced in substitution
of SB No. 1129. The filing or introduction in the Senate of SB No. 1630 also violated Section 24,
Article VI of the Constitution.
VIOLATIONS OF SECTION 26(2), ARTICLE VI

OF THE CONSTITUTION:
First violation. -- The Senate, despite its lack of constitutional authority to consider SB No. 1630 or
SB No. 1129 which the former substituted, opened deliberations on second reading of SB No. 1630
on 8 February 1994. On 24 March 1994, the Senate approved it on second reading and on third
reading. 30 That approval on the same day violated Section 26(2), Article VI of the Constitution. The
justification therefor was that on 24 February 1994 the President certified to "the necessity of the
enactment of SB No. 1630 ... to meet a public emergency." 31
I submit, however, that the Presidential certification is void ab initio not necessarily for the reason
adduced by petitioner Kilosbayan, Inc., but because it was addressed to the Senate for a bill which is
prohibited from originating therein. The only bill which could be properly certified on permissible
constitutional grounds even if it had already been transmitted to the Senate is HB No. 11197. As
earlier observed, this was not so certified, although HB No. 9210 (one of those consolidated into HB
No. 11197) was certified on 1 June 1993. 32
Also, the certification of SB No. 1630 cannot, by any stretch of the imagination, be extended to HB
No. 11197 because SB No. 1630 did not substitute HB No. 11197 but SB No. 1129.
Considering that the certification of SB No. 1630 is void, its approval on second and third readings in
one day violated Section 26(2), Article VI of the Constitution.
Second violation. -- It further appears that on 24 June 1994, after the approval of SB No. 1630, the
Secretary of the Senate, upon directive of the Senate President, formally notified the House Speaker
of the Senate's approval thereof and its request for a bicameral conference "in view of the
disagreeing provisions of said bill and House Bill No. 11197." 33
It must be stressed again that HB No. 11197 was never submitted for or acted on second and third
readings in the Senate, and SB No. 1630 was never sent to the House for its concurrence. Elsewise
stated, both were only half-way through the legislative mill. Their submission to a conference
committee was not only anomalously premature, but violate of the constitutional rule on three
readings.
The suggestion that SB No. 1630 was not required to be submitted to the House for otherwise the
procedure would be endless, is unacceptable for, firstly, it violates Section 26, Rule XII of the Rules
of the Senate and Section 85, Rule XIV of the Rules of the House, and, secondly, it is never endless.
If the chamber of origin refuses to accept the amendments of the other chamber, the request for
conference shall be made.
VIOLATIONS OF THE RULES OF BOTH CHAMBERS;

GRAVE ABUSE OF DISCRETION.
The erroneous referral to the conference committee needs further discussion. Since S.B. No. 1630
was not a substitute bill for H.B. No. 11197 but for S.B. No. 1129, it (S.B. No. 1630) remained a bill
which originated in the Senate. Even assuming arguendo that it could be validly initiated in the
Senate, it should have been first transmitted to the House where it would undergo three readings.
On the other hand, since HB No. 11197 was never acted upon by the Senate on second and third
readings, no differences or inconsistencies could as yet arise so as to warrant a request for a
conference. It should be noted that under Section 83, Rule XIV of the Rules of the House, it is only
when the Senate shall have approved with amendments HB no. 11197 and the House declines to
accept the amendments after having been notified thereof that the request for a conference may be
made by the House, not by the Senate. Conversely, the Senate's request for a conference would
only be proper if, following the transmittal of SB No. 1630 to the House, it was approved by the latter
with amendments but the Senate rejected the amendments.
Indisputably then, when the request for a bicameral conference was made by the Senate, SB No.
1630 was not yet transmitted to the House for consideration on three readings and HB No. 11197
was still in the Senate awaiting consideration on second and third readings. Their referral to the
bicameral conference committee was palpably premature and, in so doing, both the Senate and the
House acted without authority or with grave abuse of discretion. Nothing, and absolutely nothing,
could have been validly acted upon by the bicameral conference committee.
GRAVE ABUSE OF DISCRETION COMMITTED BY

THE BICAMERAL CONFERENCE COMMITTEE.
Serious irregularities amounting to lack of jurisdiction or grave abuse of discretion were committed
by the bicameral conference committee.
First, it assumed, and took for granted that SB No. 1630 could validly originate in the Senate. This
assumption is erroneous.
Second, it assumed that HB No. 11197 and SB No. 1630 had properly passed both chambers of
Congress and were properly and regularly submitted to it. As earlier discussed, the assumption is
unfounded in fact.
Third, per the bicameral conference committee's proceedings of 19 April 1994, Representative
Exequiel Javier, Chairman of the panel from the House, initially suggested that HB No. 11197 should
be the "frame of reference," because it is a revenue measure, to which Senator Ernesto Maceda
concurred. However, after an incompletely recorded reaction of Senator Ernesto Herrera, Chairman
of the Senate panel, Representative Javier seemed to agree that "all amendments will be coming
from the Senate." The issue of what should be the "frame of reference" does not appear to have
been resolved. These facts are recorded in this wise, as quoted in the Consolidated Memorandum
for Respondents: 34
CHAIRMAN JAVIER.
 First of all, what would be the basis, no, or framework para huwag naman mawala
yung personality namin dito sa bicameral, no, because the bill originates from the
House because this is a revenue bill, so we would just want to ask, we make the
House Bill as the frame of reference, and then everything will just be inserted?
HON. MACEDA.
Yes. That's true for every revenue measure. There's no other way. The House Bill
has got to be the base. Of course, for the record, we know that this is an
administration; this is certified by the President and I was about to put into the
records as I am saying now that your problem about the impact on prices on the
people was already decided when the President and the administration sent this to
us and certified it. They have already gotten over that political implication of this bill
and the economic impact on prices.
CHAIRMAN HERRERA.
Yung concern mo about the bill as the reference in this discussion is something that
we can just ...
CHAIRMAN JAVIER.
We will just ... all the amendments will be coming from the Senate.
(BICAMERAL CONFERENCE ON MAJOR DIFFERENCES BETWEEN HB NO.
11197 AND SB NO. 1630 [Cte. on Ways & Means] APRIL 19, 1994, II-6 and II-7;
Italics supplied)
These exchanges would suggest that Representative Javier had wanted HB No. 11197 to be the
principal measure on which reconciliation of the differences should be based. However, since the
Senate did not act on this Bill on second and third readings because its Committee on Ways and
Means did not deliberate on it but instead proposed SB No. 1630 in substitution of SB No. 1129, the
suggestion has no factual basis. Then, when finally he agreed that "all amendments will be coming
from the Senate," he in fact withdrew the former suggestion and agreed that SB No. 1630, which is
the Senate version of the Value Added Tax (VAT) measure, should be the "frame of reference." But
then SB No. 1630 was never transmitted to the House for the latter's concurrence. Hence, it cannot
serve as the "frame of reference" or as the basis for deliberation. The posture taken by
Representative Javier also indicates that SB No. 1630 should be taken as the amendment to HB No.
11197. This, too, is unfounded because SB No. 1630 was not proposed in substitution of HB No.
11197.
Since SB No. 1630 did not pass three readings in the House and HB No. 11197 did not pass second
and third readings in the Senate, it logically follows that no disagreeing provisions had as yet arisen.
The bicameral conference committee erroneously assumed the contrary.
Even granting arguendo that both HB No. 11197 and SB No. 1630 had been validly approved by
both chambers of Congress and validly referred to the bicameral conference committee, the latter
had very limited authority thereon. It was created "in view of the disagreeing provisions of" the two
bills. 35 Its duty was limited to the reconciliation of disagreeing provisions or the resolution of
differences or inconsistencies. The committee recognized that limited authority in the opening
paragraph of its Report 36 when it said:
The Conference Committee on the disagreeing provisions of House Bill No. 11197 ...
and Senate Bill No. 1630 ... .
Under such limited authority, it could only either (a) restore, wholly or partly, the specific provisions of
HB No. 11197 amended by SB No. 1630, (b) sustain, wholly or partly, the Senate's amendments, or
(c) by way of a compromise, to agree that neither provisions in HB No. 11197 amended by the
Senate nor the latter's amendments thereto be carried into the final form of the former.
But as pointed out by petitioners Senator Raul Roco and Kilosbayan, Inc., the bicameral conference
committee not only struck out non-disagreeing provisions of HB No. 11197 and SB No. 1630, i.e.,
provisions where both bills are in full agreement; it added more activities or transactions to be
covered by VAT, which were not within the contemplation of both bills.
Since both HB No. 11197 and SB No. 1630 were still half-cooked in the legislative vat, and were not
ready for referral to a conference, the bicameral conference committee clearly acted without
jurisdiction or with grave abuse of discretion when it consolidated both into one bill which became
R.A. No. 7716.
APPROVAL BY BOTH CHAMBERS OF CONFERENCE

COMMITTEE REPORT AND PROPOSED BILL DID

NOT CURE CONSTITUTIONAL INFIRMITIES.
I cannot agree with the suggestion that since both the Senate and the House had approved the
bicameral conference committee report and the bill proposed by it in substitution of HB No. 11197
and SB No. 1630, whatever infirmities may have been committed by it were cured by ratification.
This doctrine of ratification may apply to minor procedural flaws or tolerable breachs of the
parameters of the bicameral conference committee's limited powers but never to violations of the
Constitution. Congress is not above the Constitution. In the instant case, since SB No. 1630 was
introduced in violation of Section 24, Article VI of the Constitution, was passed in the Senate in
violation of the "three readings" rule, and was not transmitted to the House for the completion of the
constitutional process of legislation, and HB No. 11197 was not likewise passed by the Senate on
second and third readings, neither the Senate nor the House could validly approve the bicameral
conference committee report and the proposed bill.
In view of the foregoing, the conclusion is inevitable that for non-compliance with mandatory
provisions of the Constitution and of the Rules of the Senate and of the House on the enactment of
laws, R.A. No. 7716 is unconstitutional and, therefore, null and void. A discussion then of the
instrinsic validity of some of its provisions would be unnecessary.
The majority opinion, however, invokes the enrolled bill doctrine and wants this Court to desist from
looking behind the copy of the assailed measure as certified by the Senate President and the
Speaker of the House. I respectfully submit that the invocation is misplaced. First, as to the issue of
origination, the certification in this case explicitly states that R.A. No. 7716 is a "consolidation of
House Bill No. 11197 and Senate Bill No. 1630." This is conclusive evidence that the measure did
not originate exclusively in the House. Second, the enrolled bill doctrine is of American origin, and
unquestioned fealty to it may no longer be justified in view of the expanded jurisdiction 37 of this Court
under Section 1, Article VIII of our Constitution which now expressly grants authority to this Court to:
determine whether or not there has been a grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of any branch or instrumentality of the
Government.
Third, even under the regime of the 1935 Constitution which did not contain the above provision, this
Court, through Mr. Chief Justice Makalintal, in Astorga vs. Villegas, 38 declared that it cannot be truly
said that Mabanag vs. Lopez Vito 39 has laid to rest the question of whether the enrolled bill doctrine
or the journal entry rule should be adhered to in this jurisdiction, and stated:
As far as Congress itself is concerned, there is nothing sacrosanct in the certification
made by the presiding officers. It is merely a mode of authentication. The lawmaking
process in Congress ends when the bill is approved by both Houses, and the
certification does not add to the validity of the bill or cure any defect already present
upon its passage. In other words, it is the approval of Congress and not the
signatures of the presiding officers that is essential. Thus the (1935) Constitution
says that '[e]very bill passed by the Congress shall, before it becomes a law, be
presented to the President.' In Brown vs. Morris, supra, the Supreme Court of
Missouri, interpreting a similar provision in the State Constitution, said that the same
 'makes it clear that the indispensable step in the passage' and it follows that if a bill,
otherwise fully enacted as a law, is not attested by the presiding officer, other proof
that it has 'passed both houses will satisfy the constitutional requirement.'
Fourth, even in the United States, the enrolled bill doctrine has been substantially undercut. This is
shown in the disquisitions of Mr. Justice Reynato S. Puno in his dissenting opinion, citing Sutherland,
Statutory Construction.
Last, the pleadings of the parties have established beyond doubt that HB No. 11197 was not acted
on second and third readings in the Senate and SB No. 1630, which was approved by the Senate on
second and third readings in substitution of SB No. 1129, was never transmitted to the House for its
passage. Otherwise stated, they were only passed in their respective chamber of origin but not in the
other. In no way can each become a law under paragraph 2, Section 26, Article VI of the
Constitution. For the Court to close its eyes to this fact because of the enrolled bill doctrine is to
shrink its duty to hold "inviolate what is decreed by the Constitution." 40
I vote then to GRANT these petitions and to declare R.A. No. 7716 as unconstitutional.

ROMERO, J.:
Few issues brought before this Court for resolution have roiled the citizenry as much as the instant
case brought by nine petitioners which challenges the constitutionality of Republic Act No. 7716 (to
be referred to herein as the "Expanded Value Added Tax" or EVAT law to distinguish it from
Executive Order No. 273 which is the VAT law proper) that was enacted on May 5, 1994. A visceral
issue, it has galvanized the populace into mass action and strident protest even as the EVAT
proponents have taken to podia and media in a post facto information campaign.
The Court is confronted here with an atypical case. Not only is it a vatful of seething controversy but
some unlikely petitioners invoke unorthodox remedies. Three Senator-petitioners would nullify a
statute that bore the indispensable stamp of approval of their own Chamber with two of them publicly
repudiating what they had earlier endorsed. With two former colleagues, one of them an erstwhile
Senate President, making common cause with them, they would stay the implementation by the
Executive Department of a law which they themselves have initiated. They address a prayer to a co-
equal Department to probe their official acts for any procedural irregularities they have themselves
committed lest the effects of these aberrations inflict such damage or irreparable loss as would bring
down the wrath of the people on their heads.
To the extent that they perceive that a vital cog in the internal machinery of the Legislature has
malfunctioned from having operated in blatant violation of the enabling Rules they have themselves
laid down, they would now plead that this other Branch of Government step in, invoking the exercise
of what is at once a delicate and awesome power. Undoubtedly, the case at bench is as much a test
for the Legislature as it is for the Judiciary.
A backward glance on the Value Added Tax (VAT) is in order at this point.
The first codification of the country's internal revenue laws was effected with the enactment of
Commonwealth Act No. 466, commonly known as the 'National Internal Revenue Code' which was
approved on June 15, 1939 and took effect on July 1, 1939, although the provisions on the income
tax were made retroactive to January 1, 1939.
Since 1939 when the turnover tax was replaced by the manufacturer's sales tax, the
Tax Code had provided for a single-stage value-added tax on original sales by
manufacturers, producers and importers computed on the 'cost deduction method'
and later, on the basis of the 'tax credit method.' The turnover tax was re-introduced
in 1985 by Presidential Decree No. 1991 (as amended by Presidential Decree No.
2006). 1
In 1986, a tax reform package was approved by the Aquino Cabinet. It contained twenty-nine
measures, one of which proposed the adoption of the VAT, as well as the simplification of the sales
tax structure and the abolition of the turnover tax.
Up until 1987, the system of taxing goods consisted of (a) an excise tax on certain
selected articles (b) fixed and percentage taxes on original and subsequent sales, on
importations and on milled articles and (c) mining taxes on mineral products.
Services were subjected to percentage taxes based mainly on gross receipts. 2
On July 25, 1987, President Corazon C. Aquino signed into law Executive Order No. 273 which
adopted the VAT. From the former single-stage value-added tax, it introduced the multi-stage VAT
system where "the value-added tax is imposed on the sale of and distribution process culminating in
sale, to the final consumer. Generally described, the taxpayer (the seller) determines his tax liability
by computing the tax on the gross selling price or gross receipt ("output tax") and subtracting or
crediting the earlier VAT on the purchase or importation of goods or on the sale of service ("input
tax") against the tax due on his own sale." 3
On January 1, 1988, implementing rules and regulations for the VAT were promulgated. President
Aquino then issued Proclamation No. 219 on February 12, 1988 urging the public and private
sectors to join the nationwide consumers' education campaign for VAT.
Soon after the implementation of Executive Order No. 273, its constitutionality was assailed before
this Court in the case of Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc., et al. v.
Tan. 4 The four petitioners sought to nullify the VAT law "for being unconstitutional in that its
enactment is not allegedly within the powers of the President; that the VAT is oppressive,
discriminatory, regressive, and violates the due process and equal protection clauses and other
provisions of the 1987 Constitution." 5 In dismissing the consolidated petitions, this Court stated:
The Court, following the time-honored doctrine of separation of powers cannot
substitute its judgment for that of the President as to the wisdom, justice and
advisability of the VAT. The Court can only look into and determine whether or not
Executive Order No. 273 was enacted and made effective as law, in the manner
required by and consistent with, the Constitution, and to make sure that it was not
issued in grave abuse of discretion amounting to lack or excess of jurisdiction; and,
in this regard, the Court finds no reason to impede its application or continued
implementation. 6
Although declared constitutional, the VAT law was sought to be amended from 1992 on by a series
of bills filed in both Houses of Congress. In chronological sequence, these were:
HB/SB No. - Date Filed in Congress
HB No. 253 - July 22, 1992
HB No. 771 - August 10, 1992
HB No. 2450 - September 9, 1992
Senate Res. No. 734 7 - September 10, 1992
HB No. 7033 - February 3, 1993
SB No. 1129 8 - March 1, 1993
HB No. 8086 - March 9, 1993
HB No. 9030 - May 11, 1993
HB No. 9210 9 - May 19, 1993
HB No. 9297 - May 25, 1993
HB No. 10012 - July 28, 1993
HB No. 10100 - August 3, 1993
 HB No. 11197 in
substitution of
HB Nos. 253, 771,
2450, 7033, 8086,
9030, 9210, 9297
10012 and 10100 10 - November 5, 1993
We now trace the course taken by H.B. No. 11197 and S.B. No. 1129.

HB/SB No.
HB No. 11197 was approved in

the Lower House on

second reading - November 11, 1993
HB No. 11197 was approved in

the Lower House on third

reading and voted upon

with 114 Yeas and 12 Nays - November 17, 1993
HB No. 11197 was transmitted

to the Senate - November 18, 1993
Senate Committee on Ways and

Means submitted Com.

Report No. 349 recommeding

for approval SB No. 1630 in

substitution of SB No. 1129,

taking into consideration PS Res. No.

734 and HB No. 11197 11 - February 7, 1994
Certification by President Fidel V.

Ramos of Senate Bill No.

1630 for immediate enactment

to meet a public emergency - March 22, 1994
SB No. 1630 was approved by

the Senate on second and third

readings and subsequently

voted upon with 13 yeas, none

against and one abstention - March 24, 1994
Transmittal by the Senate to the

Lower House of a request

for a conference in view of

disagreeing provisions of

SB No. 1630 and HB NO.

11197 - March 24, 1994
The Bicameral Conference Committee

conducted various meetings to

reconcile the proposals on the

VAT - April 13, 19, 20, 21, 25
The House agreed on the Conference

Committee Report - April 27, 1994
 The Senate agreed on the Conference

Committee Report - May 2, 1994
The President signed Republic Act

No. 7716 - The Expanded

VAT Law 12 - May 5, 1994
Republic Act No. 7716 was

published in two newspapers

of general circulation - May 12, 1994
Republic Act No. 7716 became

effective - May 28, 1994

Republic Act No. 7716 merely expanded the base of the VAT law even as the tax retained its multi-
stage character.
At the oral hearing held on July 7, 1994, this Court delimited petitioners' arguments to the following
issues culled from their respective petitions.
PROCEDURAL ISSUES
Does Republic Act No. 7716 violate Article VI, Section 24, of the Constitution? 13
Does it violate Article VI, Section 26, paragraph 2, of the Constitution? 14
What is the extent of the power of the Bicameral Conference Committee?
SUBSTANTIVE ISSUES
Does the law violate the following provisions in Article III (Bill of Rights) of the Constitution:
1. Section 1 15
2. Section 4 16
3. Section 5 17
4. Section 10 18
Does the law violate the following other provisions of the Constitution?
1. Article VI, Section 28, paragraph 1 19
2. Article VI, Section 28, paragraph 3 20
As a result of the unedifying experience of the past where the Court had the propensity to steer clear
of questions it perceived to be "political" in nature, the present Constitution, in contrast, has explicitly
expanded judicial power to include the duty of the courts, especially the Supreme Court, "to
determine whether or not there has been a grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of the Government." 21 I submit that under this
explicit mandate, the Court is empowered to rule upon acts of other Government entities for the
purpose of determining whether there may have been, in fact, irregularities committed tantamount to
violation of the Constitution, which case would clearly constitute a grave abuse of discretion on their
part.
In the words of the sponsor of the above-quoted Article of the Constitution on the Judiciary, the
former Chief Justice Roberto R. Concepcion, "the judiciary is the final arbiter on the question of
whether or not a branch of government or any of its officials has acted without jurisdiction or in
excess of jurisdiction, or so capriciously as to constitute an abuse of discretion amounting to excess
of jurisdiction or lack of jurisdiction. This is not only a judicial power but a duty to pass judgment on
matters of this nature.
This is the back ground of paragraph 2 of Section 1, which means that the courts cannot hereafter
exhibit its wonted reticence by claiming that such matters constitute a political question." 22
In the instant petitions, this Court is called upon, not so much to exercise its traditional power of
judicial review as to determine whether or not there has indeed been a grave abuse of discretion on
the part of the Legislature amounting to lack or excess of jurisdiction.
Where there are grounds to resolve a case without touching on its constitutionality, the Court will do
so with utmost alacrity in due deference to the doctrine of separation of powers anchored on the
respect that must be accorded to the other branches of government which are coordinate, coequal
and, as far as practicable, independent of one another.
Once it is palpable that the constitutional issue is unavoidable, then it is time to assume jurisdiction,
provided that the following requisites for a judicial inquiry are met: that there must be an actual and
appropriate case; a personal and substantial interest of the party raising the constitutional question;
the constitutional question must be raised at the earliest possible opportunity and the decision of the
constitutional question must be necessary to the determination of the case itself, the same being
the lis mota of the case. 23
Having assured ourselves that the above-cited requisites are present in the instant petitions, we
proceed to take them up.
ARTICLE VI, SECTION 24
Some petitioners assail the constitutionality of Republic Act No. 7716 as being in violation of Article
VI, Section 24 of the Constitution which provides:
All appropriation, revenue or tariff bills, bills authorizing increase of the public debt,
bills of local application, and private bills, shall originate exclusively in the House of
Representatives, but the Senate may propose or concur with amendments.
In G.R. Nos. 115455 and 115781, petitioners argue:
(a) The bill which became Republic Act No. 7716 did not originate exclusively in the House of
Representatives. The Senate, after receiving H.B. No. 11197, submitted its own bill, S.B. No. 1630,
and proceeded to vote and approve the same after second and third readings.
(b) The Senate exceeded its authority to "propose or concur with amendments" when it submitted its
own bill, S.B. No. 1630, recommending its approval "in substitution of S.B. No. 1129, taking into
consideration P.S. Res. No. 734 and H.B. No. 11197."
(c) H.B. No. 11197 was not deliberated upon by the Senate. Neither was it voted upon by the Senate
on second and third readings, as what was voted upon was S.B. No. 1630.
Article VI, Section 24 is taken word for word from Article VI, Section 18 of the 1935 Constitution
which was, in turn, patterned after Article I, Section 7 (1) of the Constitution of the United States,
which states:
All bills for raising revenue shall originate in the House of Representatives, but the
Senate may propose or concur with amendments as on other bills.
The historical precedent for requiring revenue bills to originate in Congress is explained in the U.S.
case of Morgan v. Murray. 24
The constitutional requirement that all bills for raising revenue shall originate in the
House of Representatives stemmed from a remedial outgrowth of the historic conflict
between Parliament (i.e., Commons) and the Crown, whose ability to dominate the
monarchially appointive and hereditary Lords was patent. See 1 Story, Constitution,
S 875 et seq., 5th Ed.; 1 Cooley, Constitutional Limitations, pp. 267, 268, 8th Ed., 1
Sutherland, Statutory Construction, S 806, 3d Ed. There was a measure of like
justification for the insertion of the provision of article I, S 7, cl. 1, of the Federal
Constitution. At that time (1787) and thereafter until the adoption (in 1913) of the
Seventeenth Amendment providing for the direct election of senators, the members
of the United States Senate were elected for each state by the joint vote of both
 houses of the Legislature of the respective states, and hence, were removed from
the people ...
The legislative authority under the 1935 Constitution being unicameral, in the form of the National
Assembly, it served no purpose to include the subject provision in the draft submitted by the 1934
Constitutional Convention to the Filipino people for ratification.
In 1940, however, the Constitution was amended to establish a bicameral Congress of the
Philippines composed of a House of Representatives and a Senate.
In the wake of the creation of a new legislative machinery, new provisions were enacted regarding
the law-making power of Congress. The National Assembly explained how the final formulation of
the subject provision came about:
The concurrence of both houses would be necessary to the enactment of a law.
However, all appropriation, revenue or tariff bills, bills authorizing an increase of the
public debt, bills of local application, and private bills, should originate exclusively in
the House of Representatives, although the Senate could propose or concur with
amendments.
In one of the first drafts of the amendments, it was proposed to give both houses
equal powers in lawmaking. There was, however, much opposition on the part of
several members of the Assembly. In another draft; the following provision, more
restrictive than the present provision in the amendment, was proposed and for
sometime was seriously considered:
'All bills appropriating public funds, revenue or tariff bills, bills of local application, and
private bills shall originate exclusively in the Assembly, but the Senate may propose
or concur with amendments. In case of disapproval by the Senate of any such bills,
the Assembly may repass the same by a two-thirds vote of all its members, and
thereupon, the bill so repassed shall be deemed enacted and may be submitted to
the President for corresponding action. In the event that the Senate should fail to
finally act on any such bills, the Assembly may, after thirty days from the opening of
the next regular sessions of the same legislative term, reapprove the same with a
vote of two-thirds of all the members of the Assembly. And upon such reapproval, the
bill shall be deemed enacted and may be submitted to the president for
corresponding action.'
However, the special committee voted finally to report the present amending
provision as it is now worded; and in that form it was approved by the National
Assembly with the approval of Resolution No. 38 and later of Resolution No.
73. 25 (Italics supplied)
Thus, the present Constitution is identically worded as its 1935 precursor: "All appropriation, revenue
or tariff bills, bills authorizing increase of the public debt, bills of local application, and private bills,
shall originate exclusively in the House of Representatives, but the Senate may propose or concur
with amendments." (Italics supplied)
That all revenue bills, such as Republic Act No. 7716, should "originate exclusively in the House of
Representatives" logically flows from the more representative and broadly-based character of this
Chamber.
It is said that the House of Representatives being the more popular branch of the
legislature, being closer to the people, and having more frequent contacts with them
than the Senate, should have the privilege of taking the initiative in the proposals of
revenue and tax project, the disposal of the people's money, and the contracting of
public indebtedness.
These powers of initiative in the raising and spending of public funds enable the
House of Representatives not only to implement but even to determine the fiscal
 policies of the government. They place on its shoulders much of the responsibility of
solving the financial problems of the government, which are so closely related to the
economic life of the country, and of deciding on the proper distribution of revenues
for such uses as may best advance public interests. 26
The popular nature of the Lower House has been more pronounced with the inclusion of
Presidentially-appointed sectoral representatives, as provided in Article VI, Section 5 (2), of the
Constitution, thus: "The party-list representatives shall constitute twenty per centum of the total
number of representatives including those under the party list. For three consecutive terms after the
ratification of this Constitution, one-half of the seats allocated to party-list representatives shall be
filled, as provided by law, by selection or election from the labor, peasant, urban poor, indigenous
cultural communities, women, youth, and such other sectors as may be provided by law, except the
religious sector." (Italics supplied)
This novel provision which was implemented in the Batasang Pambansa during the martial law
regime 27 was eventually incorporated in the present Constitution in order to give those from the
marginalized and often deprived sector, an opportunity to have their voices heard in the halls of the
Legislature, thus giving substance and meaning to the concept of "people empowerment."
That the Congressmen indeed have access to, and consult their constituencies has been
demonstrated often enough by the fact that even after a House bill has been transmitted to the
Senate for concurrence, some Congressmen have been known to express their desire to change
their earlier official position or reverse themselves after having heard their constituents' adverse
reactions to their representations.
In trying to determine whether the mandate of the Constitution with regard to the initiation of revenue
bills has been preserved inviolate, we have recourse to the tried and tested method of definition of
terms. The term "originate" is defined by Webster's New International Dictionary (3rd Edition, 1986)
as follows: "v.i., to come into being; begin; to start."
On the other hand, the word "exclusively" is defined by the same Webster's Dictionary as "in an
exclusive manner; to the exclusion of all others; only; as, it is his, exclusively." Black's Law Dictionary
has this definition: "apart from all others; only; solely; substantially all or for the greater part. to the
exclusion of all other; without admission of others to participation; in a manner to exclude. Standard
Oil Co. of Texas v. State, Tex. Civ. App., 142 S.W. 2d 519, 521, 522, 523."
This Court had occasion to define the term "exclusive" as follows:
... In its usual and generally accepted sense, the term means possessed to the
exclusion of others; appertaining to the subject alone; not including, admitting or
pertaining to another or others; undivided, sole. 28
When this writer, during the oral argument of July 7, 1994, asked the petitioner in G.R. No. 115455
whether he considers the word "exclusively" to be synonymous with "solely," he replied in the
affirmative. 29
A careful examination of the legislative history traced earlier in this decision shows that the original
VAT law, Executive Order No. 273, was sought to be amended by ten House bills which finally
culminated in House Bill No. 11197, as well as two Senate bills. It is to be noted that the first House
Bill No. 253 was filed on July 22, 1992, and two other House bills followed in quick succession on
August 10 and September 9, 1992 before a Senate Resolution, namely, Senate Res. No. 734, was
filed on September 10, 1992 and much later, a Senate Bill proper, viz., Senate Bill No. 1129 on
March 1, 1993. Undoubtedly, therefore, these bills originated or had their start in the House and
before any Senate bill amending the VAT law was filed. In point of time and venue, the conclusion is
ineluctable that Republic Act No. 7716, which is indisputably a revenue measure, originated in the
House of Representatives in the form of House Bill No. 253, the first EVAT bill.
Additionally, the content and substance of the ten amendatory House Bills filed over the roughly one-
year period from July 1992 to August 1993 reenforce the position that these revenue bills, pertaining
as they do, to Executive Order No. 273, the prevailing VAT law, originated in the Lower House.
House Bill Nos. 253, 771, 2450, 7033, 8086, 9030, 9210, 9297, 10012 and 10100 were intended to
restructure the VAT system by exempting or imposing the tax on certain items or otherwise
introducing reforms in the mechanics of implementation. 30 Of these, House Bill No. 9210 was
favored with a Presidential certification on the need for its immediate enactment to meet a public
emergency. Easily the most comprehensive, it noted that the revenue performance of the VAT, being
far from satisfactory since the collections have always fallen short of projections, "the system is
rendered inefficient, inequitable and less comprehensive." Hence, the Bill proposed several
amendments designed to widen the tax base of the VAT and enhance its administration. 31
That House Bill No. 11197 being a revenue bill, originated from the Lower House was acknowledged,
in fact was virtually taken for granted, by the Chairmen of the Committee on Ways and Means of
both the House of Representatives and the Senate. Consequently, at the April 19, 1994 meeting of
the Bicameral Conference Committee, the Members agreed to make the House Bill as the "frame of
reference" or "base" of the discussions of the Bicameral Conference Committee with the
"amendments" or "insertions to emanate from the Senate." 32
As to whether the bills originated exclusively in the Lower House is altogether a different matter.
Obviously, bills amendatory of VAT did not originate solely in the House to the exclusion of all others
for there were P.S. Res. No. 734 filed in the Senate on September 10, 1992 followed by Senate Bill
No. 1129 which was filed on March 1, 1993. About a year later, this was substituted by Senate Bill
No. 1630 that eventually became the EVAT law, namely, Republic Act No. 7716.
Adverting to the passage of the amendatory VAT bills in the Lower House, it is to be noted that
House Bill No. 11197 which substituted all the prior bills introduced in said House complied with the
required readings, that is, the first reading consisting of the reading of the title and referral to the
appropriate Committee, approval on second reading on November 11, 1993 and on third reading on
November 17, 1993 before being finally transmitted to the Senate. In the Senate, its identity was
preserved and its provisions were taken into consideration when the Senate Committee on Ways
and Means submitted Com. Report No. 349 which recommended for approval "S.B. No. 1630 in
substitution of S.B. No. 1129, taking into consideration P.S. Res. No. 734 and H.B. No. 11197." At
this stage, the subject bill may be considered to have passed first reading in the Senate with the
submission of said Committee Report No. 349 by the Senate Committee on Ways and Means to
which it had been referred earlier. What remained, therefore, was no longer House Bill No. 11197 but
Senate Bill No. 1630. Thence, the Senate, instead of transmitting the bill to the Lower House for its
concurrence and amendments, if any, took a "shortcut," bypassed the Lower House and instead,
approved Senate Bill No. 1630 on both second and third readings on the same day, March 24, 1994.
The first irregularity, that is, the failure to return Senate Bill No. 1630 to the Lower House for its
approval is fatal inasmuch as the other chamber of legislature was not afforded the opportunity to
deliberate and make known its views. It is no idle dictum that no less than the Constitution ordains:
"The legislative power shall be vested in the Congress of the Philippines which shall consist of a
Senate and a House of Representatives ..." 33 (Italics supplied)
It is to be pointed out too, that inasmuch as Senate Bill No. 1630 which had "taken into
consideration" House Bill No. 11197 was not returned to the Lower House for deliberation, the latter
Chamber had no opportunity at all to express its views thereon or to introduce any amendment. The
customary practice is, after the Senate has considered the Lower House Bill, it returns the same to
the House of origin with its amendments. In the event that there may be any differences between the
two, the same shall then be referred to a Conference Committee composed of members from both
Chambers which shall then proceed to reconcile said differences.
In the instant case, the Senate transmitted to the Lower House on March 24, 1994, a letter informing
the latter that it had "passed S. No. 1630 entitled . . . (and) in view of the disagreeing provisions of
said bill and House Bill No. 11197, entitled . . . the Senate requests a conference . . ." This, in spite of
the fact that Com. Report No. 349 of the Senate Committee on Ways and Means had already
recommended for approval on February 7, 1994 "S.B. No. 1630 . . . taking into consideration H.B.
No. 11197." Clearly, the Conference Committee could only have acted upon Senate Bill No. 1630, for
House Bill No. 11197 had already been fused into the former.
At the oral hearing of July 7, 1994, petitioner in G.R. No. 115455 admitted, in response to this
writer's query, that he had attempted to rectify some of the perceived irregularities by presenting a
motion in the Senate to recall the bill from the Conference Committee so that it could revert to the
period of amendment, but he was outvoted, in fact "slaughtered." 34
In accordance with the Rules of the House of Representatives and the Senate, Republic Act No.
7716 was duly authenticated after it was signed by the President of the Senate and the Speaker of
the House of Representatives followed by the certifications of the Secretary of the Senate and the
Acting Secretary General of the House of Representatives. 35 With the signature of President Fidel V.
Ramos under the words "Approved: 5 May 1994," it was finally promulgated.
Its legislative journey ended, Republic Act No. 7716 attained the status of an enrolled bill which is
defined as one "which has been duly introduced, finally passed by both houses, signed by the proper
officers of each, approved by the governor (or president) and filed by the secretary of state." 36
Stated differently:
It is a declaration by the two houses, through their presiding officers, to the president,
that a bill, thus attested, has received in due form, the sanction of the legislative
branch of the government, and that it is delivered to him in obedience to the
constitutional requirement that all bills which pass Congress shall be presented to
him. And when a bill, thus attested, receives his approval, and is deposited in the
public archives, its authentication as a bill that has passed Congress should be
deemed complete and unimpeachable. As the President has no authority to approve
a bill not passed by Congress, an enrolled Act in the custody of the Secretary of
State, and having the official attestations of the Speaker of the House of
Representatives, of the President of the Senate, and of the President of the United
States, carries, on its face, a solemn assurance by the legislative and executive
departments of the government, charged, respectively, with the duty of enacting and
executing the laws, that it was passed by Congress. The respect due to coequal and
independent departments requires the judicial department to act upon that
assurance, and to accept, as having passed Congress, all bills authenticated in the
manner stated; leaving the courts to determine, when the question properly arises,
whether the Act, so authenticated, is in conformity with the Constitution. 37
The enrolled bill assumes importance when there is some variance between what actually transpired
in the halls of Congress, as reflected in its journals, and as shown in the text of the law as finally
enacted. But suppose the journals of either or both Houses fail to disclose that the law was passed
in accordance with what was certified to by their respective presiding officers and the President. Or
that certain constitutional requirements regarding its passage were not observed, as in the instant
case. Which shall prevail: the journal or the enrolled bill?
A word on the journal.
The journal is the official record of the acts of a legislative body. It should be a true
record of the proceedings arranged in chronological order. It should be a record of
what is done rather than what is said. The journal should be a clear, concise,
unembellished statement of all proposals made and all actions taken complying with
all requirements of constitutions, statutes, charters or rules concerning what is to be
recorded and how it is to be recorded. 38
Article VI, Section 16 (4) of the Constitution ordains:
 Each house shall keep a Journal of its proceedings, and from time to time publish the
same, excepting such parts as may, in its judgment, affect national security; and the
yeas and nays on any question shall, at the request of one-fifth of the Members
present, be entered in the Journal.
Each House shall also keep a Record of its proceedings." (Italics supplied)
The rationale behind the above provision and of the "journal entry rule" is as follows:
It is apparent that the object of this provision is to make the legislature show what it
has done, leaving nothing whatever to implication. And, when the legislature says
what it has done, with regard to the passage of any bill, it negatives the idea that it
has done anything else in regard thereto. Silence proves nothing where one is
commanded to speak . . . . Our constitution commands certain things to be done in
regard to the passage of a bill, and says that no bill shall become a law unless these
things are done. It seems a travesty upon our supreme law to say that it guaranties
to the people the right to have their laws made in this manner only, and that there is
no way of enforcing this right, or for the court to say that this is law when the
constitution says it is not law. There is one safe course which is in harmony with the
constitution, and that is to adhere to the rule that the legislature must show, as
commanded by the constitution, that it has done everything required by the
constitution to be done in the serious and important matter of making laws. This is
the rule of evidence provided by the constitution. It is not presumptuous in the courts,
nor disrespectful to the legislature, to judge the acts of the legislature by its own
evidence. 39
Confronted with a discrepancy between the journal proceedings and the law as duly enacted, courts
have indulged in different theories. The "enrolled bill" and "journal entry" rules, being rooted deep in
the Parliamentary practices of England where there is no written constitution, and then transplanted
to the United States, it may be instructive to examine which rule prevails in the latter country through
which, by a process of legislative osmosis, we adopted them in turn.
There seems to be three distinct and different rules as applicable to the enrolled bill
recognized by the various courts of this country. The first of these rules appears to be
that the enrolled bill is the ultimate proof and exclusive and conclusive evidence that
the bill passed the legislature in accordance with the provisions of the Constitution.
Such has been the holding in California, Georgia, Kentucky, Texas, Washington, New
Mexico, Mississippi, Indiana, South Dakota, and may be some others.
The second of the rules seems to be that the enrolled bill is a verity and resort cannot
be had to the journals of the Legislature to show that the constitutional mandates
were not complied with by the Legislature, except as to those provisions of the
Constitution, compliance with which is expressly required to be shown on the journal.
This rule has been adopted in South Carolina, Montana, Oklahoma, Utah, Ohio, New
Jersey, United States Supreme Court, and others.
The third of the rules seems to be that the enrolled bill raises only a prima facie
presumption that the mandatory provisions of the Constitution have been complied
with and that resort may be had to the journals to refute that presumption, and if the
constitutional provision is one, compliance with which is expressly required by the
Constitution to be shown on the journals, then the mere silence of the journals to
show a compliance therewith will refute the presumption. This rule has been adopted
in Illinois, Florida, Kansas, Louisiana, Tennessee, Arkansas, Idaho, Minnesota,
Nebraska, Arizona, Oregon, New Jersey, Colorado, and others. 40
In the 1980 case of D & W Auto Supply v. Department of Revenue, the Supreme Court of Kentucky
which had subscribed in the past to the first of the three theories, made the pronouncement that it
had shifted its stand and would henceforth adopt the third. It justified its changed stance, thus:
 We believe that a more reasonable rule is the one which Professor Sutherland
describes as the 'extrinsic evidence' rule . . . . Under this approach there is a prima
facie presumption that an enrolled bill is valid, but such presumption may be
overcome by clear satisfactory and convincing evidence establishing that
constitutional requirements have not been met. 41
What rule, if any, has been adopted in this jurisdiction?
Advocates of the "journal entry rule" cite the 1916 decision in U.S. v. Pons 42 where this Court placed
reliance on the legislative journals to determine whether Act No. 2381 was passed on February 28,
1914 which is what appears in the Journal, or on March 1, 1914 which was closer to the truth. The
confusion was caused by the adjournment sine die at midnight of February 28, 1914 of the Philippine
Commission.
A close examination of the decision reveals that the Court did not apply the "journal entry rule" vis-a-
vis the "enrolled bill rule" but the former as against what are "behind the legislative journals."
Passing over the question of whether the printed Act (No. 2381), published by
authority of law, is conclusive evidence as to the date when it was passed, we will
inquire whether the courts may go behind the legislative journals for the purpose of
determining the date of adjournment when such journals are clear and explicit. 43
It is to be noted from the above that the Court "passed over" the probative value to be accorded to
the enrolled bill.
Opting for the journals, the Court proceeded to explain:
From their very nature and object, the records of the Legislature are as important as
those of the judiciary, and to inquire into the veracity of the journals of the Philippine
Legislature, when they are, as we have said clear and explicit, would be to violate
both the letter and the spirit of the organic laws by which the Philippine Government
was brought into existence, to invade a coordinate and independent department of
the Government, and to interfere with the legitimate powers and functions of the
Legislature. 44
Following the courts in the United States since the Constitution of the Philippine Government is
modeled after that of the Federal Government, the Court did not hesitate to follow the courts in said
country, i.e., to consider the journals decisive of the point at issue. Thus: "The journals say that the
Legislature adjourned at 12 midnight on February 28, 1914. This settles the question and the court
did not err in declining to go behind these journals." 45
The Court made a categorical stand for the "enrolled bill rule" for the first time in the 1947 case
of Mabanag v. Lopez Vito 46 where it held that an enrolled bill imports absolute verity and is binding
on the courts. This Court held itself bound by an authenticated resolution, despite the fact that the
vote of three-fourths of the Members of the Congress (as required by the Constitution to approve
proposals for constitutional amendments) was not actually obtained on account of the suspension of
some members of the House of Representatives and the Senate. In this connection, the Court
invoked the "enrolled bill rule" in this wise: "If a political question conclusively binds the judges out of
respect to the political departments, a duly certified law or resolution also binds the judges under the
'enrolled bill rule' born of that respect." 47
Mindful that the U.S. Supreme Court is on the side of those who favor the rule and for no other
reason than that it conforms to the expressed policy of our law making body (i.e., Sec. 313 of the old
Code of Civil Procedure, as amended by Act No. 2210), the Court said that "duly certified copies
shall be conclusive proof of the provisions of such Acts and of the due enactment thereof." Without
pulling the legal underpinnings from U.S. v. Pons, it justified its position by saying that if the Court at
the time looked into the journals, "in all probability, those were the documents offered in evidence"
and that "even if both the journals and authenticated copy of the Act had been presented, the
disposal of the issue by the Court on the basis of the journals does not imply rejection of the enrolled
theory; for as already stated, the due enactment of a law may be proved in either of the two ways
specified in Section 313 of Act No. 190 as amended." 48 Three Justices voiced their dissent from the
majority decision.
Again, the Court made its position plain in the 1963 case of Casco Philippine Chemical Co., Inc. v.
Gimenez 49 when a unanimous Court ruled that: "The enrolled bill is conclusive upon the courts as
regards the tenor of the measure passed by Congress and approved by the President. If there has
been any mistake in the printing of a bill before it was certified by the officers of Congress and
approved by the Executive, the remedy is by amendment or curative legislation not by judicial
decree." According to Webster's New 20th Century Dictionary, 2nd ed., 1983, the word "tenor"
means, among others, "the general drift of something spoken or written; intent, purport, substance."
Thus, the Court upheld the respondent Auditor General's interpretation that Republic Act No. 2609
really exempted from the margin fee on foreign exchange transactions "urea formaldehyde" as found
in the law and not "urea and formaldehyde" which petitioner insisted were the words contained in the
bill and were so intended by Congress.
In 1969, the Court similarly placed the weight of its authority behind the conclusiveness of the
enrolled bill. In denying the motion for reconsideration, the Court ruled in Morales v. Subido that "the
enrolled Act in the office of the legislative secretary of the President of the Philippines shows that
Section 10 is exactly as it is in the statute as officially published in slip form by the Bureau of Printing
... Expressed elsewise, this is a matter worthy of the attention not of an Oliver Wendell Holmes but of
a Sherlock Holmes." 50 The alleged omission of a phrase in the final Act was made, not at any stage
of the legislative proceedings, but only in the course of the engrossment of the bill, more specifically
in the proofreading thereof.
But the Court did include a caveat that qualified the absoluteness of the "enrolled bill" rule stating:
By what we have essayed above we are not of course to be understood as holding
that in all cases the journals must yield to the enrolled bill. To be sure there are
certain matters which the Constitution (Art. VI, secs. 10 [4], 20 [1], and 21 [1)])
expressly requires must be entered on the journal of each house. To what extent the
validity of a legislative act may be affected by a failure to have such matters entered
on the journal, is a question which we do not now decide (Cf. e.g., Wilkes Country
Comm'rs. v. Coler, 180 U.S. 506 [1900]). All we hold is that with respect to matters
not expressly required to be entered on the journal, the enrolled bill prevails in the
event of any discrepancy. 51
More recently, in the 1993 case of Philippine Judges Association v. Prado, 52 this Court, in ruling on
the unconstitutionality of Section 35 of Republic Act No. 7354 withdrawing the franking privilege from
the entire hierarchy of courts, did not so much adhere to the enrolled bill rule alone as to both
"enrolled bill and legislative journals." Through Mr. Justice Isagani A. Cruz, we stated: "Both the
enrolled bill and the legislative journals certify that the measure was duly enacted, i.e., in accordance
with Article VI, Sec. 26 (2) of the Constitution. We are bound by such official assurances from a
coordinate department of the government, to which we owe, at the very least, a becoming courtesy."
Aware of the shifting sands on which the validity and continuing relevance of the "enrolled bill" theory
rests, I have taken pains to trace the history of its applicability in this jurisdiction, as influenced in
varying degrees by different Federal rulings.
As applied to the instant petition, the issue posed is whether or not the procedural irregularities that
attended the passage of House Bill No. 11197 and Senate Bill No. 1630, outside of the reading and
printing requirements which were exempted by the Presidential certification, may no longer be
impugned, having been "saved" by the conclusiveness on us of the enrolled bill. I see no cogent
reason why we cannot continue to place reliance on the enrolled bill, but only with respect to matters
pertaining to the procedure followed in the enactment of bills in Congress and their subsequent
engrossment, printing errors, omission of words and phrases and similar relatively minor matters
relating more to form and factual issues which do not materially alter the essence and substance of
the law itself.
Certainly, "courts cannot claim greater ability to judge procedural legitimacy, since constitutional
rules on legislative procedure are easily mastered. Procedural disputes are over facts - whether or
not the bill had enough votes, or three readings, or whatever - not over the meaning of the
constitution. Legislators, as eyewitnesses, are in a better position than a court to rule on the facts.
The argument is also made that legislatures would be offended if courts examined legislative
procedure. 53
Such a rationale, however, cannot conceivably apply to substantive changes in a bill introduced
towards the end of its tortuous trip through Congress, catching both legislators and the public
unawares and altering the same beyond recognition even by its sponsors.
This issue I wish to address forthwith.
EXTENT OF THE POWER OF THE BICAMERAL CONFERENCE COMMITTEE
One of the issues raised in these petitions, especially in G.R. Nos. 115781, 115543 and 115754,
respectively, is whether or not --
Congress violated Section 26, par. 2, Article VI (of the 1987 Constitution) when it
approved the Bicameral Conference Committee Report which embodied, in violation
of Rule XII of the Rules of the Senate, a radically altered tax measure containing
provisions not reported out or discussed in either House as well as provisions on
which there was no disagreement between the House and the Senate and, worse,
provisions contrary to what the House and the Senate had approved after three
separate readings. 54
and
By adding or deleting provisions, when there was no conflicting provisions between
the House and Senate versions, the BICAM acted in excess of its jurisdiction or with
such grave abuse of discretion as to amount to loss of jurisdiction. ... In adding to the
bill and thus subjecting to VAT, real properties, media and cooperatives despite the
contrary decision of both Houses, the BICAM exceeded its jurisdiction or acted with
such abuse of discretion as to amount to loss of jurisdiction. . . . 55
I wish to consider this issue in light of Article VIII, Sec. 1 of the Constitution which provides that
"(j)udicial power includes the duty of the courts of justice ... to determine whether or not there has
been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any
branch or instrumentality of the Government." We are also guided by the principle that a court may
interfere with the internal procedures of its coordinate branch only to uphold the Constitution. 56
A conference committee has been defined:
... unlike the joint committee is two committees, one appointed by each house. It is
normally appointed for a specific bill and its function is to gain accord between the
two houses either by the recession of one house from its bill or its amendments or by
the further amendment of the existing legislation or by the substitution of an entirely
new bill. Obviously the conference committee is always a special committee and
normally includes the member who introduced the bill and the chairman of the
committee which considered it together with such other representatives of the house
as seem expedient. (Horack, Cases and Materials on Legislation [1940] 220. See
also Zinn, Conference Procedure in Congress, 38 ABAJ 864 [1952]; Steiner, The
Congressional Conference Committee [U of III. Press, 1951]). 57
From the foregoing definition, it is clear that a bicameral conference committee is a creature, not of
the Constitution, but of the legislative body under its power to determine rules of its proceedings
under Article VI, Sec. 16 (3) of the Constitution. Thus, it draws its life and vitality from the rules
governing its creation. The why, when, how and wherefore of its operations, in other words, the
parameters within which it is to function, are to be found in Section 26, Rule XII of the Rules of the
Senate and Section 85 of the Rules of the House of Representatives, respectively, which provide:
Rule XII, Rules of the Senate
SEC. 26. In the event that the Senate does not agree with the House of
Representatives on the provision of any bill or joint resolution, the differences shall
be settled by a conference committee of both Houses which shall meet within ten
days after their composition.
The President shall designate the members of the conference committee in
accordance with subparagraph (c), Section 8 of Rule III.
Each Conference Committee Report shall contain a detailed and sufficiently explicit
statement of the changes in or amendments to the subject measure, and shall be
signed by the conferees.
The consideration of such report shall not be in order unless the report has been filed
with the Secretary of the Senate and copies thereof have been distributed to the
Members."
Rules of the House of Representatives
SEC. 85. Conference Committee Reports. - In the event that the House does not
agree with the Senate on the amendments to any bill or joint resolution, the
differences may be settled by conference committee of both Chambers.
The consideration of conference committee reports shall always be in order, except
when the journal is being read, while the roll is being called or the House is dividing
on any question. Each of the pages of such reports shall contain a detailed,
sufficiently explicit statement of the changes in or amendments to the subject
measure.
The consideration of such report shall not be in order unless copies thereof are
distributed to the Members: Provided, That in the last fifteen days of each session
period it shall be deemed sufficient that three copies of the report, signed as above
provided, are deposited in the office of the Secretary General.
Under these Rules, a bicameral conference committee comes into being only when there
are disagreements and differences between the Senate and the House with regard to certain
provisions of a particular legislative act which have to be reconciled.
Jefferson's Manual, which, according to Section 112, Rule XLIX of the Senate Rules, supplements it,
states that a conference committee is usually called "on the occasion of amendments between the
Houses" and "in all cases of difference of opinion between the two House on matters pending
between them." 58 It further states:
The managers of a conference must confine themselves to the differences committed to them, and
may not include subjects not within the disagreements, even though germane to a question in issue.
But they may perfect amendments committed to them if they do not in so doing go beyond the
differences. ... Managers may not change the text to which both Houses have agreed. 59 (Italics
supplied.)
Mason's Manual of Legislative Procedures which is also considered as controlling authority for any
situation not covered by a specific legislative rule, 60 states that either House may "request a
conference with the other on any matter of difference or dispute between them" and that in such a
request, "the subject of the conference should always be stated." 61
In the Philippines, as in the United States, the Conference Committee exercises such a wide range
of authority that they virtually constitute a third House in the Legislature. As admitted by the Solicitor
General, "It was the practice in past Congresses for Conference Committees to insert in bills
approved by the two Houses new provisions that were not originally contemplated by them." 62
In Legislative Procedure, Robert Luce gives a graphic description of the milieu and the
circumstances which have conspired to transform an initially innocuous mechanism designed to
facilitate action into an all-powerful Frankenstein that brooks no challenge to its authority even from
its own members.
Their power lies chiefly in the fact that reports of conference committees must be
accepted without amendment or else rejected in toto. The impulse is to get done with
the matters and so the motion to accept has undue advantage, for some members
are sure to prefer swallowing unpalatable provisions rather than prolong controversy.
This is the more likely if the report comes in the rush of business toward the end of a
session, when to seek further conference might result in the loss of the measure
altogether. At any time in the session there is some risk of such a result following the
rejection of a conference report, for it may not be possible to secure a second
conference, or delay may give opposition to the main proposal chance to develop
more strength.
xxx xxx xxx
Entangled in a network of rule and custom, the Representative who resents and
would resist this theft of his rights, finds himself helpless. Rarely can he vote, rarely
can he voice his mind, in the matter of any fraction of the bill. Usually he cannot even
record himself as protesting against some one feature while accepting the measure
as whole. Worst of all, he cannot by argument or suggested change, try to improve
what the other branch has done.
This means more than the subversion of individual rights. It means to a degree the
abandonment of whatever advantage the bicameral system may have. By so much it
in effect transfers the lawmaking power to a small group of members who work out in
private a decision that almost always prevails. What is worse, these men are not
chosen in a way to ensure the wisest choice. It has become the practice to name as
conferees the ranking members of the committee, so that the accident of seniority
determines. Exceptions are made, but in general it is not a question of who are most
competent to serve. Chance governs, sometimes giving way to favor, rarely to merit.
xxx xxx xxx
Speaking broadly, the system of legislating by conference committee is unscientific
and therefore defective. Usually it forfeits the benefit of scrutiny and judgment by all
the wisdom available. Uncontrolled, it is inferior to that process by which every
amendment is secured independent discussion and vote. ... 63 (Italics supplied)
Not surprisingly has it been said: "Conference Committee action is the most undemocratic procedure
in the legislative process; it is an appropriate target for legislative critics." 64
In the case at bench, petitioners insist that the Conference Committee to which Senate Bill No. 1630
and House Bill No. 11197 were referred for the purpose of harmonizing their differences,
overreached themselves in not confining their "reconciliation" function to those areas of
disagreement in the two bills but actually making "surreptitious insertions" and deletions which
amounted to a grave abuse of discretion.
At this point, it becomes imperative to focus on the errant provisions which found their way into
Republic Act No. 7716. Below is a breakdown to facilitate understanding the grounds for petitioners'
objections:
INSERTIONS MADE BY BICAMERAL CONFERENCE COMMITTEE (BICAM) TO SENATE BILL
(SB) NO. 1630 AND HOUSE BILL (HB) NO. 11197
1. Sec. 99 of the National Internal Revenue Code (NIRC)
(1) Under the HB, this section includes any person who, in the course of trade or business, sells,
barters or exchanges goods OR PROPERTIES and any person who LEASES PERSONAL
PROPERTIES.
(2) The SB completely changed the said section and defined a number of words and phrases. Also,
Section 99-A was added which included one who sells, exchanges, barters PROPERTIES and one
who imports PROPERTIES.
(3) The BICAM version makes LESSORS of goods OR PROPERTIES and importers of goods
LIABLE to VAT (subject of petition in G.R. No. 115754).
2. Section 100 (VAT on Sale of Goods)
The term "goods" or "properties" includes the following, which were not found in either the HB or the
SB:
- In addition to radio and television time; SATTELITE TRANSMISSION AND CABLE
TELEVISION TIME.
- The term "Other similar properties" was deleted, which was present in the HB and
the SB.
- Real properties held primarily for sale to customers or held for lease in the ordinary
course or business were included, which was neither in the HB nor the SB (subject of
petition in G.R. No. 115754).
3. Section 102
On what are included in the term "sale or exchange of services," as to make them subject to VAT, the
BICAM included/inserted the following (not found in either House or Senate Bills):
1. Services of lessors of property, whether personal or real (subject of petition in G.R.
No. 115754);
2. Warehousing services;
3. Keepers of resthouses, pension houses, inns, resorts;
4. Common carriers by land, air and sea;
5. Services of franchise grantees of telephone and telegraph;
6. Radio and television broadcasting;
7. All other franchise grantees except those under Section 117 of this Code (subject
of petition in G.R. No. 115852);
8. Services of surety, fidelity, indemnity, and bonding companies;
9. Also inserted by the BICAM (on page 8 thereof) is the lease or use of or the right
to use of satellite transmission and cable television time.
4. Section 103 (Exempt Transactions)
The BICAM deleted subsection (f) in its entirety, despite its inclusion in both the House and Senate
Bills. Therefore, under Republic Act No. 7716, the "printing, publication, importation or sale of books
and any newspaper, magazine, review, or bulletin which appears at regular intervals with fixed prices
for subscription and sale and which is not devoted principally to the publication of advertisements" is
subject to VAT (subject of petition in G.R. No. 115931 and G.R. No. 115544).
The HB and SB did not touch Subsection (g) but it was amended by the BICAM by changing the
word TEN to FIVE. Thus, importation of vessels with tonnage of more than five thousand tons is VAT
exempt.
Subsection L, which was identical in the HB and the SB that stated that medical, dental, hospital and
veterinary services were exempted from the VAT was amended by the BICAM by adding the
qualifying phrase: EXCEPT THOSE RENDERED BY PROFESSIONALS, thus subjecting doctors,
dentists and veterinarians to the VAT.
Subsection U which exempts from VAT "transactions which are exempt under special laws," was
amended by the BICAM by adding the phrase: EXCEPT THOSE GRANTED UNDER PD Nos. 66,
529, 972, 1491, AND 1590, AND NON-ELECTRIC COOPERATIVES UNDER RA 6938 (subject of
petition in G.R. No. 115873), not found in either the HB or the SB, resulting in the inclusion of all
cooperatives to the VAT, except non-electric cooperatives.
The sale of real properties was included in the exempt transactions under the House Bill, but the
BICAM qualified this with the provision:
(S) SALE OF REAL PROPERTIES NOT PRIMARILY HELD FOR SALE TO
CUSTOMERS OR HELD FOR LEASE IN THE ORDINARY COURSE OF TRADE OR
BUSINESS OR REAL PROPERTY UTILIZED FOR LOW-COST AND SOCIALIZED
HOUSING AS DEFINED BY RA NO. 7279 OTHERWISE KNOWN AS THE URBAN
DEVELOPMENT AND HOUSING ACT OF 1992 AND OTHER RELATED LAWS.
(subject of petition in G.R. No. 115754)
The BICAM also exempted the sale of properties, the receipts of which are not less than
P480,000.00 or more than P720,000.00. Under the SB, no amount was given, but in the HB it was
stated that receipts from the sale of properties not less than P350,000.00 nor more than
P600,000.00 were exempt.
It did not include, as VAT exempt, the sale or transfer of securities, as defined in the Revised
Securities Act (BP 178) which was contained in both Senate and House Bills.
5. Section 104
Not included in the HB or the SB is the phrase "INCLUDING PACKAGING MATERIALS" which was
inserted by the BICAM in Section 104 (A) (1) (B), thus excluding from creditable input tax packaging
materials and the phrase "ON WHICH A VALUE-ADDED TAX HAS BEEN ACTUALLY PAID" in
Section 104 (A) (2).
6. Section 107
Both House and Senate Bills provide for the payment of P500.00 VAT registration fee but this was
increased by BICAM to P1,000.00.
7. Section 112
Regarding a person whose sales or receipts are exempt under Section 103 (w), the BICAM inserted
the phrase: "THREE PERCENT UPON THE EFFECTIVITY OF THIS ACT AND FOUR PERCENT
(4%) TWO YEARS THEREAFTER," although the SB and the HB provide only "three percent of his
gross quarterly sales."
8. Section 115
The BICAM adopted the HB version which subjects common carriers by land, air or water for the
transport of passengers to 3% of their gross quarterly sales, which is not found in the SB.
9. Section 117
The BICAM amended this section by subjecting franchises on electric, gas and water utilities to a tax
of two percent (2%) on gross receipts derived ..., although neither the HB nor the SB has a similar
provision.
10. Section 17 (d)
(a) The BICAM defers for only 2 years the VAT on services of actors and actresses, although the SB
defers it for 3 years.
(b) The BICAM uses the word "EXCLUDE" in the section on deferment of VAT collection on certain
goods and services. The HB does not contain any counterpart provision and SB only allows
deferment for no longer than 3 years.
11. Section 18 on the Tax Administration Development Fund is an entirely new provision not
contained in the House/Senate Bills. This fund is supposed to ensure effective implementation of
Republic Act No. 7716.
12. Section 19
No period within which to promulgate the implementing rules and regulations is found in the HB or
the SB but BICAM provided "within 90 days" which found its way in Republic Act No. 7716.
Even a cursory perusal of the above outline will convince one that, indeed, the Bicameral
Conference Committee (henceforth to be referred to as BICAM) exceeded the power and authority
granted in the Rules of its creation. Both Senate and House Rules limit the task of the Conference
Committee in almost identical language to the settlement of differences in the provisions or
amendments to any bill or joint resolution. If it means anything at all, it is that there are provisions in
subject bill, to start with, which differ and, therefore, need reconciliation. Nowhere in the Rules is it
authorized to initiate or propose completely new matter. Although under certain rules on legislative
procedure, like those in Jefferson's Manual, a conference committee may
introduce germane matters in a particular bill, such matters should be circumscribed by the
committee's sole authority and function to reconcile differences.
Parenthetically, in the Senate and in the House, a matter is "germane" to a particular bill if there is a
common tie between said matter and the provisions which tend to promote the object and purpose of
the bill it seeks to amend. If it introduces a new subject matter not within the purview of the bill, then
it is not "germane" to the bill. 65 The test is whether or not the change represented an amendment or
extension of the basic purpose of the original, or the introduction of an entirely new and different
subject matter. 66
In the BICAM, however, the germane subject matter must be within the ambit of the disagreement
between the two Houses. If the "germane" subject is not covered by the disagreement but it is
reflected in the final version of the bill as reported by the Conference Committee or, if what appears
to be a "germane" matter in the sense that it is "relevant or closely allied" 67 with the purpose of the
bill, was not the subject of a disagreement between the Senate and the House, it should be deemed
an extraneous matter or even a "rider" which should never be considered legally passed for not
having undergone the three-day reading requirement. Insertion of new matter on the part of the
BICAM is, therefore, an ultra vires act which makes the same void.
The determination of what is "germane" and what is not may appear to be a difficult task but the
Congress, having been confronted with the problem before, resolved it in accordance with the rules.
In that case, the Congress approved a Conference Committee's insertion of new provisions that
were not contemplated in any of the provisions in question between the Houses simply because of
the provision in Jefferson's Manual that conferees may report matters "which are germane
modifications of subjects in disagreement between the Houses and the committee. 68 In other words,
the matter was germane to the points of disagreement between the House and the Senate.
As regards inserted amendments in the BICAM, therefore, the task of determining what is germane
to a bill is simplified, thus: If the amendments are not circumscribed by the subjects of disagreement
between the two Houses, then they are not germane to the purpose of the bill.
In the instant case before us, the insertions and deletions made do not merely spell an effort at
settling conflicting provisions but have materially altered the bill, thus giving rise to the instant
petitions on the part of those who were caught unawares by the legislative legerdemain that took
place. Going by the definition of the word "amendment" in Black's Law Dictionary, 5th Ed., 1979,
which means "to change or modify for the better; to alter by modification, deletion, or addition," said
insertions and deletions constitute amendments. Consequently, these violated Article VI, Section 26
(2) which provides inter alia: "Upon the last reading of a bill, no amendment thereto shall be
allowed . . ." This proscription is intended to subject all bills and their amendments to intensive
deliberation by the legislators and the ample ventilation of issues to afford the public an opportunity
to express their opinions or objections thereon. The same rationale underlies the three-reading
requirement to the end that no surprises may be sprung on an unsuspecting citizenry.
Provisions of the "now you see it, now you don't" variety, meaning those which were either in the
House and/or Senate versions but simply disappeared or were "bracketed out" of existence in the
BICAM Report, were eventually incorporated in Republic Act No. 7716. Worse, some goods,
properties or services which were not covered by the two versions and, therefore, were never
intended to be so covered, suddenly found their way into the same Report. No advance notice of
such insertions prepared the rest of the legislators, much less the public who could be adversely
affected, so that they could be given the opportunity to express their views thereon. Well has the
final BICAM report been described, therefore, as an instance of "taxation without representation."
That the conferees or delegates in the BICAM representing the two Chambers could not possibly be
charged with bad faith or sinister motives or, at the very least, unseemly behavior, is of no moment.
The stark fact is that items not previously subjected to the VAT now fell under its coverage without
interested sectors or parties having been afforded the opportunity to be heard thereon. This is not to
say that the Conference Committee Report should have undergone the three readings required in
Article VI, Section 26 (2), for this clearly refers only to bills which, after having been initially filed in
either House, negotiated the labyrinthine passage therein until its approval. The composition of the
BICAM including as it usually does, the Chairman of the appropriate Committee, the sponsor of the
bill and other interested members ensures an informed discussion, at least with respect to the
disagreeing provisions. The same does not obtain as regards completely new matter which suddenly
spring on the legislative horizon.
It has been pointed out that such extraneous matters notwithstanding, all Congressman and
Senators were given the opportunity to approve or turn down the Committee Report in toto, thus
"curing" whatever defect or irregularity it bore.
Earlier in this opinion, I explained that the source of the acknowledged power of this ad
hoc committee stems from the precise fact that, the meetings, being scheduled "take it or leave it"
basis. It has not been uncommon for legislators who, for one reason or another have been frustrated
in their attempt to pass a pet bill in their own chamber, to work for its passage in the BICAM where it
may enjoy a more hospitable reception and faster approval. In the instant case, had there been full,
open and unfettered discussion on the bills during the Committee sessions, there would not have
been as much vociferous objections on this score. Unfortunately, however, the Committee held two
of the five sessions behind closed doors, sans stenographers, record-takers and interested
observers. To that extent, the proceedings were shrouded in mystery and the public's right to
information on matters of public concern as enshrined in Article III, Section 7 69 and the government's
policy of transparency in transactions involving public interest in Article II, Section 28 of the
Constitution 70 are undermined.
Moreover, that which is void ab initio such as the objectionable provisions in the Conference
Committee Report, cannot be "cured" or ratified. For all intents and purposes, these never
existed. Quae ab initio non valent, ex post facto convalescere non possunt. Things that are invalid
from the beginning are not made valid by a subsequent act.
Should this argument be unacceptable, the "enrolled bill" doctrine, in turn, is invoked to support the
proposition that the certification by the presiding officers of Congress, together with the signature of
the President, bars further judicial inquiry into the validity of the law. I reiterate my submission that
the "enrolled bill ruling" may be applicable but only with respect to questions pertaining to the
procedural enactment, engrossment, printing, the insertion or deletion of a word or phrase here and
there, but would draw a dividing line with respect to substantial substantive changes, such as those
introduced by the BICAM herein.
We have before us then the spectacle of a body created by the two Houses of Congress for the very
limited purpose of settling disagreements in provisions between bills emanating therefrom,
exercising the plenary legislative powers of the parent chambers but holding itself exempt from the
mandatory constitutional requirements that are the hallmarks of legislation under the aegis of a
democratic political system. From the initial filing, through the three readings which entail detailed
debates and discussions in Committee and plenary sessions, and on to the transmittal to the other
House in a repetition of the entire process to ensure exhaustive deliberations - all these have been
skipped over. In the proverbial twinkling of an eye, provisions that probably may not have seen the
light of day had they but run their full course through the legislative mill, sprang into existence and
emerged full-blown laws.
Yet our Constitution vests the legislative power in "the Congress of the Philippines which shall
consist of a Senate and a House of Representatives ..." 71 and not in any special, standing or super
committee of its own creation, no matter that these have been described, accurately enough, as "the
eye, the ear, the hand, and very often the brain of the house."
Firstly, that usage or custom has sanctioned this abbreviated, if questionable, procedure does not
warrant its being legitimized and perpetuated any longer. Consuetudo, contra rationem introducta,
potius usurpatio quam consuetudo appellari debet. A custom against reason is rather an usurpation.
In the hierarchy of sources of legislative procedure, constitutional rules, statutory provisions and
adopted rules (as for example, the Senate and House Rules), rank highest, certainly much ahead of
customs and usages.
Secondly, is this Court to assume the role of passive spectator or indulgent third party, timorous
about exercising its power or more importantly, performing its duty, of making a judicial determination
on the issue of whether there has been grave abuse of discretion by the other branches or
instrumentalities of government, where the same is properly invoked? The time is past when the
Court was not loathe to raise the bogeyman of the political question to avert a head-on collision with
either the Executive or Legislative Departments. Even the separation of powers doctrine was
burnished to a bright sheen as often as it was invoked to keep the judiciary within bounds. No longer
does this condition obtain. Article VIII, Section 2 of the Constitution partly quoted in this paragraph
has broadened the scope of judicial inquiry. This Court can now safely fulfill its mandate of delimiting
the powers of co-equal departments like the Congress, its officers or its committees which may have
no compunctions about exercising legislative powers in full.
Thirdly, dare we close our eyes to the presumptuous assumption by a runaway committee of its
progenitor's legislative powers in derogation of the rights of the people, in the process, subverting
the democratic principles we all are sworn to uphold, when a proper case is made out for our
intervention? The answers to the above queries are self-evident.
I call to mind this exhortation: "We are sworn to see that violations of the constitution - by any
person, corporation, state agency or branch of government - are brought to light and corrected. To
countenance an artificial rule of law that silences our voices when confronted with violations of our
Constitution is not acceptable to this Court." 72
I am not unaware that a rather recent decision of ours brushed aside an argument that a provision in
subject law regarding the withdrawal of the franking privilege from the petitioners and this Court
itself, not having been included in the original version of Senate Bill No. 720 or of House Bill No.
4200 but only in the Conference Committee Report, was violative of Article VI, Section 26 (2) of the
Constitution. Likewise, that said Section 35, never having been a subject of disagreement between
both Houses, could not have been validly added as an amendment before the Conference
Committee.
The majority opinion in said case explained:
While it is true that a conference committee is the mechanism for compromising
differences between the Senate and the House, it is not limited in its jurisdiction to
this question. Its broader function is described thus:
'A conference committee may deal generally with the subject matter or it may be
limited to resolving the precise differences between the two houses. Even where the
 conference committee is not by rule limited in its jurisdiction, legislative custom
severely limits the freedom with which new subject matter can be inserted into the
conference bill. But occasionally a conference committee produces unexpected
results, results beyond its mandate. These excursions occur even where the rules
impose strict limitations on conference committee jurisdiction. This is symptomatic of
the authoritarian power of conference committee (Davies, Legislative Law and
Process: In a Nutshell, 1986 Ed., p. 81).' 73 (Italics supplied)
At the risk of being repetitious, I wish to point out that the general rule, as quoted above, is: "Even
where the conference committee is not by rule limited in its jurisdiction, legislative custom severely
limits the freedom with which new subject matter can be inserted into the conference bill." What
follows, that is, "occasionally a conference committee produces unexpected results, results beyond
its mandate. . ." is the exception. Then it concludes with a declaration that: "This is symptomatic of
the authoritarian power of conference committee." Are we about to reinstall another institution that
smacks of authoritarianism which, after our past experience, has become anathema to the Filipino
people?
The ruling above can hardly be cited in support of the proposition that a provision in a BICAM report
which was not the subject of differences between the House and Senate versions of a bill cannot be
nullified. It submit that such is not authorized in our Basic Law. Moreover, this decision concerns
merely one provision whereas the BICAM Report that culminated in the EVAT law has a wider scope
as it, in fact, expanded the base of the original VAT law by imposing the tax on several items which
were not so covered prior to the EVAT.
One other flaw in most BICAM Reports, not excluding this one under scrutiny, is that, hastily drawn
up, it often fails to conform to the Senate and House Rules requiring no less than a "detailed" and
"sufficiently explicit statement of the changes in or amendments to the subject measure." The Report
of the committee, as may be gleaned from the preceding pages, was no more than the final version
of the bill as "passed" by the BICAM. The amendments or subjects of dissension, as well as the
reconciliation made by the committee, are not even pointed out, much less explained therein.
It may be argued that legislative rules of procedure may properly be suspended, modified, revoked
or waived at will by the legislators themselves. 74 This principle, however, does not come into play in
interpreting what the record of the proceedings shows was, or was not, done. It is rather designed to
test the validity of legislative action where the record shows a final action in violation or disregard of
legislative rules. 75 Utilizing the Senate and the House Rules as both guidelines and yardstick, the
BICAM here obviously did not adhere to the rule on what the Report should contain.
Given all these irregularities that have apparently been engrafted into the BICAM system, and which
have been tolerated, if not accorded outright acceptance by everyone involved in or conversant with,
the institution, it may be asked: Why not leave well enough alone?
That these practices have remained unchallenged in the past does not justify our closing our eyes
and turning a deaf ear to them. Writ large is the spectacle of a mechanism ensconced in the very
heart of the people's legislative halls, that now stands indicted with the charge of arrogating
legislative powers unto itself through the use of dubious "shortcuts." Here, for the people to judge, is
the "mother of all shortcuts."
In the petitions at bench, we are confronted with the enactment of a tax law which was designed to
broaden the tax base. It is rote learning for any law student that as an attribute of sovereignty, the
power to tax is "the strongest of all the powers of government." 76 Admittedly, "for all its plenitude, the
power to tax is not unconfined. There are restrictions." 77 Were there none, then the oft-quoted 1803
dictum of Chief Justice Marshall that "the power to tax involves the power to destroy" 78 would be a
truism. Happily, we can concur with, and the people can find comfort in, the reassuring words of Mr.
Justice Holmes: "The power to tax is not the power to destroy while this Court sits." 79
Manakanaka, mayroong dumudulog dito sa Kataastaasang Hukuman na may kamangha-manghang
hinaing. Angkop na halimbawa ay ang mga petisyong iniharap ngayon sa amin.
Ang ilan sa kanila ay mga Senador na nais mapawalang bisa ang isang batas ukol sa buwis na
ipinasa mismo nila. Diumano ito ay hindi tumalima sa mga itinatadhana ng Saligang Batas. Bukod
sa rito, tutol sila sa mga bagong talata na isiningit ng "Bicameral Conference Committee" na
nagdagdag ng mga bagong bagay bagay at serbisyo na papatawan ng buwis. Ayon sa kanila,
ginampanan ng komiteng iyan ang gawain na nauukol sa buong Kongreso. Kung kaya't ang
nararapat na mangyari ay ihatol ng Kataastaasang Hukuman na malabis na pagsasamantala sa
sariling pagpapasiya ang ginawa ng Kongreso.
Bagama't bantulot kaming makialam sa isang kapantay na sangay ng Pamahalaan, hindi naman
nararapat na kami ay tumangging gampanan ang tungkulin na iniatas sa amin ng Saligang Batas.
Lalu't-lalo nang ang batas na kinauukulan ay maaaring makapinsala sa nakararami sa sambayanan.
Sa ganang akin, itong batas na inihaharap sa amin ngayon, ay totoong labag sa Saligang Batas,
samakatuwid ay walang bisa. Nguni't ito ay nauukol lamang sa mga katiwalian na may kinalaman sa
paraan ng pagpapasabatas nito. Hindi namin patakaran ang makialam o humadlang sa itinakdang
gawain ng Saligang Batas sa Pangulo at sa Kongreso. Ang dalawang sangay na iyan ng
Pamahalaan ang higit na maalam ukol sa kung ang anumang panukalang batas ay nararapat,
kanais-nais o magagampanan; kung kaya't hindi kami nararapat na maghatol o magpapasiya sa
mga bagay na iyan. Ang makapapataw ng angkop na lunas sa larangan na iyan ay ang mismong
mga kinatawan ng sambayanan sa Kongreso.
Faced with this challenge of protecting the rights of the people by striking down a law that I submit is
unconstitutional and in the process, checking the wonted excesses of the Bicameral Conference
Committee system, I see in this case a suitable vehicle to discharge the Court's Constitutional
mandate and duty of declaring that there has indeed been a grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of the Legislature.
Republic Act No. 7716, being unconstitutional and void, I find no necessity to rule on the substantive
issues as dealt with in the majority opinion as they have been rendered moot and academic. These
issues pertain to the intrinsic merits of the law. It is axiomatic that the wisdom, desirability and
advisability of enacting certain laws lie, not within the province of the Judiciary but that of the political
departments, the Executive and the Legislative. The relief sought by petitioners from what they
perceive to be the harsh and onerous effect of the EVAT on the people is within their reach. For
Congress, of which Senator-petitioners are a part, can furnish the solution by either repealing or
amending the subject law.
For the foregoing reasons, I VOTE to GRANT the petition.

PUNO, J.:
Petitioners plead that we affirm the self-evident proposition that they who make law should not break
the law. There are many evils whose elimination can be trusted to time. The evil of lawlessness in
lawmaking cannot. It must be slain on sight for it subverts the sovereignty of the people.
First, a fast snapshot of the facts. On November 17, 1993, the House of Representatives passed on
third reading House Bill (H.B.) No. 11197 entitled "An Act Restructuring the Value Added Tax (VAT)
System to Widen its Tax Base and Enhance its Administration, Amending for These Purposes
Sections 99, 100, 102 to 108 and 110 Title V and 236, 237 and 238 of Title IX, and Repealing
Sections 113 and 114 of Title V, all of the National Internal Revenue Code as Amended." The vote
was 114 Yeas and 12 Nays. The next day, November 18, 1993, H.B.
No. 11197 was transmitted to the Senate for its concurrence by the Hon. Camilo L. Sabio, Secretary
General of the House of Representatives.
On February 7, 1994, the Senate Committee on Ways and Means submitted Senate Bill (S.B.) No.
1630, recommending its approval "in substitution of Senate Bill No. 1129 taking into consideration
P.S. Res. No. 734 and House Bill No. 11197." On March 24, 1994, S.B. No. 1630 was approved on
second and third readings. On the same day, the Senate, thru Secretary Edgardo E. Tumangan,
requested the House for a conference "in view of the disagreeing provisions of S.B. No. 1630 and
H.B. No. 11197." It designated the following as members of its Committee: Senators Ernesto F.
Herrera, Leticia R. Shahani, Alberto S. Romulo, John H. Osmeña, Ernesto M. Maceda, Blas F. Ople,
Francisco S. Tatad, Rodolfo G. Biazon, and Wigberto S. Tañada. On the part of the House, the
members of the Committee were: Congressmen Exequiel B. Javier, James L. Chiongbian, Renato V.
Diaz, Arnulfo P. Fuentebella, Mariano M. Tajon, Gregorio Andolong, Thelma Almario, and Catalino
Figueroa. After five (5) meetings, 1 the Bicameral Conference Committee submitted its Report to the
Senate and the House stating:
CONFERENCE COMMITTEE REPORT
The Conference Committee on the disagreeing provisions of House Bill No. 11197,
entitled:
AN ACT RESTRUCTURING THE VALUE ADDED TAX (VAT) SYSTEM TO WIDEN
ITS TAX BASE AND ENHANCE ITS ADMINISTRATION, AMENDING FOR THESE
PURPOSES SECTIONS 99, 100, 102, 103, 104, 105, 106, 107, 108 AND 110 OF
TITLE IV, 112, 115 AND 116 OF TITLE V, AND 236, 237, AND 238 OF TITLE IX, AND
REPEALING SECTIONS 113 AND 114 OF TITLE V, ALL OF THE NATIONAL
INTERNAL REVENUE CODE, AS AMENDED
and Senate Bill No. 1630 entitled:
AN ACT RESTRUCTURING THE VALUE ADDED TAX (VAT) SYSTEM TO WIDEN
ITS TAX BASE AND ENHANCE ITS ADMINISTRATION, AMENDING FOR THESE
PURPOSES SECTIONS 99, 100, 102, 103, 104, 106, 107, 108 AND 110 OF TITLE
IV, 112, 115, 117 AND 121 OF TITLE V, AND 236, 237, AND 238 OF TITLE IX, AND
REPEALING SECTIONS 113, 114, 116, 119 AND 120 OF TITLE V, ALL OF THE
NATIONAL INTERNAL REVENUE CODE, AS AMENDED AND FOR OTHER
PURPOSES
having met, after full and free conference, has agreed to recommend and do hereby
recommend to their respective Houses that House Bill No. 11197, in consolidation
with Senate Bill No. 1630, be approved in accordance with the attached copy of the
bill as reconciled and approved by the conferees.
Approved.
The Report was approved by the House on April 27, 1994. The Senate approved it on May 2, 1994.
On May 5, 1994, the President signed the bill into law as R.A. No. 7716.
There is no question that the Bicameral Conference Committee did more than reconcile differences
between House Bill No. 11197 and Senate Bill No. 1630. In several instances, it either added new
provisions or deleted provisions already approved in House Bill No. 11197 and Senate Bill No. 1630.
These insertions/deletions numbering twenty four (24) are specified in detail by petitioner Tolentino
as follows: 2
SOME SALIENT POINTS ON THE

(AMENDMENTS TO THE VATE LAW [EO 273])

SHOWING ADDITIONS/INSERTIONS MADE BY BICAMERAL

CONFERENCE COMMITTEE TO SB 1630 & HB 11197
I On Sec. 99 of the NIRC
H.B. 11197 amends this section by including, as liable to VAT, any person who in the
course of trade of business, sells, barters, or exchanges goods or PROPERTIES and
any person who LEASES PERSONAL PROPERTIES.
Senate Bill 1630 deleted Sec. 99 to give way for a new Section 99 - DEFINITION OF
TERMS - where eleven (11) terms were defined. A new Section, Section 99-A was
incorporated which included as subject to VAT, one who sells, exchanges, barters
PROPERTIES and one who imports PROPERTIES.
The BCC version (R.A. 7716) makes LESSORS of goods OR PROPERTIES and
importers of goods LIABLE to VAT.
II On Section 100 (VAT on sale of goods)
A. The H.B., S.B., and the BCC (R.A. 7716) all included sale of PROPERTIES as
subject to VAT.
The term GOODS or PROPERTIES includes the following:
HB (pls. refer SB (pls. refer BCC (RA 7716
to Sec. 2) To Sec. 1(4) (Sec. 2)

1 . Right or the 1. The same 1. The same

privilege to use
patent, copyright,
design, or model,
plan, secret
formula or process,
goodwill trademark,
tradebrand or other
like property or
right.

2. Right or the 2. The same 2. The same

privilege to use
in the Philippines
of any industrial,
commercial, or
scientific equip-
ment.

3. Right or the 3. The same 3. The same

privilege to use
motion picture films,
films, tapes and
discs.
4. Radio and 4. The same 4. In addition
Television time to radio and
television time the
following were
included:
SATELLITE
TRANSMISSION
and CABLE
TELEVISION TIME

5. Other Similar 5. The Same 5. 'Other

properties similar properties'
was deleted

6. - 6. - 6. Real
properties held
primarily for sale to
customers or held
for lease in the
ordinary course or
business

B. The HB and the BCC Bills has each a provision which includes THE SALE OF
GOLD TO BANGKO SENTRAL NG PILIPINAS as falling under the term Export
Sales, hence subject to 0% VAT. The Senate Bill does not contain such provision
(See Section 102-A thereof).
III. On Section 102
This section was amended to include as subject to a 10% VAT the gross receipts
derived from THE SALE OR EXCHANGE OF SERVICES, INCLUDING THE USE
OR LEASE OF PROPERTIES.
The SB, HB, and BCC have the same provisions on this.
However, on what are included in the term SALE OR EXCHANGE OF SERVICES,
the BCC included/inserted the following (not found in either the House or Senate
Bills):
1. Services of lessors of property WHETHER PERSONAL OR REAL; (See BCC
Report/Bill p. 7)
2. WAREHOUSING SERVICES (Ibid.,)
3. Keepers of RESTHOUSES, PENSION HOUSES, INNS, RESORTS (Ibid.,)
4. Common carriers by LAND, AIR AND SEA (Ibid.,)
5. SERVICES OF FRANCHISE GRANTEES OF TELEPHONE AND TELEGRAPH;
6. RADIO AND TELEVISION BROADCASTING
7. ALL OTHER FRANCHISE GRANTEES EXCEPT THOSE UNDER SECTION 117
OF THIS CODE
8. SERVICES OF SURETY, FIDELITY, INDEMNITY, AND BONDING COMPANIES.
9. Also inserted by the BCC (on page B thereof) is the LEASE OR USE OF OR THE
RIGHT TO USE OF SATTELITE TRANSMISSION AND CABLE TELEVISION TIME
IV. On Section 103 (Exempt Transactions)
The BCC deleted subsection (f) in its entirety, despite its retention in both the House
and Senate Bills, thus under RA 7716, the 'printing, publication, importation or sale of
books and any newspaper, magazine, review, or bulletin which appears at regular
intervals with fixed prices for subscription and sale and which is not devoted
principally to the publication of advertisements' is subject to VAT.
Subsection (g) was amended by the BCC (both Senate and House Bills did not) by
changing the word TEN to FIVE, thus: "Importation of passenger and/or cargo vessel
of more than five thousand ton to ocean going, including engine and spare parts of
said vessel to be used by the importer himself as operator thereof." In short,
importation of vessels with tonnage of more than 5 thousand is VAT exempt.
Subsection L, was amended by the BCC by adding the qualifying phrase: EXCEPT
THOSE RENDERED BY PROFESSIONALS.
Subsection U which exempts from VAT "Transactions which are exempt under
special laws", was amended by BCC by adding the phrase: EXCEPT THOSE
GRANTED UNDER PD NOS. 66, 529, 972, 1491, and 1590, and NON-ELECTRIC
COOPERATIVES under RA 6938. This is the reason why cooperatives are now
subject to VAT.
While the SALE OF REAL PROPERTIES was included in the exempt transactions
under the House Bill, the BCC made a qualification by stating:
'(S) SALE OF REAL PROPERTIES NOT PRIMARILY HELD FOR SALE TO
CUSTOMERS OR HELD FOR LEASE IN THE ORDINARY COURSE OF TRADE OR
BUSINESS OR REAL PROPERTY UTILIZED FOR LOW-COST AND SOCIALIZED
HOUSING AS DEFINED BY R.A. NO. 7279 OTHERWISE KNOWN AS THE URBAN
DEVELOPMENT AND HOUSING ACT OF 1992 AND OTHER RELATED LAWS.
Under the Senate Bill, the sale of real property utilized for low-cost and socialized
housing as defined by RA 7279, is one of the exempt transactions.
Under the House Bill, also exempt from VAT, is the SALE OF PROPERTIES OTHER
THAN THE TRANSACTIONS MENTIONED IN THE FOREGOING PARAGRAPHS
WITH A GROSS ANNUAL SALES AND/OR RECEIPTS OF WHICH DOES NOT
EXCEED THE AMOUNT PRESCRIBED IN THE REGULATIONS TO BE
PROMULGATED BY THE SECRETARY OF FINANCE WHICH SHALL NOT BE
LESS THAN P350,000.00 OR HIGHER THAN P600,000.00 ... Under the Senate Bill,
the amount is P240,000.00. The BCC agreed at the amount of not less than
P480,000.00 or more than P720,000.00 SUBJECT TO TAX UNDER SEC. 112 OF
THIS CODE.
 The BCC did not include, as VAT exempt, the sale or transfer of securities as defined
in the Revised Securities Act (BP 178) which was contained in both Senate and
House Bills.
V On Section 104
The phrase INCLUDING PACKAGING MATERIALS was included by the BCC on
Section 104 (A) (1) (B), and the phrase ON WHICH A VALUE-ADDED TAX HAS
BEEN ACTUALLY on Section 104 (A) (2).
These phrases are not contained in either House and Senate Bills.
VI On Section 107
Both House and Senate Bills provide for the payment of P500.00 VAT registration
fee. The BCC provides for P1,000.00 VAT fee.
VII On Section 112
While both the Senate and House Bills provide that a person whose sales or receipts
and are exempt under Section 103[w] of the Code, and who are not VAT registered
shall pay a tax equivalent to THREE (3) PERCENT of his gross quarterly sales or
receipts, the BCC inserted the phrase: THREE PERCENT UPON THE
EFFECTIVITY OF THIS ACT AND FOUR PERCENT (4%) TWO YEARS
THEREAFTER.
VIII On Section 115
Sec. 17 of SB 1630 Sec. 12 of House Bill 11197 amends this Section by clarifying
that common carriers by land, air or water FOR THE TRANSPORT OF
PASSENGERS are subject to Percentage Tax equivalent to 3% of their quarterly
gross sales.
The BCC adopted this and the House Bill's provision that the GROSS RECEIPTS OF
COMMON CARRIERS DERIVED FROM THEIR INCOMING AND OUTGOING
FREIGHT SHALL NOT BE SUBJECTED TO THE LOCAL TAXES IMPOSED UNDER
RA 7160. The Senate Bill has no similar provision.
IX On Section 117
This Section has not been touched by either Senate and House Bills. But the BCC
amended it by subjecting franchises on ELECTRIC, GAS and WATER UTILITIES A
TAX OF TWO PERCENT (2%) ON GROSS RECEIPTS DERIVED ... .
X On Section 121
The BCC adopted the Senate Bills' amendment to this section by subjecting to 5%
premium tax on life insurance business.
The House Bill does not contain this provision.
XI Others
A) The House Bill does not contain any provision on the deferment of VAT collection
on Certain Goods and Services as does the Senate Bill (Section 19, SB 1630). But
although the Senate Bill authorizes the deferment on certain goods and services for
no longer than 3 years, there is no specific provision that authorizes the President to
EXCLUDE from VAT any of these. The BCC uses the word EXCLUDE.
B) Moreover, the Senate Bill defers the VAT on services of actors and actresses etc.
for 3 years but the BCC defers it for only 2 years.
C) Section 18 of the BCC Bill (RA 7716) is an entirely new provision not contained in
the House/Senate Bills.
 D) The period within which to promulgate the implementing rules and regulations is
within 60 days under SB 1630; No specific period under the House Bill, within 90
days under RA 7716 (BCC).
E) The House Bill provides for a general repealing clause i.e., all inconsistent laws
etc. are repealed. Section 16 of the Senate Bill expressly repeals Sections 113, 114,
116, 119 and 120 of the code. The same Senate Bill however contains a general
repealing clause in Sec. 21 thereof.
RA 7716 (BCC's Bill) expressly repeals Sections 113, 114 and 116 of the NIRC;
Article 39 (c) (d) and (e) of EO 226 and provides the repeal of Sec. 119 and 120 of
the NIRC upon the expiration of two (2) years unless otherwise excluded by the
President."
The charge that the Bicameral Conference Committee added new provisions in the bills of the two
chambers is hardly disputed by respondents. Instead, respondents justify them. According to
respondents: (1) the Bicameral Conference Committee has an ex post veto power or a veto after the
fact of approval of the bill by both Houses; (2) the bill prepared by the Bicameral Conference
Committee, with its additions and deletions, was anyway approved by both Houses; (3) it was the
practice in past Congresses for conference committees to insert in bills approved by the two Houses
new provisions that were not originally contemplated by them; and (4) the enrolled bill doctrine
precludes inquiry into the regularity of the proceedings that led to the enactment of R.A. 7716.
With due respect, I reject these contentions which will cave in on closer examination.
First. There is absolutely no legal warrant for the bold submission that a Bicameral Conference
Committee possesses the power to add/delete provisions in bills already approved on third reading
by both Houses or an ex post veto power. To support this postulate that can enfeeble Congress
itself, respondents cite no constitutional provision, no law, not even any rule or regulation. 3 Worse,
their stance is categorically repudiated by the rules of both the Senate and the House of
Representatives which define with precision the parameters of power of a Bicameral Conference
Committee. Thus, Section 209, Rule XII of the Rules of the Senate provides;
In the event that the Senate does not agree with the House of Representatives on
the provision of any bill or joint resolution, the differences shall be settled by a
conference committee of both Houses which shall meet within ten days after their
composition.
Each Conference Committee Report shall contain a detailed and sufficiently explicit
statement of the changes in or amendments to the subject measure, and shall be
signed by the conferees. (Italics supplied)
The counterpart rule of the House of Representatives is cast in near identical language. Section 85
of the Rules of the House of Representatives pertinently provides:
In the event that the House does not agree with the Senate on the amendments to
any bill or joint resolution, the differences may be settled by a conference committee
of both chambers.
... . Each report shall contain a detailed, sufficiently explicit statement of the changes
in or amendments to the subject measure. (Italics supplied)
The Jefferson's Manual has been adopted 4 as a supplement to our parliamentary rules and practice.
Section 456 of Jefferson's Manual similarly confines the powers of a conference committee, viz: 5
The managers of a conference must confine themselves to the differences
committed to them ... and may not include subjects not within the disagreements,
even though germane to a question in issue.
This rule of antiquity has been honed and honored in practice by the Congress of the United States.
Thus, it is chronicled by Floyd Biddick, Parliamentarian Emeritus of the United States Senate, viz: 6
 Committees of conference are appointed for the sole purpose of compromising and
adjusting the differing and conflicting opinions of the two Houses and the committees
of conference alone can grant compromises and modify propositions of either
Houses within the limits of the disagreement. Conferees are limited to the
consideration of differences between the two Houses.
Conferees shall not insert in their report matters not committed to them by either
House, nor shall they strike from the bill matters agreed to by both Houses. No
matter on which there is nothing in either the Senate or House passed versions of a
bill may be included in the conference report and actions to the contrary would
subject the report to a point of order. (Italics ours)
In fine, there is neither a sound nor a syllable in the Rules of the Senate and the House of
Representative to support the thesis of the respondents that a bicameral conference committee is
clothed with an ex post veto power.
But the thesis that a Bicameral Conference Committee can wield ex post veto power does not only
contravene the rules of both the Senate and the House. It wages war against our settled ideals of
representative democracy. For the inevitable, catastrophic effect of the thesis is to install a Bicameral
Conference Committee as the Third Chamber of our Congress, similarly vested with the power to
make laws but with the dissimilarity that its laws are not the subject of a free and full discussion of
both Houses of Congress. With such a vagrant power, a Bicameral Conference Committee acting as
a Third Chamber will be a constitutional monstrosity.
It needs no omniscience to perceive that our Constitution did not provide for a Congress composed
of three chambers. On the contrary, section 1, Article VI of the Constitution provides in clear and
certain language: "The legislative power shall be vested in the Congress of the Philippines
which shall consist of a Senate and a House of Representatives ..." Note that in vesting legislative
power exclusively to the Senate and the House, the Constitution used the word "shall." Its command
for a Congress of two houses is mandatory. It is not mandatory sometimes.
In vesting legislative power to the Senate, the Constitution means the Senate "... composed of
twenty-four Senators ... elected at large by the qualified voters of the Philippines ... ." 7 Similarly,
when the Constitution vested the legislative power to the House, it means the House "... composed
of not more than two hundred and fifty members ... who shall be elected from legislative districts ...
and those who ... shall be elected through a party-list system of registered national, regional, and
sectoral parties or organizations." 8 The Constitution thus, did not vest on a Bicameral Conference
Committee with an ad hoc membership the power to legislate for it exclusively vested legislative
power to the Senate and the House as co-equal bodies. To be sure, the Constitution does not
mention the Bicameral Conference Committees of Congress. No constitutional status is accorded to
them. They are not even statutory creations. They owe their existence from the internal rules of the
two Houses of Congress. Yet, respondents peddle the disconcerting idea that they should be
recognized as a Third Chamber of Congress and with ex post veto power at that.
The thesis that a Bicameral Conference Committee can exercise law making power with ex
post veto power is freighted with mischief. Law making is a power that can be used for good or for ill,
hence, our Constitution carefully laid out a plan and a procedure for its exercise. Firstly, it
vouchsafed that the power to make laws should be exercised by no other body except the Senate
and the House. It ought to be indubitable that what is contemplated is the Senate acting as a full
Senate and the House acting as a full House. It is only when the Senate and the House act as whole
bodies that they truly represent the people. And it is only when they represent the people that they
can legitimately pass laws. Laws that are not enacted by the people's rightful representatives subvert
the people's sovereignty. Bicameral Conference Committees, with their ad hoc character and limited
membership, cannot pass laws for they do not represent the people. The Constitution does not allow
the tyranny of the majority. Yet, the respondents will impose the worst kind of tyranny - the tyranny of
the minority over the majority. Secondly, the Constitution delineated in deft strokes the steps to be
followed in making laws. The overriding purpose of these procedural rules is to assure that only bills
that successfully survive the searching scrutiny of the proper committees of Congress and the full
and unfettered deliberations of both Houses can become laws. For this reason, a bill has to undergo
three (3) mandatory separate readings in each House. In the case at bench, the additions and
deletions made by the Bicameral Conference Committee did not enjoy the enlightened studies of
appropriate committees. It is meet to note that the complexities of modern day legislations have
made our committee system a significant part of the legislative process. Thomas Reed called the
committee system as "the eye, the ear, the hand, and very often the brain of the house." President
Woodrow Wilson of the United States once referred to the government of the United States as "a
government by the Chairman of the Standing Committees of Congress... " 9 Neither did these
additions and deletions of the Bicameral Conference Committee pass through the coils of collective
deliberation of the members of the two Houses acting separately. Due to this shortcircuiting of the
constitutional procedure of making laws, confusion shrouds the enactment of R.A. No. 7716. Who
inserted the additions and deletions remains a mystery. Why they were inserted is a riddle. To use a
Churchillian phrase, lawmaking should not be a riddle wrapped in an enigma. It cannot be, for Article
II, section 28 of the Constitution mandates the State to adopt and implement a "policy of full public
disclosure of all its transactions involving public interest." The Constitution could not have
contemplated a Congress of invisible and unaccountable John and Mary Does. A law whose
rationale is a riddle and whose authorship is obscure cannot bind the people.
All these notwithstanding, respondents resort to the legal cosmetology that these additions and
deletions should govern the people as laws because the Bicameral Conference Committee Report
was anyway submitted to and approved by the Senate and the House of Representatives. The
submission may have some merit with respect to provisions agreed upon by the Committee in the
process of reconciling conflicts between S.B. No. 1630 and H.B. No. 11197. In these instances, the
conflicting provisions had been previously screened by the proper committees, deliberated upon by
both Houses and approved by them. It is, however, a different matter with respect to additions and
deletions which were entirely new and which were made not to reconcile inconsistencies between
S.B. No. 1630 and H.B. No. 11197. The members of the Bicameral Conference Committee did not
have any authority to add new provisions or delete provisions already approved by both Houses as it
was not necessary to discharge their limited task of reconciling differences in bills. At that late stage
of law making, the Conference Committee cannot add/delete provisions which can become laws
without undergoing the study and deliberation of both chambers given to bills on 1st, 2nd, and 3rd
readings. Even the Senate and the House cannot enact a law which will not undergo these
mandatory three (3) readings required by the Constitution. If the Senate and the House cannot enact
such a law, neither can the lesser Bicameral Conference Committee.
Moreover, the so-called choice given to the members of both Houses to either approve or
disapprove the said additions and deletions is more of an optical illusion. These additions and
deletions are not submitted separately for approval. They are tucked to the entire bill. The vote is on
the bill as a package, i.e., together with the insertions and deletions. And the vote is either "aye" or
"nay," without any further debate and deliberation. Quite often, legislators vote "yes" because they
approve of the bill as a whole although they may object to its amendments by the Conference
Committee. This lack of real choice is well observed by Robert Luce: 10
Their power lies chiefly in the fact that reports of conference committees must be
accepted without amendment or else rejected in toto. The impulse is to get done with
the matter and so the motion to accept has undue advantage, for some members are
sure to prefer swallowing unpalatable provisions rather than prolong controversy.
This is the more likely if the report comes in the rush of business toward the end of a
session, when to seek further conference might result in the loss of the measure
altogether. At any time in the session there is some risk of such a result following the
rejection of a conference report, for it may not be possible to secure a second
conference, or delay may give opposition to the main proposal chance to develop
more strength.
In a similar vein, Prof. Jack Davies commented that "conference reports are returned to assembly
and Senate on a take-it or leave-it-basis, and the bodies are generally placed in the position that to
leave-it is a practical impossibility." 11 Thus, he concludes that "conference committee action is the
most undemocratic procedure in the legislative process." 12
The respondents also contend that the additions and deletions made by the Bicameral Conference
Committee were in accord with legislative customs and usages. The argument does not persuade for
it misappreciates the value of customs and usages in the hierarchy of sources of legislative rules of
procedure. To be sure, every legislative assembly has the inherent right to promulgate its own
internal rules. In our jurisdiction, Article VI, section 16(3) of the Constitution provides that "Each
House may determine the rules of its proceedings ..." But it is hornbook law that the sources of
Rules of Procedure are many and hierarchical in character. Mason laid them down as follows: 13
xxx xxx xxx
1. Rules of Procedure are derived from several sources. The principal sources are as
follows:
a. Constitutional rules.
b. Statutory rules or charter provisions.
c. Adopted rules.
d. Judicial decisions.
e. Adopted parliamentary authority.
f. Parliamentary law.
g. Customs and usages.
2. The rules from the different sources take precedence in the order listed
above except that judicial decisions, since they are interpretations of rules from one
of the other sources, take the same precedence as the source interpreted. Thus, for
example, an interpretation of a constitutional provision takes precedence over a
statute.
3. Whenever there is conflict between rules from these sources the rule from the
source listed earlier prevails over the rule from the source listed, later. Thus, where
the Constitution requires three readings of bills, this provision controls over any
provision of statute, adopted rules, adopted manual, or of parliamentary law, and a
rule of parliamentary law controls over a local usage but must give way to any rule
from a higher source of authority. (Italics ours)
As discussed above, the unauthorized additions and deletions made by the Bicameral Conference
Committee violated the procedure fixed by the Constitution in the making of laws. It is reasonless for
respondents therefore to justify these insertions as sanctioned by customs and usages.
Finally, respondents seek sanctuary in the conclusiveness of an enrolled bill to bar any judicial
inquiry on whether Congress observed our constitutional procedure in the passage of R.A. No. 7716.
The enrolled bill theory is a historical relic that should not continuously rule us from the fossilized
past. It should be immediately emphasized that the enrolled bill theory originated in England where
there is no written constitution and where Parliament is supreme. 14 In this jurisdiction, we have a
written constitution and the legislature is a body of limited powers. Likewise, it must be pointed out
that starting from the decade of the 40's, even American courts have veered away from the rigidity
and unrealism of the conclusiveness of an enrolled bill. Prof. Sutherland observed: 15
xxx xxx xxx.
Where the failure of constitutional compliance in the enactment of statutes is not
discoverable from the face of the act itself but may be demonstrated by recourse to
the legislative journals, debates, committee reports or papers of the governor, courts
 have used several conflicting theories with which to dispose of the issue. They have
held: (1) that the enrolled bill is conclusive and like the sheriff's return cannot be
attacked; (2) that the enrolled bill is prima facie correct and only in case the
legislative journal shows affirmative contradiction of the constitutional requirement
will the bill be held invalid, (3) that although the enrolled bill is prima facie correct,
evidence from the journals, or other extrinsic sources is admissible to strike the bill
down; (4) that the legislative journal is conclusive and the enrolled bill is valid only if it
accords with the recital in the journal and the constitutional procedure.
Various jurisdictions have adopted these alternative approaches in view of strong dissent and
dissatisfaction against the philosophical underpinnings of the conclusiveness of an enrolled bill. Prof.
Sutherland further observed:
... Numerous reasons have been given for this rule. Traditionally, an enrolled bill was
'a record' and as such was not subject to attack at common law. Likewise, the rule of
conclusiveness was similar to the common law rule of the inviolability of the sheriff's
return. Indeed, they had the same origin, that is, the sheriff was an officer of the king
and likewise the parliamentary act was a regal act and no official might dispute the
king's word. Transposed to our democratic system of government, courts held that as
the legislature was an official branch of government the court must indulge every
presumption that the legislative act was valid. The doctrine of separation of powers
was advanced as a strong reason why the court should treat the acts of a co-ordinate
branch of government with the same respect as it treats the action of its own officers;
indeed, it was thought that it was entitled to even greater respect, else the court
might be in the position of reviewing the work of a supposedly equal branch of
government. When these arguments failed, as they frequently did, the doctrine of
convenience was advanced, that is, that it was not only an undue burden upon the
legislature to preserve its records to meet the attack of persons not affected by the
procedure of enactment, but also that it unnecessarily complicated litigation and
confused the trial of substantive issues.
Although many of these arguments are persuasive and are indeed the basis for the
rule in many states today, they are not invulnerable to attack. The rule most relied on
- the sheriff's return or sworn official rule - did not in civil litigation deprive the injured
party of an action, for always he could sue the sheriff upon his official bond. Likewise,
although collateral attack was not permitted, direct attack permitted raising the issue
of fraud, and at a later date attack in equity was also available; and that the evidence
of the sheriff was not of unusual weight was demonstrated by the fact that in an
action against the sheriff no presumption of its authenticity prevailed.
The argument that the enrolled bill is a 'record' and therefore unimpeachable is
likewise misleading, for the correction of records is a matter of established judicial
procedure. Apparently, the justification is either the historical one that the king's word
could not be questioned or the separation of powers principle that one branch of the
government must treat as valid the acts of another.
Persuasive as these arguments are, the tendency today is to avoid reaching results by artificial
presumptions and thus it would seem desirable to insist that the enrolled bill stand or fall on the
basis of the relevant evidence which may be submitted for or against it. (Italics ours)
Thus, as far back as the 1940's, Prof. Sutherland confirmed that "... the tendency seems to be
toward the abandonment of the conclusive presumption rule and the adoption of the third rule
leaving only a prima faciepresumption of validity which may be attacked by any authoritative source
of information." 16
I am not unaware that this Court has subscribed to the conclusiveness of an enrolled bill as
enunciated in the 1947 lead case of Mabanag v. Lopez Vito, and reiterated in subsequent cases. 17
With due respect, I submit that these rulings are no longer good law. Part of the ratiocination in
Mabanag states:
xxx xxx xxx
If for no other reason than that it conforms to the expressed policy of our law making
body, we choose to follow the rule. Section 313 of the old Code of Civil Procedure, as
amended by Act No. 2210, provides: 'Official documents' may be proved as follows: *
* * (2) the proceedings of the Philippine Commission, or of any legislative body that
may be provided for in the Philippine Islands, or of Congress, by the journals of those
bodies or of either house thereof, or by published statutes or resolutions, or by
copies certified by the clerk or secretary, or printed by their order; Provided, That in
the case of Acts of the Philippine Commission or the Philippine Legislature, when
there is an existence of a copy signed by the presiding officers and secretaries of
said bodies, it shall be conclusive proof of the provisions of such Acts and of the due
enactment thereof.
Suffice to state that section 313 of the Old Code of Civil Procedure as amended by Act No. 2210 is
no longer in our statute books. It has long been repealed by the Rules of Court. Mabanag also relied
on jurisprudence and authorities in the United States which are under severe criticisms by modern
scholars. Hence, even in the United States the conclusiveness of an enrolled bill has been junked by
most of the States. It is also true that as late as last year, in the case of Philippine Judges
Association v. Prado, op. cit., this Court still relied on the conclusiveness of an enrolled bill as it
refused to invalidate a provision of law on the ground that it was merely inserted by the bicameral
conference committee of both Houses. Prado, however, is distinguishable. In Prado, the alleged
insertion of the second paragraph of section 35 of R.A. No. 7354 repealing the franking privilege of
the judiciary does not appear to be an uncontested fact. In the case at bench, the numerous
additions/deletions made by the Bicameral Conference Committee as detailed by petitioners
Tolentino and Salonga are not disputed by the respondents. In Prado, the Court was not also
confronted with the argument that it can no longer rely on the conclusiveness of an enrolled bill in
light of the new provision in the Constitution defining judicial power. More specifically, section 1 of
Article VIII now provides:
Section 1.The judicial power shall be vested in one Supreme Court and in such lower
courts as may be established by law.
Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of the
Government. (Italics supplied)
Former Chief Justice Roberto R. Concepcion, the sponsor of this provision in the Constitutional
Commission explained the sense and the reach of judicial power as follows: 18
xxx xxx xxx
... In other words, the judiciary is the final arbiter on the question of whether or not a
branch of government or any of its officials has acted without jurisdiction or in excess
of jurisdiction, or so capriciously as to constitute an abuse of discretion amounting to
excess of jurisdiction. This is not only a judicial power but a duty to pass judgment on
matters of this nature.
This is the background of paragraph 2 of Section 1, which means that the courts
cannot hereafter evade the duty to settle matters of this nature, by claiming that such
matters constitute political question. (Italics ours)
The Constitution cannot be any clearer. What it granted to this Court is not a mere power which it
can decline to exercise. Precisely to deter this disinclination, the Constitution imposed it as a duty of
this Court to strike down any act of a branch or instrumentality of government or any of its officials
done with grave abuse of discretion amounting to lack or excess of jurisdiction. Rightly or wrongly,
the Constitution has elongated the checking powers of this Court against the other branches of
government despite their more democratic character, the President and the legislators being elected
by the people.
It is, however, theorized that this provision is nothing new. 19 I beg to disagree for the view misses the
significant changes made in our constitutional canvass to cure the legal deficiencies we discovered
during martial law. One of the areas radically changed by the framers of the 1987 Constitution is the
imbalance of power between and among the three great branches of our government - the
Executive, the Legislative and the Judiciary. To upgrade the powers of the Judiciary, the
Constitutional Commission strengthened some more the independence of courts. Thus, it further
protected the security of tenure of the members of the Judiciary by providing "No law shall be
passed reorganizing the Judiciary when it undermines the security of tenure of its Members." 20 It
also guaranteed fiscal autonomy to the Judiciary. 21
More, it depoliticalized appointments in the judiciary by creating the Judicial and Bar Council which
was tasked with screening the list of prospective appointees to the judiciary. 22 The power of
confirming appointments to the judiciary was also taken away from Congress. 23 The President was
likewise given a specific time to fill up vacancies in the judiciary - ninety (90) days from the
occurrence of the vacancy in case of the Supreme Court 24 and ninety (90) days from the submission
of the list of recommendees by the Judicial and Bar Council in case of vacancies in the lower
courts. 25 To further insulate appointments in the judiciary from the virus of politics, the Supreme
Court was given the power to "appoint all officials and employees of the Judiciary in accordance with
the Civil Service Law." 26 And to make the separation of the judiciary from the other branches of
government more watertight, it prohibited members of the judiciary to be " ... designated to any
agency performing quasi judicial or administrative functions." 27 While the Constitution strengthened
the sinews of the Supreme Court, it reduced the powers of the two other branches of government,
especially the Executive. Notable of the powers of the President clipped by the Constitution is his
power to suspend the writ of habeas corpus and to proclaim martial law. The exercise of this power
is now subject to revocation by Congress. Likewise, the sufficiency of the factual basis for the
exercise of said power may be reviewed by this Court in an appropriate proceeding filed by any
citizen. 28
The provision defining judicial power as including the "duty of the courts of justice ... to determine
whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction
on the part of any branch or instrumentality of the Government" constitutes the capstone of the
efforts of the Constitutional Commission to upgrade the powers of this Court vis-a-vis the other
branches of government. This provision was dictated by our experience under martial law which
taught us that a stronger and more independent judiciary is needed to abort abuses in government.
As sharply stressed by petitioner Salonga, this provision is distinctly Filipino and its interpretation
should not be depreciated by undue reliance on inapplicable foreign jurisprudence. It is thus crystal
clear that unlike other Supreme Courts, this Court has been mandated by our new Constitution to be
a more active agent in annulling acts of grave abuse of discretion committed by a branch of
government or any of its officials. This new role, however, will not compel the Court, appropriately
defined by Prof. A. Bickel as the least dangerous branch of government, to assume imperial powers
and run roughshod over the principle of separation of power for that is judicial tyranny by any
language. But while respecting the essential of the principle of separation of power, the Court is not
to be restricted by its non-essentials. Applied to the case at bench, by voiding R.A. No. 7716 on the
ground that its enactment violated the procedure imposed by the Constitution in lawmaking, the
Court is not by any means wrecking the wall separating the powers between the legislature and the
judiciary. For in so doing, the Court is not engaging in lawmaking which is the essence of legislative
power. But the Court's interposition of power should not be defeated by the conclusiveness of the
enrolled bill. A resort to this fiction will result in the enactment of laws not properly deliberated upon
and passed by Congress. Certainly, the enrolled bill theory was not conceived to cover up violations
of the constitutional procedure in law making, a procedure intended to assure the passage of good
laws. The conclusiveness of the enrolled bill can, therefore, be disregarded for it is not necessary to
preserve the principle of separation of powers.
In sum, I submit that in imposing to this Court the duty to annul acts of government committed with
grave abuse of discretion, the new Constitution transformed this Court from passivity to activism.
This transformation, dictated by our distinct experience as a nation, is not merely evolutionary but
revolutionary. Under the 1935 and 1973 Constitutions, this Court approached constitutional violations
by initially determining what it cannot do; under the 1987 Constitution, there is a shift in stress - this
Court is mandated to approach constitutional violations not by finding out what it should not do but
what it must do. The Court must discharge this solemn duty by not resuscitating a past that petrifies
the present.
I vote to declare R.A. No. 7716 unconstitutional.

BELLOSILLO, J.:
With a consensus already reached after due deliberations, silence perhaps should be the better part
of discretion, except to vote. The different views and opinions expressed are so persuasive and
convincing; they are more than enough to sway the pendulum for or against the subject petitions.
The penetrating and scholarly dissertations of my brethren should dispense with further arguments
which may only confound and confuse even the most learned of men.
But there is a crucial point, a constitutional issue which, I submit, has been belittled, treated lightly, if
not almost considered insignificant and purposeless. It is elementary, as much as it is fundamental. I
am referring to the word "exclusively" appearing in Sec. 24, Art. VI, of our 1987 Constitution. This is
regrettable, to say the least, as it involves a constitutional mandate which, wittingly or unwittingly,
has been cast aside as trivial and meaningless.
A comparison of the particular provision on the enactment of revenue bills in the U.S. Constitution
with its counterpart in the Philippine Constitution will help explain my position.
Under the U.S. Constitution, "[a]ll bills for raising revenue shall originate in the House of
Representatives; but the Senate may propose or concur with amendments as on other bills" (Sec. 7,
par. [1], Art. I). In contrast, our 1987 Constitution reads: "All appropriation, revenue or tariff bills, bills
authorizing increase of the public debt, bills of local application, and private bills shall
originate exclusively in the House of Representatives, but the Senate may propose or concur with
amendments" (Sec. 24, Art. VI; Italics supplied).
As may be gleaned from the pertinent provision of our Constitution, all revenue bills are required to
originate "exclusively" in the House of Representatives. On the other hand, the U.S. Constitution
does not use the word "exclusively;" it merely says, "[a]ll bills for raising revenue shall originate in the
House of Representatives."
Since the term "exclusively" has already been adequately defined in the various opinions, as to
which there seems to be no dispute, I shall no longer offer my own definition.
Verily, the provision in our Constitution requiring that all revenue bills shall originate exclusively from
the Lower House is mandatory. The word "exclusively" is an "exclusive word," which is indicative of
an intent that the provision is mandatory. 1 Hence, all American authorities expounding on the
meaning and application of Sec. 7, par. (1), Art. I, of the U.S. Constitution cannot be used in the
interpretation of Sec. 24, Art. VI, of our 1987 Constitution which has a distinct feature of
"exclusiveness" all its own. Thus, when our Constitution absolutely requires - as it is mandatory - that
a particular bill should exclusively emanate from the Lower House, there is no alternative to the
requirement that the bill to become valid law must originate exclusively from that House.
In the interpretation of constitutions, questions frequently arise as to whether particular sections are
mandatory or directory. The courts usually hesitate to declare that a constitutional provision is
directory merely in view of the tendency of the legislature to disregard provisions which are not said
to be mandatory. Accordingly, it is the general rule to regard constitutional provisions as mandatory,
and not to leave any discretion to the will of the legislature to obey or disregard them. This
presumption as to mandatory quality is usually followed unless it is unmistakably manifest that the
provisions are intended to be merely directory. So strong is the inclination in favor of giving obligatory
force to the terms of the organic law that it has even been said that neither by the courts nor by any
other department of the government may any provision of the Constitution be regarded as merely
directory, but that each and everyone of its provisions should be treated as imperative and
mandatory, without reference to the rules and distinguishing between the directory and the
mandatory statutes. 2
The framers of our 1987 Constitution could not have used the term "exclusively" if they only meant to
replicate and adopt in toto the U.S. version. By inserting "exclusively" in Sec. 24, Art. VI, of our
Constitution, their message is clear: they wanted it different, strong, stringent. There must be a
compelling reason for the inclusion of the word "exclusively," which cannot be an act of retrogression
but progression, an improvement on its precursor. Thus, "exclusively" must be given its true
meaning, its purpose observed and virtue recognized, for it could not have been conceived to be of
minor consequence. That construction is to be sought which gives effect to the whole of the statute -
its every word. Ut magis valeat quam pereat.
Consequently, any reference to American authorities, decisions and opinions, however wisely and
delicately put, can only mislead in the interpretation of our own Constitution. To refer to them in
defending the constitutionality of R.A. 7716, subject of the present petitions, is to argue on a false
premise, i.e., that Sec. 24, Art. VI, of our 1987 Constitution is, or means exactly, the same as Sec. 7,
par. (1), Art. I, of the U.S. Constitution, which is not correct. Hence, only a wrong conclusion can be
drawn from a wrong premise.
For example, it is argued that in the United States, from where our own legislature is patterned, the
Senate can practically substitute its own tax measure for that of the Lower House. Thus, according
to the Majority, citing an American case, "the validity of Sec. 37 which the Senate had inserted in the
Tariff Act of 1909 by imposing an ad valorem tax based on the weight of vessels, was upheld against
the claim that the revenue bill originated in the Senate in contravention of Art. I, Sec. 7, of the U.S.
Constitution." 3 In an effort to be more convincing, the Majority even quotes the footnote
in Introduction to American Government by F.A. Ogg and P.O. Ray which reads -
Thus in 1883 the upper house struck out everything after the enacting clause of a
tariff bill and wrote its own measure, which the House eventually felt obliged to
accept. It likewise added 847 amendments to the Payne-Aldrich tariff act of 1909,
dictated the schedules of the emergency tariff act of 1921, rewrote an extensive tax
revision bill in the same year, and recast most of the permanent tariff bill of 1922 4 -
which in fact suggests, very clearly, that the subject revenue bill actually originated from the Lower
House and was only amended, perhaps considerably, by the Senate after it was passed by the
former and transmitted to the latter.
In the cases cited, where the statutes passed by the U.S. Congress were upheld, the revenue bills
did not actually originate from the Senate but, in fact, from the Lower House. Thus, the Supreme
Court of the United States, speaking through Chief Justice White in Rainey v. United States 5 upheld
the revenue bill passed by Congress and adopted the ruling of the lower court that -
... the section in question is not void as a bill for raising revenue originating in the
Senate and not in the House of Representatives. It appears that the section was
proposed by the Senate as an amendment to a bill for raising revenue which
originated in the House. That is sufficient.
Flint v. Stone Tracy Co., 6 on which the Solicitor General heavily leans in his Consolidated Comment
as well as in his Memorandum, does not support the thesis of the Majority since the subject bill
therein actually originated from the Lower House and not from the Senate, and the amendment
merely covered a certain provision in the House bill.
In fine, in the cases cited which were lifted from American authorities, it appears that the revenue
bills in question actually originated from the House of Representatives and were amended by the
Senate only after they were transmitted to it. Perhaps, if the factual circumstances in those cases
were exactly the same as the ones at bench, then the subject revenue or tariff bill may be upheld in
this jurisdiction on the principle of substantial compliance, as they were in the United States, except
possibly in instances where the House bill undergoes what is now referred to as "amendment by
substitution," for that would be in derogation of our Constitution which vests solely in the House of
Representatives the power to initiate revenue bills. A Senate amendment by substitution simply
means that the bill in question did not in effect originate from the lower chamber but from the upper
chamber and not disguises itself as a mere amendment of the House version.
It is also theorized that in the U.S., amendment by substitution is recognized. That may be true. But
the process may be validly effective only under the U.S. Constitution. The cases before us present a
totally different factual backdrop. Several months before the Lower House could even pass HB No.
11197, P.S. Res. No. 734 and SB No. 1129 had already been filed in the Senate. Worse, the Senate
subsequently approved SB No. 1630 "in substitution of SB No. 1129, taking into consideration P.S.
Res. No. 734 and HB No. 11197," and not HB No. 11197 itself "as amended." Here, the Senate could
not have proposed or concurred with amendments because there was nothing to concur with or
amend except its own bill. It must be stressed that the process of concurring or amending
presupposes that there exists a bill upon which concurrence may be based or amendments
introduced. The Senate should have reported out HB No. 11197, as amended, even if in the
amendment it took into consideration SB No. 1630. It should not have submitted to the Bicameral
Conference Committee SB No. 1630 which, admittedly, did not originate exclusively from the Lower
House.
But even assuming that in our jurisdiction a revenue bill of the Lower House may be amended by
substitution by the Senate - although I am not prepared to accept it in view of Sec. 24, Art. VI, of our
Constitution - still R.A. 7716 could not have been the result of amendment by substitution since the
Senate had no House bill to speak of that it could amend when the Senate started deliberating on its
own version.
Be that as it may, I cannot rest easy on the proposition that a constitutional mandate calling for the
exclusive power and prerogative of the House of Representatives may just be discarded and ignored
by the Senate. Since the Constitution is for the observance of all - the judiciary as well as the other
departments of government - and the judges are sworn to support its provisions, the courts are not
at liberty to overlook or disregard its commands. And it is not fair and just to impute to them undue
interference if they look into the validity of legislative enactments to determine whether the
fundamental law has been faithfully observed in the process. It is their duty to give effect to the
existing Constitution and to obey all constitutional provisions irrespective of their opinion as to the
wisdom of such provisions.
The rule is fixed that the duty in a proper case to declare a law unconstitutional cannot be declined
and must be performed in accordance with the deliberate judgment of the tribunal before which the
validity of the enactment is directly drawn into question. When it is clear that a statute transgresses
the authority vested in the legislature by the Constitution, it is the duty of the courts to declare the act
unconstitutional because they cannot shirk from it without violating their oaths of office. This duty of
the courts to maintain the Constitution as the fundamental law of the state is imperative and
unceasing; and, as Chief Justice Marshal said, whenever a statute is in violation of the fundamental
law, the courts must so adjudge and thereby give effect to the Constitution. Any other course would
lead to the destruction of the Constitution. Since the question as to the constitutionality of a statute is
a judicial matter, the courts will not decline the exercise of jurisdiction upon the suggestion that
action might be taken by political agencies in disregard of the judgment of the judicial tribunals. 7
It is my submission that the power and authority to originate revenue bills under our Constitution is
vested exclusively in the House of Representatives. Its members being more numerous than those
of the Senate, elected more frequently, and more directly represent the people, are therefore
considered better aware of the economic life of their individual constituencies. It is just proper that
revenue bills originate exclusively from them.
In this regard, we do not have to devote much time delving into American decisions and opinions
and invoke them in the interpretation of our own Constitution which is different from the American
version, particularly on the enactment of revenue bills. We have our own Constitution couched in a
language our own legislators thought best. Insofar as revenue bills are concerned, our Constitution
is not American; it is distinctively Filipino. And no amplitude of legerdemain can detract from our
constitutional requirement that all appropriation, revenue or tariff bills, bills authorizing increase of
the public debt, bills of local application, and private bills shall originate exclusively in the House of
Representatives, although the Senate may propose or concur with amendments.
In this milieu, I am left no option but to vote to grant the petitions and strike down R.A. 7716 as
unconstitutional.

EN BANC
G.R. No. 168056 September 1, 2005
ABAKADA GURO PARTY LIST (Formerly AASJAS) OFFICERS SAMSON S. ALCANTARA and
ED VINCENT S. ALBANO, Petitioners, 

vs.

THE HONORABLE EXECUTIVE SECRETARY EDUARDO ERMITA; HONORABLE SECRETARY
OF THE DEPARTMENT OF FINANCE CESAR PURISIMA; and HONORABLE COMMISSIONER
OF INTERNAL REVENUE GUILLERMO PARAYNO, JR., Respondent.
x-------------------------x
G.R. No. 168207
AQUILINO Q. PIMENTEL, JR., LUISA P. EJERCITO-ESTRADA, JINGGOY E. ESTRADA, PANFILO
M. LACSON, ALFREDO S. LIM, JAMBY A.S. MADRIGAL, AND SERGIO R. OSMEÑA III,
Petitioners, 

vs.

EXECUTIVE SECRETARY EDUARDO R. ERMITA, CESAR V. PURISIMA, SECRETARY OF
FINANCE, GUILLERMO L. PARAYNO, JR., COMMISSIONER OF THE BUREAU OF INTERNAL
REVENUE, Respondent.
x-------------------------x
G.R. No. 168461
ASSOCIATION OF PILIPINAS SHELL DEALERS, INC. represented by its President, ROSARIO
ANTONIO; PETRON DEALERS’ ASSOCIATION represented by its President, RUTH E. BARBIBI;
ASSOCIATION OF CALTEX DEALERS’ OF THE PHILIPPINES represented by its President,
MERCEDITAS A. GARCIA; ROSARIO ANTONIO doing business under the name and style of "ANB
NORTH SHELL SERVICE STATION"; LOURDES MARTINEZ doing business under the name and
style of "SHELL GATE – N. DOMINGO"; BETHZAIDA TAN doing business under the name and style
of "ADVANCE SHELL STATION"; REYNALDO P. MONTOYA doing business under the name and
style of "NEW LAMUAN SHELL SERVICE STATION"; EFREN SOTTO doing business under the
name and style of "RED FIELD SHELL SERVICE STATION"; DONICA CORPORATION represented
by its President, DESI TOMACRUZ; RUTH E. MARBIBI doing business under the name and style of
"R&R PETRON STATION"; PETER M. UNGSON doing business under the name and style of
"CLASSIC STAR GASOLINE SERVICE STATION"; MARIAN SHEILA A. LEE doing business under
the name and style of "NTE GASOLINE & SERVICE STATION"; JULIAN CESAR P. POSADAS
doing business under the name and style of "STARCARGA ENTERPRISES"; ADORACION
MAÑEBO doing business under the name and style of "CMA MOTORISTS CENTER"; SUSAN M.
ENTRATA doing business under the name and style of "LEONA’S GASOLINE STATION and
SERVICE CENTER"; CARMELITA BALDONADO doing business under the name and style of
"FIRST CHOICE SERVICE CENTER"; MERCEDITAS A. GARCIA doing business under the name
and style of "LORPED SERVICE CENTER"; RHEAMAR A. RAMOS doing business under the name
and style of "RJRAM PTT GAS STATION"; MA. ISABEL VIOLAGO doing business under the name
and style of "VIOLAGO-PTT SERVICE CENTER"; MOTORISTS’ HEART CORPORATION
represented by its Vice-President for Operations, JOSELITO F. FLORDELIZA; MOTORISTS’
HARVARD CORPORATION represented by its Vice-President for Operations, JOSELITO F.
FLORDELIZA; MOTORISTS’ HERITAGE CORPORATION represented by its Vice-President for
Operations, JOSELITO F. FLORDELIZA; PHILIPPINE STANDARD OIL CORPORATION
represented by its Vice-President for Operations, JOSELITO F. FLORDELIZA; ROMEO MANUEL
doing business under the name and style of "ROMMAN GASOLINE STATION"; ANTHONY ALBERT
CRUZ III doing business under the name and style of "TRUE SERVICE STATION", Petitioners, 

vs.

CESAR V. PURISIMA, in his capacity as Secretary of the Department of Finance and
GUILLERMO L. PARAYNO, JR., in his capacity as Commissioner of Internal
Revenue, Respondent.
x-------------------------x
G.R. No. 168463
FRANCIS JOSEPH G. ESCUDERO, VINCENT CRISOLOGO, EMMANUEL JOEL J. VILLANUEVA,
RODOLFO G. PLAZA, DARLENE ANTONINO-CUSTODIO, OSCAR G. MALAPITAN, BENJAMIN C.
AGARAO, JR. JUAN EDGARDO M. ANGARA, JUSTIN MARC SB. CHIPECO, FLORENCIO G.
NOEL, MUJIV S. HATAMAN, RENATO B. MAGTUBO, JOSEPH A. SANTIAGO, TEOFISTO DL.
GUINGONA III, RUY ELIAS C. LOPEZ, RODOLFO Q. AGBAYANI and TEODORO A. CASIÑO,
Petitioners, 

vs.

CESAR V. PURISIMA, in his capacity as Secretary of Finance, GUILLERMO L. PARAYNO, JR.,
in his capacity as Commissioner of Internal Revenue, and EDUARDO R. ERMITA, in his
capacity as Executive Secretary,Respondent.
x-------------------------x
G.R. No. 168730
BATAAN GOVERNOR ENRIQUE T. GARCIA, JR. Petitioner, 

vs. 

HON. EDUARDO R. ERMITA, in his capacity as the Executive Secretary; HON. MARGARITO
TEVES, in his capacity as Secretary of Finance; HON. JOSE MARIO BUNAG, in his capacity as the
OIC Commissioner of the Bureau of Internal Revenue; and HON. ALEXANDER AREVALO, in his
capacity as the OIC Commissioner of the Bureau of Customs, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
The expenses of government, having for their object the interest of all, should be borne by everyone,
and the more man enjoys the advantages of society, the more he ought to hold himself honored in
contributing to those expenses.
-Anne Robert Jacques Turgot (1727-1781)
French statesman and economist
Mounting budget deficit, revenue generation, inadequate fiscal allocation for education, increased
emoluments for health workers, and wider coverage for full value-added tax benefits … these are the
reasons why Republic Act No. 9337 (R.A. No. 9337)1 was enacted. Reasons, the wisdom of which,
the Court even with its extensive constitutional power of review, cannot probe. The petitioners in
these cases, however, question not only the wisdom of the law, but also perceived constitutional
infirmities in its passage.
Every law enjoys in its favor the presumption of constitutionality. Their arguments notwithstanding,
petitioners failed to justify their call for the invalidity of the law. Hence, R.A. No. 9337 is not
unconstitutional.
LEGISLATIVE HISTORY
R.A. No. 9337 is a consolidation of three legislative bills namely, House Bill Nos. 3555 and 3705, and
Senate Bill No. 1950.
House Bill No. 35552 was introduced on first reading on January 7, 2005. The House Committee on
Ways and Means approved the bill, in substitution of House Bill No. 1468, which Representative
(Rep.) Eric D. Singson introduced on August 8, 2004. The President certified the bill on January 7,
2005 for immediate enactment. On January 27, 2005, the House of Representatives approved the
bill on second and third reading.
House Bill No. 37053 on the other hand, substituted House Bill No. 3105 introduced by Rep.
Salacnib F. Baterina, and House Bill No. 3381 introduced by Rep. Jacinto V. Paras. Its "mother bill"
is House Bill No. 3555. The House Committee on Ways and Means approved the bill on February 2,
2005. The President also certified it as urgent on February 8, 2005. The House of Representatives
approved the bill on second and third reading on February 28, 2005.
Meanwhile, the Senate Committee on Ways and Means approved Senate Bill No. 19504 on March
7, 2005, "in substitution of Senate Bill Nos. 1337, 1838 and 1873, taking into consideration House
Bill Nos. 3555 and 3705." Senator Ralph G. Recto sponsored Senate Bill No. 1337, while Senate Bill
Nos. 1838 and 1873 were both sponsored by Sens. Franklin M. Drilon, Juan M. Flavier and Francis
N. Pangilinan. The President certified the bill on March 11, 2005, and was approved by the Senate
on second and third reading on April 13, 2005.
On the same date, April 13, 2005, the Senate agreed to the request of the House of Representatives
for a committee conference on the disagreeing provisions of the proposed bills.
Before long, the Conference Committee on the Disagreeing Provisions of House Bill No. 3555,
House Bill No. 3705, and Senate Bill No. 1950, "after having met and discussed in full free and
conference," recommended the approval of its report, which the Senate did on May 10, 2005, and
with the House of Representatives agreeing thereto the next day, May 11, 2005.
On May 23, 2005, the enrolled copy of the consolidated House and Senate version was transmitted
to the President, who signed the same into law on May 24, 2005. Thus, came R.A. No. 9337.
July 1, 2005 is the effectivity date of R.A. No. 9337.5 When said date came, the Court issued a
temporary restraining order, effective immediately and continuing until further orders, enjoining
respondents from enforcing and implementing the law.
Oral arguments were held on July 14, 2005. Significantly, during the hearing, the Court speaking
through Mr. Justice Artemio V. Panganiban, voiced the rationale for its issuance of the temporary
restraining order on July 1, 2005, to wit:
J. PANGANIBAN : . . . But before I go into the details of your presentation, let me just tell you a little
background. You know when the law took effect on July 1, 2005, the Court issued a TRO at about 5
o’clock in the afternoon. But before that, there was a lot of complaints aired on television and on
radio. Some people in a gas station were complaining that the gas prices went up by 10%. Some
people were complaining that their electric bill will go up by 10%. Other times people riding in
domestic air carrier were complaining that the prices that they’ll have to pay would have to go up by
10%. While all that was being aired, per your presentation and per our own understanding of the law,
that’s not true. It’s not true that the e-vat law necessarily increased prices by 10% uniformly isn’t it?
ATTY. BANIQUED : No, Your Honor.
J. PANGANIBAN : It is not?
ATTY. BANIQUED : It’s not, because, Your Honor, there is an Executive Order that granted the
Petroleum companies some subsidy . . . interrupted
J. PANGANIBAN : That’s correct . . .
ATTY. BANIQUED : . . . and therefore that was meant to temper the impact . . . interrupted
J. PANGANIBAN : . . . mitigating measures . . .
ATTY. BANIQUED : Yes, Your Honor.
J. PANGANIBAN : As a matter of fact a part of the mitigating measures would be the elimination of
the Excise Tax and the import duties. That is why, it is not correct to say that the VAT as to petroleum
dealers increased prices by 10%.
ATTY. BANIQUED : Yes, Your Honor.
J. PANGANIBAN : And therefore, there is no justification for increasing the retail price by 10% to
cover the E-Vat tax. If you consider the excise tax and the import duties, the Net Tax would probably
be in the neighborhood of 7%? We are not going into exact figures I am just trying to deliver a point
that different industries, different products, different services are hit differently. So it’s not correct to
say that all prices must go up by 10%.
ATTY. BANIQUED : You’re right, Your Honor.
J. PANGANIBAN : Now. For instance, Domestic Airline companies, Mr. Counsel, are at present
imposed a Sales Tax of 3%. When this E-Vat law took effect the Sales Tax was also removed as a
mitigating measure. So, therefore, there is no justification to increase the fares by 10% at best 7%,
correct?
ATTY. BANIQUED : I guess so, Your Honor, yes.
J. PANGANIBAN : There are other products that the people were complaining on that first day, were
being increased arbitrarily by 10%. And that’s one reason among many others this Court had to
issue TRO because of the confusion in the implementation. That’s why we added as an issue in this
case, even if it’s tangentially taken up by the pleadings of the parties, the confusion in the
implementation of the E-vat. Our people were subjected to the mercy of that confusion of an across
the board increase of 10%, which you yourself now admit and I think even the Government will admit
is incorrect. In some cases, it should be 3% only, in some cases it should be 6% depending on these
mitigating measures and the location and situation of each product, of each service, of each
company, isn’t it?
ATTY. BANIQUED : Yes, Your Honor.
J. PANGANIBAN : Alright. So that’s one reason why we had to issue a TRO pending the clarification
of all these and we wish the government will take time to clarify all these by means of a more
detailed implementing rules, in case the law is upheld by this Court. . . .6
The Court also directed the parties to file their respective Memoranda.
G.R. No. 168056
Before R.A. No. 9337 took effect, petitioners ABAKADA GURO Party List, et al., filed a petition for
prohibition on May 27, 2005. They question the constitutionality of Sections 4, 5 and 6 of R.A. No.
9337, amending Sections 106, 107 and 108, respectively, of the National Internal Revenue Code
(NIRC). Section 4 imposes a 10% VAT on sale of goods and properties, Section 5 imposes a 10%
VAT on importation of goods, and Section 6 imposes a 10% VAT on sale of services and use or
lease of properties. These questioned provisions contain a uniform proviso authorizing the President,
upon recommendation of the Secretary of Finance, to raise the VAT rate to 12%, effective January 1,
2006, after any of the following conditions have been satisfied, to wit:
. . . That the President, upon the recommendation of the Secretary of Finance, shall, effective
January 1, 2006, raise the rate of value-added tax to twelve percent (12%), after any of the following
conditions has been satisfied:
(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous
year exceeds two and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-
half percent (1 ½%).
Petitioners argue that the law is unconstitutional, as it constitutes abandonment by Congress of its
exclusive authority to fix the rate of taxes under Article VI, Section 28(2) of the 1987 Philippine
Constitution.
G.R. No. 168207
On June 9, 2005, Sen. Aquilino Q. Pimentel, Jr., et al., filed a petition for certiorari likewise assailing
the constitutionality of Sections 4, 5 and 6 of R.A. No. 9337.
Aside from questioning the so-called stand-by authority of the President to increase the VAT rate to
12%, on the ground that it amounts to an undue delegation of legislative power, petitioners also
contend that the increase in the VAT rate to 12% contingent on any of the two conditions being
satisfied violates the due process clause embodied in Article III, Section 1 of the Constitution, as it
imposes an unfair and additional tax burden on the people, in that: (1) the 12% increase is
ambiguous because it does not state if the rate would be returned to the original 10% if the
conditions are no longer satisfied; (2) the rate is unfair and unreasonable, as the people are unsure
of the applicable VAT rate from year to year; and (3) the increase in the VAT rate, which is supposed
to be an incentive to the President to raise the VAT collection to at least 2 4/5 of the GDP of the
previous year, should only be based on fiscal adequacy.
Petitioners further claim that the inclusion of a stand-by authority granted to the President by the
Bicameral Conference Committee is a violation of the "no-amendment rule" upon last reading of a
bill laid down in Article VI, Section 26(2) of the Constitution.
G.R. No. 168461
Thereafter, a petition for prohibition was filed on June 29, 2005, by the Association of Pilipinas Shell
Dealers, Inc., et al., assailing the following provisions of R.A. No. 9337:
1) Section 8, amending Section 110 (A)(2) of the NIRC, requiring that the input tax on depreciable
goods shall be amortized over a 60-month period, if the acquisition, excluding the VAT components,
exceeds One Million Pesos (₱1, 000,000.00);
2) Section 8, amending Section 110 (B) of the NIRC, imposing a 70% limit on the amount of input tax
to be credited against the output tax; and
3) Section 12, amending Section 114 (c) of the NIRC, authorizing the Government or any of its
political subdivisions, instrumentalities or agencies, including GOCCs, to deduct a 5% final
withholding tax on gross payments of goods and services, which are subject to 10% VAT under
Sections 106 (sale of goods and properties) and 108 (sale of services and use or lease of
properties) of the NIRC.
Petitioners contend that these provisions are unconstitutional for being arbitrary, oppressive,
excessive, and confiscatory.
Petitioners’ argument is premised on the constitutional right of non-deprivation of life, liberty or
property without due process of law under Article III, Section 1 of the Constitution. According to
petitioners, the contested sections impose limitations on the amount of input tax that may be
claimed. Petitioners also argue that the input tax partakes the nature of a property that may not be
confiscated, appropriated, or limited without due process of law. Petitioners further contend that like
any other property or property right, the input tax credit may be transferred or disposed of, and that
by limiting the same, the government gets to tax a profit or value-added even if there is no profit or
value-added.
Petitioners also believe that these provisions violate the constitutional guarantee of equal protection
of the law under Article III, Section 1 of the Constitution, as the limitation on the creditable input tax
if: (1) the entity has a high ratio of input tax; or (2) invests in capital equipment; or (3) has several
transactions with the government, is not based on real and substantial differences to meet a valid
classification.
Lastly, petitioners contend that the 70% limit is anything but progressive, violative of Article VI,
Section 28(1) of the Constitution, and that it is the smaller businesses with higher input tax to output
tax ratio that will suffer the consequences thereof for it wipes out whatever meager margins the
petitioners make.
G.R. No. 168463
Several members of the House of Representatives led by Rep. Francis Joseph G. Escudero filed
this petition for certiorari on June 30, 2005. They question the constitutionality of R.A. No. 9337 on
the following grounds:
1) Sections 4, 5, and 6 of R.A. No. 9337 constitute an undue delegation of legislative power, in
violation of Article VI, Section 28(2) of the Constitution;
2) The Bicameral Conference Committee acted without jurisdiction in deleting the no pass
on provisions present in Senate Bill No. 1950 and House Bill No. 3705; and
3) Insertion by the Bicameral Conference Committee of Sections 27, 28, 34, 116, 117, 119, 121,
125,7 148, 151, 236, 237 and 288, which were present in Senate Bill No. 1950, violates Article VI,
Section 24(1) of the Constitution, which provides that all appropriation, revenue or tariff bills shall
originate exclusively in the House of Representatives
G.R. No. 168730
On the eleventh hour, Governor Enrique T. Garcia filed a petition for certiorari and prohibition on July
20, 2005, alleging unconstitutionality of the law on the ground that the limitation on the creditable
input tax in effect allows VAT-registered establishments to retain a portion of the taxes they collect,
thus violating the principle that tax collection and revenue should be solely allocated for public
purposes and expenditures. Petitioner Garcia further claims that allowing these establishments to
 pass on the tax to the consumers is inequitable, in violation of Article VI, Section 28(1) of the
Constitution.
RESPONDENTS’ COMMENT
The Office of the Solicitor General (OSG) filed a Comment in behalf of respondents. Preliminarily,
respondents contend that R.A. No. 9337 enjoys the presumption of constitutionality and petitioners
failed to cast doubt on its validity.
Relying on the case of Tolentino vs. Secretary of Finance, 235 SCRA
630 (1994), respondents argue that the procedural issues raised by petitioners, i.e., legality of the
bicameral proceedings, exclusive origination of revenue measures and the power of the Senate
concomitant thereto, have already been settled. With regard to the issue of undue delegation of
legislative power to the President, respondents contend that the law is complete and leaves no
discretion to the President but to increase the rate to 12% once any of the two conditions provided
therein arise.
Respondents also refute petitioners’ argument that the increase to 12%, as well as the 70%
limitation on the creditable input tax, the 60-month amortization on the purchase or importation of
capital goods exceeding ₱1,000,000.00, and the 5% final withholding tax by government agencies,
is arbitrary, oppressive, and confiscatory, and that it violates the constitutional principle on
progressive taxation, among others.
Finally, respondents manifest that R.A. No. 9337 is the anchor of the government’s fiscal reform
agenda. A reform in the value-added system of taxation is the core revenue measure that will tilt the
balance towards a sustainable macroeconomic environment necessary for economic growth.
ISSUES
The Court defined the issues, as follows:
PROCEDURAL ISSUE
Whether R.A. No. 9337 violates the following provisions of the Constitution:
a. Article VI, Section 24, and
b. Article VI, Section 26(2)
SUBSTANTIVE ISSUES
1. Whether Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108 of the NIRC,
violate the following provisions of the Constitution:
a. Article VI, Section 28(1), and
b. Article VI, Section 28(2)
2. Whether Section 8 of R.A. No. 9337, amending Sections 110(A)(2) and 110(B) of the NIRC; and
Section 12 of R.A. No. 9337, amending Section 114(C) of the NIRC, violate the following provisions
of the Constitution:
a. Article VI, Section 28(1), and
b. Article III, Section 1
RULING OF THE COURT
As a prelude, the Court deems it apt to restate the general principles and concepts of value-added
tax (VAT), as the confusion and inevitably, litigation, breeds from a fallacious notion of its nature.
The VAT is a tax on spending or consumption. It is levied on the sale, barter, exchange or lease of
goods or properties and services.8 Being an indirect tax on expenditure, the seller of goods or
services may pass on the amount of tax paid to the buyer,9 with the seller acting merely as a tax
collector.10 The burden of VAT is intended to fall on the immediate buyers and ultimately, the end-
consumers.
In contrast, a direct tax is a tax for which a taxpayer is directly liable on the transaction or business it
engages in, without transferring the burden to someone else.11 Examples are individual and
corporate income taxes, transfer taxes, and residence taxes.12
In the Philippines, the value-added system of sales taxation has long been in existence, albeit in a
different mode. Prior to 1978, the system was a single-stage tax computed under the "cost deduction
method" and was payable only by the original sellers. The single-stage system was subsequently
modified, and a mixture of the "cost deduction method" and "tax credit method" was used to
determine the value-added tax payable.13 Under the "tax credit method," an entity can credit against
or subtract from the VAT charged on its sales or outputs the VAT paid on its purchases, inputs and
imports.14
It was only in 1987, when President Corazon C. Aquino issued Executive Order No. 273, that the
VAT system was rationalized by imposing a multi-stage tax rate of 0% or 10% on all sales using the
"tax credit method."15
E.O. No. 273 was followed by R.A. No. 7716 or the Expanded VAT Law,16 R.A. No. 8241 or the
Improved VAT Law,17 R.A. No. 8424 or the Tax Reform Act of 1997,18 and finally, the presently
beleaguered R.A. No. 9337, also referred to by respondents as the VAT Reform Act.
The Court will now discuss the issues in logical sequence.
PROCEDURAL ISSUE
I.
Whether R.A. No. 9337 violates the following provisions of the Constitution:
a. Article VI, Section 24, and
b. Article VI, Section 26(2)
A. The Bicameral Conference Committee
Petitioners Escudero, et al., and Pimentel, et al., allege that the Bicameral Conference Committee
exceeded its authority by:
1) Inserting the stand-by authority in favor of the President in Sections 4, 5, and 6 of R.A. No. 9337;
2) Deleting entirely the no pass-on provisions found in both the House and Senate bills;
3) Inserting the provision imposing a 70% limit on the amount of input tax to be credited against the
output tax; and
4) Including the amendments introduced only by Senate Bill No. 1950 regarding other kinds of taxes
in addition to the value-added tax.
Petitioners now beseech the Court to define the powers of the Bicameral Conference Committee.
It should be borne in mind that the power of internal regulation and discipline are intrinsic in any
legislative body for, as unerringly elucidated by Justice Story, "[i]f the power did not exist, it would
be utterly impracticable to transact the business of the nation, either at all, or at least with
decency, deliberation, and order."19 Thus, Article VI, Section 16 (3) of the Constitution provides
that "each House may determine the rules of its proceedings." Pursuant to this inherent
constitutional power to promulgate and implement its own rules of procedure, the respective rules of
each house of Congress provided for the creation of a Bicameral Conference Committee.
Thus, Rule XIV, Sections 88 and 89 of the Rules of House of Representatives provides as follows:
Sec. 88. Conference Committee. – In the event that the House does not agree with the Senate on
the amendment to any bill or joint resolution, the differences may be settled by the conference
committees of both chambers.
In resolving the differences with the Senate, the House panel shall, as much as possible, adhere to
and support the House Bill. If the differences with the Senate are so substantial that they materially
impair the House Bill, the panel shall report such fact to the House for the latter’s appropriate action.
Sec. 89. Conference Committee Reports. – . . . Each report shall contain a detailed, sufficiently
explicit statement of the changes in or amendments to the subject measure.
...
The Chairman of the House panel may be interpellated on the Conference Committee Report prior
to the voting thereon. The House shall vote on the Conference Committee Report in the same
manner and procedure as it votes on a bill on third and final reading.
Rule XII, Section 35 of the Rules of the Senate states:
Sec. 35. In the event that the Senate does not agree with the House of Representatives on the
provision of any bill or joint resolution, the differences shall be settled by a conference committee of
both Houses which shall meet within ten (10) days after their composition. The President shall
designate the members of the Senate Panel in the conference committee with the approval of the
Senate.
Each Conference Committee Report shall contain a detailed and sufficiently explicit statement of the
changes in, or amendments to the subject measure, and shall be signed by a majority of the
members of each House panel, voting separately.
A comparative presentation of the conflicting House and Senate provisions and a reconciled version
thereof with the explanatory statement of the conference committee shall be attached to the report.
...
The creation of such conference committee was apparently in response to a problem, not addressed
by any constitutional provision, where the two houses of Congress find themselves in disagreement
over changes or amendments introduced by the other house in a legislative bill. Given that one of
the most basic powers of the legislative branch is to formulate and implement its own rules of
proceedings and to discipline its members, may the Court then delve into the details of how
Congress complies with its internal rules or how it conducts its business of passing legislation? Note
that in the present petitions, the issue is not whether provisions of the rules of both houses creating
the bicameral conference committee are unconstitutional, but whether the bicameral conference
committee has strictly complied with the rules of both houses, thereby remaining within the
jurisdiction conferred upon it by Congress.
In the recent case of Fariñas vs. The Executive Secretary,20 the Court En
Banc, unanimously reiterated and emphasized its adherence to the "enrolled bill doctrine," thus,
declining therein petitioners’ plea for the Court to go behind the enrolled copy of the bill. Assailed in
said case was Congress’s creation of two sets of bicameral conference committees, the lack of
records of said committees’ proceedings, the alleged violation of said committees of the rules of both
houses, and the disappearance or deletion of one of the provisions in the compromise bill submitted
by the bicameral conference committee. It was argued that such irregularities in the passage of the
law nullified R.A. No. 9006, or the Fair Election Act.
Striking down such argument, the Court held thus:
Under the "enrolled bill doctrine," the signing of a bill by the Speaker of the House and the Senate
President and the certification of the Secretaries of both Houses of Congress that it was passed are
conclusive of its due enactment. A review of cases reveals the Court’s consistent adherence to the
rule. The Court finds no reason to deviate from the salutary rule in this case where the
irregularities alleged by the petitioners mostly involved the internal rules of Congress, e.g.,
creation of the 2nd or 3rd Bicameral Conference Committee by the House. This Court is not
the proper forum for the enforcement of these internal rules of Congress, whether House or
Senate. Parliamentary rules are merely procedural and with their observance the courts have
no concern. Whatever doubts there may be as to the formal validity of Rep. Act No. 9006 must
be resolved in its favor.The Court reiterates its ruling in Arroyo vs. De Venecia, viz.:
But the cases, both here and abroad, in varying forms of expression, all deny to the courts the
power to inquire into allegations that, in enacting a law, a House of Congress failed to comply
with its own rules, in the absence of showing that there was a violation of a constitutional
provision or the rights of private individuals. In Osmeña v. Pendatun, it was held: "At any rate,
courts have declared that ‘the rules adopted by deliberative bodies are subject to revocation,
modification or waiver at the pleasure of the body adopting them.’ And it has been said that
"Parliamentary rules are merely procedural, and with their observance, the courts have no
concern. They may be waived or disregarded by the legislative body." Consequently, "mere
failure to conform to parliamentary usage will not invalidate the action (taken by a
deliberative body) when the requisite number of members have agreed to a particular
measure."21 (Emphasis supplied)
The foregoing declaration is exactly in point with the present cases, where petitioners allege
irregularities committed by the conference committee in introducing changes or deleting provisions in
the House and Senate bills. Akin to the Fariñas case,22 the present petitions also raise an issue
regarding the actions taken by the conference committee on matters regarding Congress’
compliance with its own internal rules. As stated earlier, one of the most basic and inherent power of
the legislature is the power to formulate rules for its proceedings and the discipline of its members.
Congress is the best judge of how it should conduct its own business expeditiously and in the most
orderly manner. It is also the sole
concern of Congress to instill discipline among the members of its conference committee if it
believes that said members violated any of its rules of proceedings. Even the expanded jurisdiction
of this Court cannot apply to questions regarding only the internal operation of Congress, thus, the
Court is wont to deny a review of the internal proceedings of a co-equal branch of government.
Moreover, as far back as 1994 or more than ten years ago, in the case of Tolentino vs. Secretary of
Finance,23 the Court already made the pronouncement that "[i]f a change is desired in the practice
[of the Bicameral Conference Committee] it must be sought in Congress since this question
is not covered by any constitutional provision but is only an internal rule of each house." 24 To
date, Congress has not seen it fit to make such changes adverted to by the Court. It seems,
therefore, that Congress finds the practices of the bicameral conference committee to be very useful
for purposes of prompt and efficient legislative action.
Nevertheless, just to put minds at ease that no blatant irregularities tainted the proceedings of the
bicameral conference committees, the Court deems it necessary to dwell on the issue. The Court
observes that there was a necessity for a conference committee because a comparison of the
provisions of House Bill Nos. 3555 and 3705 on one hand, and Senate Bill No. 1950 on the other,
reveals that there were indeed disagreements. As pointed out in the petitions, said disagreements
were as follows:

House Bill No. 3555 House Bill No.3705 Senate Bill No. 1950
With regard to "Stand-By Authority" in favor of President
Provides for 12% VAT on Provides for 12% VAT in Provides for a single rate of
every sale of goods or general on sales of goods or 10% VAT on sale of goods
properties (amending Sec. properties and reduced rates or properties (amending
106 of NIRC); 12% VAT on for sale of certain locally Sec. 106 of NIRC), 10%
importation of goods manufactured goods and VAT on sale of services
(amending Sec. 107 of petroleum products and raw including sale of electricity
NIRC); and 12% VAT on materials to be used in the by generation companies,
sale of services and use or manufacture thereof transmission and
lease of properties (amending Sec. 106 of NIRC); distribution companies, and
(amending Sec. 108 of 12% VAT on importation of use or lease of properties
NIRC) goods and reduced rates for (amending Sec. 108 of
certain imported products NIRC)
including petroleum products
(amending Sec. 107 of NIRC);
and 12% VAT on sale of
services and use or lease of
properties and a reduced rate
for certain services including
power generation (amending
Sec. 108 of NIRC)
With regard to the "no pass-on" provision
No similar provision Provides that the VAT imposed Provides that the VAT
on power generation and on imposed on sales of
the sale of petroleum products electricity by generation
shall be absorbed by companies and services of
generation companies or transmission companies
sellers, respectively, and shall and distribution companies,
not be passed on to as well as those of franchise
consumers grantees of electric utilities
shall not apply to residential
end-users. VAT shall be
absorbed by generation,
transmission, and
distribution companies.
With regard to 70% limit on input tax credit
Provides that the input tax No similar provision Provides that the input tax
credit for capital goods on credit for capital goods on
which a VAT has been paid which a VAT has been paid
shall be equally distributed shall be equally distributed
over 5 years or the over 5 years or the
depreciable life of such depreciable life of such
capital goods; the input tax capital goods; the input tax
credit for goods and credit for goods and
services other than capital services other than capital
goods shall not exceed 5% goods shall not exceed 90%
of the total amount of such of the output VAT.
goods and services; and
for persons engaged in
retail trading of goods, the
allowable input tax credit
shall not exceed 11% of
the total amount of goods
purchased.

With regard to amendments to be made to NIRC provisions regarding income and excise
taxes
No similar provision No similar provision Provided for amendments to
several NIRC provisions
regarding corporate income,
percentage, franchise and
excise taxes

The disagreements between the provisions in the House bills and the Senate bill were with regard to
(1) what rate of VAT is to be imposed; (2) whether only the VAT imposed on electricity generation,
transmission and distribution companies should not be passed on to consumers, as proposed in the
Senate bill, or both the VAT imposed on electricity generation, transmission and distribution
companies and the VAT imposed on sale of petroleum products should not be passed on to
consumers, as proposed in the House bill; (3) in what manner input tax credits should be limited; (4)
and whether the NIRC provisions on corporate income taxes, percentage, franchise and excise
taxes should be amended.
There being differences and/or disagreements on the foregoing provisions of the House and Senate
bills, the Bicameral Conference Committee was mandated by the rules of both houses of Congress
to act on the same by settling said differences and/or disagreements. The Bicameral Conference
Committee acted on the disagreeing provisions by making the following changes:
1. With regard to the disagreement on the rate of VAT to be imposed, it would appear from the
Conference Committee Report that the Bicameral Conference Committee tried to bridge the gap in
the difference between the 10% VAT rate proposed by the Senate, and the various rates with 12% as
the highest VAT rate proposed by the House, by striking a compromise whereby the present 10%
VAT rate would be retained until certain conditions arise, i.e., the value-added tax collection as a
percentage of gross domestic product (GDP) of the previous year exceeds 2 4/5%, or National
Government deficit as a percentage of GDP of the previous year exceeds 1½%, when the President,
upon recommendation of the Secretary of Finance shall raise the rate of VAT to 12% effective
January 1, 2006.
2. With regard to the disagreement on whether only the VAT imposed on electricity generation,
transmission and distribution companies should not be passed on to consumers or whether both the
VAT imposed on electricity generation, transmission and distribution companies and the VAT
imposed on sale of petroleum products may be passed on to consumers, the Bicameral Conference
Committee chose to settle such disagreement by altogether deleting from its Report any no pass-
on provision.
3. With regard to the disagreement on whether input tax credits should be limited or not, the
Bicameral Conference Committee decided to adopt the position of the House by putting a limitation
on the amount of input tax that may be credited against the output tax, although it crafted its own
language as to the amount of the limitation on input tax credits and the manner of computing the
same by providing thus:
(A) Creditable Input Tax. – . . .
...
Provided, The input tax on goods purchased or imported in a calendar month for use in trade or
business for which deduction for depreciation is allowed under this Code, shall be spread evenly
over the month of acquisition and the fifty-nine (59) succeeding months if the aggregate acquisition
cost for such goods, excluding the VAT component thereof, exceeds one million Pesos
(₱1,000,000.00): PROVIDED, however, that if the estimated useful life of the capital good is less
than five (5) years, as used for depreciation purposes, then the input VAT shall be spread over such
shorter period: . . .
(B) Excess Output or Input Tax. – If at the end of any taxable quarter the output tax exceeds the
input tax, the excess shall be paid by the VAT-registered person. If the input tax exceeds the output
tax, the excess shall be carried over to the succeeding quarter or quarters: PROVIDED that the input
tax inclusive of input VAT carried over from the previous quarter that may be credited in every
quarter shall not exceed seventy percent (70%) of the output VAT: PROVIDED, HOWEVER, THAT
any input tax attributable to zero-rated sales by a VAT-registered person may at his option be
refunded or credited against other internal revenue taxes, . . .
4. With regard to the amendments to other provisions of the NIRC on corporate income tax,
franchise, percentage and excise taxes, the conference committee decided to include such
amendments and basically adopted the provisions found in Senate Bill No. 1950, with some changes
as to the rate of the tax to be imposed.
Under the provisions of both the Rules of the House of Representatives and Senate Rules, the
Bicameral Conference Committee is mandated to settle the differences between the disagreeing
provisions in the House bill and the Senate bill. The term "settle" is synonymous to "reconcile" and
"harmonize."25 To reconcile or harmonize disagreeing provisions, the Bicameral Conference
Committee may then (a) adopt the specific provisions of either the House bill or Senate bill, (b)
decide that neither provisions in the House bill or the provisions in the Senate bill would
be carried into the final form of the bill, and/or (c) try to arrive at a compromise between the
disagreeing provisions.
In the present case, the changes introduced by the Bicameral Conference Committee on
disagreeing provisions were meant only to reconcile and harmonize the disagreeing provisions for it
did not inject any idea or intent that is wholly foreign to the subject embraced by the original
provisions.
The so-called stand-by authority in favor of the President, whereby the rate of 10% VAT wanted by
the Senate is retained until such time that certain conditions arise when the 12% VAT wanted by the
House shall be imposed, appears to be a compromise to try to bridge the difference in the rate of
VAT proposed by the two houses of Congress. Nevertheless, such compromise is still totally within
the subject of what rate of VAT should be imposed on taxpayers.
The no pass-on provision was deleted altogether. In the transcripts of the proceedings of the
Bicameral Conference Committee held on May 10, 2005, Sen. Ralph Recto, Chairman of the Senate
Panel, explained the reason for deleting the no pass-on provision in this wise:
. . . the thinking was just to keep the VAT law or the VAT bill simple. And we were thinking that no
sector should be a beneficiary of legislative grace, neither should any sector be discriminated on.
The VAT is an indirect tax. It is a pass on-tax. And let’s keep it plain and simple. Let’s not confuse
the bill and put a no pass-on provision. Two-thirds of the world have a VAT system and in this two-
thirds of the globe, I have yet to see a VAT with a no pass-though provision. So, the thinking of the
Senate is basically simple, let’s keep the VAT simple.26 (Emphasis supplied)
Rep. Teodoro Locsin further made the manifestation that the no pass-on provision "never really
enjoyed the support of either House."27
With regard to the amount of input tax to be credited against output tax, the Bicameral Conference
Committee came to a compromise on the percentage rate of the limitation or cap on such input tax
credit, but again, the change introduced by the Bicameral Conference Committee was totally within
the intent of both houses to put a cap on input tax that may be
credited against the output tax. From the inception of the subject revenue bill in the House of
Representatives, one of the major objectives was to "plug a glaring loophole in the tax policy and
administration by creating vital restrictions on the claiming of input VAT tax credits . . ." and "[b]y
introducing limitations on the claiming of tax credit, we are capping a major leakage that has placed
our collection efforts at an apparent disadvantage."28
As to the amendments to NIRC provisions on taxes other than the value-added tax proposed in
Senate Bill No. 1950, since said provisions were among those referred to it, the conference
committee had to act on the same and it basically adopted the version of the Senate.
Thus, all the changes or modifications made by the Bicameral Conference Committee were germane
to subjects of the provisions referred
to it for reconciliation. Such being the case, the Court does not see any grave abuse of discretion
amounting to lack or excess of jurisdiction committed by the Bicameral Conference Committee. In
the earlier cases of Philippine Judges Association vs. Prado29 and Tolentino vs. Secretary of
Finance,30 the Court recognized the long-standing legislative practice of giving said conference
committee ample latitude for compromising differences between the Senate and the House. Thus, in
the Tolentino case, it was held that:
. . . it is within the power of a conference committee to include in its report an entirely new provision
that is not found either in the House bill or in the Senate bill. If the committee can propose an
amendment consisting of one or two provisions, there is no reason why it cannot propose several
provisions, collectively considered as an "amendment in the nature of a substitute," so long as such
amendment is germane to the subject of the bills before the committee. After all, its report was not
final but needed the approval of both houses of Congress to become valid as an act of the legislative
department. The charge that in this case the Conference Committee acted as a third legislative
chamber is thus without any basis.31 (Emphasis supplied)
B. R.A. No. 9337 Does Not Violate Article VI, Section 26(2) of the Constitution on the "No-
Amendment Rule"
Article VI, Sec. 26 (2) of the Constitution, states:
No bill passed by either House shall become a law unless it has passed three readings on separate
days, and printed copies thereof in its final form have been distributed to its Members three days
before its passage, except when the President certifies to the necessity of its immediate enactment
to meet a public calamity or emergency. Upon the last reading of a bill, no amendment thereto shall
be allowed, and the vote thereon shall be taken immediately thereafter, and the yeas and nays
entered in the Journal.
Petitioners’ argument that the practice where a bicameral conference committee is allowed to add or
delete provisions in the House bill and the Senate bill after these had passed three readings is in
effect a circumvention of the "no amendment rule" (Sec. 26 (2), Art. VI of the 1987 Constitution), fails
to convince the Court to deviate from its ruling in the Tolentino case that:
Nor is there any reason for requiring that the Committee’s Report in these cases must have
undergone three readings in each of the two houses. If that be the case, there would be no end to
negotiation since each house may seek modification of the compromise bill. . . .
Art. VI. § 26 (2) must, therefore, be construed as referring only to bills introduced for the first
time in either house of Congress, not to the conference committee report.32 (Emphasis
supplied)
The Court reiterates here that the "no-amendment rule" refers only to the procedure to be
followed by each house of Congress with regard to bills initiated in each of said respective
houses, before said bill is transmitted to the other house for its concurrence or amendment.
Verily, to construe said provision in a way as to proscribe any further changes to a bill after one
house has voted on it would lead to absurdity as this would mean that the other house of Congress
would be deprived of its constitutional power to amend or introduce changes to said bill. Thus, Art.
VI, Sec. 26 (2) of the Constitution cannot be taken to mean that the introduction by the Bicameral
Conference Committee of amendments and modifications to disagreeing provisions in bills that have
been acted upon by both houses of Congress is prohibited.
C. R.A. No. 9337 Does Not Violate Article VI, Section 24 of the Constitution on Exclusive Origination
of Revenue Bills
Coming to the issue of the validity of the amendments made regarding the NIRC provisions on
corporate income taxes and percentage, excise taxes. Petitioners refer to the following provisions, to
wit:

Section 27 Rates of Income Tax on Domestic Corporation

28(A)(1) Tax on Resident Foreign Corporation
28(B)(1) Inter-corporate Dividends
34(B)(1) Inter-corporate Dividends
116 Tax on Persons Exempt from VAT
117 Percentage Tax on domestic carriers and keepers of Garage
119 Tax on franchises
121 Tax on banks and Non-Bank Financial Intermediaries
148 Excise Tax on manufactured oils and other fuels
151 Excise Tax on mineral products
236 Registration requirements
237 Issuance of receipts or sales or commercial invoices
288 Disposition of Incremental Revenue

Petitioners claim that the amendments to these provisions of the NIRC did not at all originate from
the House. They aver that House Bill No. 3555 proposed amendments only regarding Sections 106,
107, 108, 110 and 114 of the NIRC, while House Bill No. 3705 proposed amendments only to
Sections 106, 107,108, 109, 110 and 111 of the NIRC; thus, the other sections of the NIRC which the
Senate amended but which amendments were not found in the House bills are not intended to be
amended by the House of Representatives. Hence, they argue that since the proposed amendments
did not originate from the House, such amendments are a violation of Article VI, Section 24 of the
Constitution.
The argument does not hold water.
Article VI, Section 24 of the Constitution reads:
Sec. 24. All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of
local application, and private bills shall originate exclusively in the House of Representatives but the
Senate may propose or concur with amendments.
In the present cases, petitioners admit that it was indeed House Bill Nos. 3555 and 3705 that
initiated the move for amending provisions of the NIRC dealing mainly with the value-added tax.
Upon transmittal of said House bills to the Senate, the Senate came out with Senate Bill No. 1950
proposing amendments not only to NIRC provisions on the value-added tax but also amendments to
NIRC provisions on other kinds of taxes. Is the introduction by the Senate of provisions not dealing
directly with the value- added tax, which is the only kind of tax being amended in the House bills, still
within the purview of the constitutional provision authorizing the Senate to propose or concur with
amendments to a revenue bill that originated from the House?
The foregoing question had been squarely answered in the Tolentino case, wherein the Court held,
thus:
. . . To begin with, it is not the law – but the revenue bill – which is required by the Constitution to
"originate exclusively" in the House of Representatives. It is important to emphasize this, because a
bill originating in the House may undergo such extensive changes in the Senate that the result may
be a rewriting of the whole. . . . At this point, what is important to note is that, as a result of the
Senate action, a distinct bill may be produced. To insist that a revenue statute – and not only the
bill which initiated the legislative process culminating in the enactment of the law – must
substantially be the same as the House bill would be to deny the Senate’s power not only to
"concur with amendments" but also to "propose amendments." It would be to violate the
coequality of legislative power of the two houses of Congress and in fact make the House superior to
the Senate.
…
…Given, then, the power of the Senate to propose amendments, the Senate can propose its
own version even with respect to bills which are required by the Constitution to originate in
the House.
...
Indeed, what the Constitution simply means is that the initiative for filing revenue, tariff or tax bills,
bills authorizing an increase of the public debt, private bills and bills of local application must come
from the House of Representatives on the theory that, elected as they are from the districts, the
members of the House can be expected to be more sensitive to the local needs and
problems. On the other hand, the senators, who are elected at large, are expected to
approach the same problems from the national perspective. Both views are thereby made to
bear on the enactment of such laws.33 (Emphasis supplied)
Since there is no question that the revenue bill exclusively originated in the House of
Representatives, the Senate was acting within its
constitutional power to introduce amendments to the House bill when it included provisions in
Senate Bill No. 1950 amending corporate income taxes, percentage, excise and franchise taxes.
Verily, Article VI, Section 24 of the Constitution does not contain any prohibition or limitation on the
extent of the amendments that may be introduced by the Senate to the House revenue bill.
Furthermore, the amendments introduced by the Senate to the NIRC provisions that had not been
touched in the House bills are still in furtherance of the intent of the House in initiating the subject
revenue bills. The Explanatory Note of House Bill No. 1468, the very first House bill introduced on
the floor, which was later substituted by House Bill No. 3555, stated:
One of the challenges faced by the present administration is the urgent and daunting task of solving
the country’s serious financial problems. To do this, government expenditures must be strictly
monitored and controlled and revenues must be significantly increased. This may be easier said than
done, but our fiscal authorities are still optimistic the government will be operating on a balanced
budget by the year 2009. In fact, several measures that will result to significant expenditure savings
have been identified by the administration. It is supported with a credible package of revenue
measures that include measures to improve tax administration and control the leakages in
revenues from income taxes and the value-added tax (VAT). (Emphasis supplied)
Rep. Eric D. Singson, in his sponsorship speech for House Bill No. 3555, declared that:
In the budget message of our President in the year 2005, she reiterated that we all acknowledged
that on top of our agenda must be the restoration of the health of our fiscal system.
In order to considerably lower the consolidated public sector deficit and eventually achieve a
balanced budget by the year 2009, we need to seize windows of opportunities which might
seem poignant in the beginning, but in the long run prove effective and beneficial to the
overall status of our economy. One such opportunity is a review of existing tax rates,
evaluating the relevance given our present conditions.34 (Emphasis supplied)
Notably therefore, the main purpose of the bills emanating from the House of Representatives is to
bring in sizeable revenues for the government
to supplement our country’s serious financial problems, and improve tax administration and control
of the leakages in revenues from income taxes and value-added taxes. As these house bills were
transmitted to the Senate, the latter, approaching the measures from the point of national
perspective, can introduce amendments within the purposes of those bills. It can provide for ways
that would soften the impact of the VAT measure on the consumer, i.e., by distributing the burden
across all sectors instead of putting it entirely on the shoulders of the consumers. The sponsorship
speech of Sen. Ralph Recto on why the provisions on income tax on corporation were included is
worth quoting:
All in all, the proposal of the Senate Committee on Ways and Means will raise ₱64.3 billion in
additional revenues annually even while by mitigating prices of power, services and petroleum
products.
However, not all of this will be wrung out of VAT. In fact, only ₱48.7 billion amount is from the VAT on
twelve goods and services. The rest of the tab – ₱10.5 billion- will be picked by corporations.
What we therefore prescribe is a burden sharing between corporate Philippines and the consumer.
Why should the latter bear all the pain? Why should the fiscal salvation be only on the burden of the
consumer?
The corporate world’s equity is in form of the increase in the corporate income tax from 32 to 35
percent, but up to 2008 only. This will raise ₱10.5 billion a year. After that, the rate will slide back, not
to its old rate of 32 percent, but two notches lower, to 30 percent.
Clearly, we are telling those with the capacity to pay, corporations, to bear with this emergency
provision that will be in effect for 1,200 days, while we put our fiscal house in order. This fiscal
medicine will have an expiry date.
For their assistance, a reward of tax reduction awaits them. We intend to keep the length of their
sacrifice brief. We would like to assure them that not because there is a light at the end of the tunnel,
this government will keep on making the tunnel long.
The responsibility will not rest solely on the weary shoulders of the small man. Big business will be
there to share the burden.35
As the Court has said, the Senate can propose amendments and in fact, the amendments made on
provisions in the tax on income of corporations are germane to the purpose of the house bills which
is to raise revenues for the government.
Likewise, the Court finds the sections referring to other percentage and excise taxes germane to the
reforms to the VAT system, as these sections would cushion the effects of VAT on consumers.
Considering that certain goods and services which were subject to percentage tax and excise tax
would no longer be VAT-exempt, the consumer would be burdened more as they would be paying
the VAT in addition to these taxes. Thus, there is a need to amend these sections to soften the
impact of VAT. Again, in his sponsorship speech, Sen. Recto said:
However, for power plants that run on oil, we will reduce to zero the present excise tax on bunker
fuel, to lessen the effect of a VAT on this product.
For electric utilities like Meralco, we will wipe out the franchise tax in exchange for a VAT.
And in the case of petroleum, while we will levy the VAT on oil products, so as not to destroy the VAT
chain, we will however bring down the excise tax on socially sensitive products such as diesel,
bunker, fuel and kerosene.
...
What do all these exercises point to? These are not contortions of giving to the left hand what was
taken from the right. Rather, these sprang from our concern of softening the impact of VAT, so that
the people can cushion the blow of higher prices they will have to pay as a result of VAT.36
The other sections amended by the Senate pertained to matters of tax administration which are
necessary for the implementation of the changes in the VAT system.
To reiterate, the sections introduced by the Senate are germane to the subject matter and purposes
of the house bills, which is to supplement our country’s fiscal deficit, among others. Thus, the Senate
acted within its power to propose those amendments.
SUBSTANTIVE ISSUES
I.
Whether Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108 of the NIRC,
violate the following provisions of the Constitution:
a. Article VI, Section 28(1), and
b. Article VI, Section 28(2)
A. No Undue Delegation of Legislative Power
Petitioners ABAKADA GURO Party List, et al., Pimentel, Jr., et al., and Escudero, et al. contend in
common that Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108,
respectively, of the NIRC giving the President the stand-by authority to raise the VAT rate from 10%
to 12% when a certain condition is met, constitutes undue delegation of the legislative power to tax.
The assailed provisions read as follows:
SEC. 4. Sec. 106 of the same Code, as amended, is hereby further amended to read as follows:
SEC. 106. Value-Added Tax on Sale of Goods or Properties. –
(A) Rate and Base of Tax. – There shall be levied, assessed and collected on every sale, barter or
exchange of goods or properties, a value-added tax equivalent to ten percent (10%) of the gross
selling price or gross value in money of the goods or properties sold, bartered or exchanged, such
tax to be paid by the seller or transferor: provided, that the President, upon the recommendation
of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax
to twelve percent (12%), after any of the following conditions has been satisfied.
(i) value-added tax collection as a percentage of Gross Domestic Product (GDP) of the
previous year exceeds two and four-fifth percent (2 4/5%) or
(ii) national government deficit as a percentage of GDP of the previous year exceeds one and
one-half percent (1 ½%).
SEC. 5. Section 107 of the same Code, as amended, is hereby further amended to read as follows:
SEC. 107. Value-Added Tax on Importation of Goods. –
(A) In General. – There shall be levied, assessed and collected on every importation of goods a
value-added tax equivalent to ten percent (10%) based on the total value used by the Bureau of
Customs in determining tariff and customs duties, plus customs duties, excise taxes, if any, and
other charges, such tax to be paid by the importer prior to the release of such goods from customs
custody: Provided, That where the customs duties are determined on the basis of the quantity or
volume of the goods, the value-added tax shall be based on the landed cost plus excise taxes, if
any: provided, further, that the President, upon the recommendation of the Secretary of
Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent
(12%) after any of the following conditions has been satisfied.
(i) value-added tax collection as a percentage of Gross Domestic Product (GDP) of the
previous year exceeds two and four-fifth percent (2 4/5%) or
(ii) national government deficit as a percentage of GDP of the previous year exceeds one and
one-half percent (1 ½%).
SEC. 6. Section 108 of the same Code, as amended, is hereby further amended to read as follows:
SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties –
(A) Rate and Base of Tax. – There shall be levied, assessed and collected, a value-added tax
equivalent to ten percent (10%) of gross receipts derived from the sale or exchange of
services: provided, that the President, upon the recommendation of the Secretary of Finance,
shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%),
after any of the following conditions has been satisfied.
(i) value-added tax collection as a percentage of Gross Domestic Product (GDP) of the
previous year exceeds two and four-fifth percent (2 4/5%) or
(ii) national government deficit as a percentage of GDP of the previous year exceeds one and
one-half percent (1 ½%). (Emphasis supplied)
Petitioners allege that the grant of the stand-by authority to the President to increase the VAT rate is
a virtual abdication by Congress of its exclusive power to tax because such delegation is not within
the purview of Section 28 (2), Article VI of the Constitution, which provides:
The Congress may, by law, authorize the President to fix within specified limits, and may impose,
tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within
the framework of the national development program of the government.
They argue that the VAT is a tax levied on the sale, barter or exchange of goods and properties as
well as on the sale or exchange of services, which cannot be included within the purview of tariffs
under the exempted delegation as the latter refers to customs duties, tolls or tribute payable upon
merchandise to the government and usually imposed on goods or merchandise imported or
exported.
Petitioners ABAKADA GURO Party List, et al., further contend that delegating to the President the
legislative power to tax is contrary to republicanism. They insist that accountability, responsibility and
transparency should dictate the actions of Congress and they should not pass to the President the
decision to impose taxes. They also argue that the law also effectively nullified the President’s power
of control, which includes the authority to set aside and nullify the acts of her subordinates like the
Secretary of Finance, by mandating the fixing of the tax rate by the President upon the
recommendation of the Secretary of Finance.
Petitioners Pimentel, et al. aver that the President has ample powers to cause, influence or create
the conditions provided by the law to bring about either or both the conditions precedent.
On the other hand, petitioners Escudero, et al. find bizarre and revolting the situation that the
imposition of the 12% rate would be subject to the whim of the Secretary of Finance, an unelected
bureaucrat, contrary to the principle of no taxation without representation. They submit that the
Secretary of Finance is not mandated to give a favorable recommendation and he may not even give
his recommendation. Moreover, they allege that no guiding standards are provided in the law on
what basis and as to how he will make his recommendation. They claim, nonetheless, that any
recommendation of the Secretary of Finance can easily be brushed aside by the President since the
former is a mere alter ego of the latter, such that, ultimately, it is the President who decides whether
to impose the increased tax rate or not.
A brief discourse on the principle of non-delegation of powers is instructive.
The principle of separation of powers ordains that each of the three great branches of government
has exclusive cognizance of and is supreme in matters falling within its own constitutionally allocated
sphere.37 A logical
corollary to the doctrine of separation of powers is the principle of non-delegation of powers, as
expressed in the Latin maxim: potestas delegata non delegari potest which means "what has been
delegated, cannot be delegated."38 This doctrine is based on the ethical principle that such as
delegated power constitutes not only a right but a duty to be performed by the delegate through the
instrumentality of his own judgment and not through the intervening mind of another.39
With respect to the Legislature, Section 1 of Article VI of the Constitution provides that "the
Legislative power shall be vested in the Congress of the Philippines which shall consist of a Senate
and a House of Representatives." The powers which Congress is prohibited from delegating are
those which are strictly, or inherently and exclusively, legislative. Purely legislative power, which can
never be delegated, has been described as the authority to make a complete law – complete as
to the time when it shall take effect and as to whom it shall be applicable – and to determine
the expediency of its enactment.40 Thus, the rule is that in order that a court may be justified in
holding a statute unconstitutional as a delegation of legislative power, it must appear that the power
involved is purely legislative in nature – that is, one appertaining exclusively to the legislative
department. It is the nature of the power, and not the liability of its use or the manner of its exercise,
which determines the validity of its delegation.
Nonetheless, the general rule barring delegation of legislative powers is subject to the following
recognized limitations or exceptions:
(1) Delegation of tariff powers to the President under Section 28 (2) of Article VI of the Constitution;
(2) Delegation of emergency powers to the President under Section 23 (2) of Article VI of the
Constitution;
(3) Delegation to the people at large;
(4) Delegation to local governments; and
(5) Delegation to administrative bodies.
In every case of permissible delegation, there must be a showing that the delegation itself is valid. It
is valid only if the law (a) is complete in itself, setting forth therein the policy to be executed, carried
out, or implemented by the delegate;41 and (b) fixes a standard — the limits of which are sufficiently
determinate and determinable — to which the delegate must conform in the performance of his
functions.42 A sufficient standard is one which defines legislative policy, marks its limits, maps out its
boundaries and specifies the public agency to apply it. It indicates the circumstances under which
the legislative command is to be effected.43 Both tests are intended to prevent a total transference of
legislative authority to the delegate, who is not allowed to step into the shoes of the legislature and
exercise a power essentially legislative.44
In People vs. Vera,45 the Court, through eminent Justice Jose P. Laurel, expounded on the concept
and extent of delegation of power in this wise:
In testing whether a statute constitutes an undue delegation of legislative power or not, it is usual to
inquire whether the statute was complete in all its terms and provisions when it left the hands of the
legislature so that nothing was left to the judgment of any other appointee or delegate of the
legislature.
...
‘The true distinction’, says Judge Ranney, ‘is between the delegation of power to make the
law, which necessarily involves a discretion as to what it shall be, and conferring an authority
or discretion as to its execution, to be exercised under and in pursuance of the law. The first
cannot be done; to the latter no valid objection can be made.’
...
It is contended, however, that a legislative act may be made to the effect as law after it leaves the
hands of the legislature. It is true that laws may be made effective on certain contingencies, as by
proclamation of the executive or the adoption by the people of a particular community. In Wayman
vs. Southard, the Supreme Court of the United States ruled that the legislature may delegate a
power not legislative which it may itself rightfully exercise. The power to ascertain facts is such a
power which may be delegated. There is nothing essentially legislative in ascertaining the
existence of facts or conditions as the basis of the taking into effect of a law. That is a mental
process common to all branches of the government. Notwithstanding the apparent tendency,
however, to relax the rule prohibiting delegation of legislative authority on account of the complexity
arising from social and economic forces at work in this modern industrial age, the orthodox
pronouncement of Judge Cooley in his work on Constitutional Limitations finds restatement in Prof.
Willoughby's treatise on the Constitution of the United States in the following language — speaking
of declaration of legislative power to administrative agencies: The principle which permits the
legislature to provide that the administrative agent may determine when the circumstances
are such as require the application of a law is defended upon the ground that at the time this
authority is granted, the rule of public policy, which is the essence of the legislative act, is
determined by the legislature. In other words, the legislature, as it is its duty to do,
determines that, under given circumstances, certain executive or administrative action is to
be taken, and that, under other circumstances, different or no action at all is to be taken.
What is thus left to the administrative official is not the legislative determination of what
public policy demands, but simply the ascertainment of what the facts of the case require to
be done according to the terms of the law by which he is governed. The efficiency of an Act
as a declaration of legislative will must, of course, come from Congress, but the
ascertainment of the contingency upon which the Act shall take effect may be left to such
agencies as it may designate. The legislature, then, may provide that a law shall take effect
upon the happening of future specified contingencies leaving to some other person or body
the power to determine when the specified contingency has arisen. (Emphasis supplied).46
In Edu vs. Ericta,47 the Court reiterated:
What cannot be delegated is the authority under the Constitution to make laws and to alter and
repeal them; the test is the completeness of the statute in all its terms and provisions when it leaves
the hands of the legislature. To determine whether or not there is an undue delegation of legislative
power, the inquiry must be directed to the scope and definiteness of the measure enacted. The
legislative does not abdicate its functions when it describes what job must be done, who is to
do it, and what is the scope of his authority. For a complex economy, that may be the only way in
which the legislative process can go forward. A distinction has rightfully been made between
delegation of power to make the laws which necessarily involves a discretion as to what it
shall be, which constitutionally may not be done, and delegation of authority or discretion as
to its execution to be exercised under and in pursuance of the law, to which no valid
objection can be made. The Constitution is thus not to be regarded as denying the legislature the
necessary resources of flexibility and practicability. (Emphasis supplied).48
Clearly, the legislature may delegate to executive officers or bodies the power to determine certain
facts or conditions, or the happening of contingencies, on which the operation of a statute is, by its
terms, made to depend, but the legislature must prescribe sufficient standards, policies or limitations
on their authority.49 While the power to tax cannot be delegated to executive agencies, details as to
the enforcement and administration of an exercise of such power may be left to them, including the
power to determine the existence of facts on which its operation depends.50
The rationale for this is that the preliminary ascertainment of facts as basis for the enactment of
legislation is not of itself a legislative function, but is simply ancillary to legislation. Thus, the duty of
correlating information and making recommendations is the kind of subsidiary activity which the
legislature may perform through its members, or which it may delegate to others to perform.
Intelligent legislation on the complicated problems of modern society is impossible in the absence of
accurate information on the part of the legislators, and any reasonable method of securing such
information is proper.51 The Constitution as a continuously operative charter of government does not
require that Congress find for itself
every fact upon which it desires to base legislative action or that it make for itself detailed
determinations which it has declared to be prerequisite to application of legislative policy to particular
facts and circumstances impossible for Congress itself properly to investigate.52
In the present case, the challenged section of R.A. No. 9337 is the common proviso in Sections 4, 5
and 6 which reads as follows:
That the President, upon the recommendation of the Secretary of Finance, shall, effective January 1,
2006, raise the rate of value-added tax to twelve percent (12%), after any of the following conditions
has been satisfied:
(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous
year exceeds two and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-
half percent (1 ½%).
The case before the Court is not a delegation of legislative power. It is simply a delegation of
ascertainment of facts upon which enforcement and administration of the increase rate under the law
is contingent. The legislature has made the operation of the 12% rate effective January 1, 2006,
contingent upon a specified fact or condition. It leaves the entire operation or non-operation of the
12% rate upon factual matters outside of the control of the executive.
No discretion would be exercised by the President. Highlighting the absence of discretion is the fact
that the word shall is used in the common proviso. The use of the word shall connotes a mandatory
order. Its use in a statute denotes an imperative obligation and is inconsistent with the idea of
discretion.53 Where the law is clear and unambiguous, it must be taken to mean exactly what it says,
and courts have no choice but to see to it that the mandate is obeyed.54
Thus, it is the ministerial duty of the President to immediately impose the 12% rate upon the
existence of any of the conditions specified by Congress. This is a duty which cannot be evaded by
the President. Inasmuch as the law specifically uses the word shall, the exercise of discretion by the
President does not come into play. It is a clear directive to impose the 12% VAT rate when the
specified conditions are present. The time of taking into effect of the 12% VAT rate is based on the
happening of a certain specified contingency, or upon the ascertainment of certain facts or conditions
by a person or body other than the legislature itself.
The Court finds no merit to the contention of petitioners ABAKADA GURO Party List, et al. that the
law effectively nullified the President’s power of control over the Secretary of Finance by mandating
the fixing of the tax rate by the President upon the recommendation of the Secretary of Finance. The
Court cannot also subscribe to the position of petitioners
Pimentel, et al. that the word shall should be interpreted to mean may in view of the phrase "upon
the recommendation of the Secretary of Finance." Neither does the Court find persuasive the
submission of petitioners Escudero, et al. that any recommendation by the Secretary of Finance can
easily be brushed aside by the President since the former is a mere alter ego of the latter.
When one speaks of the Secretary of Finance as the alter ego of the President, it simply means that
as head of the Department of Finance he is the assistant and agent of the Chief Executive. The
multifarious executive and administrative functions of the Chief Executive are performed by and
through the executive departments, and the acts of the secretaries of such departments, such as the
Department of Finance, performed and promulgated in the regular course of business, are, unless
disapproved or reprobated by the Chief Executive, presumptively the acts of the Chief
Executive. The Secretary of Finance, as such, occupies a political position and holds office in an
advisory capacity, and, in the language of Thomas Jefferson, "should be of the President's bosom
confidence" and, in the language of Attorney-General Cushing, is "subject to the direction of the
President."55
In the present case, in making his recommendation to the President on the existence of either of the
two conditions, the Secretary of Finance is not acting as the alter ego of the President or even her
subordinate. In such instance, he is not subject to the power of control and direction of the President.
He is acting as the agent of the legislative department, to determine and declare the event upon
which its expressed will is to take effect.56 The Secretary of Finance becomes the means or tool by
which legislative policy is determined and implemented, considering that he possesses all the
facilities to gather data and information and has a much broader perspective to properly evaluate
them. His function is to gather and collate statistical data and other pertinent information and verify if
any of the two conditions laid out by Congress is present. His personality in such instance is in
reality but a projection of that of Congress. Thus, being the agent of Congress and not of the
President, the President cannot alter or modify or nullify, or set aside the findings of the Secretary of
Finance and to substitute the judgment of the former for that of the latter.
Congress simply granted the Secretary of Finance the authority to ascertain the existence of a fact,
namely, whether by December 31, 2005, the value-added tax collection as a percentage of Gross
Domestic Product (GDP) of the previous year exceeds two and four-fifth percent (24/5%) or the
national government deficit as a percentage of GDP of the previous year exceeds one and one-half
percent (1½%). If either of these two instances has occurred, the Secretary of Finance, by legislative
mandate, must submit such information to the President. Then the 12% VAT rate must be imposed
by the President effective January 1, 2006. There is no undue delegation of legislative power but
only of the discretion as to the execution of a law. This is constitutionally permissible.
57 Congress does not abdicate its functions or unduly delegate power when it describes what job

must be done, who must do it, and what is the scope of his authority; in our complex economy that is
frequently the only way in which the legislative process can go forward.58
As to the argument of petitioners ABAKADA GURO Party List, et al. that delegating to the President
the legislative power to tax is contrary to the principle of republicanism, the same deserves scant
consideration. Congress did not delegate the power to tax but the mere implementation of the law.
The intent and will to increase the VAT rate to 12% came from Congress and the task of the
President is to simply execute the legislative policy. That Congress chose to do so in such a manner
is not within the province of the Court to inquire into, its task being to interpret the law.59
The insinuation by petitioners Pimentel, et al. that the President has ample powers to cause,
influence or create the conditions to bring about either or both the conditions precedent does not
deserve any merit as this argument is highly speculative. The Court does not rule on allegations
which are manifestly conjectural, as these may not exist at all. The Court deals with facts, not
fancies; on realities, not appearances. When the Court acts on appearances instead of realities,
justice and law will be short-lived.
B. The 12% Increase VAT Rate Does Not Impose an Unfair and Unnecessary Additional Tax Burden
Petitioners Pimentel, et al. argue that the 12% increase in the VAT rate imposes an unfair and
additional tax burden on the people. Petitioners also argue that the 12% increase, dependent on any
of the 2 conditions set forth in the contested provisions, is ambiguous because it does not state if the
VAT rate would be returned to the original 10% if the rates are no longer satisfied. Petitioners also
argue that such rate is unfair and unreasonable, as the people are unsure of the applicable VAT rate
from year to year.
Under the common provisos of Sections 4, 5 and 6 of R.A. No. 9337, if any of the two conditions set
forth therein are satisfied, the President shall increase the VAT rate to 12%. The provisions of the law
are clear. It does not provide for a return to the 10% rate nor does it empower the President to so
revert if, after the rate is increased to 12%, the VAT collection goes below the 24/5 of the GDP of the
previous year or that the national government deficit as a percentage of GDP of the previous year
does not exceed 1½%.
Therefore, no statutory construction or interpretation is needed. Neither can conditions or limitations
be introduced where none is provided for. Rewriting the law is a forbidden ground that only Congress
may tread upon.60
Thus, in the absence of any provision providing for a return to the 10% rate, which in this case the
Court finds none, petitioners’ argument is, at best, purely speculative. There is no basis for
petitioners’ fear of a fluctuating VAT rate because the law itself does not provide that the rate should
go back to 10% if the conditions provided in Sections 4, 5 and 6 are no longer present. The rule is
that where the provision of the law is clear and unambiguous, so that there is no occasion for the
court's seeking the legislative intent, the law must be taken as it is, devoid of judicial addition or
subtraction.61
Petitioners also contend that the increase in the VAT rate, which was allegedly an incentive to the
President to raise the VAT collection to at least 2 4/5 of the GDP of the previous year, should be
based on fiscal adequacy.
Petitioners obviously overlooked that increase in VAT collection is not the only condition. There is
another condition, i.e., the national government deficit as a percentage of GDP of the previous year
exceeds one and one-half percent (1 ½%).
Respondents explained the philosophy behind these alternative conditions:
1. VAT/GDP Ratio > 2.8%
The condition set for increasing VAT rate to 12% have economic or fiscal meaning. If VAT/GDP is
less than 2.8%, it means that government has weak or no capability of implementing the VAT or that
VAT is not effective in the function of the tax collection. Therefore, there is no value to increase it to
12% because such action will also be ineffectual.
2. Nat’l Gov’t Deficit/GDP >1.5%
The condition set for increasing VAT when deficit/GDP is 1.5% or less means the fiscal condition of
government has reached a relatively sound position or is towards the direction of a balanced budget
position. Therefore, there is no need to increase the VAT rate since the fiscal house is in a relatively
healthy position. Otherwise stated, if the ratio is more than 1.5%, there is indeed a need to increase
the VAT rate.62
That the first condition amounts to an incentive to the President to increase the VAT collection does
not render it unconstitutional so long as there is a public purpose for which the law was passed,
which in this case, is mainly to raise revenue. In fact, fiscal adequacy dictated the need for a raise in
revenue.
The principle of fiscal adequacy as a characteristic of a sound tax system was originally stated by
Adam Smith in his Canons of Taxation (1776), as:
IV. Every tax ought to be so contrived as both to take out and to keep out of the pockets of the
people as little as possible over and above what it brings into the public treasury of the state.63
It simply means that sources of revenues must be adequate to meet government expenditures and
their variations.64
The dire need for revenue cannot be ignored. Our country is in a quagmire of financial woe. During
the Bicameral Conference Committee hearing, then Finance Secretary Purisima bluntly depicted the
country’s gloomy state of economic affairs, thus:
First, let me explain the position that the Philippines finds itself in right now. We are in a position
where 90 percent of our revenue is used for debt service. So, for every peso of revenue that we
currently raise, 90 goes to debt service. That’s interest plus amortization of our debt. So clearly, this
is not a sustainable situation. That’s the first fact.
The second fact is that our debt to GDP level is way out of line compared to other peer countries that
borrow money from that international financial markets. Our debt to GDP is approximately equal to
our GDP. Again, that shows you that this is not a sustainable situation.
The third thing that I’d like to point out is the environment that we are presently operating in is not as
benign as what it used to be the past five years.
What do I mean by that?
In the past five years, we’ve been lucky because we were operating in a period of basically global
growth and low interest rates. The past few months, we have seen an inching up, in fact, a rapid
increase in the interest rates in the leading economies of the world. And, therefore, our ability to
borrow at reasonable prices is going to be challenged. In fact, ultimately, the question is our ability to
access the financial markets.
When the President made her speech in July last year, the environment was not as bad as it is now,
at least based on the forecast of most financial institutions. So, we were assuming that raising 80
billion would put us in a position where we can then convince them to improve our ability to borrow at
lower rates. But conditions have changed on us because the interest rates have gone up. In fact, just
within this room, we tried to access the market for a billion dollars because for this year alone, the
Philippines will have to borrow 4 billion dollars. Of that amount, we have borrowed 1.5 billion. We
issued last January a 25-year bond at 9.7 percent cost. We were trying to access last week and the
market was not as favorable and up to now we have not accessed and we might pull back because
the conditions are not very good.
So given this situation, we at the Department of Finance believe that we really need to front-end our
deficit reduction. Because it is deficit that is causing the increase of the debt and we are in what we
call a debt spiral. The more debt you have, the more deficit you have because interest and debt
service eats and eats more of your revenue. We need to get out of this debt spiral. And the only way,
I think, we can get out of this debt spiral is really have a front-end adjustment in our revenue base.65
The image portrayed is chilling. Congress passed the law hoping for rescue from an inevitable
catastrophe. Whether the law is indeed sufficient to answer the state’s economic dilemma is not for
the Court to judge. In the Fariñas case, the Court refused to consider the various arguments raised
therein that dwelt on the wisdom of Section 14 of R.A. No. 9006 (The Fair Election Act), pronouncing
that:
. . . policy matters are not the concern of the Court. Government policy is within the exclusive
dominion of the political branches of the government. It is not for this Court to look into the wisdom
or propriety of legislative determination. Indeed, whether an enactment is wise or unwise, whether it
is based on sound economic theory, whether it is the best means to achieve the desired results,
whether, in short, the legislative discretion within its prescribed limits should be exercised in a
particular manner are matters for the judgment of the legislature, and the serious conflict of opinions
does not suffice to bring them within the range of judicial cognizance.66
In the same vein, the Court in this case will not dawdle on the purpose of Congress or the executive
policy, given that it is not for the judiciary to "pass upon questions of wisdom, justice or expediency
of legislation."67
II.
Whether Section 8 of R.A. No. 9337, amending Sections 110(A)(2) and 110(B) of the NIRC; and
Section 12 of R.A. No. 9337, amending Section 114(C) of the NIRC, violate the following provisions
of the Constitution:
a. Article VI, Section 28(1), and
b. Article III, Section 1
A. Due Process and Equal Protection Clauses
Petitioners Association of Pilipinas Shell Dealers, Inc., et al. argue that Section 8 of R.A. No. 9337,
amending Sections 110 (A)(2), 110 (B), and Section 12 of R.A. No. 9337, amending Section 114 (C)
of the NIRC are arbitrary, oppressive, excessive and confiscatory. Their argument is premised on the
constitutional right against deprivation of life, liberty of property without due process of law, as
embodied in Article III, Section 1 of the Constitution.
Petitioners also contend that these provisions violate the constitutional guarantee of equal protection
of the law.
The doctrine is that where the due process and equal protection clauses are invoked, considering
that they are not fixed rules but rather broad standards, there is a need for proof of such persuasive
character as would lead to such a conclusion. Absent such a showing, the presumption of validity
must prevail.68
Section 8 of R.A. No. 9337, amending Section 110(B) of the NIRC imposes a limitation on the
amount of input tax that may be credited against the output tax. It states, in part: "[P]rovided, that the
input tax inclusive of the input VAT carried over from the previous quarter that may be credited in
every quarter shall not exceed seventy percent (70%) of the output VAT: …"
Input Tax is defined under Section 110(A) of the NIRC, as amended, as the value-added tax
due from or paid by a VAT-registered person on the importation of goods or local purchase of good
and services, including lease or use of property, in the course of trade or business, from a VAT-
registered person, and Output Tax is the value-added tax due on the sale or lease of taxable goods
or properties or services by any person registered or required to register under the law.
Petitioners claim that the contested sections impose limitations on the amount of input tax that may
be claimed. In effect, a portion of the input tax that has already been paid cannot now be credited
against the output tax.
Petitioners’ argument is not absolute. It assumes that the input tax exceeds 70% of the output tax,
and therefore, the input tax in excess of 70% remains uncredited. However, to the extent that the
input tax is less than 70% of the output tax, then 100% of such input tax is still creditable.
More importantly, the excess input tax, if any, is retained in a business’s books of accounts and
remains creditable in the succeeding quarter/s. This is explicitly allowed by Section 110(B), which
provides that "if the input tax exceeds the output tax, the excess shall be carried over to the
succeeding quarter or quarters." In addition, Section 112(B) allows a VAT-registered person to apply
for the issuance of a tax credit certificate or refund for any unused input taxes, to the extent that
such input taxes have not been applied against the output taxes. Such unused input tax may be
used in payment of his other internal revenue taxes.
The non-application of the unutilized input tax in a given quarter is not ad infinitum, as petitioners
exaggeratedly contend. Their analysis of the effect of the 70% limitation is incomplete and one-
sided. It ends at the net effect that there will be unapplied/unutilized inputs VAT for a given quarter. It
does not proceed further to the fact that such unapplied/unutilized input tax may be credited in the
subsequent periods as allowed by the carry-over provision of Section 110(B) or that it may later on
be refunded through a tax credit certificate under Section 112(B).
Therefore, petitioners’ argument must be rejected.
On the other hand, it appears that petitioner Garcia failed to comprehend the operation of the 70%
limitation on the input tax. According to petitioner, the limitation on the creditable input tax in effect
allows VAT-registered establishments to retain a portion of the taxes they collect, which violates the
principle that tax collection and revenue should be for public purposes and expenditures
As earlier stated, the input tax is the tax paid by a person, passed on to him by the seller, when he
buys goods. Output tax meanwhile is the tax due to the person when he sells goods. In computing
the VAT payable, three possible scenarios may arise:
First, if at the end of a taxable quarter the output taxes charged by the seller are equal to the input
taxes that he paid and passed on by the suppliers, then no payment is required;
Second, when the output taxes exceed the input taxes, the person shall be liable for the excess,
which has to be paid to the Bureau of Internal Revenue (BIR);69 and
Third, if the input taxes exceed the output taxes, the excess shall be carried over to the succeeding
quarter or quarters. Should the input taxes result from zero-rated or effectively zero-rated
transactions, any excess over the output taxes shall instead be refunded to the taxpayer or credited
against other internal revenue taxes, at the taxpayer’s option.70
Section 8 of R.A. No. 9337 however, imposed a 70% limitation on the input tax. Thus, a person can
credit his input tax only up to the extent of 70% of the output tax. In layman’s term, the value-added
taxes that a person/taxpayer paid and passed on to him by a seller can only be credited up to 70%
of the value-added taxes that is due to him on a taxable transaction. There is no retention of any tax
collection because the person/taxpayer has already previously paid the input tax to a seller, and the
seller will subsequently remit such input tax to the BIR. The party directly liable for the payment of
the tax is the seller.71 What only needs to be done is for the person/taxpayer to apply or credit these
input taxes, as evidenced by receipts, against his output taxes.
Petitioners Association of Pilipinas Shell Dealers, Inc., et al. also argue that the input tax partakes
the nature of a property that may not be confiscated, appropriated, or limited without due process of
law.
The input tax is not a property or a property right within the constitutional purview of the due process
clause. A VAT-registered person’s entitlement to the creditable input tax is a mere statutory privilege.
The distinction between statutory privileges and vested rights must be borne in mind for persons
have no vested rights in statutory privileges. The state may change or take away rights, which were
created by the law of the state, although it may not take away property, which was vested by virtue of
such rights.72
Under the previous system of single-stage taxation, taxes paid at every level of distribution are not
recoverable from the taxes payable, although it becomes part of the cost, which is deductible from
the gross revenue. When Pres. Aquino issued E.O. No. 273 imposing a 10% multi-stage tax on all
sales, it was then that the crediting of the input tax paid on purchase or importation of goods and
services by VAT-registered persons against the output tax was introduced.73 This was adopted by the
Expanded VAT Law (R.A. No. 7716),74 and The Tax Reform Act of 1997 (R.A. No. 8424).75 The right
to credit input tax as against the output tax is clearly a privilege created by law, a privilege that also
the law can remove, or in this case, limit.
Petitioners also contest as arbitrary, oppressive, excessive and confiscatory, Section 8 of R.A. No.
9337, amending Section 110(A) of the NIRC, which provides:
SEC. 110. Tax Credits. –
(A) Creditable Input Tax. – …
Provided, That the input tax on goods purchased or imported in a calendar month for use in trade or
business for which deduction for depreciation is allowed under this Code, shall be spread evenly
over the month of acquisition and the fifty-nine (59) succeeding months if the aggregate acquisition
cost for such goods, excluding the VAT component thereof, exceeds One million pesos
(₱1,000,000.00): Provided, however, That if the estimated useful life of the capital goods is less than
five (5) years, as used for depreciation purposes, then the input VAT shall be spread over such a
shorter period: Provided, finally, That in the case of purchase of services, lease or use of properties,
the input tax shall be creditable to the purchaser, lessee or license upon payment of the
compensation, rental, royalty or fee.
The foregoing section imposes a 60-month period within which to amortize the creditable input tax
on purchase or importation of capital goods with acquisition cost of ₱1 Million pesos, exclusive of the
VAT component. Such spread out only poses a delay in the crediting of the input tax. Petitioners’
argument is without basis because the taxpayer is not permanently deprived of his privilege to credit
the input tax.
It is worth mentioning that Congress admitted that the spread-out of the creditable input tax in this
case amounts to a 4-year interest-free loan to the government.76 In the same breath, Congress also
justified its move by saying that the provision was designed to raise an annual revenue of 22.6
billion.77 The legislature also dispelled the fear that the provision will fend off foreign investments,
saying that foreign investors have other tax incentives provided by law, and citing the case of China,
where despite a 17.5% non-creditable VAT, foreign investments were not deterred.78 Again, for
whatever is the purpose of the 60-month amortization, this involves executive economic policy and
legislative wisdom in which the Court cannot intervene.
With regard to the 5% creditable withholding tax imposed on payments made by the government for
taxable transactions, Section 12 of R.A. No. 9337, which amended Section 114 of the NIRC, reads:
SEC. 114. Return and Payment of Value-added Tax. –
(C) Withholding of Value-added Tax. – The Government or any of its political subdivisions,
instrumentalities or agencies, including government-owned or controlled corporations (GOCCs)
shall, before making payment on account of each purchase of goods and services which are subject
to the value-added tax imposed in Sections 106 and 108 of this Code, deduct and withhold a final
value-added tax at the rate of five percent (5%) of the gross payment thereof: Provided, That the
payment for lease or use of properties or property rights to nonresident owners shall be subject to
ten percent (10%) withholding tax at the time of payment. For purposes of this Section, the payor or
person in control of the payment shall be considered as the withholding agent.
The value-added tax withheld under this Section shall be remitted within ten (10) days following the
end of the month the withholding was made.
Section 114(C) merely provides a method of collection, or as stated by respondents, a more
simplified VAT withholding system. The government in this case is constituted as a withholding agent
with respect to their payments for goods and services.
Prior to its amendment, Section 114(C) provided for different rates of value-added taxes to be
withheld -- 3% on gross payments for purchases of goods; 6% on gross payments for services
supplied by contractors other than by public works contractors; 8.5% on gross payments for services
supplied by public work contractors; or 10% on payment for the lease or use of properties or
property rights to nonresident owners. Under the present Section 114(C), these different rates,
except for the 10% on lease or property rights payment to nonresidents, were deleted, and a uniform
rate of 5% is applied.
The Court observes, however, that the law the used the word final. In tax usage, final, as opposed to
creditable, means full. Thus, it is provided in Section 114(C): "final value-added tax at the rate of five
percent (5%)."
In Revenue Regulations No. 02-98, implementing R.A. No. 8424 (The Tax Reform Act of 1997), the
concept of final withholding tax on income was explained, to wit:
SECTION 2.57. Withholding of Tax at Source
(A) Final Withholding Tax. – Under the final withholding tax system the amount of income tax
withheld by the withholding agent is constituted as full and final payment of the income tax due
from the payee on the said income. The liability for payment of the tax rests primarily on the payor as
a withholding agent. Thus, in case of his failure to withhold the tax or in case of underwithholding,
the deficiency tax shall be collected from the payor/withholding agent. …
(B) Creditable Withholding Tax. – Under the creditable withholding tax system, taxes withheld on
certain income payments are intended to equal or at least approximate the tax due of the payee on
said income. … Taxes withheld on income payments covered by the expanded withholding tax
(referred to in Sec. 2.57.2 of these regulations) and compensation income (referred to in Sec. 2.78
also of these regulations) are creditable in nature.
As applied to value-added tax, this means that taxable transactions with the government are subject
to a 5% rate, which constitutes as full payment of the tax payable on the transaction. This represents
the net VAT payable of the seller. The other 5% effectively accounts for the standard input VAT
(deemed input VAT), in lieu of the actual input VAT directly or attributable to the taxable transaction.79
The Court need not explore the rationale behind the provision. It is clear that Congress intended to
treat differently taxable transactions with the government.80 This is supported by the fact that under
the old provision, the 5% tax withheld by the government remains creditable against the tax liability
of the seller or contractor, to wit:
SEC. 114. Return and Payment of Value-added Tax. –
(C) Withholding of Creditable Value-added Tax. – The Government or any of its political
subdivisions, instrumentalities or agencies, including government-owned or controlled corporations
(GOCCs) shall, before making payment on account of each purchase of goods from sellers and
services rendered by contractors which are subject to the value-added tax imposed in Sections 106
and 108 of this Code, deduct and withhold the value-added tax due at the rate of three percent (3%)
of the gross payment for the purchase of goods and six percent (6%) on gross receipts for services
rendered by contractors on every sale or installment payment which shall be creditable against the
value-added tax liability of the seller or contractor: Provided, however, That in the case of
government public works contractors, the withholding rate shall be eight and one-half percent
(8.5%): Provided, further, That the payment for lease or use of properties or property rights to
nonresident owners shall be subject to ten percent (10%) withholding tax at the time of payment. For
this purpose, the payor or person in control of the payment shall be considered as the withholding
agent.
The valued-added tax withheld under this Section shall be remitted within ten (10) days following the
end of the month the withholding was made. (Emphasis supplied)
As amended, the use of the word final and the deletion of the word creditable exhibits Congress’s
intention to treat transactions with the government differently. Since it has not been shown that the
class subject to the 5% final withholding tax has been unreasonably narrowed, there is no reason to
invalidate the provision. Petitioners, as petroleum dealers, are not the only ones subjected to the 5%
final withholding tax. It applies to all those who deal with the government.
Moreover, the actual input tax is not totally lost or uncreditable, as petitioners believe. Revenue
Regulations No. 14-2005 or the Consolidated Value-Added Tax Regulations 2005 issued by the BIR,
provides that should the actual input tax exceed 5% of gross payments, the excess may form part of
the cost. Equally, should the actual input tax be less than 5%, the difference is treated as income.81
Petitioners also argue that by imposing a limitation on the creditable input tax, the government gets
to tax a profit or value-added even if there is no profit or value-added.
Petitioners’ stance is purely hypothetical, argumentative, and again, one-sided. The Court will not
engage in a legal joust where premises are what ifs, arguments, theoretical and facts, uncertain. Any
disquisition by the Court on this point will only be, as Shakespeare describes life in Macbeth,82 "full of
sound and fury, signifying nothing."
What’s more, petitioners’ contention assumes the proposition that there is no profit or value-added. It
need not take an astute businessman to know that it is a matter of exception that a business will sell
goods or services without profit or value-added. It cannot be overstressed that a business is created
precisely for profit.
The equal protection clause under the Constitution means that "no person or class of persons shall
be deprived of the same protection of laws which is enjoyed by other persons or other classes in the
same place and in like circumstances."83
The power of the State to make reasonable and natural classifications for the purposes of taxation
has long been established. Whether it relates to the subject of taxation, the kind of property, the
rates to be levied, or the amounts to be raised, the methods of assessment, valuation and collection,
the State’s power is entitled to presumption of validity. As a rule, the judiciary will not interfere with
such power absent a clear showing of unreasonableness, discrimination, or arbitrariness.84
Petitioners point out that the limitation on the creditable input tax if the entity has a high ratio of input
tax, or invests in capital equipment, or has several transactions with the government, is not based on
real and substantial differences to meet a valid classification.
The argument is pedantic, if not outright baseless. The law does not make any classification in the
subject of taxation, the kind of property, the rates to be levied or the amounts to be raised, the
methods of assessment, valuation and collection. Petitioners’ alleged distinctions are based on
variables that bear different consequences. While the implementation of the law may yield varying
end results depending on one’s profit margin and value-added, the Court cannot go beyond what the
legislature has laid down and interfere with the affairs of business.
The equal protection clause does not require the universal application of the laws on all persons or
things without distinction. This might in fact sometimes result in unequal protection. What the clause
requires is equality among equals as determined according to a valid classification. By classification
is meant the grouping of persons or things similar to each other in certain particulars and different
from all others in these same particulars.85
Petitioners brought to the Court’s attention the introduction of Senate Bill No. 2038 by Sens. S.R.
Osmeña III and Ma. Ana Consuelo A.S. – Madrigal on June 6, 2005, and House Bill No. 4493 by
Rep. Eric D. Singson. The proposed legislation seeks to amend the 70% limitation by increasing the
same to 90%. This, according to petitioners, supports their stance that the 70% limitation is arbitrary
and confiscatory. On this score, suffice it to say that these are still proposed legislations. Until
Congress amends the law, and absent any unequivocal basis for its unconstitutionality, the 70%
limitation stays.
B. Uniformity and Equitability of Taxation
Article VI, Section 28(1) of the Constitution reads:
The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system
of taxation.
Uniformity in taxation means that all taxable articles or kinds of property of the same class shall be
taxed at the same rate. Different articles may be taxed at different amounts provided that the rate is
uniform on the same class everywhere with all people at all times.86
In this case, the tax law is uniform as it provides a standard rate of 0% or 10% (or 12%) on all goods
and services. Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108,
respectively, of the NIRC, provide for a rate of 10% (or 12%) on sale of goods and properties,
importation of goods, and sale of services and use or lease of properties. These same sections also
provide for a 0% rate on certain sales and transaction.
Neither does the law make any distinction as to the type of industry or trade that will bear the 70%
limitation on the creditable input tax, 5-year amortization of input tax paid on purchase of capital
goods or the 5% final withholding tax by the government. It must be stressed that the rule of uniform
taxation does not deprive Congress of the power to classify subjects of taxation, and only demands
uniformity within the particular class.87
R.A. No. 9337 is also equitable. The law is equipped with a threshold margin. The VAT rate of 0% or
10% (or 12%) does not apply to sales of goods or services with gross annual sales or receipts not
exceeding ₱1,500,000.00.88Also, basic marine and agricultural food products in their original state
are still not subject to the tax,89 thus ensuring that prices at the grassroots level will remain
accessible. As was stated in Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. vs.
Tan:90
The disputed sales tax is also equitable. It is imposed only on sales of goods or services by persons
engaged in business with an aggregate gross annual sales exceeding ₱200,000.00. Small
corner sari-sari stores are consequently exempt from its application. Likewise exempt from the tax
are sales of farm and marine products, so that the costs of basic food and other necessities, spared
as they are from the incidence of the VAT, are expected to be relatively lower and within the reach of
the general public.
It is admitted that R.A. No. 9337 puts a premium on businesses with low profit margins, and unduly
favors those with high profit margins. Congress was not oblivious to this. Thus, to equalize the
weighty burden the law entails, the law, under Section 116, imposed a 3% percentage tax on VAT-
exempt persons under Section 109(v), i.e., transactions with gross annual sales and/or receipts not
exceeding ₱1.5 Million. This acts as a equalizer because in effect, bigger businesses that qualify for
VAT coverage and VAT-exempt taxpayers stand on equal-footing.
Moreover, Congress provided mitigating measures to cushion the impact of the imposition of the tax
on those previously exempt. Excise taxes on petroleum products91 and natural gas92 were reduced.
Percentage tax on domestic carriers was removed.93 Power producers are now exempt from paying
franchise tax.94
Aside from these, Congress also increased the income tax rates of corporations, in order to
distribute the burden of taxation. Domestic, foreign, and non-resident corporations are now subject
to a 35% income tax rate, from a previous 32%.95 Intercorporate dividends of non-resident foreign
corporations are still subject to 15% final withholding tax but the tax credit allowed on the
corporation’s domicile was increased to 20%.96 The Philippine Amusement and Gaming Corporation
(PAGCOR) is not exempt from income taxes anymore.97 Even the sale by an artist of his works or
services performed for the production of such works was not spared.
All these were designed to ease, as well as spread out, the burden of taxation, which would
otherwise rest largely on the consumers. It cannot therefore be gainsaid that R.A. No. 9337 is
equitable.
C. Progressivity of Taxation
Lastly, petitioners contend that the limitation on the creditable input tax is anything but regressive. It
is the smaller business with higher input tax-output tax ratio that will suffer the consequences.
Progressive taxation is built on the principle of the taxpayer’s ability to pay. This principle was also
lifted from Adam Smith’s Canons of Taxation, and it states:
I. The subjects of every state ought to contribute towards the support of the government, as nearly
as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they
respectively enjoy under the protection of the state.
Taxation is progressive when its rate goes up depending on the resources of the person affected.98
The VAT is an antithesis of progressive taxation. By its very nature, it is regressive. The principle of
progressive taxation has no relation with the VAT system inasmuch as the VAT paid by the consumer
or business for every goods bought or services enjoyed is the same regardless of income. In
other words, the VAT paid eats the same portion of an income, whether big or small. The disparity
lies in the income earned by a person or profit margin marked by a business, such that the higher
the income or profit margin, the smaller the portion of the income or profit that is eaten by VAT. A
converso, the lower the income or profit margin, the bigger the part that the VAT eats away. At the
end of the day, it is really the lower income group or businesses with low-profit margins that is
always hardest hit.
Nevertheless, the Constitution does not really prohibit the imposition of indirect taxes, like the VAT.
What it simply provides is that Congress shall "evolve a progressive system of taxation." The Court
stated in the Tolentino case, thus:
The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT, are
regressive. What it simply provides is that Congress shall ‘evolve a progressive system of taxation.’
The constitutional provision has been interpreted to mean simply that ‘direct taxes are . . . to be
preferred [and] as much as possible, indirect taxes should be minimized.’ (E. FERNANDO, THE
CONSTITUTION OF THE PHILIPPINES 221 (Second ed. 1977)) Indeed, the mandate to Congress
is not to prescribe, but to evolve, a progressive tax system. Otherwise, sales taxes, which perhaps
are the oldest form of indirect taxes, would have been prohibited with the proclamation of Art. VIII,
§17 (1) of the 1973 Constitution from which the present Art. VI, §28 (1) was taken. Sales taxes are
also regressive.
Resort to indirect taxes should be minimized but not avoided entirely because it is difficult, if not
impossible, to avoid them by imposing such taxes according to the taxpayers' ability to pay. In the
case of the VAT, the law minimizes the regressive effects of this imposition by providing for zero
rating of certain transactions (R.A. No. 7716, §3, amending §102 (b) of the NIRC), while granting
exemptions to other transactions. (R.A. No. 7716, §4 amending §103 of the NIRC)99
CONCLUSION
It has been said that taxes are the lifeblood of the government. In this case, it is just an enema, a
first-aid measure to resuscitate an economy in distress. The Court is neither blind nor is it turning a
deaf ear on the plight of the masses. But it does not have the panacea for the malady that the law
seeks to remedy. As in other cases, the Court cannot strike down a law as unconstitutional simply
because of its yokes.
Let us not be overly influenced by the plea that for every wrong there is a remedy, and that the
judiciary should stand ready to afford relief. There are undoubtedly many wrongs the judicature may
not correct, for instance, those involving political questions. . . .
Let us likewise disabuse our minds from the notion that the judiciary is the repository of remedies for
all political or social ills; We should not forget that the Constitution has judiciously allocated the
powers of government to three distinct and separate compartments; and that judicial interpretation
has tended to the preservation of the independence of the three, and a zealous regard of the
prerogatives of each, knowing full well that one is not the guardian of the others and that, for official
wrong-doing, each may be brought to account, either by impeachment, trial or by the ballot box.100
The words of the Court in Vera vs. Avelino101 holds true then, as it still holds true now. All things
considered, there is no raison d'être for the unconstitutionality of R.A. No. 9337.
WHEREFORE, Republic Act No. 9337 not being unconstitutional, the petitions in G.R. Nos. 168056,
168207, 168461, 168463, and 168730, are hereby DISMISSED.
There being no constitutional impediment to the full enforcement and implementation of R.A. No.
9337, the temporary restraining order issued by the Court on July 1, 2005 is LIFTED upon finality of
herein decision.
SO ORDERED.
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
WE CONCUR:
HILARIO G. DAVIDE, JR.
Chief Justice

REYNATO S. PUNO ARTEMIO V. PANGANIBAN

Associate Justice Associate Justice
 LEONARDO A. QUISUMBING CONSUELO YNARES-SANTIAGO
Associate Justice Associate Justice

ANGELINA SANDOVAL-GUTIERREZ ANTONIO T. CARPIO 


Associate Justice Associate Justice

RENATO C. CORONA CONCHITA CARPIO-MORALES

Associate Justice Associate Justice

ROMEO J. CALLEJO, SR. ADOLFO S. AZCUNA 


Associate Justice Associate Justice

DANTE O. TINGA MINITA V. CHICO-NAZARIO 


Associate Justice Associate Justice

CANCIO C. GARCIA
Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the
above Decision were reached in consultation before the case was assigned to the writer of the
opinion of the Court.
HILARIO G. DAVIDE, JR.
Chief Justice



Footnotes
1Entitled "An Act Amending Sections 27, 28, 34, 106, 107, 108, 109, 110, 111, 112, 113, 114,
116, 117, 119, 121, 148, 151, 236, 237, and 288 of the National Internal Revenue Code of
1997, As Amended and For Other Purposes."
2Entitled, "An Act Restructuring the Value-Added Tax, Amending for the Purpose Sections
106, 107, 108, 110 and 114 of the National Internal Revenue Code of 1997, As Amended,
and For Other Purposes."
3 Entitled, "An Act Amending Sections 106, 107, 108, 109, 110 and 111 of the National
Internal Revenue Code of 1997, As Amended, and For Other Purposes."
4Entitled, "An Act Amending Sections 27, 28, 34, 106, 108, 109, 110, 112, 113, 114, 116,
117, 119, 121, 125, 148, 151, 236, 237 and 288 of the National Internal Revenue Code of
1997, As Amended, and For Other Purposes."
5 Section 26, R.A. No. 9337.
6 TSN, July 14, 2005.
7Section 125 of the National Internal Revenue Code, as amended, was not amended by
R.A. No. 9337, as can be gleaned from the title and body of the law.
8 Section 105, National Internal Revenue of the Philippines, as amended.
9 Ibid.
Deoferio, Jr., V.A. and Mamalateo, V.C., The Value Added Tax in the Philippines (First
10

Edition 2000).
11 Maceda vs. Macaraig, Jr., G.R. No. 88291, May 31, 1991, 197 SCRA 771.
12 Maceda vs. Macaraig, Jr., G.R. No. 88291, June 8, 1993, 223 SCRA, 217.
Id., Deoferio, Jr., V.A. and Mamalateo, V.C., The Value Added Tax in the Philippines (First
13

Edition 2000).
14 Commissioner of Internal Revenue vs. Seagate, G.R. No. 153866, February 11, 2005.
15Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. vs. Tan, G.R. Nos.
L-81311, L-81820, L-81921, L-82152, June 30, 1988, 163 SCRA 371.
16Entitled, "An Act Restructuring the Value-Added Tax (VAT) System, Widening its Tax Base
and Enhancing its Administration, And for these Purposes Amending and Repealing the
Relevant Provisions of the National Internal Revenue Code, as amended, and for other
Purposes."
17Entitled, "An Act Amending Republic Act No. 7716, otherwise known as the Value-Added
Tax Law and Other Pertinent Provisions of the National Internal Revenue Code, as
Amended."
18Entitled, "An Act Amending the National Internal Revenue Code, as Amended, and for
other Purposes."
19 Story, Commentaries 835 (1833).
20 G.R. No. 147387, December 10, 2003, 417 SCRA 503.
21 Id., pp. 529-530.
22 Supra., Note 20.
23 G.R. No. 115455, August 25, 1994, 235 SCRA 630.
24 Id., p. 670.
25 Wester’s Third New International Dictionary, p. 1897.
26TSN, Bicameral Conference Committee on the Disagreeing Provisions of Senate Bill No.
1950 and House Bill Nos. 3705 and 3555, May 10, 2005, p. 4.
27 Id., p. 3.
Sponsorship Speech of Representative Teves, in behalf of Representative Jesli Lapus,
28

TSN, January 7, 2005, pp. 34-35.

29 G.R. No. 105371, November 11, 1993, 227 SCRA 703.
30 Supra, Note 23.
31 Id., p. 668.
32 Id., p. 671.
33 Id., pp. 661-663.
34 Transcript of Session Proceedings, January 7, 2005, pp. 19-20.
35 Journal of the Senate, Session No. 67, March 7, 2005, pp. 727-728.
36 Id., p. 726.
37 See Angara vs. Electoral Commission, No. 45081, July 15, 1936, 63 Phil. 139, 156.
38Defensor-Santiago vs. Commission on Elections, G.R. No. 127325, March 19, 1997, 270
SCRA 106, 153; People vs. Rosenthal, Nos. 46076 & 46077, June 12, 1939, 68 Phil. 328;
ISAGANI A. CRUZ, Philippine Political Law 86 (1996). Judge Cooley enunciates the doctrine
in the following oft-quoted language: "One of the settled maxims in constitutional law is, that
the power conferred upon the legislature to make laws cannot be delegated by that
department to any other body or authority. Where the sovereign power of the state has
located the authority, there it must remain; and by the constitutional agency alone the laws
must be made until the Constitution itself is changed. The power to whose judgment,
wisdom, and patriotism this high prerogative has been intrusted cannot relieve itself
of the responsibility by choosing other agencies upon which the power shall be
devolved, nor can it substitute the judgment, wisdom, and patriotism of any other
body for those to which alone the people have seen fit to confide this sovereign trust."
(Cooley on Constitutional Limitations, 8th ed., Vol. I, p. 224)
39 United States vs. Barrias, No. 4349, September 24, 1908, 11 Phil. 327, 330.
40 16 Am Jur 2d, Constitutional Law, § 337.
41Pelaez vs. Auditor General, No. L-23825, December 24, 1965, 122 Phil. 965, 974 citing
Calalang vs. Williams, No. 47800, December 2, 1940, 70 Phil. 726; Pangasinan Transp. Co.
vs. Public Service Commission, No. 47065, June 26, 1940, 70 Phil. 221; Cruz vs. Youngberg,
No. 34674, October 26, 1931, 56 Phil. 234; Alegre vs. Collector of Customs, No. 30783,
August 27, 1929, 53 Phil. 394 et seq.
42Pelaez vs. Auditor General, supra, citing People vs. Lim Ho, No. L-12091-2, January 28,
1960, 106 Phil. 887; People vs. Jolliffee, No. L-9553, May 13, 1959, 105 Phil 677; People vs.
Vera, No. 45685, November 16, 1937, 65 Phil. 56; U.S. vs. Nag Tang Ho, No. L-17122,
February 27, 1922, 43 Phil. 1; Compañia General de Tabacos vs. Board of Public Utility, No.
11216, March 6, 1916, 34 Phil. 136 et seq.
43 Edu vs. Ericta, No. L-32096, October 24, 1970, 35 SCRA 481, 497.
44Eastern Shipping Lines, Inc. vs. POEA, No. L-76633, October 18, 1988, 166 SCRA 533,
543-544.
45 No. 45685, November 16, 1937, 65 Phil. 56.
46 Id., pp. 115-120.
47 Supra, note 43.
48 Id., pp. 496-497.
49 16 C.J.S., Constitutional Law, § 138.
50 Ibid.
51 16 Am Jur 2d, Constitutional Law § 340.
52 Yajus vs. United States, 321 US 414, 88 L Ed 834, 64 S Ct. 660, 28 Ohio Ops 220.
53Province of Batangas vs. Romulo, G.R. No. 152774, May 27, 2004; Enriquez vs. Court of
Appeals, G.R. No. 140473, January 28, 2003, 396 SCRA 377; Codoy vs. Calugay, G.R. No.
123486, August 12, 1999, 312 SCRA 333.
54Province of Batangas vs. Romulo, supra; Quisumbing vs. Meralco, G.R. No. 142943, April
3, 2002, 380 SCRA 195; Agpalo, Statutory Construction, 1990 ed., p. 45.
55 Villena vs. Secretary of Interior, No. 46570, April 21, 1939, 67 Phil 451, 463-464.
Alunan vs. Mirasol, G.R. No. 108399, July 31, 1997, 276 SCRA 501, 513-514, citing
56

Panama Refining Co. vs. Ryan, 293 U.S. 388, 79 L.Ed. 469 (1935).
57Compañia General de Tabacos de Filipinas vs. The Board of Public Utility Commissioners,
No. 11216, 34 Phil. 136; Cruz vs. Youngberg, No. 34674, October 26, 1931, 56 Phil. 234;
People vs. Vera, No. 45685, November 16, 1937, 65 Phil. 56, 113; Edu vs. Ericta, No.
L-32096, October 24, 1970, 35 SCRA 481; Tatad vs. Secretary of the Department of Energy,
G.R. No. 124360, November 5, 1997, 281 SCRA 330; Alunan vs. Mirasol, supra.
58 Bowles vs. Willinghan, 321 US 503, 88 l Ed 892, 64 S Ct 641, 28 Ohio Ops 180.
59United Residents of Dominican Hill, Inc. vs. Commission on the Settlement of Land
Problems, G.R. No. 135945, March 7, 2001, 353 SCRA 782; Commissioner of Internal
Revenue vs. Santos, G.R. No. 119252, August 18, 1997, 277 SCRA 617, 630.
60Commission on Internal Revenue vs. American Express International, Inc. (Philippine
Branch), G.R. No. 152609, June 29, 2005.
61Acting Commissioner of Customs vs. MERALCO, No. L-23623, June 30, 1977, 77 SCRA
469, 473.
62 Respondents’ Memorandum, pp. 168-169.
63 The Wealth of Nations, Book V, Chapter II.
64 Chavez vs. Ongpin, G.R. No. 76778, June 6, 1990, 186 SCRA 331, 338.
65TSN, Bicameral Conference Committee on the Disagreeing Provisions of Senate Bill No.
1950 and House Bill Nos. 3705 and 3555, April 25, 2005, pp. 5-6.
66 G.R. No. 147387, December 10, 2003, 417 SCRA 503, 524.
67National Housing Authority vs. Reyes, G.R. No. L-49439, June 29, 1983, 123 SCRA 245,
249.
68 Sison vs. Ancheta, G.R. No. L-59431, July 25, 1984, 130 SCRA 654, 661.
69 Section 8, R.A. No. 9337, amending Section 110(A)(B),NIRC.
70 Ibid.
71Commissioner of Internal Revenue vs. Benguet Corp., G.R. Nos. 134587 & 134588, July
8, 2005.
72United Paracale Mining Co. vs. Dela Rosa, G.R. Nos. 63786-87, April 7, 1993, 221 SCRA
108, 115.
73 E.O. No. 273, Section 1.
74 Section 5.
75 Section 110(B).
76 Journal of the Senate, Session No. 71, March 15, 2005, p. 803.
77 Id., Session No. 67, March 7, 2005, p. 726.
78 Id., Session No. 71, March 15, 2005, p. 803.
79 Revenue Regulations No. 14-2005, 4.114-2(a).
80 Commissioner of Internal Revenue vs. Philam, G.R. No. 141658, March 18, 2005.
81 Revenue Regulations No. 14-2005, Sec. 4. 114-2.
82 Act V, Scene V.
83Philippine Rural Electric Cooperatives Association, Inc. vs. DILG, G.R. No. 143076, June
10, 2003, 403 SCRA 558, 565.
84 Aban, Benjamin, Law of Basic Taxation in the Philippines (First Edition 1994).
85 Philippine Judges Association case, supra., note 29.
86Commissioner of Internal Revenue vs. Court of Appeals, G.R. No. 119761, August 29,
1996, 261 SCRA 236, 249.
87 Kee vs. Court of Tax Appeals, No. L-18080, April 22, 1963, 117 Phil 682, 688.
88 Section 7, R.A. No. 9337.
89 Ibid.
 90 No. L-81311, June 30, 1988, 163 SCRA 371, 383.
91 Section 17, R.A. No. 9337, amending Section 148, NIRC.
92 Section 18, amending Section 151, NIRC.
93 Section 14, amending Section 117, NIRC.
94 Section 15, amending Section 119, NIRC.
95 Sections 1 and 2, amending Sections 27 and 28, NIRC.
96 Section 2, amending Section 28, NIRC.
97 Section 1, amending Section 27(C), NIRC.
98 Reyes vs. Almanzor, G.R. Nos. 49839-46, April 26, 1991, 196 SCRA 322, 327.
99Tolentino vs. Secretary of Finance, G.R. No. 115455, October 30, 1995, 249 SCRA 628,
659.
100 Vera vs. Avelino, G.R. No. L-543, August 31, 1946, 77 Phil. 365.
101 Ibid.


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EN BANC
G.R. No. 168056 - ABAKADA GURO PARTY LIST, ET AL. V. EXECUTIVE
SECRETARY EDUARDO R. ERMITA, ET AL.
G.R. No. 168207 - AQUILINO PIMENTEL, JR., ET AL. V. EXECUTIVE SECRETARY EDUARDO
ERMITA, ET AL.
G.R. No. 168461 - ASSOCIATION OF PILIPINAS SHELL DEALERS, INC, ET AL. V. CESAR V.
PURISIMA, ET AL.
G.R. No. 168463 - FRANCIS JOSEPH G. ESCUDERO, ET AL. V. CESAR V. PURISIMA, ET AL.
X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - X
SEPARATE CONCURRING
AND DISSENTING OPINION
DAVIDE, JR., C.J.:
While I still hold on to my position expressed in my dissenting opinion in the first VAT cases,1 I partly
yield to the application to the cases at bar of the rule on "germaneness" therein enunciated. Thus, I
concur with the ponencia of my highly-esteemed colleague Mme. Justice Ma. Alicia Austria-Martinez
except as regards its ruling on the issue of whether Republic Act No. 9337 violates Section 24,
Article VI of the Constitution.
R.A. No. 9337 primarily aims to restructure the value-added tax (VAT) system by broadening its base
and raising the rate so as to generate more revenues for the government that can assuage the
economic predicament that our country is now facing. This recently enacted law stemmed from three
legislative bills: House Bill (HB) No. 3555, HB No. 3705, and Senate Bill (SB) 1950. The first (HB No.
3555) called for the amendment of Sections 106, 107, 108, 109, 110, and 111 of the National Internal
Revenue Code (NIRC) as amended; while the second (HB No. 3705) proposed amendments to
Sections 106, 107, 108, 110, and 114 of the NIRC, as amended. It is significant to note that all these
Sections specifically deal with VAT. And indubitably, these bills are revenue bills in that they are
intended to levy taxes and raise funds for the government.2
On the other hand, SB No. 1950 introduced amendments to "Sections 27, 28, 34, 106, 108, 109,
110, 111, 112, 113, 114, 116, 117, 118, 119, 125, 148, 236, 237, and 288" of the NIRC, as amended.
Among the provisions sought to be amended, only Sections 106, 108, 109, 110, 111, 112, 113, 114,
and 116 pertain to VAT. And while Sections 236, 237, and 288 are administrative provisions
pertaining to registration requirements and issuance of receipts commercial invoices, the proposed
amendments thereto are related to VAT. Hence, the proposed amendments to these Sections were
validly taken cognizance of and properly considered by the Bicameral Conference Committee
(BCC).
However, I am of the opinion that the inclusion into the law of the amendments proposed in SB No.
1950 to the following provisions (with modifications on the rates of taxes) is invalid.
Provision Subject matter
Section 27 Rate of income tax on domestic corporations
Section 28(A)(1) Rate of income tax on resident foreign corporation
Section 28(B)(1) Rate of income tax on non-resident foreign corporation
Section 28(B)(5-b) Rate of income tax on intra-corporate dividends received by non-resident foreign
corporation
Section 34(B)(1) Deductions from gross income
Section 117 Percentage tax on domestic carriers and keepers of garages
Section 119 Tax on franchises
Section 148 Excise tax on manufactured oils and other fuels
Obviously, these provisions do not deal with VAT. It must be noted that the House Bills initiated
amendments to provisions pertaining to VAT only. Doubtless, the Senate has the constitutional
power to concur with the amendments to the VAT provisions introduced in the House Bills or even to
propose its own version of VAT measure. But that power does not extend to initiation of other tax
measures, such as introducing amendments to provisions on corporate income taxes, percentage
taxes, franchise taxes, and excise taxes like what the Senate did in these cases. It was beyond the
ambit of the authority of the Senate to propose amendments to provisions not covered by the House
Bills or not related to the subject matter of the House Bills, which is VAT. To allow the Senate to do
so would be tantamount to vesting in it the power to initiate revenue bills -- a power that exclusively
pertains to the House of Representatives under Section 24, Article VI of the Constitution, which
provides:
Sec. 24. All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of
local application, and private bills shall originate exclusively in the House of Representatives but the
Senate may propose or concur with amendments.
Moreover, Sections 121 (Percentage Tax on Banks and Non-Bank Financial Intermediaries) and 151
(Excise Tax on Mineral Products) of the NIRC, as amended, have been included by the BCC in R.A.
N0. 9337 even though they were not found in the Senate and House Bills.
In Philippine Judges Association v. Prado,3 the Court described the function of a conference
committee in this wise: "A conference committee may deal generally with the subject matter or it may
be limited to resolving the precise differences between the two houses. Even where the conference
committee is not by rule limited in its jurisdiction, legislative custom severely limits the freedom
with which new subject matter can be inserted into the conference bill."
The limitation on the power of a conference committee to insert new provisions was laid down
in Tolentino v. Secretary of Finance.4 There, the Court, while recognizing the power of a conference
committee to include in its report an entirely new provision that is not found either in the House bill or
in the Senate bill, held that the exercise of that power is subject to the condition that the said
provision is "germane to the subject of the House and Senate bills."
As pointed out by the petitioners, Tolentino differs from the present cases in the sense that in that
case the amendments introduced in the Senate bill were on the same subject matter treated in the
House bill, which was VAT, and the new provision inserted by the conference committee had relation
to that subject matter. Specifically, HB No. 11197 called for the (1) amendment of Sections
99,100,102,103,104,105,106,107, 108, 110, 112,115, 116, 236,237, and 238 of the NIRC, as
amended; and (2) repeal of Sections 113 and 114 of the NIRC, as amended. SB No. 1630, on the
other hand, proposed the (1) amendment of Sections 99,100,102,103,104,105,107, 108, 110, 112,
236, 237, and 238 of the NIRC, as amended; and (2) repeal of Sections 113, 114, and 116 of the
NIRC, as amended. In short, all the provisions sought to be changed in the Senate bill were covered
in the House bill. Although the new provisions inserted by the conference committee were not found
in either the House or Senate bills, they were germane to the general subject of the bills.
In the present cases, the provisions inserted by the BCC, namely, Sections 121 (Percentage Tax on
Banks and Non-Bank Financial Intermediaries) and 151 (Excise Tax on Mineral Products) of the
NIRC, as amended, are undoubtedly germane to SB No. 1950, which introduced amendments to the
provisions on percentage and excise taxes -- but foreign to HB Nos. 3555 and 3705, which dealt with
VAT only. Since the proposed amendments in the Senate bill relating to percentage and excise taxes
cannot themselves be sustained because they did not take their root from, or are not related to the
subject of, HB Nos. 3705 and 3555, in violation of Section 24, Article VI of the Constitution, the new
provisions inserted by the BCC on percentage and excise taxes would have no leg to stand on.
I understand very well that the amendments of the Senate and the BCC relating to corporate
income, percentage, franchise, and excise taxes were designed to "soften the impact of VAT
measure on the consumer, i.e., by distributing the burden across all sectors instead of putting it
entirely on the shoulders of the consumers" and to alleviate the country’s financial problems by
bringing more revenues for the government. However, these commendable intentions do not justify a
deviation from the Constitution, which mandates that the initiative for filing revenue bills should come
from the House of Representatives, not from the Senate. After all, these aims may still be realized by
means of another bill that may later be initiated by the House of Representatives.
Therefore, I vote to declare R.A. No. 9337 as constitutional insofar as it amends provisions
pertaining to VAT. However, I vote to declare as unconstitutional Sections 1, 2, 3, 14, 15, 16, 17,
and 18 thereof which, respectively, amend Sections 27, 28, 34, 117, 119, 121, 148, and 151 of the
NIRC, as amended because these amendments deal with subject matters which were not touched
or covered by the bills emanating from the House of Representatives, thereby violating Section 24 of
Article VI of the Constitution.
HILARIO G. DAVIDE, JR.



Footnotes
1Tolentino v. Secretary of Finance, G.R. No. 115455, 25 August 1994, 235 SCRA 630, and
companion cases.
2 ISAGANI A. CRUZ, POLITICAL LAW 154 (2002 ed.) citing U.S. v. Nortorn, 91 U.S. 566.
3G.R. No. 105371, 11 November 1993, 27 SCRA 703, 708, citing Davies, Legislative Law
and Process: In a Nutshell 81 (1986 ed.)
4 Supra note 1.


The Lawphil Project - Arellano Law Foundation
!
 


G.R. No. 168056 – ABAKADA GURO PARTY LIST, ET AL. VS. EXECUTIVE SECRETARY
EDUARDO ERMITA, ET AL.
G.R. No. 168207 – AQUILINO PIMENTEL, JR., ET AL. VS. EXECUTIVE SECRETARY EDUARDO
ERMITA, ET AL.
G.R. No. 168461 – ASSOCIATION OF PILIPINAS SHELL DEALERS, INC., ET AL. VS. CESAR V.
PURISIMA, ET AL.
G.R. No. 168463 – FRANCIS JOSEPH G. ESCUDERO, ET AL. VS. CESAR V. PURISIMA, ET AL.
Promulgated: September 1, 2005
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
CONCURRING AND
DISSENTING OPINION
PUNO, J.:
The main opinion of Madam Justice Martinez exhaustively discusses the numerous constitutional
and legal issues raised by the petitioners. Be that as it may, I wish to raise the following points, viz:
First. Petitioners assail sections 4 to 6 of Republic Act No. 9337 as violative of the principle of non-
delegation of legislative power. These sections authorize the President, upon recommendation of the
Secretary of Finance, to raise the value-added tax (VAT) rate to 12% effective January 1, 2006,
upon satisfaction of the following conditions: viz:
(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous
year exceeds two and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-
half percent (1 ½%).
The power of judicial review under Article VIII, section 5(2) of the 1987 Constitution is limited to the
review of "actual cases and controversies."1 As rightly stressed by retired Justice Vicente V.
Mendoza, this requirement gives the judiciary "the opportunity, denied to the legislature, of seeing
the actual operation of the statute as it is applied to actual facts and thus enables it to reach sounder
judgment" and "enhances public acceptance of its role in our system of government."2 It also
assures that the judiciary does not intrude on areas committed to the other branches of government
and is confined to its role as defined by the Constitution.3 Apposite thereto is the doctrine
of ripeness whose basic rationale is "to prevent the courts, through premature adjudication, from
entangling themselves in abstract disagreements."4 Central to the doctrine is the determination of
"whether the case involves uncertain or contingent future events that may not occur as
anticipated, or indeed may not occur at all."5 The ripeness requirement must be satisfied for each
challenged legal provision and parts of a statute so that those which are "not immediately
involved are not thereby thrown open for a judicial determination of constitutionality."6
It is manifest that the constitutional challenge to sections 4 to 6 of R.A. No. 9337 cannot hurdle the
requirement of ripeness. These sections give the President the power to raise the VAT rate to
12% on January 1, 2006 upon satisfaction of certain fact-based conditions. We are not
endowed with the infallible gift of prophesy to know whether these conditions are certain to happen.
The power to adjust the tax rate given to the President is futuristic and may or may not be exercised.
The Court is therefore beseeched to render a conjectural judgment based on hypothetical facts.
Such a supplication has to be rejected.
Second. With due respect, I submit that the most important constitutional issue posed by the
petitions at bar relates to the parameters of power of a Bicameral Conference Committee. Most
of the issues in the petitions at bar arose because the Bicameral Conference Committee concerned
exercised powers that went beyond reconciling the differences between Senate Bill No. 1950 and
House Bill Nos. 3705 and 3555. In Tolentino v. Secretary of Finance,7 I ventured the view that a
Bicameral Conference Committee has limited powers and cannot be allowed to act as if it were a
"third house" of Congress. I further warned that unless its roving powers are reigned in, a
Bicameral Conference Committee can wreck the lawmaking process which is a cornerstone of the
democratic, republican regime established in our Constitution. The passage of time fortifies my faith
that there ought to be no legal u-turn on this preeminent principle. I wish, therefore, to reiterate my
reasons for this unbending view, viz:8
Section 209, Rule XII of the Rules of the Senate provides:
In the event that the Senate does not agree with the House of Representatives on the provision of
any bill or joint resolution, the differences shall be settled by a conference committee of both
Houses which shall meet within ten days after their composition.
Each Conference Committee Report shall contain a detailed and sufficiently explicit statement of the
changes in or amendments to the subject measure, and shall be signed by the conferees.
(Emphasis supplied)
The counterpart rule of the House of Representatives is cast in near identical language. Section 85
of the Rules of the House of Representatives pertinently provides:
In the event that the House does not agree with the Senate on the amendments to any bill or joint
resolution, the differences may be settled by a conference committee of both chambers.
x x x. Each report shall contain a detailed, sufficiently explicit statement of the changes in or
amendments to the subject measure. (Emphasis supplied)
The Jefferson’s Manual has been adopted as a supplement to our parliamentary rules and practice.
Section 456 of Jefferson’s Manual similarly confines the powers of a conference committee, viz:
The managers of a conference must confine themselves to the differences committed to them … and
may not include subjects not within the disagreements, even though germane to a question in issue.
This rule of antiquity has been honed and honored in practice by the Congress of the United States.
Thus, it is chronicled by Floyd Biddick, Parliamentarian Emeritus of the United States Senate, viz:
Committees of conference are appointed for the sole purpose of compromising and adjusting the
differing and conflicting opinions of the two Houses and the committees of conference alone can
grant compromises and modify propositions of either Houses within the limits of the disagreement.
Conferees are limited to the consideration of differences between the two Houses.
Congress shall not insert in their report matters not committed to them by either House, nor shall
they strike from the bill matters agreed to by both Houses. No matter on which there is nothing in
either the Senate or House passed versions of a bill may be included in the conference report and
actions to the contrary would subject the report to a point of order. (Emphasis ours)
In fine, there is neither a sound nor a syllable in the Rules of the Senate and the House of
Representatives to support the thesis of the respondents that a bicameral conference committee is
clothed with an ex post veto power.
But the thesis that a Bicameral Conference Committee can wield ex post veto power does not only
contravene the rules of both the Senate and the House. It wages war against our settled ideals of
representative democracy. For the inevitable, catastrophic effect of the thesis is to install a Bicameral
Conference Committee as the Third Chamber of our Congress, similarly vested with the power to
make laws but with the dissimilarity that its laws are not the subject of a free and full discussion of
both Houses of Congress. With such a vagrant power, a Bicameral Conference Committee acting as
a Third Chamber will be a constitutional monstrosity.
It needs no omniscience to perceive that our Constitution did not provide for a Congress composed
of three chambers. On the contrary, section 1, Article VI of the Constitution provides in clear and
certain language: "The legislative power shall be vested in the Congress of the Philippines
which shall consist of a Senate and a House of Representatives …" Note that in vesting legislative
power exclusively to the Senate and the House, the Constitution used the word "shall." Its command
for a Congress of two houses is mandatory. It is not mandatory sometimes.
In vesting legislative power to the Senate, the Constitution means the Senate "… composed of
twenty-four Senators xxx elected at large by the qualified voters of the Philippines …" Similarly,
when the Constitution vested the legislative power to the House, it means the House "… composed
of not more than two hundred and fifty members xxx who shall be elected from legislative districts
xxx and those who xxx shall be elected through a party-list system of registered national, regional,
and sectoral parties or organizations." The Constitution thus, did not vest on a Bicameral Conference
Committee with an ad hoc membership the power to legislate for it exclusively vested legislative
power to the Senate and the House as co-equal bodies. To be sure, the Constitution does not
mention the Bicameral Conference Committees of Congress. No constitutional status is accorded to
them. They are not even statutory creations. They owe their existence from the internal rules of the
two Houses of Congress. Yet, respondents peddle the disconcerting idea that they should be
recognized as a Third Chamber of Congress and with ex post veto power at that.
The thesis that a Bicameral Conference Committee can exercise law making power with ex
post veto power is freighted with mischief. Law making is a power that can be used for good or for ill,
hence, our Constitution carefully laid out a plan and a procedure for its exercise. Firstly, it
vouchsafed that the power to make laws should be exercised by no other body except the Senate
and the House. It ought to be indubitable that what is contemplated is the Senate acting as a full
Senate and the House acting as a full House. It is only when the Senate and the House act as whole
bodies that they truly represent the people. And it is only when they represent the people that they
can legitimately pass laws. Laws that are not enacted by the people’s rightful representatives subvert
the people’s sovereignty. Bicameral Conference Committees, with their ad hoc character and limited
membership, cannot pass laws for they do not represent the people. The Constitution does not allow
the tyranny of the majority. Yet, the respondents will impose the worst kind of tyranny – the tyranny of
the minority over the majority. Secondly, the Constitution delineated in deft strokes the steps to be
followed in making laws. The overriding purpose of these procedural rules is to assure that only bills
that successfully survive the searching scrutiny of the proper committees of Congress and the full
and unfettered deliberations of both Houses can become laws. For this reason, a bill has to undergo
three (3) mandatory separate readings in each House. In the case at bench, the additions and
deletions made by the Bicameral Conference Committee did not enjoy the enlightened studies of
appropriate committees. It is meet to note that the complexities of modern day legislations have
made our committee system a significant part of the legislative process. Thomas Reed called the
committee system as "the eye, the ear, the hand, and very often the brain of the house." President
Woodrow Wilson of the United States once referred to the government of the United States as "a
government by the Chairmen of the Standing Committees of Congress …" Neither did these
additions and deletions of the Bicameral Conference Committee pass through the coils of collective
deliberation of the members of the two Houses acting separately. Due to this shortcircuiting of the
constitutional procedure of making laws, confusion shrouds the enactment of R.A. No. 7716. Who
inserted the additions and deletions remains a mystery. Why they were inserted is a riddle. To use a
Churchillian phrase, lawmaking should not be a riddle wrapped in an enigma. It cannot be, for Article
II, section 28 of the Constitution mandates the State to adopt and implement a "policy of full public
disclosure of all its transactions involving public interest." The Constitution could not have
contemplated a Congress of invisible and unaccountable John and Mary Does. A law whose
rationale is a riddle and whose authorship is obscure cannot bind the people.
All these notwithstanding, respondents resort to the legal cosmetology that these additions and
deletions should govern the people as laws because the Bicameral Conference Committee Report
was anyway submitted to and approved by the Senate and the House of Representatives. The
submission may have some merit with respect to provisions agreed upon by the Committee in the
process of reconciling conflicts between S.B. No. 1630 and H.B. No. 11197. In these instances, the
conflicting provisions had been previously screened by the proper committees, deliberated upon by
both Houses and approved by them. It is, however, a different matter with respect to additions and
deletions which were entirely new and which were made not to reconcile inconsistencies between
S.B. No. 1630 and H.B. No. 11197. The members of the Bicameral Conference Committee did not
have any authority to add new provisions or delete provisions already approved by both Houses as it
was not necessary to discharge their limited task of reconciling differences in bills. At that late stage
of law making, the Conference Committee cannot add/delete provisions which can become laws
without undergoing the study and deliberation of both chambers given to bills on 1st, 2nd, and 3rd
readings. Even the Senate and the House cannot enact a law which will not undergo these
mandatory three (3) readings required by the Constitution. If the Senate and the House cannot enact
such a law, neither can the lesser Bicameral Conference Committee.
Moreover, the so-called choice given to the members of both Houses to either approve or
disapprove the said additions and deletions is more of an optical illusion. These additions and
deletions are not submitted separately for approval. They are tucked to the entire bill. The vote is on
the bill as a package, i.e., together with the insertions and deletions. And the vote is either "aye" or
"nay," without any further debate and deliberation. Quite often, legislators vote "yes" because they
approve of the bill as a whole although they may object to its amendments by the Conference
Committee. This lack of real choice is well observed by Robert Luce:
Their power lies chiefly in the fact that reports of conference committees must be accepted without
amendment or else rejected in toto. The impulse is to get done with the matter and so the motion to
accept has undue advantage, for some members are sure to prefer swallowing unpalatable
provisions rather than prolong controversy. This is the more likely if the report comes in the rush of
business toward the end of a session, when to seek further conference might result in the loss of the
measure altogether. At any time in the session there is some risk of such a result following the
rejection of a conference report, for it may not be possible to secure a second conference, or delay
may give opposition to the main proposal chance to develop more strength.
In a similar vein, Prof. Jack Davies commented that "conference reports are returned to assembly
and Senate on a take-it or leave-it-basis, and the bodies are generally placed in the position that to
leave-it is a practical impossibility." Thus, he concludes that "conference committee action is the
most undemocratic procedure in the legislative process."
The respondents also contend that the additions and deletions made by the Bicameral Conference
Committee were in accord with legislative customs and usages. The argument does not persuade for
it misappreciates the value of customs and usages in the hierarchy of sources of legislative rules of
procedure. To be sure, every legislative assembly has the inherent right to promulgate its own
internal rules. In our jurisdiction, Article VI, section 16(3) of the Constitution provides that "Each
House may determine the rules of its proceedings x x x." But it is hornbook law that the sources of
Rules of Procedure are many and hierarchical in character. Mason laid them down as follows:
xxx
1. Rules of Procedure are derived from several sources. The principal sources are as follows:
a. Constitutional rules.
b. Statutory rules or charter provisions.
c. Adopted rules.
d. Judicial decisions.
e. Adopted parliamentary authority.
f. Parliamentary law.
g. Customs and usages.
2. The rules from the different sources take precedence in the order listed above except that judicial
decisions, since they are interpretations of rules from one of the other sources, take the same
precedence as the source interpreted. Thus, for example, an interpretation of a constitutional
provision takes precedence over a statute.
3. Whenever there is conflict between rules from these sources the rule from the source listed earlier
prevails over the rule from the source listed later. Thus, where the Constitution requires three
readings of bills, this provision controls over any provision of statute, adopted rules, adopted manual,
or of parliamentary law, and a rule of parliamentary law controls over a local usage but must give
way to any rule from a higher source of authority. (Emphasis ours)
As discussed above, the unauthorized additions and deletions made by the Bicameral Conference
Committee violated the procedure fixed by the Constitution in the making of laws. It is reasonless for
respondents therefore to justify these insertions as sanctioned by customs and usages.
Finally, respondents seek sanctuary in the conclusiveness of an enrolled bill to bar any judicial
inquiry on whether Congress observed our constitutional procedure in the passage of R.A. No. 7716.
The enrolled bill theory is a historical relic that should not continuously rule us from the fossilized
past. It should be immediately emphasized that the enrolled bill theory originated in England where
there is no written constitution and where Parliament is supreme. In this jurisdiction, we have a
written constitution and the legislature is a body of limited powers. Likewise, it must be pointed out
that starting from the decade of the 40s, even American courts have veered away from the rigidity
and unrealism of the conclusiveness of an enrolled bill. Prof. Sutherland observed:
xxx
Where the failure of constitutional compliance in the enactment of statutes is not discoverable from
the face of the act itself but may be demonstrated by recourse to the legislative journals, debates,
committee reports or papers of the governor, courts have used several conflicting theories with
which to dispose of the issue. They have held: (1) that the enrolled bill is conclusive and like the
sheriff’s return cannot be attacked; (2) that the enrolled bill is prima facie correct and only in case the
legislative journal shows affirmative contradiction of the constitutional requirement will the bill be held
invalid; (3) that although the enrolled bill is prima facie correct, evidence from the journals, or other
extrinsic sources is admissible to strike the bill down; (4) that the legislative journal is conclusive and
the enrolled bills is valid only if it accords with the recital in the journal and the constitutional
procedure.
Various jurisdictions have adopted these alternative approaches in view of strong dissent and
dissatisfaction against the philosophical underpinnings of the conclusiveness of an enrolled bill. Prof.
Sutherland further observed:
x x x. Numerous reasons have been given for this rule. Traditionally, an enrolled bill was "a record"
and as such was not subject to attack at common law. Likewise, the rule of conclusiveness was
similar to the common law rule of the inviolability of the sheriff’s return. Indeed, they had the same
origin, that is, the sheriff was an officer of the king and likewise the parliamentary act was a regal act
and no official might dispute the king’s word. Transposed to our democratic system of government,
courts held that as the legislature was an official branch of government the court must indulge every
presumption that the legislative act was valid. The doctrine of separation of powers was advanced as
a strong reason why the court should treat the acts of a co-ordinate branch of government with the
same respect as it treats the action of its own officers; indeed, it was thought that it was entitled to
even greater respect, else the court might be in the position of reviewing the work of a supposedly
equal branch of government. When these arguments failed, as they frequently did, the doctrine of
convenience was advanced, that is, that it was not only an undue burden upon the legislature to
preserve its records to meet the attack of persons not affected by the procedure of enactment, but
also that it unnecessarily complicated litigation and confused the trial of substantive issues.
Although many of these arguments are persuasive and are indeed the basis for the rule in many
states today, they are not invulnerable to attack. The rule most relied on – the sheriff’s return or
sworn official rule – did not in civil litigation deprive the injured party of an action, for always he could
sue the sheriff upon his official bond. Likewise, although collateral attack was not permitted, direct
attack permitted raising the issue of fraud, and at a later date attack in equity was also available; and
that the evidence of the sheriff was not of unusual weight was demonstrated by the fact that in an
action against the sheriff no presumption of its authenticity prevailed.
The argument that the enrolled bill is a "record" and therefore unimpeachable is likewise misleading,
for the correction of records is a matter of established judicial procedure. Apparently, the justification
is either the historical one that the king’s word could not be questioned or the separation of powers
principle that one branch of the government must treat as valid the acts of another.
Persuasive as these arguments are, the tendency today is to avoid reaching results by artificial
presumptions and thus it would seem desirable to insist that the enrolled bill stand or fall on the
basis of the relevant evidence which may be submitted for or against it. (Emphasis ours)
Thus, as far back as the 1940s, Prof. Sutherland confirmed that "x x x the tendency seems to be
toward the abandonment of the conclusive presumption rule and the adoption of the third rule
leaving only a prima faciepresumption of validity which may be attacked by any authoritative source
of information.
Third. I respectfully submit that it is only by strictly following the contours of powers of a Bicameral
Conference Committee, as delineated by the rules of the House and the Senate, that we can
prevent said Committee from acting as a "third" chamber of Congress. Under the clear rules of
both the Senate and House, its power can go no further than settling differences in their bills or
joint resolutions. Sections 88 and 89, Rule XIV of the Rules of the House of
Representatives provide as follows:
Sec. 88. Conference Committee. – In the event that the House does not agree with the Senate on
the amendment to any bill or joint resolution, the differences may be settled by the conference
committees of both chambers.
In resolving the differences with the Senate, the House panel shall, as much as possible, adhere to
and support the House Bill. If the differences with the Senate are so substantial that they materially
impair the House Bill, the panel shall report such fact to the House for the latter’s appropriate action.
Sec. 89. Conference Committee Reports. - . . . Each report shall contain a detailed, sufficiently
explicit statement of the changes in or amendments to the subject measure.
...
The Chairman of the House panel may be interpellated on the Conference Committee Report prior
to the voting thereon. The House shall vote on the Conference Committee Report in the same
manner and procedure as it votes a bill on third and final reading.
Section 35, Rule XII of the Rules of the Senate states:
Sec. 35. In the event that the Senate does not agree with the House of Representatives on the
provision of any bill or joint resolution, the differences shall be settled by a conference committee of
both Houses which shall meet within ten (10) days after their composition. The President shall
designate the members of the Senate Panel in the conference committee with the approval of the
Senate.
Each Conference Committee Report shall contain a detailed and sufficiently explicit statement of the
changes in, or amendments to the subject measure, and shall be signed by a majority of the
members of each House panel, voting separately.
The House rule brightlines the following: (1) the power of the Conference Committee is limited . . .
it is only to settle differences with the Senate; (2) if the differences are substantial, the Committee
must report to the House for the latter’s appropriate action; and (3) the Committee report has to be
voted upon in the same manner and procedure as a bill on third and final reading. Similarly,
the Senate rule underscores in crimson that (1) the power of the Committee is limited - - - to
settle differences with the House; (2) it can make changes or amendments only in the discharge of
this limited power to settle differences with the House; and (3) the changes or amendments are
merely recommendatory for they still have to be approved by the Senate.
Under both rules, it is obvious that a Bicameral Conference Committee is a mere agent of the
House or the Senate with limited powers. The House contingent in the Committee cannot, on its
own, settle differences which are substantial in character. If it is confronted with substantial
differences, it has to go back to the chamber that created it "for the latter’s appropriate action." In
other words, it must take the proper instructions from the chambers that created it. It cannot
exercise its unbridled discretion. Where there is no difference between the bills, it cannot make
any change. Where the difference is substantial, it has to return to the chamber of its origin and
ask for appropriate instructions. It ought to be indubitable that it cannot create a new law, i.e., that
which has never been discussed in either chamber of Congress. Its parameters of power are not
porous, for they are hedged by the clear limitation that its only power is to settle differences in bills
and joint resolutions of the two chambers of Congress.
Fourth. Prescinding from these premises, I respectfully submit that the following acts of the
Bicameral Conference Committee constitute grave abuse of discretion amounting to lack or excess
of jurisdiction and should be struck down as unconstitutional nullities, viz:
a. Its deletion of the pro poor "no pass on provision" which is common in both Senate Bill No. 1950
and House Bill No. 3705.
Sec. 1 of House Bill No. 37059 provides:
Section 106 of the National Internal Revenue Code of 1997, as amended, is hereby further amended
to read as follows:
SEC. 106. Value-added Tax on Sale of Goods or Properties. –
xxx
Provided, further, that notwithstanding the provision of the second paragraph of Section 105 of this
Code, the Value-added Tax herein levied on the sale of petroleum products under Subparagraph (1)
hereof shall be paid and absorbed by the sellers of petroleum products who shall be prohibited
from passing on the cost of such tax payments, either directly or indirectly[,] to any
consumer in whatever form or manner, it being the express intent of this act that the Value-added
Tax shall be borne and absorbed exclusively by the sellers of petroleum products x x x.
Sec. 3 of the same House bill provides:
Section 108 of the National Internal Revenue Code of 1997, as amended, is hereby further amended
to read as follows:
Sec. 108. Value-added Tax on Sale of Goods or Properties. –
Provided, further, that notwithstanding the provision of the second paragraph of Section 105 of this
Code, the Value-added Tax imposed under this paragraph shall be paid and absorbed by the
subject generation companies who shall be prohibited from passing on the cost of such tax
payments, either directly or indirectly[,] to any consumer in whatever form or manner, it being
the express intent of this act that the Value-added Tax shall be borne and absorbed exclusively [by]
the power-generating companies.
In contrast and comparison, Sec. 5 of Senate Bill No. 1950 provides:
Value-added Tax on sale of Services and Use or Lease of Properties. –
x x x Provided, that the VAT on sales of electricity by generation companies, and services of
transmission companies and distribution companies, as well as those of franchise grantees of
electrical utilities shall not apply to residential end-users: Provided, that the Value-added Tax herein
levied shall be absorbed and paid by the generation, transmission and distribution companies
concerned. The said companies shall not pass on such tax payments to NAPOCOR or
ultimately to the consumers, including but not limited to residential end users, either as costs or in
any other form whatsoever, directly or indirectly. x x x.
Even the faintest eye contact with the above provisions will reveal that: (a) both the House bill and
the Senate bill prohibited the passing on to consumers of the VAT on sales of electricity and (b)
the House bill prohibited the passing on to consumers of the VAT on sales of petroleum products
while the Senate bill is silent on the prohibition.
In the guise of reconciling disagreeing provisions of the House and the Senate bills on the
matter, the Bicameral Conference Committee deleted the "no pass on provision" on both the
sales of electricity and petroleum products. This action by the Committee is not warranted by the
rules of either the Senate or the House. As aforediscussed, the only power of a Bicameral
Conference Committee is to reconcile disagreeing provisions in the bills or joint resolutions of the
two houses of Congress. The House and the Senate bills both prohibited the passing on to
consumers of the VAT on sales of electricity. The Bicameral Conference Committee cannot
override this unequivocal decision of the Senate and the House. Nor is it clear that there is a
conflict between the House and Senate versions on the "no pass on provisions" of the VAT on sales
of petroleum products. The House version contained a "no pass on provision" but the Senate had
none. Elementary logic will tell us that while there may be a difference in the two versions, it
does not necessarily mean that there is a disagreement or conflict between the Senate and
the House. The silence of the Senate on the issue cannot be interpreted as an outright
opposition to the House decision prohibiting the passing on of the VAT to the consumers on sales
of petroleum products. Silence can even be conformity, albeit implicit in nature. But granting for the
nonce that there is conflict between the two versions, the conflict cannot escape the characterization
as a substantial difference. The seismic consequence of the deletion of the "no pass on provision"
of the VAT on sales of petroleum products on the ability of our consumers, especially on the
roofless and the shirtless of our society, to survive the onslaught of spiraling prices ought to be
beyond quibble. The rules require that the Bicameral Conference Committee should not, on its own,
act on this substantial conflict. It has to seek guidance from the chamber that created it. It must
receive proper instructions from its principal, for it is the law of nature that no spring can rise higher
than its source. The records of both the Senate and the House do not reveal that this step was taken
by the members of the Bicameral Conference Committee. They bypassed their principal and ran riot
with the exercise of powers that the rules never bestowed on them.
b. Even more constitutionally obnoxious are the added restrictions on local government’s use
of incremental revenue from the VAT in Section 21 of R.A. No. 9337 which were not present in
the Senate or House Bills. Section 21 of R.A. No. 9337 provides:
Fifty percent of the local government unit’s share from VAT shall be allocated and used exclusively
for the following purposes:
1. Fifteen percent (15%) for public elementary and secondary education to finance the construction
of buildings, purchases of school furniture and in-service teacher trainings;
2. Ten percent (10%) for health insurance premiums of enrolled indigents as a counterpart
contribution of the local government to sustain the universal coverage of the national health
insurance program;
3. Fifteen percent (15%) for environmental conservation to fully implement a comprehensive national
reforestation program; and
4. Ten percent (10%) for agricultural modernization to finance the construction of farm-to-market
roads and irrigation facilities.
Such allocations shall be segregated as separate trust funds by the national treasury and shall be
over and above the annual appropriation for similar purposes.
These amendments did not harmonize conflicting provisions between the constituent bills of R.A.
No. 9337 but are entirely new and extraneous concepts which fall beyond the median thereof.
They transgress the limits of the Bicameral Conference Committee’s authority and must be struck
down.
I cannot therefore subscribe to the thesis of the majority that "the changes introduced by the
Bicameral Conference Committee on disagreeing provisions were meant only to reconcile and
harmonize the disagreeing provisions for it did not inject any idea or intent that is wholly foreign
to the subject embraced by the original provisions."
Fifth. The majority further defends the constitutionality of the above provisions by holding that "all
the changes or modifications were germane to subjects of the provisions referred to it for
reconciliation."
With due respect, it is high time to re-examine the test of germaneness proffered in Tolentino.
The test of germaneness is overly broad and is the fountainhead of mischief for it allows the
Bicameral Conference Committee to change provisions in the bills of the House and the Senate
when they are not even in disagreement. Worse still, it enables the Committee to introduce
amendments which are entirely new and have not previously passed through the coils of scrutiny of
the members of both houses. The Constitution did not establish a Bicameral Conference Committee
that can act as a "third house" of Congress with super veto power over bills passed by the Senate
and the House. We cannot concede that super veto power without wrecking the delicate
architecture of legislative power so carefully laid down in our Constitution. The clear intent of our
fundamental law is to install a lawmaking structure composed only of two houses whose members
would thoroughly debate proposed legislations in representation of the will of their respective
constituents. The institution of this lawmaking structure is unmistakable from the following
provisions: (1) requiring that legislative power shall be vested in a bicameral legislature;10 (2)
providing for quorum requirements;11 (3) requiring that appropriation, revenue or tariff bills, bills
authorizing increase of public debt, bills of local application, and private bills originate exclusively in
the House of Representatives;12 (4) requiring 

that bills embrace one subject expressed in the title thereof;13 and (5) mandating that bills undergo
three readings on separate days in each House prior to passage into law and prohibiting
amendments on the last reading thereof.14 A Bicameral Conference Committee with untrammeled
powers will destroy this lawmaking structure. At the very least, it will diminish the free and open
debate of proposed legislations and facilitate the smuggling of what purports to be laws.
On this point, Mr. Robert Luce’s disconcerting observations are apropos:
"Their power lies chiefly in the fact that reports of conference committees must be accepted without
amendment or else rejected in toto. The impulse is to get done with the matters and so the
motion to accept has undue advantage, for some members are sure to prefer swallowing
unpalatable provisions rather than prolong controversy. This is more likely if the report comes in
the rush of business toward the end of the session, when to seek further conference might result in
the loss of the measure altogether. At any time in the session there is some risk of such a result
following the rejection of a conference report, for it may not be possible to secure a second
conference, or delay may give opposition to the main proposal chance to develop more strength.
xxx xxx xxx
Entangled in a network of rule and custom, the Representative who resents and would resist this
theft of his rights, finds himself helpless. Rarely can be vote, rarely can he voice his mind, in the
matter of any fraction of the bill. Usually he cannot even record himself as protesting against some
one feature while accepting the measure as whole. Worst of all, he cannot by argument or
suggested change, try to improve what the other branch has done.
This means more than the subversion of individual rights. It means to a degree the abandonment
of whatever advantage the bicameral system may have. By so much it in effect transfers the
lawmaking power to small group of members who work out in private a decision that almost
always prevails. What is worse, these men are not chosen in a way to ensure the wisest choice. It
has become the practice to name as conferees the ranking members of the committee, so that the
accident of seniority determines. Exceptions are made, but in general it is not a question of who are
most competent to serve. Chance governs, sometimes giving way to favor, rarely to merit.
xxx xxx xxx
Speaking broadly, the system of legislating by conference committee is unscientific and therefore
defective. Usually it forfeits the benefit of scrutiny and judgment by all the wisdom available.
Uncontrolled, it is inferior to that process by which every amendment is secured independent
discussion and vote. . . ."15
It cannot be overemphasized that in a republican form of government, laws can only be enacted
by all the duly elected representatives of the people. It cuts against conventional wisdom in
democracy to lodge this power in the hands of a few or in the claws of a committee. It is for
these reasons that the argument that we should overlook the excesses of the Bicameral Conference
Committee because its report is anyway approved by both houses is a futile attempt to square the
circle for an unconstitutional act is void and cannot be redeemed by any subsequent ratification.
Neither can we shut our eyes to the unconstitutional acts of the Bicameral Conference Committee by
holding that the Court cannot interpose its checking powers over mere violations of the internal rules
of Congress. In Arroyo, et al. v. de Venecia, et al.,16 we ruled that when the violations affect private
rights or impair the Constitution, the Court has all the power, nay, the duty to strike them
down.
In conclusion, I wish to stress that this is not the first time nor will it be last that arguments will be
foisted for the Court to merely wink at assaults 

on the Constitution on the ground of some national interest, sometimes clear and at other times
inchoate. To be sure, it cannot be gainsaid that the country is in the vortex of a financial crisis. The
broadsheets scream the disconcerting news that our debt payments for the year 2006 will exceed
Pph1 billion daily for interest alone. Experts underscore some factors that will further drive up the
debt service expenses such as the devaluation of the peso, credit downgrades and a spike in
interest rates.17 But no doomsday scenario will ever justify the thrashing of the Constitution. The
Constitution is meant to be our rule both in good times as in bad times. It is the Court’s
uncompromising obligation to defend the Constitution at all times lest it be condemned as an
irrelevant relic.
WHEREFORE, I concur with the majority but dissent on the following points:
a) I vote to withhold judgment on the constitutionality of the "standby authority" in Sections 4 to 6 of
Republic Act No. 9337 as this issue is not ripe for adjudication.;
b) I vote to declare unconstitutional the deletion by the Bicameral Conference Committee of the pro
poor "no pass on provision" on electricity to residential consumers as it contravened the unequivocal
intent of both Houses of Congress; and
c) I vote to declare Section 21 of Republic Act No. 9337 as unconstitutional as it contains extraneous
provisions not found in its constituent bills.
REYNATO S. PUNO
Associate Justice



Footnotes
1Angara v. Electoral Commission, 63 Phil. 139 (1936); See also Tribe, American
Constitutional Law, pp. 311-314 (3rd ed.).
2 Mendoza, Judicial Review of Constitutional Questions: Cases and Materials, p. 86 (2004).
3 Id. at 87.
4Abbott Laboratories v. Gardner, 387 U.S. 136 (1967); I Tribe, American Constitutional Law,
p. 334 (3rd ed.).
5Texas v. United States, 523 U.S. 296 (1998); Thomas v. Union Carbide Agricultural
Products Co., 473 U.S. 568 (1985); I Tribe, American Constitutional Law, pp. 335-336 (3rd
ed.).
6Communist Party of the United States v. Subversive Activities Control Bd., 367 U.S. 1, 71
(1961); I Tribe, American Constitutional Law, p. 336 (3rd ed.); See also concurring opinion of
Justice Brandeis in Ashwander v. Tennessee Valley Authority, 297 U.S. 288 (1936).
7 235 SCRA 630 (1994).
8 See Opinion in 235 SCRA 630, 805-825.
9 H.B. No. 3555 has no "no pass on provision." House Bill No. 3705 expresses the latest
intent of the House on the matter.
101 Sutherland Statutory Construction § 6:2 (6th ed.): The provision requiring that legislative
power shall be vested in a bicameral legislature seeks to "assure sound judgment that
comes from separate deliberations and actions in the respective bodies that check and
balance each other."
11Const., Article VI, Section 16(2) (1987): "(2) A majority of each House shall constitute a
quorum to do business, but a smaller number may adjourn from day to day and may compel
the attendance of absent Members in such manner, and under such penalties, as such
House may provide."
12Const., Article VI, Section 24 (1987); 1 Sutherland Statutory Construction § 9:6 (6th ed.):
The provision helps guarantee that the exercise of the taxing power is well studied as the
lower house is "presumably more representative in character."
13 Const., Article VI, Section 26(1) (1987); I Cooley, A Treatise on Constitutional Limitations,
p. 143; Central Capiz v. Ramirez, 40 Phil. 883 (1920): "In the construction and application of
this constitutional restriction the courts have kept steadily in view the correction of the
mischief against which it was aimed. The object is to prevent the practice, which was
common in all legislative bodies where no such restrictions existed of embracing in the same
bill incongruous matters having no relation to each other or to the subject specified in the
title, by which measures were often adopted without attracting attention. Such distinct
subjects represented diverse interests, and were combined in order to unite the members of
the legislature who favor either in support of all. These combinations were corruptive of the
legislature and dangerous to the State. Such omnibus bills sometimes included more than a
hundred sections on as many different subjects, with a title appropriate to the first section,
and for other purposes."
"The failure to indicate in the title of the bill the object intended to be accomplished by the
legislation often resulted in members voting ignorantly for measures which they would not
knowingly have approved; and not only were legislators thus misled, but the public also; so
that legislative provisions were steadily pushed through in the closing hours of a session,
which, having no merit to commend them, would have been made odious by popular
discussion and remonstrance if their pendency had been seasonably announced. The
constitutional clause under discussion is intended to correct these evils; to prevent such
corrupting aggregations of incongruous measures, by confining each act to one subject or
object; to prevent surprise and inadvertence by requiring that subject or object to be
expressed in the title."
14Const., Article VI, Section 26(2) (1987); 1 Sutherland Statutory Construction § 10:4 (6th
ed.); See also IV Laurel, Journal of the (1935) Constitutional Convention, pp. 436-437,
440-441 where the 1934 Constitutional Convention noted the anomalous legislative practice
of railroading bills on the last day of the legislative year when members of Congress were
 eager to go home. By this irregular procedure, legislators were able to successfully insert
matters into bills which would not otherwise stand scrutiny in leisurely debate; I Cooley, A
Treatise on the Constitutional Limitations, pp. 286-287(8th ed.); Smith v. Mitchell, 69 W.Va
481, 72 S.E. 755 (1911): "The purpose of this provision of the Constitution is to inform
legislators and people of legislation proposed by a bill, and to prevent hasty legislation."
15235 SCRA 630, 783-784 citing Luce, Legislative Procedure, pp. 404-405, 407 (1922); See
also Davies, Legislative Law and Process, p. 81 (2nd ed.): "conference reports are returned
to assembly and Senate on a take-it or leave-it-basis, and the bodies are generally placed in
the position that to leave-it is a practical impossibility." Thus, he concludes that "conference
committee action is the most undemocratic procedure in the legislative process."
16 268 SCRA 269, 289 (1997).
17 The Manila Standard Today, August 26, 2005, p. 1.


The Lawphil Project - Arellano Law Foundation
!



EN BANC
GR No. 168056 -- ABAKADA GURO PARTY LIST, etc. et al. v. HON. EXECUTIVE SECRETARY
EDUARDO R. ERMITA et al.
GR No. 168207 -- AQUILINO Q. PIMENTEL JR. et al. v. EXECUTIVE SECRETARY EDUARDO R.
ERMITA et al.
GR No. 168461 -- ASSOCIATION OF PILIPINAS SHELL DEALERS, INC., etc. et al. v. CESAR V.
PURISIMA, etc. et al.
GR No. 168463 -- FRANCIS JOSEPH G. ESCUDERO et al. v. CESAR V. PURISIMA etc., et al.
GR No. 168730 -- BATAAN GOVERNOR ENRIQUE T. GARCIA JR. v. HON. EDUARDO R.
ERMITA, etc. et al.
Promulgated: September 1, 2005
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x
SEPARATE OPINION
PANGANIBAN, J.:
The ponencia written by the esteemed Madame Justice Ma. Alicia Austria-Martinez declares that the
enrolled bill doctrine has been historically and uniformly upheld in our country. Cited as recent
reiterations of this doctrine are the two Tolentino v. Secretary of Finance judgments1 and Fariñas v.
Executive Secretary.2
Precedence of Mandatory
Constitutional Provisions
Over the Enrolled Bill Doctrine
I believe, however, that the enrolled bill doctrine3 is not absolute. It may be all-encompassing in
some countries like Great Britain,4 but as applied to our jurisdiction, it must yield to mandatory
provisions of our 1987 Constitution. The Court can take judicial notice of the form of government5 in
Great Britain.6 It is unlike that in our country and, therefore, the doctrine from which it
originated7 could be modified accordingly by our Constitution.
In fine, the enrolled bill doctrine applies mainly to the internal rules and processes followed by
Congress in its principal duty of lawmaking. However, when the Constitution imposes certain
conditions, restrictions or limitations on the exercise of congressional prerogatives, the judiciary has
both the power and the duty to strike down congressional actions that are done in plain
contravention of such conditions, restrictions or limitations.8 Insofar as the present case is
concerned, the three most important restrictions or limitations to the enrolled bill doctrine are the
"origination," "no-amendment" and "three-reading" rules which I will discuss later.
Verily, these restrictions or limitations to the enrolled bill doctrine are safeguarded by the
expanded9 constitutional mandate of the judiciary "to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the government."10 Even the ponente of Tolentino,11 the learned Mr. Justice Vicente
V. Mendoza, concedes in another decision that each house "may not by its rules ignore constitutional
restraints or violate fundamental rights, and there should be a reasonable relation between the mode
or method of proceeding established by the rule and the result which is sought to be attained."12
The Bicameral Conference Committee (BCC) created by Congress to iron out differences between
the Senate and the House of Representatives versions of the E-VAT bills13 is one such "branch or
instrumentality of the government," over which this Court may exercise certiorari review to determine
whether or not grave abuse of discretion has been committed; and, specifically, to find out whether
the constitutional conditions, restrictions and limitations on law-making have been violated.
In general, the BCC has at least five options in performing its functions: (1) adopt the House version
in part or in toto, (2) adopt the Senate version in part or in toto, (3) consolidate the two versions, (4)
reject non-conflictingprovisions, and (5) adopt completely new provisions not found in either version.
This, therefore, is the simple question: In the performance of its function of reconciling conflicting
provisions, has the Committee blatantly violated the Constitution?
My short answer is: No, except those relating to income taxes referred to in Sections 1, 2 and 3 of
Republic Act (RA) No. 9337. Let me explain.
Adopting the House
Version in Part or in Toto
First, the BCC had the option of adopting the House bills either in part or in toto, endorsing them
without changes. Since these bills had passed the three-reading requirement14 under the
Constitution,15 it readily becomes apparent that no procedural impediment would arise. There would
also be no question as to their origination,16 because the bills originated exclusively from the House
of Representatives itself.
In the present case, the BCC did not ignore the Senate and adopt any of the House bills in part or in
toto. Therefore, this option was not taken by the BCC.
Adopting the Senate
Version in Part or in Toto
Second, the BCC may choose to adopt the Senate version either 

in part or in toto, endorsing it also without changes. In so doing, the question of origination arises.
Under the 1987 Constitution, all "revenue x x x bills x x x shall originate exclusively in the House of
Representatives, but the Senate may propose or concur with amendments."17
If the revenue bill originates exclusively from the Senate, then obviously the origination provision18 of
the Constitution would be violated. If, however, it originates exclusively from the House and
presumably passes the three-reading requirement there, then the question to contend with is
whether the Senate amendments complied with the "germane" principle.
While in the Senate, the House version may, per Tolentino, undergo extensive changes, such that
the Senate may rewrite not only portions of it but even all of it.19 I believe that such rewriting is limited
by the "germane" principle: although "relevant"20 or "related"21 to the general subject of taxation, the
Senate version is not necessarily "germane" all the time. The "germane" principle requires a legal --
not necessarily an economic22 or political -- interpretation. There must be an "inherent logical
connection."23 What may be germane in an economic or political sense is not necessarily germane in
the legal sense. Otherwise, any provision in the Senate version that is entirely new and extraneous,
or that is remotely or even slightly connected, to the vast and perplexing subject of taxation, would
always be germane. Under this interpretation, the origination principle would surely be rendered
inutile.
To repeat, in Tolentino, the Court said that the Senate may even write its own version, which in effect
would be an amendment by substitution.24 The Court went further by saying that "the Constitution
does not prohibit the filing in the Senate of a substitute bill in anticipation of its receipt of the bill from
the House, so long as action by the Senate as a body is withheld pending receipt of the House
bill."25 After all, the initiative for filing a revenue bill must come from the House26 on the theory that,
elected as its members are from their respective districts, the House is more sensitive to local needs
and problems. By contrast, the Senate whose members are elected at large approaches the matter
from a national perspective,27 with a broader and more circumspect outlook.28
Even if I have some reservations on the foregoing sweeping pronouncements in Tolentino, I shall not
comment any further, because the BCC, in reconciling conflicting provisions, also did not take the
second option of ignoring the House bills completely and of adopting only the Senate version in part
or in toto. Instead, the BCC used or applied the third option as will be discussed below.
Compromising
by Consolidating
As a third option, the BCC may reach a compromise by 

consolidating both the Senate and the House versions. It can adopt some parts and reject other
parts of both bills, and craft new provisions or even a substitute bill. I believe this option is viable,
provided that there is no violation of the origination and germane principles, as well as the three-
reading rule. After all, the report generated by the BCC will not become a final valid act of the
Legislative Department until the BCC obtains the approval of both houses of Congress.29
Standby Authority. I believe that the BCC did not exceed its authority when it crafted the so-called
"standby authority" of the President. The originating bills from the House imposed a 12 percent VAT
rate,30 while the bill from the Senate retained the 

original 10 percent.31 The BCC opted to initially use the 10 percent Senate provision and to increase
this rate to the 12 percent House provision, effective January 1, 2006, upon the occurrence of a
predetermined factual scenario as follows:
"(i) [VAT] collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds
two and four-fifth percent (2 4/5%) or
(ii) National Government Deficit as a percentage of GDP of the previous year exceeds one and one-
half percent (1 1/2%)."32
In the computation of the percentage requirements in the alternative conditions under the law, the
amounts of the VAT collection, National Deficit,33 and GDP34 -- as well as the interrelationship among
them -- can easily be derived by the finance secretary from the proper government bodies charged
with their determination. The law is complete and standards have been fixed.35 Only the fact-finding
mathematical computation for its implementation on January 1, 2006, is necessary.
Once either of the factual and mathematical events provided in the law takes place, the President
has no choice but to implement the increase of the VAT rate to 12 percent.36 This eventuality has
been predetermined by Congress.37
The taxing power has not been delegated by Congress to either or both the President and the
finance secretary. What was delegated
was only the power to ascertain the facts in order to bring the law into operation. In fact, there was
really no "delegation’ to speak of;
__________________
Culled from the same record, the following excerpts show the position of public respondents:
"Justice Panganiban: It will be based on actual figures?
"Usec. Bonoan: It will be based on actual figures.
"Justice Panganiban: That creates a problem[,] because where do you get the actual figures[?]
"Usec. Bonoan: I understand that[,] traditionally[,] we can come in March, but there is no
impediment to speeding up the gathering.
"Justice Panganiban: Speed it up. February 15?
"Usec. Bonoan: Even within January, Your Honor, I think this can be….
"Justice Panganiban: Alright at the end of January, it’s just estimate to get the figures in January.
"Usec. Bonoan: Yes, Your Honor (pp. 661-662); and
xxx
"Justice Panganiban: My only point is, I raised this earlier and I promised counsel for the petitioner
whom I was questionin[g] that I will raise it with you, whether the date January 1, 2006 would
present an impossibility of a condition happening.
"Usec. Bonoan: It will not, Your Honor.
"Justice Panganiban: So, your position [is] it will not present an impossibility. Elaborate on it in your
memorandum.
"Usec. Bonoan: Yes, Your Honor.
"Justice Panganiban: Because it is important. The administrative regulations are important[,]
because they clarify the law and it will guide taxpayers. So[,] by January 1[,] [taxpayers] would
not be wondering. Do we charge the end consumers 10 [percent] or 12 [percent]? The regulations
should be able to spell that out [i]n the same manner that even now the various consumers of
various products and services must be able to get from your
there was merely a declaration of an administrative, not a legislative, function.38
I concur with the ponencia in that there was no undue delegation of legislative power in the increase
from 10 percent to 12 percent of the VAT rate. I respectfully disagree, however, with the statements
therein that, first, the secretary of finance is "acting as the agent of the legislative department" or an
"agent of Congress" in determining and declaring the event upon which its expressed will is to take
effect; and, second, that the secretary’s personality "is in reality but a projection of that of Congress."

The secretary of finance is not an alter ego of Congress, but of the President. The mandate given by
RA 9337 to the secretary is not equipollent to an authority to make laws. In passing this law,
Congress did not restrict or curtail the constitutional power of the President to retain control and
supervision over the entire Executive Department. The law should be construed to be merely asking
the President, with a recommendation from the President’s alter ego in finance matters, to determine
the factual bases for making the increase in VAT rate operative.39 Indeed, as I have mentioned
earlier, the fact-finding condition is a mere administrative, not legislative, function.
The ponencia states that Congress merely delegates the implementation of the law to the secretary
of finance. How then can the latter be its agent? Making a law is different from implementing it. While
the first (the making of laws) may be delegated under certain conditions and only in specific
instances provided under the Constitution, the second (the implementation of laws) may not be done
by Congress. After all, the legislature does not have the power to implement laws. Therefore,
congressional agency arises only in the first, not in the second. The first is a legislative function;
the second, an executive one.
Petitioners’ argument is that because the GDP does not account for the economic effects of so-
called underground businesses, it is an inaccurate indicator of either economic growth or slowdown
in transitional economies.40 Clearly, this matter is within the confines of lawmaking. This Court is
neither a substitute for the wisdom, or lack of it, in Congress,41 nor an arbiter of flaws within the
latter’s internal rules.42 Policy matters lie within the domain of the political branches of government,
43 outside the range of judicial cognizance.44 "[T]he right to select the measure and objects of

taxation devolves upon the Congress, and not upon the courts, and such selections are valid unless
constitutional limitations are overstepped."45 Moreover, each house of Congress has the power and
authority to determine the rules of its proceedings.46 The contention that this case is not ripe for
determination because there is no violation yet of the Constitution regarding the exercise of the
President’s standby authority has no basis. The question raised is whether the BCC, in passing the
law, committed grave abuse of discretion, not whether the provision in question had been violated.
Hence, this case is not premature and is, in fact, subject to judicial determination.
Amendments on Income Taxes. I respectfully submit that the amendments made by the BCC (that
were culled from the Senate version) regarding income taxes47 are not legally germane to the subject
matter of the House bills. Revising the income tax rates on domestic, resident foreign and
nonresident foreign corporations; increasing the tax credit against taxes due from nonresident
foreign corporations on intercorporate dividends; and reducing the allowable deduction for interest
expense are legally unrelated and not germane to the subject matter contained in the House bills;
they violate the origination principle.48 The reasons are as follows:
One, an income tax is a direct tax imposed on actual or presumed income -- gross or net -- realized
by a taxpayer during a given taxable year,49 while a VAT is an indirect tax not in the context of who is
directly and legally liable for its payment, but in terms of its nature as "a tax on
consumption."50 The former cannot be passed on to the consumer, but the latter can.51 It is too wide
a stretch of the imagination to even relate one concept with the other. In like manner, it is
inconceivable how the provisions that increase corporate income taxes can be considered
asmitigating measures for increasing the VAT and, as I will explain later, for effectively imposing a
maximum of 3 percent tax on gross sales or revenues because of the 70 percent cap. Even the
argument that the corporate income tax rates will be reduced to 30 percent does not hold water. This
reduction will take effect only in 2009, not 2006 when the 12 percent VAT rate will have been
implemented.
Two, taxes on intercorporate dividends are final, but the input VAT is generally creditable. Under
a final withholding tax system, the amount of income tax that is withheld by a withholding agent is
constituted as a full and final payment of the income tax due from the payee on said income.52 The
liability for the tax primarily rests upon the payor as a withholding agent.53 Under
a creditable withholding tax system, taxes withheld on certain payments are meant to approximate
the tax that is due of the payee on said payments.54 The liability for the tax rests upon the payee who
is mandated by law to still file a tax return, report the tax base, and pay the difference between the
tax withheld and the tax due.55
From this observation alone, it can already be seen that not only are dividends alien to the tax base
upon which the VAT is imposed, but their respective methods of withholding are totally different. VAT-
registered persons may not always be nonresident foreign corporations that declare and pay
dividends, while intercorporate dividends are certainly not goods or properties for sale, barter,
exchange, lease or importation. Certainly, input VAT credits are different from tax credits on
dividends received by nonresident foreign corporations.
Three, itemized deductions from gross income partake of the nature of a tax exemption.56 Interest --
which is among such deductions -- refers to the amount paid by a debtor to a creditor for the use or
forbearance of money.57 It is an expense item that is paid or incurred within a given taxable year on
indebtedness in connection with a taxpayer’s trade, business or exercise of profession.58 In order to
reduce revenue losses, Congress enacted RA 842459 which reduces the amount of interest expense
deductible by a taxpayer from gross income, equal to the applicable percentage of interest income
subject to final tax.60 To assert that reducing the allowable deduction in interest expense is a matter
that is legally related to the proposed VAT amendments is too far-fetched. Interest expenses are not
allowed as credits against output VAT. Neither are VAT-registered persons always liable for interest.
Having argued on the unconstitutionality (non-germaneness) of the BCC insertions on income taxes,
let me now proceed to the other provisions that were attacked by petitioners.
No Pass-on Provisions. I agree with the ponencia that the BCC did not exceed its authority when it
deleted the no pass-on provisions found in the congressional bills. Its authority to make amendments
not only implies the power to make insertions, but also deletions, in order to
resolve conflicting provisions.
The no pass-on provision in House Bill (HB) No. 3705 referred to the petroleum products subject to
excise tax (and the raw materials used in the manufacture of such products), the sellers of petroleum
products, and the generation companies.61 The analogous provision in Senate Bill (SB) No. 1950
dealt with electricity, businesses other than generation companies, and services of franchise
grantees of electric utilities.62 In contrast, there was a marked absence of the no pass-on provision in
HB 3555. Faced with such variances, the BCC had the option of retaining or modifying the no pass-
on provisions and determining their extent, or of deleting them altogether. In opting for deletion to
resolve the variances, it was merely acting within its discretion. No grave abuse may be imputed to
the BCC.
The 70 Percent Cap on Input Tax and the 5 Percent Final Withholding VAT. Deciding on the 70
percent cap and the 5 percent final withholding VAT in the consolidated bill is also within the power
of the BCC. While HB 3555 included limits of 5 percent and 11 percent on input tax,63 SB 1950
proposed an even spread over 60 months.64The decision to put a cap and fix its rate, so as to
harmonize or to find a compromise in settling the apparent differences in these versions,65 was within
the sound discretion of the BCC.
In like manner, HB 3555 contained provisions on the withholding of creditable VAT at the rates of 5
percent, 8 percent, 10.5 percent, and 12 percent.66 HB 3705 had no such equivalent amendment,
and SB 1950 pegged the rates at only 5 percent and 10 percent.67 I believe that the decision to
impose a final (not creditable) VAT and to fix the rates at 5 percent and 10 percent, so as to
harmonize the apparent differences in all three versions, was also within the sound discretion of the
BCC.
Indeed, the tax credit method under our VAT system is not only practical, but also principally used in
almost all taxing jurisdictions. This does not mean, however, that in the eyes of Congress through
the BCC, our country can neither deviate from this method nor modify its application to suit our fiscal
requirements. The VAT is usuallycollected through the tax credit method (and in the past, even
through the cost deduction method or a mixture of these two methods),68 but there is no hard and
fast rule that 100 percent of the input taxes will always be allowed as a tax credit.
In fact, it was Maurice Lauré, a French engineer,69 who invented the VAT. In 1954, he had the idea of
imposing an indirect tax on consumption, called taxe sur la valeur ajoutée,70 which was quickly
adopted by the Direction Générale des Impost, the new French tax authority of which he became
joint director. Consequently, taxpayers at all levels in the production process, rather than retailers or
tax authorities, were forced to administer and account for the tax themselves.71
Since the unutilized input VAT can be carried over to succeeding quarters, there is no undue
deprivation of property. Alternatively, it can be passed on to the consumers;72 there is no law
prohibiting that. Merely speculative and unproven, therefore, is the contention that the law is arbitrary
and oppressive.73 Laws that impose taxes are necessarily burdensome, compulsory, and involuntary.
The deferred input tax account -- which accumulates the unutilized input VAT -- remains an asset in
the accounting records of a business. It is not at all confiscated by the government. By deleting
Section 112(B) of the Tax Code,74Congress no longer made available tax credit certificates for such
asset account until retirement from or cessation of business, or changes in or cessation of VAT-
registered status.75 This is a matter of policy, not legality. The Court cannot step beyond the confines
of its constitutional power, if there is absolutely no clear showing of grave abuse of discretion in the
enactment of the law.
That the unutilized input VAT would be rendered useless is merely speculative.76 Although it is
recorded as a deferred asset in the books of a company, it remains to be a mere privilege. It may be
written off or expensed outright; it may also be denied as a tax credit.
There is no vested right in a deferred input tax account; it is a mere statutory privilege.77 The State
may modify or withdraw such privilege, which is merely an asset granted by operation of law.
78 Moreover, there is no vested right in generally accepted accounting principles.79 These refer to

accounting concepts, measurement techniques, and standards of presentation in a company’s

financial statements, and are not rooted in laws of nature, as are the laws of physical science, for
these are merely developed and continually modified by local and international regulatory accounting
bodies.80 To state otherwise and recognize such asset account as a vested right is to limit the taxing
power of the State. Unlimited, plenary, comprehensive and supreme, this power cannot be unduly
restricted by mere creations of the State.
That the unutilized input VAT would also have an unequal effect on businesses -- some with low,
others with high, input-output ratio -- is not a legal ground for invalidating the law. Profit margins are
a variable of sound business judgment, not of legal doctrine. The law applies equally to all
businesses; it is up to each of them to determine the best formula for selling their goods or services
in the face of stiffer competition. There is, thus, no violation of the equal protection clause. If the
implementation of the 70 percent cap would cause an ad infinitum deferment of input taxes or an
unequal effect upon different types of businesses with varying profit margins and capital
requirements, then the remedy would be an amendment of the law -- not an unwarranted and
outright declaration of unconstitutionality.
The matter of business establishments shouldering 30 percent of output tax and remitting the
amount, as computed, to the government is in effect imposing a tax that is equivalent to a maximum
of 3 percent of gross sales or revenues.81 This imposition is arguably another tax on gross -- not net
-- income and thus a deviation from the concept of VAT as a tax on consumption; it also assumes
that sales or revenues are on cash basis or, if on credit, given credit terms shorter than a quarter of a
year. However, such additional imposition and assumption are also arguably within the power of
Congress to make. The State may in fact choose to impose an additional 3 percent tax on gross
income, in lieu of the 70 percent cap, and thus subject the income of businesses to two types of
taxes -- one on gross, the other on net. These impositions may constitute double taxation,82 which is
not constitutionally proscribed.83
Besides, prior to the amendments introduced by the BCC, already extant in the Tax Code was a 3
percent percentage tax on the gross quarterly sales or receipts of persons who were not VAT-
registered, and whose sales or receipts were exempt from VAT.84 This is another type of tax imposed
by the Tax Code, in addition to the tax on their respective incomes. No question as to its validity was
raised before; none is being brought now. More important, there is a presumption in favor of
constitutionality,85 "rooted in the doctrine of separation of powers which enjoins upon the three
coordinate departments of the Government a becoming courtesy for each other’s acts."86
As to the argument that Section 8 of RA 9337 contravenes Section 1 of Article III and Section 20 of
Article II of the 1987 Constitution, I respectfully disagree.
One, petitioners have not been denied due process or, as I have illustrated earlier, equal protection.
In the exercise of its inherent power to tax, the State validly interferes with the right to property of
persons, natural or artificial. Those similarly situated are affected in the same way and treated alike,
"both as to privileges conferred and liabilities enforced."87
RA 9337 was enacted precisely to achieve the objective of raising revenues to defray the necessary
expenses of government.88 The means that this law employs are reasonably related to the
accomplishment of such objective, and not unduly oppressive. The reduction of tax credits is a
question of economic policy, not of legal perlustration. Its determination is vested in Congress, not in
this Court. Since the purpose of the law is to raise revenues, it cannot be denied that the means
employed is reasonably related to the achievement of that purpose. Moreover, the proper
congressional procedure for its enactment was followed;89 neither public notice nor public hearings
were denied.
Two, private enterprises are not discouraged. Tax burdens are never delightful, but with the
imposition of the 70 percent cap, there will be an assurance of a steady cash flow to the
government, which can be translated to the production of improved goods, rendition of better
services, and construction of better facilities for the people, including all private enterprises.
Perhaps, Congress deems it best to make our economy depend more on businesses that are easier
to monitor, so there will be a more efficient collection of taxes. Whatever is expected of the outcome
of the law, or its wisdom, should be the sole responsibility of the representatives chosen by the
electorate.
The profit margin rates of various industries generally do not change. However, the profit
margin figures do, because these are obviously monetary variables that affect business, along with
the level of competition, the quality of goods and services offered, and the cost of their production.
And there will inevitably be a conscious desire on the part of those who engage in business and
those who consume their output to adapt or adjust accordingly to any congressional modification of
the VAT system.
In addition, it is contended that the VAT should be proportional in nature. I submit that this
proportionality pertains to the rate imposable, not the credit allowable. Private enterprises are
subjected to a proportional VAT rate, but VAT credits need not be. The VAT is, after all, a human
concept that is neither immutable nor invariable. In fact, it has changed after it was adopted as a
system of indirect taxation by other countries. Again unlike the laws of physical science, the VAT
system can always be modified to suit modern fiscal demands. The State, through the Legislative
Department, may even choose to do away with it and revert to our previous system of turnover
taxes, sales taxes and compensating taxes, in which credits may be disallowed altogether.
Not expensed, but amortized over its useful life, is capital equipment, which is purchased or treated
as capital leases by private enterprises. Aimed at achieving the twin objectives of profitability and
solvency, such purchase or lease is a matter of prudence in business decision-making.
Hence, business judgments, sales volume, and their effect on competition are for businesses to
determine and for Congress to regulate -- not for this Court to interfere with, absent a clear showing
that constitutional provisions have been violated. Tax collection and administrative feasibility are for
the executive branch to focus on, again not for this Court to dwell upon.
The Transcript of the Oral Arguments on July 14, 2005 clearly point out in a long line of relevant
questioning that, absent a violation of constitutional provisions, the Court cannot interfere with the 70
percent cap, the 5 percent final withholding tax, and the 60-month amortization, there being other
extra-judicial remedies available to petitioners, thus:
"Atty. Baniqued: But if your profit margin is low as i[n] the case of the petroleum dealers, x x x then
we would have a serious problem, Your Honor.
"Justice Panganiban: Isn’t the solution to increase the price then?
"Atty. Baniqued: If you increase the price which you can very well do, Your Honor, then that [will] be
deflationary and it [will] have a cascading effect on all other basic commodities[, especially] because
what is involved here is petroleum, Your Honor.
"Justice Panganiban: That may be true[,] but it’s not unconstitutional?
"Atty. Baniqued: That may be true, Your Honor, but the very limitation of the [seventy percent] input
[VAT], when applied to the case of the petroleum dealers[,] is oppressive[.] [I]t’s unjust and it’s
unreasonable, Your Honor.
"Justice Panganiban: But it can be passed as a part of sales, sales costs rather.
"Atty. Baniqued: But the petroleum dealers here themselves…… interrupted
"Justice Panganiban: In your [b]alance [s]heet, it could be reflected as Cost of Sales and therefore
the price will go up?
"Atty. Baniqued: Even if it were to be reflected as part of the Cost of Sales, Your Honor, the [input
VAT] that you cannot claim, the benefit to you is only to the extent of the corporate tax rate which is
32 now 35 [percent].
"Justice Panganiban: Yes.
"Atty. Baniqued: It’s not 100 [percent] credi[ta]bility[,] unlike if it were applied against your [output
VAT], you get to claim 100 [percent] of it, Your Honor.
"Justice Panganiban: That might be true, but we are talking about whether that particular provision
would be unconstitutional. You say it’s oppressive, but you have a remedy, you just pass it on to
the customer. I am not sayin[g] it’s good[.] [N]either am I saying it’s wise[.] [A]ll I’m talking about is,
whether it’s constitutional or not.
"Atty. Baniqued: Yes, in fact we acknowledge, Your Honor, that that is a remedy available to the
petroleum dealers, but considering the impact of that limitation[,] and were just talking of the 70
[percent cap] on [input VAT] in the level of the petroleum dealers. Were not even talking yet of the
limitation on the [input VAT] available to the manufacturers, so, what if they pass that on as well?
"Justice Panganiban: Yes.
"Atty. Baniqued: Then, it would complicate… interrupted
"Justice Panganiban: What I am saying is, there is a remedy, which is business in character. The
mere fact that the government is imposing that [seventy percent] cap does not make the law
unconstitutional, isn’t it?
"Atty. Baniqued: It does, Your Honor, if it can be shown. And as we have shown, it is oppressive and
unreasonable, it is excessive, Your Honor… interrupted
"Justice Panganiban: If you have no way of recouping it. If you have no way of recouping that
amount, then it will be oppressive, but you have a business way of recouping it[.] I am saying that,
not advising that it’s good. All I am saying is, is it constitutional or not[?] We’re not here to determine
the wisdom of the law, that’s up for Congress. As pointed out earlier, if the law is not wise, the law
makers will be changed by the people[.] [T]hat is their solution t[o] the lack of wisdom of a law. If the
law is unconstitutional[,] then the Supreme Court will declare it unconstitutional and void it, but[,] in
this case[,] there seems to be a business remedy in the same manner that Congress may just
impose that tax straight without saying it’s [VAT]. If Congress will just say all petroleum will pay 3
[percent] of their Gross Sales, but you don’t bear that, you pass that on, isn’t it?
"Atty. Baniqued: We acknowledge your concern, Your Honor, but we should not forget that when the
petroleum dealers pass these financial burden or this tax differential to the consumers, they
themselves are consumers in their own right. As a matter of fact, they filed this case both as
petroleum dealer[s] and as taxpayers. If they pass if on, they themselves would ultimately bear the
burden[, especially] in increase[d] cost of electricity, land transport, food, everything, Your Honor.
"Justice Panganiban: Yes, but the issue here in this Court, is whether that act of Congress is
unconstitutional.
"Atty. Baniqued: Yes, we believe it is unconstitutional, Your Honor.
"Justice Panganiban: You have a right to complain that it is oppressive, it is excessive, it burdens the
people too much, but is it unconstitutional?
"Atty. Baniqued: Besides, passing it on, Your Honor, may not be as simple as it may seem. As a
matter of fact, at the strike of midnight on June 30, when petroleum prices were being changed
upward, the [s]ecretary of [the] Department of Energy was going around[.] [H]e was seen on TV
going around just to check that prices don’t go up. And as a matter of fact, he had pronouncements
that, the increase in petroleum price should only be limited to the effect of 10 [percent] E-VAT.
"Justice Panganiban: It’s becaus[e] the implementing rules were not clear and were not extensive
enough to cover how much really should be the increase for various oil products, refined oil
products. It’s up for the dealers to guess, and the dealers were guessing to their advantage by
saying plus 10 [percent] anyway, right?
"Atty. Baniqued: In fact, the petroleum dealers, Your Honors, are not only faced with constitutional
issues before this Court. They are also faced with a possibility of the Department of Energy not
allowing them to pass it on[,] because this would be an unreasonable price increase. And so, they
are being hit from both sides…interrupted
"Justice Panganiban: That’s why I say, that there is need to refine the implementing rules so that
everyone will know, the customers will know how much to pay for gasoline, not only gasoline,
gasoline, and so on, diesel and all kinds of products, so there’ll be no confusion and there’ll be no
undue taking advantage. There will be a smooth implementation[,] if the law were to be upheld by
the Court. In your case, as I said, it may be unwise to pass that on to the customers, but definitely,
the dealers will not bear that [--] to suffer the loss that you mentioned in your consolidated balance
sheets. Certainly, the dealers will not bear that [cost], isn’t it?
"Atty. Baniqued: It will be a very hard decision to make, Your Honor.
"Justice Panganiban: Why, you will not pass it on?
"Atty. Baniqued: I cannot speak for the dealers…. interrupted.
"Justice Panganiban: As a consumer, I will thank you if you don’t pass it on[;] but you or your clients
as businessm[e]n, I know, will pass it on.
"Atty. Baniqued: As I have said, Your Honor, there are many constraints on their ability to do that[,]
and that is why the first step that we are seeking is to seek redress from this Honorable Court[,]
because we feel that the imposition is excessive and oppressive….. interrupted
"Justice Panganiban: You can find redress here, only if you can show that the law is unconstitutional.
"Atty. Baniqued: We realized that, Your Honor.
"Justice Panganiban: Alright. Let’s talk about the 5 [percent] [d]epreciation rate, but that applies
only to the capital equipment worth over a million?
"Atty. Baniqued: Yes, Your Honor.
"Justice Panganiban: And that doesn’t apply at all times, isn’t it?
"Atty. Baniqued: Well……
"Justice Panganiban: That doesn’t at all times?
"Atty. Baniqued: For capital goods costing less than 1 million, Your Honor, then….
"Justice Panganiban: That will not apply?
"Atty. Baniqued: That will not apply, but you will have the 70 [percent] cap on input [VAT], Your
Honor.
"Justice Panganiban: Yes, but we talked already about the 70 [percent].
"Atty. Baniqued: Yes, Your Honor.
"Justice Panganiban: When you made your presentation on the balance sheet, it is as if every capital
expenditure you made is subject to the 5 [percent,] rather the [five year] depreciation schedule[.]
[T]hat’s not so. So, the presentation you made is a little inaccurate and misleading.
"Atty. Baniqued: At the start of our presentation, Your Honor[,] we stated clearly that this applies only
to capital goods costing more than one [million].
"Justice Panganiban: Yes, but you combined it later on with the 70 [percent] cap to show that the
dealers are so disadvantaged. But you didn’t tell us that that will apply only when capital equipment
or goods is one million or more. And in your case, what kind of capital goods will be worth one million
or more in your existing gas stations?
"Atty. Baniqued: Well, you would have petroleum dealers, Your Honor, who would have[,] aside from
sale of petroleum[,] they would have their service centers[,] like[…] to service cars and they would
have those equipments, they are, Your Honor.
"Justice Panganiban: But that’s a different profit center, that’s not from the sale of…
"Atty. Baniqued: No, they would form part of their [VATable] sale, Your Honor.
Justice Panganiban: It’s a different profit center[;] it’s not in the sale of petroleum products. In fact the
mode now is to put up super stores in huge gas stations. I do not begrudge the gas station[.] [A]ll I
am saying is it should be presented to us in perspective. Neither am I siding with the government. All
I am saying is, when I saw your complicated balance sheet and mathematics, I saw that you were to
put in all the time the depreciation that should be spread over [five] years. But we have agreed that
that applies only to capital equipment [-- ]not to any kind of goods [--] but to capital equipment
costing over 1 million pesos.
"Atty. Baniqued: Yes, Your Honor, we apologize if it has caused a little confusion….
"Justice Panganiban: Again the solution could b[e] to pass that on, because that’s an added
cost, isn’t it?
"Atty. Baniqued: Well, yes, you can pass it on….
"Justice Panganiban: I am not teaching you, I am just saying that you have a remedy… I am not
saying either that the remedy is wise or should be done, because[,] as a consumer[,] I wouldn’t want
that to be done to me.
"Atty. Baniqued: We realiz[e] that, Your Honor, but the fact remain[s] that whether it is in the hands of
the petroleum dealers or in the hands of the consumers[,] if this imposition is unreasonable and
oppressive, it will remain so, even after it is passed on, Your Honor.
"Justice Panganiban: Alright. Let’s go to the third. The 5 [percent] withholding tax, [f]inal [w]ithholding
[t]ax, but this applies to sales to government?
"Atty. Baniqued: Yes, Your Honor.
"Justice Panganiban: So, you can pass on this 5 [percent] to the [g]overnment. After all, that 5
[percent] will still go back to the government.
"Atty. Baniqued: Then it will come back to haunt us, Your Honor…..
"Justice Panganiban: Why?
"Atty. Baniqued: By way of, for example sales to NAPOCOR or NTC…. interrupted
"Justice Panganiban: Sales of petroleum products….
"Atty. Baniqued: ………… in the case of NTC, Your Honor, it would come back to us by way of
increase[d] cost, Your Honor.
"Justice Panganiban: Okay, let’s see. You sell, let’s say[,] your petroleum products to the Supreme
Court, as a gas station that sells gasoline to us here. Under this law, the 5 [percent] withholding tax
will have to be charged, right?
"Atty. Baniqued: Yes, Your Honor.
"Justice Panganiban: You will charge that[.] [T]herefore[,] the sales to the Supreme Court by that gas
station will effectively be higher?
"Atty. Baniqued: Yes, Your Honor.
"Justice Panganiban: So, the Supreme Court will pay more, you will not [be] going to [absorb] that 5
[percent], will you?
"Atty. Baniqued; If it is passed on, Your Honor, that’s of course we agree…. Interrupted.
"Justice Panganiban: Not if, you can pass it on….
"Atty. Baniqued: Yes, we can…. interrupted
"Justice Panganiban: There is no prohibition to passing it on[.] [P]robably the gas station will simply
pass it on to the Supreme Court and say[,] well[,] there is this 5 [percent] final VAT on you so[,]
therefore, for every tank full you buy[,] we’ll just have to [charge] you 5 [percent] more. Well, the
Supreme Court will probably say, well, anyway, that 5 [percent] that we will pay the gas dealer, will
be paid back to the government, isn’t it[?] So, how [will] you be affected?
"Atty. Baniqued: I hope the passing on of the burden, Your Honor, doesn’t come back to party
litigants by way of increase in docket fees, Your Honor.
"Justice Panganiban: But that’s quite another m[a]tter, though…(laughs) [W]hat I am saying, Mr.
[C]ounsel is, you still have to show to us that your remedy is to declare the law unconstitutional[,]
and it’s not business in character.
"Atty. Baniqued: Yes, Your Honor, it is our submission that this limitation in the input [VAT] credit as
well as the amortization…….
"Justice Panganiban: All you talk about is equal protection clause, about due process, depreciation
of property without observance of due process[,] could really be a remedy than a business way.
"Atty. Baniqued: Business in the level of the petroleum dealers, Your Honor, or in the level of
Congress, Your Honor.
"Justice Panganiban: Yes, you can pass them on to customers[,] in other words. It’s the customers
who should [complain].
"Atty. Baniqued: Yes, Your Honor… interrupted
"Justice Panganiban: And perhaps will not elect their representatives anymore[.]
"Atty. Baniqued: Yes, Your Honor…..
"Justice Panganiban: For agreeing to it, because the wisdom of a law is not for the Supreme Court to
pass upon.
"Atty. Baniqued: It just so happens, Your Honor, that what is [involved] here is a commodity that
when it goes up, it affects everybody….
"Justice Panganiban: Yes, inflationary and inflammatory….
"Atty. Baniqued: …just like what Justice Puno says it shakes the entire economic foundation, Your
Honor.
"Justice Panganiban: Yes, it’s inflationary[,] brings up the prices of everything…
"Atty. Baniqued: And it is our submission that[,] if the petroleum dealers cannot absorb it and they
pass it on to the customers, a lot of consumers would neither be in a position to absorb it too and
that[’s] why we patronize, Your Honor.
"Justice Panganiban: There might be wisdom in what you’re saying, but is that unconstitutional?
"Atty. Baniqued: Yes, because as I said, Your Honor, there are even constraints in the petroleum
dealers to pass it on, and we[‘]re not even sure whether….interrupted
"Justice Panganiban: Are these constraints [--] legal constraints?
"Atty. Baniqued: Well, it would be a different story, Your Honor[.] [T]hat’s something we probably
have to take up with the Department of Energy, lest [we may] be accused of …..
"Justice Panganiban: In other words, that’s your remedy
[--] to take it up with the Department of Energy
"Atty. Baniqued: …..unreasonable price increases, Your Honor.
"Justice Panganiban: Not for us to declare those provisions unconstitutional.
"Atty. Baniqued: We, again, wish to stress that the petroleum dealers went to this Court[,] both as
businessmen and as consumers. And as consumers, [we’re] also going to bear the burden of
whatever they themselves pass on.
"Justice Panganiban: You know[,] as a consumer, I wish you can really show that the laws are
unconstitutional, so I don’t have to pay it. But as a magistrate of this Court, I will have to pass upon
judgment on the basis of [--] whether the law is unconstitutional or not. And I hope you can in your
memorandum show that.
"Atty. Baniqued: We recognized that, Your Honor." (boldface supplied, pp. 386-410).
Amendments on Other Taxes and Administrative Matters. Finally, the BCC’s amendments
regarding other taxes90 are both germane in a legal sense and reasonably necessary in an economic
sense. This fact is evident, considering that the proposed changes in the VAT law will have inevitable
implications and repercussions on such taxes, as well as on the procedural requirements and the
disposition of incremental revenues, in the Tax Code. Either mitigating measures91 have to be put in
place or increased rates imposed, in order to achieve the purpose of the law, cushion the impact of
increased taxation, and still maintain the equitability desired of any other revenue law.92 Directly
related to the proposed VAT changes, these amendments are expected also to have a salutary effect
on the national economy.
The no-amendment rule93 in the Constitution was not violated by the BCC, because no completely
new provision was inserted in the approved bill. The amendments may be unpopular or even work
hardship upon everyone (this writer included). If so, the remedy cannot be prescribed by this Court,
but by Congress.
Rejecting Non-Conflicting
Provisions
Fourth, the BCC may choose neither to adopt nor to consolidate the versions presented to it by both
houses of Congress, but instead to reject non-conflicting provisions in those versions. In other
words, despite the lack of conflict in them, such provisions are still eliminated entirely from the
consolidated bill. There may be a constitutional problem here.
The no pass-on provisions in the congressional bills are the only item raised by petitioners
concerning deletion.94 As I have already mentioned earlier, these provisions were in conflict. Thus,
the BCC exercised its prerogative to remove them. In fact, congressional rules give the BCC the
power to reconcile disagreeing provisions, and in the process of reconciliation, to delete them. No
other non-conflicting provision was deleted.
At this point, and after the extensive discussion above, it can readily be seen no non-
conflicting provisions of the E-VAT bills were rejected indiscriminately by the BCC.
Approving and Inserting
Completely New Provisions
Fifth, the BCC had the option of inserting completely new provisions not found in any of the
provisions of the bills of either house of Congress, or make and endorse an entirely new bill as a
substitute. Taking this option may be a blatant violation of the Constitution, for not only will the
surreptitious insertion or unwarranted creation contravene the "origination" principle; it may likewise
desecrate the three-reading requirement and the no-amendment rule.95
Fortunately, however, the BCC did not approve or insert completely new provisions. Thus, no
violation of the Constitution was committed in this regard.
 Summary
The enrolled bill doctrine is said to be conclusive not only as to the provisions of a law, but also to its
due enactment. It is not absolute, however, and must yield to mandatory provisions of the 1987
Constitution. Specifically, this Court has the duty of striking down provisions of a law that in their
enactment violate conditions, restrictions or limitations imposed by the Constitution.96 The Bicameral
Conference Committee (BCC) is a mere creation of Congress. Hence, the BCC may resolve
differences only in conflicting provisions of congressional bills that are referred to it; and it may do so
only on the condition that such resolution does not violate the origination, the three-reading, and the
no-amendment rules of the Constitution.
In crafting RA 9337, the BCC opted to reconcile the conflicting provisions of the Senate and House
bills, particularly those on the 70 percent cap on input tax; the 5 percent final withholding tax;
percentage taxes on domestic carriers, keepers of garages and international carriers; franchise
taxes; amusement taxes; excise taxes on manufactured oils and other fuels; registration
requirements; issuance of receipts or sales or commercial invoices; and disposition of incremental
revenues. To my mind, these changes do not violate the origination or the germaneness principles.
Neither is there undue delegation of legislative power in the standby authority given by Congress to
the President. The law is complete, and the standards are fixed. While I concur with
the ponencia’s view that the President was given merely the power to ascertain the facts to bring the
law into operation -- clearly an administrative, not a legislative, function -- I stress that the finance
secretary remains the Chief Executive’s alter ego, not an agent of Congress.
The BCC exercised its prerogative to delete the no pass-on provisions, because these were in
conflict. I believe, however, that it blatantly violated the origination and the germaneness principles
when it inserted provisions not found in the House versions of the E-VAT Law: (1) increasing the tax
rates on domestic, resident foreign and nonresident foreign corporations; (2) increasing the tax credit
against taxes due from nonresident foreign corporations on intercorporate dividends; and (3)
reducing the allowable deduction for interest expense. Hence, I find these insertions
unconstitutional.
Some have criticized the E-VAT Law as oppressive to our already suffering people. On the other
hand, respondents have justified it by comparing it to bitter medicine that patients must endure to be
healed eventually of their maladies. The advantages and disadvantages of the E-VAT Law, as well
as its long-term effects on the economy, are beyond the reach of judicial review. The economic
repercussions of the statute are policy in nature and are beyond the power of the courts to pass
upon.
I have combed through the specific points raised in the Petitions. Other than the three items on
income taxes that I respectfully submit are unconstitutional, I cannot otherwise attribute grave abuse
of discretion to the BCC, or Congress for that matter, for passing the law.
"[T]he Court -- as a rule -- is deferential to the actions taken by the other branches of government
that have primary responsibility for the economic development of our country."97 Thus, in upholding
the Philippine ratification of the treaty establishing the World Trade Organization (WTO), Tañada v.
Angara held that "this Court never forgets that the Senate, whose act is under review, is one of two
sovereign houses of Congress and is thus entitled to great respect in its actions. It is itself a
constitutional body, independent and coordinate, and thus its actions are presumed regular and done
in good faith. Unless convincing proof and persuasive arguments are presented to overthrow such
presumption, this Court will resolve every doubt in its favor."98 As pointed our in Cawaling Jr. v.
Comelec, the grounds for nullity of the law "must be beyond reasonable doubt, for to doubt is to
sustain."99 Indeed, "there must be clear and unequivocal showing that what the Constitutions
prohibits, the statute permits."100
WHEREFORE, I vote to GRANT the Petitions in part and to declare Sections 1, 2, and 3 of Republic
Act No. 9337 unconstitutional, insofar as these sections (a) amend the rates of income tax on
domestic, resident foreign, and nonresident foreign corporations; (b) amend the tax credit against
taxes due from nonresident foreign corporations on intercorporate dividends; and (c) reduce the
allowable deduction for interest expense. The other provisions are constitutional, and as to these I
vote to DISMISS the Petitions.
ARTEMIO V. PANGANIBAN
Associate Justice



Footnotes
1 235 SCRA 630, August 25, 1994; and 249 SCRA 628, October 30, 1995. The second case
is an en banc Resolution on the Motions for Reconsideration of the first case.
2 417 SCRA 503, December 10, 2003.
3 "[I]t is well settled that the enrolled bill doctrine is conclusive upon the courts as regards the
tenor of the measure passed by Congress and approved by the President." Resins Inc. v.
Auditor General, 134 Phil. 697, 700, October 29, 1968, per Fernando, J., later CJ.;
(citing Casco Philippine Chemical Co., Inc. v. Gimenez, 117 Phil. 363, 366, February 28,
1963, per Concepción, J., later CJ.). It is a doctrine that flows as a corollary to the separation
of powers, and by which due respect is given by one branch of government to the actions of
the others. See Morales v. Subido, 136 Phil. 405, 412, February 27, 1969.
Following Field v. Clark (143 US 649, 12 S.Ct. 495, February 29, 1892), such conclusiveness
refers not only to the provisions of the law, but also to its due enactment. Mabanag v. Lopez
Vito, 78 Phil. 1, 13-18, March 5, 1947.
"[T]he signing of a bill by the Speaker of the House and the Senate President and the
certification of the Secretaries of both [h]ouses of Congress that it was passed are
conclusive of its due enactment." Fariñas v. Executive Secretary, supra, p. 529, per Callejo
Sr., J.
4 Mabanag v. Lopez Vito, supra, p. 12.
5 §1 of Rule 129 of the Rules of Court.
6 The United Kingdom has an uncodified Constitution, consisting of both written and
unwritten sources, capable of evolving to be responsive to political and social change, and
found partly in conventions and customs and partly in statute. Its Parliament has the power
to change or abolish any written or unwritten element of the Constitution. There is neither
separation of powers nor formal checks and balances. Every bill drafted has to be approved
by both the House of Commons and the House of Lords, before it receives the Royal Assent
and becomes an Act of Parliament. The House of Lords is the second chamber that
complements the work of the Commons, whose members are elected to represent their
constituents. The first is the House of Commons that alone may start bills to raise taxes or
authorize expenditures. Each bill goes through several stages in each House. The first stage,
called the first reading, is a mere formality. The second -- the second reading -- is when
general principles of the bill are debated upon. At the second reading, the House may vote to
reject the bill. Once the House considers the bill, the third reading follows. In the House of
Commons, no further amendments may be made, and the passage of the motion amounts to
passage of the whole bill. The House of Lords, however, may not amend a bill so as to insert
a provision relating to taxation. http://en.wikipedia.org/wiki/
Constitution_of_the_United_Kingdom; http:// www.oefre.unibe.ch/law/icl/uk00000_.html;
www.parliament.uk; and http://encyclopedia.thefreedictionary.com/British+Parliament (Last
visited August 4, 2005, 11:30am PST).
7 See Dissenting Opinion of Puno, J. in Tolentino v. Secretary of Finance, supra, p. 818.
8 Cf. Francisco Jr. v. House of Representatives, 415 SCRA 44, November 10, 2003.
9 Tolentino v. Secretary of Finance, supra.
10 2nd paragraph, §1 of Article VIII of the 1987 Constitution.
11 Tolentino v. Secretary of Finance, supra.
12 Arroyo v. De Venecia, 343 Phil. 42, 61-62, August 14, 1997, per Mendoza, J.
13 These refer to House Bill Nos. 3555 & 3705; and Senate Bill No. 1950.
14 §26(2) of Article VI of the 1987 Constitution.
15"The purpose for which three readings on separate days is required is said to be two-fold:
(1) to inform the members of Congress of what they must vote on and (2) to give them notice
that a measure is progressing through the enacting process, thus enabling them and others
interested in the measure to prepare their positions with reference to it." Tolentino v.
Secretary of Finance, supra, p. 647, October 30, 1995, per Mendoza, J.
16 §24 of Article VI of the 1987 Constitution.
17 §24 of Article VI of the 1987 Constitution.
The power of the Senate to propose or concur with amendments is, apparently, without
restriction. By virtue of this power, the Senate can practically rewrite a bill that is required to
come from the House and leave only a trace of the original bill. See Flint v. Stone Tracy Co.,
220 US 107, 31 S.Ct. 342, March 13, 1911.
18 §24 of Article VI of the 1987 Constitution.
19 Tolentino v. Secretary of Finance, supra, p. 661, August 25, 1994.
20 Garner (ed. in chief), Black’s Law Dictionary (8th ed., 2004), p. 708.
21 Statsky, West’s Legal Thesaurus/Dictionary (1986), p. 348.
22To argue that the raising of revenues makes the non-VAT provisions of a VAT bill
automatically germane is to bring legal analysis within the penumbra of economic scrutiny.
The burden or impact of any tax depends on the relative elasticities of supply and demand
and is chiefly a matter of policy confined within the august halls of Congress. See Pindyck
and Rubinfeld, Microeconomics (5th ed., 2003), pp. 314-317.
Exxon Mobil Corp. v. Allapattah Services, Inc., 125 S.Ct. 2611, 2622, June 23, 2005, per
23

Kennedy, J.
Tolentino v. Secretary of Finance, supra, p. 663, August 25, 1994. See Cruz, Philippine
24

Political Law(2002), p. 154.

25 Tolentino v. Secretary of Finance, supra, August 25, 1994, per Mendoza, J.
26 Cruz, Philippine Political Law (2002), p. 155.
27 Tolentino v. Secretary of Finance, supra, August 25, 1994.
28 Cruz, Philippine Political Law (2002), p. 111.
29 Tolentino v. Secretary of Finance, supra, p. 668, August 25, 1994.
There is no allegation in any of the memoranda submitted to this Court that the consolidated
bill was not approved. In fact, both houses of Congress voted separately and majority of
each house approved it.
30On the one hand, §§1-3 of House Bill (HB) No. 3555 seek to amend §§106, 107 & 108 the
Tax Code by increasing the VAT rate to 12% on every sale, barter or exchange of goods or
properties; importation of goods; and sale or exchange of services, including the use or lease
of properties.
§§1-3 of HB 3705, on the other, seek to amend §§106, 107 & 108 the Tax Code by
also increasing the VAT rate to 12% on every sale, barter or exchange of goods or
properties; importation of goods; and sale or exchange of services, including the use or lease
of properties, but decreasing such rate to 8% on every importation of certain goods; 6% on
the sale, barter or exchange of certain locally manufactured goods; and 4% on the sale,
barter or exchange, as well as importation, of petroleum products subject to excise tax and
raw materials to be used in their manufacture (subject to subsequent increases of such
reduced rates), and on the gross receipts derived from services rendered on the sale of
generated power.
The Tax Code referred to in this case is RA 8424, otherwise known as the "Tax Reform Act of
1997."
31§§4-5 of Senate Bill (SB) No. 1950 seek to amend §§106 & 108 of the Tax Code by
retaining the VAT rate of 10% on every sale, barter or exchange of goods or properties; and
on the sale or exchange of services, including the use or lease of properties, and the sale of
electricity by generation, transmission, and distribution companies.
32§§4-6 of the consolidated bill amending §§106-108 of the Tax Code,
respectively. Conference Committee Report on HBs 3555 & 3705, and SB 1950, pp. 4-7.
The predetermined factual scenario in the above-cited sections of the consolidated bill also
appears in §§4-6 of Republic Act (RA) No. 9337, amending the same provisions of the Tax
Code. Mathematically, it is expressed as follows:
VAT Collection > 2.8%
GDP
or
National Government Deficit > 1.5%
GDP
A negative budget surplus, or an excess of expenditure over revenues, is a budget deficit.
33

Dornbusch, Fischer, and Startz, Macroeconomics (9th ed., 2005), p. 231.

34GDP refers to the value of all goods and services produced domestically; the sum of gross
value added of all resident institutional units engaged in production (plus any taxes, and
minus any subsidies, on products not included in the values of their outputs).
www.nscb.gov.ph/sna/default.asp (Last visited July 14, 2005 10am PST).
35 See Pelaez v. Auditor General, 122 Phil. 965, 974, December 24, 1965.
36The acts of retroactively implementing the 12 percent VAT rate, should the finance
secretary be able to make recommendation only weeks or months after the end of fiscal year
2005, or reverting to 10 percent if both conditions are not met, are best addressed to the
political branches of government.
The following excerpts from the Transcript of the Oral Arguments in GR Nos. 168461,
168463, 168056, and 168207, held on July 14, 2005 at the Supreme Court Session Hall, are
instructive on the position of petitioners:
"Atty. Gorospe: [It’s] supposed to be 2005, Your Honor, but apparently, it [will] be
impossible to determine GDP the first day of 2006, Your Honor." (p. 57);
xxx
"Justice Panganiban: Now [let’s see] when it is possible then to determine this formula. It
cannot be on the first day of January 2006, because the year [2005] ended just the midnight
before, isn’t it?
"Atty. Gorospe: Yes, Your Honor.
"Justice Panganiban: x x x if it’s only determined on March 1[,] then how can the law become
effective January 1[.] In other words, how will the [people be] able to pay the tax if ever that
formula is exceeded x x x?" (pp. 59-60);
xxx
"Atty. Gana: Well, x x x it would take a grace period of 6 to 8 months[,] because
obviously, determination could not be made on January 1, 2006. Yes, they were under
the impression that at the earliest it would take 30 days.
"Justice Panganiban: Historically, when [will] these figures [be] available[:] the GDP, [VAT]
collection?" (p. 192);
xxx
"Justice Panganiban: But certainly not on January 1. Therefore, by January 1, people
would not know whether the rate would be increased or not, even if there is no
discretion?
"Atty. Gana: That’s true, Your Honor, even if there is no discretion.
"Justice Panganiban: It will take weeks, or months to be able to determine that?
"Atty. Gana: Well, they anticipated it, would take at most by March." (p. 193); and
xxx
"Justice Panganiban: March, I will ask the government later on when they argue.
"Atty. Gana: As early as January but not later than 60 to 90 days." (boldface supplied; p.
194).
37

38regulations how much they [would] be charged, how much should gasoline stations charge
in addition to their correct prices, how much carriers should charge[,] so there [would] be
no confusion.
"Usec. Bonoan: Yes, Your Honor." (boldface supplied; pp. 665-666).
37 Using available statistics, it is approximated that the 24/5 percent has been reached. VAT
collection (in million pesos) for the first quarter alone of 2004 is 83,542.83, or 83 percent of
revenue collections amounting to 100,654.01. Divided into GDP of 13,053, the quotient is
already 6.4 percent. http://www.nscb.gov.ph/sna/2005/1stQ2005/2005per1.asp; and the 2003
Bureau of Internal Revenue (BIR) Annual Report found on www.bir.gov.ph (Last visited July
14, 2005, 10:45am PST).
[38] Besides, the use of the word "shall" in §§106(A), 107(A) & 108(A) of the Tax Code, as
amended respectively by §§4, 5 & 6 of RA 9337, is mandatory, imperative and compulsory.
See Agpalo, Statutory Construction (4th ed., 1998), p. 333.
39See Separate Opinion (Concurring and Dissenting) of Panganiban, J., in Southern Cross
Cement Corp. v. Philippine Cement Manufacturers Corp., GR No. 158540, August 3, 2005, p.
31.
40 Escudero Memorandum, pp. 38-39.
GDP data are far from perfect measures of either economic output or welfare. There are
three major problems: (1) some outputs are poorly measured because they are not traded in
the market, and government services are not directly priced by such market; (2) some
activities measured as additions to GDP in fact only represent the use of resources in order
to avoid crime or risks to national security; and (3) it is difficult to account correctly for
improvements in the quality of goods. Dornbusch, Fischer, and Startz, Macroeconomics(9th
ed., 2005), pp. 35-36.
41 Fariñas v. Executive Secretary, 417 SCRA, 503, 530, December 10, 2003.
"Any meaningful change in the method and procedures of Congress or its committees
42

must x x x be sought in that body itself." Tolentino v. Secretary of Finance, supra, p. 650,
October 30, 1995, per Mendoza, J.
43 The necessity, desirability or expediency of a law must be addressed to Congress as the
body that is responsible to the electorate, for "legislators are the ultimate guardians of the
liberties and welfare of the people in quite as great a degree [as the] courts." Tolentino v.
Secretary of Finance, supra, p. 650, October 30, 1995, per Mendoza, J.; (citing Missouri, K.
& T. Ry. Co. v. May, 194 US 267, 270, 24 S.Ct. 638, 639, May 2, 1904, per Holmes, J.)
44 Fariñas v. Executive Secretary, 417 SCRA, 503, 524, December 10, 2003.
45 Flint v. Stone Tracy Co., 220 US 107, 167, 31 S.Ct. 342, 355, March 13, 1911, per Day, J.
46 §16(3) of Article VI of the 1987 Constitution.
"Parliamentary rules are merely procedural, and with their observance, the courts have no
concern. They may be waived or disregarded by the legislative body." Arroyo v. De Venecia,
supra, p. 61, August 14, 1997, per Mendoza, J.; (citing Osmeña Jr. v. Pendatun, 109 Phil
863, 870-871, October 28, 1960, per Bengzon, J.).
47HBs 3555 & 3705 do not contain any provision that seeks to revise non-VAT provisions of
the Tax Code, but SB 1950 has §§1-3 that seek to amend the rates of income tax on
domestic, resident foreign and nonresident foreign corporations at 35% (30% in 2009), with a
tax credit on intercorporate dividends at 20% (15% in 2009); and to reduce the allowable
deductions for interest expense by 42% (33% in 2009) of the interest income subject to final
tax.
48The amendments to income taxes also partake of the nature of taxation without
representation. As I will discuss in the succeeding paragraphs of this Opinion, they did not
emanate from the House of Representatives that, under §24 of Article VI of the 1987
Constitution, is the only body from which revenue bills should exclusively originate.
49 Mamalateo, Philippine Income Tax (2004), p. 1.
50Commissioner of Internal Revenue v. American Express International, Inc. (Philippine
Branch), GR No. 152609, p. 20, June 29, 2005, per Panganiban, J. See Deoferio Jr. &
Mamalateo, The Value Added Tax in the Philippines (2000), p. 36.
51 De Leon, The Fundamentals of Taxation (12th ed., 1998), pp. 92 & 132.
52 Mamalateo, Philippine Income Tax (2004), p. 379.
53 Vitug, Tax Law and Jurisprudence (2nd ed., 2000), p. 188.
54 Mamalateo, Philippine Income Tax (2004), p. 380.
De Leon, The Law on Transfer and Business Taxation with Illustrations, Problems, and
55

Solutions (1998), pp. 195-196 & 222-224.

56 Mamalateo, Philippine Income Tax (2004), p. 173.
57See §78 of Revenue Regulations No. 2-1940, recommended by Bibiano L. Meer, then
Collector of Internal Revenue, and promulgated by Manuel Roxas, then Secretary of
Finance, later President of the Republic of the Philippines, on February 11, 1941, XXXIX OG
18, 325.
58 Mamalateo, Philippine Income Tax (2004), p. 196.
59 RA 8424 refers to the Tax Reform Act of 1997.
60 The 42 percent reduction rate under §3 of RA 9337, amending §34(B)(1) of the Tax Code,
is derived by first subtracting the 20 percent tax on interest income from the increased tax
rate of 35 percent imposed on domestic, resident foreign, and nonresident foreign
corporations, and then dividing the difference obtained by the increased rate. Hence, it is
computed as follows:
35% - 20% = 15%
15% : 35% = 42%, the amount of reduction.
61 §§1-3 of HB 3705.
62 §5 of SB 1950. There seems to be a discrepancy between the Conference Committee
Report and the various pleadings before this Court. While such report, attaching a copy of
the bill as reconciled and approved by its conferees, as well as the report submitted by the
Senate’s Committee on Ways & Means to the Senate President on March 7, 2005, show that
SB 1950 does not contain a no-pass on provision, the petitioners and respondents show that
it does (Pimentel Memorandum, Annex A showing a "Matrix on the Disagreeing Provisions of
the [VAT] Bills," pp. 9-11; Escudero Memorandum, p. 42; and Respondents’ Memorandum,
pp. 109-110). Notably, the qualified dissent of Senator Joker Arroyo to the Bicameral
Conference Report states that the Senate version prohibits the power companies from
passing on the VAT that they will pay.
63§4 of HB 3555 seeks to amend §110(A) of the Tax Code by limiting to 5% and 11% of their
respective total amounts the claim for input tax credit of capital goods, through equal
distribution of the amount of such claim over their depreciable lives; and of goods and
services other than capital goods, and goods purchased by persons engaged in retail trade.
64§7 of SB 1950 seeks to amend §110 of the Tax Code by also limiting the claim for input tax
credit of goods purchased or imported for use in trade or business, through an even
depreciation or amortization over the month of acquisition and the 59 succeeding months, if
the aggregate acquisition cost of such goods exceeds ₱ 660,000.
The depreciation or amortization in the amendments is referred to as a "spread-out" in an
unnumbered Revenue Memorandum Circular dated July 12, 2005, submitted to this Court by
public respondents in their Compliance dated August 16, 2005. Such spread-out recognizes
industries where capital assets are constructed or assembled.
65 No cap is found in HB 3705.
66§5 of HB 3555 seeks to amend §114 of the Tax Code by requiring that the VAT be
deducted and withheld by the government or by any of its political subdivisions,
instrumentalities or agencies -- including government-owned-and-controlled corporations
(GOCCs) -- before making any payment on account of each purchase of goods from sellers
and services rendered by contractors. The VAT deducted and withheld shall be at the rates
of 5% of the gross payment for the purchase of goods and 8% of the gross receipts for
services rendered by contractors on every sale or installment payment. The VAT that is
deducted and withheld shall be creditable against their respective VAT liabilities -- 10.5%, in
case of government public works contractors; and 12% of the payments for the lease or use
of properties or property rights to nonresident owners.
67§11 of SB 1950 seeks to amend §114 of the Tax Code by requiring that the VAT be
deducted and withheld by the government or by any of its political subdivisions,
instrumentalities or agencies -- including government-owned or -controlled corporations
(GOCCs) -- before making any payment on account of each purchase of goods from sellers
and services rendered by contractors. The VAT deducted and withheld shall be at the rates
of 5% of the gross payment for the purchase of goods and on the gross receipts for services
rendered by contractors, including public works contractors. The VAT that is deducted and
withheld shall be creditable against the VAT liability of the seller; and 10% of the gross
payment for the lease or use of properties or property rights to nonresident owners.
68 Deoferio Jr. & Mamalateo, The Value Added Tax in the Philippines (2000), pp. 34-35 & 44.
69http://explanation-guide.info/meaning/Maurice-Lauré.html (Last visited August 23, 2005,
3:25pm PST).
70 This refers to a "tax on value added" -- TVA in French and VAT in English.
71 http://en.wikipedia.org/wiki/ Maurice-Lauré (Last visited August 23, 2005, 3:20pm PST).
72The Transcript of the Oral Arguments in GR Nos. 168461, 168463, 168056, and 168207,
held on July 14, 2005 at the Supreme Court Session Hall, show that the act of passing on to
consumers is a mere cash flow problem, as agreed to by counsel for petitioners in GR No.
168461:
"Justice Panganiban: So, the final consumer pays the tax?
"Atty. Baniqued: Yes, Your Honor.
"Justice Panganiban: The trade people in between the middlemen just take it as an input and
then [collect] it as output, isn’t it?
Atty. Baniqued: Yes, Your Honor.
"Justice Panganiban: It’s just a cash flow problem for them, essentially?
"Atty. Baniqued: Yes x x x." (p. 375).
The 5 percent final withholding tax may also be charged as part of a supplier’s Cost of
73

Sales.
74 This refers to RA 8424, as amended.
75In fact, §112(B) of the Tax Code, prior to and after its amendment by §10 of RA 9337, does
not at all prohibit the application of unused input taxes against other internal revenue taxes.
The manner of application is determined though by the BIR through §4.112-1(b) of Revenue
Regulations No. 14-2005, otherwise known as the "Consolidated VAT Regulations of 2005,"
dated June 22, 2005.
76That the unutilized input VAT can be considered an ordinary and necessary expense for
which a corresponding deduction will be allowed against gross income under §34(A)(1) of
the Tax Code -- instead of a deferred asset -- is another matter to be adjudicated upon in
proper cases.
77 See United Paracale Mining Co. v. De la Rosa, 221 SCRA 108, 115, April 7, 1993.
78The law referred to is not only the Tax Code, but also RA 9298, otherwise known as the
"Philippine Accountancy Act of 2004."
79These are based on pronouncements of recognized bodies involved in setting accounting
principles. Greatest weight shall be given to their pronouncements in the order listed below:
1. Securities and Exchange Commission (SEC);
2. Accounting Standards Council;
3. Standards issued by the International Accounting Standards Board (now Committee); and
4. Accounting principles and practices for which there has been a long history of acceptance
and usage.
If there appears to be a conflict between any of the bodies listed above, the pronouncements
of the first listed body shall be applied. SEC Securities Regulation Code Rule 68(1)(b)(iv) as
amended, cited in Appendix C of Morales, The Philippine Securities Regulation Code
(Annotated), [2005], p. 578.
Recommended by the World Bank and the Asian Development Bank, and increasingly
recognized worldwide, international accounting standards (IAS) have been merely adopted
by Philippine regulatory bodies and accredited professional organizations. The SEC, for
instance, complies with the agreement among co-members of the International Organization
of Securities Commissions to adopt IAS in order to ensure high-quality and transparent
financial reporting, with full disclosure as a means to promote credibility and efficiency in the
capital markets. In implementing the General Agreement on Trade in Services, the
Professional Regulatory Board of Accountancy (PRBOA) of the Professional Regulatory
Commission supports the adoption of IAS. The Philippine Institute of Certified Public
Accountants, a member of the International Accounting Standards Committee (IASC), also
has the commitment to support the work of the IASC and uses best endeavors to foster
compliance with IAS. http://www.picpa.com.ph/adb/index.htm (Last visited August 23, 2005,
3:15pm PST).
80 Meigs & Meigs, Accounting: The Basis for Business Decisions (1981), pp. 28 & 515.
Under §9(b) & (g) of RA 9298, the PRBOA shall supervise the practice of accountancy in the
Philippines and adopt measures -- such as the promulgation of accounting and auditing
standards, rules and regulations, and best practices -- that may be deemed proper for the
enhancement and maintenance of high professional, ethical, accounting, and auditing
standards that include international accounting and auditing standards and generally
accepted best practices.
81The VAT is collected on each sale of goods or properties or upon the actual or constructive
receipt of consideration for services, starting from the production stage, followed by the
intermediate stages in the distribution process, and culminating with the sale to the final
consumer. This is the essence of a VAT; it is a tax on the value added, that is, on the excess
of sales over purchases. See Deoferio Jr. & Mamalateo, The Value Added Tax in the
Philippines (2000), pp. 33-34. With the 70 percent cap on output tax that is allowable as an
input tax credit, the remaining 30 percent becomes an outright expense that is, however,
immediately payable and remitted by the business establishment to the government. This
amount can never be recovered or passed on to the consumer, but it can be an allowable
deduction from gross income under §34(A)(1) of the Tax Code. In effect, it is a tax computed
by multiplying 30 percent to the 10 percent VAT that is imposed on gross sales, receipts or
revenues. It is not a tax on tax and, mathematically, it is derived as follows:
30% x 10% = 3% of gross sales, receipts or revenues.
82"Double taxation means taxing the same property [or subject matter] twice when it should
be taxed only once; that is, ‘taxing the same person twice by the same jurisdiction for the
same thing.’" Commissioner of Internal Revenue v. Solidbank Corp., 416 SCRA 436,
November 25, 2003, per Panganiban, J.; (citing Afisco Insurance Corp. v. CA, 361 Phil. 671,
687, January 25, 1999, per Panganiban, J.). See Commissioner of Internal Revenue v. Bank
of Commerce, GR No. 149636, pp. 17-18, June 8, 2005.
83"The rule x x x is well settled that there is no constitutional prohibition against double
taxation." China Banking Corp. v. CA, 403 SCRA 634, 664, June 10, 2003, per Carpio, J.
Cruz, Constitutional Law (1998), p. 89.
84 §116 of the Tax Code as amended.
85"[C]ourts accord the presumption of constitutionality to legislative enactments, not only
because the legislature is presumed to abide by the Constitution[,] but also because the
judiciary[,] in the determination of actual cases and controversies[,] must reflect the wisdom
and justice of the people as expressed through their representatives in the executive and
legislative departments of the government." Angara v. Electoral Commission, 63 Phil. 139,
158-159, July 15, 1936, per Laurel, J.; (cited in Francisco Jr. v. House of Representatives,
supra, pp. 121-122.)
Cawaling Jr. v. COMELEC, 420 Phil. 524, 530, October 26, 2001, per Sandoval-
86

Gutierrez, J.
87 Ichong v. Hernandez, 101 Phil. 1155, 1164, May 31, 1957, per Labrador, J.
88 De Leon, The Fundamentals of Taxation (12th ed., 1998), p. 1.
89 Except, as earlier discussed, for Sections 1, 2 and 3 of the law.
90§§13-20 of SB 1950 seek to amend Tax Code provisions on percentage taxes on domestic
carriers and keepers of garages in §117, and on international carriers in §118; franchise
taxes in §119; amusement taxes in §125; excise taxes on manufactured oils and other fuels
in §148; registration requirements in §236; issuance of receipts or sales or commercial
invoices in §237; and disposition of incremental revenues in §288.
91"[T]he removal of the excise tax on diesel x x x and other socially sensitive products such
as kerosene and fuel oil substantially lessened the impact of VAT. The reduction in import
duty x x x also eased the impact of VAT." Manila Bulletin, "Impact of VAT on prices of oil
products should be less than 10%, says DoE," by James A. Loyola, Business Bulletin B-3,
Friday, July 1, 2005, attached as Annex A to the Memorandum filed by the Association of
Pilipinas Shell Dealers, Inc.
The Transcript of the Oral Arguments in GR Nos. 168461, 168463, 168056, and 168207 on
July 14, 2005 also reveals the effect of mitigating measures upon petitioners in GR No.
168461:
"Justice Panganiban: As a matter of fact[,] a part of the mitigating measures would be the
elimination of the [e]xcise [t]ax and the import duties. That is [why] it is not correct to say that
the [VAT] as to petroleum dealers increase to 10 [percent].
"Atty. Baniqued: Yes, Your Honor.
"Justice Panganiban: And[,] therefore, there is no justification for increasing the retail price by
10 [percent] to cover the E-[VAT.] [I]f you consider the excise tax and the import duties, the
[n]et [t]ax would probably be in the neighborhood of 7 [percent]? We are not going into exact
figures[.] I am just trying to deliver a point that different industries, different products, different
services are hit differently. So it’s not correct to say that all prices must go up by 10 [percent].
"Atty. Baniqued: You’re right, Your Honor.
"Justice Panganiban: Now. For instance, [d]omestic [a]irline companies, Mr. Counsel, are at
present imposed a [s]ales [t]ax of 3 [percent]. When this E-[VAT] law took effect[,] the [s]ales
[t]ax was also removed as a mitigating measure. So, therefore, there is no justification to
increase the fares by 10 [percent;] at best 7 [percent], correct?
"Atty. Baniqued: I guess so, Your Honor, yes." (pp. 367-368).
92 §28(1) of Article VI of the 1987 Constitution.
93 §26(2) of Article VI of the 1987 Constitution.
94 These bills refer to HB 3705 and SB 1950.
95 §26(2), supra.
96 "Each house may not by its rules ignore constitutional restraints or violate fundamental
rights, and there should be a reasonable relation between the mode or method of proceeding
established by the rule and the result which is sought to be attained." US v. Ballin, 144 US 1,
5, 12 S.Ct. 507, 509, February 29, 1892, per Brewer, J.
97Panganiban, Leveling the Playing Field (2004), PRINTTOWN Group of Companies, pp.
46-47.
98 338 Phil. 546, 604-605, May 2, 1997, per Panganiban, J.
99420 Phil. 525, 531, October 26, 2001, per Sandoval-Gutierrez, J.; (citing The Philippine
Judges Association v. Prado, 227 SCRA 703, 706, November 11, 1993, per Cruz, J.).
 Veterans Federation Party v. COMELEC, 396 Phil. 419, 452-453, October 6, 2000, per
100

Panganiban, J.; (citing Garcia v. COMELEC, 227 SCRA 100, 107-108, October 5, 1993).


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EN BANC
G.R. No. 168056 --- ABAKADA Guro Party List (Formerly AASJAS) Officers Samson S.
Alcantara and Ed Vincent S. Albano, Petitioners, versus The Honorable Executive Secretary
Eduardo Ermita, et al., Respondents.
G.R. No. 168207 --- Aquilino Q. Pimentel, Jr., et al., Petitioners, versus Executive Secretary
Eduardo R. Ermita, et al., Respondents.
G.R. No. 168461 --- Association of Pilipinas Shell Dealers, Inc., et al., Petitioners, versus Cesar
V. Purisima, et al., Respondents.
G.R. No. 168463 --- Francis Joseph G. Escudero, et al., Petitioners, versus Cesar V. Purisima, et
al., Respondents.
G.R. No. 168730 --- Bataan Governor Enrique T. Garcia, Jr., et al., Petitioners, versus Hon.
Eduardo R. Ermita, et al., Respondents.
Promulgated:
September 1, 2005
x ---------------------------------------------------------------------------------------- x
CONCURRING AND DISSENTING OPINION
YNARES-SANTIAGO, J.:
The ponencia states that under the provisions of the Rules of the House of Representatives and the
Senate Rules, the Bicameral Conference Committee is mandated to settle differences between the
disagreeing provisions in the House bill and Senate bill. However, the ponencia construed the term
"settle" as synonymous to "reconcile" and "harmonize," and as such, the Bicameral Conference
Committee may either (a) adopt the specific provisions of either the House bill or Senate
bill, (b) decide that neither provisions in the House bill or the provisions in the Senate bill would be
carried into the final form of the bill, and/or (c) try to arrive at a compromise between the
disagreeing provisions.
I beg to differ on the third proposition.
Indeed, Section 16(3), Article VI of the 1987 Constitution explicitly allows each House to determine
the rules of its proceedings. However, the rules must not contravene constitutional provisions. The
rule-making power of Congress should take its bearings from the Constitution. If in the exercise of
this rule-making power, Congress failed to set parameters in the functions of the committee and
allowed the latter unbridled authority to perform acts which Congress itself is prohibited, like the
passage of a law without undergoing the requisite three-reading and the so-called no-amendment
rule, then the same amount to grave abuse of discretion which this Court is empowered to correct
under its expanded certiorari jurisdiction. Notwithstanding the doctrine of separation of powers,
therefore, it is the duty of the Court to declare as void a legislative enactment, either from want of
constitutional power to enact or because the constitutional forms or conditions have not
been observed.1 When the Court declares as unconstitutional a law or a specific provision thereof
because procedural requirements for its passage were not complied, the Court is by no means
asserting its ascendancy over the Legislature, but simply affirming the supremacy of the Constitution
as repository of the sovereign will.2 The judicial branch must ensure that constitutional norms for the
exercise of powers vested upon the two other branches are properly observed. This is the very
essence of judicial authority conferred upon the Court under Section 1, Article VII of the 1987
Constitution.
The Rules of the House of Representatives and the Rules of the Senate provide that in the event
there is disagreement between the provisions of the House and Senate bills, the differences shall be
settled by a bicameral conference committee.
By this, I fully subscribe to the theory advanced in the Dissenting Opinion of Chief Justice Hilario G.
Davide, Jr. in Tolentino v. Secretary of Finance3 that the authority of the bicameral conference
committee was limited to the reconciliation of disagreeing provisions or the resolution of differences
or inconsistencies. Thus, it could only either (a) restore, wholly or partly, the specific provisions
of the House bill amended by the Senate bill, (b) sustain, wholly or partly, the Senate’s
amendments, or (c) by way of a compromise, to agree that neither provisions in the House
bill amended by the Senate nor the latter’s amendments thereto be carried into the final form
of the former.
Otherwise stated, the Bicameral Conference Committee is authorized only to adopt either the
version of the House bill or the Senate bill, or adopt neither. It cannot, as the ponencia proposed, "try
to arrive at a compromise", such as introducing provisions not included in either the House or Senate
bill, as it would allow a mere ad hoc committee to substitute the will of the entire Congress and
without undergoing the requisite three-reading, which are both constitutionally proscribed. To allow
the committee unbridled discretion to overturn the collective will of the whole Congress defies logic
considering that the bills are passed presumably after study, deliberation and debate in both houses.
A lesser body like the Bicameral Conference Committee should not be allowed to substitute its
judgment for that of the entire Congress, whose will is expressed collectively through the passed
bills.
When the Bicameral Conference Committee goes beyond its limited function by substituting its own
judgment for that of either of the two houses, it violates the internal rules of Congress and
contravenes material restrictions imposed by the Constitution, particularly on the passage of law.
While concededly, the internal rules of both Houses do not explicitly limit the Bicameral Conference
Committee to a consideration only of conflicting provisions, it is understood that the provisions of the
Constitution should be read into these rules as imposing limits on what the committee can or cannot
do. As such, it cannot perform its delegated function in violation of the three-reading requirement and
the no-amendment rule.
Section 26(2) of Article VI of the 1987 Constitution provides that:
(2) No bill shall be passed by either House shall become a law unless it has passed three readings
on separate days, and printed copies thereof in its final form have been distributed to its Members
three days before its passage, except when the President certifies to the necessity of its immediate
enactment to meet a public calamity or emergency. Upon the last reading of a bill, no amendment
hereto shall be allowed, and the vote thereon shall be taken immediately thereafter, and
the yeas and nays entered in the Journal.
Thus, before a bill becomes a law, it must pass three readings. Hence, the ponencia’s submission
that despite its limited authority, the Bicameral Conference Committee could "compromise the
disagreeing provisions" by substituting it with its own version – clearly violate the three-reading
requirement, as the committee’s version would no longer undergo the same since it would be
immediately put into vote by the respective houses. In effect, it is not a bill that was passed by the
entire Congress but by the members of the ad hoc committee only, which of course is constitutionally
infirm.
I disagree that the no-amendment rule referred only to "the procedure to be followed by each house
of Congress with regard to bills initiated in each of said respective houses" because it would relegate
the no-amendment rule to a mere rule of procedure. To my mind, the no-amendment rule should be
construed as prohibiting the Bicameral Conference Committee from introducing amendments and
modifications to non-disagreeing provisions of the House and Senate bills. In sum, the committee
could only either adopt the version of the House bill or the Senate bill, or adopt neither. As Justice
Reynato S. Puno said in his Dissenting Opinion in Tolentino v. Secretary of Finance,4 there is
absolutely no legal warrant for the bold submission that a Bicameral Conference Committee
possesses the power to add/delete provisions in bills already approved on third reading by both
Houses or an ex post veto power.
In view thereof, it is my submission that the amendments introduced by the Bicameral Conference
Committee which are not found either in the House or Senate versions of the VAT reform bills, but
are inserted merely by the Bicameral Conference Committee and thereafter included in Republic Act
No. 9337, should be declared unconstitutional. The insertions and deletions made do not merely
settle conflicting provisions but materially altered the bill, thus giving rise to the instant petitions.
I, therefore, join the concurring and dissenting opinion of Mr. Justice Reynato S. Puno.
CONSUELO YNARES-SANTIAGO
Associate Justice



Footnotes
1 Cooley on Constitutional Limitations, 8th Ed., Vol. I, p. 332.
2 Angara v. Electoral Commission, 63 Phil. 139, 158 [1936].
3G.R. Nos. 115455, 115525, 115543, 115544, 115754, 115781, 115852, 115873, 115931, 25
August 1994, 235 SCRA 630, 750.
4 Supra, p. 811.


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G.R. NO. 168056 – ABAKADA GURO PARTY LIST (FORMERLY AASJAS) OFFICERS SAMSON S.
ALCANTARA AND ED VINCENT S. ALBANO, petitioners – versus – THE HONORABLE
EXECUTIVE SECRETARY EDUARDO ERMITA, ET AL., respondents.
G.R. NO. 168207 – AQUILINO Q. PIMENTEL, JR., ET AL., petitioners – versus – THE
HONORABLE EXECUTIVE SECRETARY EDUARDO ERMITA, ET AL., respondents.
G.R. NO. 168461 – ASSOCIATION OF PILIPINAS SHELL DEALERS, INC., ET AL., petitioners –
versus – CESAR V. PURISIMA, ET AL., respondents.
G.R. NO. 168463 – FRANCIS JOSEPH G. ESCUDERO, ET AL., petitioners – versus – CESAR V.
PURISIMA, ET AL., respondents.
G.R. NO. 168730 – BATAAN GOVERNOR ENRIQUE T. GARCIA, JR., ET AL., petitioners – versus –
HONORABLE EXECUTIVE SECRETARY EDUARDO ERMITA, ET AL., respondents.
Promulgated:
September 1, 2005
x----------------------------------------------------------------------------------------------x
CONCURRING AND DISSENTING OPINION
SANDOVAL – GUTIERREZ, J.:
Adam Smith, the great 18th – century political economist, enunciated the dictum that "the subjects of
every state ought to contribute to the support of government, as nearly as possible, in proportion to
their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the
protection of the state."1 At no other time this dictum becomes more urgent and obligatory as in the
present time, when the Philippines is in its most precarious fiscal position.
At this juncture, may I state that I join Mr. Senior Justice Reynato S. Puno in his Opinion, specifically
on the following points:
1. It is "high time to re-examine the test of germaneness proffered in Tolentino;"
2. The Bicameral Conference Committee "cannot exercise its unbridled discretion," "it cannot create
a new law," and its deletion of the "no pass on provision" common in both Senate Bill No. 1950 and
House Bill No. 3705 is "unconstitutional."
In addition to the above points raised by Mr. Senior Justice Puno, may I expound on the issues
specified hereunder:
There is no reason to rush and stamp the imprimatur of validity to a tax law, R.A. 9337, that contains
patently unconstitutional provisions. I refer to Sections 4 to 6 which violate the principle of non-
delegation of legislative power. These Sections authorize the President, upon recommendation of
the Secretary of Finance, to raise the VAT rate from 

10% to 12% effective January 1, 2006, if the conditions specified therein are met, thus:
. . . That the President, upon the recommendation of the Secretary of Finance, shall, effective
January 1, 2006, raise the rate of value-added tax to twelve percent (12%) after any of the following
conditions has been satisfied:
(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the
previous year exceeds two and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of GDP of the previous year exceeds one and
one-half percent (1 ½%).
This proviso on the authority of the President is uniformly appended to Sections 4, 5 and 6 of R.A.
No. 9337, provisions amending Sections 106, 107 and 108 of the NIRC, respectively. Section 4
imposes a 10% VAT on sales of goods and properties, Section 5 imposes a 10% VAT on importation
of goods, and Section 6 imposes a 10% VAT on sale of services and use or lease of properties.
Petitioners in G.R. Nos. 168056,2 1682073 and 1684634 assail the constitutionality of the above
provisions on the ground that such stand-by authority granted to the President constitutes: (1) undue
delegation of legislative power; (2) violation of due process; and (3) violation of the principle of
"exclusive origination." They cited as their basis Article VI, Section 28 (2); Article III, Section 1; and
Article VI, Section 24 of the Constitution.
I
Undue Delegation of Legislative Power
Taxation is an inherent attribute of sovereignty.5 It is a power that is purely legislative and which the
central legislative body cannot delegate either to the executive or judicial department of government
without infringing upon the theory of separation of powers.6 The rationale of this doctrine may be
traced from the democratic principle of "no taxation without representation." The power of taxation
being so pervasive, it is in the best interest of the people that such power be lodged only in the
Legislature. Composed of the people’s representatives, it is "closer to the pulse of the people and…
are therefore in a better position to determine both the extent of the legal burden the people are
capable of bearing and the benefits they need."7 Also, this set-up provides security against the abuse
of power. As Chief Justice Marshall said: "In imposing a tax, the legislature acts upon its
constituents. The power may be abused; but the interest, wisdom, and justice of the representative
body, and its relations with its constituents, furnish a sufficient security."
Consequently, Section 24, Article VI of our Constitution enshrined the principle of "no taxation
without representation" by providing that "all… revenue bills… shall originate exclusively in the
House of Representatives, but the Senate may propose or concur with amendments." This provision
generally confines the power of taxation to the Legislature.
R.A. No. 9337, in granting to the President the stand-by authority to increase the VAT rate from
10% to 12%, the Legislature abdicated its power by delegating it to the President. This is
constitutionally impermissible. The Legislature may not escape its duties and responsibilities by
delegating its power to any other body or authority. Any attempt to abdicate the power is
unconstitutional and void, on the principle that potestas delegata non delegare potest.8 As Judge
Cooley enunciated:
"One of the settled maxims in constitutional law is, that the power conferred upon the legislature to
make laws cannot be delegated by that department to any other body or authority. Where the
sovereign power of the state has located the authority, there it must remain; and by the
constitutional agency alone the laws must be made until the Constitution itself is
changed. The power to whose judgment, wisdom, and patriotism this high prerogative has been
entrusted cannot relieve itself of the responsibility by choosing other agencies upon which the power
shall be devolved, nor can it substitute the judgment, wisdom, and patriotism of any other body for
those to which alone the people have seen fit to confide this sovereign trust."9
Of course, the rule which forbids the delegation of the power of taxation is not absolute and
inflexible. It admits of exceptions. Retired Justice Jose C. Vitug enumerated such exceptions, to
wit: (1) delegations to local governments (to be exercised by the local legislative bodies thereof) or
political subdivisions; (2) delegations allowed by the Constitution; and (3) delegations relating merely
to administrative implementation that may call for some degree of discretionary powers under a set
of sufficient standards expressed by law.10
Patently, the act of the Legislature in delegating its power to tax does not fall under any of the
exceptions.
First, it does not involve a delegation of taxing power to the local government. It is a delegation to
the President.
Second, it is not allowed by the Constitution. Section 28 (2), Article VI of the Constitution
enumerates the charges or duties, the rates of which may be fixed by the President pursuant to a
law passed by Congress, thus:
The Congress may, by law, authorize the President to fix within specified limits, and subject to
such limitations and restrictions as it may impose, tariff rates, import and export
quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the
national development program of the Government.
Noteworthy is the absence of tax rates or VAT rates in the enumeration. If the intention of the
Framers of the Constitution is to permit the delegation of the power to fix tax rates or VAT rates to
the President, such could have been easily achieved by the mere inclusion of the term "tax rates" or
"VAT rates" in the enumeration. It is a dictum in statutory construction that what is expressed puts
an end to what is implied. Expressium facit cessare tacitum.11 This is a derivative of the more
familiar maxim express mention is implied exclusion or expressio unius est exclusio
alterius. Considering that Section 28 (2), Article VI expressly speaks only of "tariff rates,
12 import13 and export 


quotas,14 tonnage15 and wharfage dues16 and other duties and imposts,17" by no stretch of
imagination can this enumeration be extended to include the VAT.
And third, it does not relate merely to the administrative implementation of R.A. No. 9337.
In testing whether a statute constitutes an undue delegation of legislative power or not, it is usual to
inquire whether the statute was complete in all its terms and provisions when it left the hands of the
Legislature so that nothing was left to the judgment of any other appointee or delegate of the
legislature.18
In the present case, the President is the delegate of the Legislature, endowed with the power to
raise the VAT rate from 10 % to 12% if any of the following conditions, to reiterate, has been
satisfied: (i) value-added tax collection as a percentage of gross domestic product (GDP) of the
previous year exceeds two and four-fifths percent (2 4/5%) or (ii) National Government deficit as a
percentage of GDP of the previous year exceeds one and one-half percent (1 ½%).
At first glance, the two conditions may appear to be definite standards sufficient to guide the
President. However, to my mind, they are ineffectual and malleable as they give the President ample
opportunity to exercise her authorityin arbitrary and discretionary fashion.
The two conditions set forth by law would have been sufficient had it not been for the fact that the
President, being at the helm of the entire officialdom, has more than enough power of control to
bring about the existence of such conditions. Obviously, R.A. No. 9337 allows the President to
determine for herself whether the VAT rate shall be increased or not at all. The fulfillment of the
conditions is entirely placed in her hands. If she wishes to increase the VAT rate, all she has to do is
to strictly enforce the VAT collection so as to exceed the 2 4/5% ceiling. The same holds true with the
national government deficit. She will just limit government expenses so as not to exceed the 1 ½%
ceiling. On the other hand, if she does not wish to increase the VAT rate, she may discourage the
Secretary of Finance from making the recommendation.
That the President’s exercise of an authority is practically within her control is tantamount to giving
no conditions at all. I believe this amounts to a virtual surrender of legislative power to her. It must be
stressed that the validity of a law is not tested by what has been done but by what may be done
under its provisions.19
II
Violation of Due Process
The constitutional safeguard of due process is briefly worded in Section 1, Article III of the
Constitution which states that, "no person shall be deprived of life, liberty or property without due
process of law."20
Substantive due process requires the intrinsic validity of the law in interfering with the rights of the
person to his property. The inquiry in this regard is not whether or not the law is being enforced in
accordance with the prescribed manner but whether or not, to begin with, it is a proper exercise
of legislative power.
To be so, the law must have a valid governmental objective, i.e., the interest of the public as
distinguished from those of a particular class, requires the intervention of the State. This objective
must be pursued in a lawful manner, or in other words, the means employed must be reasonably
related to the accomplishment of the purpose and not unduly oppressive.
There is no doubt that R.A. No. 9337 was enacted pursuant to a valid governmental objective, i.e. to
raise revenues for the government. However, with respect to the means employed to accomplish
such objective, I am convinced that R.A. No. 9337, particularly Sections 4, 5 and 6 thereof, are
arbitrary and unduly oppressive.
A reading of the Senate deliberation reveals that the first condition constitutes a reward to the
President for her effective collection of VAT. Thus, the President may increase the VAT rate from
10% to 12% if her VAT collection during the previous year exceeds 2 4/5% of the Gross Domestic
Product. I quote the deliberation:
Senator Lacson. Thank you, Mr. President. Now, I will go back to my original question, my first
question. Who are we threatening to punish on the imposed condition No. 1 – the public or the
President?
Senator Recto. That is not a punishment, that is supposed to be a reward system.
Senator Lacson. Yes, an incentive. So we are offering an incentive to the Chief Executive.
Senator Recto. That is right.
Senator Lacson. – in order for her to be able to raise the VAT to 12 %.
Senator Recto. That is right. That is the intention, yes.
xxxxxx
Senator Osmena. All right. Therefore, with the lifting of exemptions it stands to reason that
Value-added tax collections as a percentage of GDP will be much higher than… Now, if it is
higher than 2.5%, in other words, because they collected more, we will allow them to even tax
more. Is that the meaning of this particular phrase?
Senator Recto. Yes, Mr. President, that is why it is as low as 2.8%. It is like if a person has a
son and his son asks him for an allowance, I do not think that he would immediately give his
son an increase in allowance unless he tells his son, You better improve your grades and I
will give you an allowance. That is the analogy of this.
xxxxxx
Senator Osmena. So the gentleman is telling the President, If you collect more than 138
billion, I will give you additional powers to tax the people.
Senator Recto. x x x We are saying, kung mataas and grade mo, dadagdagan ko an allowance
mo. Katulad ng sinabi natin ditto. What we are saying here is you prove to me that you can
collect it, then we will increase your rate, you can raise your rate. It is an incentive.21
Why authorize the President to increase the VAT rate on the premise alone that she deserves an
"incentive" or "reward"? Indeed, why should she be rewarded for performing a duty reposed upon
her by law?
The rationale stated by Senator Recto is flawed. One of the principles of sound taxation is fiscal
adequacy. The proceeds of tax revenue should coincide with, and approximate the needs of,
government expenditures. Neither an excess nor a deficiency of revenue vis-à-vis the needs of
government would be in keeping with the principle.22
Equating the grant of authority to the President to increase the VAT rate with the grant of additional
allowance to a studious son is highly inappropriate. Our Senators must have forgotten that for every
increase of taxes, the burden always redounds to the people. Unlike the additional allowance given
to a studious son that comes from the pocket of the granting parent alone, the increase in the VAT
rate would be shouldered by the masses. Indeed, mandating them to pay the increased rate as an
award to the President is arbitrary and unduly oppressive. Taxation is not a power to be exercised at
one’s whim.
III
Exclusive Origination from the
House of Representatives
Section 24, Article VI of the Constitution provides:
SEC. 24. All appropriations, revenue or tariff bills, bills authorizing increase of the public debt, bills of
local application, and private bills shall originate exclusively in the House of Representatives, but
the Senate may propose or concur with amendments.
In Tolentino vs. Secretary of Finance,23 this Court expounded on the foregoing provision by holding
that:
"x x x To begin with, it is not the law – but the revenue bill – which is required by the Constitution to
‘originate exclusively in the House of Representatives. It is important to emphasize this, because a
bill originating the in the House may undergo such extensive changes in the Senate that the result
may be a rewriting of the whole x x x. At this point, what is important to note is that, as a result of the
Senate action, a distinct bill may be produced. To insist that a revenue statute -- and not only the bill
which initiated the legislative process culminating in the enactment of the law – must substantially be
the same as the House Bill would be to deny the Senate’s power not only to ‘concur with
amendments: but also to ‘propose amendments.’ It would be to violate the co-equality of the
legislative power of the two houses of Congress and in fact, make the House superior to the
Senate."
The case at bar gives us an opportunity to take a second hard look at the efficacy of the foregoing
jurisprudence.
Section 25, Article VI is a verbatim re-enactment of Section 18, Article VI of the 1935 Constitution.
The latter provision was modeled from Section 7 (1), Article I of the United States Constitution, which
states:
"All bills for raising revenue shall originate in the House of Representatives, but the Senate
may propose or concur with amendments, as on other bills."
The American people, in entrusting what James Madison termed "the power of the purse" to their
elected representatives, drew inspiration from the British practice and experience with the House of
Commons. As one commentator puts it:
"They knew the inestimable value of the House of Commons, as a component branch of the British
parliament; and they believed that it had at all times furnished the best security against the
oppression of the crown and the aristocracy. While the power of taxation, of revenue, and of
supplies remained in the hands of a popular branch, it was difficult for usurpation to exist for
any length of time without check, and prerogative must yield of that necessity which
controlled at once the sword and the purse."
But while the fundamental principle underlying the vesting of the power to propose revenue bills
solely in the House of Representatives is present in both the Philippines and US Constitutions,
stress must be laid on the differences between the two quoted provisions. For one, the word
"exclusively" appearing in Section 24, Article VI of our Constitution is nowhere to be found in
Section 7 (1), Article I of the US Constitution. For another, the phrase "as on other bills," present in
the same provision of the US Constitution, is not written in our Constitution.
The adverb "exclusively" means "in an exclusive manner."24 The term "exclusive" is defined as
"excluding or having power to exclude; limiting to or limited to; single, sole, undivided, whole."25 In
one case, this Court define the term "exclusive" as "possessed to the exclusion of others;
appertaining to the subject alone, not including, admitting, or pertaining to another or others."26
As for the term "originate," its meaning are "to cause the beginning of; to give rise to; to initiate;
to start on a course or journey; to take or have origin; to be deprived; arise; begin or start."27
With the foregoing definitions in mind, it can be reasonably concluded that when Section 24, Article
VI provides that revenue bills shall originate exclusively from the House of Representatives, what
the Constitution mandates is that any revenue statute must begin or start solely and only in the
House. Not the Senate. Not both Chambers of Congress. But there is more to it than that. It also
means that "an act for taxation must pass the House first." It is no consequence what
amendments the Senate adds.28
A perusal of the legislative history of R.A. No. 9337 shows that it did not "exclusively originate"
from the House of Representatives.
The House of Representatives approved House Bill Nos. 355529 and 370530. These Bills intended to
amend Sections 106, 107, 108, 109, 110, 111 and 114 of the NIRC. For its part, the Senate
approved Senate Bill No.1950,31 taking into consideration House Bill Nos. 3555 and 3705. It
intended to amend Sections 27, 28, 34, 106, 108, 109, 110, 112, 113, 114, 116, 117, 119, 121, 125,
148, 151, 236, 237 and 288 of the NIRC.
Thereafter, on April 13, 2005, a Committee Conference was created to thresh out the disagreeing
provisions of the three proposed bills.
In less than a month, the Conference Committee "after having met and discussed in full free and
conference," came up with a report and recommended the approval of the consolidated version of
the bills. The Senate and the House of Representatives approved it.
On May 23, 2005, the enrolled copy of the consolidated version of the bills was transmitted to
President Arroyo, who signed it into law. Thus, the enactment of R.A. No. 9337, entitled "An Act
Amending Sections 27, 28, 34, 106, 107, 108, 109, 110, 111, 112, 113, 114, 116, 117, 119, 121, 148,
151, 236, 237 and 288 of the National Internal Revenue Code of 1997, As Amended and For Other
Purposes."
Clearly, Senate Bill No. 1950 is not based on any bill passed by the House of Representatives. It has
a legislative identity and existence separate and apart from House Bills No. 3555 and 3705. Instead
of concurring or proposing amendments, Senate Bill No. 1950 merely "takes into consideration"
the two House Bills. To take into consideration means "to take into account." Consideration, in this
sense, means "deliberation, attention, observation or contemplation.32 Simply put, the Senate in
passing Senate Bill No. 1950, a tax measure, merely took into account House Bills No. 3555 and
3705, but did not concur with or amend either or both bills. As a matter of fact, it did not even take
these two House Bills as a frame of reference.
In Tolentino, the majority subscribed to the view that Senate may amend the House revenue bill by
substitution or by presenting its own version of the bill. In either case, the result is "two bills on the
same subject."33 This is the source of the "germaneness" rule which states that the Senate bill must
be germane to the bill originally passed by the House of Representatives. In Tolentino, this was not
really an issue as both the House and Senate Bills in question had one subject – the VAT.
The facts obtaining here is very much different from Tolentino. It is very apparent that House Bills
No. 3555 and 3705 merely intended to amend Sections 106, 107, 108, 109, 110, 111 and 114 of the
NIRC of 1997, pertaining to the VAT provisions. On the other hand, Senate Bill No. 1950 intended to
amend Sections 27, 28, 34, 106, 108, 109, 110, 112, 113, 114, 116, 117, 119, 121, 125, 148, 151,
236, 237 and 288 of the NIRC, pertaining to matters outside of VAT, such as income tax, percentage
tax, franchise tax, taxes on banks and other financial intermediaries, excise taxes, etc.
Thus, I am of the position that the Senate could not, without violating the germaneness rule and the
principle of "exclusive origination," propose tax matters not included in the House Bills.
WHEREFORE, I vote to CONCUR with the majority opinion except with respect to the points above-
mentioned.
ANGELINA SANDOVAL-GUTIERREZ
Associate Justice



Footnotes
1 Book V of The Wealth of Nations.
2ABAKADA GURO Party List (Formerly AASJAS), Officers Samson S. Alcantara and Ed
Vincent S. Albano.
3Aquilino Q. Pimentel, Jr., Luisa P. Ejercito-Estrada, Jinggoy E. Estrada, Panfilo M. Lacson,
Alfredo S. Lim, Jamby A.S. Madrigal and Sergio R. Osmena III.
4Francis Joseph G. Escudero, Vincent Crisologo, Emmanuel Joel J. Villanueva, Rodolfo G.
Plaza, Darlene Antonino-Custodio, Oscar G. Malapitan, Benjamin C. Agarao, Jr., Juan
Edgardo M. Angara, Justin Marc SB. Chipeco, Florencio G. Noel, Mujiv S. Hataman, Renato
B. Magtubo, Joseph A. Santiago, Teofisto DL. Guingona III, Ruy Elias C. Lopez, Rodolfo Q.
Agbayani and Teodoro A. Casino.
5Luzon Stevedoring Co. vs. Court of Tax Appeals, L-302332, July 29, 1998, 163 SCRA 647
cited in Vitug, Acosta, Tax Law and Jurisprudence, Second Edition, at 7.
6Pepsi Cola Bottling Company of the Philippines vs. Municipality of Tanauan, Leyte, G.R.
No. L-31156, February 27, 1976, 69 SCRA 460. See also National Power Corporation vs.
Albay, G.R. No. 87479, June 4, 1990, 186 SCRA 198.
7Bernas, SJ, The 1987 Constitution of the Republic of the Philippines, A Commentary, 1996
Edition, at 687.
8 People vs. Vera, 65 Phil. 56 (1937).
9 Cooley on Constitutional Limitations, 8th ed., Vol. I, p. 224.
10 Vitug, Acosta, Tax Law and Jurisprudence, Second Edition, at 8-9.
11 Espiritu vs. Cipriano, G.R. No. 32743, February 15, 1974, 55 SCRA 533, 538,
citing Sutherlands Statutory Construction, Vol. 2, Section 4945, p. 412.
12A tariff is a list or schedule of articles on which a duty is imposed upon their importation,
with the rates at which they are severally taxed, it is also the custom or duty payable on such
articles. (Black’s Law Dictionary [6th Edition], 1990, at 1456).
13An import quota is a quantitative restriction on the importation of an article into a country,
and is a remedy available to the executive department upon its determination that an
imported article threatens serious injury to a domestic industry. (Id. at 755).
14An export quota is an amount of specific goods which may be exported and are set by the
government for purposes of national defense, economic stability and price support. (Id. at
579).
15 Tonnage dues are duties laid upon vessels according to their tonnage or cubical capacity.
(Id. at 1488).
16Wharfage dues are generally understood to be the fees paid for landing goods upon or
loading them from a wharf. It is a charge for the use of the wharf and may be treated either
as rent or compensation. (Marine Lighterage Corp. vs. Luckenbach S.S. Co., 119 Misc. 612,
248 NYS 71).
17A duty is generally understood to be a tax on the importation or exportation of goods,
merchandise and other commodities, while imposts are duties or impositions levied for
various reasons. (Crew Levick Co. vs. Commonwealth of Pennsylvania, 245 US 292, 62 L.
Ed. 295, 38 S. Ct. 126).
18 People vs. Vera, supra.
19 Walter E. Olsen & Co. vs. Aldanese and Trinidad (1922), 43 Phil., 259; 12 C. J., p. 786.
20 Cruz, Constitutional Law, 1987 Edition, at 101.
21 TSN, May 10, 2005, Annex ‘E" of the Petition in G.R. No. 168056.
22 Vitug, Acosta, Tax Law and Jurisprudence, Second Edition, at 3.
23 G.R. No. 115455, August 25, 1994, 235 SCRA 630.
24 Merriam-Webster’s Third New International Dictionary (1993 Ed.), at 793.
25 Id.
City Mayor vs. The Chief of Philippine Constabulary, G.R. No. 20346, October 31, 1967, 21
26

SCRA 665, 673.

27 Merriam-Webster’s Third New International Dictionary (1993 Ed.), at 1592.
28 Davies, Legislative Law and Process, (2d. Ed. 1986), at 89.
 29Entitled "An Act Restructuring the Value-Added Tax, Amending for the Purpose Sections
106, 107, 108, 110 and 114 of the National Internal Revenue Code of 1997, As amended,
and For Other Purposes." Approved on January 27, 2005.
30Entitled "An Act Amending Sections 106, 107, 108, 109, 110 and 111 of the National
Internal Revenue Code of 1997, As Amended, and For Other Purposes." Approved on
February 28, 2005.
31Entitled "An Act Amending Sections 27, 28, 34, 106,108, 109,110, 112, 113, 114, 116, 117,
119, 121, 125, 148, 151, 236, 237 and 288 of the National Internal Revenue Code of 1997,
As Amended, and For Other Purposes." Approved on April1 3, 2005.
32 Merriam-Webster’s Third New International Dictionary (1993 Ed.), at 484.
33 Supra.


The Lawphil Project - Arellano Law Foundation
!



G.R. No. 168056 – (Abakada Guro Party List [Formerly AASJAS] Officers Samson S. Alcantara
and Ed Vincent S. Albano v. The Hon. Executive Secretary Eduardo Ermita, et al.)
G.R. No. 168207 – (Aquilino Q. Pimentel, Jr., et al. v. Executive Secretary Eduardo R. Ermita,
et al.)
G.R. No. 168461 – (Association of Filipinas Shell Dealers, Inc., et al. v. Cesar V. Purisima, et
al.)
G.R. No. 168463 – (Francis Joseph G. Escudero, et al. v. Cesar V. Purisima, et al.)
G.R. No. 168730 – (Bataan Governor Enrique T. Garcia, Jr. v. Hon. Eduardo R. Ermita, et al.)
Promulgated:
September 1, 2005
X--------------------------------------------------X
CONCURRING AND DISSENTING OPINION
CALLEJO, SR., J.:
I join the concurring and dissenting opinion of Mr. Justice Reynato S. Puno as I concur with the
majority opinion but vote to declare as unconstitutional the deletion of the "no-pass on provision"
contained in Senate Bill No. 1950 and House Bill No. 3705 (the constituent bills of Republic Act No.
9337).
The present petitions provide an opportune
occasion for the Court to re-examine
Tolentino v. Secretary of Finance
In ruling that Congress, in enacting R.A. No. 9337, complied with the formal requirements of the
Constitution, the ponencia relies mainly on the Court’s rulings in Tolentino v. Secretary of Finance.
1 To recall, Tolentino involved Republic Act No. 7716, which similarly amended the NIRC by widening

the tax base of the VAT system. The procedural attacks against R.A. No. 9337 are substantially the
same as those leveled against R.A. No. 7716, e.g., violation of the "Origination Clause" (Article VI,
Section 24) and the "Three-Reading Rule" and the "No-Amendment Rule" (Article VI, Section 26[2])
of the Constitution.
The present petitions provide an opportune occasion for the Court to re-examine its rulings
in Tolentino particularly with respect to the scope of the powers of the Bicameral Conference
Committee vis-à-vis Article VI, Section 26(2) of the Constitution.
The crucial issue posed by the present petitions is whether the Bicameral Conference Committee
may validly introduce amendments that were not contained in the respective bills of the Senate and
the House of Representatives. As a corollary, whether it may validly delete provisions uniformly
contained in the respective bills of the Senate and the House of Representatives.
In Tolentino, the Court declared as valid amendments introduced by the Bicameral Conference
Committee even if these were not contained in the Senate and House bills. The majority opinion
therein held:
As to the possibility of an entirely new bill emerging out of a Conference Committee, it has been
explained:
Under congressional rules of procedures, conference committees are not expected to make any
material change in the measure at issue, either by deleting provisions to which both houses have
already agreed or by inserting new provisions. But this is a difficult provision to enforce. Note the
problem when one house amends a proposal originating in either house by striking out everything
following the enacting clause and substituting provisions which make it an entirely new bill. The
versions are now altogether different, permitting a conference committee to draft essentially a new
bill …
The result is a third version, which is considered an "amendment in the nature of a substitute," the
only requirement for which being that the third version be germane to the subject of the House and
Senate bills.
Indeed, this Court recently held that it is within the power of a conference committee to include in its
report an entirely new provision that is not found either in the House bill or in the Senate Bill. If the
committee can propose an amendment consisting of one or two provisions, collectively considered
as an "amendment in the nature of a substitute," so long as such an amendment is germane to the
subject of the bills before the committee. After all, its report was not final but needed the approval of
both houses of Congress to become valid as an act of the legislative department. The charge that in
this case the Conference Committee acted a third legislative chamber is thus without any basis.2
The majority opinion in Tolentino relied mainly on the practice of the United States legislature in
making the foregoing disquisition. It was held, in effect, that following the US Congress’ practice
where a conference committee is permitted to draft a bill that is entirely different from the bills of
either the House of Representatives or Senate, the Bicameral Conference Committee is similarly
empowered to make amendments not found in either the House or Senate bills.
The ponencia upholds the acts of the Bicameral Conference Committee with respect to R.A. No.
9337, following the said ruling in Tolentino.
To my mind, this unqualified adherence by the majority opinion in Tolentino, and now by
the ponencia, to the practice of the US Congress and its conference committee system ought to be
re-examined. There are significant textual differences between the US Federal Constitution’s and our
Constitution’s prescribed congressional procedure for enacting laws. Accordingly, the degree of
freedom accorded by the US Federal Constitution to the US Congress markedly differ from that
accorded by our Constitution to the Philippine Congress.
Section 7, Article I of the US Federal Constitution reads:
[1] All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may
propose or concur with Amendments as on other Bills.
[2] Every Bill which shall have passed the House of Representatives and the Senate, shall, before it
become a Law, be presented to the President of the United States; If he approve he shall it, but if not
he shall return it, with his Objections to the House in which it shall have originated, who shall enter
the Objections at large on their Journal, and proceed to reconsider it. If after such Reconsideration
two thirds of that House shall agree to pass the Bill, it shall be sent together with the Objections, to
the other House, by which it shall, likewise, be reconsidered, and if approved by two thirds of that
House, it shall become a Law. But in all such Cases the Votes of both Houses shall be determined
by yeas and Nays, and the Names of the Persons voting for and against the Bill shall be entered on
the Journal of each House respectively. If any Bill shall not be returned by the President within ten
Days (Sundays excepted) after it shall have been presented to him, the Same shall be a Law, in like
Manner as if he had signed it, unless the Congress by their Adjournment prevent its return in which
Case it shall not be a Law.
[3] Every Order, Resolution, or Vote to Which the Concurrence of the Senate and House of
Representatives may be necessary (except on a question of Adjournment) shall be presented to the
President of the United States; and before the Same shall take Effect, shall be approved by him, or
being disapproved by him, shall be repassed by two thirds of the Senate and House of
Representatives, according to the Rules and Limitations prescribed in the Case of a Bill.
On the other hand, Article VI of our Constitution prescribes for the following procedure for enacting a
law:
Sec. 26. (1) Every bill passed by Congress shall embrace only one subject which shall be expressed
in the title thereof.
(2) No bill passed by either House shall become a law unless it has passed three readings on
separate days, and printed copies thereof in its final form have been distributed to its Members three
days before its passage, except when the President certifies to the necessity of its immediate
enactment to meet a public calamity or emergency. Upon the last reading of a bill, no amendment
thereto shall be allowed, and the vote thereon shall be taken immediately thereafter, and
the yeas and nays entered in the Journal.
Sec. 27. (1) Every bill passed by Congress shall, before it becomes a law, be presented to the
President. If he approves the same, he shall sign it; otherwise, he shall veto it and return the same
with his objections to the House where it originated, which shall enter the objections at large in its
Journal and proceed to reconsider it. If, after such reconsideration, two-thirds of all the Members of
such House shall agree to pass the bill, it shall be sent, together with the objections, to the other
House by which it shall likewise be reconsidered, and if approved by two-thirds of all the Members of
that House, it shall become a law. In all such cases, the votes of each House shall be determined
by yeas and nays, and the names of the Members voting for or against shall be entered in its
Journal. The President shall communicate his veto of any bill to the House where it originated within
thirty days after the date of receipt thereof; otherwise, it shall become a law as if he had signed it.
(2) The President shall have the power to veto any particular item or items in an appropriation,
revenue, or tariff bill, but the veto shall not affect the item or items to which he does not object.
Two distinctions are readily apparent between the two procedures:
1. Unlike the US Federal Constitution, our Constitution prescribes the "three-reading" rule or that no
bill shall become a law unless it shall have been read on three separate days in each house except
when its urgency is certified by the President; and
2. Unlike the US Federal Constitution, our Constitution prescribes the "no-amendment" rule or that
no amendments shall be allowed upon the last reading of the bill.
American constitutional experts have lamented that certain congressional procedures have not been
entrenched in the US Federal Constitution. According to a noted constitutional law professor, the
absence of the "three-reading" requirement as well as similar legislative-procedure rules from the US
Federal Constitution is a "cause for regret."3
In this connection, it is interesting to note that the conference committee system in the US Congress
has been described in this wise:
Conference Committees
Another main mechanism of joint House and Senate action is the conference committee. Inherited
from the English Constitution, the conference committee system is an evolutionary product whose
principal threads were woven on the loom of congressional practice into a unified pattern by the
middle of the nineteenth century. "By 1852," writes Ada McCown, historian of the origin and
development of the conference committee, "the customs of presenting identical reports from the
committees of conference in both houses, of granting high privilege to these conference reports, of
voting upon the conference report as a whole and permitting no amendment of it, of keeping secret
the discussions carried on in the meetings of the conference committee, had become established in
American parliamentary practice."
Conference committees are composed of Senators and Representatives, usually three each,
appointed by the presiding officers of both houses, for the purpose of adjusting differences between
bills they have passed. This device has been extensively used by every Congress since 1789. Of the
1157 laws enacted by the 78th Congress, for example, 107 went through conference and, of these,
36 were appropriation bills on which the House had disagreed to Senate amendments. In practice,
most important legislation goes through the conference closet and is there revised, sometimes
beyond recognition, by the all-powerful conferees or managers, as they are styled. A large body of
law and practice has been built up over the years governing conference procedure and reports.
Suffice it to say here that serious evils have marked the development of the conference committee
system. In the first place, it is highly prodigal of members’ time. McConachie calculated that the
average time consumed in conference was 33 days per bill. Bills are sent to conference without
reading the amendments of the other chamber. Despite rules to the contrary, conferees do not
confine themselves to matters in dispute, but often initiate entirely new legislation and even strike out
identical provisions previously approved by both houses. This happened during the 78th Congress,
for instance, when an important amendment to the surplus property bill, which had been approved
by both houses, was deleted in conference.
Conference committees, moreover, suffer like other committees from the seniority rule. The senior
members of the committees concerned, who are customarily appointed as managers on the part of
the House and Senate, are not always the best informed on the questions at issue, nor do they
always reflect the majority sentiment of their houses. Furthermore, conference reports must be
accepted or rejected in toto without amendment and they are often so complex and obscure that
they are voted upon without knowledge of their contents. What happens in practice is that Congress
surrenders its legislative function to irresponsible committees of conference. The standing rules
against including new and extraneous matter in conference reports have been gradually whittled
away in recent years by the decisions of presiding officers. Senate riders attached to appropriation
bills enable conference committees to legislate and the House usually accepts them rather than
withhold supply, thus putting it, as Senator Hoar once declared, under a degrading duress.
It is also alleged that under this secret system lobbyist are able to kill legislation they dislike and that
"jokers" designed to defeat the will of Congress can be inserted without detection. Senator George
W. Norris once characterized the conference committee as a third house of Congress. "The
members of this ‘house,’ he said, "are not elected by the people. The people have no voice as to
who these members shall be ... This conference committee is many times, in very important matters
of legislation, the most important branch of our legislature. There is no record kept of the workings of
the conference committee. Its work is performed, in the main, in secret. No constituent has any
definite knowledge as to how members of this conference committee vote, and there is no record to
prove the attitude of any member of the conference committee ... As a practical proposition we have
legislation, then, not by the voice of the members of the Senate, not by the members of the House of
Representatives, but we have legislation by the voice of five or six men. And for practical purposes,
in most cases, it is impossible to defeat the legislation proposed by this conference committee.
Every experienced legislator knows that it is the hardest thing in the world to defeat a conference
report."
Despite these admitted evils, impartial students of the conference committee system defend it on net
balance as an essential part of the legislative process. Some mechanism for reconciling differences
under bicameral system is obviously indispensable. The remedy for the defects of the device is not
to abolish it, but to keep it under congressional control. This can be done by enforcing the rules
which prohibit the inclusion in conference reports of matter not committed to them by either house
and forbid the deletion of items approved by both bodies; by permitting conference managers to
report necessary new matter separately and the houses to consider it apart from the conference
report; by fixing a deadline toward the close of a session after which no bills could be sent to
conference, so as to eliminate congestion at the end of the session – a suggestion made by the
elder Senator La Follete in 1919; by holding conferences in sessions open to the public, letting
conference reports lie over longer, and printing them in bill form (with conference changes in italics)
so as to allow members more time to examine them and discover "jokers."4
The "three-reading" and "no-amendment" rules, absent in the US Federal Constitution, but expressly
mandated by Article VI, Section 26(2) of our Constitution are mechanisms instituted to remedy the
"evils" inherent in a bicameral system of legislature, including the conference committee system.
Sadly, the ponencia’s refusal to apply Article VI, Section 26(2) of the Constitution on the Bicameral
Conference Committee and the amendments it introduced to R.A. No. 9337 has "effectively
dismantled" the "three-reading rule" and "no-amendment rule." As posited by Fr. Joaquin Bernas, a
member of the Constitutional Commission:
In a bicameral system, bills are independently processed by both House of Congress. It is not
unusual that the final version approved by one House differs from what has been approved by the
other. The "conference committee," consisting of members nominated from both Houses, is an extra-
constitutional creation of Congress whose function is to propose to Congress ways of reconciling
conflicting provisions found in the Senate version and in the House version of a bill. It performs a
necessary function in a bicameral system. However, since conference committees have merely
delegated authority from Congress, they should not perform functions that Congress itself may not
do. Moreover, their proposals need confirmation by both Houses of Congress.
In Tolentino v. Secretary of Finance, the Court had the opportunity to delve into the limits of what
conference committees may do. The petitioners contended that the consolidation of the House and
Senate bills made by the conference committee contained provisions which neither the Senate bill
nor the House bill had. In her dissenting opinion, Justice Romero laid out in great detail the
provisions that had been inserted by the conference committee. These provisions, according to the
petitioners had been introduced "surreptitiously" during a closed door meeting of the committee.
The Court’s answer to this was that in United States practice conference committees could be held
in executive sessions and amendments germane to the purpose of the bill could be introduced even
if these were not in either original bill. But the Court did not bother to check whether perhaps the
American practice was based on a constitutional text different from that of the Philippine
Constitution.
There are as a matter of fact significant differences in the degree of freedom American and
Philippine legislators have. The only rule that binds the Federal Congress is that it may formulate its
own rules of procedure. For this reason, the Federal Congress is master of its own procedures. It is
different with the Philippine Congress. Our Congress indeed is also authorized to formulate its own
rules of procedure – but within limits not found in American law. For instance, there is the "three
readings on separate days" rule. Another important rule is that no amendments may be introduced
by either house during third reading. These limitations were introduced by the 1935 and 1973
Constitutions and confirmed by the 1987 Constitution as a defense against the inventiveness of the
stealthy and surreptitious. These, however, were disregarded by the Court in Tolentino in favor of
contrary American practice.
This is not to say that conference committees should not be allowed. But an effort should be made to
lay out the scope of what conference committees may do according to the requirements and the
reasons of the Philippine Constitution and not according to the practice of the American Congress.
For instance, if the two Houses are not allowed to introduce and debate amendments on third
reading, can they circumvent this rule by coursing new provisions through the instrumentality of a
conference committee created by Congress and meeting in secret? The effect of the Court’s
uncritical embrace of the practice of the American Congress and its conference committees is to
dismantle the no-amendment rule.5
The task at hand for the Court, but which the ponencia eschews, is to circumscribe the powers of the
Bicameral Conference Committee in light of the "three-reading" and "no-amendment" rules in Article
VI, Section 26(2) of the Constitution.
The Bicameral Conference Committee, in
deleting the "no pass on provision" contained in
Senate Bill No. 1950 and House Bill No. 3705,
violated Article VI , Section 26(2) of the Constitution
Pertinently, in his dissenting opinion in Tolentino, Justice Davide (now Chief Justice) opined that the
duty of the Bicameral Conference Committee was limited to the reconciliation of disagreeing
provisions or the resolution of differences or inconsistencies. This proposition still applies as can be
gleaned from the following text of Sections 88 and 89, Rule XIV of the Rules of the House of
Representatives:
Sec. 88. Conference Committee. – In the event that the House does not agree with the Senate on
the amendments to any bill or joint resolution, the differences may be settled by the conference
committees of both chambers.
In resolving the differences with the Senate, the House panel shall, as much as possible, adhere to
and support the House Bill. If the differences with the Senate are so substantial that they materially
impair the House Bill, the panel shall report such fact to the House for the latter’s appropriate action.
Sec. 89. Conference Committee Reports. - …Each report shall contain a detailed, sufficiently explicit
statement of the changes in or amendments to the subject measure.
…
The Chairman of the House panel may be interpellated on the Conference Committee Report prior
to the voting thereon. The House shall vote on the Conference Committee report in the same
manner and procedure as it votes on a bill on third and final reading.
and Rule XII, Section 35 of the Rules of the Senate:
Sec. 35. In the event that the Senate does not agree with the House of Representatives on the
provision of any bill or joint resolution, the differences shall be settled by a conference committee of
both Houses which shall meet within ten (10) days after their composition. The President shall
designate the members of the Senate Panel in the conference committee with the approval of the
Senate.
Each Conference Committee Report shall contain a detailed and sufficiently explicit statement of the
changes in, or amendments to the subject measure, and shall be signed by a majority of the
members of each House panel, voting separately.
Justice Davide further explained that under its limited authority, the Bicameral Conference
Committee could only (a) restore, wholly or partly, the specific provisions of the House Bill amended
by the Senate Bill; (b) sustain, wholly or partly, the Senate’s amendments, or (c) by way of
compromise, to agree that neither provisions in the House Bill amended by the Senate nor the
latter’s amendments thereto be carried into the final form of the former. Justice Romero, who also
dissented in Tolentino, added that the conference committee is not authorized to initiate or propose
completely new matters although under certain legislative rules like the Jefferson’s Manual, a
conference committee may introduce germane matters in a particular bill. However, such matters
should be circumscribed by the committee’s sole authority and function to reconcile differences.
In the case of R.A. No. 9337, the Bicameral Conference Committee made an "amendment by
deletion" with respect to the "no pass on provision" contained in both House Bill (HB) No. 3705 and
Senate Bill (SB) No. 1950. HB 3705 proposed to amend Sections 106 and 108 of the NIRC by
expressly stating therein that sellers of petroleum products and power generation companies selling
electricity are prohibited from passing on the VAT to the consumers. SB 1950 proposed to amend
Section 108 by likewise prohibiting power generation companies from passing on the VAT to the
consumers. However, these "no pass on provisions" were altogether deleted by the Bicameral
Conference Committee. At the least, since there was no disagreement between HB 3705 and SB
1950 with respect to the "no pass on provision" on the sale of electricity, the Bicameral Conference
Committee acted beyond the scope of its authority in deleting the pertinent proviso.
At this point, it is well to recall the rationale for the "no-amendment rule" and the "three-reading rule"
in Article VI, Section 26(2) of the Constitution. The proscription on amendments upon the last
reading is intended to subject all bills and their amendments to intensive deliberation by the
legislators and the ample ventilation of issues to afford the public an opportunity to express their
opinions or objections thereon.6 Analogously, it is said that the "three-reading rule" operates "as a
self-binding mechanism that allows the legislature to guard against the consequences of its own
future passions, myopia, or herd behavior. By requiring that bills be read and debated on successive
days, legislature may anticipate and forestall future occasions on which it will be seized by
deliberative pathologies."7 As Jeremy Bentham, a noted political analyst, put it: "[t]he more
susceptible a people are of excitement and being led astray, so much the more ought they to place
themselves under the protection of forms which impose the necessity of reflection, and prevent
surprises."8
Reports of the Bicameral Conference Committee, especially in cases where substantial
amendments, or in this case deletions, have been made to the respective bills of either house of
Congress, ought to undergo the "three-reading" requirement in order to give effect to the letter and
spirit of Article VI, Section 26(2) of the Constitution.
The Bicameral Conference Committee Report that eventually became R.A. No. 9337, in fact,
bolsters the argument for the strict compliance by Congress of the legislative procedure prescribed
by the Constitution. As can be gleaned from the said Report, of the 9 Senators-Conferees,9 only 5
Senators10 unqualifiedly approved it. Senator Joker P. Arroyo expressed his qualified dissent while
Senators Sergio R. Osmeña III and Juan Ponce Enrile approved it with reservations. On the other
hand, of the twenty-eight (28) Members of the House of Representatives-Conferees,11fourteen
(14)12 approved the same with reservations while three13 voted no. All the reservations expressed by
the conferees relate to the deletion of the "no pass on provision." Only eleven (11) unqualifiedly
approved it. In other words, even among themselves, the conferees were not unanimous on their
Report. Nonetheless, Congress approved it without even thoroughly discussing the reservations or
qualifications expressed by the conferees therein.
This "take it or leave it" stance vis-à-vis conference committee reports opens the possibility of
amendments, which are substantial and not even germane to the original bills of either house, being
introduced by the conference committees and voted upon by the legislators without knowledge of
their contents. This practice cannot be countenanced as it patently runs afoul of the essence of
Article VI, Section 26(2) of the Constitution. Worse, it is tantamount to Congress surrendering its
legislative functions to the conference committees.
Ratification by Congress did not cure the
unconstitutional act of the Bicameral Conference
Committee of deleting the "no pass on provision"
That both the Senate and the House of Representatives approved the Bicameral Conference
Committee Report which deleted the "no pass on provision" did not cure the unconstitutional act of
the said committee. As succinctly put by Chief Justice Davide in his dissent in Tolentino, "[t]his
doctrine of ratification may apply to minor procedural flaws or tolerable breaches of the parameters
of the bicameral conference committee’s limited powers but never to violations of the Constitution.
Congress is not above the Constitution."14
Enrolled Bill Doctrine is not applicable where, as in
this case, there is grave violation of the Constitution
As expected, the ponencia invokes the enrolled bill doctrine to buttress its refusal to pass upon the
validity of the assailed acts of the Bicameral Conference Committee. Under the "enrolled bill
doctrine," the signing of a bill by the Speaker of the House and the Senate President and the
certification of the Secretaries of both houses of Congress that it was passed are conclusive of its
due enactment. In addition to Tolentino, the ponencia cites Fariñas v. Executive Secretary15 where
the Court declined to go behind the enrolled bill vis-à-vis the allegations of the petitioners therein that
irregularities attended the passage of Republic Act No. 9006, otherwise known as the Fair Election
Act.
Reliance by the ponencia on Fariñas is quite misplaced. The Court’s adherence to the enrolled bill
doctrine in the said case was justified for the following reasons:
The Court finds no reason to deviate from the salutary in this case where the irregularities alleged by
the petitioners mostly involved the internal rules of Congress, whether House or Senate.
Parliamentary rules are merely procedural and with their observance the courts have no concern.
Whatever doubts there may be as to the formal validity of Rep. Act No. 9006 must be resolved in its
favor. The Court reiterates its ruling in Arroyo v. De Venecia, viz.:
But the cases, both here and abroad, in varying forms of expression, all deny to the courts the power
to inquire into the allegations that, in enacting a law, a House of Congress failed to comply with its
own rules, in the absence of showing that there was a violation of a constitutional provision or the
rights of private individuals. In Osmeña v. Pendatun, it was held: "At any rate, courts have declared
that ‘the rules adopted by deliberative bodies are subject to revocation, modification or waiver at the
pleasure of the body adopting them.’ And it has been said that ‘Parliamentary rules are merely
procedural, and with their observance, the courts have no concern. They may be waived or
disregarded by the legislative body.’ Consequently, ‘mere failure to conform to parliamentary usage
will not invalidate the action (taken by a deliberative body) when the requisite number of members
have agreed to a particular measure.16
Thus, in Fariñas, the Court’s refusal to go behind the enrolled bill was based on the fact that the
alleged irregularities that attended the passage of R.A. No. 9006 merely involved the internal rules of
both houses of Congress. The procedural irregularities allegedly committed by the conference
committee therein did not amount to a violation of a provision of the Constitution.17
In contrast, the act of the Bicameral Conference Committee of deleting the "no pass on provision" of
SB 1950 and HB 3705 infringe Article VI, Section 26(2) of the Constitution. The violation of this
constitutional provision warrants the exercise by the Court of its constitutionally-ordained power to
strike down any act of a branch or instrumentality of government or any of its officials done with
grave abuse of discretion amounting to lack or excess of jurisdiction.18
ACCORDINGLY, I join the concurring and dissenting opinion of Mr. Justice Reynato S. Puno and
vote to dismiss the petitions with respect to Sections 4, 5 and 6 of Republic Act No. 9337 for being
premature. Further, I vote to declare as unconstitutional Section 21 thereof and the deletion of the
"no pass on provision" contained in the constituent bills of Republic Act No. 9337.
ROMEO J. CALLEJO, SR.
Associate Justice



Footnotes
 1 G.R. No. 115455, 25 August 1994, 235 SCRA 630.
2 Tolentino v. Secretary of Finance, supra, at 667-668.
3See, for example, Vermuele, A., The Constitutional Law of Congressional Procedure, 71 U.
Chi. L. Rev. 361 (Spring 2004).
4 Galloway, G., Congress at the Crossroads, pp. 98-100.
5Bernas SJ, J., The 1987 Constitution of the Republic of the Philippines, A Commentary, pp.
702-703 (1996 Ed.).
6 Dissenting Opinion of Justice Romero in Tolentino, supra.
7 Vermuele, supra.
8 Id. citing Bentham, J., Political Tactics.
9Senators Ralph G. Recto, Joker P. Arroyo, Manuel B. Villar, Richard J. Gordon, Rodolfo G.
Biazon, Edgardo G. Angara, M.A. Madrigal, Sergio R. Osmena III, Juan Ponce Enrile.
10 Senators Recto, Villar, Gordon, Biazon.
11Representatives Jesli A. Lapus, Danilo E. Suarez, Arnulfo P. Fuentebella, Eric D. Singson,
Junie E. Cua, Teodoro L. Locsin, Jr., Salacnib Baterina, Edcel C. Lagman, Luis R. Villafuerte,
Herminio G. Teves, Eduardo G. Gullas, Joey Sarte Salceda, Prospero C. Nograles, Exequiel
B. Javier, Rolando G. Andaya, Jr., Guillermo P. Cua, Arthur D. Defensor, Raul V. Del Mar,
Ronaldo B. Zamora, Rolex P. Suplico, Jacinto V. Paras, Vincent P. Crisologo, Alan Peter S.
Cayetano, Joseph Santiago, Oscar G. Malapitan, Catalino Figueroa, Antonino P. Roman and
Imee R. Marcos.
Representatives Suarez, Fuentebella, Cua, Locsin, Jr., Teves, Gullas, Javier, Cua,
12

Defensor, Crisologo, Cayetano, Santiago, Malapitan and Marcos.

13 Representatives Del Mar, Suplico and Paras.
14 Dissenting Opinion in Tolentino, supra.
15 G.R. No. 147387, 10 December 2003, 417 SCRA 503.
16 Id., pp. 529-530. (Emphases mine.)
17 By way of explanation, the constitutional issues raised in Fariñas were (1) whether Section
14 of R.A. No. 9006 was a rider or that it violated Article VI, Section 26(1) of the Constitution
requiring that "[e]very bill passed by Congress shall embrace only one subject which shall be
expressed in the title thereof;" and (2) whether Section 14 of R.A. No. 9006 violated the
equal protection clause of the Constitution. On both issues the Court ruled in the negative. To
reiterate, unlike in the present cases, the acts of the conference committee with respect to
R.A. No. 9006 in Fariñas allegedly violated the internal rules of either house of Congress, but
it was not alleged therein that they amounted to a violation of any constitutional provision on
legislative procedure.
18 Article VIII, Section 1, CONSTITUTION.


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EN BANC
G.R. No. 168056 (ABAKADA Guro Party List [formerly ASSJS] Officers Samson S. Alcantara,
et al. v. Hon. Executive Secretary Eduardo Ermita, et al.);
G.R. No. 168207 (Aquilino Q. Pimentel, Jr., et al. v. Executive Secretary Eduardo R. Ermita, et
al.);
G.R. No. 168461 (Association of Pilipinas Shell Dealers, Inc., etc., et al. v. Cesar V. Purisima,
etc., et al.);
G.R. No. 168463 (Francis Joseph G. Escudero, et al. v. Cesar V. Purisima, etc., et al.); and
G.R. No. 168730 (Bataan Governor Enrique T. Garcia, Jr. v. Hon. Eduardo R. Ermita, etc., et al.)
Promulgated:
September 1, 2005
X----------------------------------------------------------------------------------------X
CONCURRING AND DISSENTING OPINION
AZCUNA, J.:
Republic Act No. 9337, the E-VAT law, is assailed as an unconstitutional abdication of Congress of
its power to tax through its delegation to the President of the decision to increase the rate of the tax
from 10% to 12%, effective January 1, 2006, after any of two conditions has been satisfied.1
The two conditions are:
(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous
year exceeds two and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-
half percent (1 ½%).2
A scrutiny of these "conditions" shows that one of them is certain to happen on January 1, 2006.
The first condition is that the collection from the E-VAT exceeds 2 4/5% of the Gross Domestic
Product (GDP) of the previous year, a ratio that is known as the tax effort.
The second condition is that the national government deficit exceeds 1 ½% of the GDP of the
previous year.
Note that the law says that the rate shall be increased if any of the two conditions happens, i.e., if
condition (i) orcondition (ii) occurs.
Now, in realistic terms, considering the short time-frame given, the only practicable way that the
present deficit of the national government can be reduced to 1 ½% or lower, thus preventing
condition (ii) from happening, is to increase the tax effort, which mainly has to come from the E-VAT.
But increasing the tax effort through the E-VAT, to the extent needed to reduce the national deficit to
1 ½% or less, will trigger the happening of condition (i) under the law. Thus, the happening of
condition (i) or condition (ii) is in reality certain and unavoidable, as of January 1, 2006.
This becomes all the more clear when we consider the figures provided during the oral arguments.
The Gross Domestic Product for 2005 is estimated at ₱5.3 Trillion pesos.
The tax effort of the present VAT is now at 1.5%.
The national budgetary deficit against the GDP is now at 3%.
So to reduce the deficit to 1.5% from 3%, one has to increase the tax effort from VAT, now at 1.5%,
to at least 3%, thereby exceeding the 2 4/5 percent ceiling in condition (i), making condition (i)
happen. 



If, on the other hand, this is not done, then condition (ii) happens – the budget deficit remains over
1.5%.
What is the result of this? The result is that in reality, the law does not impose any condition, or the
rate increase thereunder, from 10% to 12%, effective January 1, 2006, is unconditional. For a
condition is an event that may or may not happen, or one whose occurrence is uncertain.3 Now while
condition (i) is indeed uncertain and condition (ii) is likewise uncertain, the combination of both
makes the occurrence of one of them certain.
Accordingly, there is here no abdication by Congress of its power to fix the rate of the tax since the
rate increase provided under the law, from 10% to 12%, is definite and certain to occur, effective
January 1, 2006. All that the President will do is state which of the two conditions occurred and
thereupon implement the rate increase.
At first glance, therefore, it would appear that the decision to increase the rate is to be made by the
President, or that the increase is still uncertain, as it is subject to the happening of any of two
conditions.
Nevertheless, the contrary is true and thus it would be best in these difficult and critical times to let
our people know precisely what burdens they are being asked to bear as the necessary means to
recover from a crisis that calls for a heroic sacrifice by all.
It is for this reason that the Court required respondents to submit a copy of the rules to implement
the E-VAT, particularly as to the impact of the tax on prices of affected commodities, specially oil and
electricity. For the onset of the law last July 1, 2005 was confusing, resulting in across-the-board
increases of 10% in the prices of commodities. This is not supposed to be the effect of the law, as
was made clear during the oral arguments, because the law also contains provisions that mitigate
the impact of the E-VAT through reduction of other kinds of taxes and duties, and other similar
measures, specially as to goods that go into the supply chain of the affected products. A proper
implementation of the E-VAT, therefore, should cause only the appropriate incremental increase in
prices, reflecting the net incremental effect of the tax, which is not necessarily 10%, but possibly
less, depending on the products involved.
The introduction of the mitigating or cushioning measures through the Senate or through the
Bicameral Conference Committee, is also being questioned by petitioners as unconstitutional for
violating the rule against amendments after third reading and the rule that tax measures must
originate exclusively in the House of Representatives (Art. VI, Secs. 24 and 26 [2], Constitution). For
my part, I would rather give the necessary leeway to Congress, as long as the changes are germane
to the bill being changed, the bill which 





originated from the House of Representatives, and these are so, since these were precisely the
mitigating measures that go hand-on-hand with the E-VAT, and are, therefore, essential -- and
hopefully sufficient -- means to enable our people to bear the sacrifices they are being asked to
make. Such an approach is in accordance with the Enrolled Bill Doctrine that is the prevailing rule in
this jurisdiction. (Tolentino v. Secretary of Finance, 249 SCRA 628 [1994]). The exceptions I find are
the provisions on corporate income taxes, which are not germane to the E-VAT law, and are not
found in the Senate and House bills.
I thus agree with Chief Justice Hilario G. Davide, Jr. in his separate opinion that the following are not
germane to the E-VAT legislation:
Amended TAX
CODE Provision Subject Matter
Section 27 Rate of income tax on domestic corporations
Section 28(A)(1) Rate of income tax on resident foreign corporations
Section 28(B)(1) Rate of income tax on non-resident foreign corporations
Section 28(B)(5-b) Rate of income tax on intercorporate dividends received by non-resident foreign
corporations
Section 34(B)(1) Deduction from gross income
Similarly, I agree with Justice Artemio V. Panganiban in his separate opinion that the following are
not germane to the E-VAT law:
"Sections 1, 2, and 3 of the Republic Act No. 9337…, in so far as these sections (a) amend the rates
of income taxon domestic, resident foreign, and nonresident foreign corporations; (b) amend the tax
credit against taxes due from nonresident foreign corporations on the intercorporate dividends; and
(c) reduce the allowable deduction from interest expense."
Respondents should, in any case, now be able to implement the E-VAT law without confusion and
thereby achieve its purpose.4
I vote to GRANT the petitions to the extent of declaring unconstitutional the provisions in Republic
Act. No. 9337 that are not germane to the subject matter and DENY said petitions as to the rest of
the law, which are constitutional.
ADOLFO S. AZCUNA
Associate Justice



Footnotes
1 The Constitution states that "Congress may, by law, allow the President to fix within
specified limits, and subject to such limitations and restrictions as it may impose, tariff rates,
import and export quotas, tonnage and wharfage dues, and other duties as imposts within
the framework of the national development program of the Government." (Art. VI, Sec. 28 [2],
emphasis supplied.)
Petitioners claim that the power does not extend to fixing the rates of taxes, since taxes
are not tariffs, import and export quotas, tonnage and wharfage dues, or other duties or
imposts.
2 Section 4, Republic Act No. 9337. The pertinent portion of the provision states:
SEC. 4. Section 106 of the same Code, as amended, is hereby further amended to read as
follows:
"SEC. 106. Value-added Tax on Sale of Goods or Properties. –
"(A) Rate and Base of Tax. – There shall be levied, assessed and collected on every sale,
barter or exchange of goods or properties, a value-added tax equivalent to ten percent (10%)
of the gross selling price or gross value in money of the goods or properties sold, bartered or
exchanged, such tax to be paid by the seller or transferor: Provided, That the President,
upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise
the rate of value-added tax to twelve percent (12%), after any of the following conditions has
been satisfied:
"(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the
previous year exceeds two and four-fifth percent (2 4/5%); or
"(ii) National government deficit as a percentage of GDP of the previous year exceeds one
and one-half percent (1 ½%)."
3 Condition has been defined by Escriche as "every future and uncertain event upon which
an obligation or provision is made to depend." It is a future and uncertain event upon which
the acquisition or resolution of rights is made to depend by those who execute the juridical
act. Futurity and uncertainty must concur as characteristics of the event.
...
 An event which is not uncertain but must necessarily happen cannot be a condition; the
obligation will be considered as one with a term. (IV TOLENTINO, COMMENTARIES AND
JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES, 144).
4 I voted for the issuance of the temporary restraining order to prevent the disorderly
implementation of the law that would have defeated its very purpose and disrupted the entire
VAT system, resulting in less revenues. The rationale, therefore, of the rule against enjoining
the collection of taxes, that taxes are the lifeblood of Government, leaned in favor of the
temporary restraining order.


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GR No. 168056 - (ABAKADA GURO PARTY LIST (Formerly AASJAS) OFFICERS SAMSON S.
ALCANTARA and ED VINCENT S. ALBANO v. THE HONORABLE EXECUTIVE SECRETARY
EDUARDO ERMITA; HONORABLE SECRETARY OF THE DEPARTMENT OF FINANCE CESAR
PURISIMA; and HONORABLE COMMISSIONER OF INTERNAL REVENUE GUILLERMO
PARAYNO, JR.)
GR No. 168207 – (AQUILINO Q. PIMENTEL, JR., LUISA P. EJERCITO-ESTRADA, JINGGOY E.
ESTRADA, PANFILO M. LACSON, ALFREDO S. LIM, JAMBY A.S. MADRIGAL, and SERGIO R.
OSMEÑA III v. EXECUTIVE SECRETARY EDUARDO R. ERMITA, CESAR V. PURISIMA,
SECRETARY OF FINANCE, GUILLERMO L. PARAYNO, JR., COMMISSIONER OF THE BUREAU
OF INTERNAL REVENUE)
GR No. 168461 – ASSOCIATION OF PILIPINAS SHELL DEALERS, INC. represented by its
President, ROSARIO ANTONIO; PETRON DEALERS’ ASSOCIATION represented by its
President, RUTH E. BARBIBI; ASSOCIATION OF CALTEX DEALERS’ OF THE PHILIPPINES
represented by its President, MERCEDITAS A. GARCIA; ROSARIO ANTONIO doing business
under the name and style of "ANB NORTH SHELL SERVICE STATION"; LOURDES MARTINEZ
doing business under the name and style of "SHELL GATE – N. DOMINGO"; BETHZAIDA TAN
doing business under the name and style of "ADVANCED SHELL STATION"; REYNALDO P.
MONTOYA doing business under the name and style of "NEW LAMUAN SHELL SERVICE
STATION"; EFREN SOTTO doing business under the name and style of "REDFIELD SHELL
SERVICE STATION"; DONICA CORPORATION represented by its President, DESI TOMACRUZ;
RUTH E. MARBIBI doing business under the name and style of "R&R PETRO STATION";
PETER M. UNGSON doing business under the name and style of "CLASSIC STAR GASOLINE
SERVICE STATION"; MARIAN SHEILA A. LEE doing business under the name and style "NTE
GASOLINE & SERVICE STATION"; JULIAN CESAR P. POSADAS doing business under the
name and style of "STARCARGA ENTERPRISES"; ADORACION MAÑEBO doing business
under the name and style of "CMA MOTORISTS CENTER"; SUSAN M. ENTRATA doing
business under the name and style of "LEONA’S GASOLINE STATION and SERVICE
CENTER"; CARMELITA BALDONADO doing business under the name and style of "FIRST
CHOICE SERVICE CENTER’: RHEAMAR A. RAMOS doing business under the name and style
of "RJAM PTT GAS STATION"; MA. ISABEL VIOLAGO doing business under the name and
style of "VIOLAGO-PTT SERVICE CENTER"; MOTORISTS’ HEART CORPORATON represented
by its Vice-President for Operations, JOSELITO F. FLORDELIZA; MOTORISTS’ HARVARD
CORPORATION represented by its Vice-President for Operations, JOSELITO F. FLORDELIZA;
MOTORISTS’ HERITAGE CORPORATION represented by its Vice-President for Operations,
JOSELITO F. FLORDELIZA; PHILIPPINE STANDARD OIL CORPORATION represented by its
Vice-President for Operations, JOSELITO F. FLORDELIZA; ROMEO MANUEL doing business
under the name and style of "ROMMAN GASOLINE STATION"; ANTHONY ALBERT CRUZ III
doing business under the name and style of "TRUE SERVICE STATION" v. CESAR V.
PURISIMA, in his capacity as Secretary of the Department of Finance and GUILLERMO L.
PARAYNO, JR., in his capacity as Commissioner of Internal Revenue.
GR No. 168463 – FRANCIS JOSEPH G. ESCUDERO, VINCENT CRISOLOGO, EMMANUEL
JOSEL J. VILLANUEVA, RODOLFO G. PLAZA, DARLENE ANTONINO-CUSTODIO, OSCAR G.
MALAPITAN, BENJAMIN C. AGARAO, JR., JUAN EDGARDO M. ANGARA, JUSTIN MARC SB.
CHIPECO, FLORENCIOI G. NOEL, MUJIV S. HATAMAN, RENATO B. MAGTUBO, JOSEPH A.
SANTIAGO, TEOFISTO DL. GUINGONA III, RUY ELIAS C. LOPEZ, RODOLFO Q. AGBAYANI
and TEODORO A. CASIÑO, v. CESAR V. PURISIMA, in his capacity as Secretary of Finance,
GUILLERMO L. PARAYNO, JR., in his capacity as Commissioner of Internal Revenue, and
EDUARDO R. ERMITA, in his capacity as Executive Secretary.
GR. No. 168730 – BATAAN GOVERNOR ENRIQUE T. GARCIA, JR. v. HON. EDUARDO R.
ERMITA, in his capacity as the Executive Secretary; HON. MARGARITO TEVES, in his
capacity as Secretary of Finance; HON. JOSE MARIO BUNAG, in his capacity as the OIC
Commissioner of the Bureau of Customs.
x-------------------------------------------------------------------x
DISSENTING OPINION
Tinga, J.:
The E-VAT Law,1 as it stands, will exterminate our country’s small to medium enterprises. This
will be the net effect of affirming Section 8 of the law, which amends Sections 110 of the National
Internal Revenue Code (NIRC) by imposing a seventy percent (70%) cap on the creditable input tax
a VAT-registered person may apply every quarter and a mandatory sixty (60) -month amortization
period on the input tax on goods purchased or imported in a calendar month if the acquisition cost of
such goods exceeds One Million Pesos (₱1,000,000.00).
Taxes may be inherently punitive, but when the fine line between damage and destruction is
crossed, the courts must step forth and cut the hangman’s noose. Justice Holmes once
confidently asserted that "the power to tax is not the power to destroy while this Court sits", and we
should very well live up to this expectation not only of the revered Holmes, but of the Filipino people
who rely on this Court as the guardian of their rights. At stake is the right to exist and subsist
despite taxes, which is encompassed in the due process clause.
I respectfully submit these views while maintaining the deepest respect for the prerogative of the
legislature to impose taxes, and of the national government to chart economic policy. Such respect
impels me to vote to deny the petitions in G.R. Nos. 168056, 168207, 168463,2 and 168730, even as
I acknowledge certain merit in the challenges against the E-VAT law that are asserted in those
petitions. In the final analysis, petitioners therein are unable to convincingly demonstrate the
constitutional infirmity of the provisions they seek to assail. The only exception is Section 21 of the
law, which I consider unconstitutional, for reasons I shall later elaborate.
However, I see the petition in G.R. No. 168461 as meritorious and would vote to grant it. Accordingly,
I dissent and hold as unconstitutional Section 8 of Republic Act No. 9337, insofar as it amends
Section 110(A) and (B) of the National Internal Revenue Code (NIRC) as well as Section 12 of the
same law, with respect to its amendment of Section 114(C) of the NIRC.
The first part of my discussion pertains to the petitions in G.R. Nos. 168056, 168207, 168463, and
168730, while the second part is devoted to what I deem the most crucial issue before the Court, the
petition in G.R. No. 168461.
I.
Undue Delegation and the Increase
Of the VAT Rate
My first point pertains to whether or not Sections 4, 5 and 6 of the E-VAT Law constitutes an undue
delegation of legislative power. In appreciating the aspect of undue delegation as regards taxation
statutes, the fundamental point remains that the power of taxation is inherently legislative,3 and may
be imposed or revoked only by the legislature.4In tandem with Section 1, Article VI of the Constitution
which institutionalizes the law-making power of Congress, Section 24 under the same Article
crystallizes this principle, as it provides that "[a]ll appropriation, revenue or tariff bills … shall
originate exclusively in the House of Representatives."5
Consequently, neither the executive nor judicial branches of government may originate tax
measures. Even if the President desires to levy new taxes, the imposition cannot be done by mere
executive fiat. In such an instance, the President would have to rely on Congress to enact tax laws.
Moreover, this plenary power of taxation cannot be delegated by Congress to any other branch of
government or private persons, unless its delegation is authorized by the Constitution itself.6 In this
regard, the situation stands different from that in the recent case Southern Cross v. PHILCEMCOR,
7 wherein I noted in my ponencia that the Tariff Commission and the DTI Secretary may be regarded

as agents of Congress for the purpose of imposing safeguard measures. That pronouncement was
made in light of Section 28(2) Article VI, which allows Congress to delegate to the President through
law the power to impose tariffs and imposts, subject to limitations and restrictions as may be
ordained by Congress. In the case of taxes, no such constitutional authorization exists, and the
discretion to ascertain the rates, subjects, and conditions of taxation may not be delegated away by
Congress.
However, as the majority correctly points out, the power to ascertain the facts or conditions as the
basis of the taking into effect of a law may be delegated by Congress,8 and that the details as to the
enforcement and administration of an exercise of taxing power may be delegated to executive
agencies, including the power to determine the existence of facts on which its operation depends.9
Proceeding from these principles, Sections 4, 5, and 6 of the E-VAT Law warrant examination. The
provisions read:
SEC. 4. Sec. 106 of the same Code, as amended, is hereby further amended to read as follows:
SEC. 106. Value-Added Tax on Sale of Goods or Properties. —
(A) Rate and Base of Tax. — There shall be levied, assessed and collected on every sale, barter or
exchange of goods or properties, a value-added tax equivalent to ten percent (10%) of the gross
selling price or gross value in money of the goods or properties sold, bartered or exchanged, such
tax to be paid by the seller or transferor; provided, that the President, upon the recommendation
of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax
to twelve percent (12%), after any of the following conditions has been satisfied.
(i) value-added tax collection as a percentage of Gross Domestic Product (GDP) of the
previous year exceeds two and four-fifth percent (2 4/5%) or
(ii) national government deficit as a percentage of GDP of the previous year exceeds one and
one-half percent 1 ½%).
Sec. 5. Section 107 of the same Code, as amended, is hereby further amended to read as follows:
SEC. 107. Value-Added Tax on Importation of Goods.—
(a) In General.— There shall be levied, assessed and collected on every importation of goods a
value-added tax equivalent to ten percent (10%) based on the total value used by the Bureau of
Customs in determining tariff and customs duties, plus customs duties, excise taxes, if any, and
other charges, such tax to be paid by the importer prior to the release of such goods from customs
custody: Provided, That where the customs duties are determined on the basis of the quantity or
volume of the goods, the value-added tax shall be based on the landed cost plus excise taxes, if
any: provided, further, that the President, upon the recommendation of the Secretary of
Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent
(12%) after any of the following conditions has been satisfied.
(i) national value-added tax collection as a percentage of Gross Domestic Product (GDP) of
the previous year exceeds two and four-fifth percent (2 4/5%) or
(ii) government deficit as a percentage of GDP of the previous year exceeds one and one-half
percent (1 ½%).
SEC. 6. Section 108 of the same Code, as amended, is hereby further amended to read as
follows:
SEC. 108. Value-added Tax on Sale of Services and Use of Lease of Properties-
(A) Rate and Base of Tax. – There shall be levied, assessed and collected, a value-added tax
equivalent to ten percent (10%) of gross receipts derived from the sale or exchange of
services; provided, that the President, upon the recommendation of the Secretary of Finance, shall,
effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%), after any of the
following conditions has been satisfied.
(i) value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous
year exceeds two and four-fifth percent (2 4/5%) or
(ii) national government deficit as a percentage of GDP of the previous year exceed same and on-
half percent (1 ½%).
The petitioners deem as noxious the proviso common to these provisions that "the President, upon
the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of
value-added tax to twelve percent (12%)," after the satisfaction of the twin conditions that value-
added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year
exceeds two and four-fifth percent (2 4/5%); or that the national government deficit as a percentage
of GDP of the previous year exceed same and on-half percent (1 ½%).
At first blush, it does seem that the assailed provisions are constitutionally deficient. It is Congress,
and not the President, which is authorized to raise the rate of VAT from 10% to 12%, no matter the
circumstance. Yet a closer analysis of the proviso reveals that this is not exactly the operative effect
of the law. The qualifier "shall" denotes a mandatory, rather than discretionary function on the part of
the President to raise the rate of VAT to 12% upon the existence of any of the two listed conditions.
Since the President is not given any discretion in refusing to raise the VAT rate to 12%, there is
clearly no delegation of the legislative power to tax by Congress to the executive branch. The use of
the word "shall" obviates any logical construction that would allow the President leeway in not raising
the tax rate. More so, it is accepted that the principle of constitutional construction that every
presumption should be indulged in favor of constitutionality and the court in considering the validity
of the 'statute in question should give it such reasonable construction as can be reached to bring it
within the fundamental law.10 While all reasonable doubts should be resolved in favor, of the
constitutionality of a statute,11 it should necessarily follow that the construction upheld should be one
that is not itself noxious to the Constitution.
Congress should be taken to task for imperfect draftsmanship at least. Much trouble would have
been avoided had the provisos instead read: "that effective January 1, 2006, the rate of value-added
tax shall be raised to twelve percent (12%), after any of the following conditions has been satisfied
xxx." This, after all is the operative effect of the provision as it stands. In relation to the operation of
the tax increase, the denominated role of the President and the Secretary of Finance may be
regarded as a superfluity, as their imprimatur as a precondition to the increase of the VAT rate must
have no bearing.
Nonetheless, I cannot ignore the fact that both the President and the Secretary of Finance have
designated roles in the implementation of the tax increase. Considering that it is Congress, and not
these officials, which properly have imposed the increase in the VAT rate, how should these roles be
construed?
The enactment of a law should be distinguished from its implementation. Even if it is Congress which
exercises the plenary power of taxation, it is not the body that administers the implementation of the
tax. Under Section 2 of the National Internal Revenue Code (NIRC), the assessment and collection
of all national internal revenue taxes, and the enforcement of all forefeitures, penalties and fines
connected therewith had been previously delegated to the Bureau of Internal Revenue, under the
supervision and control of the Department of Finance.12
Moreover, as intimated earlier, Congress may delegate to other components of the government the
power to ascertain the facts or conditions as the basis of the taking into effect of a law. It follows that
ascertainment of the existence of the two conditions precedent for the increase as stated in the law
could very well be delegated to the President or the Secretary of Finance.13
Nonetheless, the apprehensions arise that the process of ascertainment of the listed conditions
delegated to the Secretary of Finance and the President effectively vest discretionary authority to
raise the VAT rate on the President, through the subterfuges that may be employed to delay the
determination, or even to manipulate the factual premises. Assuming arguendo that these feared
abuses may arise, I think it possible to seek judicial enforcement of the increased VAT rate, even
without the participation or consent of the President or Secretary of Finance, upon indubitable
showing that any of the two listed conditions do exist. After all, the Court is ruling that the increase in
the VAT rate is mandatory and beyond the discretion of the President to impose or delay.
The majority states that in making the recommendation to the President on the existence of either of
the two conditions, the Secretary of Finance is acting as the agent of the legislative branch, to
determine and declare the event upon which its expressed will is to take effect.14 This recognition of
agency must be qualified. I do not doubt the ability of Congress to delegate to the Secretary of
Finance administrative functions in the implementation of tax laws, as it does under Section 2 of the
NIRC. Yet it would be impermissible for Congress to delegate to the Secretary of Finance the
plenary function of enacting a tax law. As stated earlier, the situation stands different from that
in Southern Cross wherein the Constitution itself authorizes the delegation by Congress through a
law to the President of the discretion to impose tariff measures, subject to restrictions and limitations
provided in the law.15Herein, Congress cannot delegate to either the President or the Secretary of
Finance the discretion to raise the tax, as such power belongs exclusively to the legislative branch.
Perhaps the term "agency" is not most suitable in describing the delegation exercised by Congress
in this case, for agency implies that the agent takes on attributes of the principal by reason of
representative capacity. In this case, whatever "agency" that can be appreciated would be of
severely limited capacity, encompassing as it only could the administration, not enactment, of the tax
measure.
I do not doubt the impression left by the provisions that it is the President, and not Congress, which
is authorized to raise the VAT rate. On paper at least, these imperfect provisions could be multiple
sources of mischief. On the political front, whatever blame or scorn that may be attended with the
increase of the VAT rate would fall on the President, and not on Congress which actually increased
the tax rate. On the legal front, a President averse to increasing the VAT rate despite the existence
of the two listed conditions may take refuge in the infelicities of the provision, and refuse to do so on
the ground that the law, as written, implies some form of discretion on the part of the President who
was, after all, "authorized" to increase the tax rate. It is critical for the Court to disabuse this notion
right now.
The Continued Viability of
Tolentino v. Secretary of Finance
One of the more crucial issues now before us, one that has seriously divided the Court, pertains to
the ability of the Bicameral Conference Committee to introduce amendments to the final bill which
were not contained in the House bill from which the E-VAT Law originated. Most of the points
addressed by the petitioners have been settled in our ruling in Tolentino v. Secretary of Finance,
16 yet a revisit of that precedent is urged upon this Court. On this score, I offer my qualified

concurrence with the ponencia.

Two key provisions of the Constitution come into play: Sections 24 and 26(2), Article VI of the
Constitution. They read:
Section 24: All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills
of local application, and private bills shall originate exclusively in the House of Representatives, but
the Senate may propose or concur with amendments.
Section 26(2): No bill passed by either House shall become a law unless it has passed three
readings on separate days, and printed copies thereof in its final form have been distributed to its
Members three days before its passage, except when the President certifies to the necessity of its
immediate enactment to meet a public calamity or emergency. Upon the last reading of a bill, no
amendment thereto shall be allowed, and the vote thereon shall be taken immediately thereafter,
and the yeas and nays entered in the Journal.
Section 24 is also known as the origination clause, which derives origin from British practice. From
the assertion that the power to tax the public at large must reside in the representatives of the
people, the principle evolved that money bills must originate in the House of Commons and may not
be amended by the House of Lords.17 The principle was adopted across the shores in the United
States, and was famously described by James Madison in The Federalist Papers as follows:
This power over the purse, may in fact be regarded as the most compleat and effectual weapon with
which any constitution can arm the immediate representatives of the people, for obtaining a redress
of every grievance, and for carrying into effect every just and salutary measure.18
There is an eminent difference from the British system from which the principle emerged, and from
our own polity. To this day, only members of the British House of Commons are directly elected by
the people, with the members of the House of Lords deriving their seats from hereditary peerage.
Even in the United States, members of the Senate were not directly elected by the people, but
chosen by state legislatures, until the adoption of the Seventeenth Amendment in 1913. Hence, the
rule assured the British and American people that tax legislation arises with the consent of the
sovereign people, through their directly elected representatives. In our country though, both
members of the House and Senate are directly elected by the people, hence the vitality of the
original conception of the rule has somewhat lost luster.
Still, the origination clause deserves obeisance in this jurisdiction, simply because it is provided in
the Constitution. At the same time, its proper interpretation is settled precedent, as enunciated
in Tolentino:
To begin with, it is not the law — but the revenue bill — which is required by the Constitution to
"originate exclusively" in the House of Representatives. It is important to emphasize this, because a
bill originating in the House may undergo such extensive changes in the Senate that the result may
be a rewriting of the whole. The possibility of a third version by the conference committee will be
discussed later. At this point, what is important to note is that, as a result of the Senate action, a
distinct bill may be produced. To insist that a revenue statute — and not only the bill which initiated
the legislative process culminating in the enactment of the law — must substantially be the same as
the House bill would be to deny the Senate's power not only to "concur with amendments" but also
to " propose amendments." It would be to violate the coequality of legislative power of the two
houses of Congress and in fact make the House superior to the Senate.19
The vested power of the Senate to " propose or concur with amendments" necessarily implies the
ability to adduce transformations from the original House bill into the final law. Since the House and
Senate sit separately in sessions, the only opportunity for the Senate to introduce its amendments
would be in the Bicameral Conference Committee, which emerges only after both the House and the
Senate have approved their respective bills.
In the present petitions, Tolentino comes under fire on two fronts. The first controversy arises from
the adoption in Tolentino of American legislative practices relating to bicameral committees despite
the difference in constitutional frameworks, particularly the limitation under Section 26(2), Article VI
which does not exist in the American Constitution.
The majority points out that the "no amendment rule" refers only to the procedure to be followed by
each house of Congress with regard to bills initiated in the house concerned, before said bills are
transmitted to the other house for its concurrence or amendment. I agree with this statement.
Clearly, the procedure under Section 26(2), Article VI only relates to the passage of a bill before the
House and Senate, and not the process undertaken afterwards in the Bicameral Conference
Committee.
Indeed, Sections 26 and 27 of Article VI, which detail the procedure how a bill becomes a law, are
silent as to what occurs between the passage by both houses of their respective bills, and the
presentation to the President of
"every bill passed by the Congress".20 Evidently, "Congress" means both Houses, such that a bill
approved by the Senate but not by the House is not presented to the President for approval. There is
obviously a need for joint concurrence by the House and Senate of a bill before it is transmitted to
the President, but the Constitution does not provide how such concurrence is acquired. This lacuna
has to be filled, otherwise no bill may be transmitted to the President.
Even if the Bicameral Conference Committee is not a constitutionally organized body, it has existed
as the necessary conclave for both chambers of Congress to reconcile their respective versions of a
prospective law. The members of the Bicameral Conference Committee may possess in them the
capacity to represent their particular chamber, yet the collective is neither the House nor the Senate.
Hence, the procedure contained in Section 26(2), Article VI cannot apply to the Bicameral
Conference Committee.
Tellingly, the version approved by the Bicameral Conference Committee still undergoes deliberation
and approval by both Houses. Only one vote is taken to approve the reconciled bill, just as only one
vote is taken in order to approve the original bill. Certainly, it could not be contended that this final
version surreptitiously evades approval of either the House or Senate.
The second front concerns the scope and limitations of the Bicameral Conference Committee to
amend, delete, or otherwise modify the bills as approved by the House and the Senate.
Tolentino adduced the principle, adopted from American practice, that the version as approved by
the Bicameral Conference Committee need only be germane to the subject of the House and Senate
bills in order to be valid.21The majority, in applying the test of germaneness, upholds the contested
provisions of the E-VAT Law. Even the members of the Court who prepared to strike down provisions
of the law applying germaneness nonetheless accept the basic premise that such test is controlling.
I agree that any amendment made by the Bicameral Conference Committee that is not germane to
the subject matter of the House or Senate Bills is not valid. It is the only valid ground by which an
amendment introduced by the Bicameral Conference Committee may be judicially stricken.
The germaneness standard which should guide Congress or the Bicameral Conference Committee
should be appreciated in its normal but total sense. In that regard, my views contrast with that of
Justice Panganiban, who asserts that provisions that are not "legally germane" should be stricken
down. The legal notion of germaneness is just but one component, along with other factors
such as economics and politics, which guides the Bicameral Conference Committee, or the
legislature for that matter, in the enactment of laws. After all, factors such as economics or
politics are expected to cast a pervasive influence on the legislative process in the first place, and it
is essential as well to allow such "non-legal" elements to be considered in ascertaining whether
Congress has complied with the criteria of germaneness.
Congress is a political body, and its rationale for legislating may be guided by factors other
than established legal standards. I deem it unduly restrictive on the plenary powers of
Congress to legislate, to coerce the body to adhere to judge-made standards, such as a
standard of "legal germaneness". The Constitution is the only legal standard that Congress is
required to abide by in its enactment of laws.
Following these views, I cannot agree with the position maintained by the Chief Justice, Justices
Panganiban and Azcuna that the provisions of the law that do not pertain to VAT should be stricken
as unconstitutional. These would include, for example, the provisions raising corporate income
taxes. The Bicameral Conference Committee, in evaluating the proposed amendments, necessarily
takes into account not just the provisions relating to the VAT, but the entire revenue generating
mechanism in place. If, for example, amendments to non-VAT related provisions of the NIRC were
intended to offset the expanded coverage for the VAT, then such amendments are germane to the
purpose of the House and Senate Bills.
Moreover, it would be myopic to consider that the subject matter of the House Bill is solely the VAT
system, rather than the generation of revenue. The majority has sufficiently demonstrated that the
legislative intent behind the bills that led to the E-VAT Law was the generation of revenue to counter
the country’s dire fiscal situation.
The mere fact that the law is popularly known as the E-VAT Law, or that most of its provisions pertain
to the VAT, or indirect taxes, does not mean that any and all amendments which are introduced by
the Bicameral Conference Committee must pertain to the VAT system. As the Court noted in Tatad v.
Secretary of Energy:22
[I]t is contended that section 5(b) of R.A. No. 8180 on tariff differential violates the provision 17 of the
Constitution requiring every law to have only one subject which should be expressed in its title. We
do not concur with this contention. As a policy, this Court has adopted a liberal construction of
the one title - one subject rule. We have consistently ruled that the title need not mirror, fully
index or catalogue all contents and minute details of a law. A law having a single general
subject indicated in the title may contain any number of provisions, no matter how diverse
they may be, so long as they are not inconsistent with or foreign to the general subject, and
may be considered in furtherance of such subject by providing for the method and means of
carrying out the general subject. We hold that section 5(b) providing for tariff differential is
germane to the subject of R.A. No. 8180 which is the deregulation of the downstream oil industry.
The section is supposed to sway prospective investors to put up refineries in our country and make
them rely less on imported petroleum.23
I submit that if the amendments are attuned to the goal of revenue generation, the stated purpose of
the original House Bills, then the test of germaneness is satisfied. It might seem that the goal of
revenue generation, which is stated in virtually all tax or tariff bills, is so encompassing in scope as to
justify the inclusion by the Bicameral Conference Committee of just about any revenue generation
measure. This may be so, but it does not mean that the test of germaneness would be rendered
inutile when it comes to revenue laws.
I do believe that the test of germaneness was violated by the E-VAT Law in one regard. Section 21
of the law, which was not contained in either the House or Senate Bills, imposes restrictions on the
use by local government units of their incremental revenue from the VAT. These restrictions are alien
to the principal purposes of revenue generation, or the purposes of restructuring the VAT system. I
could not see how the provision, which relates to budgetary allocations, is germane to the E-VAT
Law. Since it was introduced only in the Bicameral Conference Committee, the test of germaneness
is essential, and the provision does not pass muster. I join Justice Puno and the Chief Justice in
voting to declare Section 21 as unconstitutional.
I also offer this brief comment regarding the deletion of the so-called "no pass on" provisions, which
several of my colleagues deem unconstitutional. Both the House and Senate Bills contained these
provisions that would prohibit the seller/producer from passing on the cost of the VAT payments to
the consumers. However, an examination of the said bills reveal that the "no pass on" provisions in
the House Bill affects a different subject of taxation from that of the Senate Bill. In the House Bill No.
3705, the taxpayers who are prohibited from passing on the VAT payments are the sellers of
petroleum products and electricity/power generation companies. In Senate Bill No. 1950, no
prohibition was adopted as to sellers of petroleum products, but enjoined therein are electricity/
power generation companies but also transmission and distribution companies.
I consider such deletions as valid, for the same reason that I deem the amendments valid. The
deletion of the two disparate "no pass on" provisions which were approved by the House in one
instance, and only by the Senate in the other, remains in the sphere of compromise that ultimately
guides the approval of the final version. Again, I point out that even while the two provisions may
have been originally approved by the House and Senate respectively, their subsequent deletion by
the Bicameral Conference Committee is still subject to approval by both chambers of Congress
when the final version is submitted for deliberation and voting.
Moreover, the fact that the nature of the "no pass on" provisions adopted by the House essentially
differs from that of the Senate necessarily required the corrective relief from the Bicameral
Conference Committee. The Committee could have either insisted on the House version, the Senate
version, or both versions, and it is not difficult to divine that any of these steps would have obtained
easy approval. Hence, the deletion altogether of the "no pass on" provisions existed as a tangible
solution to the possible impasse, and the Committee should be accorded leeway to implement such
a compromise, especially considering that the deletion would have remained germane to the law,
and would not be constitutionally prohibited since the prohibition on amendments under Section
26(2), Article VI does not apply to the Committee.
An outright declaration that the deletion of the two elementally different "no-pass on" provisions is
unconstitutional, is of dubious efficacy in this case. Had such pronouncement gained endorsement of
a majority of the Court, it could not result in the ipso facto restoration of the provision, the omission
of which was ultimately approved in both the House and Senate. Moreover, since the House version
of the "no pass on" is quite different from that of the Senate, there would be a question as to whether
the House version, the Senate version, or both versions would be reinstated. And of course, if it were
the Court which would be called upon to choose, such would be way beyond the bounds of judicial
power.
Indeed, to intimate that the Court may require Congress to reinstate a provision that failed to meet
legislative approval would result in a blatant violation of the principle of separation of powers, with
the Court effectively dictating to Congress the content of its legislation. The Court cannot simply
decree to Congress what laws or provisions to enact, but is limited to reviewing those enactments
which are actually ratified by the legislature.
II.
My earlier views, as are the submissions I am about to offer, are rooted in nothing more than
constitutional interpretation. Perhaps my preceding discussion may lead to an impression that I
whole-heartedly welcome the passage of the E-VAT Law. Yet whatever relief I may have over the
enactment of a law designed to relieve our country’s financial woes are sadly obviated with the
realization that a key amendment introduced in the law is not only unconstitutional, but of fatal
consequences. The clarion call of judicial review is most critical when it stands as the sole barrier
against the deprivation of life, liberty and property without due process of law. It becomes even more
impelling now as we are faced with provisions of the E-VAT Law which, though in bland disguise,
would operate as the most destructive of tax measures enacted in generations.
Tax Statutes and the Due Process Clause
It is the duty of the courts to nullify laws that contravene the due process clause of the Bill of Rights.
This task is at the heart not only of judicial review, but of the democratic system, for the fundamental
guarantees in the Bill of Rights become merely hortatory if their judicial enforcement is unavailing.
Even if the void law in question is a tax statute, or one that encompasses national economic policy,
the courts should not shirk from striking it down notwithstanding any notion of deference to the
executive or legislative branch on questions of policy. Neither Congress nor the President has the
right to enact or enforce unconstitutional laws.
The Bill of Rights is by no means the only constitutional yardstick by which the validity of a tax law
can be measured. Nonetheless, it stands as the most unyielding of constitutional standards, given its
position of primacy in the fundamental law way above the articles on governmental power.24 If the
question lodged, for example, hinges on the proper exercise of legislative powers in the enactment
of the tax law, leeway can be appreciated in favor of affirming the legislature’s inherent power to levy
taxes. On the other hand, no quarter can be ceded, no concession yielded, on the people’s
fundamental rights as enshrined in the Bill of Rights, even if the sacrifice is ostensibly made "in the
national interest." It is my understanding that "the national interests," however comported, always
subsumes in the first place recognition and enforcement of the Bill of Rights, which manifests where
we stand as a democratic society.
The constitutional safeguard of due process is embodied in the fiat "No person shall be deprived of
life, liberty or property without due process of law".25 The purpose of the guaranty is to prevent
governmental encroachment against the life, liberty and property of individuals; to secure the
individual from the arbitrary exercise of the powers of the government, unrestrained by the
established principles of private rights and distributive justice; to protect property from confiscation
by legislative enactments, from seizure, forfeiture, and destruction without a trial and conviction by
the ordinary mode of judicial procedure; and to secure to all persons equal and impartial justice and
the benefit of the general law.26
In Magnano Co. v. Hamilton,27 the U.S. Supreme Court recognized that the due process clause may
be utilized to strike down a taxation statute, "if the act be so arbitrary as to compel the conclusion
that it does not involve an exertion of the taxing power, but constitutes, in substance and effect, the
direct exertion of a different and forbidden power, as, for example, the confiscation of
property."28 Locally, Sison v. Ancheta29 has long provided sanctuary for persons assailing the
constitutionality of taxing statutes. The oft-quoted pronouncement of Justice Fernando follows:
2. The power to tax moreover, to borrow from Justice Malcolm, "is an attribute of sovereignty. It is the
strongest of all the powers of government." It is, of course, to be admitted that for all its
plenitude, the power to tax is not unconfined. There are restrictions. The Constitution sets
forth such limits. Adversely affecting as it does property rights, both the due process and
equal protection clauses may properly be invoked, as petitioner does, to invalidate in
appropriate cases a revenue measure. If it were otherwise, there would be truth to the 1803
dictum of Chief Justice Marshall that "the power to tax involves the power to destroy." In a separate
opinion in Graves v. New York, Justice Frankfurter, after referring to it as an "unfortunate remark,"
characterized it as "a flourish of rhetoric [attributable to] the intellectual fashion of the times [allowing]
a free use of absolutes." This is merely to emphasize that it is not and there cannot be such a
constitutional mandate. Justice Frankfurter could rightfully conclude: "The web of unreality spun from
Marshall's famous dictum was brushed away by one stroke of Mr. Justice Holmes's pen: 'The power
to tax is not the power to destroy while this Court sits.'" So it is in the Philippines.
3. This Court then is left with no choice. The Constitution as the fundamental law overrides any
legislative or executive act that runs counter to it. In any case therefore where it can be
demonstrated that the challenged statutory provision — as petitioner here alleges — fails to
abide by its command, then this Court must so declared and adjudge it null. The inquiry thus is
centered on the question of whether the imposition of a higher tax rate on taxable net income
derived from business or profession than on compensation is constitutionally infirm.
4. The difficulty confronting petitioner is thus apparent. He alleges arbitrariness. A mere allegation,
as here, does not suffice. There must be a factual foundation of such unconstitutional taint.
Considering that petitioner here would condemn such a provision as void on its face, he has not
made out a case. This is merely to adhere to the authoritative doctrine that where the due process
and equal protection clauses are invoked, considering that they are not fixed rules but rather broad
standards, there is a need for proof of such persuasive character as would lead to such a
conclusion. Absent such a showing, the presumption of validity must prevail.
5. It is undoubted that the due process clause 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. That would be a clear abuse of power. It
then becomes the duty of this Court to say that such an arbitrary act amounted to the
exercise of an authority not conferred. That properly calls for the application of the Holmes
dictum. It has also been held that where the assailed tax measure is beyond the jurisdiction
of the state, or is not for a public purpose, or, in case of a retroactive statute is so harsh and
unreasonable, it is subject to attack on due process grounds.30
Sison pronounces more concretely how a tax statute may contravene the due process clause.
Arbitrariness, confiscation, overstepping the state’s jurisdiction, and lack of a public purpose are all
grounds for nullity encompassed under the due process invocation.
Yet even these more particular standards as enunciated in Sison are quite exacting, and difficult to
reach. Even the constitutional challenge posed in Sison failed to pass muster. The majority
cites Sison in asserting that due process and equal protection are broad standards which need proof
of such persuasive character to lead to such a conclusion.
It is difficult though to put into quantifiable terms how onerous a taxation statute must be before it
contravenes the due process clause.31 After all, the inherent nature of taxation is to cause pain and
injury to the taxpayer, albeit for the greater good of society. Perhaps whatever collective notion there
may be of what constitutes an arbitrary, confiscatory, and unreasonable tax might draw more from
the fairy tale/legend traditions of absolute monarchs and the oppressed peasants they tax. Indeed, it
is easier to jump to the conclusion that a tax is oppressive and unfair if it is imposed by a tyrant or an
authoritarian state.
But could an arbitrary, confiscatory or unreasonable tax actually be enacted by a democratic state
such as ours? Of course it could, but these would exist in more palatable guises. In a democratic
society wherein statutes are enacted by a representative legislature only after debate and
deliberation, tax statutes will most likely, on their face, seem fair and even-handed. After all, if
Congress passes a tax law that on facial examination is obviously harsh and unfair, it faces the
wrath of the voting public, to say nothing of the media.
In testing the validity of a tax statute as against the due process clause, I think that the Court should
go beyond a facial examination of the statute, and seek to understand how exactly it would operate.
The express terms of a statute, especially tax laws, are usually inadequate in spelling out the
practical effects of its implementation. The devil is usually in the details.
Admittedly, the degree of difficulty involved of judicial review of tax laws has increased with the
growing complexities of business, economic and accounting practices. These are sciences which
laymen are not normally equipped by their general education to fully grasp, hence the possible
insecurity on their part when confronted with such questions on these fields.
However, we should not cede ground to those transgressions of the people’s fundamental rights
simply because the mechanism employed to violate constitutional guarantees is steeped in
disciplines not normally associated with the legal profession. Venality cannot be allowed to triumph
simply due to its sophistication. This petition imputes in the E-VAT Law unconstitutional oppression
of the fatal variety, but in order to comprehend exactly how and why that is so, one has to delve into
the complex milieu of the VAT system. The party alleging the law’s unconstitutionality of course has
the burden to demonstrate the violations in understandable terms, but if such proof is presented, the
Court’s duty is to engage accordingly.
The Viability of the Clear and Present
Danger Doctrine as Counterweight
To the Shibboleths of Speculation
and Wisdom
I do not see as an impediment to the annulment of a tax law the fact that it has yet to be
implemented, or the fear that doing so constitutes an undue attack on the wisdom, rather than the
legality of a statute. However, my position in this petition has been challenged on those grounds, and
I see it fit to refute these preemptive allegations before delving into the operative aspect of the E-VAT
Law.
If there is cause to characterize my arguments as speculative, it is only because the E-VAT
Law has yet to be implemented. No person as of yet can claim to have sustained actual injury by
reason of the implementation of the assailed provisions in G.R. No. 168461. Yet this should not
mean that the Court is impotent from declaring a provision of law as violative of the due process
clause if it is clear that its implementation will cause the illegal deprivation of life, liberty or property
without due process of
law. This is especially so if, as in this case, the injury is of mathematical certainty, and the extent of
the loss quantifiable through easy reference to the most basic of business practices.
These arguments are conjectural for the same reason that the bare statement "firing a
gunshot into the head will cause a fatal wound" would be conjectural. Some people are lucky
enough to survive gunshot wounds to the head, while many others are not. Yet just because the fear
of mortality would be merely speculative, it does not mean that there should be less compulsion to
avoid a situation of getting shot in the head.
Indeed, the Court has long responded to strike down prospective actions, even if the injury has not
yet even occurred. One of the most significant legal principles of the last century, the "clear
and present danger" doctrine in free speech cases, in fact emanates from the prospectivity,
and not the actuality of danger. The Court has not been hesitant to nullify acts which might cause
injury, owing to the presence of a clear and present danger of a substantive evil which the State has
the right to prevent. It has even extended the "clear and present danger rule" beyond the confines of
freedom of expression to the
realm of freedom of religion, as noted by Justice Puno in his ponencia in Estrada v. Escritor.32
Justice Teodoro Padilla goes further in his concurring opinion in Basco v. PAGCOR, and asserts that
the clear and present danger test squarely applies to the due process clause: "The courts, as the
decision states, cannot inquire into the wisdom, morality or expediency of policies adopted
by the political departments of government in areas which fall within their authority, except
only when such policies pose a clear and present danger to the life, liberty or property of the
individual."
I see no reason why the clear and present danger test cannot apply in this case, or any case
wherein a taxing statute poses a clear and present danger to the life, liberty or property of the
individual. The application of this standard frees the Court from inutility in the face of
patently unconstitutional tax laws that have been enacted but are yet to be fully operational.
If for example, Congress deems it wise to impose the most draconian of tax measures ─ such as
trebling the income taxes of all persons over 40, raising the gross sales tax rate to 50%, or
penalizing delinquent taxpayers with 50 lashes of the whip ─ there certainly would be a massive
public outcry, and an expectation that the Court would immediately nullify the offensive measures
even before they are actually imposed. Applying the clear and present danger test, the Court is
empowered to strike down the noxious measures even before they are implemented. Yet with this
"bar on speculativeness" as argued by the majority, the Court could easily refuse to pay heed to the
prayers for injunctive relief, and instead demand that the taxing subjects must first suffer before the
Court can act.
In the same vein, the claim that my arguments strike at the wisdom, rather than the constitutionality
of the law are misplaced. Concededly, the assailed provisions of the E-VAT law are basically unwise.
But any provision of law that directly contradicts the Constitution, especially the Bill of Rights, are
similarly unwise, as they run inconsistent with the fundamental law of the land, the enunciated state
policies and the elemental guarantees assured by the State to its people. Not every unwise law is
unconstitutional, but every unconstitutional law is unwise, for an unconstitutional law
contravenes a primordial principle or guarantee on which our polity is founded.
If it can be shown that the E-VAT Law violates these provisions of the Constitution, especially the
due process clause, then the Court should accordingly act and nullify. Such is the essence of judicial
review, which stands as the sole barrier to the implementation of an unconstitutional law.
The Separate Opinion of Justice Panganiban notes that "[t]he Court cannot step beyond the confines
of its constitutional power, if there is absolutely no clear showing of grave abuse of discretion in the
enactment of the law"33. This, I feel, is an unduly narrow view of judicial review, implying that such
merely encompasses the procedural aspect by which a law is enacted. If the policy of the law, and/or
the means by which such policy is implemented run counter to the Constitution, then the Court is
empowered to strike down the law, even if the legislative and executive branches act within their
discretion in legislating and signing the law.
It is also asserted that if the implementation of the 70% cap imposes an unequal effect on different
types of businesses with varying profit margins and capital requirements, then the remedy would be
an amendment of the law.34 Of course, the remedy of legislative amendment applies to even the
most unconstitutional of laws. But if our society can take cold comfort in the ability of the legislature
to amend its enactments as the defense against unconstitutional laws, what remains then as the
function of judicial review? This legislative capacity to amend unconstitutional laws runs concurrently
with the judicial capacity to strike down unconstitutional laws. In fact, the long-standing tradition has
been reliance on the judicial branch, and not the legislative branch, for salvation from
unconstitutional laws.
I do recognize that the Separate Opinion of Justice Panganiban ultimately proceeds from the
premise that the assailed provisions of the E-VAT Law may be merely unwise, but not
unconstitutional. Hence, its preference to rely on Congress to amend the offending provisions rather
than judicial nullification. But I maintain that the assailed provisions of the E-VAT Law violate the due
process clause of the Constitution and must be stricken down.
The Nature of VAT
To understand why Sections 8 and 12 of the E-VAT law contravenes the due process clause, it is
essential to understand the nature of the value-added tax itself. Filipino consumers may comprehend
VAT at its elemental form, having been accustomed for several years now in paying an extra 10% of
the listed selling price for a wide class of consumer goods. From the perspective of the end
consumer, such as the patron who purchases a meal from a fastfood restaurant, VAT is simply a tax
on transactions involving the sale of goods. The tax is shouldered by the buyer, and is based on a
percentage of the purchase price. Since an excise or percentage tax shares the same
characteristics, there could be some confusion as between such taxes and the VAT.
However, VAT is distinguishable from the standard excise or percentage taxes in that it is imposable
not only on the final transaction involving the end user, but on previous stages as well so long as
there was a sale involved. Thus, VAT does not simply pertain to the extra percentage paid by the
buyer of a fast-food meal, but also that paid by restaurant itself to its suppliers of raw food products.
This multi-stage system is more acclimated to the vagaries of the modern industrial climate, which
has long surpassed the stage when there was only one level of transfer between the farmer who
harvests the crop and the person who eats the crop. Indeed, from the extraction or production of the
raw material to its final consumption by a user, several transactions or sales materialize. The VAT
system assures that the government shall reap income for every transaction that is had, and not just
on the final sale or transfer.
The European Union, which has long required its member states to apply the VAT system, provided
the following definition of the tax which I deem clear and comprehensive:
The principle of the common system of value added tax involves the application to goods and
services of a general tax on consumption exactly proportional to the price of the goods and
services, whatever the number of transactions that take place in the production and
distribution process before the stage at which tax is charged.
On each transaction, value added tax, calculated on the price of the goods or services at the rate
applicable to such goods or services, shall be chargeable after deduction of the amount of value
added tax borne directly by the various cost components.35
The above definition alludes to a key characteristic of the VAT system, that the imposable tax
remains proportional to the price of goods and services no matter the number of transactions that
takes place.
There is another key characteristic of the VAT ─ that no matter how many the taxable transactions
that precede the final purchase or sale, it is the end-user, or the consumer, that ultimately shoulders
the tax. Despite its name, VAT is generally not intended to be a tax on value added, but rather as a
tax on consumption. Hence, there is a mechanism in the VAT system that enables firms to offset the
tax they have paid on their own purchases of goods and services against the tax they charge on
their sales of goods and services.36 Section 105 of the NIRC assures that "the amount of tax may be
shifted or passed on to the buyer, transferee or lessee of the goods, properties or services." The
assailed provisions of the E-VAT law strike at the heart of this accepted principle.
And there is one final basic element of the VAT system integral to this disquisition: the mode by
which the tax is remitted to the government. In simple theory, the VAT payable can be remitted to the
government immediately upon the occurrence of the transaction, but such a demand proves
excessively unwieldy. The number of VAT covered transactions a modern enterprise may contract in
a single day, plus the recognized principle that it is the final end user who ultimately shoulders the
tax; render the remittance of the tax on a per transaction basis impossible.
Thus, the VAT is delivered by the purchaser not directly to the government but to the seller, who then
collates the VAT received and remits it to the government every quarter. The process may seem
simple if cast in this manner, but there is a wrinkle, due to the offsetting mechanism designed to
ultimately make the end consumer bear the cost of the VAT.
The Concepts of Input and
Output VAT
This mechanism is employed through the introduction of two concepts, the input tax and the output
tax. Section 110(A) of the National Internal Revenue Code defines the input tax as the VAT due from
or paid by a VAT-registered person on the importation of goods or local purchase of goods and
services in the course of trade or business, from a VAT registered person.
Let us put this in operational terms. A VAT registered person, engaged in an enterprise, necessarily
purchases goods such as raw materials and machinery in order to produce consumer goods. The
purchase of such raw materials and machineries is subject to VAT, hence the enterprise pays an
additional 10% of the purchase price to the supplier as VAT. This extra amount paid by the enterprise
constitutes its input VAT. The enterprise likewise pays input VAT when it purchases services covered
by the tax, or rentals of property.
Since VAT is a final tax that is supposed to be ultimately shouldered by the end consumer, the VAT
system allows for a mechanism by which the business is able to recover the input VAT that it paid.
This comes into play when the business, having transformed the raw materials into consumer goods,
sells these goods to the public. As widely known, the consumer pays to the business an additional
amount of 10% of the purchase price as VAT. As to the business, this VAT payments it collects from
the consumer represents output VAT, which is formally described under Section 110(A) of the NIRC
as "the value-added tax due on the sale or lease of taxable goods or properties or services by" by
any VAT-registered person.
The output VAT collected by the business from the consumers accumulates, until the end of every
quarter, when the enterprise is obliged to remit the collected output VAT to the government. This is
where the crediting mechanism comes into play. Since the business is entitled to recover the prepaid
input VAT, it does so in every quarter by applying the amount of prepaid input VAT against the
collected output VAT which is to be remitted. If the output VAT collected exceeds the prepaid input
VAT, then the amount of input VAT is deducted from the output VAT, and it is entitled to remit only the
remainder as output VAT to the government. To illustrate, if Business X collects ₱1,000,000.00 as
output VAT and incurs ₱500,000.00 as input VAT, the ₱500,000.00 is deducted from the
₱1,000,000.00 output VAT, and X is required to remit only ₱500,000.00 of the output VAT it collected
from customers.
On the other hand, if the input VAT prepaid exceeds the output VAT collected, then the business
need not remit any amount as output VAT for the quarter. Moreover, the difference between the input
VAT and the output VAT may be credited as input VAT by the business in the succeeding quarter.
Thus, if in the First Quarter of a year, Business X prepays ₱1,000,000.00 as input VAT, and collects
only ₱500,000.00 as output VAT, it need not remit any amount of output VAT to the government.
Moreover, in the Second Quarter, Business X can credit the remaining ₱500,000.00 as part of its
input VAT for that quarter. Hence, if in the Second Quarter, X actually prepays ₱400,000.00 as input
VAT, and collects ₱500,000.00 as output VAT, it may add the ₱500,000.00 input VAT from the
previous quarter to the ₱400,000.00 prepaid in the current quarter, bringing the total input VAT it
could claim to ₱900,000.00. Since the input VAT of ₱900,000.00 now exceeds the output VAT
collected of ₱500,000, then X need not remit any output VAT as well to the government for the
Second Quarter.
However, reality is far bleaker than that befaced by Business X. The VAT collected and remitted is
not the most relevant statistic evaluated by the business. The figure of primary concern of the
enterprise would be the profit margin, which is simply the excess of revenue less expenditures.
Revenue is derived from the gross sales of the business. Expenditures encompass all expenses
incurred by the business including overhead expenses, wages and purchases of capital goods.
Crucially, expenditures would include the input VAT prepaid by the business on its capital
expenditures.
Since a significant amount of the capital outlay incurred by a business is subjected to the
prepayment of input taxes, the necessity of recovering these losses through the output VAT collected
becomes more impelling. These output taxes are obviously proportional to the volume of gross sales
― the higher the gross sales, the higher the output VAT collected. The output taxes collected on
sales answer for not only those input taxes paid on the purchase of the raw materials, but
also for the input taxes paid on the multifarious overhead expenses covered by VAT. The
burden carried by the sales volume on the stability, if not survival of the business thus just became
more crucial. The maintenance of the proper equilibrium is not an easy matter. Increasing the selling
price of the goods sold does not necessarily increase the gross sales, as it could have the counter-
effect of repelling the consumer and diminishing the number of goods sold. At the same time,
keeping the selling price low may increase the volume of goods sold, but not necessarily the amount
of gross sales.
Profit is a chancy matter, and in cases of small to medium enterprises, usually small if any. It is quite
common for retail and distribution enterprises to incur profits of less than 1% of their gross revenues.
Low profitability is not an automatic badge of poor business skills, but a reality dictated by the laws
of the marketplace. The probability of profit is lower than that of capital expenditures, and ultimately,
many business establishments end up with a higher input tax than output tax in a given quarter. This
would be especially true for small to medium enterprises who do not reap sufficient profits from its
business in the first place, and for those firms that opt to also invest in capital expenses in addition to
the overhead. Whatever miniscule profit margins that can be obtained usually spell the difference
between life and death of the business.
The possibility of profit is further diminished by the fact that businesses have to shoulder the input
VAT in the purchase of their capital expenses. Yet the erstwhile VAT system was not tainted by
the label of oppressiveness and neither did it bear the confiscatory mode. This was because
of the immediate relief afforded from the input taxes paid by the crediting system. In theory,
VAT is not supposed to affect the profit margin. If such margin is affected, it is only because
of the prepayment of the input taxes, and this should be remedied by the immediate recovery
through the crediting system of the settled input taxes.
The new E-VAT law changes all that, and puts in jeopardy the survival of small to medium
enterprises.
The Effects of the 70% Cap on Creditable Input VAT
The first radical shift introduced by the E-VAT law to the creditable input system ─ the 70% cap on
the creditable input tax that may be carried over into the next quarter ─ is provided in Section 8 of
the law, which amends Section 110(A) of the NIRC, among others. Section 110(A) as amended
would now read:
Sec. 110. Tax Credits. –
(B) Excess Output or Input Tax. – If at the end of any taxable quarter the output tax exceeds the
input tax, the excess shall be paid by the VAT-registered person. If the input tax exceeds the output
tax, the excess shall be carried over to the succeeding quarter or quarters. Provided, That the
input tax inclusive of input VAT carried over from the previous quarter that may be credited in
every quarter shall not exceed seventy percent (70%) of the output VAT: Provided, however,
That any input tax attributable to zero rated sales by a VAT-registered person may at his option be
refunded or credited against other internal revenue taxes, subject to the provisions of Section 112.
(emphasis supplied)
All hope for entrepreneurial stability is dashed with the imposition of the 70% cap. Under the E-VAT
Law, the business, regardless of stability or financial capability, is obliged to remit to the government
every quarter at least 30% of the output VAT collected from customers, or roughly 3% of the amount
of gross sales. Thus, if a quarterly gross sales of Y Business totaled ₱1,000,000, and Y is prudent
enough to keep its capital expenses down to ₱980,000, it would then appear on paper that Y
incurred a profit of ₱20,000. However, with the 70% cap, Y would be obliged to remit to the
government ₱30,000, thus wiping out the profit margin for the quarter. Y would be entitled to credit
the excess input VAT it prepaid for the next quarter, but the continuous operation of the 70% cap
obviates whatever benefits this may give, and cause the accumulation of the unutilized creditable
input VAT which should be returned to the business.
The difference is even more dramatic if seen how the unutilized creditable input VAT accumulates
over a one year period. To illustrate, Business Y prepays the following amounts of input VAT over a
one-year period: ₱100,000.00 - First Quarter; ₱100,000.00 – 2nd Quarter; ₱34,000.00 – 3rd
Quarter; and ₱50,000.00 – 4th Quarter. On the other hand, Y collects the following amounts of
output VAT from consumers: ₱60,000.00 - First Quarter; ₱60,000.00 – 2nd Quarter; ₱100,000.00 –
3rd Quarter; and ₱50,000.00 – 4th Quarter. Applying the 70% cap, which would limit the amount of
the declarable input VAT to 70% in a quarter, the following results obtain, as presented in tabular
form:

Particulars 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Output VAT 60,000 60,000 100,000 50,000
Input VAT 100,000 100,000 [input] 34,000 50,000
(Actual) + +58,000 [input] [input]
Carry Over [excess +116,000 +80,000
creditable]
[excess [excess
158,000 creditable] creditable]
150,000 130,000
DeclarableInp (60,000x70%) (60,000x70%) (100,000x70% (50,000x70%)
ut VAT (70% )
42,000 42,000 35,000
of output VAT)
70,000
Lower of (60,000 -42,000) (60,000 -42,000) (100,000-70,0 (50,000-
actual and 00) 35,000)
18,000 18,000
70% cap –
30,000 15,000
allowable
VAT
Payable
CreditableInp (100,000 – (158,000 – (150,000- (130,000-
ut VAT 42,000) 42,000) 70,000) 35,000)
58,000 116,000 80,000 95,000

This stands in contrast to same business VAT accountability under the present system, using the
same variables of output VAT and input VAT. The need to distinguish a declarable input VAT is
obviated with the elimination of the 70% cap.

Particulars 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Output VAT 60,000 60,000 100,000 50,000
Input VAT 100,000 100,000 [input] 34,000 50,000
(Actual) + +40,000 [input] [input]
Carry Over
[excess +80,000 + 14,000
creditable] [excess (excess
140,000 creditable] creditable)
114,000 50,000
VAT Payable 0 0 0 0
Creditable 40,000 80,000 14,000 14,000
Input VAT

The difference is dramatic, as is the impact on the business’s profit margin and available cash on
hand. Under normal conditions, small to medium enterprises are already encumbered with the
likelihood of obtaining only a minimal profit margin. Without the 70% cap, those businesses would
nonetheless be able to expect an immediate return on its input taxes earlier advanced, taxes which
under the VAT system it is not supposed to shoulder in the first place. However, with the 70% cap in
place, the unutilized input taxes would continue to accumulate, and the enterprise precluded from
immediate recovery thereof. The inability to utilize these input taxes, which could spell the
difference between profit and loss, solvency and insolvency, will eventually impair, if not kill
off the enterprise.
The majority fails to consider one of the most important concepts in finance, time value for money.
37 Simply put, the value of one peso is worth more today than in 2006. Money that you hold today is

worth more because you can invest it and earn interest.38 By reason of the 70% cap, the amount of
input VAT credit that remains unutilized would continue accumulate for months and years. The longer
the amount remains unutilized, the higher the degree of its depreciation in value, in accordance with
the concept of time value of money. Even assuming that the business eventually recovers the input
VAT credit, the sum recovered would have decreased in practical value.
It would be sad, but fair, if a business ceases because of its inability to compete with other
businesses. It would be utter malevolence to condemn an enterprise to death solely through
the employment of a deceptive accounting wizardry. For the raison d’etre of this 70% cap is
to make it appear on paper that the government is more solvent than it actually is. Conceding
for the nonce, there is a temporary advantage gained by the government by this 70% cap, as the
steady remittance by businesses of the 30% output VAT would assure a cash flow. Such collection
may only momentarily resolve an endemic problem in our local tax system, the problem of collection
itself.
If the 70% cap was designed in order to enhance revenue collection, then I submit that the means
employed stand beyond reason. If sheer will proves insufficient in assuring that the State all taxes
due it, there should be allowable discretion for the government to formulate creative means to
enhance collection. But to do so by depriving low profit enterprises of whatever meager income
earned and consequently assuring the death of these industries goes beyond any valid State
purpose.
Only stable businesses with substantial cash flows, or extraordinarily successful enterprises will be
able to remain in operation should the 70% cap be retained. The effect of the 70% cap is to
effectively impose a tax amounting to 3% of gross revenue. The amount may seem insignificant to
those without working knowledge of the ways of business, but anybody who is actually familiar with
business would be well aware the profit margins of the retailing and distribution sectors typically
amount to less than 1% of the gross revenues. A taxpayer has to earn a margin of at least 3% on
gross revenue in order to recoup the losses sustained due to the 70% cap. But as stated earlier,
profits are chancy, and the entrepreneur does not have full control of the conditions that lead to
profit.
Even more galling is the fact that the 70% cap, oppressive as it already is to the business
establishment, even limits the options of the business to recover the unutilized input VAT credit.
During the deliberations, the argument was raised that the problem presented by the 70% cap was a
business problem, which can only be solved by business. Yet there is only one viable option for the
enterprise to resolve the problem, and that is to increase the selling price of goods.39 It would be
incorrect to assume that increase the volume of the goods sold could solve the problem, since for
items with the same purchasing cost, the effect of the 70% cap remains constant regardless of an
increase in volume.
But the additional burden is not limited to the increase of prices by the retailer to the end consumer.
Since VAT is a transaction tax, every level of distribution becomes subject not only to the VAT, but
also to the 70% cap. The problem increases due to a cascading effect as the number of distribution
levels increases since it will result in the collection of an effective 3% percentage tax at every
distribution level.
In analyzing the effects of the 70% cap, and appreciating how it violates the due process clause, we
should not focus solely on the end consumers. Undoubtedly, consumers will face hardships due to
the increased prices, but their threshold of physical survival, as individual people, is significantly less
than that of enterprises. Somehow, I do not think the new E-VAT would generally deprive consumers
of the bare necessities such as food, water, shelter and clothing. There may be significant
deprivation of comfort as a result, but not of life.
The same does not hold true for businesses. The standard of "deprivation of life" of juridical persons
employs different variables than that of natural persons. What food and water may be for persons,
profit is for an enterprise ―― the bare necessity for survival. For businesses, the implementation of
the same law, with the 70% cap and 60-month amortization period, would mean the deprivation of
profit, which is the determinative necessity for the survival of a business.
It is easy to admonish both the consumer and the enterprise to cut back on expenditures to survive
the new E-VAT Law. However, this can be realistically expected only of the consumer. The small/
medium enterprise cannot just cut back easily on expenditures in order to survive the
implementation of the E-VAT Law. For such businesses, expenditures do not normally contemplate
unnecessary expenses such as executive perks which can be dispensed with without injury to the
enterprises. These expenditures pertain to expenses necessary for the survival of the enterprise,
such as wages, overhead and purchase of raw materials. Those three basic items of expenditure
cannot simply be reduced, as to do so with impair the ability of the business to operate on a daily
basis.
And reduction of expenditures is not the exclusive antidote to these impositions under the E-VAT
Law, as there must also be a corresponding increase in the amount of gross sales. To do so though,
would require an increase in the selling price, dampening consumer enthusiasm, and further
impairing the ability of the enterprise to recover from the E-VAT Law. This is your basic
Catch-2240 situation — no matter which means the enterprise employs to recover from the E-VAT
Law, it will still go down in flames.
Section 8 of the E-VAT law, while ostensibly even-handed in application, fails to appreciate valid
substantial distinctions between large scale enterprises and small and medium enterprises. The
latter group, owing to the limited capability for capital investment, subsists on modest profit margins,
whereas the former expects, by reason of its substantial capital investments, a high margin. In
essentially prohibiting the recovery of small profit margins, the E-VAT law effectively sends
the message that only high margin businesses are welcome to do business in the
Philippines. It stifles any entrepreneurial ambitions of Filipinos unfortunate enough to have
been born poor yet seek a better life by sacrificing all to start a small business.
Among the enunciated State policies in the Constitution, as stated in Section 20, Article II, is that
"the State recognizes the indispensable role of the private sector, encourages private
enterprise, and provides incentives to needed investments."41 The provision, as with other
declared State policies in the Constitution, have sufficient import and consequence such that in
assessing the constitutionality of the governmental action, these provisions should be considered
and weighed as against the rationale for the assailed State action.42 The incompatibility of the 70%
cap with this provision is patent.
Pilipinas Shell Dealers, on whom the burden to establish the violation of due process and equal
protection lies, offers the following chart of the income statement of a typical petroleum dealer:
QUARTERLY PROFIT AND LOSS STATEMENT
DEALER "A"

Price VAT (without 70% cap) VAT (with 70%

cap)
Sales/Output 32,748,534 3,274,853.40 3,274,853.40
Cost of Sales 31,834,717 3,183,471.70
Gross Margin 913,817
Operating Expenses 536,249 31,758.40
Non-vatable items 317,584
Vatable Items
Total Cost 853,833
Net Profit 59,984
Total Input Tax 3,215,230.10 2,292,397.38
VAT Payable 59,623.30 982,456.02

Unutilized Input VAT 922,832.72

*computed by multiplying output VAT by 70% [3,274,853.40 x 70% = 2,292.397.38]
The presentation of the Pilipinas Shell Dealers more or less jibes with my own observations on the
impact of the 70% cap. The dealer whose income is illustrated above has to outlay a cash amount of
₱922,832.72 more than what would have been shelled out if the 70% cap were not in place.
Considering that the net profit of the dealer is only ₱59,984.00, the consequences could very well be
fatal, especially if these state of events persist in succeeding quarters.
The burden of proof was on the Pilipinas Shell Dealers’ to prove their allegations, and accordingly,
these figures have been duly presented to the Court for appreciation and evaluation. Instead, the
majority has shunted aside these presentations as being merely theoretical, despite the fact that
they present a clear and present danger to the very life of our nation’s enterprises. The majority’s
position would have been more credible had it faced the issue squarely, and endeavored to
demonstrate in like numerical fashion why the 70% cap is not oppressive, confiscatory, or otherwise
violative of the due process clause.
Sadly, the majority refuses to confront the figures or engage in a meaningful demonstration of how
these assailed provisions truly operate. Instead, it counters with platitudes and bromides that do not
intellectually satisfy. Considering that the very vitality, if not life of our domestic economy is at stake, I
think it derelict to our duty to block out these urgent concerns presented to the Court with blind faith
tinged with irrational Panglossian43 optimism.
The obligation of the majority to refute on the merits the arguments of the Petroleum Dealers
becomes even more grave considering that the respondents have abjectly failed to convincingly
dispute the claims. During oral arguments, respondents attempted to counter the arguments that the
70% cap was oppressive and confiscatory by presenting the following illustration, which I fear is
severely misleading:
Slide 1

%
Item Cost VAT

Sales 1,000,000.00 100,000.00

Purchases 800,000.00 80,000.00

Due BIR without cap Due BIR with 70% cap

Output VAT 100,000.00 Output VAT 100,000.00
Actual Input VAT 80,000.00 Allowable Input VAT 70,000.00
Net VAT Payable 20,000.00 Net VAT Payable 30,000.00
Excess Input VAT 10,000.00
Carry-over to next quarter
Slide 2
___________________________________________

Item Cost VAT

%
Sales 1,000,000.00 100,000.00
Purchases 600,000.00 60,000.00
Due BIR without cap Due BIR with 70% cap

%
%
Output VAT 100,000.00 Output VAT 100,000.00
Actual Input VAT (60% of output VAT) 60,000.00 Allowable Input VAT 60,000.00

Net VAT Payable 40,000.00 Net VAT Payable 40,000.00

Excess Input VAT 0
Carry-over to next quarter
This presentation of the respondents is grossly deceptive, as it fails to account for the excess
creditable input VAT that remains unutilized due to the 70% cap. This excess or creditable input VAT
is supposed to be carried over for the computation of the input VAT of the next quarter. Instead, this
excess or creditable input VAT magically disappears from the table of the respondents. In their
memorandum, the Pilipinas Shell Dealers counter with their own presentation using the same
variables as respondents’, but taking into account the excess creditable input VAT and extending the
situation over a one-year period. I cite with approval the following chart44 of the Pilipinas Shell
Dealers:
Slide 1
Quarter 1
Item No. Cost VAT
Sales 1,000,000.00 100,000.00
Purchases 800,000.00 80,000.00
Due BIR with 70% cap
Output VAT 100,000.00
Allowable Input VAT 70,000.00
Net VAT Payable 30,000.00
Excess Input Vat
Carry-over to next quarter 10,000.00
Quarter 2
Cost VAT
Sales 1,000,000.00 100,000.00
Purchases 800,000.00 80,000.00
Due BIR with 7-% cap
Output VAT 100,000.00
Less: Input VAT
Excess Input VAT fr. 1st Quarter 10,000.00
Input VAT-Current Qtr. 80,000.00
Total Available Input VAT 90,000.00
Allowable Input VAT (100,000 x 70%) 70,000.00 70,000.00
Net VAT Payable 30,000.00
=========
Total Available Input VAT 90,000.00
Allowable Input VAT 70,000.00
Excess Input VAT to be carried over to next
Quarter 20,000.00
=========
Quarter 3
Cost VAT
Sales 1,000,000.00 100,000.00
Purchases 800,000.00 80,000.00
Due BIR with 70% cap
Output VAT 100,000.00
Less: Input VAT
Excess Input VAT fr. 2nd Qtr. 20,000.00
Input VAT-Current Qtr. 80,000.00
Total Available Input VAT 100,000.00
Allowable Input VAT (100,000 x 70%) 70,000.00 70,000.00
Net VAT Payable 30,000.00
=========
Total Available Input VAT 100,000.00
Allowable Input VAT 70,000.00
Excess Input VAT to be carried over to next quarter 30,000.00
==========
Quarter 4
Cost VAT
Sales 1,000,000.00 100,000.00
Purchases 800,000.00 80,000.00
Due BIR with 70% cap
Output VAT 100,000.00
Less: Input VAT
Excess Input VAT fr. 3rd Qtr. 30,000.00
Input VAT-Current Qtr. 80,000.00
Total Available Input VAT 110,000.00
Allowable Input VAT (100,000 x 70%) 70,000.00 70,000.00
Net VAT Payable 30,000.00
========
Total Available Input VAT 110,000.00
Allowable Input VAT 70,000.00
Excess Input VAT to be carried over to next quarter 40,000.00
==========
The 70% cap is not merely an unwise imposition. It is a burden designed, either through
sheer heedlessness or cruel calculation, to kill off the small and medium enterprises that are
the soul, if not the heart, of our economy. It is not merely an undue taking of property, but
constitutes an unjustified taking of life as well.
And what legitimate, germane purposes does this lethal 70% cap serve? It certainly does not
increase the government’s revenue since the unutilized creditable input VAT should be
entered in the government books as a debt payable as it is supposed to be eventually repaid
to the taxpayer, and so on the contrary it increases the government’s debts. I do see that the
70% cap temporarily allows the government to brag to the world of an increased cash flow.
But this situation would be akin to the provincial man who borrows from everybody in the
barrio in order to show off money and maintain the pretense of prosperity to visiting city
relatives. The illusion of wealth is hardly a legitimate state purpose, especially if projected at
the expense of the very business life of the country.
The majority, in an effort to belittle these concerns, points out that that the excess input tax remains
creditable in succeeding quarters. However, as seen in the above illustration, the actual application
of the excess input tax will always be limited by the amount of output taxes collected in a quarter, as
a result of the 70% cap. Thus, it is entirely possible that a VAT-registered person, through the
accumulation of unutilized input taxes, would have in a quarter an express creditable input tax of
₱50,000,000, but would be allowed to actually credit only ₱70,000 if the output tax collected for that
quarter were only ₱100,000.
The burden of the VAT may fall at first to the immediate buyers, but it is supposed to be eventually
shifted to the end-consumer. The 70% cap effectively prevents this from happening, as it limits the
ability of the business to recover the prepaid input taxes. This is unconscionable, since in the first
place, these intervening
players ─ the manufacturers, producers, traders, retailers ─ are not even supposed to sustain the
losses incurred by reason of the prepayment of the input taxes. Worse, they would be obliged every
quarter to pay to the government from out of their own pockets the equivalent of 30% of the output
taxes, no matter their own particular financial condition. Worst, this twin yoke on the taxpayer of
having to sustain a debit equivalent to 30% of output taxes, and having to await forever in order to
recover the prepaid taxes would impair the cash flow and prove fatal for a shocking number of
businesses which, as they now stand, have to make do with a minimum profit that stands to be
wiped out with the introduction of the 70% cap.
Nonetheless, the majority notes that the excess creditable input tax may be the subject of a tax
credit certificate, which then could be used in payment of internal revenue taxes, or a refund to the
extent that such input taxes have not been applied against output taxes.45 What the majority fails
to mention is that under Section 10 of the E-VAT Law, which amends Section 112 of the NIRC,
such credit or refund may not be done while the enterprise remains operational:
SEC. 10. Section 112 of the same Code, as amended, is hereby further amended to read as follows:
SEC. 112. Refunds or Tax Credits of Input Tax.—
xxx
"(B) Cancellation of VAT Registration.— A person whose registration has been cancelled due to
retirement from or cessation of business or due to changes or cessation of status under
Section 106(C) of this Code may, within two (2) years from the date of cancellation, apply for
the issuance of a tax credit certificate for any unused input tax which may be used in
payment of his other internal revenue taxes.
xxx
This stands in marked contrast to Section 112(B) of the NIRC as it read prior to this amendment.
Under the previous rule, a VAT-registered person was entitled to apply for the tax credit certificate or
refund paid on capital goods even while it remained in operation:
SEC. 112. Refunds or Tax Credits of Input Tax.—
xxx
"(B) Capital Goods .— A VAT-registered person may apply for the issuance of a tax credit certificate
or refund of input taxes paid on capital goods imported or locally purchased, to the extent that such
input taxes have not been applied against output taxes. The application may be made only within
two (2) years after the close of the taxable quarter when the importation or purchase was made.
This provision, which could have provided foreseeable and useful relief to the VAT-registered person,
was deleted under the new E-VAT Law. At present, the refund or tax credit certificate may only be
issued upon two instances: on zero-rated or effectively zero-rated sales, and upon cancellation of
VAT registration due to retirement from or cessation of business.46 This is the cruelest cut of all.
Only after the business ceases to be may the State be compelled to repay the entire amount
of the unutilized input tax. It is like a macabre form of sweepstakes wherein the winner is to
be paid his fortune only when he is already dead. Aanhin pa ang damo kung patay na ang
kabayo.
Moreover, the inability to immediately credit or otherwise recover the unutilized input VAT could
cause such prepaid amount to actually be recognized in the accounting books as a loss. Under
international accounting practices, the unutilized input VAT due to the 70% cap would not even be
recognized as a deferred asset. The same would not hold true if the 70% cap were eliminated.
Under the International Accounting Standards47, the unutilized input VAT credit is recognized as an
asset "to the extent that it is probable that future taxable profit will be available against which the
unused tax losses and unused tax credits can be utili[z]ed"48 Thus, if the immediate accreditation of
the input VAT credit can be obtained, as it would without the 70% cap, the asset could be
recognized.
However, the same Standards hold that "[t]o the extent that it is not probable that taxable profit will
be available against which the unused tax losses or unused tax credits can be utilised, the deferred
tax asset is not recognised".49 As demonstrated, the continuous operation of the 70% cap precludes
the recovery of input VAT prepaid months or years prior. Moreover, the inability to claim a refund or
tax credit certificate until after the business has already ceased virtually renders it improbable for the
input VAT to be recovered. As such, under the International Accounting Standards, it is with all
likelihood that the prepaid input VAT, ostensibly creditable, would actually be reflected as a loss.
50 What heretofore was recognized as an asset would now, with the imposition of the 70% cap, be

now considered as a loss, enhancing the view that the 70% cap is ultimately confiscatory in nature.
This leads to my next point. The majority asserts that the input tax is not a property or property right
within the purview of the due process clause.51 I respectfully but strongly disagree.
Tellingly, the BIR itself has recognized that unutilized input VAT is one of those assets, corporate
attributes or property rights that, in the event of a merger, are transferred to the surviving corporation
by operation of law.52Assets would fall under the purview of property under the due process clause,
and if the taxing arm of the State recognizes that such property belongs to the taxpayer and not to
the State, then due respect should be given to such expert opinion.
Even under the International Accounting Standards I adverted to above, the unutilized input VAT
credit may be recognized as an asset "to the extent that it is probable that future taxable profit will be
available against which the unused tax losses and unused tax credits can be utilised"53 If not
probable, it would be recognized as a loss.54Since these international standards, duly recognized by
the Securities and Exchange Commission as controlling in this jurisdiction, attribute tangible gain or
loss to the VAT credit, it necessarily follows that there is proprietary value attached to such gain or
loss.
Moreover, the prepaid input tax represents unutilized profit, which can only be utilized if it is refunded
or credited to output taxes. To assert that the input VAT is merely a privilege is to correspondingly
claim that the business profit is similarly a mere privilege. The Constitution itself recognizes the right
to profit by private enterprises. As I stated earlier, one of the enunciated State policies under the
Constitution is the recognition of the indispensable role of the private sector, the encouragement of
private enterprise, and the provision of incentives to needed investments.55Moreover, the
Constitution also requires the State to recognize the right of enterprises to reasonable
returns on investments, and to expansion and growth.56 This, I believe, encompasses profit.
60-Month Amortization Period
Another portion of Section 8 of the E-VAT Law is unconstitutional, essentially for the same reasons
as above. The relevant portion reads:
SEC. 8. Section 110 of the same Code, as amended, is hereby further amended to read as follows:
"SEC. 110. Tax Credits. –
(A) Creditable Input Tax. –
....
Provided, That the input tax on goods purchased or imported in a calendar month for use in
trade or business for which deduction for depreciation is allowed under this Code, shall be
spread evenly over the month of acquisition and the fifty-nine (59) succeeding months if the
aggregate acquisition cost for such goods, excluding the VAT component thereof, exceeds
One million pesos (₱1,000,000): Provided, however, That if the estimated useful life of the capital
good is less than five (5) years, as used for depreciation purposes, then the input VAT shall be
spread over such a shorter period: Provided, finally, that in the case of purchase of services, lease or
use of properties, the input tax shall be creditable to the purchaser, lessee or licensee upon payment
of the compensation, rental, royalty or fee.
Again, this provision unreasonably severely limits the ability of an enterprise to recover its prepaid
input VAT. On its face, it might appear injurious primarily to high margin enterprises, whose purchase
of capital goods in a given quarter would routinely exceed ₱1,000,000.00. The amortization over a
five-year period of the input VAT on these capital goods would definitely eat up into their profit
margin. But it is still possible for such big businesses to survive despite this new restriction, and their
financial pain alone may not be sufficient to cause the invalidity of a taxing statute.
However, this amortization plan will prove especially fatal to start-ups and other new
businesses, which need to purchase capital goods in order to start up their new
businesses. It is a known fact in the financial community that a majority of businesses start earning
profit only after the second or third year, and many enterprises do not even get to survive that long.
The first few years of a business are the most crucial to its survival, and any financial benefits it can
obtain in those years, no matter how miniscule, may spell the difference between life and death. For
such emerging businesses, it is already difficult under the present system to recover the prepaid
input VAT from the output VAT collected from customers because initial sales volumes are usually
low. With this further limitation, diminishing as it does any opportunity to have a sustainable cash
flow, the ability of new businesses to survive the first three years becomes even more endangered.
Even existing small to medium enterprises are imperiled by this 60 month amortization restriction,
especially considering the application of the 70% cap. The additional purchase of capital goods
bears as a means of adding value to the consumer good, as a means to justify the increased selling
price. However, the purchase of capital goods in excess of ₱1,000,000.00 would impose another
burden on the small to medium enterprise by further restricting their ability to immediately recover
the entire prepaid input VAT (which would exceed at least ₱100,000.00), as they would be compelled
to wait for at least five years before they can do so. Another hurdle is imposed for such small to
medium enterprise to obtain the profit margin critical to survival. For some lucky enterprises who
may be able to survive the injury brought about by the 70% cap, this 60 month amortization
period might instead provide the mortal head wound.
Moreover, the increased administrative burden on the taxpayer should not be discounted,
considering this Court’s previous recognition of the aims of the VAT system to "rationalize the system
of taxes on goods and services, [and] simplify tax administration".57 With the amortization
requirement, the taxpayer would be forced to segregate assets into several classes and strictly
monitor the useful life of assets so that proper classification can be made. The administrative
requirements of the taxpayer in order to monitor the input VAT from the purchase of capital assets
thus has exponentially increased.
5% Withholding VAT on Sales
Pilipinas Shell Dealers argue that Section 12 of the E-VAT law, which amends Section 114(C) of the
NIRC, is also unconstitutional. The provision is supremely unwise, oppressive and confiscatory
in nature, and ruinous to private enterprise and even State development. The provision reads:
SEC. 12. Section 114 of the same Code, as amended, is hereby further amended to read as follows:
"SEC. 114. Return and Payment of Value-Added Tax. –
xxx
"(C) Withholding of Value-added Tax. – The Government or any of its political subdivisions,
instrumentalities or agencies, including government-owned or –controlled corporations (GOCCs)
shall, before making payment on account of each purchase of goods and services which are subject
to the value-added tax imposed in Sections 106 and 108 of this Code, deduct and withhold a final
value-added tax at the rate of five percent (5%) of the gross payment thereof: Provided, That the
payment for lease or use of properties or property rights to nonresident owners shall be subject to
ten percent (10%) withholding tax at the time of payment. For purposes of this Section, the payor or
person in control of the payment shall be considered as the withholding payment. xxx
The principle that the Government and its subsidiaries may deduct and withhold a final value-added
tax on its purchase of goods and services is not new, as the NIRC had allowed such deduction and
withholding at the rate of 3% of the gross payment for the purchase of goods, and 6% of the gross
receipts for services. However, the NIRC had also provided that this tax withheld would also be
creditable against the VAT liability of the seller or contractor, a mechanism that was deleted
by the E-VAT law. The deletion of this credit apparatus effectively compels the private
enterprise transacting with the government to shoulder the output VAT that should have been
paid by the government in excess of 5% of the gross selling price, and at the same time
unduly burdens the private enterprise by precluding it from applying any creditable input VAT
on the same transaction.
Notably, the removal of the credit mechanism runs contrary to the essence of the VAT system, which
characteristically allows the crediting of input taxes against output taxes. Without such crediting
mechanism, which allows the shifting of the VAT to only the final end user, the tax becomes a
straightforward tax on business or income. The effect on the enterprise doing business with
the government would be that two taxes would be imposed on the income by the business
derived on such transaction: the regular personal or corporate income tax on such income,
and this final withholding tax of 5%.
Granted that Congress is not bound to adopt with strict conformity the VAT system, and that it has to
power to impose new taxes on business income, this amendment to Section 114(C) of the NIRC still
remains unconstitutional. It unfairly discriminates against entities which contract with the
government by imposing an additional tax on the income derived from such transactions.
The end result of such discrimination is double taxation on income that is both oppressive
and confiscatory.
It is a legitimate purpose of a tax law to devise a manner by which the government could save
money on its own transactions, but it is another matter if a private enterprise is punished for
doing business with the government. The erstwhile NIRC worked towards such advantage, by
allowing the government to reduce its cash outlay on purchases of goods and services by
withholding the payment of a percentage thereof. While the new E-VAT law retains this benefit to the
government, at the same time it burdens the private enterprise with an additional tax by refusing to
allow the crediting of this tax withheld to the business’s input VAT.
This imposition would be grossly unfair for private entities that transact with the government,
especially on a regular basis. It might be argued that the provision, even if concededly unwise,
nonetheless fails to meet the standard of unconstitutionality, as it affects only those persons or
establishments that choose to do business with the government. However, it is an acknowledged
fact that the government and its subsidiaries rely on contracts with private enterprises in order to be
able to carry out innumerable functions of the State. This provision effectively discourages
private enterprises to do business with the State, as it would impose on the business a
higher rate of tax if it were to transact with the State, as compared to transactions with other
private entities.
Established industries with track records of quality performance could very well be dissuaded from
doing further business with government entities as the higher tax rate would make no economic
sense. Only those enterprises which really need the money, such as those with substandard track
records that have affected their viability in the marketplace, would bother seeking out government
contracts. The corresponding sacrifice in quality would eventually prove detrimental to the State. Our
society can ill afford shoddy infrastructures such as roads, bridges and buildings that would
unnecessarily pose danger to the public at large simply because the government wanted to skimp on
expenses.
The provision squarely contradicts Section 20, Article II of the Constitution as it vacuously
discourages private enterprise, and provides disincentives to needed investments such as
those expected by the State from private businesses. Whatever advantages may be gained by
the temporary increase in the government coffers would be overturned by the disadvantages of
having a reduced pool of private enterprises willing to do business with the government. Moreover,
since government contracts with private enterprises will still remain a necessary fact of life, the
amendment to Section 114(C) of the NIRC introduced by the E-VAT Law.
Double taxation means taxing for the same tax period the same thing or activity twice, when it should
be taxed but once, for the same purpose and with the same kind of character of tax.58 Double
taxation is not expressly forbidden in our constitution, but the Court has recognized it as obnoxious
"where the taxpayer is taxed twice for the benefit of the same governmental entity or by the same
jurisdiction for the same purpose."59 Certainly, both the 5% final tax withheld and the general
corporate income tax are both paid for the benefit of the national government, and for the same
incidence of taxation, the sale/lease of goods and services to the government.
The Court, in Re: Request of Atty. Bernardo Zialcita60 had cause to make the following observation I
submit apropos to the case at bar, on double taxation in a case involving the attempt of the BIR to
tax the commuted accumulated leave credits of a government lawyer upon his retirement:
Section 284 of the Revised Administrative Code grants to a government employee 15 days vacation
leave and 15 days sick leave for every year of service. Hence, even if the government employee
absents himself and exhausts his leave credits, he is still deemed to have worked and to have
rendered services. His leave benefits are already imputed in, and form part of, his salary which
in turn is subject to withholding tax on income. He is taxed on the entirety of his salaries
without any deductions for any leaves not utilized. It follows then that the money values
corresponding to these leave benefits both the used and unused have already been taxed
during the year that they were earned. To tax them again when the retiring employee receives
their money value as a form of government concern and appreciation plainly constitutes an
attempt to tax the employee a second time. This is tantamount to double taxation.61
Conclusions
The VAT system, in itself, is intelligently designed, and stands as a fair means to raise revenue. It
has been adopted worldwide by countries hoping to employ an efficient means of taxation. The
concerns I have raised do not detract from my general approval of the VAT system.
I do lament though that our government’s wholehearted adoption of the VAT system is endemic of
what I deem a flaw in our national tax policy in the last few decades. The power of taxation, inherent
in the State and ever so powerful, has been generally employed by our financial planners for a
solitary purpose: the raising of revenue. Revenue generation is a legitimate purpose of taxation, but
standing alone, it is a woefully unsophisticated design. Intelligent tax policy should extend beyond
the singular-minded goal of raising State funds ─ the old-time philosophy behind the taxing schemes
of war-mongering monarchs and totalitarian states ─ and should sincerely explore the concept of
taxation as a means of providing genuine incentives to private enterprise to spur economic growth;
of promoting egalitarian social justice that would allow everyone to their fair share of the nation’s
wealth.
Instead, we are condemned by a national policy driven by the monomania for State revenue. It may
be beyond my oath as a Justice to compel the government to adopt an economic policy in
consonance with my personal views, but I offer these observations since they lie at the very heart of
the noxiousness of the assailed provisions of the E-VAT law. The 70% cap, the 60-month
amortization period and the 5% withholding tax on government transactions were selfishly designed
to increase government revenue at the expense of the survival of local industries.
I am not insensitive to the concerns raised by the respondents as to the dire consequences to the
economy should the E-VAT law be struck down. I am aware that the granting of the petition in G.R.
No. 168461 will negatively affect the cash flow of the government. If that were the only relevant
concern at stake, I would have no problems denying the petition. Unfortunately, under the device
employed in the E-VAT law, the price to be paid for a more sustainable liquidity of the
government’s finances will be the death of local business, and correspondingly, the demise
of our society. It is a measure just as draconian as the standard issue taxes of medieval
tyrants.
I am not normally inclined towards the language of the overwrought, yet if the sky were indeed truly
falling, how else could that fact be communicated. The E-VAT Law is of multiple fatal consequences.
How are we to survive as a nation without the bulwark of private industries? Perhaps the larger
scale, established businesses may ultimately remain standing, but they will be unable to sustain the
void left by the demise of small to medium enterprises. Or worse, domestic industry would be left in
the absolute control of monopolies, combines or cartels, whether dominated by foreigners or local
oligarchs. The destruction of subsisting industries would be bad enough, the destruction of
opportunity and the entrepreneurial spirit would be even more grievous and tragic, as it would mark
as well the end of hope. Taxes may be the lifeblood of the state, but never at the expense of the life
of its subjects.
Accordingly, I VOTE to:
1) DENY the Petitions in G.R. Nos. 168056, 168207, and 168730 for lack of merit;
2) PARTIALLY GRANT the Petition in G.R. Nos. 168463 and declare Section 21 of the E-VAT Law as
unconstitutional;
3) GRANT the Petition in G.R. No. 168461 and declare as unconstitutional Section 8 of Republic Act
No. 9337, insofar as it amends Section 110(A) and (B) of the National Internal Revenue Code
(NIRC) as well as Section 12 of the same law, with respect to its amendment of Section 114(C) of
the NIRC.
DANTE O. TINGA
Associate Justice



Footnotes
1 Republic Act No. 9337. Referred to intext as "E-VAT Law."
2Except insofar as it prays that Section 21 of the E-VAT Law be declared
unconstitutional. Infra.
3 J. Vitug and E. Acosta, Tax Law and Jurisprudence (2nd ed., 2000), at 7-8.
See National Power Corporation v. Province of Albay, G.R. No. 87479, 4 June 1990, 186
4

SCRA 198, 203.

5 See Section 24, Article VI, Constitution.
6The recognized exceptions, both expressly provided by the Constitution, being the tariff
clause under Section 28(2), Article VI, and the powers of taxation of local government units
under Section 5, Article X.
7 G.R. No. 158540, 8 July 2005, 434 SCRA 65.
8 See People v. Vera, 65 Phil. 56, 117 (1937).
9 Decision, infra.
Carpio v. Executive Secretary, GR No. 96409 February 14,1992, 206 SCRA 290,
10

298; citing In re Guarina, 24 Phil. 37.

11 People v. Vera, supra note 8.
12 See Section 2, National Internal Revenue Code.
13There are two eminent tests for valid delegation, the "completeness test" and the "sufficient
standard test". The law must be complete in its essential terms and conditions when it leaves
the legislature so that there will be nothing left for the delegate to do when it reaches him
except enforce it. U.S. v. Ang Tang Ho, 43 Phil. 1, 6-7 (1922). On the other hand, a sufficient
standard is intended to map out the boundaries of the delegate’s authority by defining
legislative policy and indicating the circumstances under which it is to be pursued and
effected; intended to prevent a total transference of legislative power from the legislature to
the delegate.
Decision, infra, citing Alunan v. Mirasol, G.R. No. 108399, 31 July 1997, 276 SCRA 501,
14

513-514.
15Notwithstanding, the Court in Southern Cross did rule that Section 5 of the Safeguard
Measures Act, which required a positive final determination by the Tariff Commission before
the DTI or Agriculture Secretaries could impose general safeguard measures, operated as a
valid restriction and limitation on the exercise by the executive branch of government of its
tariff powers.
16 G.R. No. 115455, 25 August 1994, 235 SCRA 630.
17M. Evans, ‘A Source of Frequent and Obstinate Altercations’: The History and Application of
the Origination Clause.
The Federalist No. 58, at 394 (J. Madison) (J.Cooke ed. 1961), cited in J. M. Medina, The
18

Orignation Clause in the American Constitution: A Comparative Survey, 23 Tulsa Law Journal
2, at 165.
19 Tolentino v. Secretary of Finance, supra note 16 at 661.
20 See Section 27(1), Article VI, Constitution.
21 Tolentino v. Secretary of Finance, supra note 16 at 668.
22 G.R. No. 124360, 5 November 1997, 281 SCRA 330.
23 Id. at 349-350.
24 People v. Tudtud, G.R. No. 144037, 26 September 2003, 412 SCRA 142, 168.
See Section 1, Article III, Constitution. Private corporations and partnerships are persons
25

within the scope of the guaranty insofar as their property is concerned. Smith Bell & Co. v.
Natividad, 40 Phil. 136, 145 (1919).
26 16 C.J.S., at 1150-1151.
27 292 U.S. 40 (1934).
28 Id. at 44.
29 G.R. No. L-59431, 25 July 1984, 130 SCRA 654.
30 Id. at 660-662.
31Justice Isagani Cruz offers the following examples of taxes that contravene the due process
clause: "A tax, for example, that would claim 80 percent of a person’s net income would
clearly be oppressive and could unquestionably struck down as a deprivation of his property
without due process of law. A property tax retroacting to as long as fifty years back would by
tyrannical and unrealistic, as the property might not yet have been then in the possession of
the taxpayer nor, presumably, would he have acquired it had he known of the tax to be
imposed on it." I. Cruz, Constitutional Law, p. 85.
32 "After defining religion, the Court, citing Tanada and Fernando, made this statement, viz:
The constitutional guaranty of the free exercise and enjoyment of religious profession and
worship carries with it the right to disseminate religious information. Any restraint of such
right can only be justified like other restraints of freedom of expression on the grounds that
there is a clear and present danger of any substantive evil which the State has the right to
prevent. (Tanada and Fernando on the Constitution of the Philippines, vol. 1, 4th ed., p. 297)
(emphasis supplied)
This was the Court's maiden unequivocal affirmation of the "clear and present danger" rule in
the religious freedom area, and in Philippine jurisprudence, for that matter." Estrada v.
Escritor, A.M. No. P-02-1651, 4 August 2003, 408 SCRA 1.
33 Separate Opinion, infra.
34 Ibid.
Art. 2, European Commission First Council Directive 67/227 of 11 April 1967 on the
35

Harmonization of Legislation of Member States Concerning Turnover Taxes, 1971 O.J. (L 71)
1301.
36 Liam & Ebrill, The Modern VAT.
37"The most basic law in finance!" Understand the Time Value of Money. http://www.free-
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38

Last visited, 30 August 2005.

39There is also the option for the business to go underground and avoid VAT registration, and
consequently avoid remitting VAT payments to the government. It would be facetious though
for a Justice of the Supreme Court to characterize this illegal option as "viable."
40In Joseph Heller’s Catch-22, Yossarian, a World War II pilot reasoned that if he feigned
insanity, he would be necessarily exempt from assignment to dangerous bombing runs in
enemy territory. However, his superiors reasoned that if he were truly insane, he then would
be heedless enough to be sent on those dangerous bombing runs he had sought to avoid in
the first place.
41 Section 20, Article II, Constitution.
42The due process clause alone is sufficient to invalidate any contravening taxing statute. On
the other hand, Section 20, Article II on its own might not be similarly sufficient. However, if
the taxing statute violates both the due process clause and Section 20, Article II, then the
impetus to strike down the offending law becomes even more compelling, so as to defeat the
generalist invocation of the State’s inherent powers of taxation.
Pangloss was a famed character ridiculed in Voltaire’s Candide, renowned for his absolute
43

blind faith in optimism, no matter how dire the circumstances.

44 Id. at 29-30.
45 Decision, infra.
This is confirmed by the BIR in its draft Revenue Memorandum Circular dated 12 July
46

2005, submitted by respondents in its Compliance dated 16 August 2005:

"[Q]: Is there a way by which such unapplied excess input tax credits can be claimed for
refund or issuance of TCC?
[A]: The only time application for refund/issuance of TCC is allowed for input taxes
incurred on the purchase of domestic goods/services is when the same are directly
attributable to zero-rated or effectively zero-rated sales (of goods/services). xxx
For those engaged purely in domestic transactions, the only time that unapplied input
taxes may be applied for the issuance of TCC is when the VAT registration of the
taxpayer is cancelled due to retirement or cessation of business or change in the
status of the taxpayer as a VAT registered taxpayer. As provided for in Section 112(B0, in
 case of cancellation of VAT registration due to cessation of business or change in status of
taxpayer, the only recourse given to such taxpayer is to apply for the issuance of TCC on his
excess input tax credits which may be used in payment of his other internal revenue taxes,
application for refund thereof is not an option."
See Annexes "18-N" and "18-O", Compliance dated 12 July 2005.
See SRC Rule 68(1)(b)(c), Implementing Rules and Regulations to the Securities and
47

Regulations Code.
48 Section 34, International Accounting Standards 12.
49 Section 36, id.
50In his Separate Opinion, Justice Panganiban asserts that the deferred input tax credit is not
really confiscated by the government, as it remains an asset in the accounting records of a
business. See Separate Opinion, infra. By the same logic, a law requiring all businesses to
surrender to the government 100% of its gross sales subject to reimbursement only after a
five year period, would pass muster, since the amount is "not really confiscated by the
government as it remains an asset in the accounting records of a business."
51Justice Panganiban cites United Paracale Mining Co. v. De la Rosa (cited as 221 SCRA
108, 115, April 7, 1993) to bolster his stated position that ""[t]here is no vested right in a
deferred input tax account; it is a mere statutory privilege". Separate Opinion, infra. United
Paracale does not pertain to any deferred input taxes, but instead to "mining claims which
according to [petitioners] is private property would constitute impairment of vested rights
since by shifting the forum of the petitioner’s case from the courts to the Bureau of Mines…
[the] substantive rights to full protection of its property rights shall be greatly impaired."
United Paracale Mining Co. v. Hon. Dela Rosa, G.R. Nos. 63786-87, 7 April 1993, 221 SCRA
108, `115. Clearly, United Paracale is not even a tax case, involving as it does, questions of
the jurisdiction of the Bureau of Mines.
52 See Part III, Paragraph 3, Revenue Memorandum Ruling No. 1-2002.
53 Section 32, International Accounting Standards 12.
54 Supra note 47.
55 Supra note 9.
56 Section 3, Article XIII, Constitution.
Kapatiran ng Mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. et al. v. Tan, G.R. No.
57

L-81311, 30 June 1988.

58 J. Vitug and E. Acosta, supra note 3 at 41.
Pepsi-Cola Bottling Co. of the Philippines, Inc. v. Municipality of Tanauan, G.R. No.
59

L-31156, 27 February 1976, 69 SCRA 460, 466-67; citing CIR v. Lednicky, L-18169, July 31,
1964, 11 SACRA 609 and SMB, Inc. v. City of Cebu, L-20312, February 26, 1972, 43 SCRA
280.
60 A.M. No. 90-6-015-SC, 18 October 1990, 190 SCRA 851.
61 Id. at 856.


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EN BANC
G.R. No. 168056 – ABAKADA GURO PARTY LIST (Formerly AASJAS) OFFICERS SAMSON S.
ALCANTARA and ED VINCENT S. ALBANO v. THE HONORABLE EXECUTIVE SECRETARY
EDUARDO ERMITA, ET AL.
G.R. No. 168207 – AQUILINO Q. PIMENTEL, JR., ET AL. v. EXECUTIVE SECRETARY
EDUARDO R. ERMITA
G.R. No. 168461 – ASSOCIATION OF PILIPINAS SHELL DEALERS, INC., ET AL. v. CESAR V.
PURISIMA, ET AL.
G.R. No. 168463 – FRANCIS JOSEPH G. ESCUDERO, ET AL. v. CESAR V. PURISIMA, ET AL.
G.R. No. 168730 – BATAAN GOVERNOR ENRIQUE T. GARCIA, JR., ET AL. v. HON. EDUARDO
R. ERMITA, ET AL.
Promulgated:
September 1, 2005
x--------------------------------------------------x
CONCURRING OPINION
CHICO-NAZARIO, J.:
Five petitions were filed before this Court questioning the constitutionality of Republic Act No. 9337.
Rep. Act No. 9337, which amended certain provisions of the National Internal Revenue Code of
1997,1 by essentially increasing the tax rates and expanding the coverage of the Value-Added Tax
(VAT). Undoubtedly, during these financially difficult times, more taxes would be additionally
burdensome to the citizenry. However, like a bitter pill, all Filipino citizens must bear the burden of
these new taxes so as to raise the much-needed revenue for the ailing Philippine economy. Taxation
is the indispensable and inevitable price for a civilized society, and without taxes, the government
would be paralyzed.2 Without the tax reforms introduced by Rep. Act No. 9337, the then Secretary of
the Department of Finance, Cesar V. Purisima, assessed that "all economic scenarios point to the
National Government’s inability to sustain its precarious fiscal position, resulting in severe erosion of
investor confidence and economic stagnation."3
Finding Rep. Act No. 9337 as not unconstitutional, both in its procedural enactment and in its
substance, I hereby concur in full in the foregoing majority opinion, penned by my esteemed
colleague, Justice Ma. Alicia Austria-Martinez.
According to petitioners, the enactment of Rep. Act No. 9337 by Congress was riddled with
irregularities and violations of the Constitution. In particular, they alleged that: (1) The Bicameral
Conference Committee exceeded its authority to merely settle or reconcile the differences among
House Bills No. 3555 and 3705 and Senate Bill No. 1950, by including in Rep. Act No. 9337
provisions not found in any of the said bills, or deleting from Rep. Act No. 9337 or amending
provisions therein even though they were not in conflict with the provisions of the other bills; (2) The
amendments introduced by the Bicameral Conference Committee violated Article VI, Section 26(2),
of the Constitution which forbids the amendment of a bill after it had passed third reading; and (3)
Rep. Act No. 9337 contravened Article VI, Section 24, of the Constitution which prescribes that
revenue bills should originate exclusively from the House of Representatives.
Invoking the expanded power of judicial review granted to it by the Constitution of 1987, petitioners
are calling upon this Court to look into the enactment of Rep. Act No. 9337 by Congress and,
consequently, to review the applicability of the enrolled bill doctrine in this jurisdiction. Under the said
doctrine, the enrolled bill, as signed by the Speaker of the House of Representatives and the Senate
President, and certified by the Secretaries of both Houses of Congress, shall be conclusive proof of
its due enactment.4
Petitioners’ arguments failed to convince me of the wisdom of abandoning the enrolled bill doctrine. I
believe that it is more prudent for this Court to remain conservative and to continue its adherence to
the enrolled bill doctrine, for to abandon the said doctrine would be to open a Pandora’s Box, giving
rise to a situation more fraught with evil and mischief. Statutes enacted by Congress may not attain
finality or conclusiveness unless declared so by this Court. This would undermine the authority of our
statutes because despite having been signed and certified by the designated officers of Congress,
their validity would still be in doubt and their implementation would be greatly hampered by
allegations of irregularities in their passage by the Legislature. Such an uncertainty in the statutes
would indubitably result in confusion and disorder. In all probability, it is the contemplation of such a
scenario that led an American judge to proclaim, thus –
. . . Better, far better, that a provision should occasionally find its way into the statute through
mistake, or even fraud, than, that every Act, state and national, should at any and all times be liable
to put in issue and impeached by the journals, loose papers of the Legislature, and parol evidence.
Such a state of uncertainty in the statute laws of the land would lead to mischiefs absolutely
intolerable. . . .5
Moreover, this Court must attribute good faith and accord utmost respect to the acts of a co-equal
branch of government. While it is true that its jurisdiction has been expanded by the Constitution, the
exercise thereof should not violate the basic principle of separation of powers. The expanded
jurisdiction does not contemplate judicial supremacy over the other branches of government. Thus,
in resolving the procedural issues raised by the petitioners, this Court should limit itself to a
determination of compliance with, or conversely, the violation of a specified procedure in the
Constitution for the passage of laws by Congress, and not of a mere internal rule of proceedings of
its Houses.
It bears emphasis that most of the irregularities in the enactment of Rep. Act No. 9337 concern the
amendments introduced by the Bicameral Conference Committee. The Constitution is silent on such
a committee, it neither prescribes the creation thereof nor does it prohibit it. The creation of the
Bicameral Conference Committee is authorized by the Rules of both Houses of Congress. That the
Rules of both Houses of Congress provide for the creation of a Bicameral Conference Committee is
within the prerogative of each House under the Constitution to determine its own rules of
proceedings.
The Bicameral Conference Committee is a creation of necessity and practicality considering that our
Congress is composed of two Houses, and it is highly improbable that their respective bills on the
same subject matter shall always be in accord and consistent with each other. Instead of all their
members, only the appointed representatives of both Houses shall meet to reconcile or settle the
differences in their bills. The resulting bill from their meetings, embodied in the Bicameral
Conference Report, shall be subject to approval and ratification by both Houses, voting separately.
It does perplex me that members of both Houses would again ask the Court to define and limit the
powers of the Bicameral Conference Committee when such committee is of their own creation. In a
number of cases,6 this Court already made a determination of the extent of the powers of the
Bicameral Conference Committee after taking into account the existing Rules of both Houses of
Congress. In gist, the power of the Bicameral Conference Committee to reconcile or settle the
differences in the two Houses’ respective bills is not limited to the conflicting provisions of the bills;
but may include matters not found in the original bills but germane to the purpose thereof. If both
Houses viewed the pronouncement made by this Court in such cases as extreme or beyond what
they intended, they had the power to amend their respective Rules to clarify or limit even further the
scope of the authority which they grant to the Bicameral Conference Committee. Petitioners’
grievance that, unfortunately, they cannot bring about such an amendment of the Rules on the
Bicameral Conference Committee because they are members of the minority, deserves scant
consideration. That the majority of the members of both Houses refuses to amend the Rules on the
Bicameral Conference Committee is an indication that it is still satisfied therewith. At any rate, this is
how democracy works – the will of the majority shall be controlling.
Worth reiterating herein is the concluding paragraph in Arroyo v. De Venecia,7 which reads –
It would be unwarranted invasion of the prerogative of a coequal department for this Court either to
set aside a legislative action as void because the Court thinks the house has disregarded its own
rules of procedure, or to allow those defeated in the political arena to seek a rematch in the judicial
forum when petitioners can find remedy in that department. The Court has not been invested with a
roving commission to inquire into complaints, real or imagined, of legislative skullduggery. It would
be acting in excess of its power and would itself be guilty of grave abuse of its discretion were it to
do so. . . .
Present jurisprudence allows the Bicameral Conference Committee to amend, add, and delete
provisions of the Bill under consideration, even in the absence of conflict thereon between the
Senate and House versions, but only so far as said provisions are germane to the purpose of the
Bill.8 Now, there is a question as to whether the Bicameral Conference Committee, which produced
Rep. Act No. 9337, exceeded its authority when it included therein amendments of provisions of the
National Internal Revenue Code of 1997 not related to VAT.
Although House Bills No. 3555 and 3705 were limited to the amendments of the provisions on VAT
of the National Internal Revenue Code of 1997, Senate Bill No. 1950 had a much wider scope and
included amendments of other provisions of the said Code, such as those on income, percentage,
and excise taxes. It should be borne in mind that the very purpose of these three Bills and,
subsequently, of Rep. Act No. 9337, was to raise additional revenues for the government to address
the dire economic situation of the country. The National Internal Revenue Code of 1997, as its title
suggests, is the single Code that governs all our national internal revenue taxes. While it does cover
different taxes, all of them are imposed and collected by the national government to raise revenues.
If we have one Code for all our national internal revenue taxes, then there is no reason why we
cannot have a single statute amending provisions thereof even if they involve different taxes under
separate titles. I hereby submit that the amendments introduced by the Bicameral Conference
Committee to non-VAT provisions of the National Internal Revenue Code of 1997 are not
unconstitutional for they are germane to the purpose of House Bills No. 3555 and 3705 and Senate
Bill No. 1950, which is to raise national revenues.
Furthermore, the procedural issues raised by the petitioners were already addressed and resolved
by this Court in Tolentino v. Executive Secretary.9 Since petitioners failed to proffer novel factual or
legal argument in support of their positions that were not previously considered by this Court in the
same case, then I am not compelled to depart from the conclusions made therein.
The majority opinion has already thoroughly discussed each of the substantial issues raised by the
petitioners. I would just wish to discuss additional matters pertaining to the petition of the petroleum
dealers in G.R. No. 168461.
They claim that the provision of Rep. Act No. 9337 limiting their input VAT credit to only 70% of their
output VAT deprives them of their property without due process of law. They argue further that such
70% cap violates the equal protection and uniformity of taxation clauses under Article III, Section 1,
and Article VI, Section 28(1), respectively, of the Constitution, because it will unduly prejudice
taxpayers who have high input VAT and who, because of the cap, cannot fully utilize their input VAT
as credit.
I cannot sustain the petroleum dealers’ position for the following reasons –
First, I adhere to the view that the input VAT is not a property to which the taxpayer has vested
rights. Input VAT consists of the VAT a VAT-registered person had paid on his purchases or
importation of goods, properties, and services from a VAT-registered supplier; more simply, it is VAT
paid. It is not, as averred by petitioner petroleum dealers, a property that the taxpayer acquired for
valuable consideration.10 A VAT-registered person incurs input VAT because he complied with the
National Internal Revenue Code of 1997, which imposed the VAT and made the payment thereof
mandatory; and not because he paid for it or purchased it for a price.
Generally, when one pays taxes to the government, he cannot expect any direct and concrete
benefit to himself for such payment. The benefit of payment of taxes shall redound to the society as
a whole. However, by virtue of Section 110(A) of the National Internal Revenue Code of 1997, prior
to its amendment by Rep. Act No. 9337, a VAT-registered person is allowed, subject to certain
substantiation requirements, to credit his input VAT against his output VAT.
Output VAT is the VAT imposed by the VAT-registered person on his own sales of goods, properties,
and services or the VAT he passes on to his buyers. Hence, the VAT-registered person selling the
goods, properties, and services does not pay for the output VAT; said output VAT is paid for by his
consumers and he only collects and remits the same to the government.
The crediting of the input VAT against the output VAT is a statutory privilege, granted by Section 110
of the National Internal Revenue Code of 1997. It gives the VAT-registered person the opportunity to
recover the input VAT he had paid, so that, in effect, the input VAT does not constitute an additional
cost for him. While it is true that input VAT credits are reported as assets in a VAT-registered
person’s financial statements and books of account, this accounting treatment is still based on the
statutory provision recognizing the input VAT as a credit. Without Section 110 of the National Internal
Revenue Code of 1997, then the accounting treatment of any input VAT will also change and may no
longer be booked outright as an asset. Since the privilege of an input VAT credit is granted by law,
then an amendment of such law may limit the exercise of or may totally withdraw the privilege.
The amendment of Section 110 of the National Internal Revenue Code of 1997 by Rep. Act No.
9337, which imposed the 70% cap on input VAT credits, is a legitimate exercise by Congress of its
law-making power. To say that Congress may not trifle with Section 110 of the National Internal
Revenue Code of 1997 would be to violate a basic precept of constitutional law – that no law is
irrepealable.11 There can be no vested right to the continued existence of a statute, which precludes
its change or repeal.12
It bears to emphasize that Rep. Act No. 9337 does not totally remove the privilege of crediting the
input VAT against the output VAT. It merely limits the amount of input VAT one may credit against his
output VAT per quarter to an amount equivalent to 70% of the output VAT. What is more, any input
VAT in excess of the 70% cap may be carried-over to the next quarter.13 It is certainly a departure
from the VAT crediting system under Section 110 of the National Internal Revenue Code of 1997, but
it is an innovation that Congress may very well introduce, because –
VAT will continue to evolve from its pioneering original structure. Dynamically, it will be subjected to
reforms that will make it conform to many factors, among which are: the changing requirements of
government revenue; the social, economic and political vicissitudes of the times; and the conflicting
interests in our society. In the course of its evolution, it will be injected with some oddities and
inevitably transformed into a structure which its revisionists believe will be an improvement overtime.
14

Second, assuming for the sake of argument, that the input VAT credit is indeed a property, the
petroleum dealers’ right thereto has not vested. A right is deemed vested and subject to
constitutional protection when –
". . . [T]he right to enjoyment, present or prospective, has become the property of some particular
person or persons as a present interest. The right must be absolute, complete, and unconditional,
independent of a contingency, and a mere expectancy of future benefit, or a contingent interest in
property founded on anticipated continuance of existing laws, does not constitute a vested right. So,
inchoate rights which have not been acted on are not vested." (16 C. J. S. 214-215)15
Under the National Internal Revenue Code of 1997, before it was amended by Rep. Act No. 9337,
the sale or importation of petroleum products were exempt from VAT, and instead, were subject to
excise tax.16 Petroleum dealers did not impose any output VAT on their sales to consumers. Since
they had no output VAT against which they could credit their input VAT, they shouldered the costs of
the input VAT that they paid on their purchases of goods, properties, and services. Their sales not
being subject to VAT, the petroleum dealers had no input VAT credits to speak of.
It is only under Rep. Act No. 9337 that the sales by the petroleum dealers have become subject to
VAT and only in its implementation may they use their input VAT as credit against their output VAT.
While eager to use their input VAT credit accorded to it by Rep. Act No. 9337, the petroleum dealers
reject the limitation imposed by the very same law on such use.
It should be remembered that prior to Rep. Act No. 9337, the petroleum dealers’ input VAT credits
were inexistent – they were unrecognized and disallowed by law. The petroleum dealers had no
such property called input VAT credits. It is only rational, therefore, that they cannot acquire vested
rights to the use of such input VAT credits when they were never entitled to such credits in the first
place, at least, not until Rep. Act No. 9337.
My view, at this point, when Rep. Act No. 9337 has not yet even been implemented, is that
petroleum dealers’ right to use their input VAT as credit against their output VAT unlimitedly has not
vested, being a mere expectancy of a future benefit and being contingent on the continuance of
Section 110 of the National Internal Revenue Code of 1997, prior to its amendment by Rep. Act No.
9337.
Third, although the petroleum dealers presented figures and computations to support their
contention that the cap shall lead to the demise of their businesses, I remain unconvinced.
Rep. Act No. 9337, while imposing the 70% cap on input VAT credits, allows the taxpayer to carry-
over to the succeeding quarters any excess input VAT. The petroleum dealers presented a situation
wherein their input VAT would always exceed 70% of their output VAT, and thus, their excess input
VAT will be perennially carried-over and would remain unutilized. Even though they consistently
questioned the 70% cap on their input VAT credits, the petroleum dealers failed to establish what is
the average ratio of their input VAT vis-à-vis their output VAT per quarter. Without such fact, I
consider their objection to the 70% cap arbitrary because there is no basis therefor.
On the other, I find that the 70% cap on input VAT credits was not imposed by Congress arbitrarily.
Members of the Bicameral Conference Committee settled on the said percentage so as to ensure
that the government can collect a minimum of 30% output VAT per taxpayer. This is to put a VAT-
taxpayer, at least, on equal footing with a VAT-exempt taxpayer under Section 109(V) of the National
Internal Revenue Code, as amended by Rep. Act No. 9337.17 The latter taxpayer is exempt from VAT
on the basis that his sale or lease of goods or properties or services do not exceed ₱1,500,000;
instead, he is subject to pay a three percent (3%) tax on his gross receipts in lieu of the VAT.18 If a
taxpayer with presumably a smaller business is required to pay three percent (3%) gross receipts
tax, a type of tax which does not even allow for any crediting, a VAT-taxpayer with a bigger business
should be obligated, likewise, to pay a minimum of 30% output VAT (which should be equivalent to
3% of the gross selling price per good or property or service sold). The cap assures the government
a collection of at least 30% output VAT, contributing to an improved cash flow for the government.
Attention is further called to the fact that the output VAT is the VAT imposed on the sales by a VAT-
taxpayer; it is paid by the purchasers of the goods, properties, and services, and merely collected
through the VAT-registered seller. The latter, therefore, serves as a collecting agent for the
government. The VAT-registered seller is merely being required to remit to the government a
minimum of 30% of his output VAT collection.
Fourth, I give no weight to the figures and computations presented before this Court by the
petroleum dealers, particularly the supposed quarterly profit and loss statement of a "typical dealer."
How these data represent the financial status of a typical dealer, I would not know when there was
no effort to explain the manner by which they were surveyed, collated, and averaged out. Without
establishing their source therefor, the figures and computations presented by the petroleum dealers
are merely self-serving and unsubstantiated, deserving scant consideration by this Court. Even
assuming that these figures truly represent the financial standing of petroleum dealers, the
introduction and application thereto of the VAT factor, which forebode the collapse of said petroleum
dealers’ businesses, would be nothing more than an anticipated damage – an injury that may or may
not happen. To resolve their petition on this basis would be premature and contrary to the
established tenet of ripeness of a cause of action before this Court could validly exercise its power of
judicial review.
Fifth, in response to the contention of the petroleum dealers during oral arguments before this Court
that they cannot pass on to the consumers the VAT burden and increase the prices of their goods, it
is worthy to quote below this Court’s ruling in Churchill v. Concepcion,19 to wit –
It will thus be seen that the contention that the rates charged for advertising cannot be raised is
purely hypothetical, based entirely upon the opinion of the plaintiffs, unsupported by actual test, and
that the plaintiffs themselves admit that a number of other persons have voluntarily and without
protest paid the tax herein complained of. Under these circumstances, can it be held as a matter of
fact that the tax is confiscatory or that, as a matter of law, the tax is unconstitutional? Is the exercise
of the taxing power of the Legislature dependent upon and restricted by the opinion of two interested
witnesses? There can be but one answer to these questions, especially in view of the fact that others
are paying the tax and presumably making reasonable profit from their business.
As a final observation, I perceive that what truly underlies the opposition to Rep. Act No. 9337 is not
the question of its constitutionality, but rather the wisdom of its enactment. Would it truly raise
national revenue and benefit the entire country, or would it only increase the burden of the Filipino
people? Would it contribute to a revival of our economy or only contribute to the difficulties and
eventual closure of businesses? These are issues that we cannot resolve as the Supreme Court. As
this Court explained in Agustin v. Edu,20 to wit –
It does appear clearly that petitioner’s objection to this Letter of Instruction is not premised on lack of
power, the justification for a finding of unconstitutionality, but on the pessimistic, not to say negative,
view he entertains as to its wisdom. That approach, it put it at its mildest, is distinguished, if that is
the appropriate word, by its unorthodoxy. It bears repeating "that this Court, in the language of
Justice Laurel, ‘does not pass upon questions of wisdom, justice or expediency of legislation.’ As
expressed by Justice Tuason: ‘It is not the province of the courts to supervise legislation and keep it
within the bounds of propriety and common sense. That is primarily and exclusively a legislative
concern.’ There can be no possible objection then to the observation of Justice Montemayor: ‘As
long as laws do not violate any Constitutional provision, the Courts merely interpret and apply them
regardless of whether or not they are wise or salutary.’ For they, according to Justice Labrador, ‘are
not supposed to override legitimate policy and * * * never inquire into the wisdom of the law.’ It is
thus settled, to paraphrase Chief Justice Concepcion in Gonzales v. Commission on Elections, that
only congressional power or competence, not the wisdom of the action taken, may be the basis for
declaring a statute invalid. This is as it ought to be. The principle of separation of powers has in the
main wisely allocated the respective authority of each department and confined its jurisdiction to
such sphere. There would then be intrusion not allowable under the Constitution if on a matter left to
the discretion of a coordinate branch, the judiciary would substitute its own…"21
To reiterate, we cannot substitute our discretion for Congress, and even though there are provisions
in Rep. Act No. 9337 which we may believe as unwise or iniquitous, but not unconstitutional, we
cannot strike them off by invoking our power of judicial review. In such a situation, the recourse of
the people is not judicial, but rather political. If they severely doubt the wisdom of the present
Congress for passing a statute such as Rep. Act No. 9337, then they have the power to hold the
members of said Congress accountable by using their voting power in the next elections.
In view of the foregoing, I vote for the denial of the present petitions and the upholding of the
constitutionality of Rep. Act No. 9337 in its entirety.
MINITA V. CHICO-NAZARIO
EN BANC
G.R. No. 168056 October 18, 2005
Agenda for Item No. 45
G.R. No. 168056 (ABAKADA Guro Party List Officer Samson S. Alcantara, et al. vs. The Hon.
Executive Secretary Eduardo R. Ermita); G.R. No. 168207 (Aquilino Q. Pimentel, Jr., et
al. vs. Executive Secretary Eduardo R. Ermita, et al.); G.R. No. 168461 (Association of
Pilipinas Shell Dealers, Inc., et al. vs. Cesar V. Purisima, et al.); G.R. No. 168463 (Francis
Joseph G. Escudero vs. Cesar V. Purisima, et al); and G.R. No. 168730 (Bataan Governor
Enrique T. Garcia, Jr. vs. Hon. Eduardo R. Ermita, et al.)
RESOLUTION
For resolution are the following motions for reconsideration of the Court’s Decision dated September
1, 2005 upholding the constitutionality of Republic Act No. 9337 or the VAT Reform Act1:
1) Motion for Reconsideration filed by petitioners in G.R. No. 168463, Escudero, et al., on the
following grounds:
A. THE DELETION OF THE "NO PASS ON PROVISIONS" FOR THE SALE OF PETROLEUM
PRODUCTS AND POWER GENERATION SERVICES CONSTITUTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION ON THE PART OF THE
BICAMERAL CONFERENCE COMMITTEE.
B. REPUBLIC ACT NO. 9337 GROSSLY VIOLATES THE CONSTITUTIONAL IMPERATIVE ON
EXCLUSIVE ORIGINATION OF REVENUE BILLS UNDER §24, ARTICLE VI, 1987 PHILIPPINE
CONSTITUTION.
C. REPUBLIC ACT NO. 9337’S STAND-BY AUTHORITY TO THE EXECUTIVE TO INCREASE THE
VAT RATE, ESPECIALLY ON ACCOUNT OF THE EFFECTIVE RECOMMENDATORY POWER
GRANTED TO THE SECRETARY OF FINANCE, CONSTITUTES UNDUE DELEGATION OF
LEGISLATIVE AUTHORITY.
2) Motion for Reconsideration of petitioner in G.R. No. 168730, Bataan Governor Enrique T. Garcia,
Jr., with the argument that burdening the consumers with significantly higher prices under a VAT
regime vis-à-vis a 3% gross tax renders the law unconstitutional for being arbitrary, oppressive and
inequitable.
and
3) Motion for Reconsideration by petitioners Association of Pilipinas Shell Dealers, Inc. in G.R. No.
168461, on the grounds that:
I. This Honorable Court erred in upholding the constitutionality of Section 110(A)(2) and Section
110(B) of the NIRC, as amended by the EVAT Law, imposing limitations on the amount of input VAT
that may be claimed as a credit against output VAT, as well as Section 114(C) of the NIRC, as
amended by the EVAT Law, requiring the government or any of its instrumentalities to withhold a 5%
final withholding VAT on their gross payments on purchases of goods and services, and finding that
the questioned provisions:
A. are not arbitrary, oppressive and consfiscatory as to amount to a deprivation of property without
due process of law in violation of Article III, Section 1 of the 1987 Philippine Constitution;
B. do not violate the equal protection clause prescribed under Article III, Section 1 of the 1987
Philippine Constitution; and
C. apply uniformly to all those belonging to the same class and do not violate Article VI, Section
28(1) of the 1987 Philippine Constitution.
II. This Honorable Court erred in upholding the constitutionality of Section 110(B) of the NIRC, as
amended by the EVAT Law, imposing a limitation on the amount of input VAT that may be claimed as
a credit against output VAT notwithstanding the finding that the tax is not progressive as exhorted by
Article VI, Section 28(1) of the 1987 Philippine Constitution.
Respondents filed their Consolidated Comment. Petitioner Garcia filed his Reply.
Petitioners Escudero, et al., insist that the bicameral conference committee should not even have
acted on the no pass-on provisions since there is no disagreement between House Bill Nos. 3705
and 3555 on the one hand, and Senate Bill No. 1950 on the other, with regard to the no pass-
on provision for the sale of service for power generation because both the Senate and the House
were in agreement that the VAT burden for the sale of such service shall not be passed on to the
end-consumer. As to the no pass-on provision for sale of petroleum products, petitioners argue that
the fact that the presence of such a no pass-on provision in the House version and the absence
thereof in the Senate Bill means there is no conflict because "a House provision cannot be in conflict
with something that does not exist."
Such argument is flawed. Note that the rules of both houses of Congress provide that a conference
committee shall settle the "differences" in the respective bills of each house. Verily, the fact that a no
pass-on provision is present in one version but absent in the other, and one version intends two
industries, i.e., power generation companies and petroleum sellers, to bear the burden of the tax,
while the other version intended only the industry of power generation, transmission and distribution
to be saddled with such burden, clearly shows that there are indeed differences between the bills
coming from each house, which differences should be acted upon by the bicameral conference
committee. It is incorrect to conclude that there is no clash between two opposing forces with regard
to the no pass-on provision for VAT on the sale of petroleum products merely because such
provision exists in the House version while it is absent in the Senate version. It is precisely the
absence of such provision in the Senate bill and the presence thereof in the House bills that causes
the conflict. The absence of the provision in the Senate bill shows the Senate’s disagreement to the
intention of the House of Representatives make the sellers of petroleum bear the burden of the VAT.
Thus, there are indeed two opposing forces: on one side, the House of Representatives which wants
petroleum dealers to be saddled with the burden of paying VAT and on the other, the Senate which
does not see it proper to make that particular industry bear said burden. Clearly, such conflicts and
differences between the no pass-on provisions in the Senate and House bills had to be acted upon
by the bicameral conference committee as mandated by the rules of both houses of Congress.
Moreover, the deletion of the no pass-on provision made the present VAT law more in consonance
with the very nature of VAT which, as stated in the Decision promulgated on September 1, 2005, is a
tax on spending or consumption, thus, the burden thereof is ultimately borne by the end-consumer.
Escudero, et al., then claim that there had been changes introduced in the Rules of the House of
Representatives regarding the conduct of the House panel in a bicameral conference committee,
since the time of Tolentino vs. Secretary of Finance2 to act as safeguards against possible abuse of
authority by the House members of the bicameral conference committee. Even assuming that the
rule requiring the House panel to report back to the House if there are substantial differences in the
House and Senate bills had indeed been introduced after Tolentino, the Court stands by its ruling
that the issue of whether or not the House panel in the bicameral conference committee complied
with said internal rule cannot be inquired into by the Court. To reiterate, "mere failure to conform to
parliamentary usage will not invalidate the action (taken by a deliberative body) when the requisite
number of members have agreed to a particular measure."3
Escudero, et. al., also contend that Republic Act No. 9337 grossly violates the constitutional
imperative on exclusive origination of revenue bills under Section 24 of Article VI of the Constitution
when the Senate introduced amendments not connected with VAT.
The Court is not persuaded.
Article VI, Section 24 of the Constitution provides:
Sec. 24 All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of
local application, and private bills shall originate exclusively in the House of Representatives, but the
Senate may propose or concur with amendments.
Section 24 speaks of origination of certain bills from the House of Representatives which has been
interpreted in the Tolentino case as follows:
… To begin with, it is not the law — but the revenue bill — which is required by the Constitution to
"originate exclusively" in the House of Representatives. It is important to emphasize this, because a
bill originating in the House may undergo such extensive changes in the Senate that the result may
be a rewriting of the whole … At this point, what is important to note is that, as a result of the Senate
action, a distinct bill may be produced. To insist that a revenue statute — and not only the bill which
initiated the legislative process culminating in the enactment of the law — must substantially be the
same as the House bill would be to deny the Senate's power not only to "concur with amendments"
but also to " propose amendments." It would be to violate the coequality of legislative power of the
two houses of Congress and in fact make the House superior to the Senate.
… Given, then, the power of the Senate to propose amendments, the Senate can propose its own
version even with respect to bills which are required by the Constitution to originate in the House.
...
Indeed, what the Constitution simply means is that the initiative for filing revenue, tariff, or tax bills,
bills authorizing an increase of the public debt, private bills and bills of local application must come
from the House of Representatives on the theory that, elected as they are from the districts, the
members of the House can be expected to be more sensitive to the local needs and problems. On
the other hand, the senators, who are elected at large, are expected to approach the same problems
from the national perspective. Both views are thereby made to bear on the enactment of such laws.4
Clearly, after the House bills as approved on third reading are duly transmitted to the Senate, the
Constitution states that the latter can propose or concur with amendments. The Court finds that the
subject provisions found in the Senate bill are within the purview of such constitutional provision as
declared in the Tolentino case.
The intent of the House of Representatives in initiating House Bill Nos. 3555 and 3705 was to solve
the country’s serious financial problems. It was stated in the respective explanatory notes that there
is a need for the government to make significant expenditure savings and a credible package of
revenue measures. These measures include improvement of tax administration and control and
leakages in revenues from income taxes and value added tax. It is also stated that one opportunity
that could be beneficial to the overall status of our economy is to review existing tax rates, evaluating
the relevance given our present conditions. Thus, with these purposes in mind and to accomplish
these purposes for which the house bills were filed, i.e., to raise revenues for the government, the
Senate introduced amendments on income taxes, which as admitted by Senator Ralph Recto, would
yield about ₱10.5 billion a year.
Moreover, since the objective of these house bills is to raise revenues, the increase in corporate
income taxes would be a great help and would also soften the impact of VAT measure on the
consumers by distributing the burden across all sectors instead of putting it entirely on the shoulders
of the consumers.
As to the other National Internal Revenue Code (NIRC) provisions found in Senate Bill No.
1950, i.e., percentage taxes, franchise taxes, amusement and excise taxes, these provisions are
needed so as to cushion the effects of VAT on consumers. As we said in our decision, certain goods
and services which were subject to percentage tax and excise tax would no longer be VAT exempt,
thus, the consumer would be burdened more as they would be paying the VAT in addition to these
taxes. Thus, there is a need to amend these sections to soften the impact of VAT. The Court finds no
reason to reverse the earlier ruling that the Senate introduced amendments that are germane to the
subject matter and purposes of the house bills.
Petitioners Escudero, et al., also reiterate that R.A. No. 9337’s stand- by authority to the Executive to
increase the VAT rate, especially on account of the recommendatory power granted to the Secretary
of Finance, constitutes undue delegation of legislative power. They submit that the recommendatory
power given to the Secretary of Finance in regard to the occurrence of either of two events using the
Gross Domestic Product (GDP) as a benchmark necessarily and inherently required extended
analysis and evaluation, as well as policy making.
There is no merit in this contention. The Court reiterates that in making his recommendation to the
President on the existence of either of the two conditions, the Secretary of Finance is not acting as
the alter ego of the President or even her subordinate. He is acting as the agent of the legislative
department, to determine and declare the event upon which its expressed will is to take effect. The
Secretary of Finance becomes the means or tool by which legislative policy is determined and
implemented, considering that he possesses all the facilities to gather data and information and has
a much broader perspective to properly evaluate them. His function is to gather and collate statistical
data and other pertinent information and verify if any of the two conditions laid out by Congress is
present. Congress granted the Secretary of Finance the authority to ascertain the existence of a fact,
namely, whether by December 31, 2005, the value-added tax collection as a percentage of GDP of
the previous year exceeds two and four-fifth percent (24/5%) or the national government deficit as a
percentage of GDP of the previous year exceeds one and one-half percent (1½%). If either of these
two instances has occurred, the Secretary of Finance, by legislative mandate, must submit such
information to the President. Then the 12% VAT rate must be imposed by the President effective
January 1, 2006. Congress does not abdicate its functions or unduly delegate power when it
describes what job must be done, who must do it, and what is the scope of his authority; in our
complex economy that is frequently the only way in which the legislative process can go
forward. There is no undue delegation of legislative power but only of the discretion as to the
execution of a law. This is constitutionally permissible. Congress did not delegate the power to tax
but the mere implementation of the law. The intent and will to increase the VAT rate to 12% came
from Congress and the task of the President is to simply execute the legislative policy. That
Congress chose to use the GDP as a benchmark to determine economic growth is not within the
province of the Court to inquire into, its task being to interpret the law.
With regard to petitioner Garcia’s arguments, the Court also finds the same to be without merit. As
stated in the assailed Decision, the Court recognizes the burden that the consumers will be bearing
with the passage of R.A. No. 9337. But as was also stated by the Court, it cannot strike down the
law as unconstitutional simply because of its yokes. The legislature has spoken and the only role
that the Court plays in the picture is to determine whether the law was passed with due regard to the
mandates of the Constitution. Inasmuch as the Court finds that there are no constitutional infirmities
with its passage, the validity of the law must therefore be upheld.
Finally, petitioners Association of Pilipinas Shell Dealers, Inc. reiterated their arguments in the
petition, citing this time, the dissertation of Associate Justice Dante O. Tinga in his Dissenting
Opinion.
The glitch in petitioners’ arguments is that it presents figures based on an event that is yet to
happen. Their illustration of the possible effects of the 70% limitation, while seemingly concrete, still
remains theoretical. Theories have no place in this case as the Court must only deal with an
existing case or controversy that is appropriate or ripe for judicial determination, not one that
is conjectural or merely anticipatory.5 The Court will not intervene absent an actual and
substantial controversy admitting of specific relief through a decree conclusive in nature, as
distinguished from an opinion advising what the law would be upon a hypothetical state of facts.6
The impact of the 70% limitation on the creditable input tax will ultimately depend on how one
manages and operates its business. Market forces, strategy and acumen will dictate their moves.
With or without these VAT provisions, an entrepreneur who does not have the ken to adapt to
economic variables will surely perish in the competition. The arguments posed are within the realm
of business, and the solution lies also in business.
Petitioners also reiterate their argument that the input tax is a property or a property right. In the
same breath, the Court reiterates its finding that it is not a property or a property right, and a VAT-
registered person’s entitlement to the creditable input tax is a mere statutory privilege.
Petitioners also contend that even if the right to credit the input VAT is merely a statutory privilege, it
has already evolved into a vested right that the State cannot remove.
As the Court stated in its Decision, the right to credit the input tax is a mere creation of law. Prior to
the enactment of multi-stage sales taxation, the sales taxes paid at every level of distribution are not
recoverable from the taxes payable. With the advent of Executive Order No. 273 imposing a 10%
multi-stage tax on all sales, it was only then that the crediting of the input tax paid on purchase or
importation of goods and services by VAT-registered persons against the output tax was established.
This continued with the Expanded VAT Law (R.A. No. 7716), and The Tax Reform Act of 1997 (R.A.
No. 8424). The right to credit input tax as against the output tax is clearly a privilege created by law,
a privilege that also the law can limit. It should be stressed that a person has no vested right in
statutory privileges.7
The concept of "vested right" is a consequence of the constitutional guaranty of due process that
expresses a present fixed interest which in right reason and natural justice is protected against
arbitrary state action; it includes not only legal or equitable title to the enforcement of a demand but
also exemptions from new obligations created after the right has become vested. Rights are
considered vested when the right to enjoyment is a present interest, absolute, unconditional, and
perfect or fixed and irrefutable.8 As adeptly stated by Associate Justice Minita V. Chico-Nazario in her
Concurring Opinion, which the Court adopts, petitioners’ right to the input VAT credits has not yet
vested, thus –
It should be remembered that prior to Rep. Act No. 9337, the petroleum dealers’ input VAT credits
were inexistent – they were unrecognized and disallowed by law. The petroleum dealers had no
such property called input VAT credits. It is only rational, therefore, that they cannot acquire vested
rights to the use of such input VAT credits when they were never entitled to such credits in the first
place, at least, not until Rep. Act No. 9337.
My view, at this point, when Rep. Act No. 9337 has not yet even been implemented, is that
petroleum dealers’ right to use their input VAT as credit against their output VAT unlimitedly has not
vested, being a mere expectancy of a future benefit and being contingent on the continuance of
Section 110 of the National Internal Revenue Code of 1997, prior to its amendment by Rep. Act No.
9337.
The elucidation of Associate Justice Artemio V. Panganiban is likewise worthy of note, to wit:
Moreover, there is no vested right in generally accepted accounting principles. These refer to
accounting concepts, measurement techniques, and standards of presentation in a company’s
financial statements, and are not rooted in laws of nature, as are the laws of physical science, for
these are merely developed and continually modified by local and international regulatory accounting
bodies. To state otherwise and recognize such asset account as a vested right is to limit the taxing
power of the State. Unlimited, plenary, comprehensive and supreme, this power cannot be unduly
restricted by mere creations of the State.
More importantly, the assailed provisions of R.A. No. 9337 already involve legislative policy and
wisdom. So long as there is a public end for which R.A. No. 9337 was passed, the means through
which such end shall be accomplished is for the legislature to choose so long as it is within
constitutional bounds. As stated in Carmichael vs. Southern Coal & Coke Co.:
If the question were ours to decide, we could not say that the legislature, in adopting the present
scheme rather than another, had no basis for its choice, or was arbitrary or unreasonable in its
action. But, as the state is free to distribute the burden of a tax without regard to the particular
purpose for which it is to be used, there is no warrant in the Constitution for setting the tax aside
because a court thinks that it could have distributed the burden more wisely. Those are functions
reserved for the legislature.9
WHEREFORE, the Motions for Reconsideration are hereby DENIED WITH FINALITY. The
temporary restraining order issued by the Court is LIFTED.
SO ORDERED.
(The Justices who filed their respective concurring and dissenting opinions maintain their respective
positions. Justice Dante O. Tinga filed a dissenting opinion to the present Resolution; while Justice
Consuelo Ynares- Santiago joins him in his dissenting opinion.)


Footnotes
1 Also referred to as the EVAT Law.
2G.R. Nos. 115455, 115525, 115543, 115544, 115754, 115781, 115852, 115873 and 115931,
August 25, 1994, 235 SCRA 630.
3Fariñas vs. The Executive Secretary, G.R. No. 147387, December 10, 2003, 417 SCRA
503, 530.
4 Supra, note no. 2, pp. 661-663.
5 Velarde vs. Social Justice Society, G.R. No. 159357, April 28, 2004, 428 SCRA 283.
6Information Technology Foundation of the Phils. vs. COMELEC, G.R. No. 159139, June 15,
2005.
7 Lahom vs. Sibulo, G.R. No. 143989, July 14, 2003, 406 SCRA 135.
8 Ibid.
9 301 U.S. 495.


The Lawphil Project - Arellano Law Foundation
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GR No. 168056 - (ABAKADA GURO PARTY LIST (Formerly AASJAS) OFFICERS SAMSON S.
ALCANTARA and ED VINCENT S. ALBANO v. THE HON. EXECUTIVE SECRETARY EDUARDO
ERMITA, ET AL.)
GR No. 168207 – (AQUILINO Q. PIMENTEL, JR., ET. AL. v. EXECUTIVE SECRETARY EDUARDO
R. ERMITA, ET. AL.)
GR No. 168461 – ASSOCIATION OF PILIPINAS SHELL DEALERS, INC. represented by its
President, ROSARIO ANTONIO, ET AL. v. CESAR V. PURISIMA, in his capacity as Secretary of the
Department of Finance and GUILLERMO L. PARAYNO, JR., in his capacity as Commissioner of
Internal Revenue.
GR No. 168463 – FRANCIS JOSEPH G. ESCUDERO, ET AL. v. CESAR V. PURISIMA, in his
capacity as Secretary of Finance, GUILLERMO L. PARAYNO, JR., in his capacity as Commissioner
of Internal Revenue, and EDUARDO R. ERMITA, in his capacity as Executive Secretary.
GR. No. 168730 – BATAAN GOVERNOR ENRIQUE T. GARCIA, JR. v. HON. EDUARDO R.
ERMITA, in his capacity as the Executive Secretary; HON. MARGARITO TEVES, in his capacity as
Secretary of Finance; HON. JOSE MARIO BUNAG, in his capacity as the OIC Commissioner of the
Bureau of Customs.
x-------------------------------------------------------------------x
DISSENTING OPINION
Tinga, J.:
Once again, the majority has refused to engage and refute in any meaningful fashion the arguments
raised by the petitioners in G.R. No. 168461. The de minimis appreciation exhibited by the majority
of the issues of 70% cap, the 60-month amortization period, and 5% withholding VAT on transactions
made with the national government is regrettable, with ruinous consequences for the nation. I see no
reason to turn back from any of the views expressed in my Dissenting Opinion, and I accordingly
dissent from the denial of the Motion for Reconsideration filed by the petitioners in G.R. No. 168461.1
The reasons for my vote have been comprehensively discussed in my previous Dissenting Opinion,
and I do not see the need to replicate them herein. However, I wish to stress a few points.
Tax Statutes May Be Invalidated
If They Pose a Clear and Present Danger
To the Deprivation of Life, Liberty and
Property Without Due Process of Law
The majority again dismisses the arguments of the petitioners as "theoretical", "conjectural" or
merely "anticipatory," notwithstanding that the injury to the taxpayers resulting from Section 8 and 12
of the E-VAT Law is ascertainable with mathematical certainty. In support of this view, the majority
cites the Court’s Resolution dated 15 June 2005 in Information Technology Foundation v.
COMELEC,2 one of the rulings issued in that case subsequent to the main Decision rendered on 13
January 2004. The reference is grievously ironic, considering that in the 13 January 2004 Decision,
the Court, over vigorous dissents, chose anyway to intervene and grant the petition despite the fact
that the petitioners therein did not allege any violation of any constitutional provision or letter of
statute.3 In this case, the petitioners have squarely invoked the violation of the Bill of Rights of the
Constitution, and yet the majority is suddenly timid, unlike in Infotech.
Still, the formulation of the majority unfortunately leaves the impression that any statute, taxing or
otherwise, is beyond judicial attack prior to its implementation. If the tax measure in question
provided that the taxpayer shall remit all income earned to the government beginning 1 January
2008, would this mean that the Court can take cognizance of the legal challenge only starting 2
January 2008?
I do not share the majority’s penchant for awaiting the blood spurts before taking action even when
the knife’s edge already dangles. As I maintained in my Dissenting Opinion, a tax measure may be
validly challenged and stricken down even before its implementation if it poses a clear and present
danger to the deprivation of life, liberty or property of the taxpayer without due process of law. This is
the expectation of every citizen who wishes to maintain trust in all the branches of government. In
the enforcement of the constitutional rights of all persons, the commonsense expectation is that the
Court, as guardian of these rights, is empowered to step in even before the prospective violation
takes place. Hence, the evolution of the "clear and present danger" doctrine and other analogous
principles, without which, the Court would be seen as inutile in the face of constitutional violation.
Of course, not every anticipatory threat to constitutional liberties can be assailed prior to
implementation, hence the employment of the "clear and present danger" standard to separate the
wheat from the chaff. Still, the Court should not be so readily dismissive of the petitioners’ posture
herein merely because it is anticipatory. There should have been a meaningful engagement by the
majority of the facts and formulae presented by the petitioners before the reasonable conclusion
could have been reached on the maturity of the claim. That the majority has not bothered to do so is
ultimately of tragic consequence.
70% Input VAT Credit
An Impaired Asset
The ponencia, joined by Justices Panganiban and Chico-Nazario, express the belief that no property
rights attach to the input VAT paid by the taxpayer. This is a bizarre view that assumes that all
income earned by private persons preternaturally belongs to the government, and whatever is
retained by the person after taxes is acquired as a matter of privilege. This is the sort of thinking that
has fermented revolutions throughout history, such as the American Revolution of 1776.
I pointed out in my Dissenting Opinion that under current accepted international accounting
standards, the 30% prepaid input VAT would be recorded as a loss in the accounting books, since
the possibility of its recovery is improbable, considering that the E-VAT Law allows its recovery only
after the business has ceased to exist. Even the Bureau of Internal Revenue itself has long
recognized the unutilized input VAT as an asset.
The majority fails to realize that even under the new E-VAT Law, the State recognizes that the
persons who pre-pay that input VAT, usually the dealers or retailers, are not the persons who are
liable to pay for the tax. The VAT system, as implemented through the previous VAT law and the new
E-VAT Law, squarely holds the end consumer as the taxpayer liable to shoulder the input VAT.
Nonetheless, under the mechanism foisted in the new E-VAT Law, the dealer or retailer who pre-
pays the input VAT is virtually precluded from recovering the pre-paid input VAT, since the law only
allows such recovery upon the cessation of the business. Indeed, the only way said class of
taxpayers can recover this pre-paid input VAT was if it were to cease operations at the end of every
quarter.
The illusion that blinds the majority to this state of affairs is the claim that the pre-paid input VAT may
anyway be carried over into the succeeding quarter, a chimera enhanced by the grossly misleading
presentation of the Office of the Solicitor General. What this deception fosters, and what the majority
fails to realize, is that since the taxpayer is perpetually obliged to remit the 30% input VAT every
quarter, there would be a continuous accumulation of excess input VAT. It is not true then that the
input VAT prepaid for the first quarter can be recovered in the second, third or fourth quarter of that
year, or at any time in the next year for that matter since the amount of prepaid input VAT
accumulates with every succeeding prepayment of input VAT. Moreover, the accumulation of the
prepaid input VAT diminishes the actual value of the refundable amounts, considering the
established principle of "time-value of money", as explained in my Dissenting Opinion.
Thus, the pre-paid input VAT, for which the petitioners and other similarly situated taxpayers are not
even ultimately liable in the first place, represents in tangible terms an actual loss. To put it more
succinctly, when the taxpayer prepays the 30% input VAT, there is no chance for its recovery except
until after the taxpayer ceases to be such. This point is crucial, as it goes in the heart of the
constitutional challenge raised by the petitioners. A recognition that the input VAT is a property asset
places it squarely in the ambit of the due process clause.
The majority now stresses that prior to Executive Order No. 273 sales taxes paid by the retailer or
dealers were not recoverable. The nature of a sales tax precisely is that it is shouldered by the seller,
not the consumer. In that case, the clear legislative intent is to encumber the retailer with the end
tax. Under the VAT system, as enshrined under Rep. Act No. 9337, the new E-VAT Law, there is
precisely a legislative recognition that it is the end user, not the seller, who shoulders the E-VAT. The
problem with the new E-VAT law is that it correspondingly imposes a defeatist mechanism that
obviates this entitlement of the seller by forcibly withholding in perpetua this pre-paid input VAT.
The majority cites with approval Justice Chico-Nazario’s argument, as expressed in her concurring
opinion, that prior to the new E-VAT Law, the petroleum dealers in particular had no input VAT credits
to speak of, and therefore, could not assert any property rights to the input VAT credits under the
new law. Of course the petroleum dealers had no input VAT credits prior to the E-VAT Law because
precisely they were not covered by the VAT system in the first place. What would now be classified
as "input VAT credits" was, in real terms, profit obtainable by the petroleum dealers prior to the new
E-VAT Law. The E-VAT Law stands to diminish such profit, not by outright taking perhaps, but by ad
infinitum confiscation with the illusory promise of eventual return. Obviously, there is a deprivation of
property in such case; yet is it seriously contended that such deprivation is ipso facto sheltered if it is
not classified as a taking, but instead reclassified as a "credit"?
It is highly distressful that the Court, in its haste to decree petitioners as bereft of any vested
property rights, rejects the notion that a person has a vested right to the earnings and profits
incurred in business. Before, no legal basis could be found to prop up such a palpably outlandish
claim; but the Decision, as affirmed by the majority’s Resolution, now enshrines a temerarious
proposition with doctrinal status.
In the Decision, and also in Justice Panganiban’s Separate Opinion therein, the case of United
Paracale Mining Co. v. De la Rosa4 was cited in support of the proposition that there is no vested
right to the input VAT credit. Justice Panganiban went as far as to cite that case to support the
contention that "[t]here is no vested right in a deferred input tax account; it is a mere statutory
privilege." Reliance on the case is quite misplaced. First, as pointed out in my Dissenting Opinion, it
does not even pertain to tax credits involving as it does, questions on the jurisdiction of the Bureau
of Mines.5 Second, the putative vested rights therein pertained to mining claims, yet all mineral
resources indisputably belong to the State. Herein, the rights pertain to profit incurred by private
enterprise, and certainly the majority cannot contend that such profits actually belong to the State.
As stated in my Dissenting Opinion, the Constitution itself recognizes a right to income and profit
when it recognizes "the right of enterprises to reasonable returns on investments, and to expansion
and growth."6 Section 20, Article II of the Constitution further mandates that the State recognize the
indispensable role of the private sector, the encouragement of private enterprise, and the provision
of incentives to needed investments.7 Indeed, there is a fundamental recognition in any form of
democratic government that recognizes a capitalist economy that the enterprise has a right to its
profits. Today, the Court instead affirms that there is no such right. Should capital flight ensue, the
phenomenom should not be blamed on investors in view of our judicial system’s rejection of
capitalism’s fundamental precept.
Mainstream Denunciation of 70% Cap
The fact that petitioners are dealers of petroleum products may have left the impression that the
70% cap singularly affects the petroleum industry; or that other classes of dealers or retailers do not
pose the same objections to these "innovations" in the E-VAT law. This is far from the truth.
In fact, the clamor against the 70% cap has been widespread among the players and components in
the financial mainstream. Denunciations have been registered by the Philippine Chamber of
Commerce and Industry8, the Joint Foreign Chambers of the Philippines (comprising of the American
Chamber of Commerce in the Philippines, the Australian-New Zealand Chamber Commerce of the
Philippines, Inc., the Canadian Chamber of Commerce of the Philippines, Inc., the European
Chamber of Commerce of the Philippines, Inc., the Japanese Chamber of Commerce of the
Philippines, Inc., the Korean Chamber of Commerce and Industry of the Philippines, and the
Philippine Association of Multinational Companies Regional Headquarters, Inc.),9 the Filipino-
Chinese Chamber of Commerce and Industry,10 the Federation of Philippine Industries,11 the
Consumer and Oil Price Watch,12 the Association of Certified Public Accountants in Public Practice,
13 the Philippine Tobacco Institute,14 and the auditing firm of PricewaterhouseCooper.15

Even newly installed Finance Secretary Margarito Teves has expressed concern that the 70% input
VAT "may not work across all industries because of varying profit margins".16 Other experts who
have voiced concerns on the 70% input VAT are former NEDA Directors Cielito Habito17 and Solita
Monsod,18 Peter Wallace of the Wallace Business Forum,19 and Paul R. Cooper, director of
PricewaterhouseCooper.
In fact, Mr. Cooper published in the Philippine Daily Inquirer a lengthy disquisition on the problems
surrounding the 70% cap, portions of which I replicate below:
Policy concerns on the cap
When the idea of putting a cap was originally introduced on the floor of the Senate. The idea was to
address to some extent the under-reporting of output VAT by non-complaint taxpayers. The original
suggestion was a 90 percent cap, or effectively a 1-percent minimum VAT. At that level, the rule
should not impact adversely on complaint taxpayers, but would result in non-complaint taxpayers
having to account for closer to their true tax liability.
As a general policy consideration, one should question why our legislators are penalizing complaint
taxpayers when the fundamental issue is at the apparent inability of the Bureau of Internal Revenue
(BIR) to implement tax law effectively.
At a 90-percent cap, the measure might still have been defensible as a rough proxy for VAT.
However, somewhere in the bicameral process, the rule has become even more punitive with a 70-
percent cap. As with most amendments introduced at the bicameral stage, there is no public
indication about what lawmakers were thinking when they put the travesty in place.
 xxx
One of the arguments in Senate debates for taxing the power and petroleum sectors was that if it
was good enough for mom-and-pop stores to have to account for the VAT, it was good enough for
the biggest companies in the country to do the same. A similar argument here is that if small
businesses have to pay a minimum 3-percent tax, why should larger VAT-registered persons get
away with paying less?
The problem with this thinking is threefold:
· The percentage tax applies to small businesses in the hard-to-tax sector and a few believe the BIR
collects close to what it should from this. Nor should we be overly concerned if this is the case—the
revenues are small, and the BIR’s efforts would be a lot better focused on larger taxpayers where
more significant revenues will be at issue.
· VAT-registered persons incur compliance costs. The 3-percent tax might be better conceived as a
slightly more expensive option to allow taxpayers to opt out of the VAT, rather than a punitive rule for
small businesses. (If the percentage tax is considered unduly punitive, why is it not just repealed?)
· Ironically, one of the new measures in the Senate bill was to allow taxpayers with turnovers below,
the registration threshold to register voluntarily for VAT if they believe the 3-percent tax imposition to
be excessive. Without the minimum VAT, smaller taxpayers might have been encouraged to enter
the more formalized VAT sector.
Potential consequences of the cap
The minimum VAT will distort the way taxpayers conduct business. A 3-percent minimum VAT is
more likely to impact on sellers of goods than on sellers of services, as their proportion of taxable
inputs are lower (there is no VAT paid when using labor, but there is VAT on the purchase of goods).
Consequently, there will be a bias toward consuming services over goods. Businesses may have an
incentive to obtain goods from the informal (and potentially tax-evading) sector as there will be no
input tax paid for the purchase—in other words, the bill may actively encourage less tax complaint
behavior. Business structures may change; expect buy-sell distributors to convent into commission
agents, as this reduces the risk that they will need to pay more than should be paid under a VAT
system to cover the 3-percent minimum VAT.20
These objections are voiced by members of the sensible center, and not those reflexively against
VAT or any tax imposition of the current administration. These objections are raised by the people
who stand to be directly affected on a daily punitive basis by the imposition of the 70% cap, the 60-
month amortization period and the 5% withholding VAT. Indeed, Justice Chico-Nazario has
expressed her disbelief over, or at least has asserted as unproven, the claimed impact of the input
VAT on the petroleum dealers.21 Of course there can be no tangible gauge as of yet on the impact of
these changes in the VAT law, since they have yet to be implemented. However, the prevalent
adverse reaction within the business sector should be sufficiently expressive of the actual fears of
the people who should know better. It is sad that the majority, by maintaining a blithely naïve view of
the input VAT, perpetuates the disconnect between the Court and the business sector, unnecessarily
considering that in this instance, the concerns of the financial community can be translated into a
viable constitutional challenge.
Reliance on Legislative Amendments
An Abdication of the Court’s Constitutional Duty
Justice Panganiban has already expressed the view that the remedy to the inequities caused by the
new input VAT system would be amending the law, and not an outright declaration of
unconstitutionality. I can only hazard a guess on how many members of the Court or the legal
community are similarly reliant on that remedy as a means of assuaging their fears on the impact of
the input VAT innovations.
As I stated in my Dissenting Opinion, it is this Court, and not the legislature, which has the duty to
strike down unconstitutional laws. Congress may amend unconstitutional laws to remedy such legal
infirmities, but it is under no constitutional or legal obligation to do so. The same does not hold true
with this Court. The essence of judicial review mandates that the Court strike down unconstitutional
laws.
Another corollary prospect has also arisen, that the Executive Department itself will mitigate the
implementation of the 70% cap by not fully implementing the law.
This prospect of course is speculative, the sort of speculation that is wholly dependent on the whim
of the officials of the executive branch and one that cannot be quantified by mathematical formula.
This cannot be the basis for any judicial action or vote. Moreover, such resort may actually be illegal.
For one, Article 239 of the Revised Penal Code imposes the penalty of prision correccional on public
officers "who shall encroach upon the powers of the legislative branch of the Government, either by
making general rules or regulations beyond the scope of his authority, or by attempting to repeal a
law or suspending the execution thereof." Certainly, the remedy to the inequities of the E-VAT Law
cannot be left to administrative pussy-footing, considering that these officials may be jailed for
refusing to implement the law, or obfuscating the legislative will.
Second, it is a cardinal rule that an administrative agency such as the Bureau of Internal Revenue or
even the Department of Finance cannot amend an act of Congress. Whatever administrative
regulations they may adopt under legislative authority must be in harmony with the provisions of the
law they are intended to carry into effect. They cannot widen or diminish its scope.22
Finally, it must be remembered that one of the central doctrines enforced in the disposition of the
joint petitions is that the power to tax belongs solely to the legislative branch of government. If the
legislative will were to be frustrated by haphazard implementation by the executive branch, all our
disquisitions on this matter, as well as the key constitutional principle on the inherent, non-delegable
nature of the legislative power of taxation, will be for naught.
Indeed, I truly fear the scenario when, after the deluge, the executive branch of government
suspends the implementation of the 70% cap, or increases the cap to a higher amount such as 90%.
Any taxpayer will have standing to attack such remedial measure, considering that the net effect
would be to diminish the government’s collection of cash at hand. Following the law, the proper
judicial action would be to uphold the clear legislative intent over the reengineering of the taxing
provisions by the executive branch of government. Yet if the courts instead uphold the power of the
executive branch of government to reinvent the tax statute, then the end concession would be that
the power to enact tax laws ultimately belongs to the executive branch of government.
I hesitate to say this, but there will be confusion, instability, and multiple fatalities within the business
sector with the enforcement of the amendments of Section 8 and 12 of the E-VAT Law. It could have
been stopped through the allowance of the petition in G.R. No. 168461, but regrettably the Court did
not act.
I respectfully dissent.
DANTE O. TINGA
Associate Justice

EN BANC
G.R. Nos. L-21633-34 June 29, 1967
COMMISSIONER OF INTERNAL REVENUE and COMMISSIONER OF CUSTOMS, petitioners, 

vs.

BOTELHO SHIPPING CORPORATION and GENERAL SHIPPING CO., INC., respondents.
Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Felicisimo R. Rosete and
F. Malate, Jr. for petitioners.

Claudio Teehankee and Leocadio de Asis for respondents.
CONCEPCION, C.J.:
Appeal by the Government from a decision of the Court of Tax Appeals, reversing of the decisions of
the Commissioner of Internal Revenue and the Commissioner of Customs, in Cases No. 956 and
957 of said Court, holding Botelho Shipping Corporation and General Shipping Co., Inc. —
hereinafter referred to collectively as the Buyers — liable for the payment of the sum of P483,433.00
and P494,824.00, respectively, as compensating taxes on the vessels "M/S Maria Rosello" and "M/S
General Lim."
On August 30, 1960, the Reparations Commission of the Philippines — hereinafter referred to as the
Commission — and Botelho Shipping Corporation — hereinafter referred to as Botelho — entered
into a "Contract of Conditional Purchase and Sale of Reparations Goods," whereby the former
agreed to sell to Botelho for P6,798,888.88 the vessel "M/S Maria Rosello," procured by the
Commission from Japan, pursuant to the provisions of the Philippine-Japanese Reparations
Agreement of May 9, 1956. On September 19, 1960, the Commission signed a similar contract with
General Shipping Co., Inc. — hereinafter referred to as General Shipping — for the sale thereto of
"M/S General Lim" at the price of P6,951,666.66. Both agreements, couched in identical terms,
except as to price, stipulated that:
a) The Reparations Commission "retains title to and ownership of the above described
vessel until it is fully paid for." (Exh. "A", p. 2, both cases)
b) The stipulated purchase price of the M/S MARIA ROSELLO was to be paid by Botelho to
the Commission under a deferred payment plan in 10 equal yearly installments of
P717,333.49, bearing 3% interest per annum, beginning August 31, 1962 and August 31 of
every year thereafter until the year 1972, while the purchase price of the M/S GENERAL LIM
was to be paid by General Shipping to the Commission under a deferred payment plan in 10
equal yearly installments of P723,132.68, bearing 3% interest per annum beginning
September 30 of every year until the year 1972. (Exhs. 9, p. 4 and A-2, both cases) (See
Respondents' brief, p. 4.)
Delivered in Japan to its respective buyers, acting on behalf of the Commission, the vessels, upon
their departure from Tokyo, on the maiden trip thereof to the Philippines, were issued, by the
Philippine Vice-Consul in said city, provisional certificates of Philippine registry in the name of the
Commission, so that the vessels could proceed to the Philippines and secure therein the respective
final registration document.
Upon arrival at the port of Manila, the Buyer filed the corresponding applications for registration of
the vessels, but, the Bureau of Customs placed the same under custody and refused to give due
course to said applications, unless the aforementioned sums of P483,433 and P494,824 be paid as
compensating tax. As the Commissioner of Customs refused to reconsider the stand taken by his
office, the Buyers simultaneously filed with the Court of Tax Appeals their respective petitions for
review, against the Commissioner of Customs and the Commissioner of Internal Revenue —
hereinafter referred to collectively as Appellants — with urgent motion for suspension of the
collection of said tax. After a joint hearing on this motion, the same was, on October 31, 1960,
granted by the Tax Court, upon the sum of a P500,000.00 bond by each one of the Buyers.
On June 17, 1961, while these cases were pending trial in said Court, Republic Act No. 3079
amended Republic Act No. 1789 — the Original Reparations Act, under which the aforementioned
contracts with the Buyers had been executed — by exempting buyers of reparations goods acquired
from the Commission, from liability for the compensating tax. Moreover, section 20 of Republic Act
No. 3079, provides:
x x x This Act shall take effect upon its approval, except that the amendment contained in
Section seven hereof relating to the requirements of procurement orders including the
requirement of down payment by private applicant end-users shall not apply to procurement
orders already duty issued and verified at the time of the passage of this amendatory Act,
and except further that the amendment contained in Section ten relating to the insurance of
the reparations goods by the end-users upon delivery shall apply also to goods covered by
contracts already entered into by the Commission and end-user prior to the approval of this
amendatory Act as well as goods already delivered to the end-user, and except further that
the amendments contained in Sections eleven and twelve hereof relating to the terms of
installment payments on capital goods disposed of to private parties, and the execution of a
performance bond before delivery of reparations goods, shall not apply to contracts for the
utilization of reparations goods already entered into by the Commission and the end-users
prior to the approval of this amendatory Act: Provided, That any end-user may apply for the
renovation of his utilization contract with the Commission in order to avail of any provision of
this amendatory Act which is more favorable to an applicant end-user than has heretofore
been granted in like manner and to the same extent as an end-user filing his application after
the approval of this amendatory Act, and the Commission may agree to such renovation on
condition that the end-user shall voluntarily assume all the new obligations provided for in
this amendatory Act.
Invoking the provisions of this section 20, the Buyers applied, therefore, for the renovation of their
utilizations contracts with the Commission, which granted the application, and, then, filed with the
Tax Court, their supplemental petitions for review. Subsequently, the parties submitted Stipulations of
Fact and, after a joint trial, at which they introduced additional evidence, said Court rendered the
appealed decision, reversing the decisions herein Appellants, and declared said Buyers exempt from
the compensating tax sought to be assessed against the vessels aforementioned. Hence, these
appeals by the Government G.R. No. L-21633 refers to the case as regards "M/S Maria Rosello,"
whereas "M/S General Lim" is the subject-matter of G.R. No. L-21634.
It seems clear that, under Republic Act No. 1789 — pursuant to which the contracts of Conditional
Purchase and Sale in question had been executed — the vessels "M/S Maria Rosello" and "M/S
General Lim" were subject to compensating tax. Indeed, Section 14 of said Act provides that
"reparations goods obtained by private parties shall be exempt only from the payment of customs
duties, consular fees and the special import tax." Although this Section was amended by R.A. No.
3079, to include the compensating tax" among the exemptions enumerated therein, such
amendment took place, not only after the contracts involved in these appeals had been perfected
and partly consummated, but, also, after the corresponding compensating tax had become due and
payment thereof demanded by Appellants herein. It is, moreover, obvious that said additional
exemption should not and cannot be given retroactive operation, in the absence of a manifest intent
of Congress to do this effect. The issue in the cases at bar hinges on whether or not such intent is
clear.
Appellants maintain the negative, upon the ground that a tax exemption must be clear and explicit;
that there is no express provision for the retroactivity of the exemption, established by Republic Act
No. 3079, from the compensating tax; that the favorable provisions, which are referred to in section
20 thereof, cannot include the exemption from compensating tax; and, that Congress could not have
intended any retroactive exemption, considering that the result thereof would be prejudicial to the
Government.
The inherent weakness of the last ground becomes manifest when we consider that, if true, there
could be no tax exemption of any kind whatsoever, even if Congress should wish to create one,
because every such exemption implies a waiver of the right to collect what otherwise would be due
to the Government, and, in this sense, is prejudicial thereto. In fact, however, tax exemptions may
and do exist, such as the one prescribed in section 14 of Republic Act No. 1789, as amended by
Republic Act No. 3079, which, by the way, is "clear and explicit," thus, meeting the first ground of
appellant's contention. It may not be amiss to add that no tax exemption — like any other legal
exemption or exception — is given without any reason therefor. In much the same way as other
statutory commands, its avowed purpose is some public benefit or interest, which the law-making
body considers sufficient to offset the monetary loss entitled in the grant of the exemption. Indeed,
section 20 of Republic Act No. 3079 exacts a valuable consideration for the retroactivity of its
favorable provisions, namely, the voluntary assumption, by the end-user who bought reparations
goods prior to June 17, 1961 of "all the new obligations provided for in" said Act.
The argument adduced in support of the third ground is that the view adopted by the Tax Court
would operate to grant exemption to particular persons, the Buyers herein. It should be noted,
however, that there is no constitutional injunction against granting tax exemptions to particular
persons. In fact, it is not unusual to grant legislative franchises to specific individuals or entities,
conferring tax exemptions thereto. What the fundamental law forbids is the denial of equal
protection, such as through unreasonable discrimination or classification. 1äwphï1.ñët

Furthermore, Section 14 of the Law on Reparations, as amended, exempts from the compensating
tax, not particular persons, but persons belonging to a particular class. Indeed, appellants do not
assail the constitutionality of said section 14, insofar as it grants exemptions to end-users
who, after the approval of Republic Act No. 3079, on June 17, 1961, purchased reparations goods
procured by the Commission. From the viewpoint of Constitutional Law, especially the equal
protection clause, there is no difference between the grant of exemption to said end-users, and the
extension of the grant to those whose contracts of purchase and sale mere made before said date,
under Republic Act No. 1789.
It is true that Republic Act No. 3079 does not explicitly declare that those who purchased reparations
goods prior to June 17, 1961, are exempt from the compensating tax. It does not say so, because
they do not really enjoy such exemption, unless they comply with the proviso in Section 20 of said
Act, by applying for the renovation of their respective utilization contracts, "in order to avail
of any provision of the Amendatory Act which is more favorable" to the applicant. In other words, it is
manifest, from the language of said section 20, that the same intended to give such buyers the
opportunity to be treated "in like manner and to the same extent as an end-user filing his application
after this approval of this Amendatory Act." Like the "most-favored-nation-clause" in international
agreements, the aforementioned section 20 thus seeks, not to discriminate or to create an
exemption or exception, but to abolish the discrimination, exemption or exception that would
otherwise result, in favor of the end-user who bought after June 17, 1961 and against one who
bought prior thereto. Indeed, it is difficult to find a substantial justification for the distinction between
the one and the other. As correctly held by the Tax Court in Philippine Ace Lines, Inc. v.
Commissioner of Internal Revenue (C.T.A. Nos. 964 and 984, January 25, 1963), and reiterated in
the cases under consideration:
x x x In providing that the favorable provision of Republic Act No. 3079 shall be available to
applicants for renovation of their utilization contracts, on condition that said applicants shall
voluntarily assume all the new obligations provided in the new law, the law intends to place
persons who acquired reparations goods before the enactment of the amendatory Act on the
same footing as those who acquire reparations goods after its enactment. This is so because
of the provision that once an application for renovation of a utilization contract has been
approved, the favorable provisions of said Act shall be available to the applicant "in like
manner and to the same extent, as an end-user filing his application alter the approval of this
amendatory Act." To deny exemption from compensating tax to one whose utilization contract
has been renovated, while granting the exemption to one who files an application for
acquisition of reparations goods after the approval of the new law, would be contrary to the
express mandate of the new law, that they both be subject to the same privileges in like
manner and to the same extent. It would be manifest distortion of the literal meaning and
purpose of the new law.
Wherefore, the appealed decision of the Court of Tax Appeals is hereby affirmed in toto, without any
pronouncement as to costs. It is so ordered.
Reyes, J.B.L., Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Castro, JJ., concur.

Dizon, J., took no part.

EN BANC

G.R. No. 109289 October 3, 1994

RUFINO R. TAN, petitioner, 

vs.

RAMON R. DEL ROSARIO, JR., as SECRETARY OF FINANCE & JOSE U. ONG, as
COMMISSIONER OF INTERNAL REVENUE, respondents.
G.R. No. 109446 October 3, 1994
CARAG, CABALLES, JAMORA AND SOMERA LAW OFFICES, CARLO A. CARAG, MANUELITO
O. CABALLES, ELPIDIO C. JAMORA, JR. and BENJAMIN A. SOMERA, JR., petitioners, 

vs.

RAMON R. DEL ROSARIO, in his capacity as SECRETARY OF FINANCE and JOSE U. ONG, in
his capacity as COMMISSIONER OF INTERNAL REVENUE, respondents.
Rufino R. Tan for and in his own behalf.
Carag, Caballes, Jamora & Zomera Law Offices for petitioners in G.R. 109446.

VITUG, J.:
These two consolidated special civil actions for prohibition challenge, in G.R. No. 109289, the
constitutionality of Republic Act No. 7496, also commonly known as the Simplified Net Income
Taxation Scheme ("SNIT"), amending certain provisions of the National Internal Revenue Code and,
in

G.R. No. 109446, the validity of Section 6, Revenue Regulations No. 2-93, promulgated by public
respondents pursuant to said law.
Petitioners claim to be taxpayers adversely affected by the continued implementation of the
amendatory legislation.
In G.R. No. 109289, it is asserted that the enactment of Republic Act

No. 7496 violates the following provisions of the Constitution:
Article VI, Section 26(1) — Every bill passed by the Congress shall embrace only
one subject which shall be expressed in the title thereof.
Article VI, Section 28(1) — The rule of taxation shall be uniform and equitable. The
Congress shall evolve a progressive system of taxation.
Article III, Section 1 — No person shall be deprived of . . . property without due
process of law, nor shall any person be denied the equal protection of the laws.
In G.R. No. 109446, petitioners, assailing Section 6 of Revenue Regulations No. 2-93, argue that
public respondents have exceeded their rule-making authority in applying SNIT to general
professional partnerships.
The Solicitor General espouses the position taken by public respondents.
The Court has given due course to both petitions. The parties, in compliance with the Court's
directive, have filed their respective memoranda.
G.R. No. 109289
Petitioner contends that the title of House Bill No. 34314, progenitor of Republic Act No. 7496, is a
misnomer or, at least, deficient for being merely entitled, "Simplified Net Income Taxation Scheme for
the Self-Employed

and Professionals Engaged in the Practice of their Profession" (Petition in G.R. No. 109289).
The full text of the title actually reads:
An Act Adopting the Simplified Net Income Taxation Scheme For The Self-Employed
and Professionals Engaged In The Practice of Their Profession, Amending Sections
21 and 29 of the National Internal Revenue Code, as Amended.
The pertinent provisions of Sections 21 and 29, so referred to, of the National Internal Revenue
Code, as now amended, provide:
Sec. 21. Tax on citizens or residents. —
xxx xxx xxx
(f) Simplified Net Income Tax for the Self-Employed and/or Professionals Engaged in
the Practice of Profession. — A tax is hereby imposed upon the taxable net income
as determined in Section 27 received during each taxable year from all sources,
other than income covered by paragraphs (b), (c), (d) and (e) of this section by every
individual whether

a citizen of the Philippines or an alien residing in the Philippines who is self-
employed or practices his profession herein, determined in accordance with the
following schedule:
Not over P10,000 3%
Over P10,000 P300 + 9%

but not over P30,000 of excess over P10,000
Over P30,000 P2,100 + 15%

but not over P120,00 of excess over P30,000
Over P120,000 P15,600 + 20%

but not over P350,000 of excess over P120,000
Over P350,000 P61,600 + 30%

of excess over P350,000
 Sec. 29. Deductions from gross income. — In computing taxable income subject to
tax under Sections 21(a), 24(a), (b) and (c); and 25 (a)(1), there shall be allowed as
deductions the items specified in paragraphs (a) to (i) of this
section: Provided, however, That in computing taxable income subject to tax under
Section 21 (f) in the case of individuals engaged in business or practice of
profession, only the following direct costs shall be allowed as deductions:
(a) Raw materials, supplies and direct labor;
(b) Salaries of employees directly engaged in activities in the course of or pursuant to
the business or practice of their profession;
(c) Telecommunications, electricity, fuel, light and water;
(d) Business rentals;
(e) Depreciation;
(f) Contributions made to the Government and accredited relief organizations for the
rehabilitation of calamity stricken areas declared by the President; and
(g) Interest paid or accrued within a taxable year on loans contracted from accredited
financial institutions which must be proven to have been incurred in connection with
the conduct of a taxpayer's profession, trade or business.
For individuals whose cost of goods sold and direct costs are difficult to determine, a
maximum of forty per cent (40%) of their gross receipts shall be allowed as
deductions to answer for business or professional expenses as the case may be.
On the basis of the above language of the law, it would be difficult to accept petitioner's view that the
amendatory law should be considered as having now adopted a gross income, instead of as having
still retained the net income, taxation scheme. The allowance for deductible items, it is true, may
have significantly been reduced by the questioned law in comparison with that which has prevailed
prior to the amendment; limiting, however, allowable deductions from gross income is neither
discordant with, nor opposed to, the net income tax concept. The fact of the matter is still that
various deductions, which are by no means inconsequential, continue to be well provided under the
new law.
Article VI, Section 26(1), of the Constitution has been envisioned so as (a) to prevent log-rolling
legislation intended to unite the members of the legislature who favor any one of unrelated subjects
in support of the whole act, (b) to avoid surprises or even fraud upon the legislature, and (c) to fairly
apprise the people, through such publications of its proceedings as are usually made, of the subjects
of legislation.1 The above objectives of the fundamental law appear to us to have been sufficiently
met. Anything else would be to require a virtual compendium of the law which could not have been
the intendment of the constitutional mandate.
Petitioner intimates that Republic Act No. 7496 desecrates the constitutional requirement that
taxation "shall be uniform and equitable" in that the law would now attempt to tax single
proprietorships and professionals differently from the manner it imposes the tax on corporations and
partnerships. The contention clearly forgets, however, that such a system of income taxation has
long been the prevailing rule even prior to Republic Act No. 7496.
Uniformity of taxation, like the kindred concept of equal protection, merely requires that all subjects
or objects of taxation, similarly situated, are to be treated alike both in privileges and liabilities (Juan
Luna Subdivision vs. Sarmiento, 91 Phil. 371). Uniformity does not forfend classification as long as:
(1) the standards that are used therefor are substantial and not arbitrary, (2) the categorization is
germane to achieve the legislative purpose, (3) the law applies, all things being equal, to both
present and future conditions, and (4) the classification applies equally well to all those belonging to
the same class (Pepsi Cola vs. City of Butuan, 24 SCRA 3; Basco vs. PAGCOR, 197 SCRA 52).
What may instead be perceived to be apparent from the amendatory law is the legislative intent to
increasingly shift the income tax system towards the schedular approach2 in the income taxation of
individual taxpayers and to maintain, by and large, the present global treatment3 on taxable
corporations. We certainly do not view this classification to be arbitrary and inappropriate.
Petitioner gives a fairly extensive discussion on the merits of the law, illustrating, in the process,
what he believes to be an imbalance between the tax liabilities of those covered by the amendatory
law and those who are not. With the legislature primarily lies the discretion to determine the nature
(kind), object (purpose), extent (rate), coverage (subjects) and situs (place) of taxation. This court
cannot freely delve into those matters which, by constitutional fiat, rightly rest on legislative
judgment. Of course, where a tax measure becomes so unconscionable and unjust as to amount to
confiscation of property, courts will not hesitate to strike it down, for, despite all its plenitude, the
power to tax cannot override constitutional proscriptions. This stage, however, has not been
demonstrated to have been reached within any appreciable distance in this controversy before us.
Having arrived at this conclusion, the plea of petitioner to have the law declared unconstitutional for
being violative of due process must perforce fail. The due process clause may correctly be invoked
only when there is a clear contravention of inherent or constitutional limitations in the exercise of the
tax power. No such transgression is so evident to us.
G.R. No. 109446
The several propositions advanced by petitioners revolve around the question of whether or not
public respondents have exceeded their authority in promulgating Section 6, Revenue Regulations
No. 2-93, to carry out Republic Act No. 7496.
The questioned regulation reads:
Sec. 6. General Professional Partnership — The general professional partnership
(GPP) and the partners comprising the GPP are covered by R. A. No. 7496. Thus, in
determining the net profit of the partnership, only the direct costs mentioned in said
law are to be deducted from partnership income. Also, the expenses paid or incurred
by partners in their individual capacities in the practice of their profession which are
not reimbursed or paid by the partnership but are not considered as direct cost, are
not deductible from his gross income.
The real objection of petitioners is focused on the administrative interpretation of public respondents
that would apply SNIT to partners in general professional partnerships. Petitioners cite the pertinent
deliberations in Congress during its enactment of Republic Act No. 7496, also quoted by the
Honorable Hernando B. Perez, minority floor leader of the House of Representatives, in the latter's
privilege speech by way of commenting on the questioned implementing regulation of public
respondents following the effectivity of the law, thusly:
MR. ALBANO, Now Mr. Speaker, I would like to get the correct
impression of this bill. Do we speak here of individuals who are
earning, I mean, who earn through business enterprises and
therefore, should file an income tax return?
MR. PEREZ. That is correct, Mr. Speaker. This does not apply to
corporations. It applies only to individuals.
(See Deliberations on H. B. No. 34314, August 6, 1991, 6:15 P.M.; Emphasis ours).
Other deliberations support this position, to wit:
MR. ABAYA . . . Now, Mr. Speaker, did I hear the Gentleman from
Batangas say that this bill is intended to increase collections as far as
individuals are concerned and to make collection of taxes equitable?
MR. PEREZ. That is correct, Mr. Speaker.
(Id. at 6:40 P.M.; Emphasis ours).
 In fact, in the sponsorship speech of Senator Mamintal Tamano on the Senate
version of the SNITS, it is categorically stated, thus:
This bill, Mr. President, is not applicable to business corporations or
to partnerships; it is only with respect to individuals and professionals.
(Emphasis ours)
The Court, first of all, should like to correct the apparent misconception that general professional
partnerships are subject to the payment of income tax or that there is a difference in the tax
treatment between individuals engaged in business or in the practice of their respective professions
and partners in general professional partnerships. The fact of the matter is that a general
professional partnership, unlike an ordinary business partnership (which is treated as a corporation
for income tax purposes and so subject to the corporate income tax), is not itself an income
taxpayer. The income tax is imposed not on the professional partnership, which is tax exempt, but on
the partners themselves in their individual capacity computed on their distributive shares of
partnership profits. Section 23 of the Tax Code, which has not been amended at all by Republic Act
7496, is explicit:
Sec. 23. Tax liability of members of general professional partnerships. — (a) Persons
exercising a common profession in general partnership shall be liable for income tax
only in their individual capacity, and the share in the net profits of the general
professional partnership to which any taxable partner would be entitled whether
distributed or otherwise, shall be returned for taxation and the tax paid in accordance
with the provisions of this Title.
(b) In determining his distributive share in the net income of the partnership, each
partner —
(1) Shall take into account separately his distributive share of the
partnership's income, gain, loss, deduction, or credit to the extent
provided by the pertinent provisions of this Code, and
(2) Shall be deemed to have elected the itemized deductions, unless
he declares his distributive share of the gross income undiminished
by his share of the deductions.
There is, then and now, no distinction in income tax liability between a person who practices his
profession alone or individually and one who does it through partnership (whether registered or not)
with others in the exercise of a common profession. Indeed, outside of the gross compensation
income tax and the final tax on passive investment income, under the present income tax system all
individuals deriving income from any source whatsoever are treated in almost invariably the same
manner and under a common set of rules.
We can well appreciate the concern taken by petitioners if perhaps we were to consider Republic Act
No. 7496 as an entirely independent, not merely as an amendatory, piece of legislation. The view
can easily become myopic, however, when the law is understood, as it should be, as only forming
part of, and subject to, the whole income tax concept and precepts long obtaining under the National
Internal Revenue Code. To elaborate a little, the phrase "income taxpayers" is an all embracing term
used in the Tax Code, and it practically covers all persons who derive taxable income. The law, in
levying the tax, adopts the most comprehensive tax situs of nationality and residence of the taxpayer
(that renders citizens, regardless of residence, and resident aliens subject to income tax liability on
their income from all sources) and of the generally accepted and internationally recognized income
taxable base (that can subject non-resident aliens and foreign corporations to income tax on their
income from Philippine sources). In the process, the Code classifies taxpayers into four main
groups, namely: (1) Individuals, (2) Corporations, (3) Estates under Judicial Settlement and (4)
Irrevocable Trusts (irrevocable both as to corpus and as to income).
Partnerships are, under the Code, either "taxable partnerships" or "exempt partnerships." Ordinarily,
partnerships, no matter how created or organized, are subject to income tax (and thus alluded to as
"taxable partnerships") which, for purposes of the above categorization, are by law assimilated to be
within the context of, and so legally contemplated as, corporations. Except for few variances, such
as in the application of the "constructive receipt rule" in the derivation of income, the income tax
approach is alike to both juridical persons. Obviously, SNIT is not intended or envisioned, as so
correctly pointed out in the discussions in Congress during its deliberations on Republic Act 7496,
aforequoted, to cover corporations and partnerships which are independently subject to the payment
of income tax.
"Exempt partnerships," upon the other hand, are not similarly identified as corporations nor even
considered as independent taxable entities for income tax purposes. A
general professional partnership is such an example.4 Here, the partners themselves, not the
partnership (although it is still obligated to file an income tax return [mainly for administration and
data]), are liable for the payment of income tax in their individual capacity computed on their
respective and distributive shares of profits. In the determination of the tax liability, a partner does so
as an individual, and there is no choice on the matter. In fine, under the Tax Code on income
taxation, the general professional partnership is deemed to be no more than a mere mechanism or a
flow-through entity in the generation of income by, and the ultimate distribution of such income to,
respectively, each of the individual partners.
Section 6 of Revenue Regulation No. 2-93 did not alter, but merely confirmed, the above standing
rule as now so modified by Republic Act

No. 7496 on basically the extent of allowable deductions applicable to all individual income
taxpayers on their non-compensation income. There is no evident intention of the law, either before
or after the amendatory legislation, to place in an unequal footing or in significant variance the
income tax treatment of professionals who practice their respective professions individually and of
those who do it through a general professional partnership.
WHEREFORE, the petitions are DISMISSED. No special pronouncement on costs.
SO ORDERED.
Narvasa, C.J., Cruz, Feliciano, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno,
Kapunan and Mendoza, JJ., concur.
Padilla and Bidin, JJ., are on leave.
 EN BANC

G.R. No. 88291 June 8, 1993

ERNESTO M. MACEDA, petitioner, 

vs.

HON. CATALINO MACARAIG, JR., in his capacity as Executive Secretary, Office of the
President, HON. VICENTE JAYME, ETC., ET AL., respondents.
Angara, Abello, Concepcion & Cruz for respondent Pilipinas Shell Petroleum Corporation.
Siguion Reyna, Montecillo & Ongsiako for Caltex.

NOCON, J.:
Just like lightning which does strike the same place twice in some instances, this matter of indirect
tax exemption of the private respondent National Power Corporation (NPC) is brought to this Court a
second time. Unfazed by the Decision We promulgated on May 31, 19911 petitioner Ernesto Maceda
asks this Court to reconsider said Decision. Lest We be criticized for denying due process to the
petitioner. We have decided to take a second look at the issues. In the process, a hearing was held
on July 9, 1992 where all parties presented their respective arguments. Etched in this Court's mind
are the paradoxical claims by both petitioner and private respondents that their respective positions
are for the benefit of the Filipino people.
I
A Chronological review of the relevant NPC laws, specially with respect to its tax exemption
provisions, at the risk of being repetitious is, therefore, in order.
On November 3, 1936, Commonwealth Act No. 120 was enacted creating the National Power
Corporation, a public corporation, mainly to develop hydraulic power from all water sources in the
Philippines.2 The sum of P250,000.00 was appropriated out of the funds in the Philippine Treasury
for the purpose of organizing the NPC and conducting its preliminary work.3 The main source of
funds for the NPC was the flotation of bonds in the capital markets4 and these bonds
. . . issued under the authority of this Act shall be exempt from the payment of all
taxes by the Commonwealth of the Philippines, or by any authority, branch, division
or political subdivision thereof and subject to the provisions of the Act of Congress,
approved March 24, 1934, otherwise known as the Tydings McDuffle Law, which
facts shall be stated upon the face of said bonds. . . . .5
On June 24, 1938, C.A. No. 344 was enacted increasing to P550,000.00 the funds needed for the
initial operations of the NPC and reiterating the provision of the flotation of bonds as soon as the first
construction of any hydraulic power project was to be decided by the NPC Board.6 The provision on
tax exemption in relation to the issuance of the NPC bonds was neither amended nor deleted.
On September 30, 1939, C.A. No. 495 was enacted removing the provision on the payment of the
bond's principal and interest in "gold coins" but adding that payment could be made in United States
dollars.7 The provision on tax exemption in relation to the issuance of the NPC bonds was neither
amended nor deleted.
On June 4, 1949, Republic Act No. 357 was enacted authorizing the President of the Philippines to
guarantee, absolutely and unconditionally, as primary obligor, the payment of any and all NPC loans.
8 He was also authorized to contract on behalf of the NPC with the International Bank for

Reconstruction and Development (IBRD) for NPC loans for the accomplishment of NPC's corporate
objectives9 and for the reconstruction and development of the economy of the country. 10 It was
expressly stated that:
Any such loan or loans shall be exempt from taxes, duties, fees, imposts, charges,
contributions and restrictions of the Republic of the Philippines, its provinces, cities
and municipalities. 11
On the same date, R.A. No. 358 was enacted expressly authorizing the NPC, for the first time, to
incur other types of indebtedness, aside from indebtedness incurred by flotation of bonds. 12 As to the
pertinent tax exemption provision, the law stated as follows:
To facilitate payment of its indebtedness, the National Power Corporation shall be
exempt from all taxes, duties, fees, imposts, charges, and restrictions of the Republic
of the Philippines, its provinces, cities and municipalities. 13
On July 10, 1952, R.A. No. 813 was enacted amending R.A. No. 357 in that, aside from the IBRD,
the President of the Philippines was authorized to negotiate, contract and guarantee loans with the
Export-Import Bank of of Washigton, D.C., U.S.A., or any other international financial
institution. 14 The tax provision for repayment of these loans, as stated in R.A. No. 357, was not
amended.
On June 2, 1954, R.A. No. 987 was enacted specifically to withdraw NPC's tax exemption for real
estate taxes. As enacted, the law states as follows:
To facilitate payment of its indebtedness, the National Power Corporation shall be
exempt from all taxes, except real property tax, and from all duties, fees, imposts,
charges, and restrictions of the Republic of the Philippines, its provinces, cities, and
municipalities.15
On September 8, 1955, R.A. No. 1397 was enacted directing that the NPC projects to be funded by
the increased indebtedness 16 should bear the National Economic Council's stamp of approval. The
tax exemption provision related to the payment of this total indebtedness was not amended nor
deleted.
On June 13, 1958, R.A. No. 2055 was enacted increasing the total amount of foreign loans NPC was
authorized to incur to US$100,000,000.00 from the US$50,000,000.00 ceiling in R.A. No. 357. 17 The
tax provision related to the repayment of these loans was not amended nor deleted.
On June 13, 1958, R.A. No. 2058 was enacting fixing the corporate life of NPC to December 31,
2000. 18 All laws or provisions of laws and executive orders contrary to said R.A. No. 2058 were
expressly repealed. 19
On June 18, 1960, R.A. No 2641 was enacted converting the NPC from a public corporation into a
stock corporation with an authorized capital stock of P100,000,000.00 divided into 1,000.000 shares
having a par value of P100.00 each, with said capital stock wholly subscribed to by the
Government. 20 No tax exemption was incorporated in said Act.
On June 17, 1961, R.A. No. 3043 was enacted increasing the above-mentioned authorized capital
stock to P250,000,000.00 with the increase to be wholly subscribed by the Government. 21 No tax
provision was incorporated in said Act.
On June 17, 1967, R.A. No 4897 was enacted. NPC's capital stock was increased again to
P300,000,000.00, the increase to be wholly subscribed by the Government. No tax provision was
incorporated in said Act. 22
On September 10, 1971, R.A. No. 6395 was enacted revising the charter of the NPC, C.A. No. 120,
as amended. Declared as primary objectives of the nation were:
Declaration of Policy. — Congress hereby declares that (1) the comprehensive
development, utilization and conservation of Philippine water resources for all
beneficial uses, including power generation, and (2) the total electrification of the
Philippines through the development of power from all sources to meet the needs of
industrial development and dispersal and the needs of rural electrification are primary
objectives of the nation which shall be pursued coordinately and supported by all
instrumentalities and agencies of the government, including the financial
institutions. 23
Section 4 of C.A. No. 120, was renumbered as Section 8, and divided into sections 8 (a) (Authority
to incur Domestic Indebtedness) and Section 8 (b) (Authority to Incur Foreign Loans).
As to the issuance of bonds by the NPC, Paragraph No. 3 of Section 8(a), states as follows:
The bonds issued under the authority of this subsection shall be exempt from the
payment of all taxes by the Republic of the Philippines, or by any authority, branch,
division or political subdivision thereof which facts shall be stated upon the face of
said bonds. . . . 24
As to the foreign loans the NPC was authorized to contract, Paragraph No. 5, Section 8(b), states as
follows:
The loans, credits and indebtedness contracted under this subsection and the
payment of the principal, interest and other charges thereon, as well as the
importation of machinery, equipment, materials and supplies by the Corporation, paid
from the proceeds of any loan, credit or indebtedeness incurred under this Act, shall
also be exempt from all taxes, fees, imposts, other charges and restrictions, including
import restrictions, by the Republic of the Philippines, or any of its agencies and
political subdivisions. 25
A new section was added to the charter, now known as Section 13, R.A. No. 6395, which declares
the non-profit character and tax exemptions of NPC as follows:
The Corporation shall be non-profit and shall devote all its returns from its capital
investment, as well as excess revenues from its operation, for expansion. To enable
the Corporation to pay its indebtedness and obligations and in furtherance and
effective implementation of the policy enunciated in Section one of this Act, the
Corporation is hereby declared exempt:
(a) From the payment of all taxes, duties, fees, imposts, charges costs and service
fees in any court or administrative proceedings in which it may be a party, restrictions
and duties to the Republic of the Philippines, its provinces, cities, and municipalities
and other government agencies and instrumentalities;
(b) From all income taxes, franchise taxes and realty taxes to be paid to the National
Government, its provinces, cities, municipalities and other government agencies and
instrumentalities;
 (c) From all import duties, compensating taxes and advanced sales tax, and
wharfage fees on import of foreign goods required for its operations and projects;
and
(d) From all taxes, duties, fees, imposts and all other charges its provinces, cities,
municipalities and other government agencies and instrumentalities, on all petroleum
products used by the Corporation in the generation, transmission, utilization, and
sale of electric power. 26
On November 7, 1972, Presidential Decree No. 40 was issued declaring that the
electrification of the entire country was one of the primary concerns of the country.
And in connection with this, it was specifically stated that:
The setting up of transmission line grids and the construction of associated
generation facilities in Luzon, Mindanao and major islands of the country, including
the Visayas, shall be the responsibility of the National Power Corporation (NPC) as
the authorized implementing agency of the State. 27
xxx xxx xxx
It is the ultimate objective of the State for the NPC to own and operate as a single
integrated system all generating facilities supplying electric power to the entire area
embraced by any grid set up by the NPC. 28
On January 22, 1974, P.D. No. 380 was issued giving extra powers to the NPC to enable it to fulfill
its role under aforesaid P.D. No. 40. Its authorized capital stock was raised to
P2,000,000,000.00, 29 its total domestic indebtedness was pegged at a maximum of
P3,000,000,000.00 at any one time, 30 and the NPC was authorized to borrow a total of
US$1,000,000,000.00 31 in foreign loans.
The relevant tax exemption provision for these foreign loans states as follows:
The loans, credits and indebtedness contracted under this subsection and the
payment of the principal, interest and other charges thereon, as well as the
importation of machinery, equipment, materials, supplies and services, by the
Corporation, paid from the proceeds of any loan, credit or indebtedness incurred
under this Act, shall also be exempt from all direct and indirect taxes, fees, imposts,
other charges and restrictions, including import restrictions previously and presently
imposed, and to be imposed by the Republic of the Philippines, or any of its agencies
and political subdivisions. 32(Emphasis supplied)
Section 13(a) and 13(d) of R.A. No 6395 were amended to read as follows:
(a) From the payment of all taxes, duties, fees, imposts, charges and restrictions to
the Republic of the Philippines, its provinces, cities, municipalities and other
government agencies and instrumentalities including the taxes, duties, fees, imposts
and other charges provided for under the Tariff and Customs Code of the Philippines,
Republic Act Numbered Nineteen Hundred Thirty-Seven, as amended, and as further
amended by Presidential Decree No. 34 dated October 27, 1972, and Presidential
Decree No. 69, dated November 24, 1972, and costs and service fees in any court or
administrative proceedings in which it may be a party;
xxx xxx xxx
(d) From all taxes, duties, fees, imposts, and all other charges imposed directly or
indirectly by the Republic of the Philippines, its provinces, cities, municipalities and
other government agencies and instrumentalities, on all petroleum products used by
the Corporation in the generation, transmission, utilization and sale of electric
power. 33 (Emphasis supplied)
On February 26, 1970, P.D. No. 395 was issued removing certain restrictions in the NPC's sale of
electricity to its different customers. 34 No tax exemption provision was amended, deleted or added.
On July 31, 1975, P.D. No. 758 was issued directing that P200,000,000.00 would be appropriated
annually to cover the unpaid subscription of the Government in the NPC authorized capital stock,
which amount would be taken from taxes accruing to the General Funds of the Government,
proceeds from loans, issuance of bonds, treasury bills or notes to be issued by the Secretary of
Finance for this particular purpose. 35
On May 27, 1976 P.D. No. 938 was issued
(I)n view of the accelerated expansion programs for generation and transmission
facilities which includes nuclear power generation, the present capitalization of
National Power Corporation (NPC) and the ceilings for domestic and foreign
borrowings are deemed insufficient; 36
xxx xxx xxx
(I)n the application of the tax exemption provisions of the Revised Charter, the non-
profit character of NPC has not been fully utilized because of restrictive interpretation
of the taxing agencies of the government on said provisions; 37
xxx xxx xxx
(I)n order to effect the accelerated expansion program and attain the declared
objective of total electrification of the country, further amendments of certain sections
of Republic Act No. 6395, as amended by Presidential Decrees Nos. 380, 395 and
758, have become imperative; 38
Thus NPC's capital stock was raised to P8,000,000,000.00, 39 the total domestic indebtedness ceiling
was increased to P12,000,000,000.00, 40 the total foreign loan ceiling was raised to
US$4,000,000,000.00 41 and Section 13 of R.A. No. 6395, was amended to read as follows:
The Corporation shall be non-profit and shall devote all its returns from its capital
investment as well as excess revenues from its operation, for expansion. To enable
the Corporation to pay to its indebtedness and obligations and in furtherance and
effective implementation of the policy enunciated in Section one of this Act, the
Corporation, including its subsidiaries, is hereby declared exempt from the payment
of all forms of taxes, duties, fees, imposts as well as costs and service fees including
filing fees, appeal bonds, supersedeas bonds, in any court or administrative
proceedings. 42
II
On the other hand, the pertinent tax laws involved in this controversy are P.D. Nos. 882, 1177, 1931
and Executive Order No. 93 (S'86).
On January 30, 1976, P.D. No. 882 was issued withdrawing the tax exemption of NPC with regard to
imports as follows:
WHEREAS, importations by certain government agencies, including government-
owned or controlled corporation, are exempt from the payment of customs duties and
compensating tax; and
WHEREAS, in order to reduce foreign exchange spending and to protect domestic
industries, it is necessary to restrict and regulate such tax-free importations.
NOW THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by
virtue of the powers vested in me by the Constitution, and do hereby decree and
order the following:
Sec. 1. All importations of any government agency, including government-owned or
controlled corporations which are exempt from the payment of customs duties and
 internal revenue taxes, shall be subject to the prior approval of an Inter-Agency
Committee which shall insure compliance with the following conditions:
(a) That no such article of local manufacture are available in sufficient quantity and
comparable quality at reasonable prices;
(b) That the articles to be imported are directly and actually needed and will be used
exclusively by the grantee of the exemption for its operations and projects or in the
conduct of its functions; and
(c) The shipping documents covering the importation are in the name of the grantee
to whom the goods shall be delivered directly by customs authorities.
xxx xxx xxx
Sec. 3. The Committee shall have the power to regulate and control the tax-free
importation of government agencies in accordance with the conditions set forth in
Section 1 hereof and the regulations to be promulgated to implement the provisions
of this Decree. Provided, however, That any government agency or government-
owned or controlled corporation, or any local manufacturer or business firm
adversely affected by any decision or ruling of the Inter-Agency Committee may file
an appeal with the Office of the President within ten days from the date of notice
thereof. . . . .
xxx xxx xxx
Sec. 6. . . . . Section 13 of Republic Act No. 6395; . . .. and all similar provisions of all
general and special laws and decrees are hereby amended accordingly.
xxx xxx xxx
On July 30, 1977, P.D. 1177 was issued as it was
. . . declared the policy of the State to formulate and implement a National Budget
that is an instrument of national development, reflective of national objectives,
strategies and plans. The budget shall be supportive of and consistent with the socio-
economic development plan and shall be oriented towards the achievement of
explicit objectives and expected results, to ensure that funds are utilized and
operations are conducted effectively, economically and efficiently. The national
budget shall be formulated within a context of a regionalized government structure
and of the totality of revenues and other receipts, expenditures and borrowings of all
levels of government-owned or controlled corporations. The budget shall likewise be
prepared within the context of the national long-term plan and of a long-term budget
program. 43
In line with such policy, the law decreed that
All units of government, including government-owned or controlled corporations, shall pay income
taxes, customs duties and other taxes and fees are imposed under revenues laws: provided, that
organizations otherwise exempted by law from the payment of such taxes/duties may ask for a
subsidy from the General Fund in the exact amount of taxes/duties due: provided, further, that a
procedure shall be established by the Secretary of Finance and the Commissioner of the Budget,
whereby such subsidies shall automatically be considered as both revenue and expenditure of the
General Fund. 44
The law also declared that —
[A]ll laws, decrees, executive orders, rules and regulations or parts thereof which are
inconsistent with the provisions of the Decree are hereby repealed and/or modified
accordingly. 45
On July 11, 1984, most likely due to the economic morass the Government found itself in after the
Aquino assassination, P.D. No. 1931 was issued to reiterate that:
WHEREAS, Presidential Decree No. 1177 has already expressly repealed the grant
of tax privileges to any government-owned or controlled corporation and all other
units of government; 46
and since there was a
. . . need for government-owned or controlled corporations and all other units of
government enjoying tax privileges to share in the requirements of development,
fiscal or otherwise, by paying the duties, taxes and other charges due from them. 47
it was decreed that:
Sec. 1. The provisions of special on general law to the contrary notwithstanding, all
exemptions from the payment of duties, taxes, fees, imposts and other charges
heretofore granted in favor of government-owned or controlled corporations including
their subsidiaries, are hereby withdrawn.
Sec. 2. The President of the Philippines and/or the Minister of Finance, upon the
recommendation of the Fiscal Incentives Review Board created under Presidential
Decree No. 776, is hereby empowered to restore, partially or totally, the exemptions
withdrawn by Section 1 above, any applicable tax and duty, taking into account,
among others, any or all of the following:
1) The effect on the relative price levels;
2) The relative contribution of the corporation to the revenue generation effort;
3) The nature of the activity in which the corporation is engaged in; or
4) In general the greater national interest to be served.
xxx xxx xxx
Sec. 5. The provisions of Presidential Decree No. 1177 as well as all other laws,
decrees, executive orders, administrative orders, rules, regulations or parts thereof
which are inconsistent with this Decree are hereby repealed, amended or modified
accordingly.
On December 17, 1986, E.O. No. 93 (S'86) was issued with a view to correct presidential restoration
or grant of tax exemption to other government and private entities without benefit of review by the
Fiscal Incentives Review Board, to wit:
WHEREAS, Presidential Decree Nos. 1931 and 1955 issued on June 11, 1984 and
October 14, 1984, respectively, withdrew the tax and duty exemption privileges,
including the preferential tax treatment, of government and private entities with
certain exceptions, in order that the requirements of national economic development,
in terms of fiscals and other resources, may be met more adequately;
xxx xxx xxx
WHEREAS, in addition to those tax and duty exemption privileges were restored by
the Fiscal Incentives Review Board (FIRB), a number of affected entities,
government and private, had their tax and duty exemption privileges restored or
granted by Presidential action without benefit or review by the Fiscal Incentives
Review Board (FIRB);
xxx xxx xxx
Since it was decided that:
[A]ssistance to government and private entities may be better provided where
necessary by explicit subsidy and budgetary support rather than tax and duty
 exemption privileges if only to improve the fiscal monitoring aspects of government
operations.
It was thus ordered that:
Sec. 1. The Provisions of any general or special law to the contrary notwithstanding,
all tax and duty incentives granted to government and private entities are hereby
withdrawn, except:
a) those covered by the non-impairment clause of the Constitution;
b) those conferred by effective internation agreement to which the Government of the
Republic of the Philippines is a signatory;
c) those enjoyed by enterprises registered with:
(i) the Board of Investment pursuant to Presidential Decree No. 1789,
as amended;
(ii) the Export Processing Zone Authority, pursuant to Presidential
Decree No. 66 as amended;
(iii) the Philippine Veterans Investment Development Corporation
Industrial Authority pursuant to Presidential Decree No. 538, was
amended.
d) those enjoyed by the copper mining industry pursuant to the provisions of Letter of
Instructions No. 1416;
e) those conferred under the four basic codes namely:
(i) the Tariff and Customs Code, as amended;
(ii) the National Internal Revenue Code, as amended;
(iii) the Local Tax Code, as amended;
(iv) the Real Property Tax Code, as amended;
f) those approved by the President upon the recommendation of the
Fiscal Incentives Review Board.
Sec. 2. The Fiscal Incentives Review Board created under Presidential Decree No.
776, as amended, is hereby authorized to:
a) restore tax and/or duty exemptions withdrawn hereunder in whole or in part;
b) revise the scope and coverage of tax and/or duty exemption that may be restored;
c) impose conditions for the restoration of tax and/or duty exemption;
d) prescribe the date of period of effectivity of the restoration of tax and/or duty
exemption;
e) formulate and submit to the President for approval, a complete system for the
grant of subsidies to deserving beneficiaries, in lieu of or in combination with the
restoration of tax and duty exemptions or preferential treatment in taxation, indicating
the source of funding therefor, eligible beneficiaries and the terms and conditions for
the grant thereof taking into consideration the international commitment of the
Philippines and the necessary precautions such that the grant of subsidies does not
become the basis for countervailing action.
Sec. 3. In the discharge of its authority hereunder, the Fiscal Incentives Review
Board shall take into account any or all of the following considerations:
a) the effect on relative price levels;
b) relative contribution of the beneficiary to the revenue generation effort;
 c) nature of the activity the beneficiary is engaged; and
d) in general, the greater national interest to be served.
xxx xxx xxx
Sec. 5. All laws, orders, issuances, rules and regulations or parts thereof inconsistent
with this Executive Order are hereby repealed or modified accordingly.
E.O. No. 93 (S'86) was decreed to be effective 48 upon the promulgation of the rules and regulations,
to be issued by the Ministry of Finance. 49 Said rules and regulations were promulgated and
published in the Official Gazette 

on February 23, 1987. These became effective on the 15th day after promulgation 50 in the Official
Gasetter, 51 which 15th day was March 10, 1987.
III
Now to some definitions. We refer to the very simplistic approach that all would-be lawyers, learn in
their TAXATION I course, which fro convenient reference, is as follows:
Classifications or kinds of Taxes:
According to Persons who pay or who bear the burden:
a. Direct Tax — the where the person supposed to pay the tax really pays
it. WITHOUT transferring the burden to someone else.
Examples: Individual income tax, corporate income tax, transfer taxes (estate tax,
donor's tax), residence tax, immigration tax
b. Indirect Tax — that where the tax is imposed upon goods BEFORE reaching the
consumer who ultimately pays for it, not as a tax, but as a part of the purchase price.
Examples: the internal revenue indirect taxes (specific tax, percentage taxes, (VAT)
and the tariff and customs indirect taxes (import duties, special import tax and other
dues) 52
IV
To simply matter, the issues raised by petitioner in his motion for reconsideration can be reduced to
the following:
(1) What kind of tax exemption privileges did NPC have?
(2) For what periods in time were these privileges being enjoyed?
(3) If there are taxes to be paid, who shall pay for these taxes?
V
Petitioner contends that P.D. No. 938 repealed the indirect tax exemption of NPC as the phrase "all
forms of taxes etc.," in its section 10, amending Section 13, R.A. No. 6395, as amended by P.D. No.
380, does not expressly include "indirect taxes."
His point is not well-taken.
A chronological review of the NPC laws will show that it has been the lawmaker's intention that the
NPC was to be completely tax exempt from all forms of taxes — direct and indirect.
NPC's tax exemptions at first applied to the bonds it was authorized to float to finance its operations
upon its creation by virtue of C.A. No. 120.
When the NPC was authorized to contract with the IBRD for foreign financing, any loans obtained
were to be completely tax exempt.
After the NPC was authorized to borrow from other sources of funds — aside issuance of bonds — it
was again specifically exempted from all types of taxes "to facilitate payment of its indebtedness."
Even when the ceilings for domestic and foreign borrowings were periodically increased, the tax
exemption privileges of the NPC were maintained.
NPC's tax exemption from real estate taxes was, however, specifically withdrawn by Rep. Act No.
987, as above stated. The exemption was, however, restored by R.A. No. 6395.
Section 13, R.A. No. 6395, was very comprehensive in its enumeration of the tax exemptions
allowed NPC. Its section 13(d) is the starting point of this bone of contention among the parties. For
easy reference, it is reproduced as follows:
[T]he Corporation is hereby declared exempt:
xxx xxx xxx
(d) From all taxes, duties, fees, imposts and all other charges imposed by the
Republic of the Philippines, its provinces, cities, municipalities and other government
agencies and instrumentalities, on all petroleum products used by the Corporation in
the generation, transmission, utilization, and sale of electric power.
P.D. No. 380 added phrase "directly or indirectly" to said Section 13(d), which now reads as follows:
xxx xxx xxx
(d) From all taxes, duties, fees, imposts, and all other charges imposed directly or
indirectly by the Republic of the Philippines, its provinces, cities, municipalities and
other government agencies and instrumentalities, on all petroleum products used by
the Corporation in the generation, transmission, utilization and sale of electric power.
(Emphasis supplied)
Then came P.D. No. 938 which amended Sec. 13(a), (b), (c) and (d) into one very simple paragraph
as follows:
The Corporation shall be non-profit and shall devote all its returns from its capital
investment as well as excess revenues from its operation, for expansion. To enable
the Corporation to pay its indebtedness and obligations and in furtherance and
effective implementation of the policy enunciated in Section one of this Act, the
Corporation, including its subsidiaries, is hereby declared exempt from the payment
of ALL FORMS OF taxes, duties, fees, imposts as well as costs and service fees
including filing fees, appeal bonds, supersedeas bonds, in any court or administrative
proceedings. (Emphasis supplied)
Petitioner reminds Us that:
[I]t must be borne in mind that Presidential Decree Nos. 380 

and 938 were issued by one man, acting as such the Executive and Legislative. 53
xxx xxx xxx
[S]ince both presidential decrees were made by the same person, it would have been
very easy for him to retain the same or similar language used in P.D. No. 380 P.D.
No. 938 if his intention were to preserve the indirect tax exemption of NPC. 54
Actually, P.D. No. 938 attests to the ingenuousness of then President Marcos no matter what his
fault were. It should be noted that section 13, R.A. No. 6395, provided for tax exemptions for the
following items:
13(a) : court or administrative proceedings;
13(b) : income, franchise, realty taxes;
13(c) : import of foreign goods required for its operations and projects;
13(d) : petroleum products used in generation of electric power.
P.D. No. 938 lumped up 13(b), 13(c), and 13(d) into the phrase "ALL FORMS OF TAXES, ETC.,",
included 13(a) under the "as well as" clause and added PNOC subsidiaries as qualified for tax
exemptions.
This is the only conclusion one can arrive at if he has read all the NPC laws in the order of
enactment or issuance as narrated above in part I hereof. President Marcos must have considered
all the NPC statutes from C.A. No. 120 up to its latest amendments, P.D. No. 380, P.D. No. 395 and
P.D. No. 759, AND came up 55 with a very simple Section 13, R.A. No. 6395, as amended by P.D. No.
938.
One common theme in all these laws is that the NPC must be enable to pay its
indebtedness 56 which, as of P.D. No. 938, was P12 Billion in total domestic indebtedness, at any one
time, and U$4 Billion in total foreign loans at any one time. The NPC must be and has to be exempt
from all forms of taxes if this goal is to be achieved.
By virtue of P.D. No. 938 NPC's capital stock was raised to P8 Billion. It must be remembered that to
pay the government share in its capital stock P.D. No. 758 was issued mandating that P200 Million
would be appropriated annually to cover the said unpaid subscription of the Government in NPC's
authorized capital stock. And significantly one of the sources of this annual appropriation of P200
million is TAX MONEY accruing to the General Fund of the Government. It does not stand to reason
then that former President Marcos would order P200 Million to be taken partially or totally from tax
money to be used to pay the Government subscription in the NPC, on one hand, and then order the
NPC to pay all its indirect taxes, on the other.
The above conclusion that then President Marcos lumped up Sections 13 (b), 13 (c) and (d) into the
phrase "All FORMS OF" is supported by the fact that he did not do the same for the tax exemption
provision for the foreign loans to be incurred.
The tax exemption on foreign loans found in Section 8(b), R.A. No. 6395, reads as follows:
The loans, credits and indebtedness contracted under this subsection and the
payment of the principal, interest and other charges thereon, as well as the
importation of machinery, equipment, materials and supplies by the Corporation, paid
from the proceeds of any loan, credit or indebtedness incurred under this Act, shall
also be exempt from all taxes, fees, imposts, other charges and restrictions, including
import restrictions, by the Republic of the Philippines, or any of its agencies and
political subdivisions. 57
The same was amended by P.D. No. 380 as follows:
The loans, credits and indebtedness contracted this subsection and the payment of
the principal, interest and other charges thereon, as well as the importation of
machinery, equipment, materials, supplies and services, by the Corporation, paid
from the proceeds of any loan, credit or indebtedness incurred under this Act, shall
also be exempt from all direct and indirect taxes, fees, imposts, other charges and
restrictions, including import restrictions previously and presently imposed, and to be
imposed by the Republic of the Philippines, or any of its agencies and political
subdivisions. 58(Emphasis supplied)
P.D. No. 938 did not amend the same 59 and so the tax exemption provision in Section 8 (b), R.A. No.
6395, as amended by P.D. No. 380, still stands. Since the subject matter of this particular Section 8
(b) had to do only with loans and machinery imported, paid for from the proceeds of these foreign
loans, THERE WAS NO OTHER SUBJECT MATTER TO LUMP IT UP WITH, and so, the tax
exemption stood as is — with the express mention of "direct 

and indirect" tax exemptions. And this "direct and indirect" tax exemption privilege extended to
"taxes, fees, imposts, other charges . . . to be imposed" in the future — surely, an indication that the
lawmakers wanted the NPC to be exempt from ALL FORMS of taxes — direct and indirect.
It is crystal clear, therefore, that NPC had been granted tax exemption privileges for both direct and
indirect taxes under P.D. No. 938.
VI
Five (5) years on into the now discredited New Society, the Government decided to rationalize
government receipts and expenditures by formulating and implementing a National Budget. 60 The
NPC, being a government owned and controlled corporation had to be shed off its tax exemption
status privileges under P.D. No. 1177. It was, however, allowed to ask for a subsidy from the General
Fund in the exact amount of taxes/duties due.
Actually, much earlier, P.D. No. 882 had already repealed NPC's tax-free importation privileges. It
allowed, however, NPC to appeal said repeal with the Office of the President and to avail of tax-free
importation privileges under its Section 1, subject to the prior approval of an Inter-Agency Committed
created by virtue of said P.D. No. 882. It is presumed that the NPC, being the special creation of the
State, was allowed to continue its tax-free importations.
This Court notes that petitioner brought to the attention of this Court, the matter of the abolition of
NPC's tax exemption privileges by P.D. No. 1177 61 only in his Common Reply/Comment to private
Respondents' "Opposition" and "Comment" to Motion for Reconsideration, four (4) months AFTER
the motion for Reconsideration had been filed. During oral arguments heard on July 9, 1992, he
proceeded to discuss this tax exemption withdrawal as explained by then Secretary of Justice
Vicente Abad Santos in opinion No. 133 (S '77). 62 A careful perusal of petitioner's senate Blue
Ribbon Committee Report No. 474, the basis of the petition at bar, fails to yield any mention of said
P.D. No. 1177's effect on NPC's tax exemption privileges. 63 Applying by analogy Pulido vs.
Pablo, 64 the court declares that the matter of P.D. No. 1177 abolishing NPC's tax exemption
privileges was not seasonably invoked 65 by the petitioner.
Be that as it may, the Court still has to discuss the effect of P.D. No. 1177 on the NPC tax exemption
privileges as this statute has been reiterated twice in P.D. No. 1931. The express repeal of tax
privileges of any government-owned or controlled corporation (GOCC). NPC included, was
reiterated in the fourth whereas clause of P.D. No. 1931's preamble. The subsidy provided for in
Section 23, P.D. No. 1177, being inconsistent with Section 2, P.D. No. 1931, was deemed repealed
as the Fiscal Incentives Revenue Board was tasked with recommending the partial or total
restoration of tax exemptions withdrawn by Section 1, P.D. No. 1931.
The records before Us do not indicate whether or not NPC asked for the subsidy contemplated in
Section 23, P.D. No. 1177. Considering, however, that under Section 16 of P.D. No. 1177, NPC had
to submit to the Office of the President its request for the P200 million mandated by P.D. No. 758 to
be appropriated annually by the Government to cover its unpaid subscription to the NPC authorized
capital stock and that under Section 22, of the same P.D. No. NPC had to likewise submit to the
Office of the President its internal operating budget for review due to capital inputs of the
government (P.D. No. 758) and to the national government's guarantee of the domestic and foreign
indebtedness of the NPC, it is clear that NPC was covered by P.D. No. 1177.
There is reason to believe that NPC availed of subsidy granted to exempt GOCC's that suddenly
found themselves having to pay taxes. It will be noted that Section 23, P.D. No. 1177, mandated that
the Secretary of Finance and the Commissioner of the Budget had to establish the necessary
procedure to accomplish the tax payment/tax subsidy scheme of the Government. In effect, NPC, did
not put any cash to pay any tax as it got from the General Fund the amounts necessary to pay
different revenue collectors for the taxes it had to pay.
In his memorandum filed July 16, 1992, petitioner submits:
[T]hat with the enactment of P.D. No. 1177 on July 30, 1977, the NPC lost all its duty
and tax exemptions, whether direct or indirect. And so there was nothing to be
withdrawn or to be restored under P.D. No. 1931, issued on June 11, 1984. This is
evident from sections 1 and 2 of said P.D. No. 1931, which reads:
 "Section 1. The provisions of special or general law to the contrary
notwithstanding, all exemptions from the payment of duties, taxes,
fees, imports and other charges heretofore granted in favor of
government-owned or controlled corporations including their
subsidiaries are hereby withdrawn."
Sec. 2. The President of the Philippines and/or the Minister of
Finance, upon the recommendation of the Fiscal Incentives Review
Board created under P.D. No. 776, is hereby empowered to restore
partially or totally, the exemptions withdrawn by section 1 above. . . .
Hence, P.D. No. 1931 did not have any effect or did it change NPC's status. Since it
had already lost all its tax exemptions privilege with the issuance of P.D. No. 1177
seven (7) years earlier or on July 30, 1977, there were no tax exemptions to be
withdrawn by section 1 which could later be restored by the Minister of Finance upon
the recommendation of the FIRB under Section 2 of P.D. No. 1931. Consequently,
FIRB resolutions No. 10-85, and 1-86, were all illegally and validly issued since FIRB
acted beyond their statutory authority by creating and not merely restoring the tax
exempt status of NPC. The same is true for FIRB Res. No. 17-87 which restored
NPC's tax exemption under E.O. No. 93 which likewise abolished all duties and tax
exemptions but allowed the President upon recommendation of the FIRB to restore
those abolished.
The Court disagrees.
Applying by analogy the weight of authority that:
When a revised and consolidated act re-enacts in the same or substantially the same
terms the provisions of the act or acts so revised and consolidated, the revision and
consolidation shall be taken to be a continuation of the former act or acts, although
the former act or acts may be expressly repealed by the revised and consolidated
act; and all rights 

and liabilities under the former act or acts are preserved and may be enforced. 66
the Court rules that when P.D. No. 1931 basically reenacted in its Section 1 the first half of Section
23, P.D. No. 1177, on withdrawal of tax exemption privileges of all GOCC's said Section 1, P.D. No.
1931 was deemed to be a continuation of the first half of Section 23, P.D. No. 1177, although the
second half of Section 23, P.D. No. 177, on the subsidy scheme for former tax exempt GOCCs had
been expressly repealed by Section 2 with its institution of the FIRB recommendation of partial/total
restoration of tax exemption privileges.
The NPC tax privileges withdrawn by Section 1. P.D. No. 1931, were, therefore, the same NPC tax
exemption privileges withdrawn by Section 23, P.D. No. 1177. NPC could no longer obtain a subsidy
for the taxes it had to pay. It could, however, under P.D. No. 1931, ask for a total restoration of its tax
exemption privileges, which, it did, and the same were granted under FIRB Resolutions Nos.
10-85 67 and 1-86 68 as approved by the Minister of Finance.
Consequently, contrary to petitioner's submission, FIRB Resolutions Nos. 10-85 and 1-86 were both
legally and validly issued by the FIRB pursuant to P.D. No. 1931. FIRB did not created NPC's tax
exemption status but merely restored it. 69
Some quarters have expressed the view that P.D. No. 1931 was illegally issued under the now rather
infamous Amendment No. 6 70 as there was no showing that President Marcos' encroachment on
legislative prerogatives was justified under the then prevailing condition that he could legislate "only
if the Batasang Pambansa 'failed or was unable to act inadequately on any matter that in his
judgment required immediate action' to meet the 'exigency'. 71
Actually under said Amendment No. 6, then President Marcos could issue decrees not only when the
Interim Batasang Pambansa failed or was unable to act adequately on any matter for any reason
that in his (Marcos') judgment required immediate action, but also when there existed a grave
emergency or a threat or thereof. It must be remembered that said Presidential Decree was issued
only around nine (9) months after the Philippines unilaterally declared a moratorium on its foreign
debt payments 72 as a result of the economic crisis triggered by loss of confidence in the government
brought about by the Aquino assassination. The Philippines was then trying to reschedule its debt
payments. 73 One of the big borrowers was the NPC 74 which had a US$ 2.1 billion white elephant of a
Bataan Nuclear Power Plant on its back. 75 From all indications, it must have been this grave
emergency of a debt rescheduling which compelled Marcos to issue P.D. No. 1931, under his
Amendment 6 power. 76
The rule, therefore, that under the 1973 Constitution "no law granting a tax exemption shall be
passed without the concurrence of a majority of all the members of the Batasang Pambansa" 77 does
not apply as said P.D. No. 1931 was not passed by the Interim Batasang Pambansa but by then
President Marcos under His Amendment No. 6 power.
P.D. No. 1931 was, therefore, validly issued by then President Marcos under his Amendment No. 6
authority.
Under E.O No. 93 (S'86) NPC's tax exemption privileges were again clipped by, this time, President
Aquino. Its section 2 allowed the NPC to apply for the restoration of its tax exemption privileges. The
same was granted under FIRB Resolution No. 17-87 78 dated June 24, 1987 which restored NPC's
tax exemption privileges effective, starting March 10, 1987, the date of effectivity of E.O. No. 93
(S'86).
FIRB Resolution No. 17-87 was approved by the President on October 5, 1987. 79 There is no
indication, however, from the records of the case whether or not similar approvals were given by
then President Marcos for FIRB Resolutions Nos. 10-85 and 1- 86. This has led some quarters to
believe that a "travesty of justice" might have occurred when the Minister of Finance approved his
own recommendation as Chairman of the Fiscal Incentives Review Board as what happened
in Zambales Chromate vs. Court of Appeals 80 when the Secretary of Agriculture and Natural
Resources approved a decision earlier rendered by him when he was the Director of Mines, 81 and
in Anzaldo vs. Clave 82 where Presidential Executive Assistant Clave affirmed, on appeal to
Malacañang, his own decision as Chairman of the Civil Service Commission. 83
Upon deeper analysis, the question arises as to whether one can talk about "due process" being
violated when FIRB Resolutions Nos. 10-85 and 1-86 were approved by the Minister of Finance
when the same were recommended by him in his capacity as Chairman of the Fiscal Incentives
Review Board. 84
In Zambales Chromite and Anzaldo, two (2) different parties were involved: mining groups and
scientist-doctors, respectively. Thus, there was a need for procedural due process to be followed.
In the case of the tax exemption restoration of NPC, there is no other comparable entity — not even
a single public or private corporation — whose rights would be violated if NPC's tax exemption
privileges were to be restored. While there might have been a MERALCO before Martial Law, it is of
public knowledge that the MERALCO generating plants were sold to the NPC in line with the State
policy that NPC was to be the State implementing arm for the electrification of the entire country.
Besides, MERALCO was limited to Manila and its environs. And as of 1984, there was no more
MERALCO — as a producer of electricity — which could have objected to the restoration of NPC's
tax exemption privileges.
It should be noted that NPC was not asking to be granted tax exemption privileges for the first time.
It was just asking that its tax exemption privileges be restored. It is for these reasons that, at least in
NPC's case, the recommendation and approval of NPC's tax exemption privileges under FIRB
Resolution Nos. 10-85 and 1-86, done by the same person acting in his dual capacities as Chairman
of the Fiscal Incentives Review Board and Minister of Finance, respectively, do not violate
procedural due process.
While as above-mentioned, FIRB Resolution No. 17-87 was approved by President Aquino on
October 5, 1987, the view has been expressed that President Aquino, at least with regard to E.O. 93
(S'86), had no authority to sub-delegate to the FIRB, which was allegedly not a delegate of the
legislature, the power delegated to her thereunder.
A misconception must be cleared up.
When E.O No. 93 (S'86) was issued, President Aquino was exercising both Executive and
Legislative powers. Thus, there was no power delegated to her, rather it was she who was
delegating her power. She delegated it to the FIRB, which, for purposes of E.O No. 93 (S'86), is a
delegate of the legislature. Clearly, she was not sub-delegating her power.
And E.O. No. 93 (S'86), as a delegating law, was complete in itself — it set forth the policy to be
carried out 85 and it fixed the standard to which the delegate had to conform in the performance of his
functions, 86 both qualities having been enunciated by this Court in Pelaez vs. Auditor General. 87
Thus, after all has been said, it is clear that the NPC had its tax exemption privileges restored from
June 11, 1984 up to the present.
VII
The next question that projects itself is — who pays the tax?
The answer to the question could be gleamed from the manner by which the Commissaries of the
Armed Forces of the Philippines sell their goods.
By virtue of P.D. No. 83, 88 veterans, members of the Armed of the Philippines, and their defendants
but groceries and other goods free of all taxes and duties if bought from any AFP Commissaries.
In practice, the AFP Commissary suppliers probably treat the unchargeable specific, ad valorem and
other taxes on the goods earmarked for AFP Commissaries as an added cost of operation and
distribute it over the total units of goods sold as it would any other cost. Thus, even the ordinary
supermarket buyer probably pays for the specific, ad valorem and other taxes which theses
suppliers do not charge the AFP Commissaries. 89
IN MUCH THE SAME MANNER, it is clear that private respondents-oil companies have to absorb
the taxes they add to the bunker fuel oil they sell to NPC.
It should be stated at this juncture that, as early as May 14, 1954, the Secretary of Justice renders
an opinion, 90wherein he stated and We quote:
xxx xxx xxx
Republic Act No. 358 exempts the National Power Corporation from "all taxes, duties,
fees, imposts, charges, and restrictions of the Republic of the Philippines and its
provinces, cities, and municipalities." This exemption is broad enough to include all
taxes, whether direct or indirect, which the National Power Corporation may be
required to pay, such as the specific tax on petroleum products. That it is indirect or is
of no amount [should be of no moment], for it is the corporation that ultimately pays
it. The view which refuses to accord the exemption because the tax is first paid by
the seller disregards realities and gives more importance to form than to substance.
Equity and law always exalt substance over from.
xxx xxx xxx
Tax exemptions are undoubtedly to be construed strictly but not so grudgingly as
knowledge that many impositions taxpayers have to pay are in the nature of indirect
taxes. To limit the exemption granted the National Power Corporation to direct taxes
notwithstanding the general and broad language of the statue will be to thwrat the
legislative intention in giving exemption from all forms of taxes and impositions
without distinguishing between those that are direct and those that are not.
(Emphasis supplied)
In view of all the foregoing, the Court rules and declares that the oil companies which supply bunker
fuel oil to NPC have to pay the taxes imposed upon said bunker fuel oil sold to NPC. By the very
nature of indirect taxation, the economic burden of such taxation is expected to be passed on
through the channels of commerce to the user or consumer of the goods sold. Because, however,
the NPC has been exempted from both direct and indirect taxation, the NPC must beheld exempted
from absorbing the economic burden of indirect taxation. This means, on the one hand, that the oil
companies which wish to sell to NPC absorb all or part of the economic burden of the taxes
previously paid to BIR, which could they shift to NPC if NPC did not enjoy exemption from indirect
taxes. This means also, on the other hand, that the NPC may refuse to pay the part of the "normal"
purchase price of bunker fuel oil which represents all or part of the taxes previously paid by the oil
companies to BIR. If NPC nonetheless purchases such oil from the oil companies — because to do
so may be more convenient and ultimately less costly for NPC than NPC itself importing and hauling
and storing the oil from overseas — NPC is entitled to be reimbursed by the BIR for that part of the
buying price of NPC which verifiably represents the tax already paid by the oil company-vendor to
the BIR.
It should be noted at this point in time that the whole issue of who WILL pay these indirect taxes
HAS BEEN RENDERED moot and academic by E.O. No. 195 issued on June 16, 1987 by virtue of
which the ad valorem tax rate on bunker fuel oil was reduced to ZERO (0%) PER CENTUM. Said
E.O. no. 195 reads as follows:
EXECUTIVE ORDER NO. 195
AMENDING PARAGRAPH (b) OF SECTION 128 OF THE NATIONAL INTERNAL
REVENUE CODE, AS AMENDED BY REVISING THE EXCISE TAX RATES OF
CERTAIN PETROLEUM PRODUCTS.
xxx xxx xxx
Sec. 1. Paragraph (b) of Section 128 of the National Internal Revenue Code, as
amended, is hereby amended to read as follows:
Par. (b) — For products subject to ad valorem tax only:
PRODUCT AD VALOREM TAX RATE
1. . . .
2. . . .
3. . . .
4. Fuel oil, commercially known as bunker oil and on similar fuel oils having more or
less the same generating power 0%
xxx xxx xxx
Sec. 3. This Executive Order shall take effect immediately.
Done in the city of Manila, this 17th day of June, in the year of Our Lord, nineteen
hundred and eighty-seven. (Emphasis supplied)
The oil companies can now deliver bunker fuel oil to NPC without having to worry about who is going
to bear the economic burden of the ad valorem taxes. What this Court will now dispose of are
petitioner's complaints that some indirect tax money has been illegally refunded by the Bureau of
Internal Revenue to the NPC and that more claims for refunds by the NPC are being processed for
payment by the BIR.
A case in point is the Tax Credit Memo issued by the Bureau of Internal Revenue in favor of the NPC
last July 7, 1986 for P58.020.110.79 which were for "erroneously paid specific and ad valorem taxes
during the period from October 31, 1984 to April 27, 1985. 91 Petitioner asks Us to declare this Tax
Credit Memo illegal as the PNC did not have indirect tax exemptions with the enactment of P.D. No.
938. As We have already ruled otherwise, the only questions left are whether NPC Is entitled to a tax
refund for the tax component of the price of the bunker fuel oil purchased from Caltex (Phils.) Inc.
and whether the Bureau of Internal Revenue properly refunded the amount to NPC.
After P.D. No. 1931 was issued on June 11, 1984 withdrawing the 

tax exemptions of all GOCCs — NPC included, it was only on May 8, 1985 when the BIR issues its
letter authority to the NPC authorizing it to withdraw tax-free bunker fuel oil from the oil companies
pursuant to FIRB Resolution No. 10-85. 92 Since the tax exemption restoration was retroactive to
June 11, 1984 there was a need. therefore, to recover said amount as Caltex (PhiIs.) Inc. had
already paid the BIR the specific and ad valorem taxes on the bunker oil it sold NPC during the
period above indicated and had billed NPC correspondingly. 93 It should be noted that the NPC, in its
letter-claim dated September 11, 1985 to the Commissioner of the Bureau of Internal Revenue DID
NOT CATEGORICALLY AND UNEQUIVOCALLY STATE that itself paid the P58.020,110.79 as part
of the bunker fuel oil price it purchased from Caltex (Phils) Inc. 94
The law governing recovery of erroneously or illegally, collected taxes is section 230 of the National
Internal Revenue Code of 1977, as amended which reads as follows:
Sec. 230. Recover of tax erroneously or illegally collected. — No suit or proceeding
shall be maintained in any court for the recovery of any national internal revenue tax
hereafter alleged to have been erroneously or illegally assessed or collected, or of
any penalty claimed to have been collected without authority, or of any sum alleged
to have been excessive or in any Manner wrongfully collected. until a claim for refund
or credit has been duly filed with the Commissioner; but such suit or proceeding may
be maintained, whether or not such tax, penalty, or sum has been paid under protest
or duress.
In any case, no such suit or proceeding shall be begun after the expiration of two
years from the date of payment of the tax or penalty regardless of any supervening
cause that may arise after payment; Provided, however, That the Commissioner may,
even without a written claim therefor, refund or credit any tax, where on the face of
the return upon which payment was made, such payment appears clearly, to have
been erroneously paid.
xxx xxx xxx
Inasmuch as NPC filled its claim for P58.020,110.79 on September 11, 1985, 95 the Commissioner
correctly issued the Tax Credit Memo in view of NPC's indirect tax exemption.
Petitioner, however, asks Us to restrain the Commissioner from acting favorably on NPC's claim for
P410.580,000.00 which represents specific and ad valorem taxes paid by the oil companies to the
BIR from June 11, 1984 to the early part of 1986. 96
A careful examination of petitioner's pleadings and annexes attached thereto does not reveal when
the alleged claim for a P410,580,000.00 tax refund was filed. It is only stated In paragraph No. 2 of
the Deed of Assignment 97executed by and between NPC and Caltex (Phils.) Inc., as follows:
That the ASSIGNOR(NPC) has a pending tax credit claim with the Bureau of Internal
Revenue amounting to P442,887,716.16. P58.020,110.79 of which is due to
Assignor's oil purchases from the Assignee (Caltex [Phils.] Inc.)
Actually, as the Court sees it, this is a clear case of a "Mexican standoff." We cannot restrain the BIR
from refunding said amount because of Our ruling that NPC has both direct and indirect tax
exemption privileges. Neither can We order the BIR to refund said amount to NPC as there is no
pending petition for review on certiorari of a suit for its collection before Us. At any rate, at this point
in time, NPC can no longer file any suit to collect said amount EVEN IF lt has previously filed a claim
with the BIR because it is time-barred under Section 230 of the National Internal Revenue Code of
1977. as amended, which states:
 In any case, no such suit or proceeding shall be begun after the expiration of two
years from the date of payment of the tax or penalty REGARDLESS of any
supervening cause that may arise after payment. . . . (Emphasis supplied)
The date of the Deed of Assignment is June 6. 1986. Even if We were to assume that payment by
NPC for the amount of P410,580,000.00 had been made on said date. it is clear that more than two
(2) years had already elapsed from said date. At the same time, We should note that there is no
legal obstacle to the BIR granting, even without a suit by NPC, the tax credit or refund claimed by
NPC, assuming that NPC's claim had been made seasonably, and assuming the amounts covered
had actually been paid previously by the oil companies to the BIR.
WHEREFORE, in view of all the foregoing, the Motion for Reconsideration of petitioner is hereby
DENIED for lack of merit and the decision of this Court promulgated on May 31, 1991 is hereby
AFFIRMED.
SO ORDERED.
Narvasa, C.J., Feliciano, Bidin, Regalado, Romero, Bellosillo and Melo, JJ., concur.
Padilla and Quiason, JJ. took no part.

EN BANC
G.R. No. L-14264 April 30, 1963
RAYMUNDO B. TAN, JOSE ESGUERRA, ROMAN ABASTILLAS, ANTONIO QUEBRADO,
ROMAN AGNES, ELISEO AMANDY, NICOLAS SOTOMAYOR, INESTORIO TORRENUEVA and
FELIPE TIOSAN, plaintiffs-appellees, 

vs.

THE MUNICIPALITY OF PAGBILAO, ELIAS PORNOBI as Municipal Mayor of Pagbilao and
CEFERINO CAPARROS as Municipal Treasurer of Pagbilao, defendants-appellants.
Jose D. Villena for plaintiffs-appellees.

Claro M. Recto for defendants-appellants.
PAREDES, J.:
Defendant municipal corporation was the owner and operator of a wharf (Exhs. E & F). On May 31,
1956, the municipal council of defendant municipality enacted Ordinance No. 11, series of 1956,
imposing certain charges and/or fees on articles or merchandises landed upon, or loaded from the
said wharf and on the strip of shoreline adjacent thereto, measuring 300 meters. The plaintiffs, who
were fishermen, merchants and proprietors of Padre Burgos, Quezon, had to pass Pagbilao in order
to bring their goods consisting of fish, charcoal, copra, firewood and other merchandise to Lucena.
The merchandise were transported in bancas or motor boats from Padre Burgos and unloaded on
the Pagbilao wharf or on the shoreline, from where they were brought to Lucena by trucks.
Pursuant to the Ordinance, defendant municipality required plaintiffs to pay the charges and fees,
which they did under protest. On January 7, 1957, alleging that the Ordinance was ultra vires, in that
the fees prescribed therein partake of the nature of import or export taxes, in the guise of wharfage
or rental fees, the plaintiffs, instituted an action, with the CFI of Quezon Province, praying:
(1) That the said Municipal ordinance be declared null and void and of no legal effect; and
(2) Ordering the defendants, jointly and severally, to pay the plaintiffs the sum of P1,800.00
for fees collected and paid under protest.
Defendants answering the complaint, interposed the following special defenses:
1) that the fees collected at the wharf are intended for and actually being exclusively utilized
in the repair, improvement, and maintenance of the same;
2) that the municipality has made material and additional construction to date, and if the
revenues raised from these fees are sufficient, the wharf is intended to be lengthened along
the 300 meters distance by the river;
3) the presence, day and night, of a municipal employee or of a policeman at the wharf, has
resulted in the prevailing peace, order, and security of cargoes, vessels, and of the operators
therein;
4) the municipality also maintains a 300 candle power kerosene lantern at the wharf.
As counterclaim, defendants asked the payment of P6.00, for twelve truckloads of full-length
bamboos, loaded on a vessel at the wharf for which no payment had been made, in spite of
repeated demands. The court a quo rendered the following judgment:
xxx xxx xxx
In the light of the foregoing, the Court is therefore of the opinion that Ordinance No. 11,
Series of 1956, of defendant Municipality of Pagbilao, Quezon, is null and void for having
been enacted without lawful authority ....
xxx xxx xxx
WHEREFORE, judgment is hereby rendered ordering defendant municipality of PagbiIao,
Quezon, to pay to plaintiff Raymundo B. Tan the amount of P774.25, with legal interest
thereon from the filing of the complaint, that is, from 4 February 1957, and dismissing
defendants' counterclaim against plaintiffs, with the parties bearing their own costs.
The above judgment is now before Us on appeal by the defendants, urging a reversal thereof on
seven counts, which converge on the following legal issues:
1) whether the defendant municipality can validly enact the ordinance in question and collect
the charges contained therein; and
2) whether plaintiff Tan is entitled to a refund of the fees paid to the defendant municipality.
Appellants contend that aside from the general powers of the council to enact ordinances and make
regulations (Sec. 2238 of the Administrative Code),certain provisions of said Code authorizes a
municipality to establish a wharf and collect wharfage fees, as compensation for its use, to wit —
 SEC. 2242. Certain legislative powers of mandatory character.— It shall be the duty of the
municipal council, conformably with law:
xxx xxx xxx
(e) To regulate the construction, care, and use of streets, sidewalks, canals, wharves and
piers of the municipality, and prevent and remove obstacles and encroachment on the same.
SEC. 2318. Municipal ferries, wharves, markets, etc. — A municipal council shall have
authority to acquire or establish municipal ferries, wharves, markets, slaughterhouses,
pounds, and cemeteries. Public utilities thus owned by the municipality may be conducted by
the municipal authorities upon stipulated return to private parties.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted
and approved by this Honorable Court, without prejudice to the parties adducing other
evidence to prove their case not covered by this stipulation of facts. 1äwphï1.ñët

SEC. 2320. Establishment of certain public utilities by private parties under license.— Where
provision is not made by a municipal council, pursuant to the provisions of the next two
preceding sections hereof, for maintaining or conducting ferries, wharves, markets, or
slaughterhouses requisite for the needs of the municipality, the council shall have authority,
in its discretion, to let the privilege of establishing and maintaining such utilities to private
parties by license granted upon such terms as shall be fixed by the council ....
Aside from the above provisions, Executive Order No. 255, dated April 1, 1940, states:
(6) Collection of berthing fees at municipal ports.-Municipalities may collect berthing fees at
municipal ports, pursuant to the provisions of section two thousand three hundred eighteen (2318) of
the Revised Administrative Code, not to exceed those specified in paragraph (3) hereof, provided
that such collection shall be credited to a special fund and used only for the maintenance and
improvement of the port at which the collections are made.
Appellants further contended that the wharfage fees which section 3(t), of Commonwealth Act No.
472, prohibits a municipality from collecting, are customs charges levied in connection with the
exportation or importation of goods abroad, through ports of entry, as contemplated in the Tariff and
Customs Code, but not the ordinary wharfage rentals which a municipality may collect for the use of
its wharf, in relation to local trade and local products.
On the other hand, the appellees maintain that the appellant municipality was devoid one right to
pass the ordinance in question, since the Revised Administrative Code also prohibits the imposition
of tax on any goods or merchandise carried into or out of the municipality. Section 2287 thereof,
provides —
SEC. 2287. Fundamental principles governing municipal taxation. — ... It shall not be in the
power of the council to impose a tax in any form whatever upon goods and merchandise
carried into the municipality, or out of the same, and any attempt to impose an import or
export tax upon such goods in the guise of an unreasonable charge for wharfage, use of
bridges or otherwise shall be void.
Moreover, any power granted by the Administrative Code to municipalities had been
impliedly repealed or withdrawn by Commonwealth Act No. 472, the pertinent portions of
which read —
SEC. 3. It shall be beyond the power of the municipal council and municipal district council to
impose the following taxes, charges and fees:
xxx xxx xxx
Customs duties, registration, wharfage, tonnage and other kinds of customs fees, charges
and duties.
In the light of the legal provisions applicable, We are of the opinion that the ordinance in question, is
ultra vires, and hence, null and void. The ordinance calls for a specific tax. It charges a specific sum,
ranging from one centavo and up, by the head or number, and requires no assessment beyond a
listing and classification of the objects to be charged..
A tax which imposes a specific sum by the head or number, or some standard weight or
measurement, and which requires no assessment beyond a listing and classification of the
objects to be taxed is specific tax. (We Wa Yu v. City of Lipa, G.R. No. L-9167, Sept. 27,
1956)
Aside from being a specific tax, its nature as wharfage fee is also clear from the import of the
ordinance, specifically paragraph 1, which recites -.
PANGKAT 1.— Ang lahat na mayari o tagapangasiwa ng mga sasakyan sa pantalang bayan, ay
dapat magbigay-alam sa kinauukulang katiwala ng pamahalaan, upang maisaayos ang pagdaung,
pagbaba at pagsakay ng mga kargamentos at iba pa.
The phraseology of the above paragraph points to the fact that the charges collected pursuant
thereto, correspond to the words "berthing, unloading and loading of cargoes or merchandise" which
fall under the category of wharfage fees. The change or the designation of the said fees as "rental of
municipal property" did not change their basic character as "wharfage fees". Being a specific tax, the
municipality has no right to impose the same, for taxation is an attribute of sovereignty which
municipal corporation do not enjoy (Santo Lumber Co., et al v. City of Cebu, et al., L-10196, Jan. 22,
1958; 54 O.G. 5327; Saldana v. City of Iloilo, L-10470, June 26, 1958). It shall not be in the power of
the council to impose a tax in any form whatever upon goods and merchandise carried into the
municipality or out of the same, and any attempt to impose such tax in the guise of wharfage fee or
charge is void (Sec. 2287, Rev. Adm. Code). And being wharfage fee (Phil. Sugar Central v. Coll. of
Customs, 51 Phil. 131), it is likewise beyond the power of the municipal council and municipal district
council to impose (Sec. 3, Comm. Act No. 472, supra).
In the case at bar, aside from the fact that the right of the municipality to collect wharfage fees is
doubtful for, at most, its claim is based merely by inference, implications and deductions, which have
no place in the interpretation of the power to tax of a municipal corporation (Icard v. City Council of
Baguio, et al., 46 Off. Gaz., Suppl. No. 11, p. 320; Medina, et al. v. City of Baguio, 48 Off. Gaz., 11,
p. 4729) no less than two Secretaries of the Department of Justice, (Secretaries Jose Abad Santos &
Bengzon) expressed the opinion that, "in view of section 3, paragraph (t), Commonwealth Act No.
472, which expressly forbids municipalities from imposing wharfage fees, a municipal ordinance
levying wharfage or berthing fees is illegal and void, ... (Opinion No. 373, series of 1940 and No.
165, series of 1951). Opinions and rulings of officials of the government called upon to execute or
implement administrative laws command much respect and weight (Regalado v. Yulo, 61 Phil. 173;
Grapilon v. Mun. Council of Carigara, L-12347, May 30, 1961)
It should be noted that previous to the ordinance in question (No. 11), ordinance No. 9 was enacted
by the same municipal council, providing for "wharfage fees" for goods and merchandise only. But
because the Provincial Board ruled the to be null and void, because the prescribed fees were
unreasonable and were obviously export or import taxes in the guise of wharfage fees which are
contrary to the provisions of section 2287 of the Administrative Code, the municipal council of
Pagbilao enacted Ordinance No. 11, providing for the wharfage of boats and vessels and of goods
and merchandise; and while it fixed the fees or charges for loading and unloading goods and
merchandise, it did not state the berthing fees for boats and vessels carrying the goods, all of which
go to show that the council wanted only to impose specific tax on the goods and merchandise, which
was the same objective it had, when the annulled Ordinance No. 9 was promulgated.
The question as to whether or not the charges paid should be returned, must be answered in the
affirmative. Not only were the payments made under protest, but they were also collected under an
invalid ordinance. In a number of cases, We have ruled that monies collected under invalid acts or
tax laws are refundable, even if the payments were voluntary (East Asiatic Co., Ltd. v. City of Davao,
L-16253, Aug. 21, 1962).
It is insinuated that invalidating the ordinance would leave the municipality with no means to defray
the expenses for operation, repair and maintenance of the wharf in question. It would seem,
however, that the municipality will not be absolutely helpless and hopeless, for there is always some
remedy somewhere, and those indicated in sections 2318 and 2320 of the Adm. Code, (supra) may
be availed of.
IN VIEW OF ALL THE FOREGOING, we find that the decision appealed from is in conformity with
the law and jurisprudence on the matter. The same should be, as it is hereby affirmed, in all
respects. No costs.
Bengzon, C.J., Bautista Angelo, Labrador, Concepcion, Barrera, Dizon and Regala, JJ., concur.

Makalintal, J., concurs in the result.

Padilla and Reyes, J.B.L., JJ., took no part.

EN BANC
G.R. No. L- 41383 August 15, 1988
PHILIPPINE AIRLINES, INC., plaintiff-appellant, 

vs.

ROMEO F. EDU in his capacity as Land Transportation Commissioner, and UBALDO
CARBONELL, in his capacity as National Treasurer, defendants-appellants.
Ricardo V. Puno, Jr. and Conrado A. Boro for plaintiff-appellant.

GUTIERREZ, JR., J.:

What is the nature of motor vehicle registration fees? Are they taxes or regulatory fees?

This question has been brought before this Court in the past. The parties are, in effect, asking for a
re-examination of the latest decision on this issue.
This appeal was certified to us as one involving a pure question of law by the Court of Appeals in a
case where the then Court of First Instance of Rizal dismissed the portion-about complaint for refund
of registration fees paid under protest.
The disputed registration fees were imposed by the appellee, Commissioner Romeo F. Elevate
pursuant to Section 8, Republic Act No. 4136, otherwise known as the Land Transportation and
Traffic Code.
The Philippine Airlines (PAL) is a corporation organized and existing under the laws of the
Philippines and engaged in the air transportation business under a legislative franchise, Act No.
42739, as amended by Republic Act Nos. 25). and 269.1 Under its franchise, PAL is exempt from the
payment of taxes. The pertinent provision of the franchise provides as follows:
Section 13. In consideration of the franchise and rights hereby granted, the grantee
shall pay to the National Government during the life of this franchise a tax of two per
cent of the gross revenue or gross earning derived by the grantee from its operations
under this franchise. Such tax shall be due and payable quarterly and shall be in lieu
of all taxes of any kind, nature or description, levied, established or collected by any
municipal, provincial or national automobiles, Provided, that if, after the audit of the
accounts of the grantee by the Commissioner of Internal Revenue, a deficiency tax is
shown to be due, the deficiency tax shall be payable within the ten days from the
receipt of the assessment. The grantee shall pay the tax on its real property in
conformity with existing law.
On the strength of an opinion of the Secretary of Justice (Op. No. 307, series of 1956) PAL has,
since 1956, not been paying motor vehicle registration fees.
Sometime in 1971, however, appellee Commissioner Romeo F. Elevate issued a regulation requiring
all tax exempt entities, among them PAL to pay motor vehicle registration fees.
Despite PAL's protestations, the appellee refused to register the appellant's motor vehicles unless
the amounts imposed under Republic Act 4136 were paid. The appellant thus paid, under protest,
the amount of P19,529.75 as registration fees of its motor vehicles.
After paying under protest, PAL through counsel, wrote a letter dated May 19,1971, to Commissioner
Edu demanding a refund of the amounts paid, invoking the ruling in Calalang v. Lorenzo (97 Phil.
212 [1951]) where it was held that motor vehicle registration fees are in reality taxes from the
payment of which PAL is exempt by virtue of its legislative franchise.
Appellee Edu denied the request for refund basing his action on the decision in Republic v.
Philippine Rabbit Bus Lines, Inc., (32 SCRA 211, March 30, 1970) to the effect that motor vehicle
registration fees are regulatory exceptional. and not revenue measures and, therefore, do not come
within the exemption granted to PAL? under its franchise. Hence, PAL filed the complaint against
Land Transportation Commissioner Romeo F. Edu and National Treasurer Ubaldo Carbonell with the
Court of First Instance of Rizal, Branch 18 where it was docketed as Civil Case No. Q-15862.
Appellee Romeo F. Elevate in his capacity as LTC Commissioner, and LOI Carbonell in his capacity
as National Treasurer, filed a motion to dismiss alleging that the complaint states no cause of action.
In support of the motion to dismiss, defendants repatriation the ruling in Republic v. Philippine Rabbit
Bus Lines, Inc., (supra) that registration fees of motor vehicles are not taxes, but regulatory fees
imposed as an incident of the exercise of the police power of the state. They contended that while
Act 4271 exempts PAL from the payment of any tax except two per cent on its gross revenue or
earnings, it does not exempt the plaintiff from paying regulatory fees, such as motor vehicle
registration fees. The resolution of the motion to dismiss was deferred by the Court until after trial on
the merits.
On April 24, 1973, the trial court rendered a decision dismissing the appellant's complaint "moved by
the later ruling laid down by the Supreme Court in the case or Republic v. Philippine Rabbit Bus
Lines, Inc., (supra)." From this judgment, PAL appealed to the Court of Appeals which certified the
case to us.
Calalang v. Lorenzo (supra) and Republic v. Philippine Rabbit Bus Lines, Inc. (supra) cited by PAL
and Commissioner Romeo F. Edu respectively, discuss the main points of contention in the case at
bar.
Resolving the issue in the Philippine Rabbit case, this Court held:
"The registration fee which defendant-appellee had to pay was imposed by Section 8
of the Revised Motor Vehicle Law (Republic Act No. 587 [1950]). Its heading speaks
of "registration fees." The term is repeated four times in the body thereof. Equally so,
mention is made of the "fee for registration." (Ibid., Subsection G) A subsection starts
with a categorical statement "No fees shall be charged." (lbid.,Subsection H) The
conclusion is difficult to resist therefore that the Motor Vehicle Act requires the
payment not of a tax but of a registration fee under the police power. Hence the
incipient, of the section relied upon by defendant-appellee under the Back Pay Law,
It is not held liable for a tax but for a registration fee. It therefore cannot make use of
a backpay certificate to meet such an obligation.
Any vestige of any doubt as to the correctness of the above conclusion should be
dissipated by Republic Act No. 5448. ([1968]. Section 3 thereof as to the imposition
of additional tax on privately-owned passenger automobiles, motorcycles and
scooters was amended by Republic Act No. 5470 which is (sic) approved on May 30,
1969.) A special science fund was thereby created and its title expressly sets forth
that a tax on privately-owned passenger automobiles, motorcycles and scooters was
imposed. The rates thereof were provided for in its Section 3 which clearly specifies
the" Philippine tax."(Cooley to be paid as distinguished from the registration fee
under the Motor Vehicle Act. There cannot be any clearer expression therefore of the
legislative will, even on the assumption that the earlier legislation could by
subdivision the point be susceptible of the interpretation that a tax rather than a fee
was levied. What is thus most apparent is that where the legislative body relies on its
authority to tax it expressly so states, and where it is enacting a regulatory measure,
it is equally exploded (at p. 22,1969
In direct refutation is the ruling in Calalang v. Lorenzo (supra), where the Court, on the other hand,
held:
The charges prescribed by the Revised Motor Vehicle Law for the registration of
motor vehicles are in section 8 of that law called "fees". But the appellation is no
impediment to their being considered taxes if taxes they really are. For not the name
but the object of the charge determines whether it is a tax or a fee. Geveia speaking,
taxes are for revenue, whereas fees are exceptional. for purposes of regulation and
inspection and are for that reason limited in amount to what is necessary to cover the
cost of the services rendered in that connection. Hence, a charge fixed by statute for
the service to be person,-When by an officer, where the charge has no relation to the
 value of the services performed and where the amount collected eventually finds its
way into the treasury of the branch of the government whose officer or officers
collected the chauffeur, is not a fee but a tax."(Cooley on Taxation, Vol. 1, 4th ed., p.
110.)
From the data submitted in the court below, it appears that the expenditures of the
Motor Vehicle Office are but a small portion—about 5 per centum—of the total
collections from motor vehicle registration fees. And as proof that the money
collected is not intended for the expenditures of that office, the law itself provides that
all such money shall accrue to the funds for the construction and maintenance of
public roads, streets and bridges. It is thus obvious that the fees are not collected for
regulatory purposes, that is to say, as an incident to the enforcement of regulations
governing the operation of motor vehicles on public highways, for their express
object is to provide revenue with which the Government is to discharge one of its
principal functions—the construction and maintenance of public highways for
everybody's use. They are veritable taxes, not merely fees.
As a matter of fact, the Revised Motor Vehicle Law itself now regards those fees as
taxes, for it provides that "no other taxes or fees than those prescribed in this Act
shall be imposed," thus implying that the charges therein imposed—though called
fees—are of the category of taxes. The provision is contained in section 70, of
subsection (b), of the law, as amended by section 17 of Republic Act 587, which
reads:
Sec. 70(b) No other taxes or fees than those prescribed in this Act
shall be imposed for the registration or operation or on the ownership
of any motor vehicle, or for the exercise of the profession of
chauffeur, by any municipal corporation, the provisions of any city
charter to the contrary notwithstanding: Provided, however, That any
provincial board, city or municipal council or board, or other
competent authority may exact and collect such reasonable and
equitable toll fees for the use of such bridges and ferries, within their
respective jurisdiction, as may be authorized and approved by the
Secretary of Public Works and Communications, and also for the use
of such public roads, as may be authorized by the President of the
Philippines upon the recommendation of the Secretary of Public
Works and Communications, but in none of these cases, shall any toll
fee." be charged or collected until and unless the approved schedule
of tolls shall have been posted levied, in a conspicuous place at such
toll station. (at pp. 213-214)
Motor vehicle registration fees were matters originally governed by the Revised Motor Vehicle Law
(Act 3992 [19511) as amended by Commonwealth Act 123 and Republic Acts Nos. 587 and 1621.
Today, the matter is governed by Rep. Act 4136 [1968]), otherwise known as the Land Transportation
Code, (as amended by Rep. Acts Nos. 5715 and 64-67, P.D. Nos. 382, 843, 896, 110.) and BP Blg.
43, 74 and 398).
Section 73 of Commonwealth Act 123 (which amended Sec. 73 of Act 3992 and remained
unsegregated, by Rep. Act Nos. 587 and 1603) states:
Section 73. Disposal of moneys collected.—Twenty per centum of the money
collected under the provisions of this Act shall accrue to the road and bridge funds of
the different provinces and chartered cities in proportion to the centum shall during
the next previous year and the remaining eighty per centum shall be deposited in the
Philippine Treasury to create a special fund for the construction and maintenance of
national and provincial roads and bridges. as well as the streets and bridges in the
chartered cities to be alloted by the Secretary of Public Works and Communications
 for projects recommended by the Director of Public Works in the different provinces
and chartered cities. ....
Presently, Sec. 61 of the Land Transportation and Traffic Code provides:
Sec. 61. Disposal of Mortgage. Collected—Monies collected under the provisions of
this Act shall be deposited in a special trust account in the National Treasury to
constitute the Highway Special Fund, which shall be apportioned and expended in
accordance with the provisions of the" Philippine Highway Act of 1935. "Provided,
however, That the amount necessary to maintain and equip the Land Transportation
Commission but not to exceed twenty per cent of the total collection during one year,
shall be set aside for the purpose. (As amended by RA 64-67, approved August 6,
1971).
It appears clear from the above provisions that the legislative intent and purpose behind the law
requiring owners of vehicles to pay for their registration is mainly to raise funds for the construction
and maintenance of highways and to a much lesser degree, pay for the operating expenses of the
administering agency. On the other hand, the Philippine Rabbit case mentions a presumption arising
from the use of the term "fees," which appears to have been favored by the legislature to distinguish
fees from other taxes such as those mentioned in Section 13 of Rep. Act 4136 which reads:
Sec. 13. Payment of taxes upon registration.—No original registration of motor
vehicles subject to payment of taxes, customs s duties or other charges shall be
accepted unless proof of payment of the taxes due thereon has been presented to
the Commission.
referring to taxes other than those imposed on the registration, operation or ownership of a motor
vehicle (Sec. 59, b, Rep. Act 4136, as amended).
Fees may be properly regarded as taxes even though they also serve as an instrument of regulation,
As stated by a former presiding judge of the Court of Tax Appeals and writer on various aspects of
taxpayers
It is possible for an exaction to be both tax arose. regulation. License fees are
changes. looked to as a source of revenue as well as a means of regulation
(Sonzinky v. U.S., 300 U.S. 506) This is true, for example, of automobile license fees.
Isabela such case, the fees may properly be regarded as taxes even though they
also serve as an instrument of regulation. 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. (1955 CCH Fed. tax Course, Par. 3101, citing Cooley on
Taxation (2nd Ed.) 592, 593; Calalang v. Lorenzo. 97 Phil. 213-214) Lutz v. Araneta
98 Phil. 198.) These exactions are sometimes called regulatory taxes. (See Secs.
4701, 4711, 4741, 4801, 4811, 4851, and 4881, U.S. Internal Revenue Code of 1954,
which classify taxes on tobacco and alcohol as regulatory taxes.) (Umali, Reviewer in
Taxation, 1980, pp. 12-13, citing Cooley on Taxation, 2nd Edition, 591-593).
Indeed, taxation may be made the implement of the state's police power (Lutz v. Araneta, 98 Phil.
148).
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 (Umali, Id.) Such is the case of motor vehicle
registration fees. The conclusions become inescapable in view of Section 70(b) of Rep. Act 587
quoted in the Calalang case. The same provision appears as Section 591-593). in the Land
Transportation code. It is patent therefrom that the legislators had in mind a regulatory tax as the law
refers to the imposition on the registration, operation or ownership of a motor vehicle as a "tax or
fee." Though nowhere in Rep. Act 4136 does the law specifically state that the imposition is a tax,
Section 591-593). speaks of "taxes." or fees ... for the registration or operation or on the ownership
of any motor vehicle, or for the exercise of the profession of chauffeur ..." making the intent to
impose a tax more apparent. Thus, even Rep. Act 5448 cited by the respondents, speak of an
"additional" tax," where the law could have referred to an original tax and not one in addition to the
tax already imposed on the registration, operation, or ownership of a motor vehicle under Rep. Act
41383. Simply put, if the exaction under Rep. Act 4136 were merely a regulatory fee, the imposition
in Rep. Act 5448 need not be an "additional" tax. Rep. Act 4136 also speaks of other "fees," such as
the special permit fees for certain types of motor vehicles (Sec. 10) and additional fees for change of
registration (Sec. 11). These are not to be understood as taxes because such fees are very minimal
to be revenue-raising. Thus, they are not mentioned by Sec. 591-593). of the Code as taxes like the
motor vehicle registration fee and chauffers' license fee. Such fees are to go into the expenditures of
the Land Transportation Commission as provided for in the last proviso of see. 61, aforequoted.
It is quite apparent that vehicle registration fees were originally simple exceptional. intended only for
rigidly purposes in the exercise of the State's police powers. Over the years, however, as vehicular
traffic exploded in number and motor vehicles became absolute necessities without which modem
life as we know it would stand still, Congress found the registration of vehicles a very convenient
way of raising much needed revenues. Without changing the earlier deputy. of registration payments
as "fees," their nature has become that of "taxes."
In view of the foregoing, we rule that motor vehicle registration fees as at present exacted pursuant
to the Land Transportation and Traffic Code are actually taxes intended for additional revenues. of
government even if one fifth or less of the amount collected is set aside for the operating expenses
of the agency administering the program.
May the respondent administrative agency be required to refund the amounts stated in the complaint
of PAL?
The answer is NO.
The claim for refund is made for payments given in 1971. It is not clear from the records as to what
payments were made in succeeding years. We have ruled that Section 24 of Rep. Act No. 5448
dated June 27, 1968, repealed all earlier tax exemptions Of corporate taxpayers found in legislative
franchises similar to that invoked by PAL in this case.
In Radio Communications of the Philippines, Inc. v. Court of Tax Appeals, et al. (G.R. No. 615)." July
11, 1985), this Court ruled:
Under its original franchise, Republic Act No. 21); enacted in 1957, petitioner Radio
Communications of the Philippines, Inc., was subject to both the franchise tax and
income tax. In 1964, however, petitioner's franchise was amended by Republic Act
No. 41-42). to the effect that its franchise tax of one and one-half percentum (1-1/2%)
of all gross receipts was provided as "in lieu of any and all taxes of any kind, nature,
or description levied, established, or collected by any authority whatsoever,
municipal, provincial, or national from which taxes the grantee is hereby expressly
exempted." The issue raised to this Court now is the validity of the respondent court's
decision which ruled that the exemption under Republic Act No. 41-42). was repealed
by Section 24 of Republic Act No. 5448 dated June 27, 1968 which reads:
"(d) The provisions of existing special or general laws to the contrary
notwithstanding, all corporate taxpayers not specifically exempt under
Sections 24 (c) (1) of this Code shall pay the rates provided in this
section. All corporations, agencies, or instrumentalities owned or
controlled by the government, including the Government Service
Insurance System and the Social Security System but excluding
educational institutions, shall pay such rate of tax upon their taxable
net income as are imposed by this section upon associations or
corporations engaged in a similar business or industry. "
An examination of Section 24 of the Tax Code as amended shows clearly that the
law intended all corporate taxpayers to pay income tax as provided by the statute.
There can be no doubt as to the power of Congress to repeal the earlier exemption it
 granted. Article XIV, Section 8 of the 1935 Constitution and Article XIV, Section 5 of
the Constitution as amended in 1973 expressly provide that no franchise shall be
granted to any individual, firm, or corporation except under the condition that it shall
be subject to amendment, alteration, or repeal by the legislature when the public
interest so requires. There is no question as to the public interest involved. The
country needs increased revenues. The repealing clause is clear and unambiguous.
There is a listing of entities entitled to tax exemption. The petitioner is not covered by
the provision. Considering the foregoing, the Court Resolved to DENY the petition for
lack of merit. The decision of the respondent court is affirmed.
Any registration fees collected between June 27, 1968 and April 9, 1979, were correctly imposed
because the tax exemption in the franchise of PAL was repealed during the period. However, an
amended franchise was given to PAL in 1979. Section 13 of Presidential Decree No. 1590, now
provides:
In consideration of the franchise and rights hereby granted, the grantee shall pay to
the Philippine Government during the lifetime of this franchise whichever of
subsections (a) and (b) hereunder will result in a lower taxes.)
(a) The basic corporate income tax based on the grantee's annual net
taxable income computed in accordance with the provisions of the
Internal Revenue Code; or
(b) A franchise tax of two per cent (2%) of the gross revenues.
derived by the grantees from all specific. without distinction as to
transport or nontransport corporations; provided that with respect to
international airtransport service, only the gross passengers, mail,
and freight revenues. from its outgoing flights shall be subject to this
law.
The tax paid by the grantee under either of the above alternatives shall be in lieu of
all other taxes, duties, royalties, registration, license and other fees and charges of
any kind, nature or description imposed, levied, established, assessed, or collected
by any municipal, city, provincial, or national authority or government, agency, now or
in the future, including but not limited to the following:
xxx xxx xxx
(5) All taxes, fees and other charges on the registration, license, acquisition, and
transfer of airtransport equipment, motor vehicles, and all other personal or real
property of the gravitates (Pres. Decree 1590, 75 OG No. 15, 3259, April 9, 1979).
PAL's current franchise is clear and specific. It has removed the ambiguity found in the earlier law.
PAL is now exempt from the payment of any tax, fee, or other charge on the registration and
licensing of motor vehicles. Such payments are already included in the basic tax or franchise tax
provided in Subsections (a) and (b) of Section 13, P.D. 1590, and may no longer be exacted.
WHEREFORE, the petition is hereby partially GRANTED. The prayed for refund of registration fees
paid in 1971 is DENIED. The Land Transportation Franchising and Regulatory Board (LTFRB) is
enjoined functions-the collecting any tax, fee, or other charge on the registration and licensing of the
petitioner's motor vehicles from April 9, 1979 as provided in Presidential Decree No. 1590.
SO ORDERED.
Fernan, C.J., Narvasa, Melencio-Herrera, Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin,
Sarmiento, Cortes, Griño Aquino and Medialdea, JJ., concur.

FIRST DIVISION
G.R. Nos. L-28508-9 July 7, 1989
ESSO STANDARD EASTERN, INC., (formerly, Standard-Vacuum Oil Company), petitioner, 

vs.

THE COMMISSIONER OF INTERNAL REVENUE, respondent.
Padilla Law Office for petitioner.

CRUZ, J.:
On appeal before us is the decision of the Court of Tax Appeals 1 denying petitioner's claims for
refund of overpaid income taxes of P102,246.00 for 1959 and P434,234.93 for 1960 in CTA Cases
No. 1251 and 1558 respectively.
I
In CTA Case No. 1251, petitioner ESSO deducted from its gross income for 1959, as part of its
ordinary and necessary business expenses, the amount it had spent for drilling and exploration of its
petroleum concessions. This claim was disallowed by the respondent Commissioner of Internal
Revenue on the ground that the expenses should be capitalized and might be written off as a loss
only when a "dry hole" should result. ESSO then filed an amended return where it asked for the
refund of P323,279.00 by reason of its abandonment as dry holes of several of its oil wells. Also
claimed as ordinary and necessary expenses in the same return was the amount of P340,822.04,
representing margin fees it had paid to the Central Bank on its profit remittances to its New York
head office.
On August 5, 1964, the CIR granted a tax credit of P221,033.00 only, disallowing the claimed
deduction for the margin fees paid.
In CTA Case No. 1558, the CR assessed ESSO a deficiency income tax for the year 1960, in the
amount of P367,994.00, plus 18% interest thereon of P66,238.92 for the period from April 18,1961 to
April 18, 1964, for a total of P434,232.92. The deficiency arose from the disallowance of the margin
fees of Pl,226,647.72 paid by ESSO to the Central Bank on its profit remittances to its New York
head office.
ESSO settled this deficiency assessment on August 10, 1964, by applying the tax credit of
P221,033.00 representing its overpayment on its income tax for 1959 and paying under protest the
additional amount of P213,201.92. On August 13, 1964, it claimed the refund of P39,787.94 as
overpayment on the interest on its deficiency income tax. It argued that the 18% interest should have
been imposed not on the total deficiency of P367,944.00 but only on the amount of P146,961.00, the
difference between the total deficiency and its tax credit of P221,033.00.
This claim was denied by the CIR, who insisted on charging the 18% interest on the entire amount of
the deficiency tax. On May 4,1965, the CIR also denied the claims of ESSO for refund of the
overpayment of its 1959 and 1960 income taxes, holding that the margin fees paid to the Central
Bank could not be considered taxes or allowed as deductible business expenses.
ESSO appealed to the CTA and sought the refund of P102,246.00 for 1959, contending that the
margin fees were deductible from gross income either as a tax or as an ordinary and necessary
business expense. It also claimed an overpayment of its tax by P434,232.92 in 1960, for the same
reason. Additionally, ESSO argued that even if the amount paid as margin fees were not legally
deductible, there was still an overpayment by P39,787.94 for 1960, representing excess interest.
After trial, the CTA denied petitioner's claim for refund of P102,246.00 for 1959 and P434,234.92 for
1960 but sustained its claim for P39,787.94 as excess interest. This portion of the decision was
appealed by the CIR but was affirmed by this Court in Commissioner of Internal Revenue v.
ESSO, G.R. No. L-28502- 03, promulgated on April 18, 1989. ESSO for its part appealed the CTA
decision denying its claims for the refund of the margin fees P102,246.00 for 1959 and P434,234.92
for 1960. That is the issue now before us.
II
The first question we must settle is whether R.A. 2009, entitled An Act to Authorize the Central Bank
of the Philippines to Establish a Margin Over Banks' Selling Rates of Foreign Exchange, is a police
measure or a revenue measure. If it is a revenue measure, the margin fees paid by the petitioner to
the Central Bank on its profit remittances to its New York head office should be deductible from
ESSO's gross income under Sec. 30(c) of the National Internal Revenue Code. This provides that all
taxes paid or accrued during or within the taxable year and which are related to the taxpayer's trade,
business or profession are deductible from gross income.
The petitioner maintains that margin fees are taxes and cites the background and legislative history
of the Margin Fee Law showing that R.A. 2609 was nothing less than a revival of the 17% excise tax
on foreign exchange imposed by R.A. 601. This was a revenue measure formally proposed by
President Carlos P. Garcia to Congress as part of, and in order to balance, the budget for
1959-1960. It was enacted by Congress as such and, significantly, properly originated in the House
of Representatives. During its two and a half years of existence, the measure was one of the major
sources of revenue used to finance the ordinary operating expenditures of the government. It was,
moreover, payable out of the General Fund.
On the claimed legislative intent, the Court of Tax Appeals, quoting established principles, pointed
out that —
We are not unmindful of the rule that opinions expressed in debates, actual proceedings of the
legislature, steps taken in the enactment of a law, or the history of the passage of the law through
the legislature, may be resorted to as an aid in the interpretation of a statute which is ambiguous or
of doubtful meaning. The courts may take into consideration the facts leading up to, coincident with,
and in any way connected with, the passage of the act, in order that they may properly interpret the
legislative intent. But it is also well-settled jurisprudence that only in extremely doubtful matters of
interpretation does the legislative history of an act of Congress become important. As a matter of
fact, there may be no resort to the legislative history of the enactment of a statute, the language of
which is plain and unambiguous, since such legislative history may only be resorted to for the
purpose of solving doubt, not for the purpose of creating it. [50 Am. Jur. 328.]
Apart from the above consideration, there are at least two cases where we have held that a margin
fee is not a tax but an exaction designed to curb the excessive demands upon our international
reserve.
In Caltex (Phil.) Inc. v. Acting Commissioner of Customs, 2 the Court stated through Justice Jose P.
Bengzon:
A margin levy on foreign exchange is a form of exchange control or restriction
designed to discourage imports and encourage exports, and ultimately, 'curtail any
excessive demand upon the international reserve' in order to stabilize the currency.
Originally adopted to cope with balance of payment pressures, exchange restrictions
have come to serve various purposes, such as limiting non-essential imports,
protecting domestic industry and when combined with the use of multiple currency
rates providing a source of revenue to the government, and are in many developing
countries regarded as a more or less inevitable concomitant of their economic
development programs. The different measures of exchange control or restriction
cover different phases of foreign exchange transactions, i.e., in quantitative
restriction, the control is on the amount of foreign exchange allowable. In the case of
the margin levy, the immediate impact is on the rate of foreign exchange; in fact, its
main function is to control the exchange rate without changing the par value of the
peso as fixed in the Bretton Woods Agreement Act. For a member nation is not
supposed to alter its exchange rate (at par value) to correct a merely temporary
disequilibrium in its balance of payments. By its nature, the margin levy is part of the
rate of exchange as fixed by the government.
As to the contention that the margin levy is a tax on the purchase of foreign exchange and hence
should not form part of the exchange rate, suffice it to state that We have already held the contrary
for the reason that a tax is levied to provide revenue for government operations, while the proceeds
of the margin fee are applied to strengthen our country's international reserves.
Earlier, in Chamber of Agriculture and Natural Resources of the Philippines v. Central Bank, 3 the
same idea was expressed, though in connection with a different levy, through Justice J.B.L. Reyes:
Neither do we find merit in the argument that the 20% retention of exporter's foreign
exchange constitutes an export tax. A tax is a levy for the purpose of providing
revenue for government operations, while the proceeds of the 20% retention, as we
have seen, are applied to strengthen the Central Bank's international reserve.
We conclude then that the margin fee was imposed by the State in the exercise of its police power
and not the power of taxation.
Alternatively, ESSO prays that if margin fees are not taxes, they should nevertheless be considered
necessary and ordinary business expenses and therefore still deductible from its gross income. The
fees were paid for the remittance by ESSO as part of the profits to the head office in the Unites
States. Such remittance was an expenditure necessary and proper for the conduct of its corporate
affairs.
The applicable provision is Section 30(a) of the National Internal Revenue Code reading as follows:
SEC. 30. Deductions from gross income in computing net income there shall be
allowed as deductions
(a) Expenses:
(1) In general. — All the ordinary and necessary expenses paid or incurred during the
taxable year in carrying on any trade or business, including a reasonable allowance
for salaries or other compensation for personal services actually rendered; traveling
expenses while away from home in the pursuit of a trade or business; and rentals or
other payments required to be made as a condition to the continued use or
possession, for the purpose of the trade or business, of property to which the
taxpayer has not taken or is not taking title or in which he has no equity.
(2) Expenses allowable to non-resident alien individuals and foreign corporations. —
In the case of a non-resident alien individual or a foreign corporation, the expenses
deductible are the necessary expenses paid or incurred in carrying on any business
or trade conducted within the Philippines exclusively.
In the case of Atlas Consolidated Mining and Development Corporation v. Commissioner of Internal
Revenue, 4 the Court laid down the rules on the deductibility of business expenses, thus:
The principle is recognized that when a taxpayer claims a deduction, he must point to
some specific provision of the statute in which that deduction is authorized and must
be able to prove that he is entitled to the deduction which the law allows. As
previously adverted to, the law allowing expenses as deduction from gross income
for purposes of the income tax is Section 30(a) (1) of the National Internal Revenue
which allows a deduction of 'all the ordinary and necessary expenses paid or
incurred during the taxable year in carrying on any trade or business.' An item of
expenditure, in order to be deductible under this section of the statute, must fall
squarely within its language.
We come, then, to the statutory test of deductibility where it is axiomatic that to be
deductible as a business expense, three conditions are imposed, namely: (1) the
expense must be ordinary and necessary, (2) it must be paid or incurred within the
taxable year, and (3) it must be paid or incurred in carrying on a trade or business. In
addition, not only must the taxpayer meet the business test, he must substantially
prove by evidence or records the deductions claimed under the law, otherwise, the
 same will be disallowed. The mere allegation of the taxpayer that an item of expense
is ordinary and necessary does not justify its deduction.
While it is true that there is a number of decisions in the United States delving on the
interpretation of the terms 'ordinary and necessary' as used in the federal tax laws,
no adequate or satisfactory definition of those terms is possible. Similarly, this Court
has never attempted to define with precision the terms 'ordinary and necessary.'
There are however, certain guiding principles worthy of serious consideration in the
proper adjudication of conflicting claims. Ordinarily, an expense will be considered
'necessary' where the expenditure is appropriate and helpful in the development of
the taxpayer's business. It is 'ordinary' when it connotes a payment which is normal
in relation to the business of the taxpayer and the surrounding circumstances. The
term 'ordinary' does not require that the payments be habitual or normal in the sense
that the same taxpayer will have to make them often; the payment may be unique or
non-recurring to the particular taxpayer affected.
There is thus no hard and fast rule on the matter. The right to a deduction depends in
each case on the particular facts and the relation of the payment to the type of
business in which the taxpayer is engaged. The intention of the taxpayer often may
be the controlling fact in making the determination. Assuming that the expenditure is
ordinary and necessary in the operation of the taxpayer's business, the answer to the
question as to whether the expenditure is an allowable deduction as a business
expense must be determined from the nature of the expenditure itself, which in turn
depends on the extent and permanency of the work accomplished by the
expenditure.
In the light of the above explanation, we hold that the Court of Tax Appeals did not err when it held
on this issue as follows:
Considering the foregoing test of what constitutes an ordinary and necessary
deductible expense, it may be asked: Were the margin fees paid by petitioner on its
profit remittance to its Head Office in New York appropriate and helpful in the
taxpayer's business in the Philippines? Were the margin fees incurred for purposes
proper to the conduct of the affairs of petitioner's branch in the Philippines? Or were
the margin fees incurred for the purpose of realizing a profit or of minimizing a loss in
the Philippines? Obviously not. As stated in the Lopez case, the margin fees are not
expenses in connection with the production or earning of petitioner's incomes in the
Philippines. They were expenses incurred in the disposition of said incomes;
expenses for the remittance of funds after they have already been earned by
petitioner's branch in the Philippines for the disposal of its Head Office in New York
which is already another distinct and separate income taxpayer.
xxx
Since the margin fees in question were incurred for the remittance of funds to
petitioner's Head Office in New York, which is a separate and distinct income
taxpayer from the branch in the Philippines, for its disposal abroad, it can never be
said therefore that the margin fees were appropriate and helpful in the development
of petitioner's business in the Philippines exclusively or were incurred for purposes
proper to the conduct of the affairs of petitioner's branch in the Philippines exclusively
or for the purpose of realizing a profit or of minimizing a loss in the Philippines
exclusively. If at all, the margin fees were incurred for purposes proper to the conduct
of the corporate affairs of Standard Vacuum Oil Company in New York, but certainly
not in the Philippines.
ESSO has not shown that the remittance to the head office of part of its profits was made in
furtherance of its own trade or business. The petitioner merely presumed that all corporate expenses
are necessary and appropriate in the absence of a showing that they are illegal or ultra vires. This is
error. The public respondent is correct when it asserts that "the paramount rule is that claims for
deductions are a matter of legislative grace and do not turn on mere equitable considerations ... .
The taxpayer in every instance has the burden of justifying the allowance of any deduction
claimed." 5
It is clear that ESSO, having assumed an expense properly attributable to its head office, cannot
now claim this as an ordinary and necessary expense paid or incurred in carrying on its own trade or
business.
WHEREFORE, the decision of the Court of Tax Appeals denying the petitioner's claims for refund of
P102,246.00 for 1959 and P434,234.92 for 1960, is AFFIRMED, with costs against the petitioner.
SO ORDERED.
Narvasa (Chairman), Gancayco, Griño-Aquino and Medialdea, JJ., concur.

EN BANC

[G.R. Nos. 95203-05 :  December 18, 1990.]

192 SCRA 363

SENATOR ERNESTO MACEDA, Petitioner, vs. ENERGY REGULATORY BOARD (ERB); MARCELO

N. FERNANDO, ALEJANDRO B. AFURONG; REX V. TANTIONGCO; and OSCAR E. ALA, in their
collective official capacities as Chairman and Members of the Board (ERB), respectively;
CATALINO MACARAIG, in his quadruple official capacities as Executive Secretary, Chairman
of Philippine National Oil Company; Office of the Energy Affairs, and with MANUEL
ESTRELLA, in their respective official capacities as Chairman and President of the Petron
Corporation; PILIPINAS SHELL PETROLEUM CORPORATION; with CESAR BUENAVENTURA and
REY GAMBOA as chairman and President, respectively; CALTEX PHILIPPINES with FRANCIS
ABLAN, President and Chief Executive Officer; and the Presidents of Philippine Petroleum
Dealer's Association, Caltex Dealer's Co., Petron Dealer's Asso., Shell Dealer's Asso. of the
Phil., Liquefied Petroleum Gas Institute of the Phils., any and all concerned gasoline and
petrol dealers or stations; and such other persons, officials, and parties, acting for and on
their behalf; or in representation of and/or under their authority, Respondents.

[G.R. Nos. 95119-21 :  December 18, 1990.]

192 SCRA 363

OLIVER O. LOZANO, Petitioner, vs. ENERGY REGULATORY BOARD (ERB), PILIPINAS SHELL

PETROLEUM CORPORATION, CALTEX (PHIL.), INC., and PETRON CORPORATION,
Respondents.

DECISION

SARMIENTO, J.:
 

The petitioners pray for injunctive relief, to stop the Energy Regulatory Board (Board
hereinafter) from implementing its Order, dated September 21, 1990, mandating a provisional
increase in the prices of petroleum and petroleum products, as follows:

 PRODUCTS IN PESOS PER LITER

  OPSF

 Premium Gasoline 1.7700

 Regular Gasoline 1.7700

 Avturbo 1.8664

 Kerosene 1.2400

 Diesel Oil 1.2400

 Fuel Oil 1.4900

 Feedstock 1.4900

 LPG 0.8487

 Asphalts 2.7160

 Thinners 1.7121 1

It appears that on September 10, 1990, Caltex (Philippines), Inc., Pilipinas Shell Petroleum
Corporation, and Petron Corporation proferred separate applications with the Board for
permission to increase the wholesale posted prices of petroleum products, as follows:

 Caltex P3.2697 per liter

 Shell 2.0338 per liter

 Petron 2.00 per liter 2

and meanwhile, for provisional authority to increase temporarily such wholesale posted prices
pending further proceedings.:-cralaw

On September 21, 1990, the Board, in a joint (on three applications) Order granted
provisional relief as follows:

WHEREFORE, considering the foregoing, and pursuant to Section 8 of Executive Order No. 172,
this Board hereby grants herein applicants' prayer for provisional relief and, accordingly,
authorizes said applicants a weighted average provisional increase of ONE PESO AND FORTY-
TWO CENTAVOS (P1.42) per liter in the wholesale posted prices of their various petroleum
products enumerated below, refined and/or marketed by them locally. 3
The petitioners submit that the above Order had been issued with grave abuse of discretion,
tantamount to lack of jurisdiction, and correctible by Certiorari.

The petitioner, Senator Ernesto Maceda, 4 also submits that the same was issued without
proper notice and hearing in violation of Section 3, paragraph (e), of Executive Order No. 172;
that the Board, in decreeing an increase, had created a new source for the Oil Price
Stabilization Fund (OPSF), or otherwise that it had levied a tax, a power vested in the
legislature, and/or that it had "re-collected", by an act of taxation, ad valorem taxes on oil
which Republic Act No. 6965 had abolished.

The petitioner, Atty. Oliver Lozano, 5 likewise argues that the Board's Order was issued
without notice and hearing, and hence, without due process of law.

The intervenor, the Trade Union of the Philippines and Allied Services (TUPAS/FSM)-W.F.T.U., 6
argues on the other hand, that the increase cannot be allowed since the respondents oil
companies had not exhausted their existing oil stock which they had bought at old prices and
that they cannot be allowed to charge new rates for stock purchased at such lower rates.

The Court set the cases (in G.R. Nos. 95203-05) for hearing on October 25, 1990, in which
Senator Maceda and his counsel, Atty. Alexander Padilla, argued. The Solicitor General, on
behalf of the Board, also presented his arguments, together with Board Commissioner Rex
Tantiangco. Attys. Federico Alikpala, Jr. and Joselia Poblador represented the oil firms (Petron
and Caltex, respectively).

The parties were thereafter required to submit their memorandums after which, the Court
considered the cases submitted for resolution.

On November 20, 1990, the Court ordered these cases consolidated.

On November 27, 1990, we gave due course to both petitions.

The Court finds no merit in these petitions.

Senator Maceda and Atty. Lozano, in questioning the lack of a hearing, have overlooked the
provisions of Section 8 of Executive Order No. 172, which we quote:

"SECTION 8. Authority to Grant Provisional Relief . — The Board may, upon the filing of an
application, petition or complaint or at any stage thereafter and without prior hearing, on the
basis of supporting papers duly verified or authenticated, grant provisional relief on motion of
a party in the case or on its own initiative, without prejudice to a final decision after hearing,
should the Board find that the pleadings, together with such affidavits, documents and other
evidence which may be submitted in support of the motion, substantially support the
provisional order: Provided, That the Board shall immediately schedule and conduct a hearing
thereon within thirty (30) days thereafter, upon publication and notice to all affected
parties.: nad

As the Order itself indicates, the authority for provisional increase falls within the above
provision.
There is no merit in the Senator's contention that the "applicable" provision is Section 3,
paragraph (e) of the Executive Order, which we quote:

(e) Whenever the Board has determined that there is a shortage of any petroleum product, or
when public interest so requires, it may take such steps as it may consider necessary,
including the temporary adjustment of the levels of prices of petroleum products and the
payment to the Oil Price Stabilization Fund created under Presidential Decree No. 1956 by
persons or entities engaged in the petroleum industry of such amounts as may be determined
by the Board, which will enable the importer to recover its cost of importation.

What must be stressed is that while under Executive Order No. 172, a hearing is
indispensable, it does not preclude the Board from ordering, ex parte, a provisional increase,
as it did here, subject to its final disposition of whether or not: (1) to make it permanent; (2)
to reduce or increase it further; or (3) to deny the application. Section 37 paragraph (e) is
akin to a temporary restraining order or a writ of preliminary attachment issued by the
courts, which are given ex parte, and which are subject to the resolution of the main case.

Section 3, paragraph (e) and Section 8 do not negate each other, or otherwise, operate
exclusively of the other, in that the Board may resort to one but not to both at the same
time. Section 3(e) outlines the jurisdiction of the Board and the grounds for which it may
decree a price adjustment, subject to the requirements of notice and hearing. Pending that,
however, it may order, under Section 8, an authority to increase provisionally, without need of
a hearing, subject to the final outcome of the proceeding. The Board, of course, is not
prevented from conducting a hearing on the grant of provisional authority — which is of
course, the better procedure — however, it cannot be stigmatized later if it failed to conduct
one. As we held in Citizens' Alliance for Consumer Protection v. Energy Regulatory Board. 7

In the light of Section 8 quoted above, public respondent Board need not even have
conducted formal hearings in these cases prior to issuance of its Order of 14 August 1987
granting a provisional increase of prices. The Board, upon its own discretion and on the basis
of documents and evidence submitted by private respondents, could have issued an order
granting provisional relief immediately upon filing by private respondents of their respective
applications. In this respect, the Court considers the evidence presented by private
respondents in support of their applications — i.e., evidence showing that importation costs
of petroleum products had gone up; that the peso had depreciated in value; and that the Oil
Price Stabilization Fund (OPSF) had by then been depleted — as substantial and hence
constitutive of at least prima facie basis for issuance by the Board of a provisional relief order
granting an increase in the prices of petroleum products. 8

We do not therefore find the challenged action of the Board to have been done in violation of
the due process clause. The petitioners may contest however, the applications at the hearings
proper.

Senator Maceda's attack on the Order in question on premises that it constitutes an act of
taxation or that it negates the effects of Republic Act No. 6965, cannot prosper. Republic Act
No. 6965 operated to lower taxes on petroleum and petroleum products by imposing specific
taxes rather than ad valorem taxes thereon; it is, not, however, an insurance against an "oil
hike", whenever warranted, or is it a price control mechanism on petroleum and petroleum
products. The statute had possibly forestalled a larger hike, but it operated no more.: nad

The Board Order authorizing the proceeds generated by the increase to be deposited to the
OPSF is not an act of taxation. It is authorized by Presidential Decree No. 1956, as amended
by Executive Order No. 137, as follows:

SECTION 8.  There is hereby created a Trust Account in the books of accounts of the Ministry
of Energy to be designated as Oil Price Stabilization Fund (OPSF) for the purpose of
minimizing frequent price changes brought about by exchange rate adjustments and/or
changes in world market prices of crude oil and imported petroleum products. The Oil Price
Stabilization Fund (OPSF) may be sourced from any of the following:

a) Any increase in the tax collection from ad valorem tax or customs duty imposed on
petroleum products subject to tax under this Decree arising from exchange rate adjustment,
as may be determined by the Minister of Finance in consultation with the Board of Energy;

b) Any increase in the tax collection as a result of the lifting of tax exemptions of government
corporations, as may be determined by the Minister of Finance in consultation with the Board
of Energy;

c) Any additional amount to be imposed on petroleum products to augment the resources of

the Fund through an appropriate Order that may be issued by the Board of Energy requiring
payment by persons or companies engaged in the business of importing, manufacturing and/or
marketing petroleum products;

d) Any resulting peso cost differentials in case the actual peso costs paid by oil companies in
the importation of crude oil and petroleum products is less than the peso costs computed
using the reference foreign exchange rates as fixed by the Board of Energy.

Anent claims that oil companies cannot charge new prices for oil purchased at old rates,
suffice it to say that the increase in question was not prompted alone by the increase in world
oil prices arising from tension in the Persian Gulf. What the Court gathers from the pleadings
as well as events of which it takes judicial notice, is that: (1) as of June 30, 1990, the OPSF
has incurred a deficit of P6.1 Billion; (2) the exchange rate has fallen to P28.00 to $1.00; (3)
the country's balance of payments is expected to reach $1 Billion; (4) our trade deficit is at
$2.855 Billion as of the first nine months of the year.

Evidently, authorities have been unable to collect enough taxes necessary to replenish the
OPSF as provided by Presidential Decree No. 1956, and hence, there was no available
alternative but to hike existing prices.

The OPSF, as the Court held in the aforecited CACP cases, must not be understood to be a
funding designed to guarantee oil firms' profits although as a subsidy, or a trust account, the
Court has no doubt that oil firms make money from it. As we held there, however, the OPSF
was established precisely to protect the consuming public from the erratic movement of oil
prices and to preclude oil companies from taking advantage of fluctuations occurring every so
often. As a buffer mechanism, it stabilizes domestic prices by bringing about a uniform rate
rather than leaving pricing to the caprices of the market.
In all likelihood, therefore, an oil hike would have probably been imminent, with or without
trouble in the Gulf, although trouble would have probably aggravated it.: nad

The Court is not to be understood as having prejudged the justness of an oil price increase
amid the above premises. What the Court is saying is that it thinks that based thereon, the
Government has made out a prima facie case to justify the provisional increase in question.
Let the Court therefore make clear that these findings are not final; the burden, however, is
on the petitioners' shoulders to demonstrate the fact that the present economic picture does
not warrant a permanent increase.

There is no doubt that the increase in oil prices in question (not to mention another one
impending, which the Court understands has been under consideration by policy-makers)
spells hard(er) times for the Filipino people. The Court can not, however, debate the wisdom
of policy or the logic behind it (unless it is otherwise arbitrary), not because the Court agrees
with policy, but because the Court is not the suitable forum for debate. It is a question best
judged by the political leadership which after all, determines policy, and ultimately, by the
electorate, that stands to be better for it or worse off, either in the short or long run.

At this point, the Court shares the indignation of the people over the conspiracy of events and
regrets its own powerlessness, if by this Decision it has been powerless. The constitutional
scheme of things has simply left it with no choice.

In fine, we find no grave abuse of discretion committed by the respondent Board in issuing its
questioned Order.

WHEREFORE, these petitions are DISMISSED. No costs.

SO ORDERED.

Narvasa, Gutierrez, Jr ., Cruz, Gancayco, Bidin, Griño Aquino, Medialdea and Regalado,
JJ., concur.

Fernan, C.J., Melencio-Herrera and Padilla, JJ., no part. 

Feliciano, J., is on leave.

Separate Opinions

PARAS, J., dissenting:

I dissent.

In fixing the oil prices complained of, the Energy Regulatory Board (ERB) gravely abused its
discretion —

(1) in approving the prices without due process of law, and

(2) in exercising the taxing power in gross violation of the 1987 Constitution which vests such
power only in Congress.: nad
With respect to due process, it will be noted that it is Sec. 3(e) (and not Sec. 8) of Ex. Order
No. 172 which should apply to the instant case (and therefore a hearing is essential) 1 for it is
Sec. 3(e) that refers to "the temporary adjustment of the levels of prices of petroleum
products" or instances "when public interest so requires." Sec. 8, which is relied upon by the
majority opinion, does NOT speak of price increases. Additionally it is clear that in the instant
case, "public interest" [also mentioned in Sec. 3 (e)] necessitated a prior hearing.

Anent the unconstitutional use of the taxing power, the decision of the majority says that "the
Board Order authorizing the proceeds generated by the increases" is "authorized by
Presidential Decree No. 1456, as amended by Executive Order No. 137" (See Decision, pp.
7-8). Assuming that such is authorized by law, still a law, no matter how imperative, cannot
prevail over the Constitution which grants only to Congress the power to tax. And indeed,
there can be no denying the fact that when revenue is earned by the government from the
consuming public (except when only licenses are concerned) there is an exercise of the taxing
power.

I am of course aware of the dangerous economic quagmire to which our country has been
plunged by the sadism precipitating the Middle East crisis, but certainly one error cannot be
corrected by another error. Besides there are more significant and clear-cut reasons for our
economic crisis: namely, the intentional depreciation (actually, a devaluation) of our already
demeaned currency, our unfortunate liberalization of imports, and our slavish subservience to
the dictates of the IMF.:-cralaw
 SECOND DIVISION
G.R. No. L-46245 May 31, 1982
MERALCO SECURITIES INDUSTRIAL CORPORATION, petitioner, 

vs.

CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF
LAGUNA and PROVINCIAL ASSESSOR OF LAGUNA, respondents.

AQUINO, J.:
In this special civil action of certiorari, Meralco Securities Industrial Corporation assails the decision
of the Central Board of Assessment Appeals (composed of the Secretary of Finance as chairman
and the Secretaries of Justice and Local Government and Community Development as members)
dated May 6, 1976, holding that Meralco Securities' oil pipeline is subject to realty tax.
The record reveals that pursuant to a pipeline concession issued under the Petroleum Act of 1949,
Republic Act No. 387, Meralco Securities installed from Batangas to Manila a pipeline system
consisting of cylindrical steel pipes joined together and buried not less than one meter below the
surface along the shoulder of the public highway. The portion passing through Laguna is about thirty
kilometers long.
The pipes for white oil products measure fourteen inches in diameter by thirty-six feet with a
maximum capacity of 75,000 barrels daily. The pipes for fuel and black oil measure sixteen inches by
forty-eight feet with a maximum capacity of 100,000 barrels daily.
The pipes are embedded in the soil and are firmly and solidly welded together so as to preclude
breakage or damage thereto and prevent leakage or seepage of the oil. The valves are welded to
the pipes so as to make the pipeline system one single piece of property from end to end.
In order to repair, replace, remove or transfer segments of the pipeline, the pipes have to be cold-cut
by means of a rotary hard-metal pipe-cutter after digging or excavating them out of the ground where
they are buried. In points where the pipeline traversed rivers or creeks, the pipes were laid beneath
the bed thereof. Hence, the pipes are permanently attached to the land.
However, Meralco Securities notes that segments of the pipeline can be moved from one place to
another as shown in the permit issued by the Secretary of Public Works and Communications which
permit provides that the government reserves the right to require the removal or transfer of the pipes
by and at the concessionaire's expense should they be affected by any road repair or improvement.
Pursuant to the Assessment Law, Commonwealth Act No. 470, the provincial assessor of Laguna
treated the pipeline as real property and issued Tax Declarations Nos. 6535-6537, San Pedro;
7473-7478, Cabuyao; 7967-7971, Sta. Rosa; 9882-9885, Biñan and 15806-15810, Calamba,
containing the assessed values of portions of the pipeline.
Meralco Securities appealed the assessments to the Board of Assessment Appeals of Laguna
composed of the register of deeds as chairman and the provincial auditor as member. That board in
its decision of June 18, 1975 upheld the assessments (pp. 47-49, Rollo).
Meralco Securities brought the case to the Central Board of Assessment Appeals. As already stated,
that Board, composed of Acting Secretary of Finance Pedro M. Almanzor as chairman and Secretary
of Justice Vicente Abad Santos and Secretary of Local Government and Community Development
Jose Roño as members, ruled that the pipeline is subject to realty tax (p. 40, Rollo).
A copy of that decision was served on Meralco Securities' counsel on August 27, 1976. Section 36 of
the Real Property Tax Code, Presidential Decree No. 464, which took effect on June 1, 1974,
provides that the Board's decision becomes final and executory after the lapse of fifteen days from
the date of receipt of a copy of the decision by the appellant.
Under Rule III of the amended rules of procedure of the Central Board of Assessment Appeals (70
O.G. 10085), a party may ask for the reconsideration of the Board's decision within fifteen days after
receipt. On September 7, 1976 (the eleventh day), Meralco Securities filed its motion for
reconsideration.
Secretary of Finance Cesar Virata and Secretary Roño (Secretary Abad Santos abstained) denied
the motion in a resolution dated December 2, 1976, a copy of which was received by appellant's
counsel on May 24, 1977 (p. 4, Rollo). On June 6, 1977, Meralco Securities filed the instant petition
for certiorari.
The Solicitor General contends that certiorari is not proper in this case because the Board acted
within its jurisdiction and did not gravely abuse its discretion and Meralco Securities was not denied
due process of law.
Meralco Securities explains that because the Court of Tax Appeals has no jurisdiction to review the
decision of the Central Board of Assessment Appeals and because no judicial review of the Board's
decision is provided for in the Real Property Tax Code, Meralco Securities' recourse is to file a
petition for certiorari.
We hold that certiorari was properly availed of in this case. It is a writ issued by a superior court to an
inferior court, board or officer exercising judicial or quasi-judicial functions whereby the record of a
particular case is ordered to be elevated for review and correction in matters of law (14 C.J.S.
121-122; 14 Am Jur. 2nd 777).
The rule is that as to administrative agencies exercising quasi-judicial power there is an underlying
power in the courts to scrutinize the acts of such agencies on questions of law and jurisdiction even
though no right of review is given by the statute (73 C.J.S. 506, note 56).
"The purpose of judicial review is to keep the administrative agency within its jurisdiction and protect
substantial rights of parties affected by its decisions" (73 C.J.S. 507, See. 165). The review is a part
of the system of checks and balances which is a limitation on the separation of powers and which
forestalls arbitrary and unjust adjudications.
Judicial review of the decision of an official or administrative agency exercising quasi-judicial
functions is proper in cases of lack of jurisdiction, error of law, grave abuse of discretion, fraud or
collusion or in case the administrative decision is corrupt, arbitrary or capricious (Mafinco Trading
Corporation vs. Ople, L-37790, March 25, 1976, 70 SCRA 139, 158; San Miguel Corporation vs.
Secretary of Labor, L-39195, May 16, 1975, 64 SCRA 56, 60, Mun. Council of Lemery vs. Prov.
Board of Batangas, 56 Phil. 260, 268).
The Central Board of Assessment Appeals, in confirming the ruling of the provincial assessor and
the provincial board of assessment appeals that Meralco Securities' pipeline is subject to realty tax,
reasoned out that the pipes are machinery or improvements, as contemplated in the Assessment
Law and the Real Property Tax Code; that they do not fall within the category of property exempt
from realty tax under those laws; that articles 415 and 416 of the Civil Code, defining real and
personal property, have no application to this case; that even under article 415, the steel pipes can
be regarded as realty because they are constructions adhered to the soil and things attached to the
land in a fixed manner and that Meralco Securities is not exempt from realty tax under the Petroleum
Law (pp. 36-40).
Meralco Securities insists that its pipeline is not subject to realty tax because it is not real property
within the meaning of article 415. This contention is not sustainable under the provisions of the
Assessment Law, the Real Property Tax Code and the Civil Code.
Section 2 of the Assessment Law provides that the realty tax is due "on real property, including land,
buildings, machinery, and other improvements" not specifically exempted in section 3 thereof. This
provision is reproduced with some modification in the Real Property Tax Code which provides:
 SEC. 38. Incidence of Real Property Tax.— There shall be levied, assessed and
collected in all provinces, cities and municipalities an annual ad valorem tax on real
property, such as land, buildings, machinery and other improvements affixed or
attached to real property not hereinafter specifically exempted. *
It is incontestable that the pipeline of Meralco Securities does not fall within any of the classes of
exempt real property enumerated in section 3 of the Assessment Law and section 40 of the Real
Property Tax Code.
Pipeline means a line of pipe connected to pumps, valves and control devices for conveying liquids,
gases or finely divided solids. It is a line of pipe running upon or in the earth, carrying with it the right
to the use of the soil in which it is placed (Note 21[10],54 C.J.S. 561).
Article 415[l] and [3] provides that real property may consist of constructions of all kinds adhered to
the soil and everything attached to an immovable in a fixed manner, in such a way that it cannot be
separated therefrom without breaking the material or deterioration of the object.
The pipeline system in question is indubitably a construction adhering to the soil (Exh. B, p. 39,
Rollo). It is attached to the land in such a way that it cannot be separated therefrom without
dismantling the steel pipes which were welded to form the pipeline.
Insofar as the pipeline uses valves, pumps and control devices to maintain the flow of oil, it is in a
sense machinery within the meaning of the Real Property Tax Code.
It should be borne in mind that what are being characterized as real property are not the steel pipes
but the pipeline system as a whole. Meralco Securities has apparently two pipeline systems.
A pipeline for conveying petroleum has been regarded as real property for tax purposes (Miller
County Highway, etc., Dist. vs. Standard Pipe Line Co., 19 Fed. 2nd 3; Board of Directors of Red
River Levee Dist. No. 1 of Lafayette County, Ark vs. R. F. C., 170 Fed. 2nd 430; 50 C. J. 750, note
86).
The other contention of Meralco Securities is that the Petroleum Law exempts it from the payment of
realty taxes. The alleged exemption is predicated on the following provisions of that law which
exempt Meralco Securities from local taxes and make it liable for taxes of general application:
ART. 102. Work obligations, taxes, royalties not to be changed.— Work obligations,
special taxes and royalties which are fixed by the provisions of this Act or by the
concession for any of the kinds of concessions to which this Act relates, are
considered as inherent on such concessions after they are granted, and shall not be
increased or decreased during the life of the concession to which they apply; nor
shall any other special taxes or levies be applied to such concessions, nor shall
0concessionaires under this Act be subject to any provincial, municipal or other local
taxes or levies; nor shall any sales tax be charged on any petroleum produced from
the concession or portion thereof, manufactured by the concessionaire and used in
the working of his concession. All such concessionaires, however, shall be subject
to such taxes as are of general application in addition to taxes and other levies
specifically provided in this Act.
Meralco Securities argues that the realty tax is a local tax or levy and not a tax of general
application. This argument is untenable because the realty tax has always been imposed by the
lawmaking body and later by the President of the Philippines in the exercise of his lawmaking
powers, as shown in section 342 et seq. of the Revised Administrative Code, Act No. 3995,
Commonwealth Act No. 470 and Presidential Decree No. 464.
The realty tax is enforced throughout the Philippines and not merely in a particular municipality or
city but the proceeds of the tax accrue to the province, city, municipality and barrio where the realty
taxed is situated (Sec. 86, P.D. No. 464). In contrast, a local tax is imposed by the municipal or city
council by virtue of the Local Tax Code, Presidential Decree No. 231, which took effect on July 1,
1973 (69 O.G. 6197).
We hold that the Central Board of Assessment Appeals did not act with grave abuse of discretion,
did not commit any error of law and acted within its jurisdiction in sustaining the holding of the
provincial assessor and the local board of assessment appeals that Meralco Securities' pipeline
system in Laguna is subject to realty tax.
WHEREFORE, the questioned decision and resolution are affirmed. The petition is dismissed. No
costs.
SO ORDERED.
Barredo (Chairman), Guerrero, De Castro and Escolin, JJ., concur.
Justice Abad Santos, Concepcion, Jr., JJ., took no part.

FIRST DIVISION
G.R. No. L-24265 December 28, 1979
PROCTER & GAMBLE PHILIPPINE MANUFACTURING CORPORATION, plaintiff-appellant, 

vs.

THE MUNICIPALITY OF JAGNA, PROVINCE OF BOHOL, defendant-appellee.
Picazo, Agcaoili, Santayana, Reyes & Tayao for appellant.
Joel P. Tiangco and Jesus N. Borromeo for appellee.

MELENCIO-HERRERA, J.:
A direct appeal by plaintiff company from the judgment of the Court of First Instance of Manila,
Branch VI, upholding the validity of Ordinance No. 4, Series of 1957, enacted by defendant
Municipality, which imposed "storage fees on all exportable copra deposited in the bodega within the
jurisdiction of the Municipality of Jagna Bohol.
Plaintiff-appellant is a domestic corporation with principal offices in Manila. lt is a consolidated
corporation of Procter & Gamble Trading Company and Philippine Manufacturing Company, which
later became Procter & Gamble Trading Company, Philippines. It is engaged in the manufacture of
soap, edible oil, margarine and other similar products, and for this purpose maintains a "bodega" in
defendant Municipality where it stores copra purchased in the municipality and therefrom ships the
same for its manufacturing and other operations.
On December 13, 1957, the Municipal Council of Jagna enacted Municipal Ordinance No. 4, Series
of 1957, quoted hereinbelow:
AN ORDINANCE IMPOSING STORAGE FEES OF ALL EXPORTABLE COPRA
DEPOSITED IN THE BODEGA WITHIN THE JURISDlCTI0N OF THE
MUNICIPALITY OF JAGNA BOHOL.
Be it ordained by the Municipal Council of Jagna Bohol, that:
 SECTION 1. Any person, firm or corporation having a deposit of exportable copra in
the bodega, within the jurisdiction of the Municipality of Jagna Bohol, shall pay to the
Municipal Treasury a storage fee of TEN (P0.10) CENTAVOS FOR EVERY
HUNDRED (100) kilos;
SECTION 2. All exportable copra deposited in the bodega within the Municipality of
Jagna Bohol, is part of the surveillance and lookout of the Municipal Authorities;
SECTION 3. Any person, firm or corporation found violating the provision of the
preceding section of this Ordinance shall be punished by a fine of not less than TWO
HUNDRED (P 200.00) PESOS, nor more than FOUR HUNDRED (P400.00) PESOS,
or an imprisonment of hot less than ONE MONTH, nor more than THREE MONTHS,
or both fines and imprisonment at the discretion of the court.
SECTION 4. This Ordinance shall take effect on January 1, 1958.
APPROVED December 13,1957.
(Sgd.) TEODORO B. GALACAR Municipal Mayor 1
For a period of six years, from 1958 to 1963, plaintiff paid defendant Municipality, allegedly under
protest, storage fees in the total sum of 1142,265.13, broken down as follows:
Procter & Gamble Trading Co. Procter & Gamble Philippine Manufacturing Corp.
19 58 5, __________
072.13 _
195 7, __________
9 076.00 _
196 9, __________
0 950.00 _
196 7, __________
1 830.00 _
196 3, P5, 279.00
2 648.00
196 _____ P3, 410. 00
3 _
P33, P8, 689.00
576.13
TOTA P42,
L 265.13
CLAIM 2

On March 3, 1964, plaintiff filed this suit in the Court of First Instance of Manila, Branch VI, wherein it
prayed that 1) Ordinance No. 4 be declared inapplicable to it, or in the alter. native, that it be
pronounced ultra-vires and void for being beyond the power of the Municipality to enact; and 2) that
defendant Municipality be ordered to refund to it the amount of P42,265.13 which it had paid under
protest; and costs.
For its part, defendant Municipality upheld its power to enact the Ordinance in question; questioned
the jurisdiction of the trial Court to take cognizance of the action under section 44(h) of the Judiciary
Act in that it seeks to enjoin the enforcement of a Municipal Ordinance; and pleaded prescription and
laches for plaintiff's failure to timely question the validity of the said Ordinance.
After the parties had agreed to submit the case for judgment on the pleadings, the trial Court upheld
its jurisdiction as well as defendant Municipality's power to enact the Ordinance in question under
section 2238 of the Revised Administrative Code, otherwise known as the general welfare clause,
and declared that plaintiff's right of action had prescribed under the 5-year period provided for by
Article 1149 of the Civil Code.
In this appeal, plaintiff interposes the following Assignments of Error:
I
THE TRIAL COURT ERRED IN HOLDING THAT ORDINANCE NO. 4, SERIES OF
1957, ENACTED BY THE DEFENDANT MUNICIPALITY OF JAGNA BOHOL, IS A
VALID, LEGAL AND ENFORCEABLE ORDINANCE AGAINST THE PLAINTIFF.
II
THE TRIAL COURT ERRED IN HOLDING THAT PAYMENT OF THE TAX UNDER
ORDINANCE NO. 4, SERIES OF 1957 WAS NOT DONE UNDER PROTEST.
III
THE TRIAL COURT ERRED IN HOLDING THAT THE ACTION OF THE PLAINTIFF
TO ANNUL AND TO DECLARE ORDINANCE NO. 4, SERIES OF 1957 OF THE
DEFENDANT HAS ALREADY PRESCRIBED.
IV
AND, FINALLY, THE TRIAL COURT ERRED IN NOT HOLDING ORDINANCE NO. 4.
SERIES OF 1957 ULTRA-VIRES AND VOID AND IN NOT ORDERING THE
REFUND OF TAXES PAID THEREUNDER. 3
It is plaintiff's submission that the subject Ordinance is inapplicable to it as it is not engaged in the
business or trade of storing copra for others for compensation or profit and that the only copra it
stores is for its exclusive use in connection with its business as manufacturer of soap, edible oil,
margarine and other similar products; that the levy is intended as an "export tax" as it is collected on
"exportable copra' , and, therefore, beyond the power of the Municipality to enact; and that the fee of
P0.10 for every 100 kilos of copra stored in the bodega is excessive, unreasonable and oppressive
and is imposed more for revenue than as a regulatory fee.
The main question to determine is whether defendant Municipality was authorized to impose and
collect the storage fee provided for in the challenged Ordinance under the laws then prevailing.
The validity of the Ordinance must be upheld pursuant to the broad authority conferred upon
municipalities by Commonwealth Act No. 472, approved on June 16, 1939, which was the prevailing
law when the Ordinance was enacted (Procter & Gamble Trading Co. vs. Municipality of Medina, 43
SCRA 130 11972]). Section 1 thereof reads:
Section 1. A municipal council or municipal district council shall have the authority to
impose municipal license taxes upon persons engaged in any occupation or
business, or exercising privileges in the municipality or municipal district, by requiring
them to secure licenses at rates fixed by the municipal council, or municipal district
council, and to collect fees and charges for services rendered by the municipality or
municipal district and shall otherwise have power to levy for public local purposes,
and for school purposes, including teachers' salaries, just and uniform taxes other
than percentage taxes and taxes on specified articles.
Under the foregoing provision, a municipality is authorized to impose three kinds of licenses: (1) a
license for regulation of useful occupation or enterprises; (2) license for restriction or regulation of
non-useful occupations or enterprises; and (3) license for revenue. 4 It is thus unnecessary, as
plaintiff would have us do, to determine whether the subject storage fee is a tax for revenue
purposes or a license fee to reimburse defendant Municipality for service of supervision because
defendant Municipality is authorized not only to impose a license fee but also to tax for revenue
purposes.
The storage fee imposed under the question Ordinance is actually a municipal license tax or fee on
persons, firms and corporations, like plaintiff, exercising the privilege of storing copra in a bodega
within the Municipality's territorial jurisdiction. For the term "license tax" has not acquired a fixed
meaning. It is often used indiseriminately to designate impositions exacted for the exercise of
various privileges. In many instances, it refers to revenue-raising exactions on privileges or
activities. 5
Not only is the imposition of the storage fee authorized by the general grant of authority under
section 1 of CA No. 472. Neither is the storage fee in question prohibited nor beyond the power of
the municipal councils and municipal district councils to impose, as listed in section 3 of said CA No.
472. 6
Moreover, the business of buying and selling and storing copra is property the subject of regulation
within the police power granted to municipalities under section 2238 of the Revised Administrative
Code or the "general welfare clause", which we quote hereunder:
Section 2238. General power of council to enact ordinances and make regulations.
— The municipal council shall enact such ordinances and make such regulations, not
repugnant to law, as may be necessary to carry into effect and discharge the powers
and duties conferred upon it by law and such as shall seem necessary and proper to
provide for the health and safety, promote the prosperity, improve the morals, peace,
good order, comfort, and convenience of the municipality and the inhabitants thereof,
and for the protection of property therein.
For it has been held that a warehouse used for keeping or storing copra is an establishment likely to
endanger the public safety or likely to give rise to conflagration because the oil content of the copra
when ignited is difficult to put under control by water and the use of chemicals is necessary to put out
the fire.7 And as the Ordinance itself states, all exportable copra deposited within the municipality is
"part of the surveillance and lookout of municipal authorities.
Plaintiff's argument that the imposition of P0.10 per 100 kilos of copra stored in a bodega within
defendant's territory is beyond the cost of regulation and surveillance is not well taken. As
enunciated in the case of Victorias Milling Co. vs. Municipality of Victorias, supra.
The cost of regulation cannot be taken as a gauge, if the municipality really intended
to enact a revenue ordinance. For, 'if the charge exceeds the expense of issuance of
a license and costs of regulation, it is a tax'. And if it is, and it is validly imposed, 'the
rule that license fees for regulation must bear a reasonable relation to the expense of
the regulation has no application'.
Municipal corporations are allowed wide discretion in determining the rates of imposable license fees
even in cases of purely police power measures. In the absence of proof as to municipal conditions
and the nature of the business being taxed as well as other factors relevant to the issue of
arbitrariness or unreasonableness of the questioned rates, Courts will go slow in writing off an
Ordinance. 8 In the case at bar, appellant has not sufficiently shown that the rate imposed by the
questioned Ordinance is oppressive, excessive and prohibitive.
Plaintiff's averment that the Ordinance, even if presumed valid, is inapplicable to it because it is not
engaged in the business or occupation of buying or selling of copra but is only storing copra in
connection with its main business of manufacturing soap and other similar products, and that to be
compelled to pay the storage fees would amount to double taxation, does not inspire assent. The
question of whether appellant is engaged in that business or not is irrelevant because the storage
fee, as previously mentioned, is an imposition on the privilege of storing copra in a bodega within
defendant municipality by persons, firms or corporations. Section 1 of the Ordinance in question
does not state that said persons, firms or corporations should be engaged in the business or
occupation of buying or selling copra. Moreover, by plaintiff's own admission that it is a consolidated
corporation with its trading company, it will be hard to segregate the copra it uses for trading from
that it utilizes for manufacturing.
Thus, it can be said that plaintiff's payment of storage fees imposed by the Ordinance in question
does not amount to double taxation. For double taxation to exist, the same property must be taxed
twice, when it should be taxed but once. Double taxation has also been defined as taxing the same
person twice by the same jurisdiction for the same thing. 9 Surely, a tax on plaintiff's products is
different from a tax on the privilege of storing copra in a bodega situated within the territorial
boundary of defendant municipality.
Plaintiff's further contention that the storage fee imposed by the Ordinance is actually intended to be
an export tax, which is expressly prohibited by section 2287 of the Revised Administrative Code, is
without merit. Said provision reads as follows:
Section 2287 ...
It shall not be in the power of the municipal council to impose a tax in any form
whatever upon goods and merchandise carried into the municipality, or out of the
same, and any attempt to impose an import or export tax upon such goods in the
guise of an unreasonable charge for wharfage use of bridges or otherwise, shall be
void.
xxx xxx xxx
We have held that only where there is a clear showing that what is being taxed is an export to any
foreign country would the prohibition come into play.10 When the Ordinance itself speaks of
"exportable" copra, the meaning conveyed is not exclusively export to a foreign country but shipment
out of the municipality. The storage fee impugned is not a tax on export because it is imposed not
only upon copra to be exported but also upon copra sold and to be used for domestic purposes if
stored in any warehouse in the Municipality and the weight thereof is 100 kilos or more. 11
Thus finding the Ordinance in question to be valid, legal and enforceable, we find it unnecessary to
discuss the ascribed error that the Court a quo erred in declaring that appellant had not paid the
taxes under protest.
However, we find merit in plaintiff's contention that the lower Court erred in ruling that its action has
prescribed under Article 1149 of the Civil Code, which provides for a period of five years for all
actions whose periods are not fixed in that Code. The case of Municipality of Opon vs. Caltex
Phil., 12 is authority for the view that the period for prescription of actions to recover municipal license
taxes is six years under Article 1145(2) of the Civil Code. Thus, plaintiff's action brought within six
years from the time the right of action first accrued in 1958 has not yet prescribed.
WHEREFORE, affirming the judgment appealed, from, we sustain the validity of Ordinance No. 4,
Series of 1957, of defendant Municipality of Jagna Bohol, under the laws then prevailing.
Costs against plaintiff-appellant.
SO ORDERED.
Teehankee (Chairman), Makasiar, Fernandez, Guerrero and De Castro, JJ., concur.
 EN BANC
G.R. No. L-18534 December 24, 1964
GOLDEN RIBBON LUMBER COMPANY, INC., plaintiff-appellee, 

vs.

THE CITY OF BUTUAN and FRANCISCO MAGNO, in his capacity as City Treasurer of the City
of Butuan, defendants-appellants.
Rodegelio M. Jalandoni for plaintiff-appellee.

City Attorney Jose Villanueva for defendants-appellants.
DIZON, J.:
Appeal taken by the City of Butuan and Francisco Magno, as City Treasurer of the City of Butuan,
from the decision of the Court of First Instance of Agusan in Civil Case No. 624 declaring void
Ordinance No. 5, as amended, of said City, and ordering them to refund to appellee, Golden Ribbon
Lumber Company, Inc., the sum of P1,190.92 paid by the latter as tax, under protest, with legal
interests thereon from the filing of the complaint until fully paid, and to pay the costs.
Appellee, a duly organized domestic corporation, operated a lumber mill and lumber yard in Butuan
City. Pursuant to the provisions of Section 1 of Ordinance No. 5, as amended by Ordinance Nos. 9,
10, 47 and 49 of said city, appellee paid to appellants the taxes provided for therein amounting to the
total sum P2,069.26. Claiming that said ordinance, as amended, was void, it later brought the
present action to have it so declared; to recover the amount mentioned heretofore, and to have
appellants permanently enjoined from enforcing said ordinance, as amended.
After the denial of their motion to dismiss the complaint on the ground that it did not state a cause of
action, appellants filed their answer in which, after making some denials and admissions, they
alleged, as affirmative defenses, (a) that the tax assessed under Ordinance No. 5, as amended. is a
privilege tax on business and is therefore legal under paragraph p, section 15, Article III of Republic
Act No. 523, otherwise known as the Charter of the City of Butuan, and (b) that since the payments
were not made under protest, appellee could not ask for their refund. As counterclaim they also
alleged that appellee had incurred tax delinquencies and surcharges as of July, 1957 in the amount
of P16,978.44 and additional undetermined taxes from August, 1957 up to and including January
1958 exclusive of interests under Ordinance No. 5, as amended by Ordinance No. 49, Series of
1954.
In its answer to the counterclaim appellee denied the alleged unpaid taxes and interests.
On March 7, 1959 the Court admitted appellants' amended answer and counterclaim in which they
alleged, inter alia, that after deducting the taxes paid (P2,981.81), there still remained a balance of
P33,000.74 representing appellee's tax delinquencies, surcharges and interests as of March, 1958.
The latter, answering the amended counterclaim, denied such delinquencies etc., amounting to
P33,000.74, and further averred that Ordinance No. 5, as amended, being null and void, it cannot be
compelled to pay them.
On April 25, 1959, the Court below admitted appellee's amended complaint which merely included
for recovery the taxes paid by it under the same ordinance subsequent to the filing of the original
complaint.
On February 16, 1960, both parties submitted the following stipulation of facts:
COMES NOW the plaintiff, assisted by counsel, and the defendants, through its counsel, and
to this Honorable Court respectfully submit the following stipulation of facts:
1. The plaintiff is a corporation duly organized and existing under the laws of the Philippines,
with principal office in the City of Butuan; that the defendant City of Butuan is public
corporation created and existing under the law of the Philippines; and that the other
defendant, Francisco Magno, is the City Treasurer of the City of Butuan and has been sued
in that capacity only;
2. That plaintiff pursuant to the purposes for which it was organized and as a necessary
incident to its business, established and operated a lumber yard and/or lumber mill situated
within the territorial jurisdiction of the City of Butuan;
3. That sometime in September, 1950, the defendant City of Butuan enacted and approved,
through its Municipal Board, Ordinance No. 5, copy of, which is hereto attached as Exhibit
"A" and made part of this Stipulation of Facts; that said Ordinance No. 5 was subsequently
amended by the following ordinances: Ordinance No. 9, Ordinance No. 10, Ordinance No. 47
and Ordinance No. 49, copies whereof are likewise hereto attached as Exhibit "B", Exhibit
"C", Exhibit "D" and Exhibit "E", as integral parts hereof; that the dates of enactment or
approval as well as the effectivity of each of the foregoing ordinances are indicated by the
provisions thereof;
4. That defendants maintain that the aforementioned Ordinance No. 5, and all amendments
thereto, were enacted by the defendant City of Butuan pursuant to and under the provisions
of Republic Act No. 523, as amended, otherwise known as the Charter of the City of Butuan,
more particularly Section 15, paragraph (p) thereof;
5. That the plaintiff Golden Ribbon Lumber Company, Inc., as a corporation operating a
lumber mill and/or lumber yard within the territorial jurisdiction of the defendant City of
Butuan, has sawn manufactured and/or produced a total of 7,310,567 board feet of sawn
lumber, irrespective of class, within the period from September, 1956 to March, 1958,
inclusive;
6. That plaintiff corporation has been assessed by the defendants under and pursuant to the
provision of the aforesaid Ordinance No. 5, as amended, and was found delinquent in the
payment of its tax liabilities including surcharges in the total sum of P36,552.84 for the period
from September, 1956 to March, 1958, inclusive;
 7. That out of the aforestated tax liabilities and surcharges assessed against the plaintiff
corporation by the defendants pursuant to the provisions of Ordinance No. 5, as amended,
said plaintiff has paid to the defendant City of Butuan through its co-defendant, the City
Treasurer, the total sum of P2,982.11 only, broken down as follows —

Date of Payment Receipt Amount Paid

Number

Oct. 24, 1957 E-0385101 P1,000.00

Nov. 25, 1957 E-038703 180.89
Feb. 10, 1958 E-0394669 110.30

Mar. 11, 1958 H-6606335 500.00

May 14, 1958 E-2941534 1,190.92

TOTAL P2,982.11

thereby leaving still unpaid the amount of P33,570.73, pursuant to assessment;

8. That among the payments stated in the next preceding paragraph, only the last payment
— that made on May 14, 1958 in the amount of P1,190.92 was made under protest;
9. That defendants have repeatedly demanded from plaintiff payment of the aforesaid taxes,
claiming that such have been long due and payable under the provisions of Ordinance No. 5,
as amended, but plaintiff refused and still refuses to make payments up to the present,
except those mentioned in paragraph 7 of this Stipulation of Facts;
10. That, on the other hand, plaintiff since May 1958 has demanded that defendants cease
and desist from enforcing the provisions of Ordinance No. 5, as amended, but defendants
refused to comply with said plaintiff's demand;
11. That there is no question of fact involved in this case and that the only legal question for
this Court to decide and resolve is: (1) whether or not Ordinance No. 5, as amended is valid
and legal and that whether or not the plaintiff's corporation is legally bound to pay the taxes
provided for in said ordinance in question; and (2) whether or not payments made without
protest in case of a decision in favor of the plaintiff is subject to reimbursement.
PRAYER
WHEREFORE, the parties herein respectfully pray this Honorable Court to approve the
aforegoing Stipulation of Facts and to make it the basis for a decision on the issues raised by
the pleadings.
It is further respectfully prayed that both parties be granted thirty (30) days from receipt of
notice of approval of the foregoing Stipulation of Facts within which to file simultaneously
their respective memoranda, and fifteen (15) days from receipt of the other party's
memorandum within which to file a reply thereto, and thereafter, the case shall be deemed
submitted for decision.
On February 28, 1961, the lower court rendered the appealed judgment which appellants seeks to
have Us reverse, claiming that the lower court erred in holding (a) that the tax imposed by said
Ordinance No. 5, as amended, is a sales tax on the sawn manufactured or produced lumber, which
are forest products, and in further ruling (b) that said ordinance was ultra vires and, therefore, null
and void.
The principal issue to be resolved is whether Ordinance No. 5, as originally approved or as later
amended, the pertinent part of which reads as follows:
 AN ORDINANCE IMPOSING A TAX ON LUMBER MILLS
SECTION 1. — Every person, association or corporation operating a lumber mill and/or
lumber yard within the territory of the City of Butuan shall pay to the City a tax of two fifths (P.
004) centavo for every board foot of lumber sawn manufactured and/or produced (regardless
of group). The tax shall be paid within the first twenty (20), days of the following month. If the
tax is not paid within the time herein prescribed, there shall be added to the unpaid amount a
surcharge of ten per centum (10%) every month of fractional part thereof, but in no case
shall the total surcharge exceed twenty-five per centum (25%).
SECTION 2. — It shall be the duty of every person, association or corporation operating a
lumber mill to submit to the City Treasurer within the first fifteen (15) days of every month a
sworn statement of the number of board feet sawn manufactured or produced by it during the
preceding month.
falls within the provisions of paragraph 5, Section 15 of Republic Act No. 523, which empowers the
municipal board of the City of Butuan:
To tax, fix the license fee for, regulate the business and fix the location of, match factories,
blacksmith shops, foundries, steam boilers, lumber mills and lumber yards, shipyards, the
storage and sale of gunpowder, tar pitch, resin coal, oil, gasoline, benzine turpentine, hemp,
cotton, nitroglycerine, petroleum, or any of the products thereof, and of all other highly
combustible or explosive materials and other establishments likely to endanger the public
safety or give rise to conflagrations or explosions, and subject to the rules and regulations
incured by the Director of Health in accordance with law, tanneries renderies, tallow
chandeleries, embalmers, and funeral parlors, bone factories and soap factories.
Appellee contends that the questioned ordinance imposes a tax, not on lumber mills and lumber
yards, but on the sawn-manufactured and/or produced lumber, which are forest products and not
found among the taxable items enumerated in the law above quoted, thus rendering said ordinance
null and void. It argues further that, even under the latest amendment — Ordinance No. 49, series of
1954, which purports to impose the tax not on lumber sold but on lumber sawn manufactured and/or
produced — the ordinance is ultra vires because par. (p) Section 15 of the Charter of the City of
Butuan (quoted above), authorizes a tax only on lumber mills and lumber yards, which obviously
does not include the power to impose a tax on sawn manufactured or produced lumber.
Upon the other hand, appellants maintain that the tax in question is a license or privilege tax on the
business of lumber mills or lumber yards imposed by appellant city in the exercise of its police power
under Section 15 of its Charter.
The title given to the original ordinance in question was "An ordinance imposing a tax on the sales of
lumber". Section 1 thereof made the tax collectible on "every board foot of lumber sold" by every
person, association or corporation operating a lumber mill within the territory of the City of Butuan,
while Section 4 expressly exempted lumber mills from the payment of the quarterly sales tax
provided for in Section 3, Article 11 of Ordinance No. 47, Series of 1949.
The above would seem to be sufficient to show that the tax imposed is and was really intended to be
on lumber sold and not a tax on, or, license fee for the privilege of operating a lumber mill and/or a
lumber yard.
The amendatory ordinances did not change the nature of the tax imposed by the original. Ordinance
No. 9 simply changed the title of the latter so as to make it read as an ordinance imposing a tax on
the "produce of lumber mills"; Ordinance No. 10, while entitled as one imposing a tax on lumber mills
made the tax collectible on "every board foot of lumber, regardless of group, sawn manufactured or
produced, etc."; Ordinance No. 47, in turn, made the tax collectible on "every board foot of lumber
sold and/or shipped"; Ordinance No. 49, while changing again the title of the original ordinance so as
to make it read as "An ordinance imposing a tax on lumber mills", also required the tax to be paid
"for every board foot of lumber sawn manufactured and/or produced, etc."
The clear implication from the original as well as the amendatory ordinances is that the tax imposed
is one on lumber sold, manufactured, sawn or produced by parties duly licensed to engage in said
trade or business. As the lower court said — and this we quote with approval. —
The intent of Ordinance No. 5 to tax the sale of lumber is clear and unmistakable. The
subsequent ordinances Nos. 9, 10, 47 and 49, Exhs. B, C, D, and E respectively, being all
amendatory, naturally did not alter the essence or spirit of the basic ordinance. This is
evident, if we consider that section 4 of the original ordinance which exempts lumber mills
from the of quarterly sales tax, as provided in an earlier ordinance was never repealed and
instead was carried over and continued to be in force until the latest amendment.
Moreover, the tax thus levied is virtually one on "forest products" since manufactured or sawn lumber
is so considered under the provisions of Section 263, National Internal Revenue Code, which is
embraced in Chapter V thereof entitled "Charges on Forest Products", as construed by Section VI,
Regulation No. 85, Department of Finance. Municipal corporations are prohibited from imposing
charges of taxes of such nature (Commonwealth Act No. 472, Section 3; Republic Act No. 2264).
Appellants' claim that the questioned tax is one on business or a privilege tax for the operation of a
lumber mill or a lumber yard is without merit.
The character or nature of a tax is determined not by the title of the act or ordinance imposing it but
by its operation, practical results and incidents (Dawson vs. Distilleries, etc., 255 U.S. 288, 65 L. Ed.
638; Association of Customs Brokers, Inc., et al. vs. The Municipal Board, et al., G.R. No. L-4376,
May 22, 1953).
Neither the original ordinance in question nor the amendatory ones show that the tax provided for
therein is imposed by reason of the enjoyment of the privilege to engage in a particular trade or
business. Neither do they provide that payment thereof is a condition precedent to the enjoyment of
such privilege or that its non-payment would result in the cancellation of any previous license
granted. The only consequence of its non-payment appears to be the imposition of a surcharge or
liability to suffer the penal sanctions prescribed in Section 3 of the original ordinance. These
circumstances lead Us to the conclusion that the questioned tax cannot be considered as one
imposed upon a party for engaging in the business of operating a lumber mill or a lumber yard.
We likewise find to be unmeritorious appellants' contention that the power of the City of Butuan to
tax lumber mills and lumber yards includes the power to tax the sale, production, sawing and/or
manufacture of lumber by them. The rule is well-settled that municipal corporations, unlike sovereign
states, are clothed with no power of taxation; that its charter or a statute must clearly show an intent
to confer that power or the municipal corporation cannot assume and exercise it, and that any such
power granted must be construed strictly, any doubt or ambiguity arising out from the terms of the
grant to be resolved against the municipality. (Cu Unjieng vs. Patstone 42 Phil. 818; Vega, et al. vs.
Municipal Board, etc., 50 O.G. No. 6,p. 2456)
Lastly, appellants' contention that appellee had no cause of action because it does not appear that
the taxes sought to be recovered were paid under protest is also untenable. The present action
involves only the recovery of the sum of Pl,190.92 which was paid under protest (paragraph 8,
Stipulation of Facts, p. 53, Record on Appeal).
IN VIEW OF ALL THE FOREGOING, the appealed decision is hereby affirmed, with costs.
Bengzon, C.J., Concepcion, Reyes, J.B.L., Barrera Regala, Makalintal, Bengzon, J.P., and Zaldivar,
JJ., concur.
Bautista Angelo and Paredes, JJ., took no part.
 SECOND DIVISION

G.R. No. L-30727 July 15, 1975

THE CITY OF OZAMIZ, Represented by THE CITY MAYOR, MUNICIPAL BOARD, CITY
TREASURER, and CITY AUDITOR, petitioner-appellant, 

vs.

SERAPIO S. LUMAPAS and HONORABLE GERONIMO R. MARAVE, respondents-appellees.
Assistant City Fiscal Artemio C. Engracia for petitioner-appellant.
Francisco D. Boter for respondents-appellees.

ANTONIO, J.:
Appeal by certiorari from the decision, dated March 18, 1969, of respondent Judge Geronimo R.
Marave, of the Court of First Instance of Misamis Occidental, Branch II, Ozamiz City, declaring
Ordinance No. 466, series of 1964, of the Municipal Board of the City of Ozamiz, null and void (Civil
Case No. OZ-159), and ordering petitioner to return to respondent Serapio S. Lumapas the sum of
P1,243.00, representing the amount collected as parking fees, by virtue of the ordinance, without
costs.
The facts of this case, which are not disputed, are as follows:
Respondent Serapio S. Lumapas is an operator of transportation buses for passengers and cargoes,
under the name of Romar Line, with Ozamiz City and Pagadian, Zamboanga del Sur, as terminal
points, by virtue of a certificate of public convenience issued to him by the Public Service
Commission. On September 15, 1964, the Municipal Board of Ozamiz City enacted the following:
ORDINANCE NO. 466
AN ORDINANCE IMPOSING PARKING FEES FOR EVERY MOTOR VEHICLE
PARKED ON ANY PORTION OF THE EXISTING PARKING SPACE IN THE CITY
OF OZAMIZ. Be it ordained by the Municipal Board of the City of Ozamiz, that:
SECTION 1 — There is hereby imposed parking fees for all motor vehicles parked
on any portion of the duly designated parking areas in the City of Ozamiz;
SECTION 2. — Motor Vechicles' as used in this ordinance shall be construed to
mean all vehicles run by engine whether the same is offered for passengers or for
cargoes of whatever kind or nature;
SECTION 3. — The word "Parking" as used in this ordinance shall be construed to
mean, when a motor vehicle of whatever kind is stopped on any portion of the
existing parking areas for the purpose of loading and unloading passengers or
cargoes;
SECTION 4. — For purposes of the fee hereinabove provided, the following
schedule of rates collectible daily from the conductor, driver, operator and/or owner
must be observed:
For Passenger
(a) Passenger Bus ........................................................................ P1.00
(b) Weapon Carrier, Baby Bus & others of similar nature ..... .70
(c) Pick Up, Jeepneys, PU Cars and others of similar 

nature ....................................................................................................................... .
50
For Cargoes
(a) Cargo Trucks .......................................................................... 1.00
(b) Pick Up, Jeeps, Jeepneys, Weapon Carriers & Others of similar 

nature ...................................................................................................................... .70
SECTION 5. — That the City Treasurer or his authorized representative is hereby
empowered to collect the herein parking fees using any form of official receipt he
may devise, from the conductor, driver, operator and/or owner of the motor vehicles
parked in said designated parking areas;
SECTION 6. — Any person or persons, violating any provision of this ordinance
shall, upon conviction thereof, be punished by an imprisonment of not less than two
(2) months nor more than six (6) months, or by a fine in the sum of not less than
P100.00 but not more than P400.00 or both such fine and imprisonment at the
discretion of the Court;
SECTION 7. — This ordinance shall take effect immediately upon its approval.
Enacted, September 15, 1964,
 Approved, October 7, 1964.1
After approval of the above-quoted ordinance, the City of Ozamiz began collecting the prescribed
parking' fees and collected from respondent-appellee Serapio S. Lumapas, who had paid under
protest, the parking fees at One Peso (P1.00) for each of his buses, from October 1964 to January
1967, or an aggregate amount of P1,259.002 for which official receipts were issued by petitioner.
About four (4) years later, or on January 11, 1968, respondent Serapio S. Lumapas filed a complaint,
dated August 3, 19673 against the City of Ozamiz, represented by the City Mayor, Municipal Board,
City Treasurer, and City Auditor, with the Court of First instance of Misamis Occidental, Branch II
(Civil Case No. OZ-159), for recovery of parking fees, alleging, among others, that said Ordinance
No. 466 is ulta vires, and praying that judgment be issued (1) nullifying Ordinance No. 466, series of
1964, and (2) ordering the Municipal Board to appropriate the amount of P1,459.00 for the
reimbursement of P1,259.00 he had paid as parking fees, plus P200.00 as attorney's fees.
On January 25, 1968, petitioner filed its answer, with affirmative defenses4 to which respondent-
appellee Serapio S. Lumapas filed his reply, dated January 30, 1968.5
On January 3, 1969, the parties, through their respective counsel, filed the following:
STIPULATION OF FACTS
COME NOW the plaintiff and the defendants, through their respective counsel, and
unto this Honorable Court respectfully submit this stipulation of facts, to wit:
(1) That the area enclosed in red pencil in the sketch is a market site of the City of
Ozamiz which holds the same in its proprietary character as evidenced by Tax
Declaration No. 51234. This area is for public use.
(2) That the Zulueta Street is now extended up to the end of the market site passing
a row of tiendas up to the end marked "toilet" in the sketch plan of market site when
the market building was constructed in 1969;
(3) That on the right side near the row of tiendas and near the toilet and marked with
series of x's and where the buses of plaintiff were parking waiting for passengers
going to the south;
(4) That this space marked "rig parking" in the sketch plan marked "x" has been
designated by City Ordinance No. 233 as a parking place marked Exhibit "2";
(5) That the defendant City Government has been collecting parking fees and issued
corresponding official receipts to the plaintiff for each unit belonging to the plaintiff
every time it left Ozamiz City from said parking place but once a day at one peso per
unit;
(6) That the total amount of parking fees collected from the plaintiff by the defendant
is P1,243.00 as per official receipts actually counted in the presence of both parties;
(7) That the plaintiff made a demand for the reimbursement of the total amount
collected from 1964 to 1967 and this demand was received on September 1, 1967,
by the City Treasurer and that the City Treasurer replied by first indorsement dated
September 11, 1967, asking for reference and verification; and
(8) That in reply to said first indorsement, the plaintiff sent a letter to the City
Treasurer dated January 18, 1967, citing cases in support of the demand, and in
answer to that letter, the City Treasurer in his communication dated January 11,
1968, flatly denied payment of the demand.
(9) That the parties will file their respective memoranda within twenty days from
today.
 WHEREFORE, it is respectfully prayed of this Honorable Court that judgment be
rendered based upon this stipulation of facts after the parties shall have submitted
their respective memoranda or after the lapse of twenty days from today.
Ozamiz City, December 27, 1968.6
On the basis of the foregoing Stipulation of Facts, and of the court's finding, after an ocular
inspection of the parking area designated by Ordinance No. 286, series of 1956,7 superseding
Ordinance No. 234, series of 1953, that it is a municipal street, although part of the public market,
said court rendered judgment on March 18, 1969 declaring that such parking fee is in the nature of
toll fees for the use of public road and made in violation of Section 59[b] of Republic Act No. 4136
(Land Transportation and Traffic Code), there being no prior approval therefor by the President of the
Philippines upon recommendation of the Secretary of Public Works and Communications (now
Public Works). Hence, the present appeal by certiorari.
Petitioner now contends that the lower court erred: (1) in declaring Ordinance No. 466, series of
1964, of Ozamiz City, null and void; (2) in considering parking fees as road tolls under Section 59[b]
of Republic Act No. 4136; (3) in declaring the parking area as a public street and not the patrimonial
property of the city; and (4) in ordering the reimbursement of parking fees paid by respondent-
appellee.
Decisive of this controversy is whether the Municipal Board of the City of Ozamiz, herein petitioner-
appellant, had the power to enact said Ordinance No. 466.
Petitioner-appellant, in maintaining the affirmative view, contends: (1)that the ordinance is valid for
the fees collected thereunder are in the nature of property rentals for the use of parking spaces
belonging to the City in its proprietary character, as evidenced by Tax Declaration No. 51234, and
are authorized by Section 2308 (f) of the Revised Administrative Code, 8(2) that Section 15 (y) of the
Charter of Ozamiz City (Republic Act No. 321) 9 also authorizes the Municipal Board to regulate the use of streets which
carries with it the power to impose fees for its implementation; (3) that, pursuant to such power, the Municipal Board passed said Ordinance
No. 234, the purpose of which is to minimize accidents, to avoid congestion of traffic, to enable the passengers to know the exact time of the
departure of trucks and, for this purpose, the Municipal Board provided for parking areas for which the City has to have funds for the
implementation of the purposes abovestated; (4) that Section 2 of the Local Autonomy Law (Republic Act No. 2264)likewise empowers the
local governments to impose taxes and fees, except those that are enumerated therein, and parking fee is not among the exceptions: and (5)
that the word "toll" connotes the act of passing along the road and the collection of toll fees may not be imposed unless approved by the
President of the Philippines upon the recommendation of the Secretary of Public Works, pursuant to Section 59[b] of Republic Act No. 4136;
whereas the word "parking" implies a stationary condition and the parking fees provided for in Ordinance No. 466 is for the privilege of using
the designated parking area, which is owned by the City of Ozamiz, as its patrimonial property.

On the other hand, respondent-appellee insists (1) that Ozamiz City has no power to impose parking
fees on motor vehicles parked on Zulueta Street, which is property for public use and, as such,
Ordinance No. 466 imposing such fees is null and void; (2) that granting arguendo that Zulueta
Street is part of the City's public market site, its conversion into a street removes it from its category
as patrimonial property to one for public use; 10 (3) that the use of Zulueta Street as a parking place
is only incidental to the free passage of motor vehicles for, as soon as the buses are loaded with
passengers, the vehicles start their journey to their respective destinations and pay the toll clerk at a
station about one hundred; (100) feet ahead along Zulueta Street before they are allowed to get out
of the City and as such, the prohibition to impose taxes or fees embodied in Section 59[b] of
Republic. Act No. 4136 applies to this case; (4) that Section 2308[f] of the Revised Administrative
Code providing that the "proceeds on income from the ... use or management of property lawfully
held by the municipality" accrue to the municipality, does not grant, either expressly or by implication,
to the municipality, the power to impose such tax, (5) that Section 15[y] of the Charter of Ozamiz City
(Republic Act No. 321) which authorizes the City, among others, "to regulate the use of a street,"
does not empower the City to impose parking fees; besides, said section contains a proviso, i.e.,
"except as otherwise provided by law", which, in this case, is Republic Act No. 4136; and (6) that,
since the power to impose parking fees is not among those conferred by the Local Autonomy Act on
local government, said City cannot, therefore, impose such parking fees.
After the filing of its brief, or on December 10, 1969, the petitioner- appellant, through its counsel,
First Assistant City Fiscal Artemio C. Engracia, filed the following Manifestation, dated November 27,
1969, praying that the decision of the lower court be reversed in view of the approval by the
President of the Philippines upon the recommendation of the Secretary of Public Works of the
ordinance in question that validates the same, to wit:
1. That the decision of the lower court, marked Annex "E" of the petition, declaring
Ordinance No. 466, series of 1964, of Ozamiz City, marked Annex "G" of the petition,
null and void is based on the non-compliance with the provisions of Section 59[b] of
Republic Act No. 4136, otherwise known as The Land Transportation Law, which
requires the approval by the President of the Philippines upon the recommendation
of the Secretary of Public Works of such kind of ordinance..
2. That the President of the Philippines has now approved the Ordinance in question.
A certified copy of said approval is hereunder quoted.
xxx xxx xxx
4th Indorsement

Manila, September 26, 1969
Respectfully returned to the Mayor, City of Ozamiz, hereby approving, as
recommended in the 3rd indorsement hereon of the Secretary of Public Works and
Communications, Ordinance No. 466, series of 1964, of that city, entitled: "AN
ORDINANCE IMPOSING PARKING FEES FOR EVERY MOTOR VEHICLE
PARKED ON ANY PORTION OF THE EXISTING PARKING SPACE IN THE
OZAMIZ."
By Authority of the President:

(Sgd.) FLORES BAYOT

Assistant Executive Secretary
3. That the approval by the President of the Philippines is based upon the
recommendation of the Secretary of Public Works. A certified copy of said
recommendation is hereunder reproduced:
3rd Indorsement

June 3, 1969
Respectfully forwarded to His Excellency, the President of the Philippines,
Malacañang, recommending favorable action, in view of the representations herein
made, on the within letter dated March 21, 1969 of Mayor Hilarion A. Ramiro, Ozamiz
City, requesting approval No. 466, series of 1964, passed by the Municipal Board,
same city regarding the collection of fees for the privilege of parking vehicles in the
lots privately-owned by said City.
(Sgd.) ANTONIO V. RAQUIZA

Secretary
4. That the action of the Secretary of Public Works is based upon the findings of the
Commissioner of the Land Transportation Commission. A certified copy of the same
is herein reproduced:
xxx xxx xxx
2nd Indorsement

May 16, 1969
Respectfully returned to the Honorable Secretary, Department of Public Works and
Communications, Manila, with the statement that this Commission interposes no
objection on the approval of Ordinance No. 466, series of 1964, of Ozamiz City,
considering that the schedule of rate collectible from the conductor, driver, operator
and/or owner as stated under Section 4 thereof appears to be reasonable.
 It may be stated in this connection that on the Decision of the CFI of Misamis
Occidental, Branch II, dated March 18, 1969 under Civil Case No. OZ(159), the said
Ordinance was declared null and void for failure to comply with the provisions of
Section 59[b] of R. A. 4136, regarding the required "approval by the President of the
Philippines upon recommendation of the Secretary of Public Works and
Communications."
(Sgd.) ROMEO F. EDU

Commissioner
The rule is well-settled that municipal corporations, being mere creatures of the law, have only such
powers as are expressly granted to them and those which are necessarily implied or incidental to the
exercise thereof, and the power to tax is inherent upon the State and it can only be exercised by
Congress, unless delegated or conferred by it to a municipal corporation. As such, said corporation
has only such powers as the legislative department may have deemed fit to grant. By reason of the
limited powers of local governments and the nature thereof, said powers are to be
construed strictissimi juris and any doubt or ambiguity arising out of the terms used in granting said
powers must be construed against the municipality. 11
The implied powers which a municipal corporation possesses and can exercise are only those
necessarily incident to the powers expressly conferred. Inasmuch as a city has no power, except by
delegation from Congress, in order to enable it to impose a tax or license fee, the power must be
expressly granted or be necessarily implied in, or incident to, the powers expressly conferred upon
the city.
Under Sec. 15[Y] of the Ozamiz City Charter (Rep. Act No. 321), the municipal board has the power
"... to regulate the use of streets, avenues, alleys, sidewalks, wharves, piers, parks, cemeteries and
other public places; ...", and in subsection [nn] of the same section 15, the authority "To enact all
ordinances it may deem necessary and proper for the sanitation and safety, the furtherance of
prosperity and the promotion of the morality, peace, good order, comfort, convenience, and general
welfare of the city and its inhabitants, and such others as may be necessary to carry into effect and
discharge the powers and duties conferred by this Charter ..." By this express legislative grant of
authority, police power is delegated to the municipal corporation to be exercised as a governmental
function for municipal purposes.
It is, therefore, patent that the City of Ozamiz has been clothed with full power to control and
regulate its streets for the purpose of promoting the public health, safety and welfare. Indeed,
municipal power to regulate the use of streets is a delegation of the police power of the national
government, and in the exercise of such power, a municipal corporation can make all necessary and
desirable regulations which are reasonable and manifestly in the interest of public safety and
convenience.
By virtue of the aforecited statutory grant of authority, the City of Ozamiz can regulate the time,
place, manner of parking in the streets and public places. It is, however, insisted that the ordinance
did not charge a parking fee but a toll fee for the use of the street. It is true that the term " parking"
ordinarily implies "something more than a mere temporary and momentary stoppage at a curb for the
purpose of loading or unloading passengers or merchandize; it involves the idea of using a portion of
the street as storage space for an automobile." 12
In the case at bar, the TPU buses of respondent-appellee Sergio S. Lumapas stopped on the
extended portion of Zulueta Street beside the public market (Exhibit "X-1" of Exhibit "X",
Development Plan for Ozamiz Market Site),and that as soon as the buses were loaded, they
proceeded to the station, about one hundred (100) feet away from the parking area, where a toll
clerk of the City collected the "Parking" fee of P1.00 per bus once a day, before said buses were
allowed to proceed to their destination.
Section 3 of the questioned Ordinance No. 466 defines the word "'parking' to mean the stoppage of
a motor vehicle of whatever kind on any portion of the existing parking areas for the purpose of
loading and unloading passengers or cargoes." 13 (Emphasis supplied.)
The word "toll" when used in connection with highways has been defined as a duty imposed on
goods and passengers travelling public roads. 14 The toll for use of a toll road is for its use in
travelling thereon, not for its use as a parking place for vehicles. 15
It is not pretended, however, that the public utility vehicles are subject to the payment, if they pass
without stopping thru the aforesaid sections of Zulueta Street. Considering that the public utility
vehicles are only charged the fee when said vehicles stop on "any portion of the existing parking
areas for the purpose of loading or unloading passengers or cargoes", the fees collected are actually
in the nature of parking fees and not toll fees for the use of Zulueta Street. This is clear from the
Stipulation of Facts which shows that fees were not exacted for mere passage thru the street but for
stopping in the designated parking areas therein to unload or load passengers or cargoes. It was
not, therefore a toll fee for the use of public roads, within the context of Section 59[b] of Republic Act
No. 4136, which requires the authorization of the President of the Philippines.
As adverted to above, the Municipal Board of Ozamiz City is expressly granted by its Charter the
power to regulate the use of its streets. The ordinance in question appears to have been enacted in
pursuance of this grant. The parking fee imposed is minimal in amount, the maximum being only
P1.00 a day for each passenger bus and P1.00 for each cargo truck, the rates being lower for
smaller types of vehicles. This indicates that its purpose is not for revenue but for regulation.
Moreover, it is undeniable that by designating a specific place wherein passenger and freight
vehicles may load and unload passengers and cargoes, benefits are accorded to the city's residents
in the form of increased safety and convenience arising from the decongestion of traffic.
Undoubtedly the city may impose a fee sufficient in amount to include the expense of issuing the
license and the cost of necessary inspection or police surveillance connected with the business or
calling licensed.
The fees charged in the case at bar are undeniably to cover the expenses for supervision, inspection
and control, to ensure the smooth flow of traffic in the environs of the public market, and for the
safety and convenience of the public.
WHEREFORE, the appealed decision is hereby reversed and Ordinance No. 466, series of 1964
declared valid. No pronouncement as to costs.
EN BANC

G.R. No. L-47252 April 18, 1941

THE APOSTOLIC PREFECT OF THE MOUNTAIN PROVINCE, demandante-apelante,

vs.

EL TESORERO DE LA CIUDAD DE BAGUIO, demandado-apelado.

Sres. Cavanna, Jasmines y Tianco en representacion del apelante.

El Procurador General en representacion del apelado.

IMPERIAL, J.:



The plaintiff exercised this action to recover from the defendant the sum of P1,019.37 that
he paid under protest as a special contribution on his properties in the City of Baguio,
corresponding to the year 1937. Appeal of the judgment of the Court of First Instance of said
city that I override Your demand, without costs.

The parties submitted the matter through the following partial stipulation of facts:

1. The applicant is a sole proprietorship of a religious nature, organized in accordance with

the laws of the Philippines, with residence in the city of Baguio;

2. The defendant is a public official of the city of Baguio and acts as treasurer and collector
of said city;

3. That the defendant demanded and charged the plaintiff on June 25, 1937 the sum of
Thousand and nine pesos with thirty-seven cents (P1,019.37), Philippine currency, under the
provisions of Ordinance No. 137, as amended and amended by Ordinances No. 263, 277, 283,
297, 311, 325, 348, 367, 387, 419, 471, 45, 455, 466, 512, 552, 591, 592, and Resolution of
the Council of the City of Baguio No. 10 dated January 22, 1918. All such ordinances, as well
as resolution No. 10, series of 1918, become integral parts of this agreement.

4. That the payment made by the plaintiff of p1,019.37 corresponds to the year 1937 and was
made under protest formulated in a letter dated June 25, 1937 in which the reasons for the
portesta were exposed and the favorable resolution of the protest and the return of the
amount paid;

5. That the defendant denied the protest;

6. The lands affected with the payment of P1,019.37 are land owned by the plaintiff's
property dedicated to worship and education during the year 1937 and in previous years;

7. That the City of Baguio constructed in accordance with the ordinances cited above in
paragraph 2 of this stipulation, a drainage and sewerage system;

8º That the applicant came paying in years prior to 1937, without protest, the sums that the
city demanded in accordance with the ordinances and referrals; and for the first time I
protest the year 1937, protest that is the subject of this litigation;

9. That a list of the properties appraised in the city of Baguio was included in Ordinance No.
137 and that relationship became part of Ordinance No. 137 and was called and converted
into "SPECIAL ASSESSMENT LIST, CITY OF BAGUIO" , for the purposes of the aforementioned
ordinance and that the properties affected in the plaintiff's protest payment were and are
included in said list and have not been excluded until now by virtue of any ordinance
subsequent to No. 137;
10. That the construction of the drainage and sewerage system has benefited and is directly
and especially benefiting all owners whose lots and land are included in the "SPECIAL
ASSESSMENT LIST, CITY OF BAGUIO" including the lands of the plaintiff affected here. said list
and in the payment under protest and that this system of drainage and sewerage has
promoted the cleaning and sanitary condition of the lands of the referred list.

11. That the parties reserve the right to practice additional tests.



The appellant maintains in its error indications the following propositions: (1) that its real estate
and its assets in the City of Baguio for being exempted from payment of all taxes imposed by
the Constitution and by current laws must also be exempt from the payment of the special
contribution charged by the appellant and he has paid under protest; (2) that Ordinance No. 137
and its amendments, under which the special tax has been collected, exclude from its
provisions its property exempt from the payment of any tax; (3) that in the event that the
aforementioned ordinances do not exclude their properties from the payment of the special tax,
they are void and ineffective; and (4) that in the event that the aforementioned ordinances were
legal, the appellant, as Treasurer of the City of Baguio, illegally charged the special contribution
that the appellant paid under protest, for the reason that on the date of payment the Appellant
had already satisfied his participation in the costs of the drainage and sewerage system that
caused the imposition of the special contribution.

The first proposition involves the question of whether the properties on which the special tax
was collected are effectively exempt from such payment. The expert contribution was collected
by the appellant under the provisions of articles 2 and 5 of Ordinance No. 137 that provide:

It having heretofore been ascertained that said work will benefit each and all owners or
possessors or property subject to taxation situated, lying and being within the corporate
limits of the City, it is hereby declared that benefit will accrue from said work to each and all
said persons, and said persons shall pay a compensation for said benefit.

The City Assessor having heretofore compiled from the City Assessment and Valuation
aforesaid and certified to the City Treasurer a list containing and setting forth the total
amount of property within the corporate limits of the City subject to assessment and levy for
the purposes in this Ordinance recited, the total amount of properties individually owned and
possessed, and the name of each individual owner and possessor, the rate per centum, to wit:
ONE PER CENTUM ad valorem of said total value which is necessary for the purposes set forth
in Section III hereof, is hereby made the amount to be paid individually by each owner or
possessor as his share, and the above-mentioned list is hereby made part hereof and named
"SPECIAL ASSESSMENT LIST," and said list is hereby declared to be, and made the City official
list and basis for assessing, levying and collecting the rate of compensation aforesaid from the
above-referred owners and possessors, and each owner or possessor is required to, and shall
pay the amount in said list stated as his individual share to the City Treasurer on or after the
first of March and not later than June 30th, 1914.

The appellant submits that his properties are exempt from the payment of the special tax
both for what is provided in article 2 of Ordinance No. 137 and for what is stipulated in article
14, (3), Title VI, of the Philippine Constitution that It reads as follows:
(3) Cemeteries, churches, parishes and convents attached to them, and all land, buildings and
improvements used exclusively for religious, charitable or educational purposes, shall be
exempt from taxation.

It is alleged that according to Article 2 of Ordinance No. 137, only those properties that are
not exempt from the payment of a tax and that in accordance with the abovementioned
constitutional precept, the appellant's properties must be exempted from paying the payment
of the special tax. special contribution for being dedicated to religious purposes. This claim
requires that it be resolved, in the first place, if the special tax imposed by Ordinance No. 13
is a tax in its legal meaning. It is a well-established tax rule that the special contributions
that are created and collected to amortize extra-ordinary expenses caused by works, such as
the drainage and sewerage system, which benefit the inhabitants in a special way, are not a
tax in their sense. legal. According to the ordinance the special contribution charged to the
properties located in the City of Baguio, was created to amortize the extraordinary expenses
caused by the drainage and sewerage system that was built, a work that especially benefited
all property owners. city. Judge Cooley, in drawing the distinction between taxes and special
contributions in his tax treaty, expresses himself in these terms:

While the word "tax" in its broad meaning, includes both general taxes and special
assessments, and in a general sense a tax is an assessment, and an assessment is a tax, yet
there is a recognized distinction between them in that assessment is confined to local
impositions upon property for the payment of the cost of public improvements in its
immediate vicinity and levied with reference to special benefits to the property assessed. The
differences between a special assessment and a tax are that (1) a special assessment can be
levied only on land; (2) a special assessment cannot (at least in most states) be made a
personal liability of the person assessed; (3) a special assessment is based wholly on benefits;
and (4) a special assessment is exceptional both as to time and locality. The imposition of a
charge on all property, real and personal, in a prescribed area, is a tax and not an
assessment, although the purpose is to make a local improvement on a street or highway. A
charge imposed only on property owners benefited is a special assessment rather than a tax
notwithstanding the statute calls it a tax.

If the special tax charged to the appellant is not strictly speaking a tax whose payment is
exempt from it, it is evident that neither under the ordinance nor the Constitution does the
said appellant be exempted from the payment of the special tax.

In addition, in accordance with the stipulation of facts, the appellant cannot successfully
invoke the exemption established by the Constitution because it has not been admitted or
proven that his properties that paid the special contribution were used exclusively for
religious purposes. It is true that it was stipulated that the properties were dedicated to
religious purposes, but it was not agreed or proved that such use was exclusive, and it may
therefore occur that the properties, in addition to being dedicated to religious purposes,
were destined and used equally for other purposes not religious.
Regarding the validity of Ordinance No. 137 and its amendments, it is undeniable that the
City of Baguio is authorized by article 8 (1) of Law No. 1963, today article 2553 (1) of the
Revised Administrative Code, to create the special contribution discussed in order to amortize
the cats caused by the drainage and sewerage system that was built for the benefit of all the
inhabitants of the mentioned city.

The appellant's claim is that assuming Ordinance No. 137 and its amendments are valid, he is
no longer obliged to pay a special contribution in view of the fact that he already paid in the
years prior to 1937 the corresponding share of said special contribution. The claim is equally
unfounded, because it is from Exhibit 1 that the cost of the drainage and sewerage system
amounts to P502,750.75 and the city only collects by special contribution until 1937 the sum
of P291,290.08; it turns out that the cost of the system, in 1937, was not yet fully satisfied.

If the judgment under appeal is adjusted to law, it is confirmed in all its parts, with the costs
of this instance to the appellant. That's how it is ordered.

Avanceña, Pres., Diaz, Laurel, and Horrilleno, MM., Are satisfied.

FIRST DIVISION
G.R. No. 73705 August 27, 1987
VICTORIAS MILLING CO., INC., petitioner, 

vs.

OFFICE OF THE PRESIDENTIAL ASSISTANT FOR LEGAL AFFAIRS and PHILIPPINE PORTS
AUTHORITY, respondents.

PARAS, J.:
This is a petition for review on certiorari of the July 27, 1984 Decision of the Office of the Presidential
Assistant For Legal Affairs dismissing the appeal from the adverse ruling of the Philippine Ports
Authority on the sole ground that the same was filed beyond the reglementary period.
On April 28, 1981, the Iloilo Port Manager of respondent Philippine Ports Authority (PPA for short)
wrote petitioner Victorias Milling Co., requiring it to have its tugboats and barges undergo harbor
formalities and pay entrance/clearance fees as well as berthing fees effective May 1, 1981. PPA,
likewise, requiring petitioner to secure a permit for cargo handling operations at its Da-an Banua
wharf and remit 10% of its gross income for said operations as the government's share.
To these demands, petitioner sent two (2) letters, both dated June 2, 1981, wherein it maintained
that it is exempt from paying PPA any fee or charge because: (1) the wharf and an its facilities were
built and installed in its land; (2) repair and maintenance thereof were and solely paid by it; (3) even
the dredging and maintenance of the Malijao River Channel from Guimaras Strait up to said private
wharf are being done by petitioner's equipment and personnel; and (4) at no time has the
government ever spent a single centavo for such activities. Petitioner further added that the wharf
was being used mainly to handle sugar purchased from district planters pursuant to existing milling
agreements.
In reply, on November 3, 1981, PPA Iloilo sent petitioner a memorandum of PPA's Executive Officer,
Maximo Dumlao, which justified the PPA's demands. Further request for reconsideration was denied
on January 14, 1982.
On March 29, 1982, petitioner served notice to PPA that it is appealing the case to the Court of Tax
Appeals; and accordingly, on March 31, 1982, petitioner filed a Petition for Review with the said
Court, entitled "Victorias Milling Co., Inc. v. Philippine Ports Authority," and docketed therein as CTA
Case No. 3466.
On January 10, 1984, the Court of Tax Appeals dismissed petitioner's action on the ground that it
has no jurisdiction. It recommended that the appeal be addressed to the Office of the President.
On January 23, 1984, petitioner filed a Petition for Review with this Court, docketed as G.R. No.
66381, but the same was denied in a Resolution dated February 29, 1984.
On April 2, 1984, petitioner filed an appeal with the Office of the President, but in a Decision dated
July 27, 1984 (Record, p. 22), the same was denied on the sole ground that it was filed beyond the
reglementary period. A motion for Reconsideration was filed, but in an Order dated December 16,
1985, the same was denied (ibid., pp. 3-21): Hence, the instant petition.
The Second Division of this Court, in a Resolution dated June 2, 1986, resolved to require the
respondents to comment (ibid., p. 45); and in compliance therewith, the Solicitor General filed his
Comment on June 4, 1986 (Ibid., pp. 50-59).
In a Resolution of July 2, 1986, petitioner was required to file a reply (Ibid., p. 61) but before receipt
of said resolution, the latter filed a motion on July 1, 1986 praying that it be granted leave to file a
reply to respondents' Comment, and an extension of time up to June 30, 1986 within which to file the
same. (Ibid., p. 62).
On July 18, 1986, petitioner filed its reply to respondents' Comment (Ibid., pp. 68-76).
The Second Division of this Court, in a Resolution dated August 25, 1986, resolved to give due
course to the petition and to require the parties to file their respective simultaneous memoranda
(Ibid., p. 78).
On October 8, 1986, the Solicitor General filed a Manifestation and Rejoinder, stating, among others,
that respondents are adopting in toto their Comment of June 3, 1986 as their memorandum; with the
clarification that the assailed PPA Administrative Order No. 13-77 was duly published in full in the
nationwide circulated newspaper, "The Times Journal", on November 9,1977 (ibid., pp. 79-81).
The sole legal issue raised by the petitioner is —
WHETHER OR NOT THE 30-DAY PERIOD FOR APPEAL UNIDER SECTION 131 OF PPA
ADMINISTRATIVE ORDER NO. 13-77 WAS TOLLED BY THE PENDENCY OF THE PETITIONS
FILED FIRST WITH THE COURT OF TAX APPEALS, AND THEN WITH THIS HONORABLE
TRIBUNAL.
The instant petition is devoid of merit.
Petitioner, in holding that the recourse first to the Court of Tax Appeals and then to this Court tolled
the period to appeal, submits that it was guided, in good faith, by considerations which lead to the
assumption that procedural rules of appeal then enforced still hold true. It contends that when
Republic Act No. 1125 (creating the Court of Tax Appeals) was passed in 1955, PPA was not yet in
existence; and under the said law, the Court of Tax Appeals had exclusive appellate jurisdiction over
appeals from decisions of the Commissioner of Customs regarding, among others, customs duties,
fees and other money charges imposed by the Bureau under the Tariff and Customs Code. On the
other hand, neither in Presidential Decree No. 505, creating the PPA on July 11, 1974 nor in
Presidential Decree No. 857, revising its charter (said decrees, among others, merely transferred to
the PPA the powers of the Bureau of Customs to impose and collect customs duties, fees and other
money charges concerning the use of ports and facilities thereat) is there any provision governing
appeals from decisions of the PPA on such matters, so that it is but reasonable to seek recourse with
the Court of Tax Appeals. Petitioner, likewise, contends that an analysis of Presidential Decree No.
857, shows that the PPA is vested merely with corporate powers and duties (Sec. 6), which do not
and can not include the power to legislate on procedural matters, much less to effectively take away
from the Court of Tax Appeals the latter's appellate jurisdiction.
These contentions are untenable for while it is true that neither Presidential Decree No. 505 nor
Presidential Decree No. 857 provides for the remedy of appeal to the Office of the President,
nevertheless, Presidential Decree No. 857 empowers the PPA to promulgate such rules as would aid
it in accomplishing its purpose. Section 6 of the said Decree provides —
Sec. 6. Corporate Powers and Duties —
a. The corporate duties of the Authority shall be:
xxx xxx xxx
(III) To prescribe rules and regulations, procedures, and guidelines
governing the establishment, construction, maintenance, and
operation of all other ports, including private ports in the country.
xxx xxx xxx
Pursuant to the aforequoted provision, PPA enacted Administrative Order No. 13-77 precisely to
govern, among others, appeals from PPA decisions. It is now finally settled that administrative rules
and regulations issued in accordance with law, like PPA Administrative Order No. 13-77, have the
force and effect of law (Valerio vs. Secretary of Agriculture and Natural Resources, 7 SCRA 719;
Antique Sawmills, Inc. vs. Zayco, et al., 17 SCRA 316; and Macailing vs. Andrada, 31 SCRA 126),
and are binding on all persons dealing with that body.
As to petitioner's contention that Administrative Order No. 13-77, specifically its Section 131, only
provides for appeal when the decision is adverse to the government, worth mentioning is the
observation of the Solicitor General that petitioner misleads the Court. Said Section 131 provides —
Sec. 131. Supervisory Authority of General Manager and PPA Board. — If in any
case involving assessment of port charges, the Port Manager/OIC renders a decision
adverse to the government, such decision shall automatically be elevated to, and
reviewed by, the General Manager of the authority; and if the Port Manager's
decision would be affirmed by the General Manager, such decision shall be subject
to further affirmation by the PPA Board before it shall become effective; Provided,
however, that if within thirty (30) days from receipt of the record of the case by the
General Manager, no decision is rendered, the decision under review shall become
final and executory; Provided further, that any party aggrieved by the decision of the
General Manager as affirmed by the PPA Board may appeal said decision to the
Office of the President within thirty (30) days from receipt of a copy thereof.
(Emphasis supplied).
From a cursory reading of the aforequoted provision, it is evident that the above contention has no
basis.
As to petitioner's allegation that to its recollection there had been no prior publication of said PPA
Administrative Order No. 13-77, the Solicitor General correctly pointed out that said Administrative
Order was duly published in full in the nationwide newspaper, "The Times Journal", on November
9,1977.
Moreover, it must be stated that as correctly observed by the Solicitor General, the facts of this case
show that petitioner's failure to appeal to the Office of the President on time stems entirely from its
own negligence and not from a purported ignorance of the proper procedural steps to take.
Petitioner had been aware of the rules governing PPA procedures. In fact, as embodied in the
December 16, 1985 Order of the Office of the President, petitioner even assailed the PPA's rule
making powers at the hearing before the Court of Tax Appeals.
It is axiomatic that the right to appeal is merely a statutory privilege and may be exercised only in the
manner and in accordance with the provision of law (United CMC Textile Workers Union vs. Clave,
137 SCRA 346, citing the cases of Bello vs. Fernando, 4 SCRA 138; Aguila vs. Navarro, 55 Phil.
898; and Santiago vs. Valenzuela, 78 Phil. 397).
Furthermore, even if petitioner's appeal were to be given due course, the result would still be the
same as it does not present a substantially meritorious case against the PPA.
Petitioner maintains and submits that there is no basis for the PPA to assess and impose the dues
and charges it is collecting since the wharf is private, constructed and maintained at no expense to
the government, and that it exists primarily so that its tugboats and barges may ferry the sugarcane
of its Panay planters.
As correctly stated by the Solicitor General, the fees and charges PPA collects are not for the use of
the wharf that petitioner owns but for the privilege of navigating in public waters, of entering and
leaving public harbors and berthing on public streams or waters. (Rollo, pp. 056-057).
In Compañia General de Tabacos de Filipinas vs. Actg. Commissioner of Customs (23 SCRA 600),
this Court laid down the rule that berthing charges against a vessel are collectible regardless of the
fact that mooring or berthing is made from a private pier or wharf. This is because the government
maintains bodies of water in navigable condition and it is to support its operations in this regard that
dues and charges are imposed for the use of piers and wharves regardless of their ownership.
As to the requirement to remit 10% of the handling charges, Section 6B-(ix) of the Presidential
Decree No. 857 authorized the PPA "To levy dues, rates, or charges for the use of the premises,
works, appliances, facilities, or for services provided by or belonging to the Authority, or any
organization concerned with port operations." This 10% government share of earnings of arrastre
and stevedoring operators is in the nature of contractual compensation to which a person desiring to
operate arrastre service must agree as a condition to the grant of the permit to operate.
PREMISES CONSIDERED, the instant petition is hereby DISMISSED.
SO ORDERED.
Teehankee, C.J., Narvasa and Gancayco, JJ., concur.
Cruz, J., concur in the result.

EN BANC



[G.R. No. L-13912. September 30, 1960.]



THE COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. CONSUELO L. VDA. DE
PRIETO, Respondent. 



Solicitor General Edilberto Barot, Solicitor F. R. Rosete and Special Atty. B. Gatdula, Jr.
for Petitioner. 



Formilleza & Latorre for Respondent.

SYLLABUS

1. TAXATION; DEFICIENCY INCOME TAX; REQUISITES IN ORDER THAT INTEREST MAY BE

DEDUCTIBLE. — For interest to be allowed as deduction from gross income, it must be shown
that there be indebtedness, that there should be interest upon it, and that what is claimed as
an interest deduction should have been paid or accrued within the year. 



2. ID.; ID.; ID.; TAX AS AN INDEBTEDNESS; INTEREST PAID FOR LATE PAYMENT OF DONOR’S TAX
DEDUCTIBLE. — The term "indebtedness" as used in the Tax Code of the United States
containing similar provisions as in section 30 (b) (1) of our Tax Code, has been defined as an
unconditional and legally enforceable obligation for the payment of money. Within the
meaning of that definition a tax may be considered an indebtedness. Hence, interest paid for
late payment of donor’s tax is deductible from gross income under said section. 



3. ID.; ID.; ID.; WHEN SECTION 80 OF REVENUE REGULATION NO. 2 IS NOT APPLICABLE. —
Although section 80 of Revenue Regulation No. 2 (known as Income Tax Regulations)
promulgated by the Department of Finance, which provides that "the word ‘taxes’ means
taxes proper and no deductions should be allowed for amounts representing interest,
surcharge, or penalties incident to delinquency," implements section 30 (c) of the Tax Code
governing deductions of taxes, the same is inapplicable to a case where the taxpayer seeks to
come under section 30 (b) of the same Code providing for deduction of interest on
indebtedness. 



4. ID.; ID.; ID.; ID.; TAXPAYER NOT PRECLUDED FROM CLAIMING INTEREST PAYMENT AS
DEDUCTION. — Although interest payment for delinquency taxes is not deductible as tax under
section 30 (c) of the Tax Code and section 80 of the Income Tax Regulations, the taxpayer is
not said interest payment as deduction under section 30 (b) of the same code.

DECISION



GUTIERREZ DAVID, J.:

This is an appeal from a decision of the Court of Tax Appeals reversing the decision of the
Commissioner of Internal Revenue which held herein respondent Consuelo L. Vda. de Prieto
liable for the payment of the sum of P21,410.38 as deficiency income tax, plus penalties and
monthly interest. 



The case was submitted for decision in the court below upon a stipulation of facts, which for
brevity is summarized as follows: On December 4, 1945, the respondent conveyed by way of
gifts to her four children, namely, Antonio, Benito, Carmen and Mauro, all surnamed Prieto,
real property with a total assessed value of P892,497.50. After the filing of the gift tax
returns on or about February 1, 1954, the petitioner Commissioner of Internal Revenue
appraised the real property donated for gift tax purposes at P1,231,268.00 and assessed the
total sum of P117,706.50 as donor’s gift tax, interests and compromises due thereon. Of the
total sum of P117,706.50 paid by respondent on April 29, 1954, the sum of P55,978.65
represents the total interest on account of delinquency. This sum of P55,978.65 was claimed
as deduction, among others, by respondent in her 1954 income tax return. Petitioner,
however, disallowed the claim and as a consequence of such disallowance assessed
respondent for 1954 the total sum of P21,410.38 as deficiency income tax due on the
aforesaid P55,978.65, including interest up to March 31, 1957, surcharge and compromise for
the late payment. 



Under the law, for interest to be deductible, it must be shown that there be an indebtedness,
that there should be interest upon it, and that what is claimed as an interest deduction
should have been paid or accrued within the year. It is here conceded that the interest paid
by respondent was in consequence of the late payment of her donor’s tax, and the same was
paid within the year it is sought to be deducted. The only question to be determined, as
stated by the parties, is whether or not such interest was paid upon an indebtedness within
the contemplation of section 30(b) (1) of the Tax Code, the pertinent part of which
reads:jgc:chanrobles.com.ph



"Sec. 30 Deductions from gross income. — In computing net income there shall be allowed as
deductions —

x       x       x





"(b) Interest:jgc:chanrobles.com.ph



"(1) In general. — The amount of interest paid within the taxable year on indebtedness,
except on indebtedness incurred or continued to purchase or carry obligations the interest
upon which is exempt from taxation as income under this Title."cralaw virtua1aw library



The term "indebtedness" as used in the Tax Code of the United States containing similar
provisions as in the above-quoted section has been defined as an unconditional and legally
enforceable obligation for the payment of money. (Federal Taxes Vol. 2, p. 13,019, Prentice-
Hall, Inc.; Mertens’ Law of Federal Income Taxation, Vol. 4, p. 542.) Within the meaning of
that definition, it is apparent that a tax may be considered an indebtedness. As stated by this
Court in the case of Santiago Sambrano v. Court of Tax Appeals and Collector of Internal
Revenue (101 Phil., 1; 53 Off. Gaz., 4839) —



"Although taxes already due have not, strictly speaking, the same concept as debts, they are,
however, obligations that may be considered as such. 



"‘The term "debt" is properly used in a comprehensive sense as embracing not merely money
due by contract but whatever one is bound to render to another, either for contract, or the
requirement of the law. (Camben v. Fink Coule & Coke Co. 61 LRA 584). 



"Where statute imposes a personal liability for a tax, the tax becomes, at least in a board
sense, a debt. (Idem). 



"‘A tax is a debt for which a creditor’s bill may be brought in a proper case.’ (State v. Georgia
Co., 19 LEA 485)."cralaw virtua1aw library



It follows that the interest paid by herein respondent for the late payment of her donor’s tax
is deductible from her gross income under section 30 (b) of the Tax Code above quoted. 



The above conclusion finds support in the established jurisprudence in the United States after
whose laws our Income Tax Law has been patterned. Thus, under sec. 23(b) of the Internal
Revenue Code of 1939, as amended 1, which contains similarly worded provisions as sec. 30(b)
of our Tax Code, the uniform ruling is that interest on taxes is interest on indebtedness and is
deductible. (U.S. v. Jaffray, 306 U.S. 276. See also Lustig v. U.S., 138 F. Supp. 870;
Commissioner of Internal Revenue v. Bryer, 151 F. 2d 267, 34 AFTR 151; Penrose v. U.S. 18 F.
Supp. 413, 18 AFTR 1289; Max Thomas Davis, Et. Al. v. Commissioner of Internal Revenue, 46,
U.S. Board of Tax Appeals Reports, p. 663, citing U.S. v. Jaffray, supra, Smith v. Commissioner
of Internal Revenue, 6 Tax Court of limited States Reports, p. 255; Armour v. Commissioner of
Internal Revenue, 6 Tax Court of the United States Reports, p. 359; The Koppers Coal Co. v.
Commissioner of Internal Revenue, 7 Tax Court of United States Reports, p. 1209; Toy v.
Commissioner of Internal Revenue; Lucas v. Comm., 34 U.S. Board of Tax Appeals Reports,
877; Evens & Howard Fire Brick Co. v. Commissioner of Internal Revenue, 8 U.S. Board of Tax
Appeals Reports, 867; Koppers Co. v. Commissioner of Internal Revenue, 3 Tax Court of United
States Reports, p. 62). The rule applies even though the tax is nondeductible. (Federal Taxes,
Vol. 2, Prentice Hall, sec. 163, 13,022; see also Mertens’ Law of Federal Income Taxation, Vol.
5, pp. 23-24.) 



To sustain the proposition that the interest payment in question is not deductible for the
purpose of computing respondent’s net income, petitioner relies heavily on section 80 of
Revenue Regulation No. 2 (known as Income Tax Regulation) promulgated by the Department
of Finance, which provides that "the word ‘taxes’ means taxes proper and no deductions
should be allowed for amounts representing interest, surcharge, or penalties incident to
delinquency." The court below, however, held section 80 as inapplicable to the instant case
because while it implements sections 30(c) of the Tax Code governing deduction of taxes, the
respondent taxpayer seeks to come under section 30(b) of the same Code providing for
deduction of interest on indebtedness. We find the lower court’s ruling to be correct.
Contrary to petitioner’s belief, the portion of section 80 of Revenue Regulation No. 2 under
consideration has been part and parcel of the development to the law on deduction of taxes
in the United States. (See Capital Bldg. & Loan Assn. v. Comm., 23 BTA 848. Thus, Mertens in
his treatise says: "Penalties are to be distinguished from taxes and they are not deductible
under the heading of taxes.." . . Interest on state taxes is not deductible as taxes." (Vol. 5,
Law on Federal income Taxation, pp. 22-23, sec. 27.06, citing cases.) This notwithstanding,
courts in that jurisdiction, however, have invariably held that interest on deficiency taxes are
deductible, not as taxes, but as interest. (U.S. v. Jaffray, Et Al., supra; see also Mertens, sec.
26.09, Vol. 4, p. 552, and cases cited therein.) Section 80 of Revenue Regulation No. 2,
therefore, merely incorporated the established application of the tax deduction statute in the
United States, where deduction of "taxes" has always been limited to taxes proper and has
never included interest on delinquent taxes, penalties and surcharges. 



To give to the quoted portion of section 80 of our Income Tax Regulations the meaning that
the petitioner gives it would run counter to the provision of section 30(b) of the Tax Code and
the construction given to it by courts in the United States. Such effect would thus make the
regulation invalid for a "regulation which operates to create a rule out of harmony with the
statute, is a mere nullity." (Lynch v. Tilden Produce Co., 265 U.S. 315; Miller v. U.S., 294 U.S.
435.) As already stated, section 80 implements only section 30(c) of the Tax Code, or the
provision allowing deduction of taxes, while herein respondent seeks to be allowed deduction
under section 30(b), which provides for deduction of interest on indebtedness. 



In conclusion, we are of the opinion and so hold that although interest payment for
delinquent taxes is not deductible as tax under Section 30(c) of the Tax Code and section 80
of the Income Tax Regulations, the taxpayer is not precluded thereby from claiming said
interest payment as deduction under section 30(b) of the same Code. 



In view of the foregoing, the decision sought to be reviewed is affirmed, without
pronouncement as to costs. 



Bengzon, Bautista Angelo, Labrador, Barrera, Paredes, and Dizon, JJ., concur. 



Paras, C.J., Concepión, and Reyes, J. B. L., JJ., concur in the result.