1. G.R. No.

175356 December 3, 2013

MANILA MEMORIAL PARK, INC. AND LA FUNERARIA PAZ-SUCAT, INC., Petitioners,

vs.
SECRETARY OF THE DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT and THE
SECRETARY OF THE DEPARTMENT OF FINANCE, Respondents.

DEL CASTILLO, J.:

When a party challenges the constitutionality of a law, the burden of proof rests upon him.

Before us is a Petition for Prohibition2 under Rule 65 of the Rules of Court filed by petitioners Manila
Memorial Park, Inc. and La Funeraria Paz-Sucat, Inc., domestic corporations engaged in the
business of providing funeral and burial services, against public respondents Secretaries of the
Department of Social Welfare and Development (DSWD) and the Department of Finance (DOF).

Petitioners assail the constitutionality of Section 4 of Republic Act (RA) No. 7432,3 as amended by
RA 9257,4 and the implementing rules and regulations issued by the DSWD and DOF insofar
as these allow business establishments to claim the 20% discount given to senior citizens as
a tax deduction.

Factual Antecedents

On April 23, 1992, RA 7432 was passed into law, granting senior citizens the following privileges:

SECTION 4. Privileges for the Senior Citizens. – The senior citizens shall be entitled to the following:

a) the grant of twenty percent (20%) discount from all establishments relative to utilization of
transportation services, hotels and similar lodging establishment[s], restaurants and
recreation centers and purchase of medicine anywhere in the country: Provided, That private
establishments may claim the cost as tax credit;

b) a minimum of twenty percent (20%) discount on admission fees charged by theaters,

cinema houses and concert halls, circuses, carnivals and other similar places of culture,
leisure, and amusement;

c) exemption from the payment of individual income taxes: Provided, That their annual
taxable income does not exceed the property level as determined by the National Economic
and Development Authority (NEDA) for that year;

d) exemption from training fees for socioeconomic programs undertaken by the OSCA as
part of its work;

e) free medical and dental services in government establishment[s] anywhere in the country,
subject to guidelines to be issued by the Department of Health, the Government Service
Insurance System and the Social Security System;

f) to the extent practicable and feasible, the continuance of the same benefits and privileges
given by the Government Service Insurance System (GSIS), Social Security System (SSS)
and PAG-IBIG, as the case may be, as are enjoyed by those in actual service.

On August 23, 1993, Revenue Regulations (RR) No. 02-94 was issued to implement RA 7432.
Sections 2(i) and 4 of RR No. 02-94 provide:

Sec. 2. DEFINITIONS. – For purposes of these regulations: i. Tax Credit – refers to the amount
representing the 20% discount granted to a qualified senior citizen by all establishments relative to
their utilization of transportation services, hotels and similar lodging establishments, restaurants,
drugstores, recreation centers, theaters, cinema houses, concert halls, circuses, carnivals and other
similar places of culture, leisure and amusement, which discount shall be deducted by the said
establishments from their gross income for income tax purposes and from their gross sales
for value-added tax or other percentage tax purposes. x x x x Sec. 4.
RECORDING/BOOKKEEPING REQUIREMENTS FOR PRIVATE ESTABLISHMENTS. – Private
establishments, i.e., transport services, hotels and similar lodging establishments, restaurants,
recreation centers, drugstores, theaters, cinema houses, concert halls, circuses, carnivals and other
similar places of culture[,] leisure and amusement, giving 20% discounts to qualified senior citizens
are required to keep separate and accurate record[s] of sales made to senior citizens, which shall
include the name, identification number, gross sales/receipts, discounts, dates of transactions and
invoice number for every transaction. The amount of 20% discount shall be deducted from the gross
income for income tax purposes and from gross sales of the business enterprise concerned for
purposes of the VAT and other percentage taxes.

In Commissioner of Internal Revenue v. Central Luzon Drug Corporation,5 the Court declared
Sections 2(i) and 4 of RR No. 02-94 as erroneous because these contravene RA 7432,6 thus:

RA 7432 specifically allows private establishments to claim as tax credit the amount of discounts
they grant. In turn, the Implementing Rules and Regulations, issued pursuant thereto, provide the
procedures for its availment. To deny such credit, despite the plain mandate of the law and the
regulations carrying out that mandate, is indefensible. First, the definition given by petitioner is
erroneous. It refers to tax credit as the amount representing the 20 percent discount that "shall be
deducted by the said establishments from their gross income for income tax purposes and from their
gross sales for value-added tax or other percentage tax purposes." In ordinary business language,
the tax credit represents the amount of such discount. However, the manner by which the discount
shall be credited against taxes has not been clarified by the revenue regulations. By ordinary
acceptation, a discount is an "abatement or reduction made from the gross amount or value of
anything." To be more precise, it is in business parlance "a deduction or lowering of an amount of
money;" or "a reduction from the full amount or value of something, especially a price." In business
there are many kinds of discount, the most common of which is that affecting the income statement
or financial report upon which the income tax is based.

xxxx

Sections 2.i and 4 of Revenue Regulations No. (RR) 2-94 define tax credit as the 20 percent
discount deductible from gross income for income tax purposes, or from gross sales for VAT or other
percentage tax purposes. In effect, the tax credit benefit under RA 7432 is related to a sales
discount. This contrived definition is improper, considering that the latter has to be deducted from
gross sales in order to compute the gross income in the income statement and cannot be deducted
again, even for purposes of computing the income tax. When the law says that the cost of the
discount may be claimed as a tax credit, it means that the amount — when claimed — shall be
treated as a reduction from any tax liability, plain and simple. The option to avail of the tax credit
benefit depends upon the existence of a tax liability, but to limit the benefit to a sales discount —
which is not even identical to the discount privilege that is granted by law — does not define it at all
and serves no useful purpose. The definition must, therefore, be stricken down.

Laws Not Amended by Regulations

Second, the law cannot be amended by a mere regulation. In fact, a regulation that "operates to
create a rule out of harmony with the statute is a mere nullity;" it cannot prevail. It is a cardinal rule
that courts "will and should respect the contemporaneous construction placed upon a statute by the
executive officers whose duty it is to enforce it x x x." In the scheme of judicial tax administration, the
need for certainty and predictability in the implementation of tax laws is crucial. Our tax authorities fill
in the details that "Congress may not have the opportunity or competence to provide." The
regulations these authorities issue are relied upon by taxpayers, who are certain that these will be
followed by the courts. Courts, however, will not uphold these authorities’ interpretations when
clearly absurd, erroneous or improper. In the present case, the tax authorities have given the term
tax credit in Sections 2.i and 4 of RR 2-94 a meaning utterly in contrast to what RA 7432 provides.
Their interpretation has muddled x x x the intent of Congress in granting a mere discount privilege,
not a sales discount. The administrative agency issuing these regulations may not enlarge, alter or
restrict the provisions of the law it administers; it cannot engraft additional requirements not
contemplated by the legislature.

In case of conflict, the law must prevail. A "regulation adopted pursuant to law is law." Conversely, a
regulation or any portion thereof not adopted pursuant to law is no law and has neither the force nor
the effect of law.7

On February 26, 2004, RA 92578 amended certain provisions of RA 7432, to wit:

SECTION 4. Privileges for the Senior Citizens. – The senior citizens shall be entitled to the following:
(a) the grant of twenty percent (20%) discount from all establishments relative to the utilization of
services in hotels and similar lodging establishments, restaurants and recreation centers, and
purchase of medicines in all establishments for the exclusive use or enjoyment of senior citizens,
including funeral and burial services for the death of senior citizens;

xxxx

The establishment may claim the discounts granted under (a), (f), (g) and (h) as tax deduction based
on the net cost of the goods sold or services rendered: Provided, That the cost of the discount shall
be allowed as deduction from gross income for the same taxable year that the discount is granted.
Provided, further, That the total amount of the claimed tax deduction net of value added tax if
applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to
proper documentation and to the provisions of the National Internal Revenue Code, as amended.

To implement the tax provisions of RA 9257, the Secretary of Finance issued RR No. 4-2006, the
pertinent provision of which provides:

SEC. 8. AVAILMENT BY ESTABLISHMENTS OF SALES DISCOUNTS AS DEDUCTION FROM

GROSS INCOME. – Establishments enumerated in subparagraph (6) hereunder granting sales
discounts to senior citizens on the sale of goods and/or services specified thereunder are entitled to
deduct the said discount from gross income subject to the following conditions:

(1) Only that portion of the gross sales EXCLUSIVELY USED, CONSUMED OR ENJOYED
BY THE SENIOR CITIZEN shall be eligible for the deductible sales discount.

(2) The gross selling price and the sales discount MUST BE SEPARATELY INDICATED IN
THE OFFICIAL RECEIPT OR SALES INVOICE issued by the establishment for the sale of
goods or services to the senior citizen.

(3) Only the actual amount of the discount granted or a sales discount not exceeding 20% of
the gross selling price can be deducted from the gross income, net of value added tax, if
applicable, for income tax purposes, and from gross sales or gross receipts of the business
enterprise concerned, for VAT or other percentage tax purposes.

(4) The discount can only be allowed as deduction from gross income for the same taxable
year that the discount is granted.

(5) The business establishment giving sales discounts to qualified senior citizens is required
to keep separate and accurate record[s] of sales, which shall include the name of the senior
citizen, TIN, OSCA ID, gross sales/receipts, sales discount granted, [date] of [transaction]
and invoice number for every sale transaction to senior citizen.

(6) Only the following business establishments which granted sales discount to senior
citizens on their sale of goods and/or services may claim the said discount granted as
deduction from gross income, namely:

xxxx

(i) Funeral parlors and similar establishments – The beneficiary or any person who shall shoulder the
funeral and burial expenses of the deceased senior citizen shall claim the discount, such as casket,
embalmment, cremation cost and other related services for the senior citizen upon payment and
presentation of [his] death certificate.

The DSWD likewise issued its own Rules and Regulations Implementing RA 9257, to wit:

RULE VI DISCOUNTS AS TAX DEDUCTION OF ESTABLISHMENTS

Article 8. Tax Deduction of Establishments. – The establishment may claim the discounts granted
under Rule V, Section 4 – Discounts for Establishments, Section 9, Medical and Dental Services in
Private Facilities and Sections 10 and 11 – Air, Sea and Land Transportation as tax deduction based
on the net cost of the goods sold or services rendered.
Provided, That the cost of the discount shall be allowed as deduction from gross income for the
same taxable year that the discount is granted; Provided, further, That the total amount of the
claimed tax deduction net of value added tax if applicable, shall be included in their gross sales
receipts for tax purposes and shall be subject to proper documentation and to the provisions of the
National Internal Revenue Code, as amended; Provided, finally, that the implementation of the tax
deduction shall be subject to the Revenue Regulations to be issued by the Bureau of Internal
Revenue (BIR) and approved by the Department of Finance (DOF).

Feeling aggrieved by the tax deduction scheme, petitioners filed the present recourse, praying that
Section 4 of RA 7432, as amended by RA 9257, and the implementing rules and regulations issued
by the DSWD and the DOF be declared unconstitutional insofar as these allow business
establishments to claim the 20% discount given to senior citizens as a tax deduction; that the DSWD
and the DOF be prohibited from enforcing the same; and that the tax credit treatment of the 20%
discount under the former Section 4 (a) of RA 7432 be reinstated.

Issues

Petitioners raise the following issues:

A.

WHETHER THE PETITION PRESENTS AN ACTUAL CASE OR CONTROVERSY.

B.

WHETHER SECTION 4 OF REPUBLIC ACT NO. 9257 AND X X X ITS IMPLEMENTING RULES
AND REGULATIONS, INSOFAR AS THEY PROVIDE THAT THE TWENTY PERCENT (20%)
DISCOUNT TO SENIOR CITIZENS MAY BE CLAIMED AS A TAX DEDUCTION BY THE PRIVATE
ESTABLISHMENTS, ARE INVALID AND UNCONSTITUTIONAL.9

PETITIONERS’ ARGUMENTS

Petitioners emphasize that they are not questioning the 20% discount granted to senior citizens but
are only assailing the constitutionality of the tax deduction scheme prescribed under RA 9257 and
the implementing rules and regulations issued by the DSWD and the DOF.10

Petitioners posit that the tax deduction scheme contravenes Article III, Section 9 of the Constitution,
which provides that: "[p]rivate property shall not be taken for public use without just compensation."11

In support of their position, petitioners cite Central Luzon Drug Corporation,12 where it was ruled that
the 20% discount privilege constitutes taking of private property for public use which requires the
payment of just compensation,13 and Carlos Superdrug Corporation v. Department of Social Welfare
and Development,14 where it was acknowledged that the tax deduction scheme does not meet the
definition of just compensation.15

Petitioners likewise seek a reversal of the ruling in Carlos Superdrug Corporation16 that the tax
deduction scheme adopted by the government is justified by police power.17

They assert that "[a]lthough both police power and the power of eminent domain have the general
welfare for their object, there are still traditional distinctions between the two"18 and that "eminent
domain cannot be made less supreme than police power."19

Petitioners further claim that the legislature, in amending RA 7432, relied on an erroneous
contemporaneous construction that prior payment of taxes is required for tax credit.20

Petitioners also contend that the tax deduction scheme violates Article XV, Section 421 and Article
XIII, Section 1122 of the Constitution because it shifts the State’s constitutional mandate or duty of
improving the welfare of the elderly to the private sector.23

Under the tax deduction scheme, the private sector shoulders 65% of the discount because only
35%24 of it is actually returned by the government.25
Consequently, the implementation of the tax deduction scheme prescribed under Section 4 of RA
9257 affects the businesses of petitioners.26

Thus, there exists an actual case or controversy of transcendental importance which deserves
judicious disposition on the merits by the highest court of the land.27

RESPONDENTS’ ARGUMENTS

Respondents, on the other hand, question the filing of the instant Petition directly with the Supreme
Court as this disregards the hierarchy of courts.28

They likewise assert that there is no justiciable controversy as petitioners failed to prove that the tax
deduction treatment is not a "fair and full equivalent of the loss sustained" by them.29

As to the constitutionality of RA 9257 and its implementing rules and regulations, respondents
contend that petitioners failed to overturn its presumption of constitutionality.30

More important, respondents maintain that the tax deduction scheme is a legitimate exercise of the
State’s police power.31

OUR RULING

The Petition lacks merit.

1. There exists an actual case or controversy.

We shall first resolve the procedural issue. When the constitutionality of a law is put in issue, judicial
review may be availed of only if the following requisites concur: "(1) the existence of an actual and
appropriate case; (2) the existence of personal and substantial interest on the part of the party
raising the [question of constitutionality]; (3) recourse to judicial review is made at the earliest
opportunity; and (4) the [question of constitutionality] is the lis mota of the case."32

In this case, petitioners are challenging the constitutionality of the tax deduction scheme provided in
RA 9257 and the implementing rules and regulations issued by the DSWD and the DOF.
Respondents, however, oppose the Petition on the ground that there is no actual case or
controversy. We do not agree with respondents. An actual case or controversy exists when
there is "a conflict of legal rights" or "an assertion of opposite legal claims susceptible of
judicial resolution."33

The Petition must therefore show that "the governmental act being challenged has a direct adverse
effect on the individual challenging it."34

In this case, the tax deduction scheme challenged by petitioners has a direct adverse effect on them.
Thus, it cannot be denied that there exists an actual case or controversy.

The validity of the 20% senior citizen discount and tax deduction scheme under RA 9257, as
an exercise of police power of the State, has already been settled in Carlos Superdrug
Corporation.

Petitioners posit that the resolution of this case lies in the determination of whether the legally
mandated 20% senior citizen discount is an exercise of police power or eminent domain. If it is
police power, no just compensation is warranted. But if it is eminent domain, the tax deduction
scheme is unconstitutional because it is not a peso for peso reimbursement of the 20% discount
given to senior citizens. Thus, it constitutes taking of private property without payment of just
compensation. At the outset, we note that this question has been settled in Carlos Superdrug
Corporation.35

In that case, we ruled:

Petitioners assert that Section 4(a) of the law is unconstitutional because it constitutes deprivation of
private property. Compelling drugstore owners and establishments to grant the discount will result in
a loss of profit and capital because 1) drugstores impose a mark-up of only 5% to 10% on branded
medicines; and 2) the law failed to provide a scheme whereby drugstores will be justly compensated
for the discount.

(VERY IMMPORTANT) Examining petitioners’ arguments, it is apparent that what petitioners are
ultimately questioning is the validity of the tax deduction scheme as a reimbursement mechanism for
the twenty percent (20%) discount that they extend to senior citizens. Based on the afore-stated
DOF Opinion, the tax deduction scheme does not fully reimburse petitioners for the discount
privilege accorded to senior citizens. This is because the discount is treated as a deduction, a tax-
deductible expense that is subtracted from the gross income and results in a lower taxable income.
Stated otherwise, it is an amount that is allowed by law to reduce the income prior to the application
of the tax rate to compute the amount of tax which is due. Being a tax deduction, the discount does
not reduce taxes owed on a peso for peso basis but merely offers a fractional reduction in taxes
owed. Theoretically, the treatment of the discount as a deduction reduces the net income of the
private establishments concerned. The discounts given would have entered the coffers and formed
part of the gross sales of the private establishments, were it not for R.A. No. 9257. The permanent
reduction in their total revenues is a forced subsidy corresponding to the taking of private property
for public use or benefit. This constitutes compensable taking for which petitioners would ordinarily
become entitled to a just compensation. Just compensation is defined as the full and fair equivalent
of the property taken from its owner by the expropriator. The measure is not the taker’s gain but the
owner’s loss. The word just is used to intensify the meaning of the word compensation, and to
convey the idea that the equivalent to be rendered for the property to be taken shall be real,
substantial, full and ample. A tax deduction does not offer full reimbursement of the senior citizen
discount. As such, it would not meet the definition of just compensation.

Having said that, this raises the question of whether the State, in promoting the health and welfare of
a special group of citizens, can impose upon private establishments the burden of partly subsidizing
a government program. The Court believes so. The Senior Citizens Act was enacted primarily to
maximize the contribution of senior citizens to nation-building, and to grant benefits and privileges to
them for their improvement and well-being as the State considers them an integral part of our
society. The priority given to senior citizens finds its basis in the Constitution as set forth in the law
itself. Thus, the Act provides: SEC. 2. Republic Act No. 7432 is hereby amended to read as follows:
1âwphi1

SECTION 1. Declaration of Policies and Objectives. — Pursuant to Article XV, Section 4 of the
Constitution, it is the duty of the family to take care of its elderly members while the State may
design programs of social security for them. In addition to this, Section 10 in the Declaration of
Principles and State Policies provides: "The State shall provide social justice in all phases of national
development." Further, Article XIII, Section 11, provides: "The State shall adopt an integrated and
comprehensive approach to health development which shall endeavor to make essential goods,
health and other social services available to all the people at affordable cost. There shall be priority
for the needs of the underprivileged sick, elderly, disabled, women and children." Consonant with
these constitutional principles the following are the declared policies of this Act:

xxx xxx xxx

(f) To recognize the important role of the private sector in the improvement of the welfare of senior
citizens and to actively seek their partnership.

To implement the above policy, the law grants a twenty percent discount to senior citizens for
medical and dental services, and diagnostic and laboratory fees; admission fees charged by
theaters, concert halls, circuses, carnivals, and other similar places of culture, leisure and
amusement; fares for domestic land, air and sea travel; utilization of services in hotels and similar
lodging establishments, restaurants and recreation centers; and purchases of medicines for the
exclusive use or enjoyment of senior citizens. As a form of reimbursement, the law provides that
business establishments extending the twenty percent discount to senior citizens may claim the
discount as a tax deduction. The law is a legitimate exercise of police power which, similar to the
power of eminent domain, has general welfare for its object. Police power is not capable of an exact
definition, but has been purposely veiled in general terms to underscore its comprehensiveness to
meet all exigencies and provide enough room for an efficient and flexible response to conditions and
circumstances, thus assuring the greatest benefits. Accordingly, it has been described as "the most
essential, insistent and the least limitable of powers, extending as it does to all the great public
needs." It is "[t]he power vested in the legislature by the constitution to make, ordain, and establish
all manner of wholesome and reasonable laws, statutes, and ordinances, either with penalties or
without, not repugnant to the constitution, as they shall judge to be for the good and welfare of the
commonwealth, and of the subjects of the same." For this reason, when the conditions so demand
as determined by the legislature, property rights must bow to the primacy of police power because
property rights, though sheltered by due process, must yield to general welfare. Police power as an
attribute to promote the common good would be diluted considerably if on the mere plea of
petitioners that they will suffer loss of earnings and capital, the questioned provision is invalidated.
Moreover, in the absence of evidence demonstrating the alleged confiscatory effect of the provision
in question, there is no basis for its nullification in view of the presumption of validity which every law
has in its favor. Given these, it is incorrect for petitioners to insist that the grant of the senior citizen
discount is unduly oppressive to their business, because petitioners have not taken time to calculate
correctly and come up with a financial report, so that they have not been able to show properly
whether or not the tax deduction scheme really works greatly to their disadvantage. In treating the
discount as a tax deduction, petitioners insist that they will incur losses because, referring to the
DOF Opinion, for every ₱1.00 senior citizen discount that petitioners would give, P0.68 will be
shouldered by them as only P0.32 will be refunded by the government by way of a tax deduction. To
illustrate this point, petitioner Carlos Super Drug cited the anti-hypertensive maintenance drug
Norvasc as an example. According to the latter, it acquires Norvasc from the distributors at ₱37.57
per tablet, and retails it at ₱39.60 (or at a margin of 5%). If it grants a 20% discount to senior citizens
or an amount equivalent to ₱7.92, then it would have to sell Norvasc at ₱31.68 which translates to a
loss from capital of ₱5.89 per tablet. Even if the government will allow a tax deduction, only ₱2.53
per tablet will be refunded and not the full amount of the discount which is ₱7.92. In short, only 32%
of the 20% discount will be reimbursed to the drugstores. Petitioners’ computation is flawed. For
purposes of reimbursement, the law states that the cost of the discount shall be deducted from gross
income, the amount of income derived from all sources before deducting allowable expenses, which
will result in net income. Here, petitioners tried to show a loss on a per transaction basis, which
should not be the case. An income statement, showing an accounting of petitioners' sales,
expenses, and net profit (or loss) for a given period could have accurately reflected the effect of the
discount on their income. Absent any financial statement, petitioners cannot substantiate their claim
that they will be operating at a loss should they give the discount. In addition, the computation was
erroneously based on the assumption that their customers consisted wholly of senior citizens. Lastly,
the 32% tax rate is to be imposed on income, not on the amount of the discount.

Furthermore, it is unfair for petitioners to criticize the law because they cannot raise the prices of
their medicines given the cutthroat nature of the players in the industry. It is a business decision on
the part of petitioners to peg the mark-up at 5%. Selling the medicines below acquisition cost, as
alleged by petitioners, is merely a result of this decision. Inasmuch as pricing is a property right,
petitioners cannot reproach the law for being oppressive, simply because they cannot afford to raise
their prices for fear of losing their customers to competition. The Court is not oblivious of the retail
side of the pharmaceutical industry and the competitive pricing component of the business. While
the Constitution protects property rights, petitioners must accept the realities of business and the
State, in the exercise of police power, can intervene in the operations of a business which may result
in an impairment of property rights in the process.

Moreover, the right to property has a social dimension. While Article XIII of the Constitution provides
the precept for the protection of property, various laws and jurisprudence, particularly on agrarian
reform and the regulation of contracts and public utilities, continuously serve as x x x reminder[s] that
the right to property can be relinquished upon the command of the State for the promotion of public
good. Undeniably, the success of the senior citizens program rests largely on the support imparted
by petitioners and the other private establishments concerned. This being the case, the means
employed in invoking the active participation of the private sector, in order to achieve the purpose or
objective of the law, is reasonably and directly related. Without sufficient proof that Section 4 (a) of
R.A. No. 9257 is arbitrary, and that the continued implementation of the same would be
unconscionably detrimental to petitioners, the Court will refrain from quashing a legislative act. 36
(Bold in the original; underline supplied)

We, thus, found that the 20% discount as well as the tax deduction scheme is a valid exercise
of the police power of the State.

No compelling reason has been proffered to overturn, modify or abandon the ruling in Carlos
Superdrug Corporation.

Petitioners argue that we have previously ruled in Central Luzon Drug Corporation 37 that the 20%
discount is an exercise of the power of eminent domain, thus, requiring the payment of just
compensation. They urge us to re-examine our ruling in Carlos Superdrug Corporation38 which
allegedly reversed the ruling in Central Luzon Drug Corporation.39
They also point out that Carlos Superdrug Corporation40 recognized that the tax deduction scheme
under the assailed law does not provide for sufficient just compensation. We agree with petitioners’
observation that there are statements in Central Luzon Drug Corporation41 describing the 20%
discount as an exercise of the power of eminent domain, viz.:

[T]he privilege enjoyed by senior citizens does not come directly from the State, but rather from the
private establishments concerned. Accordingly, the tax credit benefit granted to these
establishments can be deemed as their just compensation for private property taken by the State for
public use. The concept of public use is no longer confined to the traditional notion of use by the
public, but held synonymous with public interest, public benefit, public welfare, and public
convenience. The discount privilege to which our senior citizens are entitled is actually a benefit
enjoyed by the general public to which these citizens belong. The discounts given would have
entered the coffers and formed part of the gross sales of the private establishments concerned, were
it not for RA 7432. The permanent reduction in their total revenues is a forced subsidy corresponding
to the taking of private property for public use or benefit. As a result of the 20 percent discount
imposed by RA 7432, respondent becomes entitled to a just compensation. This term refers not only
to the issuance of a tax credit certificate indicating the correct amount of the discounts given, but
also to the promptness in its release. Equivalent to the payment of property taken by the State, such
issuance — when not done within a reasonable time from the grant of the discounts — cannot be
considered as just compensation. In effect, respondent is made to suffer the consequences of being
immediately deprived of its revenues while awaiting actual receipt, through the certificate, of the
equivalent amount it needs to cope with the reduction in its revenues. Besides, the taxation power
can also be used as an implement for the exercise of the power of eminent domain. Tax measures
are but "enforced contributions exacted on pain of penal sanctions" and "clearly imposed for a public
purpose." In recent years, the power to tax has indeed become a most effective tool to realize social
justice, public welfare, and the equitable distribution of wealth. While it is a declared commitment
under Section 1 of RA 7432, social justice "cannot be invoked to trample on the rights of property
owners who under our Constitution and laws are also entitled to protection. The social justice
consecrated in our [C]onstitution [is] not intended to take away rights from a person and give them to
another who is not entitled thereto." For this reason, a just compensation for income that is taken
away from respondent becomes necessary. It is in the tax credit that our legislators find support to
realize social justice, and no administrative body can alter that fact. To put it differently, a private
establishment that merely breaks even — without the discounts yet — will surely start to incur losses
because of such discounts. The same effect is expected if its mark-up is less than 20 percent, and if
all its sales come from retail purchases by senior citizens. Aside from the observation we have
already raised earlier, it will also be grossly unfair to an establishment if the discounts will be treated
merely as deductions from either its gross income or its gross sales. Operating at a loss through no
1âwphi1

fault of its own, it will realize that the tax credit limitation under RR 2-94 is inutile, if not improper.
Worse, profit-generating businesses will be put in a better position if they avail themselves of tax
credits denied those that are losing, because no taxes are due from the latter.42 (Italics in the original;
emphasis supplied)

The above was partly incorporated in our ruling in Carlos Superdrug Corporation43 when we stated
preliminarily that—

Petitioners assert that Section 4(a) of the law is unconstitutional because it constitutes deprivation of
private property. Compelling drugstore owners and establishments to grant the discount will result in
a loss of profit and capital because 1) drugstores impose a mark-up of only 5% to 10% on branded
medicines; and 2) the law failed to provide a scheme whereby drugstores will be justly compensated
for the discount.

Examining petitioners’ arguments, it is apparent that what petitioners are ultimately questioning is
the validity of the tax deduction scheme as a reimbursement mechanism for the twenty percent
(20%) discount that they extend to senior citizens. Based on the afore-stated DOF Opinion, the tax
deduction scheme does not fully reimburse petitioners for the discount privilege accorded to senior
citizens. This is because the discount is treated as a deduction, a tax-deductible expense that is
subtracted from the gross income and results in a lower taxable income. Stated otherwise, it is an
amount that is allowed by law to reduce the income prior to the application of the tax rate to compute
the amount of tax which is due. Being a tax deduction, the discount does not reduce taxes owed on
a peso for peso basis but merely offers a fractional reduction in taxes owed. Theoretically, the
treatment of the discount as a deduction reduces the net income of the private establishments
concerned. The discounts given would have entered the coffers and formed part of the gross sales
of the private establishments, were it not for R.A. No. 9257. The permanent reduction in their total
revenues is a forced subsidy corresponding to the taking of private property for public use or benefit.
This constitutes compensable taking for which petitioners would ordinarily become entitled to a just
compensation. Just compensation is defined as the full and fair equivalent of the property taken from
its owner by the expropriator. The measure is not the taker’s gain but the owner’s loss. The word just
is used to intensify the meaning of the word compensation, and to convey the idea that the
equivalent to be rendered for the property to be taken shall be real, substantial, full and ample. A tax
deduction does not offer full reimbursement of the senior citizen discount. As such, it would not meet
the definition of just compensation. Having said that, this raises the question of whether the State, in
promoting the health and welfare of a special group of citizens, can impose upon private
establishments the burden of partly subsidizing a government program. The Court believes so.44

This, notwithstanding, we went on to rule in Carlos Superdrug Corporation45 that the 20% discount
and tax deduction scheme is a valid exercise of the police power of the State. The present case,
thus, affords an opportunity for us to clarify the above-quoted statements in Central Luzon Drug
Corporation46 and Carlos Superdrug Corporation.47

First, we note that the above-quoted disquisition on eminent domain in Central Luzon Drug
Corporation48 is obiter dicta and, thus, not binding precedent. As stated earlier, in Central Luzon Drug
Corporation,49 we ruled that the BIR acted ultra vires when it effectively treated the 20% discount as
a tax deduction, under Sections 2.i and 4 of RR No. 2-94, despite the clear wording of the previous
law that the same should be treated as a tax credit. We were, therefore, not confronted in that case
with the issue as to whether the 20% discount is an exercise of police power or eminent domain.
Second, although we adverted to Central Luzon Drug Corporation50 in our ruling in Carlos Superdrug
Corporation,51 this referred only to preliminary matters. A fair reading of Carlos Superdrug
Corporation52 would show that we categorically ruled therein that the 20% discount is a valid exercise
of police power. Thus, even if the current law, through its tax deduction scheme (which abandoned
the tax credit scheme under the previous law), does not provide for a peso for peso reimbursement
of the 20% discount given by private establishments, no constitutional infirmity obtains because,
being a valid exercise of police power, payment of just compensation is not warranted. We have
carefully reviewed the basis of our ruling in Carlos Superdrug Corporation53 and we find no cogent
reason to overturn, modify or abandon it. We also note that petitioners’ arguments are a mere
reiteration of those raised and resolved in Carlos Superdrug Corporation.54 Thus, we sustain Carlos
Superdrug Corporation.55

Nonetheless, we deem it proper, in what follows, to amplify our explanation in Carlos Superdrug
Corporation56 as to why the 20% discount is a valid exercise of police power and why it may not,
under the specific circumstances of this case, be considered as an exercise of the power of eminent
domain contrary to the obiter in Central Luzon Drug Corporation.57

Police power versus eminent domain.

Police power is the inherent power of the State to regulate or to restrain the use of liberty and
property for public welfare.58

The only limitation is that the restriction imposed should be reasonable, not oppressive.59

In other words, to be a valid exercise of police power, it must have a lawful subject or objective and a
lawful method of accomplishing the goal.60

Under the police power of the State, "property rights of individuals may be subjected to restraints
and burdens in order to fulfill the objectives of the government."61

The State "may interfere with personal liberty, property, lawful businesses and occupations to
promote the general welfare [as long as] the interference [is] reasonable and not arbitrary."62

Eminent domain, on the other hand, is the inherent power of the State to take or appropriate private
property for public use.63

The Constitution, however, requires that private property shall not be taken without due process of
law and the payment of just compensation.64

Traditional distinctions exist between police power and eminent domain. In the exercise of police
power, a property right is impaired by regulation,65 or the use of property is merely prohibited,
regulated or restricted66 to promote public welfare. In such cases, there is no compensable taking,
hence, payment of just compensation is not required. Examples of these regulations are property
condemned for being noxious or intended for noxious purposes (e.g., a building on the verge of
collapse to be demolished for public safety, or obscene materials to be destroyed in the interest of
public morals)67 as well as zoning ordinances prohibiting the use of property for purposes injurious to
the health, morals or safety of the community (e.g., dividing a city’s territory into residential and
industrial areas).68

It has, thus, been observed that, in the exercise of police power (as distinguished from eminent
domain), although the regulation affects the right of ownership, none of the bundle of rights which
constitute ownership is appropriated for use by or for the benefit of the public.69

On the other hand, in the exercise of the power of eminent domain, property interests are
appropriated and applied to some public purpose which necessitates the payment of just
compensation therefor. Normally, the title to and possession of the property are transferred to the
expropriating authority. Examples include the acquisition of lands for the construction of public
highways as well as agricultural lands acquired by the government under the agrarian reform law for
redistribution to qualified farmer beneficiaries. However, it is a settled rule that the acquisition of title
or total destruction of the property is not essential for "taking" under the power of eminent domain to
be present.70

Examples of these include establishment of easements such as where the land owner is perpetually
deprived of his proprietary rights because of the hazards posed by electric transmission lines
constructed above his property71 or the compelled interconnection of the telephone system between
the government and a private company.72

In these cases, although the private property owner is not divested of ownership or possession,
payment of just compensation is warranted because of the burden placed on the property for the use
or benefit of the public.

The 20% senior citizen discount is an exercise of police power.

It may not always be easy to determine whether a challenged governmental act is an exercise of
police power or eminent domain. The very nature of police power as elastic and responsive to
various social conditions73 as well as the evolving meaning and scope of public use74 and just
compensation75 in eminent domain evinces that these are not static concepts. Because of the
exigencies of rapidly changing times, Congress may be compelled to adopt or experiment with
different measures to promote the general welfare which may not fall squarely within the traditionally
recognized categories of police power and eminent domain. The judicious approach, therefore, is to
look at the nature and effects of the challenged governmental act and decide, on the basis thereof,
whether the act is the exercise of police power or eminent domain. Thus, we now look at the nature
and effects of the 20% discount to determine if it constitutes an exercise of police power or eminent
domain. The 20% discount is intended to improve the welfare of senior citizens who, at their age, are
less likely to be gainfully employed, more prone to illnesses and other disabilities, and, thus, in need
of subsidy in purchasing basic commodities. It may not be amiss to mention also that the discount
serves to honor senior citizens who presumably spent the productive years of their lives on
contributing to the development and progress of the nation. This distinct cultural Filipino practice of
honoring the elderly is an integral part of this law. As to its nature and effects, the 20% discount is a
regulation affecting the ability of private establishments to price their products and services relative
to a special class of individuals, senior citizens, for which the Constitution affords preferential
concern.76

In turn, this affects the amount of profits or income/gross sales that a private establishment can
derive from senior citizens. In other words, the subject regulation affects the pricing, and, hence, the
profitability of a private establishment. However, it does not purport to appropriate or burden specific
properties, used in the operation or conduct of the business of private establishments, for the use or
benefit of the public, or senior citizens for that matter, but merely regulates the pricing of goods and
services relative to, and the amount of profits or income/gross sales that such private establishments
may derive from, senior citizens. The subject regulation may be said to be similar to, but with
substantial distinctions from, price control or rate of return on investment control laws which are
traditionally regarded as police power measures.77

These laws generally regulate public utilities or industries/enterprises imbued with public interest in
order to protect consumers from exorbitant or unreasonable pricing as well as temper corporate
greed by controlling the rate of return on investment of these corporations considering that they have
a monopoly over the goods or services that they provide to the general public. The subject regulation
differs therefrom in that (1) the discount does not prevent the establishments from adjusting the level
of prices of their goods and services, and (2) the discount does not apply to all customers of a given
establishment but only to the class of senior citizens. Nonetheless, to the degree material to the
resolution of this case, the 20% discount may be properly viewed as belonging to the category of
price regulatory measures which affect the profitability of establishments subjected thereto. On its
face, therefore, the subject regulation is a police power measure. The obiter in Central Luzon Drug
Corporation,78 however, describes the 20% discount as an exercise of the power of eminent domain
and the tax credit, under the previous law, equivalent to the amount of discount given as the just
compensation therefor. The reason is that (1) the discount would have formed part of the gross sales
of the establishment were it not for the law prescribing the 20% discount, and (2) the permanent
reduction in total revenues is a forced subsidy corresponding to the taking of private property for
public use or benefit. The flaw in this reasoning is in its premise. It presupposes that the subject
regulation, which impacts the pricing and, hence, the profitability of a private establishment,
automatically amounts to a deprivation of property without due process of law. If this were so, then
all price and rate of return on investment control laws would have to be invalidated because they
impact, at some level, the regulated establishment’s profits or income/gross sales, yet there is no
provision for payment of just compensation. It would also mean that overnment cannot set price or
rate of return on investment limits, which reduce the profits or income/gross sales of private
establishments, if no just compensation is paid even if the measure is not confiscatory. The obiter is,
thus, at odds with the settled octrine that the State can employ police power measures to regulate
the pricing of goods and services, and, hence, the profitability of business establishments in order to
pursue legitimate State objectives for the common good, provided that the regulation does not go too
far as to amount to "taking."79

In City of Manila v. Laguio, Jr.,80 we recognized that— x x x a taking also could be found if
government regulation of the use of property went "too far." When regulation reaches a certain
magnitude, in most if not in all cases there must be an exercise of eminent domain and
compensation to support the act. While property may be regulated to a certain extent, if regulation
goes too far it will be recognized as a taking. No formula or rule can be devised to answer the
questions of what is too far and when regulation becomes a taking. In Mahon, Justice Holmes
recognized that it was "a question of degree and therefore cannot be disposed of by general
propositions." On many other occasions as well, the U.S. Supreme Court has said that the issue of
when regulation constitutes a taking is a matter of considering the facts in each case. The Court
asks whether justice and fairness require that the economic loss caused by public action must be
compensated by the government and thus borne by the public as a whole, or whether the loss
should remain concentrated on those few persons subject to the public action.81

The impact or effect of a regulation, such as the one under consideration, must, thus, be determined
on a case-to-case basis. Whether that line between permissible regulation under police power and
"taking" under eminent domain has been crossed must, under the specific circumstances of this
case, be subject to proof and the one assailing the constitutionality of the regulation carries the
heavy burden of proving that the measure is unreasonable, oppressive or confiscatory. The time-
honored rule is that the burden of proving the unconstitutionality of a law rests upon the one
assailing it and "the burden becomes heavier when police power is at issue."82

The 20% senior citizen discount has not been shown to be unreasonable, oppressive or
confiscatory.

In Alalayan v. National Power Corporation,83 petitioners, who were franchise holders of electric
plants, challenged the validity of a law limiting their allowable net profits to no more than 12% per
annum of their investments plus two-month operating expenses. In rejecting their plea, we ruled that,
in an earlier case, it was found that 12% is a reasonable rate of return and that petitioners failed to
prove that the aforesaid rate is confiscatory in view of the presumption of constitutionality.84

We adopted a similar line of reasoning in Carlos Superdrug Corporation85 when we ruled that
petitioners therein failed to prove that the 20% discount is arbitrary, oppressive or confiscatory. We
noted that no evidence, such as a financial report, to establish the impact of the 20% discount on the
overall profitability of petitioners was presented in order to show that they would be operating at a
loss due to the subject regulation or that the continued implementation of the law would be
unconscionably detrimental to the business operations of petitioners. In the case at bar, petitioners
proceeded with a hypothetical computation of the alleged loss that they will suffer similar to what the
petitioners in Carlos Superdrug Corporation86 did. Petitioners went directly to this Court without first
establishing the factual bases of their claims. Hence, the present recourse must, likewise, fail.
Because all laws enjoy the presumption of constitutionality, courts will uphold a law’s validity if any
set of facts may be conceived to sustain it.87

On its face, we find that there are at least two conceivable bases to sustain the subject regulation’s
validity absent clear and convincing proof that it is unreasonable, oppressive or confiscatory.
Congress may have legitimately concluded that business establishments have the capacity to
absorb a decrease in profits or income/gross sales due to the 20% discount without substantially
affecting the reasonable rate of return on their investments considering (1) not all customers of a
business establishment are senior citizens and (2) the level of its profit margins on goods and
services offered to the general public. Concurrently, Congress may have, likewise, legitimately
concluded that the establishments, which will be required to extend the 20% discount, have the
capacity to revise their pricing strategy so that whatever reduction in profits or income/gross sales
that they may sustain because of sales to senior citizens, can be recouped through higher mark-ups
or from other products not subject of discounts. As a result, the discounts resulting from sales to
senior citizens will not be confiscatory or unduly oppressive. In sum, we sustain our ruling in Carlos
Superdrug Corporation88 that the 20% senior citizen discount and tax deduction scheme are valid
exercises of police power of the State absent a clear showing that it is arbitrary, oppressive or
confiscatory.

Conclusion

In closing, we note that petitioners hypothesize, consistent with our previous ratiocinations, that the
discount will force establishments to raise their prices in order to compensate for its impact on
overall profits or income/gross sales. The general public, or those not belonging to the senior citizen
class, are, thus, made to effectively shoulder the subsidy for senior citizens. This, in petitioners’
view, is unfair.

As already mentioned, Congress may be reasonably assumed to have foreseen this eventuality. But,
more importantly, this goes into the wisdom, efficacy and expediency of the subject law which is not
proper for judicial review. In a way, this law pursues its social equity objective in a non-traditional
manner unlike past and existing direct subsidy programs of the government for the poor and
marginalized sectors of our society. Verily, Congress must be given sufficient leeway in formulating
welfare legislations given the enormous challenges that the government faces relative to, among
others, resource adequacy and administrative capability in implementing social reform measures
which aim to protect and uphold the interests of those most vulnerable in our society. In the process,
the individual, who enjoys the rights, benefits and privileges of living in a democratic polity, must
bear his share in supporting measures intended for the common good. This is only fair. In fine,
without the requisite showing of a clear and unequivocal breach of the Constitution, the validity of the
assailed law must be sustained.

Refutation of the Dissent

The main points of Justice Carpio’s Dissent may be summarized as follows: (1) the discussion on
eminent domain in Central Luzon Drug Corporation89 is not obiter dicta ; (2) allowable taking, in
police power, is limited to property that is destroyed or placed outside the commerce of man for
public welfare; (3) the amount of mandatory discount is private property within the ambit of Article III,
Section 990 of the Constitution; and (4) the permanent reduction in a private establishment’s total
revenue, arising from the mandatory discount, is a taking of private property for public use or benefit,
hence, an exercise of the power of eminent domain requiring the payment of just compensation. I
We maintain that the discussion on eminent domain in Central Luzon Drug Corporation 91 is obiter
dicta. As previously discussed, in Central Luzon Drug Corporation,92 the BIR, pursuant to Sections 2.i
and 4 of RR No. 2-94, treated the senior citizen discount in the previous law, RA 7432, as a tax
deduction instead of a tax credit despite the clear provision in that law which stated –

SECTION 4. Privileges for the Senior Citizens. – The senior citizens shall be entitled to the following:

a) The grant of twenty percent (20%) discount from all establishments relative to utilization of
transportation services, hotels and similar lodging establishment, restaurants and recreation
centers and purchase of medicines anywhere in the country: Provided, That private
establishments may claim the cost as tax credit; (Emphasis supplied)

Thus, the Court ruled that the subject revenue regulation violated the law, viz:
The 20 percent discount required by the law to be given to senior citizens is a tax credit, not merely
a tax deduction from the gross income or gross sale of the establishment concerned. A tax credit is
used by a private establishment only after the tax has been computed; a tax deduction, before the
tax is computed. RA 7432 unconditionally grants a tax credit to all covered entities. Thus, the
provisions of the revenue regulation that withdraw or modify such grant are void. Basic is the rule
that administrative regulations cannot amend or revoke the law.93

As can be readily seen, the discussion on eminent domain was not necessary in order to arrive at
this conclusion. All that was needed was to point out that the revenue regulation contravened the law
which it sought to implement. And, precisely, this was done in Central Luzon Drug Corporation 94 by
comparing the wording of the previous law vis-à-vis the revenue regulation; employing the rules of
statutory construction; and applying the settled principle that a regulation cannot amend the law it
seeks to implement. A close reading of Central Luzon Drug Corporation 95 would show that the Court
went on to state that the tax credit "can be deemed" as just compensation only to explain why the
previous law provides for a tax credit instead of a tax deduction. The Court surmised that the tax
credit was a form of just compensation given to the establishments covered by the 20% discount.
However, the reason why the previous law provided for a tax credit and not a tax deduction was not
necessary to resolve the issue as to whether the revenue regulation contravenes the law. Hence, the
discussion on eminent domain is obiter dicta.

A court, in resolving cases before it, may look into the possible purposes or reasons that impelled
the enactment of a particular statute or legal provision. However, statements made relative thereto
are not always necessary in resolving the actual controversies presented before it. This was the
case in Central Luzon Drug Corporation96 resulting in that unfortunate statement that the tax credit
"can be deemed" as just compensation. This, in turn, led to the erroneous conclusion, by deductive
reasoning, that the 20% discount is an exercise of the power of eminent domain. The Dissent
essentially adopts this theory and reasoning which, as will be shown below, is contrary to settled
principles in police power and eminent domain analysis. II The Dissent discusses at length the
doctrine on "taking" in police power which occurs when private property is destroyed or placed
outside the commerce of man. Indeed, there is a whole class of police power measures which justify
the destruction of private property in order to preserve public health, morals, safety or welfare. As
earlier mentioned, these would include a building on the verge of collapse or confiscated obscene
materials as well as those mentioned by the Dissent with regard to property used in violating a
criminal statute or one which constitutes a nuisance. In such cases, no compensation is required.
However, it is equally true that there is another class of police power measures which do not involve
the destruction of private property but merely regulate its use. The minimum wage law, zoning
ordinances, price control laws, laws regulating the operation of motels and hotels, laws limiting the
working hours to eight, and the like would fall under this category. The examples cited by the
Dissent, likewise, fall under this category: Article 157 of the Labor Code, Sections 19 and 18 of the
Social Security Law, and Section 7 of the Pag-IBIG Fund Law. These laws merely regulate or, to use
the term of the Dissent, burden the conduct of the affairs of business establishments. In such cases,
payment of just compensation is not required because they fall within the sphere of permissible
police power measures. The senior citizen discount law falls under this latter category. III The
Dissent proceeds from the theory that the permanent reduction of profits or income/gross sales, due
to the 20% discount, is a "taking" of private property for public purpose without payment of just
compensation. At the outset, it must be emphasized that petitioners never presented any evidence
to establish that they were forced to suffer enormous losses or operate at a loss due to the effects of
the assailed law. They came directly to this Court and provided a hypothetical computation of the
loss they would allegedly suffer due to the operation of the assailed law. The central premise of the
Dissent’s argument that the 20% discount results in a permanent reduction in profits or income/gross
sales, or forces a business establishment to operate at a loss is, thus, wholly unsupported by
competent evidence. To be sure, the Court can invalidate a law which, on its face, is arbitrary,
oppressive or confiscatory.97

But this is not the case here.

In the case at bar, evidence is indispensable before a determination of a constitutional violation can
be made because of the following reasons. First, the assailed law, by imposing the senior citizen
discount, does not take any of the properties used by a business establishment like, say, the land on
which a manufacturing plant is constructed or the equipment being used to produce goods or
services. Second, rather than taking specific properties of a business establishment, the senior
citizen discount law merely regulates the prices of the goods or services being sold to senior citizens
by mandating a 20% discount. Thus, if a product is sold at ₱10.00 to the general public, then it shall
be sold at ₱8.00 ( i.e., ₱10.00 less 20%) to senior citizens. Note that the law does not impose at
what specific price the product shall be sold, only that a 20% discount shall be given to senior
citizens based on the price set by the business establishment. A business establishment is, thus,
free to adjust the prices of the goods or services it provides to the general public. Accordingly, it can
increase the price of the above product to ₱20.00 but is required to sell it at ₱16.00 (i.e. , ₱20.00
less 20%) to senior citizens. Third, because the law impacts the prices of the goods or services of a
particular establishment relative to its sales to senior citizens, its profits or income/gross sales are
affected. The extent of the impact would, however, depend on the profit margin of the business
establishment on a particular good or service. If a product costs ₱5.00 to produce and is sold at
₱10.00, then the profit98 is ₱5.0099 or a profit margin100 of 50%.101

Under the assailed law, the aforesaid product would have to be sold at ₱8.00 to senior citizens yet
the business would still earn ₱3.00102 or a 30%103 profit margin. On the other hand, if the product costs
₱9.00 to produce and is required to be sold at ₱8.00 to senior citizens, then the business would
experience a loss of ₱1.00.104

But note that since not all customers of a business establishment are senior citizens, the business
establishment may continue to earn ₱1.00 from non-senior citizens which, in turn, can offset any
loss arising from sales to senior citizens.

Fourth, when the law imposes the 20% discount in favor of senior citizens, it does not prevent the
business establishment from revising its pricing strategy.

By revising its pricing strategy, a business establishment can recoup any reduction of profits or
income/gross sales which would otherwise arise from the giving of the 20% discount. To illustrate,
suppose A has two customers: X, a senior citizen, and Y, a non-senior citizen. Prior to the law, A
sells his products at ₱10.00 a piece to X and Y resulting in income/gross sales of ₱20.00 (₱10.00 +
₱10.00). With the passage of the law, A must now sell his product to X at ₱8.00 (i.e., ₱10.00 less
20%) so that his income/gross sales would be ₱18.00 (₱8.00 + ₱10.00) or lower by ₱2.00. To
prevent this from happening, A decides to increase the price of his products to ₱11.11 per piece.
Thus, he sells his product to X at ₱8.89 (i.e. , ₱11.11 less 20%) and to Y at ₱11.11. As a result, his
income/gross sales would still be ₱20.00105 (₱8.89 + ₱11.11). The capacity, then, of business
establishments to revise their pricing strategy makes it possible for them not to suffer any reduction
in profits or income/gross sales, or, in the alternative, mitigate the reduction of their profits or
income/gross sales even after the passage of the law. In other words, business establishments have
the capacity to adjust their prices so that they may remain profitable even under the operation of the
assailed law.

The Dissent, however, states that – The explanation by the majority that private establishments can
always increase their prices to recover the mandatory discount will only encourage private
establishments to adjust their prices upwards to the prejudice of customers who do not enjoy the
20% discount. It was likewise suggested that if a company increases its prices, despite the
application of the 20% discount, the establishment becomes more profitable than it was before the
implementation of R.A. 7432. Such an economic justification is self-defeating, for more consumers
will suffer from the price increase than will benefit from the 20% discount. Even then, such ability to
increase prices cannot legally validate a violation of the eminent domain clause.106

But, if it is possible that the business establishment, by adjusting its prices, will suffer no reduction in
its profits or income/gross sales (or suffer some reduction but continue to operate profitably) despite
giving the discount, what would be the basis to strike down the law? If it is possible that the business
establishment, by adjusting its prices, will not be unduly burdened, how can there be a finding that
the assailed law is an unconstitutional exercise of police power or eminent domain? That there may
be a burden placed on business establishments or the consuming public as a result of the operation
of the assailed law is not, by itself, a ground to declare it unconstitutional for this goes into the
wisdom and expediency of the law.

The cost of most, if not all, regulatory measures of the government on business establishments is
ultimately passed on to the consumers but that, by itself, does not justify the wholesale nullification
of these measures. It is a basic postulate of our democratic system of government that the
Constitution is a social contract whereby the people have surrendered their sovereign powers to the
State for the common good.107

All persons may be burdened by regulatory measures intended for the common good or to serve
some important governmental interest, such as protecting or improving the welfare of a special class
of people for which the Constitution affords preferential concern. Indubitably, the one assailing the
law has the heavy burden of proving that the regulation is unreasonable, oppressive or confiscatory,
or has gone "too far" as to amount to a "taking." Yet, here, the Dissent would have this Court nullify
the law without any proof of such nature.

Further, this Court is not the proper forum to debate the economic theories or realities that impelled
Congress to shift from the tax credit to the tax deduction scheme. It is not within our power or
competence to judge which scheme is more or less burdensome to business establishments or the
consuming public and, thereafter, to choose which scheme the State should use or pursue. The shift
from the tax credit to tax deduction scheme is a policy determination by Congress and the Court will
respect it for as long as there is no showing, as here, that the subject regulation has transgressed
constitutional limitations. Unavoidably, the lack of evidence constrains the Dissent to rely on
speculative and hypothetical argumentation when it states that the 20% discount is a significant
amount and not a minimal loss (which erroneously assumes that the discount automatically results in
a loss when it is possible that the profit margin is greater than 20% and/or the pricing strategy can be
revised to prevent or mitigate any reduction in profits or income/gross sales as illustrated above),108
and not all private establishments make a 20% profit margin (which conversely implies that there are
those who make more and, thus, would not be greatly affected by this regulation).109

In fine, because of the possible scenarios discussed above, we cannot assume that the 20%
discount results in a permanent reduction in profits or income/gross sales, much less that business
establishments are forced to operate at a loss under the assailed law. And, even if we gratuitously
assume that the 20% discount results in some degree of reduction in profits or income/gross sales,
we cannot assume that such reduction is arbitrary, oppressive or confiscatory. To repeat, there is no
actual proof to back up this claim, and it could be that the loss suffered by a business establishment
was occasioned through its fault or negligence in not adapting to the effects of the assailed law. The
law uniformly applies to all business establishments covered thereunder. There is, therefore, no
unjust discrimination as the aforesaid business establishments are faced with the same constraints.
The necessity of proof is all the more pertinent in this case because, as similarly observed by Justice
Velasco in his Concurring Opinion, the law has been in operation for over nine years now. However,
the grim picture painted by petitioners on the unconscionable losses to be indiscriminately suffered
by business establishments, which should have led to the closure of numerous business
establishments, has not come to pass. Verily, we cannot invalidate the assailed law based on
assumptions and conjectures. Without adequate proof, the presumption of constitutionality must
prevail. IV At this juncture, we note that the Dissent modified its original arguments by including a
new paragraph, to wit:

Section 9, Article III of the 1987 Constitution speaks of private property without any distinction. It
does not state that there should be profit before the taking of property is subject to just
compensation. The private property referred to for purposes of taking could be inherited, donated,
purchased, mortgaged, or as in this case, part of the gross sales of private establishments. They are
all private property and any taking should be attended by corresponding payment of just
compensation. The 20% discount granted to senior citizens belong to private establishments,
whether these establishments make a profit or suffer a loss. In fact, the 20% discount applies to non-
profit establishments like country, social, or golf clubs which are open to the public and not only for
exclusive membership. The issue of profit or loss to the establishments is immaterial.110

Two things may be said of this argument. First, it contradicts the rest of the arguments of the
Dissent. After it states that the issue of profit or loss is immaterial, the Dissent proceeds to argue that
the 20% discount is not a minimal loss111 and that the 20% discount forces business establishments
to operate at a loss.112

Even the obiter in Central Luzon Drug Corporation,113 which the Dissent essentially adopts and relies
on, is premised on the permanent reduction of total revenues and the loss that business
establishments will be forced to suffer in arguing that the 20% discount constitutes a "taking" under
the power of eminent domain. Thus, when the Dissent now argues that the issue of profit or loss is
immaterial, it contradicts itself because it later argues, in order to justify that there is a "taking" under
the power of eminent domain in this case, that the 20% discount forces business establishments to
suffer a significant loss or to operate at a loss. Second, this argument suffers from the same flaw as
the Dissent's original arguments. It is an erroneous characterization of the 20% discount. According
to the Dissent, the 20% discount is part of the gross sales and, hence, private property belonging to
business establishments. However, as previously discussed, the 20% discount is not private
property actually owned and/or used by the business establishment. It should be distinguished from
properties like lands or buildings actually used in the operation of a business establishment which, if
appropriated for public use, would amount to a "taking" under the power of eminent domain. Instead,
the 20% discount is a regulatory measure which impacts the pricing and, hence, the profitability of
business establishments. At the time the discount is imposed, no particular property of the business
establishment can be said to be "taken." That is, the State does not acquire or take anything from
the business establishment in the way that it takes a piece of private land to build a public road.
While the 20% discount may form part of the potential profits or income/gross sales114 of the business
establishment, as similarly characterized by Justice Bersamin in his Concurring Opinion, potential
profits or income/gross sales are not private property, specifically cash or money, already belonging
to the business establishment. They are a mere expectancy because they are potential fruits of the
successful conduct of the business. Prior to the sale of goods or services, a business establishment
may be subject to State regulations, such as the 20% senior citizen discount, which may impact the
level or amount of profits or income/gross sales that can be generated by such establishment. For
this reason, the validity of the discount is to be determined based on its overall effects on the
operations of the business establishment.

Again, as previously discussed, the 20% discount does not automatically result in a 20% reduction in
profits, or, to align it with the term used by the Dissent, the 20% discount does not mean that a 20%
reduction in gross sales necessarily results. Because (1) the profit margin of a product is not
necessarily less than 20%, (2) not all customers of a business establishment are senior citizens, and
(3) the establishment may revise its pricing strategy, such reduction in profits or income/gross sales
may be prevented or, in the alternative, mitigated so that the business establishment continues to
operate profitably. Thus, even if we gratuitously assume that some degree of reduction in profits or
income/gross sales occurs because of the 20% discount, it does not follow that the regulation is
unreasonable, oppressive or confiscatory because the business establishment may make the
necessary adjustments to continue to operate profitably. No evidence was presented by petitioners
to show otherwise. In fact, no evidence was presented by petitioners at all. Justice Leonen, in his
Concurring and Dissenting Opinion, characterizes "profits" (or income/gross sales) as an inchoate
right. Another way to view it, as stated by Justice Velasco in his Concurring Opinion, is that the
business establishment merely has a right to profits. The Constitution adverts to it as the right of an
enterprise to a reasonable return on investment.115

Undeniably, this right, like any other right, may be regulated under the police power of the State to
achieve important governmental objectives like protecting the interests and improving the welfare of
senior citizens. It should be noted though that potential profits or income/gross sales are relevant in
police power and eminent domain analyses because they may, in appropriate cases, serve as an
indicia when a regulation has gone "too far" as to amount to a "taking" under the power of eminent
domain. When the deprivation or reduction of profits or income/gross sales is shown to be
unreasonable, oppressive or confiscatory, then the challenged governmental regulation may be
nullified for being a "taking" under the power of eminent domain. In such a case, it is not profits or
income/gross sales which are actually taken and appropriated for public use. Rather, when the
regulation causes an establishment to incur losses in an unreasonable, oppressive or confiscatory
manner, what is actually taken is capital and the right of the business establishment to a reasonable
return on investment. If the business losses are not halted because of the continued operation of the
regulation, this eventually leads to the destruction of the business and the total loss of the capital
invested therein. But, again, petitioners in this case failed to prove that the subject regulation is
unreasonable, oppressive or confiscatory.

V.

The Dissent further argues that we erroneously used price and rate of return on investment control
laws to justify the senior citizen discount law. According to the Dissent, only profits from industries
imbued with public interest may be regulated because this is a condition of their franchises. Profits of
establishments without franchises cannot be regulated permanently because there is no law
regulating their profits. The Dissent concludes that the permanent reduction of total revenues or
gross sales of business establishments without franchises is a taking of private property under the
power of eminent domain. In making this argument, it is unfortunate that the Dissent quotes only a
portion of the ponencia – The subject regulation may be said to be similar to, but with substantial
distinctions from, price control or rate of return on investment control laws which are traditionally
regarded as police power measures. These laws generally regulate public utilities or
industries/enterprises imbued with public interest in order to protect consumers from exorbitant or
unreasonable pricing as well as temper corporate greed by controlling the rate of return on
investment of these corporations considering that they have a monopoly over the goods or services
that they provide to the general public. The subject regulation differs therefrom in that (1) the
discount does not prevent the establishments from adjusting the level of prices of their goods and
services, and (2) the discount does not apply to all customers of a given establishment but only to
the class of senior citizens. x x x116

The above paragraph, in full, states –

The subject regulation may be said to be similar to, but with substantial distinctions from, price
control or rate of return on investment control laws which are traditionally regarded as police power
measures. These laws generally regulate public utilities or industries/enterprises imbued with public
interest in order to protect consumers from exorbitant or unreasonable pricing as well as temper
corporate greed by controlling the rate of return on investment of these corporations considering that
they have a monopoly over the goods or services that they provide to the general public. The subject
regulation differs therefrom in that (1) the discount does not prevent the establishments from
adjusting the level of prices of their goods and services, and (2) the discount does not apply to all
customers of a given establishment but only to the class of senior citizens.

Nonetheless, to the degree material to the resolution of this case, the 20% discount may be properly
viewed as belonging to the category of price regulatory measures which affects the profitability of
establishments subjected thereto. (Emphasis supplied)

The point of this paragraph is to simply show that the State has, in the past, regulated prices and
profits of business establishments. In other words, this type of regulatory measures is traditionally
recognized as police power measures so that the senior citizen discount may be considered as a
police power measure as well. What is more, the substantial distinctions between price and rate of
return on investment control laws vis-à-vis the senior citizen discount law provide greater reason to
uphold the validity of the senior citizen discount law. As previously discussed, the ability to adjust
prices allows the establishment subject to the senior citizen discount to prevent or mitigate any
reduction of profits or income/gross sales arising from the giving of the discount. In contrast,
establishments subject to price and rate of return on investment control laws cannot adjust prices
accordingly. Certainly, there is no intention to say that price and rate of return on investment control
laws are the justification for the senior citizen discount law. Not at all. The justification for the senior
citizen discount law is the plenary powers of Congress. The legislative power to regulate business
establishments is broad and covers a wide array of areas and subjects. It is well within Congress’
legislative powers to regulate the profits or income/gross sales of industries and enterprises, even
those without franchises. For what are franchises but mere legislative enactments? There is nothing
in the Constitution that prohibits Congress from regulating the profits or income/gross sales of
industries and enterprises without franchises. On the contrary, the social justice provisions of the
Constitution enjoin the State to regulate the "acquisition, ownership, use, and disposition" of property
and its increments.117

This may cover the regulation of profits or income/gross sales of all businesses, without qualification,
to attain the objective of diffusing wealth in order to protect and enhance the right of all the people to
human dignity.118

Thus, under the social justice policy of the Constitution, business establishments may be compelled
to contribute to uplifting the plight of vulnerable or marginalized groups in our society provided that
the regulation is not arbitrary, oppressive or confiscatory, or is not in breach of some specific
constitutional limitation. When the Dissent, therefore, states that the "profits of private
establishments which are non-franchisees cannot be regulated permanently, and there is no such
law regulating their profits permanently,"119 it is assuming what it ought to prove. First, there are laws
which, in effect, permanently regulate profits or income/gross sales of establishments without
franchises, and RA 9257 is one such law. And, second, Congress can regulate such profits or
income/gross sales because, as previously noted, there is nothing in the Constitution to prevent it
from doing so. Here, again, it must be emphasized that petitioners failed to present any proof to
show that the effects of the assailed law on their operations has been unreasonable, oppressive or
confiscatory. The permanent regulation of profits or income/gross sales of business establishments,
even those without franchises, is not as uncommon as the Dissent depicts it to be. For instance, the
minimum wage law allows the State to set the minimum wage of employees in a given region or
geographical area. Because of the added labor costs arising from the minimum wage, a permanent
reduction of profits or income/gross sales would result, assuming that the employer does not
increase the prices of his goods or services. To illustrate, suppose it costs a company ₱5.00 to
produce a product and it sells the same at ₱10.00 with a 50% profit margin. Later, the State
increases the minimum wage. As a result, the company incurs greater labor costs so that it now
costs ₱7.00 to produce the same product. The profit per product of the company would be reduced
to ₱3.00 with a profit margin of 30%. The net effect would be the same as in the earlier example of
granting a 20% senior citizen discount. As can be seen, the minimum wage law could, likewise, lead
to a permanent reduction of profits. Does this mean that the minimum wage law should, likewise, be
declared unconstitutional on the mere plea that it results in a permanent reduction of profits? Taking
it a step further, suppose the company decides to increase the price of its product in order to offset
the effects of the increase in labor cost; does this mean that the minimum wage law, following the
reasoning of the Dissent, is unconstitutional because the consuming public is effectively made to
subsidize the wage of a group of laborers, i.e., minimum wage earners? The same reasoning can be
adopted relative to the examples cited by the Dissent which, according to it, are valid police power
regulations. Article 157 of the Labor Code, Sections 19 and 18 of the Social Security Law, and
Section 7 of the Pag-IBIG Fund Law would effectively increase the labor cost of a business
establishment. This would, in turn, be integrated as part of the cost of its goods or services. Again, if
1âwphi1

the establishment does not increase its prices, the net effect would be a permanent reduction in its
profits or income/gross sales. Following the reasoning of the Dissent that "any form of permanent
taking of private property (including profits or income/gross sales)120 is an exercise of eminent domain
that requires the State to pay just compensation,"121 then these statutory provisions would, likewise,
have to be declared unconstitutional. It does not matter that these benefits are deemed part of the
employees’ legislated wages because the net effect is the same, that is, it leads to higher labor costs
and a permanent reduction in the profits or income/gross sales of the business establishments.122

The point then is this – most, if not all, regulatory measures imposed by the State on business
establishments impact, at some level, the latter’s prices and/or profits or income/gross sales.123

If the Court were to sustain the Dissent’s theory, then a wholesale nullification of such measures
would inevitably result. The police power of the State and the social justice provisions of the
Constitution would, thus, be rendered nugatory. There is nothing sacrosanct about profits or
income/gross sales. This, we made clear in Carlos Superdrug Corporation:124

Police power as an attribute to promote the common good would be diluted considerably if on the
mere plea of petitioners that they will suffer loss of earnings and capital, the questioned provision is
invalidated. Moreover, in the absence of evidence demonstrating the alleged confiscatory effect of
the provision in question, there is no basis for its nullification in view of the presumption of validity
which every law has in its favor.

xxxx

The Court is not oblivious of the retail side of the pharmaceutical industry and the competitive pricing
component of the business. While the Constitution protects property rights petitioners must the
realities of business and the State, in the exercise of police power, can intervene in the operations of
a business which may result in an impairment of property rights in the process.

Moreover, the right to property has a social dimension. While Article XIII of the Constitution provides
the percept for the protection of property, various laws and jurisprudence, particularly on agrarian
reform and the regulation of contracts and public utilities, continously serve as a reminder for the
promotion of public good.

Undeniably, the success of the senior citizens program rests largely on the support imparted by
petitioners and the other private establishments concerned. This being the case, the means
employed in invoking the active participation of the private sector, in order to achieve the purpose or
objective of the law, is reasonably and directly related. Without sufficient proof that Section 4(a) of
R.A. No. 9257 is arbitrary, and that the continued implementation of the same would be
unconscionably detrimental to petitioners, the Court will refrain form quashing a legislative act.125

In conclusion, we maintain that the correct rule in determining whether the subject regulatory
measure has amounted to a "taking" under the power of eminent domain is the one laid down in
Alalayan v. National Power Corporation126 and followed in Carlos Superdurg Corporation127 consistent
with long standing principles in police power and eminent domain analysis. Thus, the deprivation or
reduction of profits or income. Gross sales must be clearly shown to be unreasonable, oppressive or
confiscatory. Under the specific circumstances of this case, such determination can only be made
upon the presentation of competent proof which petitioners failed to do. A law, which has been in
operation for many years and promotes the welfare of a group accorded special concern by the
Constitution, cannot and should not be summarily invalidated on a mere allegation that it reduces the
profits or income/gross sales of business establishments.

WHEREFORE, the Petition is hereby DISMISSED for lack of merit.

SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice

EN BANC
Petitioner-Organizations, namely: G.R. Nos. 147036-37
PAMBANSANG KOALISYON NG MGA
SAMAHANG MAGSASAKA AT MANGGAGAWA
SA NIYUGAN (PKSMMN), COCONUT INDUSTRY
REFORM MOVEMENT (COIR), BUKLOD NG
MALAYANG MAGBUBUKID, PAMBANSANG
KILUSAN NG MGA SAMAHANG MAGSASAKA
(PAKISAMA), CENTER FOR AGRARIAN REFORM,
EMPOWERMENT AND TRANSFORMATION
(CARET), PAMBANSANG KATIPUNAN NG MGA
SAMAHAN SA KANAYUNAN (PKSK); Petitioner-
Legislator: REPRESENTATIVE LORETA ANN
ROSALES; and Petitioner-Individuals, namely:
VIRGILIO V. DAVID, JOSE MARIE FAUSTINO,
JOSE CONCEPCION, ROMEO ROYANDOYAN,
JOSE V. ROMERO, JR., ATTY. CAMILO L.
SABIO, and ATTY. ANTONIO T. CARPIO,
Petitioners, Present:

CORONA, C.J.,

CARPIO,

VELASCO, JR.,

LEONARDO-DE CASTRO,

BRION,

- versus - PERALTA,

BERSAMIN,

DEL CASTILLO,

ABAD,

VILLARAMA, JR.,

PEREZ,

MENDOZA,

SERENO,
 REYES, and

PERLAS-BERNABE, JJ.

EXECUTIVE SECRETARY, SECRETARY OF

AGRICULTURE, SECRETARY OF AGRARIAN

REFORM, PRESIDENTIAL COMMISSION ON

GOOD GOVERNMENT, THE SOLICITOR

GENERAL, PHILIPPINE COCONUT PRODUCERS

FEDERATION, INC. (COCOFED), and UNITED

COCONUT PLANTERS BANK (UCPB),

Respondents.

x ------------------------------------------------------ x

TEODORO J. AMOR, representing the Peasant G.R. No. 147811

Alliance of Samar and Leyte (PASALEY),

DOMINGO C. ENCALLADO, representing

Aniban ng Magsasaka at Manggagawa sa Niyugan

(AMMANI), and VIDAL M. PILIIN, representing

the Laguna Coalition,

Petitioners,

- versus -

EXECUTIVE SECRETARY, SECRETARY OF

AGRICULTURE, SECRETARY OF AGRARIAN

REFORM, PRESIDENTIAL COMMISSION ON

GOOD GOVERNMENT, THE SOLICITOR

GENERAL, PHILIPPINE COCONUT

PRODUCERS FEDERATION, UNITED Promulgated:

COCONUT PLANTERS BANK,

Respondents. April 10, 2012

x ---------------------------------------------------------------------------------------- x

DECISION

ABAD, J.:

These are consolidated petitions to declare unconstitutional certain

presidential decrees and executive orders of the martial law era relating to the
raising and use of coco-levy funds.

The Facts and the Case

On June 19, 1971 Congress enacted Republic Act (R.A.) 62601 that
established a Coconut Investment Fund (CI Fund) for the development of the
coconut industry through capital financing.2 Coconut farmers were to capitalize
and administer the Fund through the Coconut Investment Company (CIC)3 whose
objective was, among others, to advance the coconut farmers interests. For this
purpose, the law imposed a levy of P0.55 on the coconut farmers first domestic
sale of every 100 kilograms of copra, or its equivalent, for which levy he was to
get a receipt convertible into CIC shares of stock.4

1
Entitled AN ACT INSTITUTING A COCONUT INVESTMENT FUND AND CREATING A COCONUT
INVESTMENT COMPANY FOR THE ADMINISTRATION THEREOF.
2
Id., Section 2.
3
Id.
4
Id., Section 8.
 About a year following his proclamation of martial law in the country or on
August 20, 1973 President Ferdinand E. Marcos issued Presidential Decree (P.D.)
276,5 which established a Coconut Consumers Stabilization Fund (CCS Fund), to
address the crisis at that time in the domestic market for coconut-based
consumer goods. The CCS Fund was to be built up through the imposition of a
P15.00-levy for every first sale of 100 kilograms of copra resecada.6 The levy was
to cease after a year or earlier provided the crisis was over. Any remaining
balance of the Fund was to revert to the CI Fund established under R.A. 6260.7

A year later or on November 14, 1974 President Marcos issued P.D. 582,8
creating a permanent fund called the Coconut Industry Development Fund (CID
Fund) to channel for the ultimate direct benefit of coconut farmers part of the
levies that they were already paying. The Philippine Coconut Authority (PCA) was
to provide P100 million as initial capital of the CID Fund and, thereafter, give the
Fund at least P0.20 per kilogram of copra resecada out of the PCAs collection of
coconut consumers stabilization levy. In case of the lifting of this levy, the PCA
was then to impose a permanent levy of P0.20 on the first sale of every kilogram
of copra to form part of the CID Fund.9 Also, under P.D. 582, the Philippine
National Bank (PNB), then owned by the Government, was to receive on deposit,
administer, and use the CID Fund.10 P.D. 582 authorized the PNB to invest the
unused portion of the CID Fund in easily convertible investments, the earnings of
which were to form part of the Fund.11

5
Entitled ESTABLISHING A COCONUT CONSUMERS STABILIZATION FUND.
6
Id., Section 1(a).
7
Id., Section 2.
8
Entitled FURTHER AMENDING PRESIDENTIAL DECREE NO. 232, AS AMENDED.
9
Id., Section 3-B(c).
10
Id., Section 3-B.
11
Supra note 9.
 In 1975 President Marcos enacted P.D. 75512 which approved the
acquisition of a commercial bank for the benefit of the coconut farmers to enable
such bank to promptly and efficiently realize the industrys credit policy.13
Thus, the PCA bought 72.2% of the shares of stock of First United Bank, headed
by Pedro Cojuangco.14 Due to changes in its corporate identity and purpose,
the banks articles of incorporation were amended in July 1975, resulting in
a change in the banks name from First United Bank to United Coconut
Planters Bank (UCPB).15

On July 14, 1976 President Marcos enacted P.D. 961,16 the Coconut Industry
Code, which consolidated and codified existing laws relating to the coconut
industry. The Code provided that surpluses from the CCS Fund and the CID Fund
collections, not used for replanting and other authorized purposes, were to be
invested by acquiring shares of stock of corporations, including the San Miguel
Corporation (SMC), engaged in undertakings related to the coconut and palm oil
industries.17 UCPB was to make such investments and equitably distribute these
for free to coconut farmers.18 These investments constituted the Coconut
Industry Investment Fund (CIIF). P.D. 961 also provided that the coconut levy
funds (coco-levy funds) shall be owned by the coconut farmers in their private
capacities.19 This was reiterated in the PD 146820 amendment of June 11, 1978.

In 1980, President Marcos issued P.D. 1699,21 suspending the collections of

the CCS Fund and the CID Fund. But in 1981 he issued P.D. 184122 which revived

12
Entitled APPROVING THE CREDIT POLICY FOR THE COCONUT INDUSTRY AS RECOMMENDED BY
THE PHILIPPINE COCONUT AUTHORITY AND PROVIDING FUNDS THEREFOR.
13
Id., Section 1.
14
Republic of the Philippines v. Sandiganbayan, G.R. No. 118661, January 22, 2007, 512 SCRA 25.
15
Id.
16
Entitled AN ACT TO CODIFY THE LAWS DEALING WITH THE DEVELOPMENT OF THE COCONUT
AND OTHER PALM OIL INDUSTRY AND FOR OTHER PURPOSES.
17
Id., Article III, Section 9.
18
Id., Article III, Section 10.
19
Id., Article III, Section 5.
20
Entitled REVISING PRESIDENTIAL DECREE NUMBERED NINE HUNDRED SIXTY ONE.
21
Entitled AN ACT SUSPENDING THE COLLECTION OF THE COCONUT CONSUMERS STABILIZATION
FUND LEVY AND SIMILAR LEVIES AND PROVIDING IN CONNECTION THEREWITH APPROPRIATE
MEASURES TO CUSHION THE ADVERSE EFFECTS THEREOF ON THE COCONUT FARMERS.
the collection of coconut levies. P.D. 1841 renamed the CCS Fund into the
Coconut Industry Stabilization Fund (CIS Fund).23 This Fund was to be earmarked
proportionately among several development programs, such as coconut hybrid
replanting program, insurance coverage for the coconut farmers, and scholarship
program for their children.24

In November 2000 then President Joseph Estrada issued Executive Order

(E.O.) 312,25 establishing a Sagip Niyugan Program which sought to provide
immediate income supplement to coconut farmers and encourage the creation of
a sustainable local market demand for coconut oil and other coconut products.26
The Executive Order sought to establish a P1-billion fund by disposing of assets
acquired using coco-levy funds or assets of entities supported by those funds.27 A
committee was created to manage the fund under this program.28 A majority vote
of its members could engage the services of a reputable auditing firm to conduct
periodic audits.29

At about the same time, President Estrada issued E.O. 313,30 which created
an irrevocable trust fund known as the Coconut Trust Fund (the Trust Fund). This
aimed to provide financial assistance to coconut farmers, to the coconut industry,
and to other agri-related programs.31 The shares of stock of SMC were to serve as
the Trust Funds initial capital.32 These shares were acquired with CII Funds and

22
Entitled PRESCRIBING A SYSTEM OF FINANCING THE SOCIO-ECONOMIC AND DEVELOPMENTAL
PROGRAM FOR THE BENEFIT OF THE COCONUT FARMERS AND ACCORDINGLY AMENDING THE
LAWS THEREON.
23
Id., Section 5.
24
Id., Section 1.
25
Entitled ESTABLISHING THE ERAPS SAGIP NIYUGAN PROGRAM AS AN EMERGENCY MEASURE TO
ALLEVIATE THE PLIGHT OF COCONUT FARMERS ADVERSELY AFFECTED BY LOW PRICES OF
COPRA AND OTHER COCONUT PRODUCTS, AND PROVIDING FUNDS THEREFOR.
26
Id., Section 1.
27
Id., Section 4.
28
Id.
29
Id., Section 5.
30
Entitled RATIONALIZING THE USE OF THE COCONUT LEVY FUNDS BY CONSTITUTING A FUND
FOR ASSISTANCE TO COCONUT FARMERS AS AN IRREVOCABLE TRUST FUND AND CREATING A
COCONUT TRUST FUND COMMITTEE FOR THE MANAGEMENT THEREOF.
31
Id., Section 2.
32
Id., Section 3.
constituted approximately 27% of the outstanding capital stock of SMC. E.O. 313
designated UCPB, through its Trust Department, as the Trust Funds trustee bank.
The Trust Fund Committee would administer, manage, and supervise the
operations of the Trust Fund.33 The Committee would designate an external
auditor to do an annual audit or as often as needed but it may also request the
Commission on Audit (COA) to intervene.34

To implement its mandate, E.O. 313 directed the Presidential Commission

on Good Government, the Office of the Solicitor General, and other government
agencies to exclude the 27% CIIF SMC shares from Civil Case 0033, entitled
Republic of the Philippines v. Eduardo Cojuangco, Jr., et al., which was then
pending before the Sandiganbayan and to lift the sequestration over those
shares.35

On January 26, 2001, however, former President Gloria Macapagal-Arroyo

ordered the suspension of E.O.s 312 and 313.36 This notwithstanding, on March 1,
2001 petitioner organizations and individuals brought the present action in G.R.
147036-37 to declare E.O.s 312 and 313 as well as Article III, Section 5 of P.D.
1468 unconstitutional. On April 24, 2001 the other sets of petitioner organizations
and individuals instituted G.R. 147811 to nullify Section 2 of P.D. 755 and Article
III, Section 5 of P.D.s 961 and 1468 also for being unconstitutional.

The Issues Presented

The parties submit the following issues for adjudication:

33
Id., Section 6.
34
Id., Section 13.
35
Id., Section 14.
36
http://www.afrim.org.ph/Archives/2001/BusinessWorld/September/17/Estrada%20s%20EOs%20creating%2
0coco%20levy%20trust%20fund%20challenged.txt (last accessed July 8, 2011).
 Procedurally

1. Whether or not petitioners special civil actions of certiorari under

Rule 65 constituted the proper remedy for their actions; and

2. Whether or not petitioners have legal standing to bring the same to

court.

On the substance

3. Whether or not the coco-levy funds are public funds; and

4. Whether or not (a) Section 2 of P.D. 755, (b) Article III, Section 5 of
P.D.s 961 and 1468, (c) E.O. 312, and (d) E.O. 313 are unconstitutional.

The Rulings of the Court

First. UCPB questions the propriety of the present petitions for certiorari
and mandamus under Rule 65 on the ground that there are no ongoing
proceedings in any tribunal or board or before a government official exercising
judicial, quasi-judicial, or ministerial functions.37 UCPB insists that the Court
exercises appellate jurisdiction with respect to issues of constitutionality or
validity of laws and presidential orders.38

37
Macalintal v. Commission on Elections, 453 Phil. 586, 625 (2003).
381987 Constitution, Article VIII, Section 5. The Supreme Court shall have the following powers:
(1) Exercise original jurisdiction over cases affecting ambassadors, other public ministers and
consuls, and over petitions for certiorari, prohibition, mandamus, quo warranto, and habeas corpus.
(2) Review, revise, modify, or affirm on appeal or certiorari, as the law or the Rules of Court may
provide, final judgments and orders of lower courts in:
 But, as the Court previously held, where there are serious allegations that a
law has infringed the Constitution, it becomes not only the right but the duty of
the Court to look into such allegations and, when warranted, uphold the
supremacy of the Constitution.39 Moreover, where the issues raised are of
paramount importance to the public, as in this case, the Court has the discretion
to brush aside technicalities of procedure.40

Second. The Court has to uphold petitioners right to institute these petitions.
The petitioner organizations in these cases represent coconut farmers on whom the
burden of the coco-levies attaches. It is also primarily for their benefit that the
levies were imposed.

The individual petitioners, on the other hand, join the petitions as taxpayers.
The Court recognizes their right to restrain officials from wasting public funds
through the enforcement of an unconstitutional statute.41 This so-called taxpayers
suit is based on the theory that expenditure of public funds for the purpose of
executing an unconstitutional act is a misapplication of such funds.42

Besides, the 1987 Constitution accords to the citizens a greater

participation in the affairs of government. Indeed, it provides for people's
initiative, the right to information on matters of public concern (including the
right to know the state of health of their President), as well as the right to
file cases questioning the factual bases for the suspension of the privilege
of writ of habeas corpus or declaration of martial law. These provisions
enlarge the peoples right in the political as well as the judicial field. It grants

(a) All cases in which the constitutionality or validity of any treaty, international or executive
agreement, law, presidential decree, proclamation, order, instruction, ordinance, or regulation
is in question.
(b) All cases involving the legality of any tax, impost, assessment, or toll, or any penalty imposed
in relation thereto. x x x (Emphasis ours)
39
Taada v. Angara, 338 Phil. 546, 574 (1997).
40
Integrated Bar of the Philippines v. Zamora, 392 Phil. 618, 634 (2000).
41
Phil. Constitution Assn., Inc. v. Mathay, 124 Phil. 890, 898 (1966).
42
Tan v. Macapagal, 150 Phil. 778, 783 (1972).
them the right to interfere in the affairs of government and challenge any
act tending to prejudice their interest.

Third. For some time, different and conflicting notions had been formed as
to the nature and ownership of the coco-levy funds. The Court, however, finally
put an end to the dispute when it categorically ruled in Republic of the Philippines
v. COCOFED43 that these funds are not only affected with public interest; they are,
in fact, prima facie public funds. Prima facie means a fact presumed to be true
unless disproved by some evidence to the contrary.44

The Court was satisfied that the coco-levy funds were raised pursuant to
law to support a proper governmental purpose. They were raised with the use of
the police and taxing powers of the State for the benefit of the coconut industry
and its farmers in general. The COA reviewed the use of the funds. The Bureau of
Internal Revenue (BIR) treated them as public funds and the very laws governing
coconut levies recognize their public character.45

The Court has also recently declared that the coco-levy funds are in the
nature of taxes and can only be used for public purpose.46 Taxes are enforced
proportional contributions from persons and property, levied by the State by
virtue of its sovereignty for the support of the government and for all its public
needs.47 Here, the coco-levy funds were imposed pursuant to law, namely, R.A.
6260 and P.D. 276. The funds were collected and managed by the PCA, an
independent government corporation directly under the President.48 And, as the

43
423 Phil. 735 (2001).
44
Blacks Law Dictionary (5th ed., 1979), p. 1071.
45
Supra note 43, at 772.
46
Philippine Coconut Producers Federation, Inc. (COCOFED ) v. Republic of the Philippines, G.R. Nos. 177857-
58 and 178193, January 24, 2012.
47
TAX PRINCIPLES AND REMEDIES, Japar B. Dimaampao, (2nd ed., 2005), p.1; citing 1 Cooley 62.
48
Supra note 20, Article II, Section 1.
respondent public officials pointed out, the pertinent laws used the term levy,49
which means to tax,50 in describing the exaction.

Of course, unlike ordinary revenue laws, R.A. 6260 and P.D. 276 did not
raise money to boost the governments general funds but to provide means for
the rehabilitation and stabilization of a threatened industry, the coconut industry,
which is so affected with public interest as to be within the police power of the
State.51 The funds sought to support the coconut industry, one of the main
economic backbones of the country, and to secure economic benefits for the
coconut farmers and farm workers. The subject laws are akin to the sugar liens

49
R.A. 6260

Section 8. The Coconut Investment Fund. There shall be levied on the coconut farmer a sum equivalent to
fifty-five centavos (P0.55) on the first domestic sale of every one hundred kilograms of copra, or its equivalent in
terms of other coconut products, for which he shall be issued a receipt which shall be converted into shares of
stock of the Company upon its incorporation as a private entity in accordance with Section seven hereof. x x x
(Emphasis ours)

P.D. 276

1. x x x
(a) A levy, initially, of P15.00 per 100 kilograms of copra resecada or its equivalent in other
coconut products, shall be imposed on every first sale, in accordance with the mechanics established
under R.A. 6260, effective at the start of business hours on August 10, 1973.
The proceeds from the levy shall be deposited with the Philippine National Bank or any other
government bank to the account of the Coconut Consumers Stabilization Fund, as a separate trust fund
which shall not form part of the general fund of the government. (Emphasis ours)

P.D. 582
Section 3-B. Coconut Industry Development Fund. x x x

c) x x x As the initial funds of the Coconut Industry Development Fund, the Authority is hereby
directed to pay to the Coconut Industry Development Fund the amount of One Hundred Million Pesos
(P100,000,000.00) out of its collections of the coconut consumers stabilization levy and thereafter the
Authority shall pay to the said Fund an amount equal to at least twenty centavos (P0.20) per kilogram of
copra resecada or its equivalent out of its current collections of the coconut consumers stabilization levy.
In the event that the coconut consumers stabilization levy is lifted, a permanent levy of twenty centavos
(P0.20) is thereafter automatically imposed on the first sale of every kilogram of copra or its equivalent in
terms of other coconut products x x x. (Emphasis ours)
50
Blacks Law Dictionary (5th ed., 1979), p. 816.
51
Republic of the Philippines v. COCOFED, supra note 43, at 765, citing Caltex Philippines, Inc. v. Commission on
Audit, G.R. No. 92585, May 8, 1992, 208 SCRA 726, 756 and Osmea v. Orbos, G.R. No. 99886, March 31, 1993,
220 SCRA 703, 711.
imposed by Sec. 7(b) of P.D. 388,52 and the oil price stabilization funds under P.D.
1956,53 as amended by E.O. 137.54

Respondent UCPB suggests that the coco-levy funds are closely similar to
the Social Security System (SSS) funds, which have been declared to be not public
funds but properties of the SSS members and held merely in trust by the
government.55 But the SSS Law56 collects premium contributions. It does not
collect taxes from members for a specific public purpose. They pay contributions
in exchange for insurance protection and benefits like loans, medical or health
services, and retirement packages. The benefits accrue to every SSS member, not
to the public, in general.57

Furthermore, SSS members do not lose ownership of their contributions.

The government merely holds these in trust, together with his employers
contribution, to answer for his future benefits.58 The coco-levy funds, on the other
hand, belong to the government and are subject to its administration and
disposition. Thus, these funds, including its incomes, interests, proceeds, or profits,
as well as all its assets, properties, and shares of stocks procured with such
funds must be treated, used, administered, and managed as public funds.59

Lastly, the coco-levy funds are evidently special funds. In Gaston v. Republic
Planters Bank,60 the Court held that the State collected stabilization fees from
sugar millers, planters, and producers for a special purpose: to finance the growth
and development of the sugar industry and all its components. The fees were
52
Entitled CREATING THE PHILIPPINE SUGAR COMMISSION.
53
Entitled IMPOSING AN AD VALOREM TAX ON CERTAIN MANUFACTURED OILS AND OTHER FUELS;
BUNKER FUEL OIL AND DIESEL FUEL OIL; REVISING THE RATES OF SPECIFIC TAX THEREON;
ABOLISHING THE OIL INDUSTRY SPECIAL FUND; AND FOR OTHER PURPOSES.
54 Entitled EXPANDING THE SOURCES AND UTILIZATION OF THE OIL PRICE STABILIZATION FUND

(OPSF) BY AMENDING PRESIDENTIAL DECREE NO. 1956.

55
Catholic Archbishop of Manila v. Social Security Commission, 110 Phil. 616, 622 (1961).
56
Republic Act 1161.
57
Rollo (G.R. 147036-37), p. 362, Public Respondents REPLY to COMMENT of UCPB.
58
REVIEWER IN LABOR AND SOCIAL LEGISLATION, Samson S. Alcantara and Samson B. Alcantara, Jr.,
(2004 ed., with 2007 Supplement), p. 982.
59
Republic of the Philippines v. COCOFED, supra note 43, at 776, citing Executive Order 277, DIRECTING THE
MODE OF TREATMENT UTILIZATION, ADMINISTRATION AND MANAGEMENT OF THE COCONUT
LEVY FUNDS, September 24, 1995.
60 242 Phil. 377 (1988).
levied for a special purpose and, therefore, constituted special fund when
collected. Its character as such fund was made clear by the fact that they were
deposited in the PNB (then a wholly owned government bank) and not in the
Philippine Treasury. In Osmea v. Orbos,61 the Court held that the oil price
stabilization fund was a special fund mainly because this was segregated from the
general fund and placed in what the law referred to as a trust account. Yet it
remained subject to COA scrutiny and review. The Court finds no substantial
distinction between these funds and the coco-levy funds, except as to the
industry they each support.

Fourth. Petitioners in G.R. 147811 assert that Section 2 of P.D. 755 above is
void and unconstitutional for disregarding the public character of coco-levy funds.
The subject section provides:

Section 2. Financial Assistance. x x x and since the operations, and

activities of the Philippine Coconut Authority are all in accord with the present social
economic plans and programs of the Government, all collections and levies which
the Philippine Coconut Authority is authorized to levy and collect such as but not
limited to the Coconut Consumers Stabilization Levy, and the Coconut Industry
Development Fund as prescribed by Presidential Decree No. 582 shall not be
considered or construed, under any law or regulation, special and/or fiduciary
funds and do not form part of the general funds of the national government
within the contemplation of Presidential Decree No. 711. (Emphasis ours)

The Court has, however, already passed upon this question in Philippine
Coconut Producers Federation, Inc. (COCOFED) v. Republic of the Philippines.62 It
held as unconstitutional Section 2 of P.D. 755 for effectively authorizing the PCA
to utilize portions of the CCS Fund to pay the financial commitment of the farmers
to acquire UCPB and to deposit portions of the CCS Fund levies with UCPB interest
free. And as there also provided, the CCS Fund, CID Fund and like levies that PCA
is authorized to collect shall be considered as non-special or fiduciary funds to be
transferred to the general fund of the Government, meaning they shall be
deemed private funds.

61
Osmea v. Orbos, supra note 51.
62
Supra note 46.
 Identical provisions of subsequent presidential decrees likewise declared
coco-levy funds private properties of coconut farmers. Article III, Section 5 of P.D.
961 reads:

Section 5. Exemptions. The Coconut Consumers Stabilization Fund and

the Coconut Industry Development Fund as well as all disbursements of said funds
for the benefit of the coconut farmers as herein authorized shall not be construed
or interpreted, under any law or regulation, as special and/or fiduciary funds,
or as part of the general funds of the national government within the
contemplation of P.D. No. 711; nor as a subsidy, donation, levy, government
funded investment, or government share within the contemplation of P.D. 898,
the intention being that said Fund and the disbursements thereof as herein
authorized for the benefit of the coconut farmers shall be owned by them in
their own private capacities. (Emphasis ours)

Section 5 of P.D. 1468 basically reproduces the above provision, thus

Section 5. Exemption. The Coconut Consumers Stabilization Fund and the

Coconut Industry Development Fund, as well as all disbursements as herein
authorized, shall not be construed or interpreted, under any law or regulation,
as special and/or fiduciary funds, or as part of the general funds of the national
government within the contemplation of P.D. 711; nor as subsidy, donation, levy
government funded investment, or government share within the contemplation
of P.D. 898, the intention being that said Fund and the disbursements thereof
as herein authorized for the benefit of the coconut farmers shall be owned by
them in their private capacities: Provided, however, That the President may at any
time authorize the Commission on Audit or any other officer of the government to
audit the business affairs, administration, and condition of persons and entities who
receive subsidy for coconut-based consumer products x x x. (Emphasis ours)

Notably, the raising of money by levy on coconut farm production, a form

of taxation as already stated, began in 1971 for the purpose of developing the
coconut industry and promoting the interest of coconut farmers. The use of the
fund was expanded in 1973 to include the stabilization of the domestic market for
coconut-based consumer goods and in 1974 to divert part of the funds for
obtaining direct benefit to coconut farmers. After five years or in 1976, however,
P.D. 961 declared the coco-levy funds private property of the farmers. P.D. 1468
reiterated this declaration in 1978. But neither presidential decree actually turned
over possession or control of the funds to the farmers in their private capacity.
The government continued to wield undiminished authority over the
management and disposition of those funds.
 In any event, such declaration is void. There is ownership when a thing
pertaining to a person is completely subjected to his will in everything that is not
prohibited by law or the concurrence with the rights of another.63 An owner is
free to exercise all attributes of ownership: the right, among others, to possess,
use and enjoy, abuse or consume, and dispose or alienate the thing owned.64 The
owner is of course free to waive all or some of these rights in favor of others. But
in the case of the coconut farmers, they could not, individually or collectively,
waive what have not been and could not be legally imparted to them.

Section 2 of P.D. 755, Article III, Section 5 of P.D. 961, and Article III, Section
5 of P.D. 1468 completely ignore the fact that coco-levy funds are public funds
raised through taxation. And since taxes could be exacted only for a public
purpose, they cannot be declared private properties of individuals although such
individuals fall within a distinct group of persons.65

The Court of course grants that there is no hard-and-fast rule for

determining what constitutes public purpose. It is an elastic concept that could
be made to fit into modern standards. Public purpose, for instance, is no longer
restricted to traditional government functions like building roads and school
houses or safeguarding public health and safety. Public purpose has been
construed as including the promotion of social justice. Thus, public funds may be
used for relocating illegal settlers, building low-cost housing for them, and
financing both urban and agrarian reforms that benefit certain poor individuals.
Still, these uses relieve volatile iniquities in society and, therefore, impact on
public order and welfare as a whole.

63
Cojuangco v. Sandiganbayan, G.R. No. 183278, April 24, 2009, 586 SCRA 790, 796.
64
Id. at 797.
65
Planters Products, Inc. v. Fertiphil Corporation, G.R. No. 166006, March 14, 2008, 548 SCRA 485, 510, citing
CONSTITUTIONAL LAW, Isagani Cruz, (1998 ed.), p. 90.
 But the assailed provisions, which removed the coco-levy funds from the
general funds of the government and declared them private properties of coconut
farmers, do not appear to have a color of social justice for their purpose. The levy
on copra that farmers produce appears, in the first place, to be a business tax
judging by its tax base. The concept of farmers-businessmen is incompatible with
the idea that coconut farmers are victims of social injustice and so should be
beneficiaries of the taxes raised from their earnings.

It would altogether be different of course if the laws mentioned set apart a

portion of the coco-levy fund for improving the lives of destitute coconut farm
owners or workers for their social amelioration to establish a proper government
purpose. The support for the poor is generally recognized as a public duty and has
long been an accepted exercise of police power in the promotion of the common
good.66 But the declarations do not distinguish between wealthy coconut farmers
and the impoverished ones. And even if they did, the Government cannot just
embark on a philanthropic orgy of inordinate dole-outs for motives political or
otherwise.67 Consequently, such declarations are void since they appropriate
public funds for private purpose and, therefore, violate the citizens right to
substantive due process.68

On another point, in stating that the coco-levy fund shall not be construed
or interpreted, under any law or regulation, as special and/or fiduciary funds, or
as part of the general funds of the national government, P.D.s 961 and 1468 seek
to remove such fund from COA scrutiny.

66 Binay v. Domingo, G.R. No. 92389, September 11, 1991, 201 SCRA 508, 516.
67
Id.
68 Pepsi-Cola Bottling Company of the Philippines, Inc. v. Municipality of Tanauan, Leyte, 161 Phil. 591,

602 (1976).
 This is also the fault of President Estradas E.O. 312 which deals with P1
billion to be generated out of the sale of coco-fund acquired assets. Thus

Section 5. Audit of Fund and Submission of Report. The Committee, by a

majority vote, shall engage the services of a reputable auditing firm to conduct
periodic audits of the fund. It shall render a quarterly report on all pertinent
transactions and availments of the fund to the Office of the President within the first
three (3) working days of the succeeding quarter. (Emphasis ours)

E.O. 313 has a substantially identical provision governing the management

and disposition of the Coconut Trust Fund capitalized with the substantial SMC
shares of stock that the coco-fund acquired. Thus

Section 13. Accounting. x x x

The Fund shall be audited annually or as often as necessary by an external

auditor designated by the Committee. The Committee may also request the
Commission on Audit to conduct an audit of the Fund. (Emphasis ours)

But, since coco-levy funds are taxes, the provisions of P.D.s 755, 961
and 1468 as well as those of E.O.s 312 and 313 that remove such funds
and the assets acquired through them from the jurisdiction of the COA
violate Article IX-D, Section 2(1)69 of the 1987 Constitution. Section 2(1)
vests in the COA the power and authority to examine uses of government
money and property. The cited P.D.s and E.O.s also contravene Section

69
Section 2. (1) The Commission on Audit shall have the power, authority, and duty to examine, audit, and settle all
accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or
held in trust by, or pertaining to, the Government, or any of its subdivisions, agencies, or instrumentalities,
including government-owned or controlled corporations with original charters, and on a post-audit basis: (a)
constitutional bodies, commissions and offices that have been granted fiscal autonomy under this Constitution; (b)
autonomous state colleges and universities; (c) other government-owned or controlled corporations and their
subsidiaries; and (d) such non-governmental entities receiving subsidy or equity, directly or indirectly, from or
through the Government, which are required by law or the granting institution to submit to such audit as a condition
of subsidy or equity x x x. (Emphasis ours)
270 of P.D. 898 (Providing for the Restructuring of the Commission on
Audit), which has the force of a statute.

And there is no legitimate reason why such funds should be shielded from
COA review and audit. The PCA, which implements the coco-levy laws and collects
the coco-levy funds, is a government-owned and controlled corporation subject
to COA review and audit.

E.O. 313 suffers from an additional infirmity. Its title, Rationalizing the Use
of the Coconut Levy Funds by Constituting a Fund for Assistance to Coconut
Farmers as an Irrevocable Trust Fund and Creating a Coconut Trust Fund
Committee for the Management thereof tends to mislead. Apparently, it intends
to create a trust fund out of the coco-levy funds to provide economic assistance
to the coconut farmers and, ultimately, benefit the coconut industry.71 But on
closer look, E.O. 313 strays from the special purpose for which the law raises
coco-levy funds in that it permits the use of coco-levy funds for improving
productivity in other food areas. Thus:

Section 2. Purpose of the Fund. The Fund shall be established for the purpose
of financing programs of assistance for the benefit of the coconut farmers, the coconut
industry, and other agri-related programs intended to maximize food productivity,
develop business opportunities in the countryside, provide livelihood alternatives, and
promote anti-poverty programs. (Emphasis ours)

xxxx

70
Section 2. Jurisdiction of The Commission on Audit. The Authority and powers of the Commission on Audit
shall extend to and comprehend all matters relating to auditing and accounting procedures, systems, and controls,
including inquiry into the utilization of resources and operating performance, the keeping of the general accounts of
the Government, the preservation of vouchers pertaining thereto, the examination and inspection of the books,
records, and papers relating to those accounts; and the audit and settlement of the accounts of all persons respecting
funds or property received or held by them in an accountable capacity, as well as the examination, audit, and
settlement of all debts and claims of any sort due from or owing to the Government or any of its subdivisions,
agencies, and instrumentalities. The said jurisdiction extends to all government-owned or controlled
corporations and other self-governing boards, commissions, or agencies of the Government, and as herein
prescribed, including non-governmental entities subsidized by the Government, those funded by donations
through the Government, those required to pay levies or government share, and those partly funded by the
Government. (Emphasis ours)
71
Supra note 30, Whereas clauses.
 Section 9. Use and Disposition of the Trust Income. The Coconut Trust Fund
Committee, on an annual basis, shall determine and establish the amount comprising
the Trust Income. After such determination, the Committee shall earmark, allocate and
disburse the Trust Income for the following purposes, namely:

xxxx

(d) Thirty percent (30%) of the Trust Income shall be used to assist and
fund agriculturally-related programs for the Government, as reasonably determined by
the Trust Fund Committee, implemented for the purpose of: (i) maximizing food
productivity in the agriculture areas of the country, (ii) enhancing the upliftment and
well-being of the living conditions of farmers and agricultural workers, (iii) developing
viable industries and business opportunities in the countryside, (iv) providing alternative
means of livelihood to the direct dependents of agriculture businesses and enterprises,
and (v) providing financial assistance and support to coconut farmers in times of
economic hardship due to extremely low prices of copra and other coconut products,
natural calamities, world market dislocation and similar occurrences, including financial
support to the ERAPs Sagip Niyugan Program established under Executive Order No. 312
dated November 3, 2000; x x x. (Emphasis ours)

Clearly, E.O. 313 above runs counter to the constitutional provision which
directs that all money collected on any tax levied for a special purpose shall be
treated as a special fund and paid out for such purpose only.72 Assisting other
agriculturally-related programs is way off the coco-funds objective of promoting
the general interests of the coconut industry and its farmers.

A final point, the E.O.s also transgress P.D. 1445,73 Section 84(2),74
the first part by the previously mentioned sections of E.O. 313 and the
second part by Section 4 of E.O. 312 and Sections 6 and 7 of E.O. 313.

72
Supra note 38, Article VI, Section 29. x x x
(3) All money collected on any tax levied for a special purpose shall be treated as a special fund and
paid out for such purpose only. If the purpose for which a special fund was created has been fulfilled or
abandoned, the balance, if any, shall be transferred to the general funds of the Government. (Emphasis ours)
73
Entitled ORDAINING AND INSTITUTING A GOVERNMENT AUDITING CODE OF THE PHILIPPINES.
74 Section 84. Disbursement of government funds.

xxxx
2. Trust funds shall not be paid out of any public treasury or depository except in fulfillment of the
purpose for which the trust was created or funds received, and upon authorization of the legislative body,
or head of any other agency of the government having control thereof, and subject to pertinent budget
law, rules and regulations.
E.O. 313 vests the power to administer, manage, and supervise the
operations and disbursements of the Trust Fund it established (capitalized
with SMC shares bought out of coco-levy funds) in a Coconut Trust Fund
Committee. Thus

Section 6. Creation of the Coconut Trust Fund Committee. A Committee is

hereby created to administer, manage and supervise the operations of the Trust Fund,
chaired by the President with ten (10) members, as follows:

(a) four (4) representatives from the government sector, two of

whom shall be the Secretary of Agriculture and the Secretary of
Agrarian Reform who shall act as Vice Chairmen;

(b) four (4) representatives from coconut farmers organizations,

one of whom shall come from a list of nominees from the Philippine
Coconut Producers Federation Inc. (COCOFED);

(c) a representative from the CIIF; and

(d) a representative from a non-government organization (NGO)

involved in agricultural and rural development.

All decisions of the Coconut Trust Fund Committee shall be determined by a majority
vote of all the members.

The Coconut Trust Fund Committee shall perform the functions and duties set forth
in Section 7 hereof, with the skill, care, prudence and diligence necessary under the
circumstances then prevailing that a prudent man acting in like capacity would
exercise.

The members of the Coconut Trust Fund Committee shall be appointed by the
President and shall hold office at his pleasure.

The Coconut Trust Fund Committee is authorized to hire administrative, technical

and/or support staff as may be required to enable it to effectively perform its
functions and responsibilities. (Emphasis ours)

Section 7. Functions and Responsibilities of the Committee. The Coconut Trust

Fund Committee shall have the following functions and responsibilities:

(a) set the investment policy of the Trust Fund;

(b) establish priorities for assistance giving preference to small coconut

farmers and farmworkers which shall be reviewed periodically and revised as
necessary in accordance with changing conditions;
(c) receive, process and approve project proposals for financing by the
Trust Fund;

(d) decide on the use of the Trust Funds income or net earnings including
final action on applications for assistance, grants and/or loans;
 (e) avail of professional counsel and services by retaining an investment
and financial manager, if desired;

(f) formulate the rules and regulations governing the allocation,

utilization and disbursement of the Fund; and

(g) perform such other acts and things as may be necessary proper or
conducive to attain the purposes of the Fund. (Emphasis ours)

Section 4 of E.O. 312 does essentially the same thing. It vests the
management and disposition of the assistance fund generated from the
sale of coco-levy fund-acquired assets into a Committee of five members.
Thus, Section 4 of E.O. 312 provides

Section 4. Funding. Assets acquired through the coconut levy funds or by

entities financed by the coconut levy funds identified by the President for appropriate
disposal or sale, shall be sold or disposed to generate a maximum fund of ONE
BILLION PESOS (P1,000,000,000.00) which shall be managed by a Committee
composed of a Chairman and four (4) members to be appointed by the
President whose term shall be co-terminus with the Program. x x x (Emphasis
ours)

In effect, the above transfers the power to allocate, use, and disburse
coco-levy funds that P.D. 232 vested in the PCA and transferred the same,
without legislative authorization and in violation of P.D. 232, to the
Committees mentioned above. An executive order cannot repeal a
presidential decree which has the same standing as a statute enacted by
Congress.

UCPB invokes the principle of separability to save the assailed laws

from being struck down. The general rule is that where part of a statute is
void as repugnant to the Constitution, while another part is valid, the valid
portion, if susceptible to being separated from the invalid, may stand and
be enforced. When the parts of a statute, however, are so mutually
dependent and connected, as conditions, considerations, or compensations
for each other, as to warrant a belief that the legislature intended them as a
whole, the nullity of one part will vitiate the rest. In which case, if some
parts are unconstitutional, all the other provisions which are thus
dependent, conditional, or connected must consequently fall with them.75

But, given that the provisions of E.O.s 312 and 313, which as already stated
invalidly transferred powers over the funds to two committees that President
Estrada created, the rest of their provisions became non-operational. It is evident
that President Estrada would not have created the new funding programs if they
were to be managed by some other entity. Indeed, he made himself Chairman of
the Coconut Trust Fund and left to his discretion the appointment of the
members of the other committee.

WHEREFORE, the Court GRANTS the petition in G.R. 147036-37, PARTLY

GRANTS the petition in G.R. 147811, and declares the following VOID:

a) E.O. 312, for being repugnant to Section 84(2) of P.D.

1445, and Article IX-D, Section 2(1) of the Constitution; and

b) E.O. 313, for being in contravention of Section 84(2) of

P.D. 1445, and Article IX-D, Section 2(1) and Article VI, Section 29(3)
of the Constitution.

The Court has previously declared Section 2 of P.D. 755 and Article III,
Section 5 of P.D.s 961 and 1468 unconstitutional.

SO ORDERED.

75
STATUTORY CONSTRUCTION, Ruben E. Agpalo, (5th ed., 2003), pp. 37-38.
 ROBERTO A. ABAD

Associate Justice

WE CONCUR:

RENATO C. CORONA

Chief Justice

ANTONIO T. CARPIO PRESBITERO J. VELASCO, JR.

Associate Justice Associate Justice

TERESITA J. LEONARDO-DE CASTRO ARTURO D. BRION

Associate Justice Associate Justice
DIOSDADO M. PERALTA LUCAS P. BERSAMIN

Associate Justice Associate Justice

MARIANO C. DEL CASTILLO MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice

JOSE PORTUGAL PEREZ JOSE CATRAL MENDOZA

Associate Justice Associate Justice

MARIA LOURDES P. A. SERENO BIENVENIDO L. REYES

Associate Justice Associate Justice

(On Official Leave)

ESTELA M. PERLAS-BERNABE

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified

that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court.

RENATO C. CORONA

Chief Justice
G.R. No. L-41631 December 17, 1976

HON. RAMON D. BAGATSING, as Mayor of the City of Manila; ROMAN G. GARGANTIEL, as

Secretary to the Mayor; THE MARKET ADMINISTRATOR; and THE MUNICIPAL BOARD OF
MANILA, petitioners,
vs.
HON. PEDRO A. RAMIREZ, in his capacity as Presiding Judge of the Court of First Instance of
Manila, Branch XXX and the FEDERATION OF MANILA MARKET VENDORS, INC., respondents.

Santiago F. Alidio and Restituto R. Villanueva for petitioners.

Antonio H. Abad, Jr. for private respondent.

Federico A. Blay for petitioner for intervention.

MARTIN, J.:

The chief question to be decided in this case is what law shall govern the publication of a tax
ordinance enacted by the Municipal Board of Manila, the Revised City Charter (R.A. 409, as
amended), which requires publication of the ordinance before its enactment and after its approval, or
the Local Tax Code (P.D. No. 231), which only demands publication after approval.

On June 12, 1974, the Municipal Board of Manila enacted Ordinance No. 7522, "AN ORDINANCE
REGULATING THE OPERATION OF PUBLIC MARKETS AND PRESCRIBING FEES FOR THE
RENTALS OF STALLS AND PROVIDING PENALTIES FOR VIOLATION THEREOF AND FOR
OTHER PURPOSES." The petitioner City Mayor, Ramon D. Bagatsing, approved the ordinance on
June 15, 1974.

On February 17, 1975, respondent Federation of Manila Market Vendors, Inc. commenced Civil
Case 96787 before the Court of First Instance of Manila presided over by respondent Judge,
seeking the declaration of nullity of Ordinance No. 7522 for the reason that (a) the publication
requirement under the Revised Charter of the City of Manila has not been complied with; (b) the
Market Committee was not given any participation in the enactment of the ordinance, as envisioned
by Republic Act 6039; (c) Section 3 (e) of the Anti-Graft and Corrupt Practices Act has been violated;
and (d) the ordinance would violate Presidential Decree No. 7 of September 30, 1972 prescribing the
collection of fees and charges on livestock and animal products.

Resolving the accompanying prayer for the issuance of a writ of preliminary injunction, respondent
Judge issued an order on March 11, 1975, denying the plea for failure of the respondent Federation
of Manila Market Vendors, Inc. to exhaust the administrative remedies outlined in the Local Tax
Code.

After due hearing on the merits, respondent Judge rendered its decision on August 29, 1975,
declaring the nullity of Ordinance No. 7522 of the City of Manila on the primary ground of non-
compliance with the requirement of publication under the Revised City Charter. Respondent Judge
ruled:

There is, therefore, no question that the ordinance in question was not
published at all in two daily newspapers of general circulation in the City of
Manila before its enactment. Neither was it published in the same manner
after approval, although it was posted in the legislative hall and in all city
public markets and city public libraries. There being no compliance with the
mandatory requirement of publication before and after approval, the
ordinance in question is invalid and, therefore, null and void.

Petitioners moved for reconsideration of the adverse decision, stressing that (a) only a post-
publication is required by the Local Tax Code; and (b) private respondent failed to exhaust all
administrative remedies before instituting an action in court.
On September 26, 1975, respondent Judge denied the motion.

Forthwith, petitioners brought the matter to Us through the present petition for review on certiorari.

We find the petition impressed with merits.

1. The nexus of the present controversy is the apparent conflict between the Revised Charter of the
City of Manila and the Local Tax Code on the manner of publishing a tax ordinance enacted by the
Municipal Board of Manila. For, while Section 17 of the Revised Charter provides:

Each proposed ordinance shall be published in two daily newspapers of

general circulation in the city, and shall not be discussed or enacted by the
Board until after the third day following such publication. * * * Each approved
ordinance * * * shall be published in two daily newspapers of general
circulation in the city, within ten days after its approval; and shall take effect
and be in force on and after the twentieth day following its publication, if no
date is fixed in the ordinance.

Section 43 of the Local Tax Code directs:

Within ten days after their approval, certified true copies of all provincial, city,
municipal and barrio ordinances levying or imposing taxes, fees or other
charges shall be published for three consecutive days in a newspaper or
publication widely circulated within the jurisdiction of the local government, or
posted in the local legislative hall or premises and in two other conspicuous
places within the territorial jurisdiction of the local government. In either case,
copies of all provincial, city, municipal and barrio ordinances shall be
furnished the treasurers of the respective component and mother units of a
local government for dissemination.

In other words, while the Revised Charter of the City of Manila requires publication before the
enactment of the ordinance and after the approval thereof in two daily newspapers of general
circulation in the city, the Local Tax Code only prescribes for publication after the approval of
"ordinances levying or imposing taxes, fees or other charges" either in a newspaper or publication
widely circulated within the jurisdiction of the local government or by posting the ordinance in the
local legislative hall or premises and in two other conspicuous places within the territorial jurisdiction
of the local government. Petitioners' compliance with the Local Tax Code rather than with the
Revised Charter of the City spawned this litigation.

There is no question that the Revised Charter of the City of Manila is a special act since it relates
only to the City of Manila, whereas the Local Tax Code is a general law because it applies
universally to all local governments. Blackstone defines general law as a universal rule affecting the
entire community and special law as one relating to particular persons or things of a class. 1 And the
rule commonly said is that a prior special law is not ordinarily repealed by a subsequent general law.
The fact that one is special and the other general creates a presumption that the special is to be
considered as remaining an exception of the general, one as a general law of the land, the other as
the law of a particular case. 2 However, the rule readily yields to a situation where the special statute
refers to a subject in general, which the general statute treats in particular. The exactly is the
circumstance obtaining in the case at bar. Section 17 of the Revised Charter of the City of Manila
speaks of "ordinance" in general, i.e., irrespective of the nature and scope thereof, whereas, Section
43 of the Local Tax Code relates to "ordinances levying or imposing taxes, fees or other charges" in
particular. In regard, therefore, to ordinances in general, the Revised Charter of the City of Manila is
doubtless dominant, but, that dominant force loses its continuity when it approaches the realm of
"ordinances levying or imposing taxes, fees or other charges" in particular. There, the Local Tax
Code controls. Here, as always, a general provision must give way to a particular provision. 3 Special
provision governs. 4 This is especially true where the law containing the particular provision was
enacted later than the one containing the general provision. The City Charter of Manila was
promulgated on June 18, 1949 as against the Local Tax Code which was decreed on June 1, 1973.
The law-making power cannot be said to have intended the establishment of conflicting and hostile
systems upon the same subject, or to leave in force provisions of a prior law by which the new will of
the legislating power may be thwarted and overthrown. Such a result would render legislation a
useless and Idle ceremony, and subject the law to the reproach of uncertainty and unintelligibility. 5
The case of City of Manila v. Teotico 6 is opposite. In that case, Teotico sued the City of Manila for
damages arising from the injuries he suffered when he fell inside an uncovered and unlighted
catchbasin or manhole on P. Burgos Avenue. The City of Manila denied liability on the basis of the
City Charter (R.A. 409) exempting the City of Manila from any liability for damages or injury to
persons or property arising from the failure of the city officers to enforce the provisions of the charter
or any other law or ordinance, or from negligence of the City Mayor, Municipal Board, or other
officers while enforcing or attempting to enforce the provisions of the charter or of any other law or
ordinance. Upon the other hand, Article 2189 of the Civil Code makes cities liable for damages for
the death of, or injury suffered by any persons by reason of the defective condition of roads, streets,
bridges, public buildings, and other public works under their control or supervision. On review, the
Court held the Civil Code controlling. It is true that, insofar as its territorial application is concerned,
the Revised City Charter is a special law and the subject matter of the two laws, the Revised City
Charter establishes a general rule of liability arising from negligence in general, regardless of the
object thereof, whereas the Civil Code constitutes a particular prescription for liability due to
defective streets in particular. In the same manner, the Revised Charter of the City prescribes a rule
for the publication of "ordinance" in general, while the Local Tax Code establishes a rule for the
publication of "ordinance levying or imposing taxes fees or other charges in particular.

In fact, there is no rule which prohibits the repeal even by implication of a special or specific act by a
general or broad one. 7 A charter provision may be impliedly modified or superseded by a later
statute, and where a statute is controlling, it must be read into the charter notwithstanding any
particular charter provision. 8 A subsequent general law similarly applicable to all cities prevails over
any conflicting charter provision, for the reason that a charter must not be inconsistent with the
general laws and public policy of the state. 9 A chartered city is not an independent sovereignty. The
state remains supreme in all matters not purely local. Otherwise stated, a charter must yield to the
constitution and general laws of the state, it is to have read into it that general law which governs the
municipal corporation and which the corporation cannot set aside but to which it must yield. When a
city adopts a charter, it in effect adopts as part of its charter general law of such character. 10

2. The principle of exhaustion of administrative remedies is strongly asserted by petitioners as

having been violated by private respondent in bringing a direct suit in court. This is because Section
47 of the Local Tax Code provides that any question or issue raised against the legality of any tax
ordinance, or portion thereof, shall be referred for opinion to the city fiscal in the case of tax
ordinance of a city. The opinion of the city fiscal is appealable to the Secretary of Justice, whose
decision shall be final and executory unless contested before a competent court within thirty (30)
days. But, the petition below plainly shows that the controversy between the parties is deeply rooted
in a pure question of law: whether it is the Revised Charter of the City of Manila or the Local Tax
Code that should govern the publication of the tax ordinance. In other words, the dispute is sharply
focused on the applicability of the Revised City Charter or the Local Tax Code on the point at issue,
and not on the legality of the imposition of the tax. Exhaustion of administrative remedies before
resort to judicial bodies is not an absolute rule. It admits of exceptions. Where the question litigated
upon is purely a legal one, the rule does not apply. 11 The principle may also be disregarded when it
does not provide a plain, speedy and adequate remedy. It may and should be relaxed when its
application may cause great and irreparable damage. 12

3. It is maintained by private respondent that the subject ordinance is not a "tax ordinance," because
the imposition of rentals, permit fees, tolls and other fees is not strictly a taxing power but a revenue-
raising function, so that the procedure for publication under the Local Tax Code finds no application.
The pretense bears its own marks of fallacy. Precisely, the raising of revenues is the principal object
of taxation. Under Section 5, Article XI of the New Constitution, "Each local government unit shall
have the power to create its own sources of revenue and to levy taxes, subject to such provisions as
may be provided by law." 13 And one of those sources of revenue is what the Local Tax Code points
to in particular: "Local governments may collect fees or rentals for the occupancy or use of public
markets and premises * * *." 14 They can provide for and regulate market stands, stalls and
privileges, and, also, the sale, lease or occupancy thereof. They can license, or permit the use of,
lease, sell or otherwise dispose of stands, stalls or marketing privileges. 15

It is a feeble attempt to argue that the ordinance violates Presidential Decree No. 7, dated
September 30, 1972, insofar as it affects livestock and animal products, because the said decree
prescribes the collection of other fees and charges thereon "with the exception of ante-mortem and
post-mortem inspection fees, as well as the delivery, stockyard and slaughter fees as may be
authorized by the Secretary of Agriculture and Natural Resources." 16 Clearly, even the exception
clause of the decree itself permits the collection of the proper fees for livestock. And the Local Tax
Code (P.D. 231, July 1, 1973) authorizes in its Section 31: "Local governments may collect fees for
the slaughter of animals and the use of corrals * * * "

4. The non-participation of the Market Committee in the enactment of Ordinance No. 7522
supposedly in accordance with Republic Act No. 6039, an amendment to the City Charter of Manila,
providing that "the market committee shall formulate, recommend and adopt, subject to the
ratification of the municipal board, and approval of the mayor, policies and rules or regulation
repealing or maneding existing provisions of the market code" does not infect the ordinance with any
germ of invalidity. 17 The function of the committee is purely recommendatory as the underscored
phrase suggests, its recommendation is without binding effect on the Municipal Board and the City
Mayor. Its prior acquiescence of an intended or proposed city ordinance is not a condition sine qua
non before the Municipal Board could enact such ordinance. The native power of the Municipal
Board to legislate remains undisturbed even in the slightest degree. It can move in its own initiative
and the Market Committee cannot demur. At most, the Market Committee may serve as a legislative
aide of the Municipal Board in the enactment of city ordinances affecting the city markets or, in plain
words, in the gathering of the necessary data, studies and the collection of consensus for the
proposal of ordinances regarding city markets. Much less could it be said that Republic Act 6039
intended to delegate to the Market Committee the adoption of regulatory measures for the operation
and administration of the city markets. Potestas delegata non delegare potest.

5. Private respondent bewails that the market stall fees imposed in the disputed ordinance are
diverted to the exclusive private use of the Asiatic Integrated Corporation since the collection of said
fees had been let by the City of Manila to the said corporation in a "Management and Operating
Contract." The assumption is of course saddled on erroneous premise. The fees collected do not go
direct to the private coffers of the corporation. Ordinance No. 7522 was not made for the corporation
but for the purpose of raising revenues for the city. That is the object it serves. The entrusting of the
collection of the fees does not destroy the public purpose of the ordinance. So long as the purpose is
public, it does not matter whether the agency through which the money is dispensed is public or
private. The right to tax depends upon the ultimate use, purpose and object for which the fund is
raised. It is not dependent on the nature or character of the person or corporation whose
intermediate agency is to be used in applying it. The people may be taxed for a public purpose,
although it be under the direction of an individual or private corporation. 18

Nor can the ordinance be stricken down as violative of Section 3(e) of the Anti-Graft and Corrupt
Practices Act because the increased rates of market stall fees as levied by the ordinance will
necessarily inure to the unwarranted benefit and advantage of the corporation. 19 We are concerned
only with the issue whether the ordinance in question is intra vires. Once determined in the
affirmative, the measure may not be invalidated because of consequences that may arise from its
enforcement. 20

ACCORDINGLY, the decision of the court below is hereby reversed and set aside. Ordinance No.
7522 of the City of Manila, dated June 15, 1975, is hereby held to have been validly enacted. No.
costs.

SO ORDERED.

Castro, C.J., Barredo, Makasiar, Antonio, Muñoz Palma, Aquino and Concepcion, Jr., JJ., concur.

Teehankee, J., reserves his vote.

EN BANC

G.R. No. L-23645 October 29, 1968

BENJAMIN P. GOMEZ, petitioner-appellee,

vs.
ENRICO PALOMAR, in his capacity as Postmaster General, HON. BRIGIDO R. VALENCIA, in
his capacity as Secretary of Public Works and Communications, and DOMINGO GOPEZ, in
his capacity as Acting Postmaster of San Fernando, Pampanga, respondent-appellants.

Lorenzo P. Navarro and Narvaro Belar S. Navarro for petitioner-appellee.

Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Frine C. Zaballero and
Solicitor Dominador L. Quiroz for respondents-appellants.
CASTRO, J.:

This appeal puts in issue the constitutionality of Republic Act 1635,1 as amended by Republic Act
2631,2 which provides as follows:

To help raise funds for the Philippine Tuberculosis Society, the Director of Posts shall order
for the period from August nineteen to September thirty every year the printing and issue of
semi-postal stamps of different denominations with face value showing the regular postage
charge plus the additional amount of five centavos for the said purpose, and during the said
period, no mail matter shall be accepted in the mails unless it bears such semi-postal
stamps: Provided, That no such additional charge of five centavos shall be imposed on
newspapers. The additional proceeds realized from the sale of the semi-postal stamps shall
constitute a special fund and be deposited with the National Treasury to be expended by the
Philippine Tuberculosis Society in carrying out its noble work to prevent and eradicate
tuberculosis.

The respondent Postmaster General, in implementation of the law, thereafter issued four (4)
administrative orders numbered 3 (June 20, 1958), 7 (August 9, 1958), 9 (August 28, 1958), and 10
(July 15, 1960). All these administrative orders were issued with the approval of the respondent
Secretary of Public Works and Communications.

The pertinent portions of Adm. Order 3 read as follows:

Such semi-postal stamps could not be made available during the period from August 19 to
September 30, 1957, for lack of time. However, two denominations of such stamps, one at "5
+ 5" centavos and another at "10 + 5" centavos, will soon be released for use by the public
on their mails to be posted during the same period starting with the year 1958.

xxx xxx xxx

During the period from August 19 to September 30 each year starting in 1958, no mail matter
of whatever class, and whether domestic or foreign, posted at any Philippine Post Office and
addressed for delivery in this country or abroad, shall be accepted for mailing unless it bears
at least one such semi-postal stamp showing the additional value of five centavos intended
for the Philippine Tuberculosis Society.

In the case of second-class mails and mails prepaid by means of mail permits or impressions
of postage meters, each piece of such mail shall bear at least one such semi-postal stamp if
posted during the period above stated starting with the year 1958, in addition to being
charged the usual postage prescribed by existing regulations. In the case of business reply
envelopes and cards mailed during said period, such stamp should be collected from the
addressees at the time of delivery. Mails entitled to franking privilege like those from the
office of the President, members of Congress, and other offices to which such privilege has
been granted, shall each also bear one such semi-postal stamp if posted during the said
period.

Mails posted during the said period starting in 1958, which are found in street or post-office
mail boxes without the required semi-postal stamp, shall be returned to the sender, if known,
with a notation calling for the affixing of such stamp. If the sender is unknown, the mail
matter shall be treated as nonmailable and forwarded to the Dead Letter Office for proper
disposition.

Adm. Order 7, amending the fifth paragraph of Adm. Order 3, reads as follows:

In the case of the following categories of mail matter and mails entitled to franking privilege
which are not exempted from the payment of the five centavos intended for the Philippine
Tuberculosis Society, such extra charge may be collected in cash, for which official receipt
(General Form No. 13, A) shall be issued, instead of affixing the semi-postal stamp in the
manner hereinafter indicated:

1. Second-class mail. — Aside from the postage at the second-class rate, the extra charge of
five centavos for the Philippine Tuberculosis Society shall be collected on each separately-
addressed piece of second-class mail matter, and the total sum thus collected shall be
 entered in the same official receipt to be issued for the postage at the second-class rate. In
making such entry, the total number of pieces of second-class mail posted shall be stated,
thus: "Total charge for TB Fund on 100 pieces . .. P5.00." The extra charge shall be entered
separate from the postage in both of the official receipt and the Record of Collections.

2. First-class and third-class mail permits. — Mails to be posted without postage affixed
under permits issued by this Bureau shall each be charged the usual postage, in addition to
the five-centavo extra charge intended for said society. The total extra charge thus received
shall be entered in the same official receipt to be issued for the postage collected, as in
subparagraph 1.

3. Metered mail. — For each piece of mail matter impressed by postage meter under
metered mail permit issued by this Bureau, the extra charge of five centavos for said society
shall be collected in cash and an official receipt issued for the total sum thus received, in the
manner indicated in subparagraph 1.

4. Business reply cards and envelopes. — Upon delivery of business reply cards and
envelopes to holders of business reply permits, the five-centavo charge intended for said
society shall be collected in cash on each reply card or envelope delivered, in addition to the
required postage which may also be paid in cash. An official receipt shall be issued for the
total postage and total extra charge received, in the manner shown in subparagraph 1.

5. Mails entitled to franking privilege. — Government agencies, officials, and other persons
entitled to the franking privilege under existing laws may pay in cash such extra charge
intended for said society, instead of affixing the semi-postal stamps to their mails, provided
that such mails are presented at the post-office window, where the five-centavo extra charge
for said society shall be collected on each piece of such mail matter. In such case, an official
receipt shall be issued for the total sum thus collected, in the manner stated in subparagraph
1.

Mail under permits, metered mails and franked mails not presented at the post-office window
shall be affixed with the necessary semi-postal stamps. If found in mail boxes without such
stamps, they shall be treated in the same way as herein provided for other mails.

Adm. Order 9, amending Adm. Order 3, as amended, exempts "Government and its Agencies and
Instrumentalities Performing Governmental Functions." Adm. Order 10, amending Adm. Order 3, as
amended, exempts "copies of periodical publications received for mailing under any class of mail
matter, including newspapers and magazines admitted as second-class mail."

The FACTS. On September l5, 1963 the petitioner Benjamin P. Gomez mailed a letter at the post
office in San Fernando, Pampanga. Because this letter, addressed to a certain Agustin Aquino of
1014 Dagohoy Street, Singalong, Manila did not bear the special anti-TB stamp required by the
statute, it was returned to the petitioner.

In view of this development, the petitioner brough suit for declaratory relief in the Court of First
Instance of Pampanga, to test the constitutionality of the statute, as well as the implementing
administrative orders issued, contending that it violates the equal protection clause of the
Constitution as well as the rule of uniformity and equality of taxation. The lower court declared the
statute and the orders unconstitutional; hence this appeal by the respondent postal authorities.

For the reasons set out in this opinion, the judgment appealed from must be reversed.

I.

Before reaching the merits, we deem it necessary to dispose of the respondents' contention that
declaratory relief is unavailing because this suit was filed after the petitioner had committed a breach
of the statute. While conceding that the mailing by the petitioner of a letter without the additional anti-
TB stamp was a violation of Republic Act 1635, as amended, the trial court nevertheless refused to
dismiss the action on the ground that under section 6 of Rule 64 of the Rules of Court, "If before the
final termination of the case a breach or violation of ... a statute ... should take place, the action may
thereupon be converted into an ordinary action."
The prime specification of an action for declaratory relief is that it must be brought "before breach or
violation" of the statute has been committed. Rule 64, section 1 so provides. Section 6 of the same
rule, which allows the court to treat an action for declaratory relief as an ordinary action, applies only
if the breach or violation occurs after the filing of the action but before the termination thereof.3

Hence, if, as the trial court itself admitted, there had been a breach of the statute before the firing of
this action, then indeed the remedy of declaratory relief cannot be availed of, much less can the suit
be converted into an ordinary action.

Nor is there merit in the petitioner's argument that the mailing of the letter in question did not
constitute a breach of the statute because the statute appears to be addressed only to postal
authorities. The statute, it is true, in terms provides that "no mail matter shall be accepted in the
mails unless it bears such semi-postal stamps." It does not follow, however, that only postal
authorities can be guilty of violating it by accepting mails without the payment of the anti-TB stamp. It
is obvious that they can be guilty of violating the statute only if there are people who use the mails
without paying for the additional anti-TB stamp. Just as in bribery the mere offer constitutes a breach
of the law, so in the matter of the anti-TB stamp the mere attempt to use the mails without the stamp
constitutes a violation of the statute. It is not required that the mail be accepted by postal authorities.
That requirement is relevant only for the purpose of fixing the liability of postal officials.

Nevertheless, we are of the view that the petitioner's choice of remedy is correct because this suit
was filed not only with respect to the letter which he mailed on September 15, 1963, but also with
regard to any other mail that he might send in the future. Thus, in his complaint, the petitioner prayed
that due course be given to "other mails without the semi-postal stamps which he may deliver for
mailing ... if any, during the period covered by Republic Act 1635, as amended, as well as other
mails hereafter to be sent by or to other mailers which bear the required postage, without collection
of additional charge of five centavos prescribed by the same Republic Act." As one whose mail was
returned, the petitioner is certainly interested in a ruling on the validity of the statute requiring the use
of additional stamps.

II.

We now consider the constitutional objections raised against the statute and the implementing
orders.

1. It is said that the statute is violative of the equal protection clause of the Constitution. More
specifically the claim is made that it constitutes mail users into a class for the purpose of the tax
while leaving untaxed the rest of the population and that even among postal patrons the statute
discriminatorily grants exemption to newspapers while Administrative Order 9 of the respondent
Postmaster General grants a similar exemption to offices performing governmental functions. .

The five centavo charge levied by Republic Act 1635, as amended, is in the nature of an excise tax,
laid upon the exercise of a privilege, namely, the privilege of using the mails. As such the objections
levelled against it must be viewed in the light of applicable principles of taxation.

To begin with, it is settled that the legislature has the inherent power to select the subjects of
taxation and to grant exemptions.4 This power has aptly been described as "of wide range and
flexibility."5 Indeed, it is said that in the field of taxation, more than in other areas, the legislature
possesses the greatest freedom in classification.6 The reason for this is that traditionally,
classification has been a device for fitting tax programs to local needs and usages in order to
achieve an equitable distribution of the tax burden.7

That legislative classifications must be reasonable is of course undenied. But what the petitioner
asserts is that statutory classification of mail users must bear some reasonable relationship to the
end sought to be attained, and that absent such relationship the selection of mail users is
constitutionally impermissible. This is altogether a different proposition. As explained in
Commonwealth v. Life Assurance Co.:8

While the principle that there must be a reasonable relationship between classification made
by the legislation and its purpose is undoubtedly true in some contexts, it has no application
to a measure whose sole purpose is to raise revenue ... So long as the classification
imposed is based upon some standard capable of reasonable comprehension, be that
standard based upon ability to produce revenue or some other legitimate distinction, equal
protection of the law has been afforded. See Allied Stores of Ohio, Inc. v. Bowers, supra, 358
 U.S. at 527, 79 S. Ct. at 441; Brown Forman Co. v. Commonwealth of Kentucky, 2d U.S. 56,
573, 80 S. Ct. 578, 580 (1910).

We are not wont to invalidate legislation on equal protection grounds except by the clearest
demonstration that it sanctions invidious discrimination, which is all that the Constitution forbids. The
remedy for unwise legislation must be sought in the legislature. Now, the classification of mail users
is not without any reason. It is based on ability to pay, let alone the enjoyment of a privilege, and on
administrative convinience. In the allocation of the tax burden, Congress must have concluded that
the contribution to the anti-TB fund can be assured by those whose who can afford the use of the
mails.

The classification is likewise based on considerations of administrative convenience. For it is now a

settled principle of law that "consideration of practical administrative convenience and cost in the
administration of tax laws afford adequate ground for imposing a tax on a well recognized and
defined class."9 In the case of the anti-TB stamps, undoubtedly, the single most important and
influential consideration that led the legislature to select mail users as subjects of the tax is the
relative ease and convenienceof collecting the tax through the post offices. The small amount of five
centavos does not justify the great expense and inconvenience of collecting through the regular
means of collection. On the other hand, by placing the duty of collection on postal authorities the tax
was made almost self-enforcing, with as little cost and as little inconvenience as possible.

And then of course it is not accurate to say that the statute constituted mail users into a class. Mail
users were already a class by themselves even before the enactment of the statue and all that the
legislature did was merely to select their class. Legislation is essentially empiric and Republic Act
1635, as amended, no more than reflects a distinction that exists in fact. As Mr. Justice Frankfurter
said, "to recognize differences that exist in fact is living law; to disregard [them] and concentrate on
some abstract identities is lifeless logic."10

Granted the power to select the subject of taxation, the State's power to grant exemption must
likewise be conceded as a necessary corollary. Tax exemptions are too common in the law; they
have never been thought of as raising issues under the equal protection clause.

It is thus erroneous for the trial court to hold that because certain mail users are exempted from the
levy the law and administrative officials have sanctioned an invidious discrimination offensive to the
Constitution. The application of the lower courts theory would require all mail users to be taxed, a
conclusion that is hardly tenable in the light of differences in status of mail users. The Constitution
does not require this kind of equality.

As the United States Supreme Court has said, the legislature may withhold the burden of the tax in
order to foster what it conceives to be a beneficent enterprise.11 This is the case of newspapers
which, under the amendment introduced by Republic Act 2631, are exempt from the payment of the
additional stamp.

As for the Government and its instrumentalities, their exemption rests on the State's sovereign
immunity from taxation. The State cannot be taxed without its consent and such consent, being in
derogation of its sovereignty, is to be strictly construed.12 Administrative Order 9 of the respondent
Postmaster General, which lists the various offices and instrumentalities of the Government exempt
from the payment of the anti-TB stamp, is but a restatement of this well-known principle of
constitutional law.

The trial court likewise held the law invalid on the ground that it singles out tuberculosis to the
exclusion of other diseases which, it is said, are equally a menace to public health. But it is never a
requirement of equal protection that all evils of the same genus be eradicated or none at all. 13 As this
Court has had occasion to say, "if the law presumably hits the evil where it is most felt, it is not to be
overthrown because there are other instances to which it might have been applied."14

2. The petitioner further argues that the tax in question is invalid, first, because it is not levied for a
public purpose as no special benefits accrue to mail users as taxpayers, and second, because it
violates the rule of uniformity in taxation.

The eradication of a dreaded disease is a public purpose, but if by public purpose the petitioner
means benefit to a taxpayer as a return for what he pays, then it is sufficient answer to say that the
only benefit to which the taxpayer is constitutionally entitled is that derived from his enjoyment of the
privileges of living in an organized society, established and safeguarded by the devotion of taxes to
public purposes. Any other view would preclude the levying of taxes except as they are used to
compensate for the burden on those who pay them and would involve the abandonment of the most
fundamental principle of government — that it exists primarily to provide for the common good.15

Nor is the rule of uniformity and equality of taxation infringed by the imposition of a flat rate rather
than a graduated tax. A tax need not be measured by the weight of the mail or the extent of the
service rendered. We have said that considerations of administrative convenience and cost afford an
adequate ground for classification. The same considerations may induce the legislature to impose a
flat tax which in effect is a charge for the transaction, operating equally on all persons within the
class regardless of the amount involved.16 As Mr. Justice Holmes said in sustaining the validity of a
stamp act which imposed a flat rate of two cents on every $100 face value of stock transferred:

One of the stocks was worth $30.75 a share of the face value of $100, the other $172. The
inequality of the tax, so far as actual values are concerned, is manifest. But, here again
equality in this sense has to yield to practical considerations and usage. There must be a
fixed and indisputable mode of ascertaining a stamp tax. In another sense, moreover, there
is equality. When the taxes on two sales are equal, the same number of shares is sold in
each case; that is to say, the same privilege is used to the same extent. Valuation is not the
only thing to be considered. As was pointed out by the court of appeals, the familiar stamp
tax of 2 cents on checks, irrespective of income or earning capacity, and many others,
illustrate the necessity and practice of sometimes substituting count for weight ...17

According to the trial court, the money raised from the sales of the anti-TB stamps is spent for the
benefit of the Philippine Tuberculosis Society, a private organization, without appropriation by law.
But as the Solicitor General points out, the Society is not really the beneficiary but only the agency
through which the State acts in carrying out what is essentially a public function. The money is
treated as a special fund and as such need not be appropriated by law.18

3. Finally, the claim is made that the statute is so broadly drawn that to execute it the respondents
had to issue administrative orders far beyond their powers. Indeed, this is one of the grounds on
which the lower court invalidated Republic Act 1631, as amended, namely, that it constitutes an
undue delegation of legislative power.

Administrative Order 3, as amended by Administrative Orders 7 and 10, provides that for certain
classes of mail matters (such as mail permits, metered mails, business reply cards, etc.), the five-
centavo charge may be paid in cash instead of the purchase of the anti-TB stamp. It further states
that mails deposited during the period August 19 to September 30 of each year in mail boxes without
the stamp should be returned to the sender, if known, otherwise they should be treated as
nonmailable.

It is true that the law does not expressly authorize the collection of five centavos except through the
sale of anti-TB stamps, but such authority may be implied in so far as it may be necessary to prevent
a failure of the undertaking. The authority given to the Postmaster General to raise funds through the
mails must be liberally construed, consistent with the principle that where the end is required the
appropriate means are given.19

The anti-TB stamp is a distinctive stamp which shows on its face not only the amount of the
additional charge but also that of the regular postage. In the case of business reply cards, for
instance, it is obvious that to require mailers to affix the anti-TB stamp on their cards would be to
make them pay much more because the cards likewise bear the amount of the regular postage.

It is likewise true that the statute does not provide for the disposition of mails which do not bear the
anti-TB stamp, but a declaration therein that "no mail matter shall be accepted in the mails unless it
bears such semi-postal stamp" is a declaration that such mail matter is nonmailable within the
meaning of section 1952 of the Administrative Code. Administrative Order 7 of the Postmaster
General is but a restatement of the law for the guidance of postal officials and employees. As for
Administrative Order 9, we have already said that in listing the offices and entities of the Government
exempt from the payment of the stamp, the respondent Postmaster General merely observed an
established principle, namely, that the Government is exempt from taxation.

ACCORDINGLY, the judgment a quo is reversed, and the complaint is dismissed, without
pronouncement as to costs.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Sanchez, Angeles and Capistrano, JJ., concur.
Zaldivar, J., is on leave.

G.R. No. L-10405 December 29, 1960

WENCESLAO PASCUAL, in his official capacity as Provincial Governor of Rizal, petitioner-

appellant,
vs.
THE SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS, ET AL., respondents-
appellees.

Asst. Fiscal Noli M. Cortes and Jose P. Santos for appellant.

Office of the Asst. Solicitor General Jose G. Bautista and Solicitor A. A. Torres for appellee.

CONCEPCION, J.:

Appeal, by petitioner Wenceslao Pascual, from a decision of the Court of First Instance of Rizal,
dismissing the above entitled case and dissolving the writ of preliminary injunction therein issued,
without costs.

On August 31, 1954, petitioner Wenceslao Pascual, as Provincial Governor of Rizal, instituted this
action for declaratory relief, with injunction, upon the ground that Republic Act No. 920, entitled "An
Act Appropriating Funds for Public Works", approved on June 20, 1953, contained, in section 1-C (a)
thereof, an item (43[h]) of P85,000.00 "for the construction, reconstruction, repair, extension and
improvement" of Pasig feeder road terminals (Gen. Roxas — Gen. Araneta — Gen. Lucban — Gen.
Capinpin — Gen. Segundo — Gen. Delgado — Gen. Malvar — Gen. Lim)"; that, at the time of the
passage and approval of said Act, the aforementioned feeder roads were "nothing but projected and
planned subdivision roads, not yet constructed, . . . within the Antonio Subdivision . . . situated at . . .
Pasig, Rizal" (according to the tracings attached to the petition as Annexes A and B, near Shaw
Boulevard, not far away from the intersection between the latter and Highway 54), which projected
feeder roads "do not connect any government property or any important premises to the main
highway"; that the aforementioned Antonio Subdivision (as well as the lands on which said feeder
roads were to be construed) were private properties of respondent Jose C. Zulueta, who, at the time
of the passage and approval of said Act, was a member of the Senate of the Philippines; that on
May, 1953, respondent Zulueta, addressed a letter to the Municipal Council of Pasig, Rizal, offering
to donate said projected feeder roads to the municipality of Pasig, Rizal; that, on June 13, 1953, the
offer was accepted by the council, subject to the condition "that the donor would submit a plan of the
said roads and agree to change the names of two of them"; that no deed of donation in favor of the
municipality of Pasig was, however, executed; that on July 10, 1953, respondent Zulueta wrote
another letter to said council, calling attention to the approval of Republic Act. No. 920, and the sum
of P85,000.00 appropriated therein for the construction of the projected feeder roads in question;
that the municipal council of Pasig endorsed said letter of respondent Zulueta to the District
Engineer of Rizal, who, up to the present "has not made any endorsement thereon" that inasmuch
as the projected feeder roads in question were private property at the time of the passage and
approval of Republic Act No. 920, the appropriation of P85,000.00 therein made, for the
construction, reconstruction, repair, extension and improvement of said projected feeder roads, was
illegal and, therefore, void ab initio"; that said appropriation of P85,000.00 was made by Congress
because its members were made to believe that the projected feeder roads in question were "public
roads and not private streets of a private subdivision"'; that, "in order to give a semblance of legality,
when there is absolutely none, to the aforementioned appropriation", respondents Zulueta executed
on December 12, 1953, while he was a member of the Senate of the Philippines, an alleged deed of
donation — copy of which is annexed to the petition — of the four (4) parcels of land constituting
said projected feeder roads, in favor of the Government of the Republic of the Philippines; that said
alleged deed of donation was, on the same date, accepted by the then Executive Secretary; that
being subject to an onerous condition, said donation partook of the nature of a contract; that, such,
said donation violated the provision of our fundamental law prohibiting members of Congress from
being directly or indirectly financially interested in any contract with the Government, and, hence, is
unconstitutional, as well as null and void ab initio, for the construction of the projected feeder roads
in question with public funds would greatly enhance or increase the value of the aforementioned
subdivision of respondent Zulueta, "aside from relieving him from the burden of constructing his
subdivision streets or roads at his own expense"; that the construction of said projected feeder roads
was then being undertaken by the Bureau of Public Highways; and that, unless restrained by the
court, the respondents would continue to execute, comply with, follow and implement the
aforementioned illegal provision of law, "to the irreparable damage, detriment and prejudice not only
to the petitioner but to the Filipino nation."

Petitioner prayed, therefore, that the contested item of Republic Act No. 920 be declared null and
void; that the alleged deed of donation of the feeder roads in question be "declared unconstitutional
and, therefor, illegal"; that a writ of injunction be issued enjoining the Secretary of Public Works and
Communications, the Director of the Bureau of Public Works and Highways and Jose C. Zulueta
from ordering or allowing the continuance of the above-mentioned feeder roads project, and from
making and securing any new and further releases on the aforementioned item of Republic Act No.
920, and the disbursing officers of the Department of Public Works and Highways from making any
further payments out of said funds provided for in Republic Act No. 920; and that pending final
hearing on the merits, a writ of preliminary injunction be issued enjoining the aforementioned parties
respondent from making and securing any new and further releases on the aforesaid item of
Republic Act No. 920 and from making any further payments out of said illegally appropriated funds.

Respondents moved to dismiss the petition upon the ground that petitioner had "no legal capacity to
sue", and that the petition did "not state a cause of action". In support to this motion, respondent
Zulueta alleged that the Provincial Fiscal of Rizal, not its provincial governor, should represent the
Province of Rizal, pursuant to section 1683 of the Revised Administrative Code; that said respondent
is " not aware of any law which makes illegal the appropriation of public funds for the improvements
of . . . private property"; and that, the constitutional provision invoked by petitioner is inapplicable to
the donation in question, the same being a pure act of liberality, not a contract. The other
respondents, in turn, maintained that petitioner could not assail the appropriation in question
because "there is no actual bona fide case . . . in which the validity of Republic Act No. 920 is
necessarily involved" and petitioner "has not shown that he has a personal and substantial interest"
in said Act "and that its enforcement has caused or will cause him a direct injury."

Acting upon said motions to dismiss, the lower court rendered the aforementioned decision, dated
October 29, 1953, holding that, since public interest is involved in this case, the Provincial Governor
of Rizal and the provincial fiscal thereof who represents him therein, "have the requisite
personalities" to question the constitutionality of the disputed item of Republic Act No. 920; that "the
legislature is without power appropriate public revenues for anything but a public purpose", that the
instructions and improvement of the feeder roads in question, if such roads where private property,
would not be a public purpose; that, being subject to the following condition:

The within donation is hereby made upon the condition that the Government of the
Republic of the Philippines will use the parcels of land hereby donated for street
purposes only and for no other purposes whatsoever; it being expressly understood
that should the Government of the Republic of the Philippines violate the condition
hereby imposed upon it, the title to the land hereby donated shall, upon such
violation, ipso facto revert to the DONOR, JOSE C. ZULUETA. (Emphasis supplied.)

which is onerous, the donation in question is a contract; that said donation or contract is "absolutely
forbidden by the Constitution" and consequently "illegal", for Article 1409 of the Civil Code of the
Philippines, declares in existence and void from the very beginning contracts "whose cause, objector
purpose is contrary to law, morals . . . or public policy"; that the legality of said donation may not be
contested, however, by petitioner herein, because his "interest are not directly affected" thereby; and
that, accordingly, the appropriation in question "should be upheld" and the case dismissed.

At the outset, it should be noted that we are concerned with a decision granting the aforementioned
motions to dismiss, which as much, are deemed to have admitted hypothetically the allegations of
fact made in the petition of appellant herein. According to said petition, respondent Zulueta is the
owner of several parcels of residential land situated in Pasig, Rizal, and known as the Antonio
Subdivision, certain portions of which had been reserved for the projected feeder roads
aforementioned, which, admittedly, were private property of said respondent when Republic Act No.
920, appropriating P85,000.00 for the "construction, reconstruction, repair, extension and
improvement" of said roads, was passed by Congress, as well as when it was approved by the
President on June 20, 1953. The petition further alleges that the construction of said roads, to be
undertaken with the aforementioned appropriation of P85,000.00, would have the effect of relieving
respondent Zulueta of the burden of constructing his subdivision streets or roads at his own
expenses, 1and would "greatly enhance or increase the value of the subdivision" of said respondent.
The lower court held that under these circumstances, the appropriation in question was "clearly for a
private, not a public purpose."
Respondents do not deny the accuracy of this conclusion, which is self-evident. 2However,
respondent Zulueta contended, in his motion to dismiss that:

A law passed by Congress and approved by the President can never be illegal
because Congress is the source of all laws . . . Aside from the fact that movant is not
aware of any law which makes illegal the appropriation of public funds for the
improvement of what we, in the meantime, may assume as private property . . .
(Record on Appeal, p. 33.)

The first proposition must be rejected most emphatically, it being inconsistent with the nature of the
Government established under the Constitution of the Republic of the Philippines and the system of
checks and balances underlying our political structure. Moreover, it is refuted by the decisions of this
Court invalidating legislative enactments deemed violative of the Constitution or organic laws. 3

As regards the legal feasibility of appropriating public funds for a public purpose, the principle
according to Ruling Case Law, is this:

It is a general rule that the legislature is without power to appropriate public revenue
for anything but a public purpose. . . . It is the essential character of the direct object
of the expenditure which must determine its validity as justifying a tax, and not the
magnitude of the interest to be affected nor the degree to which the general
advantage of the community, and thus the public welfare, may be ultimately
benefited by their promotion. Incidental to the public or to the state, which results
from the promotion of private interest and the prosperity of private enterprises or
business, does not justify their aid by the use public money. (25 R.L.C. pp. 398-400;
Emphasis supplied.)

The rule is set forth in Corpus Juris Secundum in the following language:

In accordance with the rule that the taxing power must be exercised for public
purposes only, discussed supra sec. 14, money raised by taxation can be expended
only for public purposes and not for the advantage of private individuals. (85 C.J.S.
pp. 645-646; emphasis supplied.)

Explaining the reason underlying said rule, Corpus Juris Secundum states:

Generally, under the express or implied provisions of the constitution, public funds
may be used only for public purpose. The right of the legislature to appropriate funds
is correlative with its right to tax, and, under constitutional provisions against taxation
except for public purposes and prohibiting the collection of a tax for one purpose and
the devotion thereof to another purpose, no appropriation of state funds can be made
for other than for a public purpose.

xxx xxx xxx

The test of the constitutionality of a statute requiring the use of public funds is
whether the statute is designed to promote the public interest, as opposed to the
furtherance of the advantage of individuals, although each advantage to individuals
might incidentally serve the public. (81 C.J.S. pp. 1147; emphasis supplied.)

Needless to say, this Court is fully in accord with the foregoing views which, apart from being
patently sound, are a necessary corollary to our democratic system of government, which, as such,
exists primarily for the promotion of the general welfare. Besides, reflecting as they do, the
established jurisprudence in the United States, after whose constitutional system ours has been
patterned, said views and jurisprudence are, likewise, part and parcel of our own constitutional law. lawphil.net

This notwithstanding, the lower court felt constrained to uphold the appropriation in question, upon
the ground that petitioner may not contest the legality of the donation above referred to because the
same does not affect him directly. This conclusion is, presumably, based upon the following
premises, namely: (1) that, if valid, said donation cured the constitutional infirmity of the
aforementioned appropriation; (2) that the latter may not be annulled without a previous declaration
of unconstitutionality of the said donation; and (3) that the rule set forth in Article 1421 of the Civil
Code is absolute, and admits of no exception. We do not agree with these premises.
The validity of a statute depends upon the powers of Congress at the time of its passage or
approval, not upon events occurring, or acts performed, subsequently thereto, unless the latter
consists of an amendment of the organic law, removing, with retrospective operation, the
constitutional limitation infringed by said statute. Referring to the P85,000.00 appropriation for the
projected feeder roads in question, the legality thereof depended upon whether said roads were
public or private property when the bill, which, latter on, became Republic Act 920, was passed by
Congress, or, when said bill was approved by the President and the disbursement of said sum
became effective, or on June 20, 1953 (see section 13 of said Act). Inasmuch as the land on which
the projected feeder roads were to be constructed belonged then to respondent Zulueta, the result is
that said appropriation sought a private purpose, and hence, was null and void. 4 The donation to
the Government, over five (5) months after the approval and effectivity of said Act, made, according
to the petition, for the purpose of giving a "semblance of legality", or legalizing, the appropriation in
question, did not cure its aforementioned basic defect. Consequently, a judicial nullification of said
donation need not precede the declaration of unconstitutionality of said appropriation.

Again, Article 1421 of our Civil Code, like many other statutory enactments, is subject to exceptions.
For instance, the creditors of a party to an illegal contract may, under the conditions set forth in
Article 1177 of said Code, exercise the rights and actions of the latter, except only those which are
inherent in his person, including therefore, his right to the annulment of said contract, even though
such creditors are not affected by the same, except indirectly, in the manner indicated in said legal
provision.

Again, it is well-stated that the validity of a statute may be contested only by one who will sustain a
direct injury in consequence of its enforcement. Yet, there are many decisions nullifying, at the
instance of taxpayers, laws providing for the disbursement of public funds, 5upon the theory that "the
expenditure of public funds by an officer of the State for the purpose of administering an
unconstitutional act constitutes a misapplication of such funds," which may be enjoined at the
request of a taxpayer. 6Although there are some decisions to the contrary, 7the prevailing view in the
United States is stated in the American Jurisprudence as follows:

In the determination of the degree of interest essential to give the requisite standing
to attack the constitutionality of a statute, the general rule is that not only persons
individually affected, but also taxpayers, have sufficient interest in preventing the
illegal expenditure of moneys raised by taxation and may therefore question the
constitutionality of statutes requiring expenditure of public moneys. (11 Am. Jur. 761;
emphasis supplied.)

However, this view was not favored by the Supreme Court of the U.S. in Frothingham vs. Mellon
(262 U.S. 447), insofar as federal laws are concerned, upon the ground that the relationship of a
taxpayer of the U.S. to its Federal Government is different from that of a taxpayer of a municipal
corporation to its government. Indeed, under the composite system of government existing in the
U.S., the states of the Union are integral part of the Federation from an international viewpoint, but,
each state enjoys internally a substantial measure of sovereignty, subject to the limitations imposed
by the Federal Constitution. In fact, the same was made by representatives of each state of the
Union, not of the people of the U.S., except insofar as the former represented the people of the
respective States, and the people of each State has, independently of that of the others, ratified said
Constitution. In other words, the Federal Constitution and the Federal statutes have become binding
upon the people of the U.S. in consequence of an act of, and, in this sense, through the respective
states of the Union of which they are citizens. The peculiar nature of the relation between said
people and the Federal Government of the U.S. is reflected in the election of its President, who is
chosen directly, not by the people of the U.S., but by electors chosen by each State, in such manner
as the legislature thereof may direct (Article II, section 2, of the Federal Constitution).
lawphi1.net

The relation between the people of the Philippines and its taxpayers, on the other hand, and the
Republic of the Philippines, on the other, is not identical to that obtaining between the people and
taxpayers of the U.S. and its Federal Government. It is closer, from a domestic viewpoint, to that
existing between the people and taxpayers of each state and the government thereof, except that
the authority of the Republic of the Philippines over the people of the Philippines is more fully direct
than that of the states of the Union, insofar as the simple and unitary type of our national
government is not subject to limitations analogous to those imposed by the Federal Constitution
upon the states of the Union, and those imposed upon the Federal Government in the interest of the
Union. For this reason, the rule recognizing the right of taxpayers to assail the constitutionality of a
legislation appropriating local or state public funds — which has been upheld by the Federal
Supreme Court (Crampton vs. Zabriskie, 101 U.S. 601) — has greater application in the Philippines
than that adopted with respect to acts of Congress of the United States appropriating federal funds.

Indeed, in the Province of Tayabas vs. Perez (56 Phil., 257), involving the expropriation of a land by
the Province of Tayabas, two (2) taxpayers thereof were allowed to intervene for the purpose of
contesting the price being paid to the owner thereof, as unduly exorbitant. It is true that in Custodio
vs. President of the Senate (42 Off. Gaz., 1243), a taxpayer and employee of the Government was
not permitted to question the constitutionality of an appropriation for backpay of members of
Congress. However, in Rodriguez vs. Treasurer of the Philippines and Barredo vs. Commission on
Elections (84 Phil., 368; 45 Off. Gaz., 4411), we entertained the action of taxpayers impugning the
validity of certain appropriations of public funds, and invalidated the same. Moreover, the reason that
impelled this Court to take such position in said two (2) cases — the importance of the issues therein
raised — is present in the case at bar. Again, like the petitioners in the Rodriguez and Barredo
cases, petitioner herein is not merely a taxpayer. The Province of Rizal, which he represents
officially as its Provincial Governor, is our most populated political subdivision, 8and, the taxpayers
therein bear a substantial portion of the burden of taxation, in the Philippines.

Hence, it is our considered opinion that the circumstances surrounding this case sufficiently justify
petitioners action in contesting the appropriation and donation in question; that this action should not
have been dismissed by the lower court; and that the writ of preliminary injunction should have been
maintained.

Wherefore, the decision appealed from is hereby reversed, and the records are remanded to the
lower court for further proceedings not inconsistent with this decision, with the costs of this instance
against respondent Jose C. Zulueta. It is so ordered.

Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera, Gutierrez David,
Paredes, and Dizon, JJ., concur.

G.R. No. L-75697

VALENTIN TIO doing business under the name and style of OMI ENTERPRISES, petitioner,
vs.
VIDEOGRAM REGULATORY BOARD, MINISTER OF FINANCE, METRO MANILA COMMISSION,
CITY MAYOR and CITY TREASURER OF MANILA, respondents.

Nelson Y. Ng for petitioner.

The City Legal Officer for respondents City Mayor and City Treasurer.

MELENCIO-HERRERA, J.:

This petition was filed on September 1, 1986 by petitioner on his own behalf and purportedly on
behalf of other videogram operators adversely affected. It assails the constitutionality of Presidential
Decree No. 1987 entitled "An Act Creating the Videogram Regulatory Board" with broad powers to
regulate and supervise the videogram industry (hereinafter briefly referred to as the BOARD). The
Decree was promulgated on October 5, 1985 and took effect on April 10, 1986, fifteen (15) days
after completion of its publication in the Official Gazette.

On November 5, 1985, a month after the promulgation of the abovementioned decree, Presidential
Decree No. 1994 amended the National Internal Revenue Code providing, inter alia:

SEC. 134. Video Tapes. — There shall be collected on each processed video-tape
cassette, ready for playback, regardless of length, an annual tax of five pesos;
Provided, That locally manufactured or imported blank video tapes shall be subject to
sales tax.

On October 23, 1986, the Greater Manila Theaters Association, Integrated Movie Producers,
Importers and Distributors Association of the Philippines, and Philippine Motion Pictures Producers
Association, hereinafter collectively referred to as the Intervenors, were permitted by the Court to
intervene in the case, over petitioner's opposition, upon the allegations that intervention was
necessary for the complete protection of their rights and that their "survival and very existence is
threatened by the unregulated proliferation of film piracy." The Intervenors were thereafter allowed to
file their Comment in Intervention.

The rationale behind the enactment of the DECREE, is set out in its preambular clauses as follows:

1. WHEREAS, the proliferation and unregulated circulation of videograms including,

among others, videotapes, discs, cassettes or any technical improvement or variation
thereof, have greatly prejudiced the operations of moviehouses and theaters, and
have caused a sharp decline in theatrical attendance by at least forty percent (40%)
and a tremendous drop in the collection of sales, contractor's specific, amusement
and other taxes, thereby resulting in substantial losses estimated at P450 Million
annually in government revenues;

2. WHEREAS, videogram(s) establishments collectively earn around P600 Million

per annum from rentals, sales and disposition of videograms, and such earnings
have not been subjected to tax, thereby depriving the Government of approximately
P180 Million in taxes each year;

3. WHEREAS, the unregulated activities of videogram establishments have also

affected the viability of the movie industry, particularly the more than 1,200 movie
houses and theaters throughout the country, and occasioned industry-wide
displacement and unemployment due to the shutdown of numerous moviehouses
and theaters;

4. "WHEREAS, in order to ensure national economic recovery, it is imperative for the

Government to create an environment conducive to growth and development of all
business industries, including the movie industry which has an accumulated
investment of about P3 Billion;

5. WHEREAS, proper taxation of the activities of videogram establishments will not

only alleviate the dire financial condition of the movie industry upon which more than
75,000 families and 500,000 workers depend for their livelihood, but also provide an
additional source of revenue for the Government, and at the same time rationalize
the heretofore uncontrolled distribution of videograms;

6. WHEREAS, the rampant and unregulated showing of obscene videogram features

constitutes a clear and present danger to the moral and spiritual well-being of the
youth, and impairs the mandate of the Constitution for the State to support the
rearing of the youth for civic efficiency and the development of moral character and
promote their physical, intellectual, and social well-being;

7. WHEREAS, civic-minded citizens and groups have called for remedial measures
to curb these blatant malpractices which have flaunted our censorship and copyright
laws;

8. WHEREAS, in the face of these grave emergencies corroding the moral values of
the people and betraying the national economic recovery program, bold emergency
measures must be adopted with dispatch; ... (Numbering of paragraphs supplied).

Petitioner's attack on the constitutionality of the DECREE rests on the following grounds:

1. Section 10 thereof, which imposes a tax of 30% on the gross receipts payable to
the local government is a RIDER and the same is not germane to the subject matter
thereof;

2. The tax imposed is harsh, confiscatory, oppressive and/or in unlawful restraint of

trade in violation of the due process clause of the Constitution;

3. There is no factual nor legal basis for the exercise by the President of the vast
powers conferred upon him by Amendment No. 6;

4. There is undue delegation of power and authority;

 5. The Decree is an ex-post facto law; and

6. There is over regulation of the video industry as if it were a nuisance, which it is

not.

We shall consider the foregoing objections in seriatim.

1. The Constitutional requirement that "every bill shall embrace only one subject which shall be
expressed in the title thereof" 1 is sufficiently complied with if the title be comprehensive enough to
include the general purpose which a statute seeks to achieve. It is not necessary that the title
express each and every end that the statute wishes to accomplish. The requirement is satisfied if all
the parts of the statute are related, and are germane to the subject matter expressed in the title, or
as long as they are not inconsistent with or foreign to the general subject and title. 2 An act 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 object." 3 The rule also is that the constitutional requirement as to the title of a bill
should not be so narrowly construed as to cripple or impede the power of legislation. 4 It should be
given practical rather than technical construction. 5

Tested by the foregoing criteria, petitioner's contention that the tax provision of the DECREE is a
rider is without merit. That section reads, inter alia:

Section 10. Tax on Sale, Lease or Disposition of Videograms. — Notwithstanding

any provision of law to the contrary, the province shall collect a tax of thirty percent
(30%) of the purchase price or rental rate, as the case may be, for every sale, lease
or disposition of a videogram containing a reproduction of any motion picture or
audiovisual program. Fifty percent (50%) of the proceeds of the tax collected shall
accrue to the province, and the other fifty percent (50%) shall acrrue to the
municipality where the tax is collected; PROVIDED, That in Metropolitan Manila, the
tax shall be shared equally by the City/Municipality and the Metropolitan Manila
Commission.

xxx xxx xxx

The foregoing provision is allied and germane to, and is reasonably necessary for the
accomplishment of, the general object of the DECREE, which is the regulation of the video industry
through the Videogram Regulatory Board as expressed in its title. The tax provision is not
inconsistent with, nor foreign to that general subject and title. As a tool for regulation 6 it is simply one
of the regulatory and control mechanisms scattered throughout the DECREE. The express purpose
of the DECREE to include taxation of the video industry in order to regulate and rationalize the
heretofore uncontrolled distribution of videograms is evident from Preambles 2 and 5, supra. Those
preambles explain the motives of the lawmaker in presenting the measure. The title of the DECREE,
which is the creation of the Videogram Regulatory Board, is comprehensive enough to include the
purposes expressed in its Preamble and reasonably covers all its provisions. It is unnecessary to
express all those objectives in the title or that the latter be an index to the body of the DECREE. 7

2. Petitioner also submits that the thirty percent (30%) tax imposed is harsh and oppressive,
confiscatory, and in restraint of trade. However, it is beyond serious question that a tax does not
cease to be valid merely because it regulates, discourages, or even definitely deters the activities
taxed. 8 The power to impose taxes is one so unlimited in force and so searching in extent, that the
courts scarcely venture to declare that it is subject to any restrictions whatever, except such as rest
in the discretion of the authority which exercises it. 9 In imposing a tax, the legislature acts upon its
constituents. This is, in general, a sufficient security against erroneous and oppressive taxation. 10

The tax imposed by the DECREE is not only a regulatory but also a revenue measure prompted by
the realization that earnings of videogram establishments of around P600 million per annum have
not been subjected to tax, thereby depriving the Government of an additional source of revenue. It is
an end-user tax, imposed on retailers for every videogram they make available for public viewing. It
is similar to the 30% amusement tax imposed or borne by the movie industry which the theater-
owners pay to the government, but which is passed on to the entire cost of the admission ticket, thus
shifting the tax burden on the buying or the viewing public. It is a tax that is imposed uniformly on all
videogram operators.
The levy of the 30% tax is for a public purpose. It was imposed primarily to answer the need for
regulating the video industry, particularly because of the rampant film piracy, the flagrant violation of
intellectual property rights, and the proliferation of pornographic video tapes. And while it was also
an objective of the DECREE to protect the movie industry, the tax remains a valid imposition.

The public purpose of a tax may legally exist even if the motive which impelled the
legislature to impose the tax was to favor one industry over another. 11

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 "inequities which result from a singling out of
one particular class for taxation or exemption infringe no constitutional limitation". 12
Taxation has been made the implement of the state's police power.13

At bottom, the rate of tax is a matter better addressed to the taxing legislature.

3. Petitioner argues that there was no legal nor factual basis for the promulgation of the DECREE by
the former President under Amendment No. 6 of the 1973 Constitution providing that "whenever in
the judgment of the President ... , there exists a grave emergency or a threat or imminence thereof,
or whenever the interim Batasang Pambansa or the regular National Assembly fails or is unable to
act adequately on any matter for any reason that in his judgment requires immediate action, he may,
in order to meet the exigency, issue the necessary decrees, orders, or letters of instructions, which
shall form part of the law of the land."

In refutation, the Intervenors and the Solicitor General's Office aver that the 8th "whereas" clause
sufficiently summarizes the justification in that grave emergencies corroding the moral values of the
people and betraying the national economic recovery program necessitated bold emergency
measures to be adopted with dispatch. Whatever the reasons "in the judgment" of the then
President, considering that the issue of the validity of the exercise of legislative power under the said
Amendment still pends resolution in several other cases, we reserve resolution of the question
raised at the proper time.

4. Neither can it be successfully argued that the DECREE contains an undue delegation of
legislative power. The grant in Section 11 of the DECREE of authority to the BOARD to "solicit the
direct assistance of other agencies and units of the government and deputize, for a fixed and limited
period, the heads or personnel of such agencies and units to perform enforcement functions for the
Board" is not a delegation of the power to legislate but merely a conferment of authority or discretion
as to its execution, enforcement, and implementation. "The true distinction is between the delegation
of power to make the law, which necessarily involves a discretion as to what it shall be, and
conferring 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." 14 Besides, in the very
language of the decree, the authority of the BOARD to solicit such assistance is for a "fixed and
limited period" with the deputized agencies concerned being "subject to the direction and control of
the BOARD." That the grant of such authority might be the source of graft and corruption would not
stigmatize the DECREE as unconstitutional. Should the eventuality occur, the aggrieved parties will
not be without adequate remedy in law.

5. The DECREE is not violative of the ex post facto principle. An ex post facto law is, among other
categories, one which "alters the legal rules of evidence, and authorizes conviction upon less or
different testimony than the law required at the time of the commission of the offense." It is
petitioner's position that Section 15 of the DECREE in providing that:

All videogram establishments in the Philippines are hereby given a period of forty-five
(45) days after the effectivity of this Decree within which to register with and secure a
permit from the BOARD to engage in the videogram business and to register with the
BOARD all their inventories of videograms, including videotapes, discs, cassettes or
other technical improvements or variations thereof, before they could be sold, leased,
or otherwise disposed of. Thereafter any videogram found in the possession of any
person engaged in the videogram business without the required proof of registration
by the BOARD, shall be prima facie evidence of violation of the Decree, whether the
possession of such videogram be for private showing and/or public exhibition.

raises immediately a prima facie evidence of violation of the DECREE when the required proof of
registration of any videogram cannot be presented and thus partakes of the nature of an ex post
facto law.
The argument is untenable. As this Court held in the recent case of Vallarta vs. Court of Appeals, et
al. 15

... it is now well settled that "there is no constitutional objection to the passage of a
law providing that the presumption of innocence may be overcome by a contrary
presumption founded upon the experience of human conduct, and enacting what
evidence shall be sufficient to overcome such presumption of innocence" (People vs.
Mingoa 92 Phil. 856 [1953] at 858-59, citing 1 COOLEY, A TREATISE ON THE
CONSTITUTIONAL LIMITATIONS, 639-641). And the "legislature may enact that
when certain facts have been proved that they shall be prima facie evidence of the
existence of the guilt of the accused and shift the burden of proof provided there be a
rational connection between the facts proved and the ultimate facts presumed so that
the inference of the one from proof of the others is not unreasonable and arbitrary
because of lack of connection between the two in common experience". 16

Applied to the challenged provision, there is no question that there is a rational connection between
the fact proved, which is non-registration, and the ultimate fact presumed which is violation of the
DECREE, besides the fact that the prima facie presumption of violation of the DECREE attaches
only after a forty-five-day period counted from its effectivity and is, therefore, neither retrospective in
character.

6. We do not share petitioner's fears that the video industry is being over-regulated and being eased
out of existence as if it were a nuisance. Being a relatively new industry, the need for its regulation
was apparent. While the underlying objective of the DECREE is to protect the moribund movie
industry, there is no question that public welfare is at bottom of its enactment, considering "the unfair
competition posed by rampant film piracy; the erosion of the moral fiber of the viewing public brought
about by the availability of unclassified and unreviewed video tapes containing pornographic films
and films with brutally violent sequences; and losses in government revenues due to the drop in
theatrical attendance, not to mention the fact that the activities of video establishments are virtually
untaxed since mere payment of Mayor's permit and municipal license fees are required to engage in
business. 17

The enactment of the Decree since April 10, 1986 has not brought about the "demise" of the video
industry. On the contrary, video establishments are seen to have proliferated in many places
notwithstanding the 30% tax imposed.

In the last analysis, what petitioner basically questions is the necessity, wisdom and expediency of
the DECREE. These considerations, however, are primarily and exclusively a matter of legislative
concern.

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 a 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. If there be adherence to the
rule of law, as there ought to be, the last offender should be courts of justice, to
which rightly litigants submit their controversy precisely to maintain unimpaired the
supremacy of legal norms and prescriptions. The attack on the validity of the
challenged provision likewise insofar as there may be objections, even if valid and
cogent on its wisdom cannot be sustained. 18

In fine, petitioner has not overcome the presumption of validity which attaches to a challenged
statute. We find no clear violation of the Constitution which would justify us in pronouncing
Presidential Decree No. 1987 as unconstitutional and void.

WHEREFORE, the instant Petition is hereby dismissed

G.R. No. L-7859 December 22, 1955

WALTER LUTZ, as Judicial Administrator of the Intestate Estate of the deceased Antonio
Jayme Ledesma, plaintiff-appellant,
vs.
J. ANTONIO ARANETA, as the Collector of Internal Revenue, defendant-appellee.
Ernesto J. Gonzaga for appellant.
Office of the Solicitor General Ambrosio Padilla, First Assistant Solicitor General Guillermo E. Torres
and Solicitor Felicisimo R. Rosete for appellee.

REYES, J.B L., J.:

This case was initiated in the Court of First Instance of Negros Occidental to test the legality of the
taxes imposed by Commonwealth Act No. 567, otherwise known as the Sugar Adjustment Act.

Promulgated in 1940, the law in question opens (section 1) with a declaration of emergency, due to
the threat to our industry by the imminent imposition of export taxes upon sugar as provided in the
Tydings-McDuffe Act, and the "eventual loss of its preferential position in the United States market";
wherefore, the national policy was expressed "to obtain a readjustment of the benefits derived from
the sugar industry by the component elements thereof" and "to stabilize the sugar industry so as to
prepare it for the eventuality of the loss of its preferential position in the United States market and
the imposition of the export taxes."

In section 2, Commonwealth Act 567 provides for an increase of the existing tax on the manufacture
of sugar, on a graduated basis, on each picul of sugar manufactured; while section 3 levies on
owners or persons in control of lands devoted to the cultivation of sugar cane and ceded to others
for a consideration, on lease or otherwise —

a tax equivalent to the difference between the money value of the rental or
consideration collected and the amount representing 12 per centum of the assessed
value of such land.

According to section 6 of the law —

SEC. 6. All collections made under this Act shall accrue to a special fund in the
Philippine Treasury, to be known as the 'Sugar Adjustment and Stabilization Fund,'
and shall be paid out only for any or all of the following purposes or to attain any or
all of the following objectives, as may be provided by law.

First, to place the sugar industry in a position to maintain itself, despite the gradual
loss of the preferntial position of the Philippine sugar in the United States market,
and ultimately to insure its continued existence notwithstanding the loss of that
market and the consequent necessity of meeting competition in the free markets of
the world;

Second, to readjust the benefits derived from the sugar industry by all of the
component elements thereof — the mill, the landowner, the planter of the sugar
cane, and the laborers in the factory and in the field — so that all might continue
profitably to engage therein;lawphi1.net

Third, to limit the production of sugar to areas more economically suited to the
production thereof; and

Fourth, to afford labor employed in the industry a living wage and to improve their
living and working conditions: Provided, That the President of the Philippines may,
until the adjourment of the next regular session of the National Assembly, make the
necessary disbursements from the fund herein created (1) for the establishment and
operation of sugar experiment station or stations and the undertaking of researchers
(a) to increase the recoveries of the centrifugal sugar factories with the view of
reducing manufacturing costs, (b) to produce and propagate higher yielding varieties
of sugar cane more adaptable to different district conditions in the Philippines, (c) to
lower the costs of raising sugar cane, (d) to improve the buying quality of denatured
alcohol from molasses for motor fuel, (e) to determine the possibility of utilizing the
other by-products of the industry, (f) to determine what crop or crops are suitable for
rotation and for the utilization of excess cane lands, and (g) on other problems the
solution of which would help rehabilitate and stabilize the industry, and (2) for the
improvement of living and working conditions in sugar mills and sugar plantations,
 authorizing him to organize the necessary agency or agencies to take charge of the
expenditure and allocation of said funds to carry out the purpose hereinbefore
enumerated, and, likewise, authorizing the disbursement from the fund herein
created of the necessary amount or amounts needed for salaries, wages, travelling
expenses, equipment, and other sundry expenses of said agency or agencies.

Plaintiff, Walter Lutz, in his capacity as Judicial Administrator of the Intestate Estate of Antonio
Jayme Ledesma, seeks to recover from the Collector of Internal Revenue the sum of P14,666.40
paid by the estate as taxes, under section 3 of the Act, for the crop years 1948-1949 and 1949-1950;
alleging that such tax is unconstitutional and void, being levied for the aid and support of the sugar
industry exclusively, which in plaintiff's opinion is not a public purpose for which a tax may be
constitutioally levied. The action having been dismissed by the Court of First Instance, the plaintifs
appealed the case directly to this Court (Judiciary Act, section 17).

The basic defect in the plaintiff's position is his assumption that the tax provided for in
Commonwealth Act No. 567 is a pure exercise of the taxing power. Analysis of the Act, and
particularly of section 6 (heretofore quoted in full), will show that the tax is levied with a regulatory
purpose, to provide means for the rehabilitation and stabilization of the threatened sugar industry. In
other words, the act is primarily an exercise of the police power.

This Court can take judicial notice of the fact that sugar production is one of the great industries of
our nation, sugar occupying a leading position among its export products; that it gives employment
to thousands of laborers in fields and factories; that it is a great source of the state's wealth, is one of
the important sources of foreign exchange needed by our government, and is thus pivotal in the
plans of a regime committed to a policy of currency stability. Its promotion, protection and
advancement, therefore redounds greatly to the general welfare. Hence it was competent for the
legislature to find that the general welfare demanded that the sugar industry should be stabilized in
turn; and in the wide field of its police power, the lawmaking body could provide that the distribution
of benefits therefrom be readjusted among its components to enable it to resist the added strain of
the increase in taxes that it had to sustain (Sligh vs. Kirkwood, 237 U. S. 52, 59 L. Ed. 835; Johnson
vs. State ex rel. Marey, 99 Fla. 1311, 128 So. 853; Maxcy Inc. vs. Mayo, 103 Fla. 552, 139 So. 121).

As stated in Johnson vs. State ex rel. Marey, with reference to the citrus industry in Florida —

The protection of a large industry constituting one of the great sources of the state's
wealth and therefore directly or indirectly affecting the welfare of so great a portion of
the population of the State is affected to such an extent by public interests as to be
within the police power of the sovereign. (128 Sp. 857).

Once it is conceded, as it must, that the protection and promotion of the sugar industry is a matter of
public concern, it follows that the Legislature may determine within reasonable bounds what is
necessary for its protection and expedient for its promotion. Here, the legislative discretion must be
allowed fully play, subject only to the test of reasonableness; and it is not contended that the means
provided in section 6 of the law (above quoted) bear no relation to the objective pursued or are
oppressive in character. If objective and methods are alike constitutionally valid, no reason is seen
why the state may not levy taxes to raise funds for their prosecution and attainment. Taxation may
be made the implement of the state's police power (Great Atl. & Pac. Tea Co. vs. Grosjean, 301 U.
S. 412, 81 L. Ed. 1193; U. S. vs. Butler, 297 U. S. 1, 80 L. Ed. 477; M'Culloch vs. Maryland, 4
Wheat. 316, 4 L. Ed. 579).

That the tax to be levied should burden the sugar producers themselves can hardly be a ground of
complaint; indeed, it appears rational that the tax be obtained precisely from those who are to be
benefited from the expenditure of the funds derived from it. 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" (Carmichael vs. Southern Coal & Coke Co., 301 U. S. 495, 81 L. Ed.
1245, citing numerous authorities, at p. 1251).

From the point of view we have taken it appears of no moment that the funds raised under the Sugar
Stabilization Act, now in question, should be exclusively spent in aid of the sugar industry, since it is
that very enterprise that is being protected. It may be that other industries are also in need of similar
protection; that the legislature is not required by the Constitution to adhere to a policy of "all or
none." As ruled in Minnesota ex rel. Pearson vs. Probate Court, 309 U. S. 270, 84 L. Ed. 744, "if the
law presumably hits the evil where it is most felt, it is not to be overthrown because there are other
instances to which it might have been applied;" and that "the legislative authority, exerted within its
proper field, need not embrace all the evils within its reach" (N. L. R. B. vs. Jones & Laughlin Steel
Corp. 301 U. S. 1, 81 L. Ed. 893).

Even from the standpoint that the Act is a pure tax measure, it cannot be said that the devotion of
tax money to experimental stations to seek increase of efficiency in sugar production, utilization of
by-products and solution of allied problems, as well as to the improvements of living and working
conditions in sugar mills or plantations, without any part of such money being channeled directly to
private persons, constitutes expenditure of tax money for private purposes, (compare Everson vs.
Board of Education, 91 L. Ed. 472, 168 ALR 1392, 1400).

The decision appealed from is affirmed, with costs against appellant. So ordered.

[G.R. NO. 166006 : March 14, 2008]

PLANTERS PRODUCTS, INC., Petitioner, v. FERTIPHIL CORPORATION,

Respondent.

DECISION

REYES, R.T., J.:

THE Regional Trial Courts (RTC) have the authority and jurisdiction to consider the
constitutionality of statutes, executive orders, presidential decrees and other issuances.
The Constitution vests that power not only in the Supreme Court but in all Regional
Trial Courts.

The principle is relevant in this Petition for Review on Certiorari of the Decision1 of the
Court of Appeals (CA) affirming with modification that of the RTC in Makati City, 2
finding petitioner Planters Products, Inc. (PPI) liable to private respondent Fertiphil
Corporation (Fertiphil) for the levies it paid under Letter of Instruction (LOI) No. 1465.

The Facts

Petitioner PPI and private respondent Fertiphil are private corporations incorporated
under Philippine laws.3 They are both engaged in the importation and distribution of
fertilizers, pesticides and agricultural chemicals.

On June 3, 1985, then President Ferdinand Marcos, exercising his legislative powers,
issued LOI No. 1465 which provided, among others, for the imposition of a capital
recovery component (CRC) on the domestic sale of all grades of fertilizers in the
Philippines.4 The LOI provides:

3. The Administrator of the Fertilizer Pesticide Authority to include in its fertilizer pricing
formula a capital contribution component of not less than P10 per bag. This capital
contribution shall be collected until adequate capital is raised to make PPI viable. Such
capital contribution shall be applied by FPA to all domestic sales of fertilizers in the
Philippines.5 (Underscoring supplied) cralawlib rary

Pursuant to the LOI, Fertiphil paid P10 for every bag of fertilizer it sold in the domestic
market to the Fertilizer and Pesticide Authority (FPA). FPA then remitted the amount
collected to the Far East Bank and Trust Company, the depositary bank of PPI. Fertiphil
paid P6,689,144 to FPA from July 8, 1985 to January 24, 1986.6

After the 1986 Edsa Revolution, FPA voluntarily stopped the imposition of the P10 levy.
With the return of democracy, Fertiphil demanded from PPI a refund of the amounts it
paid under LOI No. 1465, but PPI refused to accede to the demand.7

Fertiphil filed a complaint for collection and damages8 against FPA and PPI with the RTC
in Makati. It questioned the constitutionality of LOI No. 1465 for being unjust,
unreasonable, oppressive, invalid and an unlawful imposition that amounted to a denial
of due process of law.9 Fertiphil alleged that the LOI solely favored PPI, a privately
owned corporation, which used the proceeds to maintain its monopoly of the fertilizer
industry.

In its Answer,10 FPA, through the Solicitor General, countered that the issuance of LOI
No. 1465 was a valid exercise of the police power of the State in ensuring the stability
of the fertilizer industry in the country. It also averred that Fertiphil did not sustain any
damage from the LOI because the burden imposed by the levy fell on the ultimate
consumer, not the seller.

RTC Disposition

On November 20, 1991, the RTC rendered judgment in favor of Fertiphil, disposing as
follows:

WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of
the plaintiff and against the defendant Planters Product, Inc., ordering the latter to pay
the former:

1) the sum of P6,698,144.00 with interest at 12% from the time of judicial demand;

2) the sum of P100,000 as attorney's fees;

3) the cost of suit.

SO ORDERED.11

Ruling that the imposition of the P10 CRC was an exercise of the State's inherent power
of taxation, the RTC invalidated the levy for violating the basic principle that taxes can
only be levied for public purpose, viz.:

It is apparent that the imposition of P10 per fertilizer bag sold in the country by LOI
1465 is purportedly in the exercise of the power of taxation. It is a settled principle that
the power of taxation by the state is plenary. Comprehensive and supreme, the
principal check upon its abuse resting in the responsibility of the members of the
legislature to their constituents. However, there are two kinds of limitations on the
power of taxation: the inherent limitations and the constitutional limitations.

One of the inherent limitations is that a tax may be levied only for public purposes:

The power to tax can be resorted to only for a constitutionally valid public purpose. By
the same token, taxes may not be levied for purely private purposes, for building up of
private fortunes, or for the redress of private wrongs. They cannot be levied for the
improvement of private property, or for the benefit, and promotion of private
enterprises, except where the aid is incident to the public benefit. It is well-settled
principle of constitutional law that no general tax can be levied except for the purpose
of raising money which is to be expended for public use. Funds cannot be exacted
under the guise of taxation to promote a purpose that is not of public interest. Without
such limitation, the power to tax could be exercised or employed as an authority to
destroy the economy of the people. A tax, however, is not held void on the ground of
want of public interest unless the want of such interest is clear. (71 Am. Jur. pp. 371-
372)

In the case at bar, the plaintiff paid the amount of P6,698,144.00 to the Fertilizer and
Pesticide Authority pursuant to the P10 per bag of fertilizer sold imposition under LOI
1465 which, in turn, remitted the amount to the defendant Planters Products, Inc. thru
the latter's depository bank, Far East Bank and Trust Co. Thus, by virtue of LOI 1465
the plaintiff, Fertiphil Corporation, which is a private domestic corporation, became
poorer by the amount of P6,698,144.00 and the defendant, Planters Product, Inc.,
another private domestic corporation, became richer by the amount of P6,698,144.00.
Tested by the standards of constitutionality as set forth in the afore-quoted
jurisprudence, it is quite evident that LOI 1465 insofar as it imposes the amount of P10
per fertilizer bag sold in the country and orders that the said amount should go to the
defendant Planters Product, Inc. is unlawful because it violates the mandate that a tax
can be levied only for a public purpose and not to benefit, aid and promote a private
enterprise such as Planters Product, Inc.12

PPI moved for reconsideration but its motion was denied.13 PPI then filed a notice of
appeal with the RTC but it failed to pay the requisite appeal docket fee. In a separate
but related proceeding, this Court14 allowed the appeal of PPI and remanded the case to
the CA for proper disposition.

CA Decision

On November 28, 2003, the CA handed down its decision affirming with modification
that of the RTC, with the following fallo:

IN VIEW OF ALL THE FOREGOING, the decision appealed from is hereby AFFIRMED,
subject to the MODIFICATION that the award of attorney's fees is hereby DELETED.15

In affirming the RTC decision, the CA ruled that the lis mota of the complaint for
collection was the constitutionality of LOI No. 1465, thus:

The question then is whether it was proper for the trial court to exercise its power to
judicially determine the constitutionality of the subject statute in the instant case.

As a rule, where the controversy can be settled on other grounds, the courts will not
resolve the constitutionality of a law (Lim v. Pacquing, 240 SCRA 649 [1995]). The
policy of the courts is to avoid ruling on constitutional questions and to presume that
the acts of political departments are valid, absent a clear and unmistakable showing to
the contrary.

However, the courts are not precluded from exercising such power when the following
requisites are obtaining in a controversy before it: First, there must be before the court
an actual case calling for the exercise of judicial review. Second, the question must be
ripe for adjudication. Third, the person challenging the validity of the act must have
standing to challenge. Fourth, the question of constitutionality must have been raised
at the earliest opportunity; and lastly, the issue of constitutionality must be the very lis
mota of the case (Integrated Bar of the Philippines v. Zamora, 338 SCRA 81 [2000]).

Indisputably, the present case was primarily instituted for collection and damages.
However, a perusal of the complaint also reveals that the instant action is founded on
the claim that the levy imposed was an unlawful and unconstitutional special
assessment. Consequently, the requisite that the constitutionality of the law in question
be the very lis mota of the case is present, making it proper for the trial court to rule on
the constitutionality of LOI 1465.16

The CA held that even on the assumption that LOI No. 1465 was issued under the
police power of the state, it is still unconstitutional because it did not promote public
welfare. The CA explained:

In declaring LOI 1465 unconstitutional, the trial court held that the levy imposed under
the said law was an invalid exercise of the State's power of taxation inasmuch as it
violated the inherent and constitutional prescription that taxes be levied only for public
purposes. It reasoned out that the amount collected under the levy was remitted to the
depository bank of PPI, which the latter used to advance its private interest.

On the other hand, appellant submits that the subject statute's passage was a valid
exercise of police power. In addition, it disputes the court a quo's findings arguing that
the collections under LOI 1465 was for the benefit of Planters Foundation, Incorporated
(PFI), a foundation created by law to hold in trust for millions of farmers, the stock
ownership of PPI.

Of the three fundamental powers of the State, the exercise of police power has been
characterized as the most essential, insistent and the least limitable of powers,
extending as it does to all the great public needs. It may be exercised as long as the
activity or the property sought to be regulated has some relevance to public welfare
(Constitutional Law, by Isagani A. Cruz, p. 38, 1995 Edition).

Vast as the power is, however, it must be exercised within the limits set by the
Constitution, which requires the concurrence of a lawful subject and a lawful method.
Thus, our courts have laid down the test to determine the validity of a police measure
as follows: (1) the interests of the public generally, as distinguished from those of a
particular class, requires its exercise; and (2) the means employed are reasonably
necessary for the accomplishment of the purpose and not unduly oppressive upon
individuals (National Development Company v. Philippine Veterans Bank, 192 SCRA 257
[1990]).

It is upon applying this established tests that We sustain the trial court's holding LOI
1465 unconstitutional. To be sure, ensuring the continued supply and distribution of
fertilizer in the country is an undertaking imbued with public interest. However, the
method by which LOI 1465 sought to achieve this is by no means a measure that will
promote the public welfare. The government's commitment to support the successful
rehabilitation and continued viability of PPI, a private corporation, is an unmistakable
attempt to mask the subject statute's impartiality. There is no way to treat the self-
interest of a favored entity, like PPI, as identical with the general interest of the
country's farmers or even the Filipino people in general. Well to stress, substantive due
process exacts fairness and equal protection disallows distinction where none is needed.
When a statute's public purpose is spoiled by private interest, the use of police power
becomes a travesty which must be struck down for being an arbitrary exercise of
government power. To rule in favor of appellant would contravene the general principle
that revenues derived from taxes cannot be used for purely private purposes or for the
exclusive benefit of private individuals.17

The CA did not accept PPI's claim that the levy imposed under LOI No. 1465 was for the
benefit of Planters Foundation, Inc., a foundation created to hold in trust the stock
ownership of PPI. The CA stated:

Appellant next claims that the collections under LOI 1465 was for the benefit of Planters
Foundation, Incorporated (PFI), a foundation created by law to hold in trust for millions
of farmers, the stock ownership of PFI on the strength of Letter of Undertaking (LOU)
issued by then Prime Minister Cesar Virata on April 18, 1985 and affirmed by the
Secretary of Justice in an Opinion dated October 12, 1987, to wit:

"2. Upon the effective date of this Letter of Undertaking, the Republic shall cause FPA to
include in its fertilizer pricing formula a capital recovery component, the proceeds of
which will be used initially for the purpose of funding the unpaid portion of the
outstanding capital stock of Planters presently held in trust by Planters Foundation, Inc.
(Planters Foundation), which unpaid capital is estimated at approximately P206 million
(subject to validation by Planters and Planters Foundation) (such unpaid portion of the
outstanding capital stock of Planters being hereafter referred to as the 'Unpaid Capital'
), and subsequently for such capital increases as may be required for the continuing
viability of Planters.

The capital recovery component shall be in the minimum amount of P10 per bag, which
will be added to the price of all domestic sales of fertilizer in the Philippines by any
importer and/or fertilizer mother company. In this connection, the Republic hereby
acknowledges that the advances by Planters to Planters Foundation which were applied
to the payment of the Planters shares now held in trust by Planters Foundation, have
been assigned to, among others, the Creditors. Accordingly, the Republic, through FPA,
hereby agrees to deposit the proceeds of the capital recovery component in the special
trust account designated in the notice dated April 2, 1985, addressed by counsel for the
Creditors to Planters Foundation. Such proceeds shall be deposited by FPA on or before
the 15th day of each month.

The capital recovery component shall continue to be charged and collected until
payment in full of (a) the Unpaid Capital and/or (b) any shortfall in the payment of the
Subsidy Receivables, (c) any carrying cost accruing from the date hereof on the
amounts which may be outstanding from time to time of the Unpaid Capital and/or the
Subsidy Receivables and (d) the capital increases contemplated in paragraph 2 hereof.
For the purpose of the foregoing clause (c), the 'carrying cost' shall be at such rate as
will represent the full and reasonable cost to Planters of servicing its debts, taking into
account both its peso and foreign currency-denominated obligations." (Records, pp. 42-
43)

Appellant's proposition is open to question, to say the least. The LOU issued by then
Prime Minister Virata taken together with the Justice Secretary's Opinion does not
preponderantly demonstrate that the collections made were held in trust in favor of
millions of farmers. Unfortunately for appellant, in the absence of sufficient evidence to
establish its claims, this Court is constrained to rely on what is explicitly provided in LOI
1465 - that one of the primary aims in imposing the levy is to support the successful
rehabilitation and continued viability of PPI.18

PPI moved for reconsideration but its motion was denied.19 It then filed the present
petition with this Court.

Issues

Petitioner PPI raises four issues for Our consideration, viz.:

THE CONSTITUTIONALITY OF LOI 1465 CANNOT BE COLLATERALLY ATTACKED AND BE

DECREED VIA A DEFAULT JUDGMENT IN A CASE FILED FOR COLLECTION AND
DAMAGES WHERE THE ISSUE OF CONSTITUTIONALITY IS NOT THE VERY LIS MOTA OF
THE CASE. NEITHER CAN LOI 1465 BE CHALLENGED BY ANY PERSON OR ENTITY
WHICH HAS NO STANDING TO DO SO.

II

LOI 1465, BEING A LAW IMPLEMENTED FOR THE PURPOSE OF ASSURING THE
FERTILIZER SUPPLY AND DISTRIBUTION IN THE COUNTRY, AND FOR BENEFITING A
FOUNDATION CREATED BY LAW TO HOLD IN TRUST FOR MILLIONS OF FARMERS THEIR
STOCK OWNERSHIP IN PPI CONSTITUTES A VALID LEGISLATION PURSUANT TO THE
EXERCISE OF TAXATION AND POLICE POWER FOR PUBLIC PURPOSES.

III

THE AMOUNT COLLECTED UNDER THE CAPITAL RECOVERY COMPONENT WAS

REMITTED TO THE GOVERNMENT, AND BECAME GOVERNMENT FUNDS PURSUANT TO
AN EFFECTIVE AND VALIDLY ENACTED LAW WHICH IMPOSED DUTIES AND CONFERRED
RIGHTS BY VIRTUE OF THE PRINCIPLE OF "OPERATIVE FACT" PRIOR TO ANY
DECLARATION OF UNCONSTITUTIONALITY OF LOI 1465.

IV

THE PRINCIPLE OF UNJUST VEXATION (SHOULD BE ENRICHMENT) FINDS NO

APPLICATION IN THE INSTANT CASE.20 (Underscoring supplied) cralawlibra ry

Our Ruling
We shall first tackle the procedural issues of locus standi and the jurisdiction of the RTC
to resolve constitutional issues.

Fertiphil has locus standi because it suffered direct injury; doctrine of standing is a
mere procedural technicality which may be waived.

PPI argues that Fertiphil has no locus standi to question the constitutionality of LOI No.
1465 because it does not have a "personal and substantial interest in the case or will
sustain direct injury as a result of its enforcement."21 It asserts that Fertiphil did not
suffer any damage from the CRC imposition because "incidence of the levy fell on the
ultimate consumer or the farmers themselves, not on the seller fertilizer company."22

We cannot agree. The doctrine of locus standi or the right of appearance in a court of
justice has been adequately discussed by this Court in a catena of cases. Succinctly put,
the doctrine requires a litigant to have a material interest in the outcome of a case. In
private suits, locus standi requires a litigant to be a "real party in interest," which is
defined as "the party who stands to be benefited or injured by the judgment in the suit
or the party entitled to the avails of the suit."23

In public suits, this Court recognizes the difficulty of applying the doctrine especially
when plaintiff asserts a public right on behalf of the general public because of
conflicting public policy issues.24 On one end, there is the right of the ordinary citizen to
petition the courts to be freed from unlawful government intrusion and illegal official
action. At the other end, there is the public policy precluding excessive judicial
interference in official acts, which may unnecessarily hinder the delivery of basic public
services.

In this jurisdiction, We have adopted the "direct injury test" to determine locus standi in
public suits. In People v. Vera,25 it was held that a person who impugns the validity of a
statute must have "a personal and substantial interest in the case such that he has
sustained, or will sustain direct injury as a result." The "direct injury test" in public suits
is similar to the "real party in interest" rule for private suits under Section 2, Rule 3 of
the 1997 Rules of Civil Procedure.26

Recognizing that a strict application of the "direct injury" test may hamper public
interest, this Court relaxed the requirement in cases of "transcendental importance" or
with "far reaching implications." Being a mere procedural technicality, it has also been
held that locus standi may be waived in the public interest.27

Whether or not the complaint for collection is characterized as a private or public suit,
Fertiphil has locus standi to file it. Fertiphil suffered a direct injury from the
enforcement of LOI No. 1465. It was required, and it did pay, the P10 levy imposed for
every bag of fertilizer sold on the domestic market. It may be true that Fertiphil has
passed some or all of the levy to the ultimate consumer, but that does not disqualify it
from attacking the constitutionality of the LOI or from seeking a refund. As seller, it
bore the ultimate burden of paying the levy. It faced the possibility of severe sanctions
for failure to pay the levy. The fact of payment is sufficient injury to Fertiphil.

Moreover, Fertiphil suffered harm from the enforcement of the LOI because it was
compelled to factor in its product the levy. The levy certainly rendered the fertilizer
products of Fertiphil and other domestic sellers much more expensive. The harm to
their business consists not only in fewer clients because of the increased price, but also
in adopting alternative corporate strategies to meet the demands of LOI No. 1465.
Fertiphil and other fertilizer sellers may have shouldered all or part of the levy just to
be competitive in the market. The harm occasioned on the business of Fertiphil is
sufficient injury for purposes of locus standi.

Even assuming arguendo that there is no direct injury, We find that the liberal policy
consistently adopted by this Court on locus standi must apply. The issues raised by
Fertiphil are of paramount public importance. It involves not only the constitutionality of
a tax law but, more importantly, the use of taxes for public purpose. Former President
Marcos issued LOI No. 1465 with the intention of rehabilitating an ailing private
company. This is clear from the text of the LOI. PPI is expressly named in the LOI as
the direct beneficiary of the levy. Worse, the levy was made dependent and conditional
upon PPI becoming financially viable. The LOI provided that "the capital contribution
shall be collected until adequate capital is raised to make PPI viable."

The constitutionality of the levy is already in doubt on a plain reading of the statute. It
is Our constitutional duty to squarely resolve the issue as the final arbiter of all
justiciable controversies. The doctrine of standing, being a mere procedural technicality,
should be waived, if at all, to adequately thresh out an important constitutional issue.

RTC may resolve constitutional issues; the constitutional issue was adequately raised in
the complaint; it is the lis mota of the case.

PPI insists that the RTC and the CA erred in ruling on the constitutionality of the LOI. It
asserts that the constitutionality of the LOI cannot be collaterally attacked in a
complaint for collection.28 Alternatively, the resolution of the constitutional issue is not
necessary for a determination of the complaint for collection.29

Fertiphil counters that the constitutionality of the LOI was adequately pleaded in its
complaint. It claims that the constitutionality of LOI No. 1465 is the very lis mota of the
case because the trial court cannot determine its claim without resolving the issue.30

It is settled that the RTC has jurisdiction to resolve the constitutionality of a statute,
presidential decree or an executive order. This is clear from Section 5, Article VIII of
the 1987 Constitution, which provides:

SECTION 5. The Supreme Court shall have the following powers:

x x x

(2) Review, revise, reverse, modify, or affirm on appeal or certiorari , as the law or the
Rules of Court may provide, final judgments and orders of lower courts in:

(a) All cases in which the constitutionality or validity of any treaty, international or
executive agreement, law, presidential decree, proclamation, order, instruction,
ordinance, or regulation is in question. (Underscoring supplied) cralawlibra ry

In Mirasol v. Court of Appeals,31 this Court recognized the power of the RTC to resolve
constitutional issues, thus:

On the first issue. It is settled that Regional Trial Courts have the authority and
jurisdiction to consider the constitutionality of a statute, presidential decree, or
executive order. The Constitution vests the power of judicial review or the power to
declare a law, treaty, international or executive agreement, presidential decree, order,
instruction, ordinance, or regulation not only in this Court, but in all Regional Trial
Courts.32

In the recent case of Equi-Asia Placement, Inc. v. Department of Foreign Affairs,33 this
Court reiterated:

There is no denying that regular courts have jurisdiction over cases involving the
validity or constitutionality of a rule or regulation issued by administrative agencies.
Such jurisdiction, however, is not limited to the Court of Appeals or to this Court alone
for even the regional trial courts can take cognizance of actions assailing a specific rule
or set of rules promulgated by administrative bodies. Indeed, the Constitution vests the
power of judicial review or the power to declare a law, treaty, international or executive
agreement, presidential decree, order, instruction, ordinance, or regulation in the
courts, including the regional trial courts.34
Judicial review of official acts on the ground of unconstitutionality may be sought or
availed of through any of the actions cognizable by courts of justice, not necessarily in
a suit for declaratory relief. Such review may be had in criminal actions, as in People v.
Ferrer35 involving the constitutionality of the now defunct Anti-Subversion law, or in
ordinary actions, as in Krivenko v. Register of Deeds36 involving the constitutionality of
laws prohibiting aliens from acquiring public lands. The constitutional issue, however,
(a) must be properly raised and presented in the case, and (b) its resolution is
necessary to a determination of the case, i.e., the issue of constitutionality must be the
very lis mota presented.37

Contrary to PPI's claim, the constitutionality of LOI No. 1465 was properly and
adequately raised in the complaint for collection filed with the RTC. The pertinent
portions of the complaint allege:

6. The CRC of P10 per bag levied under LOI 1465 on domestic sales of all grades of
fertilizer in the Philippines, is unlawful, unjust, uncalled for, unreasonable, inequitable
and oppressive because:

x x x

(c) It favors only one private domestic corporation, i.e., defendant PPPI, and imposed
at the expense and disadvantage of the other fertilizer importers/distributors who were
themselves in tight business situation and were then exerting all efforts and maximizing
management and marketing skills to remain viable;

x x x

(e) It was a glaring example of crony capitalism, a forced program through which the
PPI, having been presumptuously masqueraded as "the" fertilizer industry itself, was
the sole and anointed beneficiary;

7. The CRC was an unlawful; and unconstitutional special assessment and its imposition
is tantamount to illegal exaction amounting to a denial of due process since the persons
of entities which had to bear the burden of paying the CRC derived no benefit
therefrom; that on the contrary it was used by PPI in trying to regain its former
despicable monopoly of the fertilizer industry to the detriment of other distributors and
importers.38 (Underscoring supplied) cralawlib rary

The constitutionality of LOI No. 1465 is also the very lis mota of the complaint for
collection. Fertiphil filed the complaint to compel PPI to refund the levies paid under the
statute on the ground that the law imposing the levy is unconstitutional. The thesis is
that an unconstitutional law is void. It has no legal effect. Being void, Fertiphil had no
legal obligation to pay the levy. Necessarily, all levies duly paid pursuant to an
unconstitutional law should be refunded under the civil code principle against unjust
enrichment. The refund is a mere consequence of the law being declared
unconstitutional. The RTC surely cannot order PPI to refund Fertiphil if it does not
declare the LOI unconstitutional. It is the unconstitutionality of the LOI which triggers
the refund. The issue of constitutionality is the very lis mota of the complaint with the
RTC.

The P10 levy under LOI No. 1465 is an exercise of the power of taxation.

At any rate, the Court holds that the RTC and the CA did not err in ruling against the
constitutionality of the LOI.

PPI insists that LOI No. 1465 is a valid exercise either of the police power or the power
of taxation. It claims that the LOI was implemented for the purpose of assuring the
fertilizer supply and distribution in the country and for benefiting a foundation created
by law to hold in trust for millions of farmers their stock ownership in PPI.
Fertiphil counters that the LOI is unconstitutional because it was enacted to give benefit
to a private company. The levy was imposed to pay the corporate debt of PPI. Fertiphil
also argues that, even if the LOI is enacted under the police power, it is still
unconstitutional because it did not promote the general welfare of the people or public
interest.

Police power and the power of taxation are inherent powers of the State. These powers
are distinct and have different tests for validity. Police power is the power of the State
to enact legislation that may interfere with personal liberty or property in order to
promote the general welfare,39 while the power of taxation is the power to levy taxes to
be used for public purpose. The main purpose of police power is the regulation of a
behavior or conduct, while taxation is revenue generation. The "lawful subjects" and
"lawful means" tests are used to determine the validity of a law enacted under the
police power.40 The power of taxation, on the other hand, is circumscribed by inherent
and constitutional limitations.

We agree with the RTC that the imposition of the levy was an exercise by the State of
its taxation power. While it is true that the power of taxation can be used as an
implement of police power,41 the primary purpose of the levy is revenue generation. If
the purpose is primarily revenue, or if revenue is, at least, one of the real and
substantial purposes, then the exaction is properly called a tax.42

In Philippine Airlines, Inc. v. Edu,43 it was held that the imposition of a vehicle
registration fee is not an exercise by the State of its police power, but of its taxation
power, thus:

It is clear from the provisions of Section 73 of Commonwealth Act 123 and Section 61
of the Land Transportation and Traffic Code 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. x x x Fees may be
properly regarded as taxes even though they also serve as an instrument of regulation.

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. Such is the case of
motor vehicle registration fees. The same provision appears as Section 59(b) 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." x x x 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. 59(b) of
the Code as taxes like the motor vehicle registration fee and chauffeurs' license fee.
Such fees are to go into the expenditures of the Land Transportation Commission as
provided for in the last proviso of Sec. 61.44 (Underscoring supplied) cralawlibra ry

The P10 levy under LOI No. 1465 is too excessive to serve a mere regulatory purpose.
The levy, no doubt, was a big burden on the seller or the ultimate consumer. It
increased the price of a bag of fertilizer by as much as five percent.45 A plain reading of
the LOI also supports the conclusion that the levy was for revenue generation. The LOI
expressly provided that the levy was imposed "until adequate capital is raised to make
PPI viable."

Taxes are exacted only for a public purpose. The P10 levy is unconstitutional because it
was not for a public purpose. The levy was imposed to give undue benefit to PPI.

An inherent limitation on the power of taxation is public purpose. Taxes are exacted
only for a public purpose. They cannot be used for purely private purposes or for the
exclusive benefit of private persons.46 The reason for this is simple. The power to tax
exists for the general welfare; hence, implicit in its power is the limitation that it should
be used only for a public purpose. It would be a robbery for the State to tax its citizens
and use the funds generated for a private purpose. As an old United States case bluntly
put it: "To lay with one hand, the power of the government on the property of the
citizen, and with the other to bestow it upon favored individuals to aid private
enterprises and build up private fortunes, is nonetheless a robbery because it is done
under the forms of law and is called taxation."47

The term "public purpose" is not defined. It is an elastic concept that can be hammered
to fit modern standards. Jurisprudence states that "public purpose" should be given a
broad interpretation. It does not only pertain to those purposes which are traditionally
viewed as essentially government functions, such as building roads and delivery of
basic services, but also includes those purposes designed to promote social justice.
Thus, public money may now be used for the relocation of illegal settlers, low-cost
housing and urban or agrarian reform.

While the categories of what may constitute a public purpose are continually expanding
in light of the expansion of government functions, the inherent requirement that taxes
can only be exacted for a public purpose still stands. Public purpose is the heart of a tax
law. When a tax law is only a mask to exact funds from the public when its true intent
is to give undue benefit and advantage to a private enterprise, that law will not satisfy
the requirement of "public purpose."

The purpose of a law is evident from its text or inferable from other secondary sources.
Here, We agree with the RTC and that CA that the levy imposed under LOI No. 1465
was not for a public purpose.

First, the LOI expressly provided that the levy be imposed to benefit PPI, a private
company. The purpose is explicit from Clause 3 of the law, thus:

3. The Administrator of the Fertilizer Pesticide Authority to include in its fertilizer pricing
formula a capital contribution component of not less than P10 per bag. This capital
contribution shall be collected until adequate capital is raised to make PPI viable. Such
capital contribution shall be applied by FPA to all domestic sales of fertilizers in the
Philippines.48 (Underscoring supplied) cralawlib rary

It is a basic rule of statutory construction that the text of a statute should be given a
literal meaning. In this case, the text of the LOI is plain that the levy was imposed in
order to raise capital for PPI. The framers of the LOI did not even hide the insidious
purpose of the law. They were cavalier enough to name PPI as the ultimate beneficiary
of the taxes levied under the LOI. We find it utterly repulsive that a tax law would
expressly name a private company as the ultimate beneficiary of the taxes to be levied
from the public. This is a clear case of crony capitalism.

Second, the LOI provides that the imposition of the P10 levy was conditional and
dependent upon PPI becoming financially "viable." This suggests that the levy was
actually imposed to benefit PPI. The LOI notably does not fix a maximum amount when
PPI is deemed financially "viable." Worse, the liability of Fertiphil and other domestic
sellers of fertilizer to pay the levy is made indefinite. They are required to continuously
pay the levy until adequate capital is raised for PPI.

Third, the RTC and the CA held that the levies paid under the LOI were directly remitted
and deposited by FPA to Far East Bank and Trust Company, the depositary bank of
PPI.49 This proves that PPI benefited from the LOI. It is also proves that the main
purpose of the law was to give undue benefit and advantage to PPI.

Fourth, the levy was used to pay the corporate debts of PPI. A reading of the Letter of
Understanding50 dated May 18, 1985 signed by then Prime Minister Cesar Virata reveals
that PPI was in deep financial problem because of its huge corporate debts. There were
pending petitions for rehabilitation against PPI before the Securities and Exchange
Commission. The government guaranteed payment of PPI's debts to its foreign
creditors. To fund the payment, President Marcos issued LOI No. 1465. The pertinent
portions of the letter of understanding read:

Republic of the Philippines

Office of the Prime Minister
Manila

LETTER OF UNDERTAKING

May 18, 1985

TO: THE BANKING AND FINANCIAL INSTITUTIONS

LISTED IN ANNEX A HERETO WHICH ARE
CREDITORS (COLLECTIVELY, THE "CREDITORS")
OF PLANTERS PRODUCTS, INC. ("PLANTERS")

Gentlemen:

This has reference to Planters which is the principal importer and distributor of fertilizer,
pesticides and agricultural chemicals in the Philippines. As regards Planters, the
Philippine Government confirms its awareness of the following: (1) that Planters has
outstanding obligations in foreign currency and/or pesos, to the Creditors, (2) that
Planters is currently experiencing financial difficulties, and (3) that there are presently
pending with the Securities and Exchange Commission of the Philippines a petition filed
at Planters' own behest for the suspension of payment of all its obligations, and a
separate petition filed by Manufacturers Hanover Trust Company, Manila Offshore
Branch for the appointment of a rehabilitation receiver for Planters.

In connection with the foregoing, the Republic of the Philippines (the "Republic")
confirms that it considers and continues to consider Planters as a major fertilizer
distributor. Accordingly, for and in consideration of your expressed willingness to
consider and participate in the effort to rehabilitate Planters, the Republic hereby
manifests its full and unqualified support of the successful rehabilitation and continuing
viability of Planters, and to that end, hereby binds and obligates itself to the creditors
and Planters, as follows:

x x x

2. Upon the effective date of this Letter of Undertaking, the Republic shall cause FPA to
include in its fertilizer pricing formula a capital recovery component, the proceeds of
which will be used initially for the purpose of funding the unpaid portion of the
outstanding capital stock of Planters presently held in trust by Planters Foundation, Inc.
("Planters Foundation"), which unpaid capital is estimated at approximately P206
million (subject to validation by Planters and Planters Foundation) such unpaid portion
of the outstanding capital stock of Planters being hereafter referred to as the "Unpaid
Capital"), and subsequently for such capital increases as may be required for the
continuing viability of Planters.

x x x

The capital recovery component shall continue to be charged and collected until
payment in full of (a) the Unpaid Capital and/or (b) any shortfall in the payment of the
Subsidy Receivables, (c) any carrying cost accruing from the date hereof on the
amounts which may be outstanding from time to time of the Unpaid Capital and/or the
Subsidy Receivables, and (d) the capital increases contemplated in paragraph 2 hereof.
For the purpose of the foregoing clause (c), the "carrying cost" shall be at such rate as
will represent the full and reasonable cost to Planters of servicing its debts, taking into
account both its peso and foreign currency-denominated obligations.
REPUBLIC OF THE PHILIPPINES

By:

(signed)
CESAR E. A. VIRATA
Prime Minister and Minister of Finance51

It is clear from the Letter of Understanding that the levy was imposed precisely to pay
the corporate debts of PPI. We cannot agree with PPI that the levy was imposed to
ensure the stability of the fertilizer industry in the country. The letter of understanding
and the plain text of the LOI clearly indicate that the levy was exacted for the benefit of
a private corporation.

All told, the RTC and the CA did not err in holding that the levy imposed under LOI No.
1465 was not for a public purpose. LOI No. 1465 failed to comply with the public
purpose requirement for tax laws.

The LOI is still unconstitutional even if enacted under the police power; it did not
promote public interest.

Even if We consider LOI No. 1695 enacted under the police power of the State, it would
still be invalid for failing to comply with the test of "lawful subjects" and "lawful means."
Jurisprudence states the test as follows: (1) the interest of the public generally, as
distinguished from those of particular class, requires its exercise; and (2) the means
employed are reasonably necessary for the accomplishment of the purpose and not
unduly oppressive upon individuals.52

For the same reasons as discussed, LOI No. 1695 is invalid because it did not promote
public interest. The law was enacted to give undue advantage to a private corporation.
We quote with approval the CA ratiocination on this point, thus:

It is upon applying this established tests that We sustain the trial court's holding LOI
1465 unconstitutional. ςηαñrοb lεš νι r†υα l lαω lι brα rÿ

To be sure, ensuring the continued supply and distribution of fertilizer in the country is
an undertaking imbued with public interest. However, the method by which LOI 1465
sought to achieve this is by no means a measure that will promote the public welfare.
The government's commitment to support the successful rehabilitation and continued
viability of PPI, a private corporation, is an unmistakable attempt to mask the subject
statute's impartiality. There is no way to treat the self-interest of a favored entity, like
PPI, as identical with the general interest of the country's farmers or even the Filipino
people in general. Well to stress, substantive due process exacts fairness and equal
protection disallows distinction where none is needed. When a statute's public purpose
is spoiled by private interest, the use of police power becomes a travesty which must
be struck down for being an arbitrary exercise of government power. To rule in favor of
appellant would contravene the general principle that revenues derived from taxes
cannot be used for purely private purposes or for the exclusive benefit of private
individuals. (Underscoring supplied) cralawlibra ry

The general rule is that an unconstitutional law is void; the doctrine of operative fact is
inapplicable.

PPI also argues that Fertiphil cannot seek a refund even if LOI No. 1465 is declared
unconstitutional. It banks on the doctrine of operative fact, which provides that an
unconstitutional law has an effect before being declared unconstitutional. PPI wants to
retain the levies paid under LOI No. 1465 even if it is subsequently declared to be
unconstitutional.
We cannot agree. It is settled that no question, issue or argument will be entertained
on appeal, unless it has been raised in the court a quo.53 PPI did not raise the
applicability of the doctrine of operative fact with the RTC and the CA. It cannot
belatedly raise the issue with Us in order to extricate itself from the dire effects of an
unconstitutional law.

At any rate, We find the doctrine inapplicable. The general rule is that an
unconstitutional law is void. It produces no rights, imposes no duties and affords no
protection. It has no legal effect. It is, in legal contemplation, inoperative as if it has
not been passed.54 Being void, Fertiphil is not required to pay the levy. All levies paid
should be refunded in accordance with the general civil code principle against unjust
enrichment. The general rule is supported by Article 7 of the Civil Code, which provides:

ART. 7. Laws are repealed only by subsequent ones, and their violation or non-
observance shall not be excused by disuse or custom or practice to the contrary.

When the courts declare a law to be inconsistent with the Constitution, the former shall
be void and the latter shall govern.

The doctrine of operative fact, as an exception to the general rule, only applies as a
matter of equity and fair play.55 It nullifies the effects of an unconstitutional law by
recognizing that the existence of a statute prior to a determination of
unconstitutionality is an operative fact and may have consequences which cannot
always be ignored. The past cannot always be erased by a new judicial declaration.56

The doctrine is applicable when a declaration of unconstitutionality will impose an

undue burden on those who have relied on the invalid law. Thus, it was applied to a
criminal case when a declaration of unconstitutionality would put the accused in double
jeopardy57 or would put in limbo the acts done by a municipality in reliance upon a law
creating it.58

Here, We do not find anything iniquitous in ordering PPI to refund the amounts paid by
Fertiphil under LOI No. 1465. It unduly benefited from the levy. It was proven during
the trial that the levies paid were remitted and deposited to its bank account. Quite the
reverse, it would be inequitable and unjust not to order a refund. To do so would
unjustly enrich PPI at the expense of Fertiphil. Article 22 of the Civil Code explicitly
provides that "every person who, through an act of performance by another comes into
possession of something at the expense of the latter without just or legal ground shall
return the same to him." We cannot allow PPI to profit from an unconstitutional law.
Justice and equity dictate that PPI must refund the amounts paid by Fertiphil.

WHEREFORE, the petition is DENIED. The Court of Appeals Decision dated November
28, 2003 is AFFIRMED.

SO ORDERED.
EN BANC

ABAKADA GURO PARTY LIST (Formerly

G.R. No. 168056
AASJAS) OFFICERS SAMSON S.
ALCANTARA and ED VINCENT S.
ALBANO,

Petitioners, Present:

DAVIDE, JR., C.J.,

PUNO,

PANGANIBAN,

QUISUMBING,

YNARES-SANTIAGO,

SANDOVAL-GUTIERREZ,

- versus - CARPIO,

AUSTRIA-MARTINEZ,

CORONA,

CARPIO-MORALES,

CALLEJO, SR.,

AZCUNA,
TINGA,

CHICO-NAZARIO, and

GARCIA, JJ.
THE HONORABLE EXECUTIVE
SECRETARY EDUARDO ERMITA;
HONORABLE SECRETARY OF THE
DEPARTMENT OF FINANCE CESAR
PURISIMA; and HONORABLE
COMMISSIONER OF INTERNAL
REVENUE GUILLERMO PARAYNO, JR.,

Respondents.

x-------------------------x

AQUILINO Q. PIMENTEL, JR., LUISA P.

G.R. No. 168207
EJERCITO-ESTRADA, JINGGOY E.
ESTRADA, PANFILO M. LACSON,
ALFREDO S. LIM, JAMBY A.S.
MADRIGAL, AND SERGIO R. OSMEA III,

Petitioners,

- versus -

EXECUTIVE SECRETARY EDUARDO R.

ERMITA, CESAR V. PURISIMA,
SECRETARY OF FINANCE, GUILLERMO
L. PARAYNO, JR., COMMISSIONER OF
THE BUREAU OF INTERNAL REVENUE,

Respondents.

x-------------------------x

ASSOCIATION OF PILIPINAS SHELL

G.R. No. 168461
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 MAEBO
doing business under the name and
style of CMA MOTORISTS CENTER;
SUSAN M. ENTRATA doing business
under the name and style of LEONAS
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,

- versus -

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,
Respondents.

x-------------------------x

FRANCIS JOSEPH G. ESCUDERO,

G.R. No. 168463
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. CASIO,

Petitioners,

- versus -

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,

Respondents.

x-------------------------x
BATAAN GOVERNOR ENRIQUE T.
G.R. No. 168730
GARCIA, JR.

Petitioner,

- versus -

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,

Promulgated:

Respondents. September 1, 2005

x-----------------------------------------------------------x

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. 3555[2] 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. 3705[3] 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. 1950[4] 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 oclock 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 theyll 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, thats not true.
Its not true that the e-vat law necessarily increased prices
by 10% uniformly isnt it?

ATTY. BANIQUED : No, Your Honor.

J. PANGANIBAN : It is not?

ATTY. BANIQUED : Its not, because, Your Honor, there is an Executive Order that
granted the Petroleum companies some subsidy . . .
interrupted

J. PANGANIBAN : Thats 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 its not correct to say that all prices
must go up by 10%.

ATTY. BANIQUED : Youre 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
thats one reason among many others this Court had to
issue TRO because of the confusion in the implementation.
Thats why we added as an issue in this case, even if its
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, isnt it?

ATTY. BANIQUED : Yes, Your Honor.

J. PANGANIBAN : Alright. So thats 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 %).

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 (P1, 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 P1,000,000.00, 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

governments 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 latters 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 Farias 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 Congresss 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 Courts 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 Osmea 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 Farias 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

[24]
any constitutional provision but is only an internal rule of each house. 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.3705 Senate Bill No. 1950

House Bill No. 3555

With regard to Stand-By Authority in favor of President

Provides for 12% VAT on
every sale of goods or
properties (amending Sec.
106 of NIRC); 12% VAT on
importation of goods
(amending Sec. 107 of
NIRC); and 12% VAT on
sale of services and use or
lease of properties
(amending Sec. 108 of
NIRC)
Provides for 12% VAT in
general on sales of goods or
properties and reduced rates
for sale of certain locally
manufactured goods and
petroleum products and raw
materials to be used in the
manufacture thereof
(amending Sec. 106 of NIRC);
12% VAT on importation of
goods and reduced rates for
certain imported products
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)
Provides for a single rate of
10% VAT on sale of goods
or properties (amending
Sec. 106 of NIRC), 10% VAT
on sale of services including
sale of electricity by
generation companies,
transmission and
distribution companies, and
use or lease of properties
(amending Sec. 108 of
NIRC)
 With regard to the no pass-on provision
No similar provision
With regard to 70% limit on input tax credit
Provides that the input tax
credit for capital goods on
which a VAT has been paid
shall be equally
distributed over 5 years or
the depreciable life of
such capital goods; the
input tax credit for goods
and services other than
capital goods shall not
exceed 5% of the total
amount of such 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
Provides that the VAT imposed
on power generation and on
the sale of petroleum
products shall be absorbed by
generation companies or
sellers, respectively, and shall
not be passed on to
consumers
No similar provision
No similar provision
Provides that the VAT
imposed on sales of
electricity by generation
companies and services of
transmission companies
and distribution companies,
as well as those of franchise
grantees of electric utilities
shall not apply to
residential
end-users. VAT shall be
absorbed by generation,
transmission, and
distribution companies.
Provides that the input tax
credit for capital goods on
which a VAT has been paid
shall be equally distributed
over 5 years or the
depreciable life of such
capital goods; the input tax
credit for goods and
services other than capital
goods shall not exceed 90%
of the output VAT.
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 1%, 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
(P1,000,000.00): 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 lets keep it plain and simple. Lets 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, lets 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. Prado[29] 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 Committees 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 Senates 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 countrys 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 countrys 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 P64.3 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 P48.7
billion amount is from the VAT on twelve goods and services. The rest of the tab
P10.5 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 worlds 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 P10.5
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

countrys 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 %).

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 %).

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 %).
(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 Presidents 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 %).

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 Presidents 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 (1%). 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 1%.

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 %).
 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. Natl Govt 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 countrys 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. Thats interest plus amortization of our debt. So clearly, this is not a
sustainable situation. Thats 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 Id 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, weve 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 states economic dilemma is not for the Court to judge. In the Farias 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 businesss

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 taxpayers 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 laymans 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 persons 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
(P1,000,000.00): 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 P1 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 Congresss 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.

Whats 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 States 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 ones 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 Courts attention the introduction of Senate Bill No. 2038 by Sens. S.R. Osmea 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 P1,500,000.00.[88] Also,

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 P200,000.00. 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 P1.5 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

products[91] and natural gas[92] 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

corporations 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 taxpayers ability to pay.

This principle was also lifted from Adam Smiths 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. Avelino[101] holds true then, as it still

holds true now. All things considered, there is no raison d'tre 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.

FIRST DIVISION

G.R. No. 181756, June 15, 2015

MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY (MCIAA), Petitioner, v. CITY OF LAPU-LAPU

AND ELENA T. PACALDO, Respondents.

DECISION

LEONARDO-DE CASTRO, J.:

This is a clear opportunity for this Court to clarify the effects of our two previous decisions, issued a decade
apart, on the power of local government units to collect real property taxes from airport authorities located
within their area, and the nature or the juridical personality of said airport authorities.

Before us is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure seeking to
reverse and set aside the October 8, 2007 Decision1 of the Court of Appeals (Cebu City) in CA-G.R. SP No.
01360 and the February 12, 2008 Resolution2 denying petitioner�s motion for reconsideration.

THE FACTS

Petitioner Mactan-Cebu International Airport Authority (MCIAA) was created by Congress on July 31, 1990
under Republic Act No. 69583 to �undertake the economical, efficient and effective control, management
and supervision of the Mactan International Airport in the Province of Cebu and the Lahug Airport in Cebu
City x x x and such other airports as may be established in the Province of Cebu.� It is represented in this
case by the Office of the Solicitor General.

Respondent City of Lapu-Lapu is a local government unit and political subdivision, created and existing
under its own charter with capacity to sue and be sued. Respondent Elena T. Pacaldo was impleaded in her
capacity as the City Treasurer of respondent City.

Upon its creation, petitioner enjoyed exemption from realty taxes under the following provision of Republic
Act No. 6958: chanRoblesvirtual Lawli bra ry

Section 14. Tax Exemptions. � The Authority shall be exempt from realty taxes imposed by the National
Government or any of its political subdivisions, agencies and instrumentalities: Provided, That no tax
exemption herein granted shall extend to any subsidiary which may be organized by the Authority. chanroblesvi rt uallawl ibra ry

On September 11, 1996, however, this Court rendered a decision in Mactan-Cebu International Airport
Authority v. Marcos4 (the 1996 MCIAA case) declaring that upon the effectivity of Republic Act No. 7160
(The Local Government Code of 1991), petitioner was no longer exempt from real estate taxes. The Court
held: cha nRoblesv irt ual Lawlib rary

Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the LGC, exemptions
from payment of real property taxes granted to natural or juridical persons, including government-owned or
controlled corporations, except as provided in the said section, and the petitioner is, undoubtedly, a
government-owned corporation, it necessarily follows that its exemption from such tax granted it in Section
14 of its Charter, R.A. No. 6958, has been withdrawn. x x x. chanrob lesvi rtual lawlib rary

On January 7, 1997, respondent City issued to petitioner a Statement of Real Estate Tax assessing the lots
comprising the Mactan International Airport in the amount of P162,058,959.52. Petitioner complained that
there were discrepancies in said Statement of Real Estate Tax as follows: chanRob lesvi rtual Lawli bra ry

(a) [T]he statement included lots and buildings not found in the inventory of petitioner�s real properties;
(b) [S]ome of the lots were covered by two separate tax declarations which resulted in double assessment;

(c) [There were] double entries pertaining to the same lots; and

(d) [T]he statement included lots utilized exclusively for governmental purposes.5
Respondent City amended its billing and sent a new Statement of Real Estate Tax to petitioner in the
amount of P151,376,134.66. Petitioner averred that this amount covered real estate taxes on the lots
utilized solely and exclusively for public or governmental purposes such as the airfield, runway and taxiway,
and the lots on which they are situated.6 chan robles law

Petitioner paid respondent City the amount of four million pesos (P4,000,000.00) monthly, which was later
increased to six million pesos (P6,000,000.00) monthly. As of December 2003, petitioner had paid
respondent City a total of P275,728,313.36.7 chanro bles law

Upon request of petitioner�s General Manager, the Secretary of the Department of Justice (DOJ) issued
Opinion No. 50, Series of 1998,8 and we quote the pertinent portions of said Opinion below: cha nRoblesvi rt ualLaw lib rary

You further state that among the real properties deemed transferred to MCIAA are the airfield, runway,
taxiway and the lots on which the runway and taxiway are situated, the tax declarations of which were
transferred in the name of the MCIAA. In 1997, the City of Lapu-Lapu imposed real estate taxes on these
properties invoking the provisions of the Local Government Code.

It is your view that these properties are not subject to real property tax because they are exclusively used
for airport purposes. You said that the runway and taxiway are not only used by the commercial airlines but
also by the Philippine Air Force and other government agencies. As such and in conjunction with the above
interpretation of Section 15 of R.A. No. 6958, you believe that these properties are considered owned by the
Republic of the Philippines. Hence, this request for opinion.

The query is resolved in the affirmative. The properties used for airport purposes (i.e. airfield,
runway, taxiway and the lots on which the runway and taxiway are situated) are owned by the
Republic of the Philippines.

x x x x

Under the Law on Public Corporations, the legislature has complete control over the property which a
municipal corporation has acquired in its public or governmental capacity and which is devoted to public or
governmental use. The municipality in dealing with said property is subject to such restrictions and
limitations as the legislature may impose. On the other hand, property which a municipal corporation
acquired in its private or proprietary capacity, is held by it in the same character as a private individual.
Hence, the legislature in dealing with such property, is subject to the constitutional restrictions concerning
property (Martin, Public Corporations [1997], p. 30; see also Province of Zamboanga del [Norte] v. City of
Zamboanga [131 Phil. 446]). The same may be said of properties transferred to the MCIAA and used for
airport purposes, such as those involved herein. Since such properties are of public dominion, they are
deemed held by the MCIAA in trust for the Government and can be alienated only as may be provided by
law.

Based on the foregoing, it is our considered opinion that the properties used for airport purposes,
such as the airfield, runway and taxiway and the lots on which the runway and taxiway are
located, are owned by the State or by the Republic of the Philippines and are merely held in trust
by the MCIAA, notwithstanding that certificates of titles thereto may have been issued in the
name of the MCIAA. (Emphases added.)
Based on the above DOJ Opinion, the Department of Finance issued a 2nd Indorsement to the City Treasurer
of Lapu-Lapu dated August 3, 1998,9 which reads: chanRoblesvi rt ual Lawlib rary

The distinction as to which among the MCIAA properties are still considered �owned by the State or by the
Republic of the Philippines,� such as the resolution in the above-cited DOJ Opinion No. 50, for purposes of
real property tax exemption is hereby deemed tenable considering that the subject �airfield, runway,
taxiway and the lots on which the runway and taxiway are situated� appears to be the subject of real
property tax assessment and collection of the city government of Lapu-Lapu, hence, the same are definitely
located within the jurisdiction of Lapu-Lapu City.

Moreover, then Undersecretary Antonio P. Belicena of the Department of Finance, in his 1 st

Indorsement dated May 18, 1998, advanced that �this Department (DOF) interposes no
objection to the request of Mactan Cebu International Airport Authority for exemption from
payment of real property tax on the property used for airport purposes� mentioned above.

The City Assessor, therefore, is hereby instructed to transfer the assessment of the subject
airfield, runway, taxiway and the lots on which the runway and taxiway are situated, from the
�Taxable Roll� to the �Exempt Roll� of real properties.

The City Treasurer thereat should be informed on the action taken for his immediate appropriate action.
(Emphases added.)
Respondent City Treasurer Elena T. Pacaldo sent petitioner a Statement of Real Property Tax Balances up to
the year 2002 reflecting the amount of P246,395,477.20. Petitioner claimed that the statement again
included the lots utilized solely and exclusively for public purpose such as the airfield, runway, and taxiway
and the lots on which these are built. Respondent Pacaldo then issued Notices of Levy on 18 sets of real
properties of petitioner.10 chan roble slaw
Petitioner filed a petition for prohibition11 with the Regional Trial Court (RTC) of Lapu-Lapu City with prayer
for the issuance of a temporary restraining order (TRO) and/or a writ of preliminary injunction, docketed as
SCA No. 6056-L. Branch 53 of RTC Lapu-Lapu City then issued a 72-hour TRO. The petition for prohibition
sought to enjoin respondent City from issuing a warrant of levy against petitioner�s properties and from
selling them at public auction for delinquency in realty tax obligations. The petition likewise prayed for a
declaration that the airport terminal building, the airfield, runway, taxiway and the lots on which they are
situated are exempted from real estate taxes after due hearing. Petitioner based its claim of exemption on
DOJ Opinion No. 50.

The RTC issued an Order denying the motion for extension of the TRO. Thus, on December 10, 2003,
respondent City auctioned 27 of petitioner�s properties. As there was no interested bidder who participated
in the auction sale, respondent City forfeited and purchased said properties. The corresponding Certificates
of Sale of Delinquent Property were issued to respondent City.12 chan roble slaw

Petitioner claimed before the RTC that it had discovered that respondent City did not pass any ordinance
authorizing the collection of real property tax, a tax for the special education fund (SEF), and a penalty
interest for its nonpayment. Petitioner argued that without the corresponding tax ordinances, respondent
City could not impose and collect real property tax, an additional tax for the SEF, and penalty interest from
petitioner.13 chan roble slaw

The RTC issued an Order14 on December 28, 2004 granting petitioner�s application for a writ of preliminary
injunction. The pertinent portions of the Order are quoted below: c hanRoblesv irtual Lawlib rary

The supervening legal issue has rendered it imperative that the matter of the consolidation of the ownership
of the auctioned properties be placed on hold. Furthermore, it is the view of the Court that great prejudice
and damage will be suffered by petitioner if it were to lose its dominion over these properties now when the
most important legal issue has still to be resolved by the Court. Besides, the respondents and the intervenor
have not sufficiently shown cause why petitioner�s application should not be granted.

WHEREFORE, the foregoing considered, petitioner�s application for a writ of preliminary injunction is
granted. Consequently, upon the approval of a bond in the amount of one million pesos (P1,000,000.00), let
a writ of preliminary injunction issue enjoining the respondents, the intervenor, their agents or persons
acting in [their] behalf, to desist from consolidating and exercising ownership over the properties of the
petitioner.
c han roblesv irt uallawl ibra ry

However, upon motion of respondents, the RTC lifted the writ of preliminary injunction in an Order15 dated
December 5, 2005. The RTC reasoned as follows: chanRoble svirtual Lawlib ra ry

The respondent City, in the course of the hearing of its motion, presented to this Court a certified copy of its
Ordinance No. 44 (Omnibus Tax Ordinance of the City of Lapu-Lapu), Section 25 whereof authorized the
collection of a rate of one and one-half (1 �) [per centum] from owners, executors or administrators of any
real estate lying within the jurisdiction of the City of Lapu-Lapu, based on the assessed value as shown in
the latest revision.

Though this ordinance was enacted prior to the effectivity of Republic Act No. 7160 (Local Government Code
of 1991), to the mind of the Court this ordinance is still a valid and effective ordinance in view of Sec. 529 of
RA 7160 x x x [and the] Implementing Rules and Regulations of RA 7160 x x x.

x x x x

The tax collected under Ordinance No. 44 is within the rates prescribed by RA 7160, though the 25%
penalty collected is higher than the 2% interest allowed under Sec. 255 of the said law which provides: chanRob lesvi rtua lLawl ibra ry

In case of failure to pay the basic real property tax or any other tax levied under this Title upon the
expiration of the periods as provided in Section 250, or when due, as the case may be, shall subject the
taxpayer to the payment of interest at the rate of two percent (2%) per month on the unpaid amount or a
fraction thereof, until the delinquent tax shall have been fully paid: Provided, however, That in no case shall
the total interest on the unpaid tax or portion thereof exceed thirty-six (36) months. ch anroble svirtual lawlib rary

This difference does not however detract from the essential enforceability and effectivity of Ordinance No.
44 pursuant to Section 529 of RA 7160 and Article 278 of the Implementing Rules and Regulations. The
outcome of this disparity is simply that respondent City can only collect an interest of 2% per month on the
unpaid tax. Consequently, respondent City [has] to recompute the petitioner�s tax liability.

It is also the Court�s perception that respondent City can still collect the additional 1% tax on real property
without an ordinance to this effect. It may be recalled that Republic Act No. 5447 has created the Special
Education Fund which is constituted from the proceeds of the additional tax on real property imposed by the
law. Respondent City has collected this tax as mandated by this law without any ordinance for the purpose,
as there is no need for it. Even when RA 5447 was amended by PD 464 (Real Property Tax Code),
respondent City had continued to collect the tax, as it used to.

It is true that RA 7160 has repealed RA 5447, but what has been repealed are only Section 3, a(3) and b(2)
which concern the allocation of the additional tax, considering that under RA 7160, the proceeds of the
additional 1% tax on real property accrue exclusively to the Special Education Fund. Nevertheless, RA 5447
has not been totally repealed; there is only a partial repeal.

It may be observed that there is no requirement in RA 7160 that an ordinance be enacted to enable the
collection of the additional 1% tax. This is so since RA 5447 is still in force and effect, and the declared
policy of the government in enacting the law, which is to contribute to the financial support of the goals of
education as provided in the Constitution, necessitates the continued and uninterrupted collection of the tax.
Considering that this is a tax of far-reaching importance, to require the passage of an ordinance in order
that the tax may be collected would be to place the collection of the tax at the option of the local legislature.
This would run counter to the declared policy of the government when the SEF was created and the tax
imposed.

As regards the allegation of respondents that this Court has no jurisdiction to entertain the instant petition,
the Court deems it proper, at this stage of the proceedings, not to treat this issue, as it involves facts which
are yet to be established.

x x x [T]he Court�s issuance of a writ of preliminary injunction may appear to be a futile gesture in the light
of Section 263 of RA 7160. x x x.

x x x x

It would seem from the foregoing provisions, that once the taxpayer fails to redeem within the one-year
period, ownership fully vests on the local government unit concerned. Thus, when in the present case
petitioner failed to redeem the parcels of land acquired by respondent City, the ownership thereof became
fully vested on respondent City without the latter having to perform any other acts to perfect its ownership.
Corollary thereto, ownership on the part of respondent City has become a fait accompli.

WHEREFORE, in the light of the foregoing considerations, respondents� motion for reconsideration is
granted, and the order of this Court dated December 28, 2004 is hereby reconsidered. Consequently, the
writ of preliminary injunction issued by this Court is hereby lifted. c hanro blesvi rt uallawl ibra ry

Aggrieved, petitioner filed a petition for certiorari16 with the Court of Appeals (Cebu City), with urgent prayer
for the issuance of a TRO and/or writ of preliminary injunction, docketed as CA-G.R. SP No. 01360. The
Court of Appeals (Cebu City) issued a TRO17 on January 5, 2006 and shortly thereafter, issued a writ of
preliminary injunction18 on February 17, 2006.

RULING OF THE COURT OF APPEALS

The Court of Appeals (Cebu City) promulgated the questioned Decision on October 8, 2007, holding that
petitioner is a government-owned or controlled corporation and its properties are subject to realty tax. The
dispositive portion of the questioned Decision reads: c hanRoblesv irt ual Lawlib rary

WHEREFORE, in view of the foregoing, judgment is hereby rendered by us as follows:

a. We DECLARE the airport terminal building, the airfield, runway, taxiway and the lots on which they
are situated NOT EXEMPT from the real estate tax imposed by the respondent City of Lapu-Lapu;

b. We DECLARE the imposition and collection of the real estate tax, the additional levy for the Special
Education Fund and the penalty interest as VALID and LEGAL. However, pursuant to Section 255
of the Local Government Code, respondent city can only collect an interest of 2% per month on the
unpaid tax which total interest shall, in no case, exceed thirty-six (36) months;

c. We DECLARE the sale in public auction of the aforesaid properties and the eventual forfeiture and
purchase of the subject property by the respondent City of Lapu-Lapu as NULL and VOID.
However, petitioner MCIAA�s property is encumbered only by a limited lien possessed by the
respondent City of Lapu-Lapu in accord with Section 257 of the Local Government Code.19

Petitioner filed a Motion for Partial Reconsideration20 of the questioned Decision covering only the portion of
said decision declaring that petitioner is a GOCC and, therefore, not exempt from the realty tax and special
education fund imposed by respondent City. Petitioner cited Manila International Airport Authority v. Court
of Appeals21 (the 2006 MIAA case) involving the City of Para�aque and the Manila International Airport
Authority. Petitioner claimed that it had been described by this Court as a government instrumentality, and
that it followed �as a logical consequence that petitioner is exempt from the taxing powers of respondent
City of Lapu-Lapu.�22 Petitioner alleged that the 1996 MCIAA case had been overturned by the Court in the
2006 MIAA case. Petitioner thus prayed that it be declared exempt from paying the realty tax, special
education fund, and interest being collected by respondent City.

On February 12, 2008, the Court of Appeals denied petitioner�s motion for partial reconsideration in the
questioned Resolution.

The Court of Appeals followed and applied the precedent established in the 1996 MCIAA case and refused to
apply the 2006 MIAA case. The Court of Appeals wrote in the questioned Decision: �We find that our
position is in line with the coherent and cohesive interpretation of the relevant provisions of the Local
Government Code on local taxation enunciated in the [1996 MCIAA] case which to our mind is more elegant
and rational and provides intellectual clarity than the one provided by the Supreme Court in the [2006]
MIAA case.�23 chanroble slaw

In the questioned Decision, the Court of Appeals held that petitioner�s airport terminal building, airfield,
runway, taxiway, and the lots on which they are situated are not exempt from real estate tax reasoning as
follows: cha nRoblesv irt ual Lawlib rary

Under the Local Government Code (LGC for brevity), enacted pursuant to the constitutional mandate of local
autonomy, all natural and juridical persons, including government-owned or controlled corporations
(GOCCs), instrumentalities and agencies, are no longer exempt from local taxes even if previously granted
an exemption. The only exemptions from local taxes are those specifically provided under the Code itself, or
those enacted through subsequent legislation.
Thus, the LGC, enacted pursuant to Section 3, Article X of the Constitution, provides for the exercise by local
government units of their power to tax, the scope thereof or its limitations, and the exemptions from local
taxation.

Section 133 of the LGC prescribes the common limitations on the taxing powers of local government units. x
x x.

x x x x

The above-stated provision, however, qualified the exemption of the National Government, its agencies and
instrumentalities from local taxation with the phrase �unless otherwise provided herein.�

Section 232 of the LGC provides for the power of the local government units (LGUs for brevity) to levy real
property tax. x x x.

x x x x

Section 234 of the LGC provides for the exemptions from payment of real property taxes and withdraws
previous exemptions granted to natural and juridical persons, including government-owned and controlled
corporations, except as provided therein. x x x.

x x x x

Section 193 of the LGC is the general provision on withdrawal of tax exemption privileges. x x x.24 (Citations
omitted.)
The Court of Appeals went on to state that contrary to the ruling of the Supreme Court in the 2006 MIAA
case, it finds and rules that:
chanRoblesvi rtua lLawl ibra ry

a) Section 133 of the LGC is not an absolute prohibition on the power of the LGUs to tax the National
Government, its agencies and instrumentalities as the same is qualified by Sections 193, 232 and 234 which
�otherwise provided�; and

b) Petitioner MCIAA is a GOCC.25 (Emphasis ours.)

The Court of Appeals ratiocinated in the following manner: chanRo blesvi rtua lLaw lib rary

Pursuant to the explicit provision of Section 193 of the LGC, exemptions previously enjoyed by persons,
whether natural or juridical, like the petitioner MCIAA, are deemed withdrawn upon the effectivity of the
Code. Further, the last paragraph of Section 234 of the Code also unequivocally withdrew, upon the Code�s
effectivity, exemptions from payment of real property taxes previously granted to natural or juridical
persons, including government-owned or controlled corporations, except as provided in the said section.
Petitioner MCIAA, undoubtedly a juridical person, it follows that its exemption from such tax granted under
Section 14 of R.A. 6958 has been withdrawn.

x x x x

From the [1996 MCIAA] ruling, it is acknowledged that, under Section 133 of the LGC, instrumentalities
were generally exempt from all forms of local government taxation, unless otherwise provided in the Code.
On the other hand, Section 232 �otherwise provided� insofar as it allowed local government units to levy
an ad valorem real property tax, irrespective of who owned the property. At the same time, the imposition
of real property taxes under Section 232 is, in turn, qualified by the phrase �not hereinafter specifically
exempted.� The exemptions from real property taxes are enumerated in Section 234 of the Code which
specifically states that only real properties owned by the Republic of the Philippines or any of its political
subdivisions are exempted from the payment of the tax. Clearly, instrumentalities or GOCCs do not fall
within the exceptions under Section 234 of the LGC.

Thus, as ruled in the [1996 MCIAA] case, the prohibition on taxing the national government, its agencies
and instrumentalities under Section 133 is qualified by Sections 232 and 234, and accordingly, the only
relevant exemption now applicable to these bodies is what is now provided under Section 234(a) of the
Code. It may be noted that the express withdrawal of previously granted exemptions to persons from the
payment of real property tax by the LGC does not even make any distinction as to whether the exempt
person is a governmental entity or not. As Sections 193 and 234 of the Code both state, the withdrawal
applies to �all persons, including GOCCs,� thus encompassing the two classes of persons recognized under
our laws, natural persons and juridical persons.

x x x x

The question of whether or not petitioner MCIAA is an instrumentality or a GOCC has already been lengthily
but soundly, cogently and lucidly answered in the [1996 MCIAA] case x x x.

x x x x

Based on the foregoing, the claim of the majority of the Supreme Court in the [2006 MIAA] case that MIAA
(and also petitioner MCIAA) is not a government-owned or controlled corporation but an instrumentality
based on Section 2(10) of the Administrative Code of 1987 appears to be unsound. In the [2006 MIAA]
case, the majority justifies MIAA�s purported exemption on Section 133(o) of the Local Government Code
which places agencies and instrumentalities: as generally exempt from the taxation powers of the LGUs. It
further went on to hold that �By express mandate of the Local Government Code, local governments cannot
impose any kind of tax on national government instrumentalities like the MIAA.� x x x.26 (Citations
omitted.)
The Court of Appeals further cited Justice Tinga�s dissent in the 2006 MIAA case as well as provisions from
petitioner MCIAA�s charter to show that petitioner is a GOCC.27 The Court of Appeals wrote: cha nRoblesvi rt ual Lawlib rary

These cited provisions establish the fitness of the petitioner MCIAA to be the subject of legal relations. Under
its charter, it has the power to acquire, possess and incur obligations. It also has the power to contract in its
own name and to acquire title to movable or immovable property. More importantly, it may likewise exercise
powers of a corporation under the Corporation Code. Moreover, based on its own allegation, it even
recognized itself as a GOCC when it alleged in its petition for prohibition filed before the lower court that it
�is a body corporate organized and existing under Republic Act No. 6958 x x x.�

We also find to be not meritorious the assertion of petitioner MCIAA that the respondent city can no longer
challenge the tax-exempt character of the properties since it is estopped from doing so when respondent
City of Lapu-Lapu, through its former mayor, Ernest H. Weigel, Jr., had long ago conceded that petitioner�s
properties are exempt from real property tax.

It is not denied by the respondent city that it considered, through its former mayor, Ernest H. Weigel, Jr.,
petitioner�s subject properties, specifically the runway and taxiway, as exempt from taxes. However, as
astutely pointed out by the respondent city it �can never be in estoppel, particularly in matters involving
taxes. It is a well-known rule that erroneous application and enforcement of the law by public officers do not
preclude subsequent correct application of the statute, and that the Government is never estopped by
mistake or error on the part of its agents.�28 (Citations omitted.)
The Court of Appeals established the following: c hanRoble svirtual Lawli bra ry

a) [R]espondent City was able to prove and establish that it has a valid and existing ordinance for the
imposition of realty tax against petitioner MCIAA;

b) [T]he imposition and collection of additional levy of 1% Special Education Fund (SEF) is authorized by
law, Republic Act No. 5447; and

c) [T]he collection of penalty interest for delinquent taxes is not only authorized by law but is likewise
[sanctioned] by respondent City�s ordinance.29
The Court of Appeals likewise held that respondent City has a valid and existing local tax ordinance,
Ordinance No. 44, or the Omnibus Tax Ordinance of Lapu-Lapu City, which provided for the imposition of
real property tax. The relevant provision reads: chanRoble svirtual Lawli bra ry

Chapter 5 � Tax on Real Property Ownership

Section 25. RATE OF TAX. - A rate of one and one-half (1 �) percentum shall be collected from owners,
executors or administrators of any real estate lying within the territorial jurisdiction of the City of Lapu-Lapu,
based on the assessed value as shown in the latest revision.30
The Court of Appeals found that even if Ordinance No. 44 was enacted prior to the effectivity of the LGC, it
remained in force and effect, citing Section 529 of the LGC and Article 278 of the LGC�s Implementing
Rules and Regulations.31 chan rob leslaw

As regards the Special Education Fund, the Court of Appeals held that respondent City can still collect the
additional 1% tax on real property even without an ordinance to this effect, as this is authorized by Republic
Act No. 5447, as amended by Presidential Decree No. 464 (the Real Property Tax Code), which does not
require an enabling tax ordinance. The Court of Appeals affirmed the RTC�s ruling that Republic Act No.
5447 was still in force and effect notwithstanding the passing of the LGC, as the latter only partially repealed
the former law. What Section 534 of the LGC repealed was Section 3 a(3) and b(2) of Republic Act No.
5447, and not the entire law that created the Special Education Fund.32 The repealed provisions referred to
allocation of taxes on Virginia type cigarettes and duties on imported leaf tobacco and the percentage
remittances to the taxing authority concerned. The Court of Appeals, citing The Commission on Audit of the
Province of Cebu v. Province of Cebu,33 held that �[t]he failure to add a specific repealing clause particularly
mentioning the statute to be repealed indicates that the intent was not to repeal any existing law on the
matter, unless an irreconcilable inconsistency and repugnancy exists in the terms of the new and the old
laws.�34 The Court of Appeals quoted the RTC�s discussion on this issue, which we reproduce below: chanRob lesvi rtua lLawl ibra ry

It may be observed that there is no requirement in RA 7160 that an ordinance be enacted to enable the
collection of the additional 1% tax. This is so since R.A. 5447 is still in force and effect, and the declared
policy of the government in enacting the law, which is to contribute to the financial support of the goals of
education as provided in the Constitution, necessitates the continued and uninterrupted collection of the tax.
Considering that this is a tax of far-reaching importance, to require the passage of an ordinance in order
that the tax may be collected would be to place the collection of the tax at the option of the local legislature.
This would run counter to the declared policy of the government when the SEF was created and the tax
imposed.35
Regarding the penalty interest, the Court of Appeals found that Section 30 of Ordinance No. 44 of
respondent City provided for a penalty surcharge of 25% of the tax due for a given year. Said provision
reads:chanRoble svirtual Lawli bra ry

Section 30. � PENALTY FOR FAILURE TO PAY TAX. � Failure to pay the tax provided for under this Chapter
within the time fixed in Section 27, shall subject the taxpayer to a surcharge of twenty-five percent (25%),
without interest.36
The Court of Appeals however declared that after the effectivity of the Local Government Code, the
respondent City could only collect penalty surcharge up to the extent of 72%, covering a period of three
years or 36 months, for the entire delinquent property.37 This was lower than the 25% per annum surcharge
imposed by Ordinance No. 44.38 The Court of Appeals affirmed the findings of the RTC in the decision quoted
below: c hanRoblesv irtual Lawlib rary
The tax collected under Ordinance No. 44 is within the rates prescribed by RA 7160, though the 25%
penalty collected is higher than the 2% allowed under Sec. 255 of the said law which provides: Cha nRobles Vi rtua lawlib rary

x x x x

This difference does not however detract from the essential enforceability and effectivity of Ordinance No.
44 pursuant to Section 529 of RA No. 7160 and Article 278 of the Implementing Rules and Regulations. The
outcome of this disparity is simply that respondent City can only collect an interest of 2% per month on the
unpaid tax. Consequently, respondent city will have to [recompute] the petitioner�s tax liability.39
It is worthy to note that the Court of Appeals nevertheless held that even if it is clear that
respondent City has the power to impose real property taxes over petitioner, �it is also evident
and categorical that, under Republic Act No. 6958, the properties of petitioner MCIAA may not be
conveyed or transferred to any person or entity except to the national government.�40 The
relevant provisions of the said law are quoted below:chanRoble svi rtual Lawli bra ry

Section 4. Functions, Powers and Duties. � The Authority shall have the following functions, powers and
duties:ChanRoble sVirt ualawli bra ry

x x x x

(e) To acquire, purchase, own, administer, lease, mortgage, sell or otherwise dispose of any land, building,
airport facility, or property of whatever kind and nature, whether movable or immovable, or any interest
therein: Provided, That any asset located in the Mactan International Airport important to national security
shall not be subject to alienation or mortgage by the Authority nor to transfer to any entity other than the
National Government[.]

Section 13. Borrowing Power. � The Authority may, in accordance with Section 21, Article XII of the
Constitution and other existing laws, rules and regulations on local or foreign borrowing, raise funds, either
from local or international sources, by way of loans, credit or securities, and other borrowing instruments
with the power to create pledges, mortgages and other voluntary liens or encumbrances on any of its assets
or properties, subject to the prior approval of the President of the Philippines.

All loans contracted by the Authority under this section, together with all interests and other sums payable
in respect thereof, shall constitute a charge upon all the revenues and assets of the Authority and shall rank
equally with one another, but shall have priority over any other claim or charge on the revenue and assets
of the Authority: Provided, That this provision shall not be construed as a prohibition or restriction on the
power of the Authority to create pledges, mortgages and other voluntary liens or encumbrances on any
asset or property of the Authority.

The payment of the loans or other indebtedness of the Authority may be guaranteed by the National
Government subject to the approval of the President of the Philippines. c han roblesv irt uallawl ibra ry

The Court of Appeals concluded that �it is clear that petitioner MCIAA is denied by its charter the absolute
right to dispose of its property to any person or entity except to the national government and it is not
empowered to obtain loans or encumber its property without the approval of the President.�41 The
questioned Decision contained the following conclusion: chanR oblesvi rtual Lawl ibra ry

With the advent of RA 7160, the Local Government Code, the power to tax is no longer vested exclusively
on Congress. LGUs, through its local legislative bodies, are now given direct authority to levy taxes, fees and
other charges pursuant to Article X, Section 5 of the 1987 Constitution. And one of the most significant
provisions of the LGC is the removal of the blanket inclusion of instrumentalities and agencies of the national
government from the coverage of local taxation. The express withdrawal by the Code of previously granted
exemptions from realty taxes applied to instrumentalities and government-owned or controlled corporations
(GOCCs) such as the petitioner Mactan-Cebu International Airport Authority. Thus, petitioner MCIAA became
a taxable person in view of the withdrawal of the realty tax exemption that it previously enjoyed under
Section 14 of RA No. 6958 of its charter. As expressed and categorically held in the Mactan case, the
removal and withdrawal of tax exemptions previously enjoyed by persons, natural or juridical, are consistent
with the State policy to ensure autonomy to local governments and the objective of the Local Government
Code that they enjoy genuine and meaningful local autonomy to enable them to attain their fullest
development as self-reliant communities and make them effective partners in the attainment of national
goals.

However, in the case at bench, petitioner MCIAA�s charter expressly bars the alienation or mortgage of its
property to any person or entity except to the national government. Therefore, while petitioner MCIAA is a
taxable person for purposes of real property taxation, respondent City of Lapu-Lapu is prohibited from
seizing, selling and owning these properties by and through a public auction in order to satisfy petitioner
MCIAA�s tax liability.42 (Citations omitted.)
In the questioned Resolution that affirmed its questioned Decision, the Court of Appeals denied petitioner�s
motion for reconsideration based on the following grounds: chanRoble svi rtual Lawli bra ry

First, the MCIAA case remains the controlling law on the matter as the same is the established
precedent; not the MIAA case but the MCIAA case since the former, as keenly pointed out by the
respondent City of Lapu-Lapu, has not yet attained finality as there is still yet a pending motion
for reconsideration filed with the Supreme Court in the aforesaid case.

Second, and more importantly, the ruling of the Supreme Court in the MIAA case cannot be
similarly invoked in the case at bench. The said case cannot be considered as the �law of the
case.� The �law of the case� doctrine has been defined as that principle under which determinations of
questions of law will generally be held to govern a case throughout all its subsequent stages where such
determination has already been made on a prior appeal to a court of last resort. It is merely a rule of
procedure and does not go to the power of the court, and will not be adhered to where its application will
result in an unjust decision. It relates entirely to questions of law, and is confined in its operation to
subsequent proceedings in the same case. According to said doctrine, whatever has been irrevocably
established constitutes the law of the case only as to the same parties in the same case and not to different
parties in an entirely different case. Besides, pending resolution of the aforesaid motion for reconsideration
in the MIAA case, the latter case has not irrevocably established anything.

Thus, after a thorough and judicious review of the allegations in petitioner�s motion for reconsideration,
this Court resolves to deny the same as the matters raised therein had already been exhaustively discussed
in the decision sought to be reconsidered, and that no new matters were raised which would warrant the
modification, much less reversal, thereof.43 (Emphasis added, citations omitted.)
PETITIONER�S THEORY

Petitioner is before us now claiming that this Court, in the 2006 MIAA case, had expressly declared that
petitioner, while vested with corporate powers, is not considered a government-owned or controlled
corporation, but is a government instrumentality like the Manila International Airport Authority (MIAA),
Philippine Ports Authority (PPA), University of the Philippines, and Bangko Sentral ng Pilipinas (BSP).
Petitioner alleges that as a government instrumentality, all its airport lands and buildings are exempt from
real estate taxes imposed by respondent City.44 chanrobles law

Petitioner alleges that Republic Act No. 6958 placed �a limitation on petitioner�s administration of its
assets and properties� as it provides under Section 4(e) that �any asset in the international airport
important to national security cannot be alienated or mortgaged by petitioner or transferred to any entity
other than the National Government.�45 chanrob leslaw

Thus, petitioner claims that the Court of Appeals (Cebu City) gravely erred in disregarding the following: chanRob lesvi rtua lLawl ibra ry

PETITIONER IS A GOVERNMENT INSTRUMENTALITY AS EXPRESSLY DECLARED BY THE HONORABLE COURT

IN THE MIAA CASE. AS SUCH, IT IS EXEMPT FROM PAYING REAL ESTATE TAXES IMPOSED BY RESPONDENT
CITY OF LAPU-LAPU.

II

THE PROPERTIES OF PETITIONER CONSISTING OF THE AIRPORT TERMINAL BUILDING, AIRFIELD, RUNWAY,
TAXIWAY, INCLUDING THE LOTS ON WHICH THEY ARE SITUATED, ARE EXEMPT FROM REAL PROPERTY
TAXES.

III

RESPONDENT CITY OF LAPU-LAPU CANNOT IMPOSE REAL PROPERTY TAX WITHOUT ANY APPROPRIATE
ORDINANCE.

IV

RESPONDENT CITY OF LAPU-LAPU CANNOT IMPOSE AN ADDITIONAL 1% TAX FOR THE SPECIAL
EDUCATION FUND IN THE ABSENCE OF ANY CORRESPONDING ORDINANCE.

RESPONDENT CITY OF LAPU-LAPU CANNOT IMPOSE ANY INTEREST SANS ANY ORDINANCE MANDATING ITS
IMPOSITION.46
Petitioner claims the following similarities with MIAA:

1. MCIAA belongs to the same class and performs identical functions as MIAA;

2. MCIAA is a public utility like MIAA;

3. MIAA was organized to operate the international and domestic airport in Paranaque City for public
use, while MCIAA was organized to operate the international and domestic airport in Mactan for
public use.

4. Both are attached agencies of the Department of Transportation and Communications.47

Petitioner compares its charter (Republic Act No. 6958) with that of MIAA (Executive Order No. 903).

Section 3 of Executive Order No. 903 provides: cha nRoblesvi rt ual Lawlib rary

Sec. 3. Creation of the Manila International Airport Authority. There is hereby established a body corporate
to be known as the Manila International Airport Authority which shall be attached to the Ministry of
Transportation and Communications. The principal office of the Authority shall be located at the New Manila
International Airport. The Authority may establish such offices, branches, agencies or subsidiaries as it may
deem proper and necessary; x x x. chanroble svirtual lawlib rary

Section 2 of Republic Act No. 6958 reads: chanRoblesv irt ual Lawlib rary
Section 2. Creation of the Mactan-Cebu International Airport Authority. � There is hereby
established a body corporate to be known as the Mactan-Cebu International Airport Authority which shall be
attached to the Department of Transportation and Communications. The principal office of the Authority
shall be located at the Mactan International Airport, Province of Cebu.

The Authority may have such branches, agencies or subsidiaries as it may deem proper and necessary. chanroble svirtual lawlib rary

As to MIAA�s purposes and objectives, Section 4 of Executive Order No. 903 reads: chan Roblesvirtual Lawlib ra ry

Sec. 4. Purposes and Objectives. The Authority shall have the following purposes and objectives: Cha nRobles Vi rtua lawlib rary

(a) To help encourage and promote international and domestic air traffic in the Philippines as a means of
making the Philippines a center of international trade and tourism and accelerating the development of the
means of transportation and communications in the country;

(b) To formulate and adopt for application in the Airport internationally acceptable standards of airport
accommodation and service; and

(c) To upgrade and provide safe, efficient, and reliable airport facilities for international and domestic air
travel.
chanroblesv irt uallawl ibra ry

Petitioner claims that the above purposes and objectives are analogous to those enumerated in its charter,
specifically Section 3 of Republic Act No. 6958, which reads: chanRoblesv irt ual Lawlib rary

Section 3. Primary Purposes and Objectives. � The Authority shall principally undertake the
economical, efficient and effective control, management and supervision of the Mactan International Airport
in the Province of Cebu and the Lahug Airport in Cebu City, hereinafter collectively referred to as the
airports, and such other airports as may be established in the Province of Cebu. In addition, it shall have the
following objectives: Cha nRobles Vi rtua lawlib rary

(a) To encourage, promote and develop international and domestic air traffic in the central Visayas and
Mindanao regions as a means of making the regions centers of international trade and tourism, and
accelerating the development of the means of transportation and communications in the country; and

(b) To upgrade the services and facilities of the airports and to formulate internationally acceptable
standards of airport accommodation and service. chanrob lesvi rtua llawlib ra ry

The powers, functions and duties of MIAA under Section 5 of Executive Order No. 903 are: ChanRoble sVirt ualawli bra ry

Sec. 5. Functions, Powers and Duties. The Authority shall have the following functions, powers and
duties: chanRo blesvi rtua lLaw lib rary

(a) To formulate, in coordination with the Bureau of Air Transportation and

other appropriate government agencies, a comprehensive and integrated
policy and program for the Airport and to implement, review and update
such policy and program periodically;
(b) To control, supervise, construct, maintain, operate and provide such
facilities or services as shall be necessary for the efficient functioning of
the Airport;
(c) To promulgate rules and regulations governing the planning,
development, maintenance, operation and improvement of the Airport,
and to control and/or supervise as may be necessary the construction of
any structure or the rendition of any services within the Airport;
(d) To sue and be sued in its corporate name;
(e) To adopt and use a corporate seal;
(f) To succeed by its corporate name;
(g) To adopt its by-laws, and to amend or repeal the same from time to
time;
(h) To execute or enter into contracts of any kind or nature;
(i) To acquire, purchase, own, administer, lease, mortgage, sell or
otherwise dispose of any land, building, airport facility, or property of
whatever kind and nature, whether movable or immovable, or any
interest therein;
(j) To exercise the power of eminent domain in the pursuit of its purposes
and objectives;
(k) To levy, and collect dues, charges, fees or assessments for the use of
the Airport premises, works, appliances, facilities or concessions or for
any service provided by the Authority, subject to the approval of the
Minister of Transportation and Communications in consultation with the
Minister of Finance, and subject further to the provisions of Batas
 Pambansa Blg. 325 where applicable;
(l) To invest its idle funds, as it may deem proper, in government securities
and other evidences of indebtedness of the government;
(m) To provide services, whether on its own or otherwise, within the Airport
and the approaches thereof, which shall include but shall not be limited
to, the following:
(1) Aircraft movement and allocation of parking areas of aircraft on the
ground;
(2) Loading or unloading of aircrafts;
(3) Passenger handling and other services directed towards the care,
convenience and security of passengers, visitors and other airport
users; and
(4) Sorting, weighing, measuring, warehousing or handling of baggage
and goods.
(n) To perform such other acts and transact such other business, directly or
indirectly necessary, incidental or conducive to the attainment of the
purposes and objectives of the Authority, including the adoption of
necessary measures to remedy congestion in the Airport; and
(o) To exercise all the powers of a corporation under the Corporation Law,
insofar as these powers are not inconsistent with the provisions of this
Executive Order.
Petitioner claims that MCIAA has related functions, powers and duties under Section 4 of Republic Act No.
6958, as shown in the provision quoted below: c hanRoble svirtual Lawlib ra ry

Section 4. Functions, Powers and Duties. � The Authority shall have the following functions, powers and
duties:
ChanRoble sVirt ualawli bra ry

(a) To formulate a comprehensive and integrated development policy and program for the airports and to
implement, review and update such policy and program periodically;

(b) To control, supervise, construct, maintain, operate and provide such facilities or services as shall be
necessary for the efficient functioning of the airports;

(c) To promulgate rules and regulations governing the planning, development, maintenance, operation and
improvement of the airports, and to control and supervise the construction of any structure or the rendition
of any service within the airports;

(d) To exercise all the powers of a corporation under the Corporation Code of the Philippines, insofar as
those powers are not inconsistent with the provisions of this Act;

(e) To acquire, purchase, own, administer, lease, mortgage, sell or otherwise dispose of any land, building,
airport facility, or property of whatever kind and nature, whether movable or immovable, or any interest
therein: Provided, That any asset located in the Mactan International Airport important to national security
shall not be subject to alienation or mortgage by the Authority nor to transfer to any entity other than the
National Government;

(f) To exercise the power of eminent domain in the pursuit of its purposes and objectives;

(g) To levy and collect dues, charges, fees or assessments for the use of airport premises, works,
appliances, facilities or concessions, or for any service provided by the Authority;

(h) To retain and appropriate dues, fees and charges collected by the Authority relative to the use of airport
premises for such measures as may be necessary to make the Authority more effective and efficient in the
discharge of its assigned tasks;

(i) To invest its idle funds, as it may deem proper, in government securities and other evidences of
indebtedness; and

(j) To provide services, whether on its own or otherwise, within the airports and the approaches thereof as
may be necessary or in connection with the maintenance and operation of the airports and their facilities. cha nrob lesvi rtua llawli bra ry

Petitioner claims that like MIAA, it has police authority within its premises, as shown in their respective
charters quoted below: cha nRoblesvi rt ualLaw lib rary

EO 903, Sec. 6. Police Authority. � The Authority shall have the power to exercise such police authority
as may be necessary within its premises to carry out its functions and attain its purposes and objectives,
without prejudice to the exercise of functions within the same premises by the Ministry of National Defense
through the Aviation Security Command (AVSECOM) as provided in LOI 961: Provided, That the Authority
may request the assistance of law enforcement agencies, including request for deputization as may be
required. x x x.
R.A. No. 6958, Section 5. Police Authority. � The Authority shall have the power to exercise such police
authority as may be necessary within its premises or areas of operation to carry out its functions and attain
its purposes and objectives: Provided, That the Authority may request the assistance of law enforcement
agencies, including request for deputization as may be required. x x x. chan roblesv irtuallaw lib rary

Petitioner pointed out other similarities in the two charters, such as: ChanRoblesVi rtua lawlib rary

1. Both MCIAA and MIAA are covered by the Civil Service Law, rules and regulations (Section 15, Executive
Order No. 903; Section 12, Republic Act No. 6958);

2. Both charters contain a proviso on tax exemptions (Section 21, Executive Order No. 903; Section 14,
Republic Act No. 6958);

3. Both MCIAA and MIAA are required to submit to the President an annual report generally dealing with
their activities and operations (Section 14, Executive Order No. 903; Section 11, Republic Act No. 6958);
and

4. Both have borrowing power subject to the approval of the President (Section 16, Executive Order No.
903; Section 13, Republic Act No. 6958).48 chan roble slaw

Petitioner suggests that it is because of its similarity with MIAA that this Court, in the 2006 MIAA case,
placed it in the same class as MIAA and considered it as a government instrumentality.

Petitioner submits that since it is also a government instrumentality like MIAA, the following conclusion
arrived by the Court in the 2006 MIAA case is also applicable to petitioner: chanRob lesvi rtua lLawl ibra ry

Under Section 2(10) and (13) of the Introductory Provisions of the Administrative Code, which
governs the legal relation and status of government units, agencies and offices within the entire
government machinery, MIAA is a government instrumentality and not a government-owned or
controlled corporation. Under Section 133(o) of the Local Government Code, MIAA as a
government instrumentality is not a taxable person because it is not subject to �[t]axes, fees or
charges of any kind� by local governments. The only exception is when MIAA leases its real
property to a �taxable person� as provided in Section 234(a) of the Local Government Code, in
which case the specific real property leased becomes subject to real estate tax. Thus, only
portions of the Airport Lands and Buildings leased to taxable persons like private parties are
subject to real estate tax by the City of Para�aque.

Under Article 420 of the Civil Code, the Airport Lands and Buildings of MIAA, being devoted to
public use, are properties of public dominion and thus owned by the State or the Republic of the
Philippines. Article 420 specifically mentions �ports x x x constructed by the State,� which includes public
airports and seaports, as properties of public dominion and owned by the Republic. As properties of public
dominion owned by the Republic, there is no doubt whatsoever that the Airport Lands and
Buildings are expressly exempt from real estate tax under Section 234(a) of the Local
Government Code. This Court has also repeatedly ruled that properties of public dominion are not
subject to execution or foreclosure sale.49 (Emphases added.)
Petitioner insists that its properties consisting of the airport terminal building, airfield, runway, taxiway and
the lots on which they are situated are not subject to real property tax because they are actually, solely and
exclusively used for public purposes.50 They are indispensable to the operation of the Mactan International
Airport and by their very nature, these properties are exempt from tax. Said properties belong to the State
and are merely held by petitioner in trust. As earlier mentioned, petitioner claims that these properties are
important to national security and cannot be alienated, mortgaged, or transferred to any entity except the
National Government.

Petitioner prays that judgment be rendered: chanRoble svi rtual Lawli bra ry

a) Declaring petitioner exempt from paying real property taxes as it is a

government instrumentality;
b) Declaring respondent City of Lapu-Lapu as bereft of any authority to levy
and collect the basic real property tax, the additional tax for the SEF and
the penalty interest for its failure to pass the corresponding tax
ordinances; and
c) Declaring, in the alternative, the airport lands and buildings of petitioner
as exempt from real property taxes as they are used solely and
exclusively for public purpose.51
In its Consolidated Reply filed through the OSG, petitioner claims that the 2006 MIAA ruling has overturned
the 1996 MCIAA ruling. Petitioner cites Justice Dante O. Tinga�s dissent in the MIAA ruling, as follows: cha nRoblesvi rt ualLaw lib rary

[The] ineluctable conclusion is that the majority rejects the rationale and ruling in Mactan. The majority
provides for a wildly different interpretation of Section 133, 193 and 234 of the Local Government Code than
that employed by the Court in Mactan. Moreover, the parties in Mactan and in this case are similarly
situated, as can be obviously deducted from the fact that both petitioners are airport authorities operating
under similarly worded charters. And the fact that the majority cites doctrines contrapuntal to the Local
Government Code as in Basco and Maceda evinces an intent to go against the Court�s jurisprudential trend
adopting the philosophy of expanded local government rule under the Local Government Code.

x x x The majority is obviously inconsistent with Mactan and there is no way these two rulings can stand
together. Following basic principles in statutory construction, Mactan will be deemed as giving way to this
new ruling.

x x x x

There is no way the majority can be justified unless Mactan is overturned. The MCIAA and the MIAA are
similarly situated. They are both, as will be demonstrated, GOCCs, commonly engaged in the business of
operating an airport. They are the owners of airport properties they respectively maintain and hold title over
these properties in their name. These entities are both owned by the State, and denied by their respective
charters the absolute right to dispose of their properties without prior approval elsewhere. Both of them are
not empowered to obtain loans or encumber their properties without prior approval the prior approval of the
President.52 (Citations omitted.)
Petitioner likewise claims that the enactment of Ordinance No. 070-2007 is an admission on respondent
City�s part that it must have a tax measure to be able to impose a tax or special assessment. Petitioner
avers that assuming that it is a non-exempt entity or that its airport lands and buildings are not exempt, it
was only upon the effectivity of Ordinance No. 070-2007 on January 1, 2008 that respondent City could
properly impose the basic real property tax, the additional tax for the SEF, and the interest in case of
nonpayment.53 chanrobles law

Petitioner filed its Memorandum54 on June 17, 2009.

RESPONDENTS� THEORY

In their Comment,55 respondents point out that petitioner partially moved for a reconsideration of the
questioned Decision only as to the issue of whether petitioner is a GOCC or not. Thus, respondents declare
that the other portions of the questioned decision had already attained finality and ought not to be placed in
issue in this petition for certiorari. Thus, respondents discussed the other issues raised by petitioner with
reservation as to this objection.

Respondents summarized the issues and the grounds relied upon as follows: chanRob lesvi rtua lLawl ibra ry

STATEMENT OF THE ISSUES

WHETHER OR NOT PETITIONER IS A GOVERNMENT INSTRUMENTALITY EXEMPT FROM PAYING REAL

PROPERTY TAXES

WHETHER OR NOT RESPONDENT CITY CAN [IMPOSE] REALTY TAX, SPECIAL EDUCATION FUND AND
PENALTY INTEREST

WHETHER OR NOT THE AIRPORT TERMINAL BUILDING, AIRFIELD, RUNWAY, TAXIWAY INCLUDING THE
LOTS ON WHICH THEY ARE SITUATED ARE EXEMPT FROM REALTY TAXES

GROUNDS RELIED UPON

1. PETITIONER IS A GOCC HENCE NOT EXEMPT FROM REALTY TAXES

2. TERMINAL BUILDING, RUNWAY, TAXIWAY ARE NOT EXEMPT FROM REALTY TAXES

3. ESTOPPEL DOES NOT LIE AGAINST GOVERNMENT

4. CITY CAN COLLECT REALTY TAX AND INTEREST

5. CITY CAN COLLECT SEF

6. MCIAA HAS NOT SHOWN ANY IRREPARABLE INJURY WARRANTING INJUNCTIVE RELIEF

7. MCIAA HAS NOT COMPLIED WITH PROVISION OF THE LGC56

Respondents claim that �the mere mention of MCIAA in the MIAA v. [Court of Appeals] case does not make
it the controlling case on the matter.�57 Respondents further claim that the 1996 MCIAA case where this
Court held that petitioner is a GOCC is the controlling jurisprudence. Respondents point out that petitioner
and MIAA are two very different entities. Respondents argue that petitioner is a GOCC contrary to its
assertions, based on its Charter and on DOJ Opinion No. 50.

Respondents contend that if petitioner is not a GOCC but an instrumentality of the government, still the
following statement in the 1996 MCIAA case applies: chanRoble svirtual Lawlib ra ry

Besides, nothing can prevent Congress from decreeing that even instrumentalities or agencies of the
Government performing governmental functions may be subject to tax. Where it is done precisely to fulfill a
constitutional mandate and national policy, no one can doubt its wisdom.58
Respondents argue that MCIAA properties such as the terminal building, taxiway and runway are not exempt
from real property taxation. As discussed in the 1996 MCIAA case, Section 234 of the LGC omitted GOCCs
such as MCIAA from entities enjoying tax exemptions. Said decision also provides that the transfer of
ownership of the land to petitioner was absolute and petitioner cannot evade payment of taxes.59 chanroble slaw

Even if the following issues were not raised by petitioner in its motion for reconsideration of the questioned
Decision, and thus the ruling pertaining to these issues in the questioned decision had become final,
respondents still discussed its side over its objections as to the propriety of bringing these up before this
Court.

1. Estoppel does not lie against the government.

2. Respondent City can collect realty taxes and interest.

a. Based on the Local Government Code (Sections 232, 233, 255) and its IRR (Sections 241, 247).

b. The City of Lapu-Lapu passed in 1980 Ordinance No. 44, or the Omnibus Tax Ordinance, wherein
the imposition of real property tax was made. This Ordinance was in force and effect by virtue of
Article 278 of the IRR of Republic Act No. 7160.60 chanrob leslaw

c. Ordinance No. 070-2007, known as the Revised Lapu-Lapu City Revenue Code, imposed real
property taxes, special education fund and further provided for the payment of interest and
surcharges. Thus, the issue is pass� and is moot and academic.

3. Respondent City can collect Special Education Fund.

a. The LGC does not require the enactment of an ordinance for the collection of the SEF.

b. Congress did not entirely repeal the SEF law, hence, its levy, imposition and collection need not be
covered by ordinance. Besides, the City has enacted the Revenue Code containing provisions for the
levy and collection of the SEF.61

Furthermore, respondents aver that: ChanRobles Vi rtua lawlib rary

1. Collection of taxes is beyond the ambit of injunction.

a. Respondents contend that the petition only questions the denial of the writ of preliminary injunction
by the RTC and the Court of Appeals. Petitioner failed to show irreparable injury.

b. Comparing the alleged damage that may be caused petitioner and the direct affront and challenge
against the power to tax, which is an attribute of sovereignty, it is but appropriate that injunctive
relief should be denied.

2. Petitioner did not comply with LGC provisions on payment under protest.

a. Petitioner should have protested the tax imposition as provided in Article 285 of the IRR of Republic
Act No. 7160. Section 252 of Republic Act No. 716062 requires that the taxpayer�s protest can only
be entertained if the tax is first paid under protest.63

Respondents submitted their Memorandum64 on June 30, 2009, wherein they allege that the 1996 MCIAA
case is still good law, as shown by the following cases wherein it was quoted:

1. National Power Corporation v. Local Board of Assessment Appeals of Batangas [545 Phil. 92
(2007)];

2. Mactan-Cebu International Airport Authority v. Urgello [549 Phil. 302 (2007)];

3. Quezon City v. ABS-CBN Broadcasting Corporation [588 Phil. 785 (2008)]; and

4. The City of Iloilo v. Smart Communications, Inc. [599 Phil. 492 (2009)].

Respondents assert that the constant reference to the 1996 MCIAA case �could hardly mean that the
doctrine has breathed its last� and that the 1996 MCIAA case stands as precedent and is controlling on
petitioner MCIAA.65 chanrobleslaw

Respondents allege that the issue for consideration is whether it is proper for petitioner to raise the issue of
whether it is not liable to pay real property taxes, special education fund (SEF), interests and/or
surcharges.66 Respondents argue that the Court of Appeals was correct in declaring petitioner liable for
realty taxes, etc., on the terminal building, taxiway, and runway. Respondent City relies on the following
grounds: chanRoble svi rtual Lawli bra ry

1. The case of MCIAA v. Marcos, et al., is controlling on petitioner MCIAA;

2. MCIAA is a corporation;

3. Section 133 in relation to Sections 232 and 234 of the Local Government Code of 1991 authorizes
the collection of real property taxes (etc.) from MCIAA;
 4. Terminal Building, Runway & Taxiway are not of the Public Dominion and are not exempt from
realty taxes, special education fund and interest;

5. Respondent City can collect realty tax, interest/surcharge, and Special Education Fund from MCIAA;
[and]

6. Estoppel does not lie against the government.67

THIS COURT�S RULING

The petition has merit. The petitioner is an instrumentality of the government; thus, its properties actually,
solely and exclusively used for public purposes, consisting of the airport terminal building, airfield, runway,
taxiway and the lots on which they are situated, are not subject to real property tax and respondent City is
not justified in collecting taxes from petitioner over said properties.

DISCUSSION

The Court of Appeals (Cebu City) erred in declaring that the 1996 MCIAA case still controls and that
petitioner is a GOCC. The 2006 MIAA case governs.

The Court of Appeals� reliance on the 1996 MCIAA case is misplaced and its staunch refusal to apply the
2006 MIAA case is patently erroneous. The Court of Appeals, finding for respondents, refused to apply the
ruling in the 2006 MIAA case on the premise that the same had not yet reached finality, and that as far as
MCIAA is concerned, the 1996 MCIAA case is still good law.68 cha nrob leslaw

While it is true, as respondents allege, that the 1996 MCIAA case was cited in a long line of cases,69 still, in
2006, the Court en banc decided a case that in effect reversed the 1996 Mactan ruling. The 2006 MIAA
case had, since the promulgation of the questioned Decision and Resolution, reached finality and had in fact
been either affirmed or cited in numerous cases by the Court.70 The decision became final and executory on
November 3, 2006.71 Furthermore, the 2006 MIAA case was decided by the Court en banc while the 1996
MCIAA case was decided by a Division. Hence, the 1996 MCIAA case should be read in light of the
subsequent and unequivocal ruling in the 2006 MIAA case.

To recall, in the 2006 MIAA case, we held that MIAA�s airport lands and buildings are exempt from real
estate tax imposed by local governments; that it is not a GOCC but an instrumentality of the national
government, with its real properties being owned by the Republic of the Philippines, and these are exempt
from real estate tax. Specifically referring to petitioner, we stated as follows: chanRoblesv irt ual Lawlib rary

Many government instrumentalities are vested with corporate powers but they do not become
stock or non-stock corporations, which is a necessary condition before an agency or
instrumentality is deemed a government-owned or controlled corporation. Examples are the
Mactan International Airport Authority, the Philippine Ports Authority, the University of the Philippines
and Bangko Sentral ng Pilipinas. All these government instrumentalities exercise corporate powers but they
are not organized as stock or non-stock corporations as required by Section 2(13) of the Introductory
Provisions of the Administrative Code. These government instrumentalities are sometimes loosely called
government corporate entities. However, they are not government-owned or controlled corporations in
the strict sense as understood under the Administrative Code, which is the governing law defining the legal
relationship and status of government entities.72 (Emphases ours.)
In the 2006 MIAA case, the issue before the Court was �whether the Airport Lands and Buildings of MIAA
are exempt from real estate tax under existing laws.�73 We quote the extensive discussion of the Court that
led to its finding that MIAA�s lands and buildings were exempt from real estate tax imposed by local
governments: chanRoble svi rtual Lawli bra ry

First, MIAA is not a government-owned or controlled corporation but an instrumentality of the National
Government and thus exempt from local taxation. Second, the real properties of MIAA are owned by the
Republic of the Philippines and thus exempt from real estate tax.

1. MIAA is Not a Government-Owned or Controlled Corporation

x x x x

There is no dispute that a government-owned or controlled corporation is not exempt from real estate tax.
However, MIAA is not a government-owned or controlled corporation. Section 2(13) of the Introductory
Provisions of the Administrative Code of 1987 defines a government-owned or controlled corporation as
follows: cha nRoblesv irt ual Lawlib rary

SEC. 2. General Terms Defined. - x x x

(13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock
corporation, vested with functions relating to public needs whether governmental or proprietary in nature,
and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as
in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: x x x. chanroblesvi rtua llawli bra ry

A government-owned or controlled corporation must be �organized as a stock or non-stock corporation.�

MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no
capital stock divided into shares. MIAA has no stockholders or voting shares. x x x

x x x x
Clearly, under its Charter, MIAA does not have capital stock that is divided into shares.

Section 3 of the Corporation Code defines a stock corporation as one whose �capital stock is divided into
shares and x x x authorized to distribute to the holders of such shares dividends x x x.� MIAA has capital
but it is not divided into shares of stock. MIAA has no stockholders or voting shares. Hence, MIAA is not a
stock corporation.

MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code
defines a non-stock corporation as �one where no part of its income is distributable as dividends to its
members, trustees or officers.� A non-stock corporation must have members. Even if we assume that the
Government is considered as the sole member of MIAA, this will not make MIAA a non-stock corporation.
Non-stock corporations cannot distribute any part of their income to their members. Section 11 of the MIAA
Charter mandates MIAA to remit 20% of its annual gross operating income to the National Treasury. This
prevents MIAA from qualifying as a non-stock corporation.

Section 88 of the Corporation Code provides that non-stock corporations are �organized for charitable,
religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or
similar purposes, like trade, industry, agriculture and like chambers.� MIAA is not organized for any of
these purposes. MIAA, a public utility, is organized to operate an international and domestic airport for
public use.

Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a
government-owned or controlled corporation. What then is the legal status of MIAA within the
National Government?

MIAA is a government instrumentality vested with corporate powers to perform efficiently its
governmental functions. MIAA is like any other government instrumentality, the only difference
is that MIAA is vested with corporate powers. Section 2(10) of the Introductory Provisions of the
Administrative Code defines a government �instrumentality� as follows: chanRob lesvi rtua lLawl ibra ry

SEC. 2. General Terms Defined. - x x x

(10) Instrumentality refers to any agency of the National Government, not integrated within the department
framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate
powers, administering special funds, and enjoying operational autonomy, usually through a charter. x x
x. chanrob lesvi rtua llawlib ra ry

When the law vests in a government instrumentality corporate powers, the instrumentality does
not become a corporation. Unless the government instrumentality is organized as a stock or non-
stock corporation, it remains a government instrumentality exercising not only governmental but
also corporate powers. Thus, MIAA exercises the governmental powers of eminent domain, police
authority and the levying of fees and charges. At the same time, MIAA exercises �all the powers
of a corporation under the Corporation Law, insofar as these powers are not inconsistent with
the provisions of this Executive Order.�

Likewise, when the law makes a government instrumentality operationally autonomous, the instrumentality
remains part of the National Government machinery although not integrated with the department
framework. The MIAA Charter expressly states that transforming MIAA into a �separate and autonomous
body� will make its operation more �financially viable.�

Many government instrumentalities are vested with corporate powers but they do not become
stock or non-stock corporations, which is a necessary condition before an agency or
instrumentality is deemed a government-owned or controlled corporation. Examples are the
Mactan International Airport Authority, the Philippine Ports Authority, the University of the Philippines
and Bangko Sentral ng Pilipinas. All these government instrumentalities exercise corporate powers
but they are not organized as stock or non-stock corporations as required by Section 2(13) of the
Introductory Provisions of the Administrative Code. These government instrumentalities are
sometimes loosely called government corporate entities. However, they are not government-
owned or controlled corporations in the strict sense as understood under the Administrative
Code, which is the governing law defining the legal relationship and status of government
entities.74 (Emphases ours, citations omitted.)
The Court in the 2006 MIAA case went on to discuss the limitation on the taxing power of the local
governments as against the national government or its instrumentality: chanRoble svirtual Lawlib rary

A government instrumentality like MIAA falls under Section 133(o) of the Local Government Code, which
states: chanRoblesvi rtua lLawl ibrary

SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. - Unless otherwise
provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall
not extend to the levy of the following: ChanRoble sVirt ualawli bra ry

x x x x

(o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities and
local government units. x x x. chanrob lesvi rtua llawlib ra ry

Section 133(o) recognizes the basic principle that local governments cannot tax the national government,
which historically merely delegated to local governments the power to tax. While the 1987 Constitution now
includes taxation as one of the powers of local governments, local governments may only exercise such
power �subject to such guidelines and limitations as the Congress may provide.�
When local governments invoke the power to tax on national government instrumentalities, such
power is construed strictly against local governments. The rule is that a tax is never presumed and
there must be clear language in the law imposing the tax. Any doubt whether a person, article or activity is
taxable is resolved against taxation. This rule applies with greater force when local governments seek to tax
national government instrumentalities.

Another rule is that a tax exemption is strictly construed against the taxpayer claiming the exemption.
However, when Congress grants an exemption to a national government instrumentality from local taxation,
such exemption is construed liberally in favor of the national government instrumentality. x x x.

x x x x

There is, moreover, no point in national and local governments taxing each other, unless a sound
and compelling policy requires such transfer of public funds from one government pocket to
another.

There is also no reason for local governments to tax national government instrumentalities for
rendering essential public services to inhabitants of local governments. The only exception is when
the legislature clearly intended to tax government instrumentalities for the delivery of essential public
services for sound and compelling policy considerations. There must be express language in the law
empowering local governments to tax national government instrumentalities. Any doubt whether such power
exists is resolved against local governments.

Thus, Section 133 of the Local Government Code states that �unless otherwise provided� in the Code, local
governments cannot tax national government instrumentalities. x x x.75 (Emphases ours, citations omitted.)
The Court emphasized that the airport lands and buildings of MIAA are owned by the Republic and belong to
the public domain. The Court said:chanRoble svirtual Lawlib ra ry

The Airport Lands and Buildings of MIAA are property of public dominion and therefore owned by the State
or the Republic of the Philippines. x x x.

x x x x

No one can dispute that properties of public dominion mentioned in Article 420 of the Civil Code, like
�roads, canals, rivers, torrents, ports and bridges constructed by the State,� are owned by the State. The
term �ports� includes seaports and airports. The MIAA Airport Lands and Buildings constitute a �port�
constructed by the State. Under Article 420 of the Civil Code, the MIAA Airport Lands and Buildings are
properties of public dominion and thus owned by the State or the Republic of the Philippines.

The Airport Lands and Buildings are devoted to public use because they are used by the public for
international and domestic travel and transportation. The fact that the MIAA collects terminal
fees and other charges from the public does not remove the character of the Airport Lands and
Buildings as properties for public use. x x x.

x x x x

The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to airlines,
constitute the bulk of the income that maintains the operations of MIAA. The collection of such fees does not
change the character of MIAA as an airport for public use. Such fees are often termed user�s tax. This
means taxing those among the public who actually use a public facility instead of taxing all the public
including those who never use the particular public facility. A user�s tax is more equitable - a principle of
taxation mandated in the 1987 Constitution.

The Airport Lands and Buildings of MIAA x x x are properties of public dominion because they are
intended for public use. As properties of public dominion, they indisputably belong to the State or
the Republic of the Philippines.76 (Emphases supplied, citations omitted.)
The Court also held in the 2006 MIAA case that airport lands and buildings are outside the commerce of
man.
As properties of public dominion, the Airport Lands and Buildings are outside the commerce of man. The
Court has ruled repeatedly that properties of public dominion are outside the commerce of man. As early as
1915, this Court already ruled in Municipality of Cavite v. Rojas that properties devoted to public use are
outside the commerce of man, thus: ChanRobles Virtualawl ibra ry

x x x x

The Civil Code, Article 1271, prescribes that everything which is not outside the commerce of man may be
the object of a contract, x x x.

x x x x

The Court has also ruled that property of public dominion, being outside the commerce of man, cannot be
the subject of an auction sale.

Properties of public dominion, being for public use, are not subject to levy, encumbrance or
disposition through public or private sale. Any encumbrance, levy on execution or auction sale of
any property of public dominion is void for being contrary to public policy. Essential public
services will stop if properties of public dominion are subject to encumbrances, foreclosures and
auction sale. This will happen if the City of Para�aque can foreclose and compel the auction sale of the
600-hectare runway of the MIAA for non-payment of real estate tax.

Before MIAA can encumber the Airport Lands and Buildings, the President must first withdraw from public
use the Airport Lands and Buildings. x x x.

x x x x

Thus, unless the President issues a proclamation withdrawing the Airport Lands and Buildings
from public use, these properties remain properties of public dominion and are inalienable. Since
the Airport Lands and Buildings are inalienable in their present status as properties of public
dominion, they are not subject to levy on execution or foreclosure sale. As long as the Airport
Lands and Buildings are reserved for public use, their ownership remains with the State or the
Republic of the Philippines.

The authority of the President to reserve lands of the public domain for public use, and to withdraw such
public use, is reiterated in Section 14, Chapter 4, Title I, Book III of the Administrative Code of 1987, which
states:chanRoblesvi rtua lLawl ibrary

SEC. 14. Power to Reserve Lands of the Public and Private Domain of the Government. - (1) The President
shall have the power to reserve for settlement or public use, and for specific public purposes, any of the
lands of the public domain, the use of which is not otherwise directed by law. The reserved land shall
thereafter remain subject to the specific public purpose indicated until otherwise provided by law or
proclamation;
x x x x

There is no question, therefore, that unless the Airport Lands and Buildings are withdrawn by law or
presidential proclamation from public use, they are properties of public dominion, owned by the Republic
and outside the commerce of man.77
Thus, the Court held that MIAA is �merely holding title to the Airport Lands and Buildings in trust for the
Republic. [Under] Section 48, Chapter 12, Book I of the Administrative Code [which] allows instrumentalities
like MIAA to hold title to real properties owned by the Republic.�78 chan roble slaw

The Court in the 2006 MIAA case cited Section 234(a) of the Local Government Code and held that said
provision exempts from real estate tax any �[r]eal property owned by the Republic of the Philippines.�79
The Court emphasized, however, that �portions of the Airport Lands and Buildings that MIAA leases to
private entities are not exempt from real estate tax.� The Court further held: chanRoblesvi rt ual Lawlib rary

This exemption should be read in relation with Section 133(o) of the same Code, which prohibits local
governments from imposing �[t]axes, fees or charges of any kind on the National Government, its agencies
and instrumentalities x x x.� The real properties owned by the Republic are titled either in the name of the
Republic itself or in the name of agencies or instrumentalities of the National Government. The
Administrative Code allows real property owned by the Republic to be titled in the name of agencies or
instrumentalities of the national government. Such real properties remain owned by the Republic and
continue to be exempt from real estate tax.

The Republic may grant the beneficial use of its real property to an agency or instrumentality of the national
government. This happens when title of the real property is transferred to an agency or instrumentality even
as the Republic remains the owner of the real property. Such arrangement does not result in the loss of the
tax exemption. Section 234(a) of the Local Government Code states that real property owned by the
Republic loses its tax exemption only if the �beneficial use thereof has been granted, for consideration or
otherwise, to a taxable person.� MIAA, as a government instrumentality, is not a taxable person under
Section 133(o) of the Local Government Code. Thus, even if we assume that the Republic has granted to
MIAA the beneficial use of the Airport Lands and Buildings, such fact does not make these real properties
subject to real estate tax.

However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not exempt
from real estate tax. For example, the land area occupied by hangars that MIAA leases to private
corporations is subject to real estate tax. In such a case, MIAA has granted the beneficial use of such land
area for a consideration to a taxable person and therefore such land area is subject to real estate tax. x x
x.80
Significantly, the Court reiterated the above ruling and applied the same reasoning in Manila International
Airport Authority v. City of Pasay,81 thus: chanRoblesvi rtua lLawl ibra ry

The only difference between the 2006 MIAA case and this case is that the 2006 MIAA case
involved airport lands and buildings located in Para�aque City while this case involved airport
lands and buildings located in Pasay City. The 2006 MIAA case and this case raised the same threshold
issue: whether the local government can impose real property tax on the airport lands, consisting mostly of
the runways, as well as the airport buildings, of MIAA. x x x.

x x x x

The definition of �instrumentality� under Section 2(10) of the Introductory Provisions of the Administrative
Code of 1987 uses the phrase �includes x x x government-owned or controlled corporations� which means
that a government �instrumentality� may or may not be a �government-owned or controlled
corporation.� Obviously, the term government �instrumentality� is broader than the term �government-
owned or controlled corporation.� x x x.

x x x x
The fact that two terms have separate definitions means that while a government �instrumentality� may
include a �government-owned or controlled corporation,� there may be a government �instrumentality�
that will not qualify as a �government-owned or controlled corporation.�

A close scrutiny of the definition of �government-owned or controlled corporation� in Section 2(13) will
show that MIAA would not fall under such definition. MIAA is a government �instrumentality� that
does not qualify as a �government-owned or controlled corporation.� x x x.

x x x x

Thus, MIAA is not a government-owned or controlled corporation but a government instrumentality which is
exempt from any kind of tax from the local governments. Indeed, the exercise of the taxing power of local
government units is subject to the limitations enumerated in Section 133 of the Local Government Code.
Under Section 133(o) of the Local Government Code, local government units have no power to tax
instrumentalities of the national government like the MIAA. Hence, MIAA is not liable to pay real property
tax for the NAIA Pasay properties.

Furthermore, the airport lands and buildings of MIAA are properties of public dominion intended for public
use, and as such are exempt from real property tax under Section 234(a) of the Local Government Code.
However, under the same provision, if MIAA leases its real property to a taxable person, the specific
property leased becomes subject to real property tax. In this case, only those portions of the NAIA Pasay
properties which are leased to taxable persons like private parties are subject to real property tax by the
City of Pasay. (Emphases added, citations omitted.)
The Court not only mentioned petitioner MCIAA as similarly situated as MIAA. It also mentioned several
other government instrumentalities, among which was the Philippine Fisheries Development Authority. Thus,
applying the 2006 MIAA ruling, the Court, in Philippine Fisheries Development Authority v. Court of
Appeals,82 held:chanRob lesvi rtua lLawl ibra ry

On the basis of the parameters set in the MIAA case, the Authority should be classified as an instrumentality
of the national government. As such, it is generally exempt from payment of real property tax, except those
portions which have been leased to private entities.

In the MIAA case, petitioner Philippine Fisheries Development Authority was cited as among the
instrumentalities of the national government. x x x.

x x x x

Indeed, the Authority is not a GOCC but an instrumentality of the government. The Authority has a capital
stock but it is not divided into shares of stocks. Also, it has no stockholders or voting shares. Hence, it is not
a stock corporation. Neither [is it] a non-stock corporation because it has no members.

The Authority is actually a national government instrumentality which is defined as an agency of the national
government, not integrated within the department framework, vested with special functions or jurisdiction
by law, endowed with some if not all corporate powers, administering special funds, and enjoying
operational autonomy, usually through a charter. When the law vests in a government instrumentality
corporate powers, the instrumentality does not become a corporation. Unless the government
instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality
exercising not only governmental but also corporate powers.

Thus, the Authority which is tasked with the special public function to carry out the government�s policy
�to promote the development of the country�s fishing industry and improve the efficiency in handling,
preserving, marketing, and distribution of fish and other aquatic products,� exercises the governmental
powers of eminent domain, and the power to levy fees and charges. At the same time, the Authority
exercises �the general corporate powers conferred by laws upon private and government-owned or
controlled corporations.�

x x x x

In light of the foregoing, the Authority should be classified as an instrumentality of the national government
which is liable to pay taxes only with respect to the portions of the property, the beneficial use of which
were vested in private entities. When local governments invoke the power to tax on national government
instrumentalities, such power is construed strictly against local governments. The rule is that a tax is never
presumed and there must be clear language in the law imposing the tax. Any doubt whether a person,
article or activity is taxable is resolved against taxation. This rule applies with greater force when local
governments seek to tax national government instrumentalities.

Thus, the real property tax assessments issued by the City of Iloilo should be upheld only with respect to the
portions leased to private persons. In case the Authority fails to pay the real property taxes due thereon,
said portions cannot be sold at public auction to satisfy the tax delinquency. x x x.

x x x x

In sum, the Court finds that the Authority is an instrumentality of the national government, hence, it is
liable to pay real property taxes assessed by the City of Iloilo on the IFPC only with respect to those portions
which are leased to private entities. Notwithstanding said tax delinquency on the leased portions of the
IFPC, the latter or any part thereof, being a property of public domain, cannot be sold at public auction. This
means that the City of Iloilo has to satisfy the tax delinquency through means other than the sale at public
auction of the IFPC. (Citations omitted.)
Another government instrumentality specifically mentioned in the 2006 MIAA case was the Philippine Ports
Authority (PPA). Hence, in Curata v. Philippine Ports Authority,83 the Court held that the PPA is similarly
situated as MIAA, and ruled in this wise: cha nRoblesv irt ual Lawlib rary

This Court�s disquisition in Manila International Airport Authority v. Court of Appeals � ruling that MIAA is
not a government-owned and/or controlled corporation (GOCC), but an instrumentality of the National
Government and thus exempt from local taxation, and that its real properties are owned by the Republic of
the Philippines �� is instructive. x x x. These findings are squarely applicable to PPA, as it is similarly
situated as MIAA. First, PPA is likewise not a GOCC for not having shares of stocks or members. Second, the
docks, piers and buildings it administers are likewise owned by the Republic and, thus, outside the
commerce of man. Third, PPA is a mere trustee of these properties. Hence, like MIAA, PPA is clearly a
government instrumentality, an agency of the government vested with corporate powers to perform
efficiently its governmental functions.

Therefore, an undeniable conclusion is that the funds of PPA partake of government funds, and such may
not be garnished absent an allocation by its Board or by statutory grant. If the PPA funds cannot be
garnished and its properties, being government properties, cannot be levied via a writ of execution pursuant
to a final judgment, then the trial court likewise cannot grant discretionary execution pending appeal, as it
would run afoul of the established jurisprudence that government properties are exempt from execution.
What cannot be done directly cannot be done indirectly. (Citations omitted.)
In Government Service Insurance System v. City Treasurer and City Assessor of the City of Manila 84 the
Court found that the GSIS was also a government instrumentality and not a GOCC, applying the 2006 MIAA
case even though the GSIS was not among those specifically mentioned by the Court as similarly situated as
MIAA. The Court said: chanRoble svirtual Lawli bra ry

GSIS an instrumentality of the National Government

Apart from the foregoing consideration, the Court�s fairly recent ruling in Manila International Airport
Authority v. Court of Appeals, a case likewise involving real estate tax assessments by a Metro Manila city
on the real properties administered by MIAA, argues for the non-tax liability of GSIS for real estate taxes. x
x x.

x x x x

While perhaps not of governing sway in all fours inasmuch as what were involved in Manila
International Airport Authority, e.g., airfields and runways, are properties of the public dominion
and, hence, outside the commerce of man, the rationale underpinning the disposition in that case
is squarely applicable to GSIS, both MIAA and GSIS being similarly situated. First, while created
under CA 186 as a non-stock corporation, a status that has remained unchanged even when it operated
under PD 1146 and RA 8291, GSIS is not, in the context of the aforequoted Sec. 193 of the LGC, a GOCC
following the teaching of Manila International Airport Authority, for, like MIAA, GSIS�s capital is not divided
into unit shares. Also, GSIS has no members to speak of. And by members, the reference is to those who,
under Sec. 87 of the Corporation Code, make up the non-stock corporation, and not to the compulsory
members of the system who are government employees. Its management is entrusted to a Board of
Trustees whose members are appointed by the President.

Second, the subject properties under GSIS�s name are likewise owned by the Republic. The GSIS is but a
mere trustee of the subject properties which have either been ceded to it by the Government or acquired for
the enhancement of the system. This particular property arrangement is clearly shown by the fact that the
disposal or conveyance of said subject properties are either done by or through the authority of the
President of the Philippines. x x x. (Emphasis added, citations omitted.)
All the more do we find that petitioner MCIAA, with its many similarities to the MIAA, should be classified as
a government instrumentality, as its properties are being used for public purposes, and should be exempt
from real estate taxes. This is not to derogate in any way the delegated authority of local government units
to collect realty taxes, but to uphold the fundamental doctrines of uniformity in taxation and equal
protection of the laws, by applying all the jurisprudence that have exempted from said taxes similar
authorities, agencies, and instrumentalities, whether covered by the 2006 MIAA ruling or not.

To reiterate, petitioner MCIAA is vested with corporate powers but it is not a stock or non-stock corporation,
which is a necessary condition before an agency or instrumentality is deemed a government-owned or
controlled corporation. Like MIAA, petitioner MCIAA has capital under its charter but it is not divided into
shares of stock. It also has no stockholders or voting shares. Republic Act No. 6958 provides: c hanRoble svirtual Lawli bra ry

Section 9. Capital. � The [Mactan-Cebu International Airport] Authority shall have an authorized capital
stock equal to and consisting of: ChanRobles Virtualawl ibra ry

(a) The value of fixed assets (including airport facilities, runways and equipment) and such other properties,
movable and immovable, currently administered by or belonging to the airports as valued on the date of the
effectivity of this Act;

(b) The value of such real estate owned and/or administered by the airports; and

(c) Government contribution in such amount as may be deemed an appropriate initial balance. Such initial
amount, as approved by the President of the Philippines, which shall be more or less equivalent to six (6)
months working capital requirement of the Authority, is hereby authorized to be appropriated in the General
Appropriations Act of the year following its enactment into law. chanrob lesvi rtual lawlib rary
Thereafter, the government contribution to the capital of the Authority shall be provided for in the General
Appropriations Act.

Like in MIAA, the airport lands and buildings of MCIAA are properties of public dominion because they are
intended for public use. As properties of public dominion, they indisputably belong to the State or the
Republic of the Philippines, and are outside the commerce of man. This, unless petitioner leases its real
property to a taxable person, the specific property leased becomes subject to real property tax; in which
case, only those portions of petitioner�s properties which are leased to taxable persons like private parties
are subject to real property tax by the City of Lapu-Lapu.

We hereby adopt and apply to petitioner MCIAA the findings and conclusions of the Court in the 2006 MIAA
case, and we quote: chanRoblesvirtual Lawlib rary

To summarize, MIAA is not a government-owned or controlled corporation under Section 2(13) of the
Introductory Provisions of the Administrative Code because it is not organized as a stock or non-stock
corporation. Neither is MIAA a government-owned or controlled corporation under Section 16, Article XII of
the 1987 Constitution because MIAA is not required to meet the test of economic viability. MIAA is a
government instrumentality vested with corporate powers and performing essential public services pursuant
to Section 2(10) of the Introductory Provisions of the Administrative Code. As a government instrumentality,
MIAA is not subject to any kind of tax by local governments under Section 133(o) of the Local Government
Code. The exception to the exemption in Section 234(a) does not apply to MIAA because MIAA is not a
taxable entity under the Local Government Code. Such exception applies only if the beneficial use of real
property owned by the Republic is given to a taxable entity.

Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus are properties
of public dominion. Properties of public dominion are owned by the State or the Republic. x x x.

x x x x

The term �ports x x x constructed by the State� includes airports and seaports. The Airport Lands and
Buildings of MIAA are intended for public use, and at the very least intended for public service.
Whether intended for public use or public service, the Airport Lands and Buildings are properties
of public dominion. As properties of public dominion, the Airport Lands and Buildings are owned
by the Republic and thus exempt from real estate tax under Section 234(a) of the Local
Government Code.

4. Conclusion

Under Section 2(10) and (13) of the Introductory Provisions of the Administrative Code, which governs the
legal relation and status of government units, agencies and offices within the entire government machinery,
MIAA is a government instrumentality and not a government-owned or controlled corporation. Under Section
133(o) of the Local Government Code, MIAA as a government instrumentality is not a taxable person
because it is not subject to �[t]axes, fees or charges of any kind� by local governments. The only
exception is when MIAA leases its real property to a �taxable person� as provided in Section 234(a) of the
Local Government Code, in which case the specific real property leased becomes subject to real estate tax.
Thus, only portions of the Airport Lands and Buildings leased to taxable persons like private
parties are subject to real estate tax by the City of Para�aque.

Under Article 420 of the Civil Code, the Airport Lands and Buildings of MIAA, being devoted to public use,
are properties of public dominion and thus owned by the State or the Republic of the Philippines. Article 420
specifically mentions �ports x x x constructed by the State,� which includes public airports and seaports, as
properties of public dominion and owned by the Republic. As properties of public dominion owned by the
Republic, there is no doubt whatsoever that the Airport Lands and Buildings are expressly exempt from real
estate tax under Section 234(a) of the Local Government Code. This Court has also repeatedly ruled
that properties of public dominion are not subject to execution or foreclosure sale. 85 (Emphases
added.)
WHEREFORE, we hereby GRANT the petition. We REVERSE and SET ASIDE the Decision dated October
8, 2007 and the Resolution dated February 12, 2008 of the Court of Appeals (Cebu City) in CA-G.R.
SP No. 01360. Accordingly, we DECLARE:

1. Petitioner�s properties that are actually, solely and exclusively used for public purpose, consisting
of the airport terminal building, airfield, runway, taxiway and the lots on which they are situated,
EXEMPT from real property tax imposed by the City of Lapu-Lapu.

2. VOID all the real property tax assessments, including the additional tax for the special education
fund and the penalty interest, as well as the final notices of real property tax delinquencies, issued
by the City of Lapu-Lapu on petitioner�s properties, except the assessment covering the portions
that petitioner has leased to private parties.

3. NULL and VOID the sale in public auction of 27 of petitioner�s properties and the eventual
forfeiture and purchase of the said properties by respondent City of Lapu-Lapu. We likewise declare
VOID the corresponding Certificates of Sale of Delinquent Property issued to respondent City of
Lapu-Lapu.

SO ORDERED. cralawlawlibra ry
 Today is Monday, July 02, 2018

Republic of the Philippines

SUPREME COURT
Manila

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.:

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. Gimenez 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 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. Stone nor 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 facie presumption 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." 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;
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.:

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. Gimenez 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 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. Stone nor 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 facie presumption 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.

Today is Monday, July 02, 2018

Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 115455 October 30, 1995

ARTURO M. TOLENTINO, petitioner,

vs.
THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, respondents.

G.R. No. 115525 October 30, 1995

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 October 30, 1995

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 October 30, 1995

PHILIPPINE PRESS INSTITUTE, INC.; EGP PUBLISHING CO., INC.; KAMAHALAN 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 October 30, 1995

CHAMBER OF REAL ESTATE AND BUILDERS ASSOCIATIONS, INC., (CREBA), petitioner,

vs.
THE COMMISSIONER OF INTERNAL REVENUE, respondent.

G.R. No. 115781 October 30, 1995

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., and
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 October 30, 1995

PHILIPPINE AIRLINES, INC., petitioner,
vs.
THE SECRETARY OF FINANCE and COMMISSIONER OF INTERNAL REVENUE, respondents.

G.R. No. 115873 October 30, 1995

COOPERATIVE UNION OF THE PHILIPPINES, petitioner,

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 October 30, 1995

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.

RESOLUTION

MENDOZA, J.:

These are motions seeking reconsideration of our decision dismissing the petitions filed in these cases for the declaration of
unconstitutionality of R.A. No. 7716, otherwise known as the Expanded Value-Added Tax Law. The motions, of which there are
10 in all, have been filed by the several petitioners in these cases, with the exception of the Philippine Educational Publishers
Association, Inc. and the Association of Philippine Booksellers, petitioners in G.R. No. 115931.

The Solicitor General, representing the respondents, filed a consolidated comment, to which the Philippine Airlines, Inc.,
petitioner in G.R. No. 115852, and the Philippine Press Institute, Inc., petitioner in G.R. No. 115544, and Juan T. David, petitioner
in G.R. No. 115525, each filed a reply. In turn the Solicitor General filed on June 1, 1995 a rejoinder to the PPI's reply.

On June 27, 1995 the matter was submitted for resolution.

I. Power of the Senate to propose amendments to revenue bills. Some of the petitioners (Tolentino, Kilosbayan, Inc., Philippine
Airlines (PAL), Roco, and Chamber of Real Estate and Builders Association (CREBA)) reiterate previous claims made by them
that R.A. No. 7716 did not "originate exclusively" in the House of Representatives as required by Art. VI, §24 of the Constitution.
Although they admit that H. No. 11197 was filed in the House of Representatives where it passed three readings and that
afterward it was sent to the Senate where after first reading it was referred to the Senate Ways and Means Committee, they
complain that the Senate did not pass it on second and third readings. Instead what the Senate did was to pass its own version
(S. No. 1630) which it approved on May 24, 1994. Petitioner Tolentino adds that what the Senate committee should have done
was to amend H. No. 11197 by striking out the text of the bill and substituting it with the text of S. No. 1630. That way, it is said,
"the bill remains a House bill and the Senate version just becomes the text (only the text) of the House bill."

The contention has no merit.

The enactment of S. No. 1630 is not the only instance in which the Senate proposed an amendment to a House revenue bill by
enacting its own version of a revenue bill. On at least two occasions during the Eighth Congress, the Senate passed its own
version of revenue bills, which, in consolidation with House bills earlier passed, became the enrolled bills. These were:

R.A. No. 7369 (AN ACT TO AMEND THE OMNIBUS INVESTMENTS CODE OF 1987 BY EXTENDING FROM FIVE (5) YEARS
TO TEN YEARS THE PERIOD FOR TAX AND DUTY EXEMPTION AND TAX CREDIT ON CAPITAL EQUIPMENT) which was
approved by the President on April 10, 1992. This Act is actually a consolidation of H. No. 34254, which was approved by the
House on January 29, 1992, and S. No. 1920, which was approved by the Senate on February 3, 1992.

R.A. No. 7549 (AN ACT GRANTING TAX EXEMPTIONS TO WHOEVER SHALL GIVE REWARD TO ANY FILIPINO ATHLETE
WINNING A MEDAL IN OLYMPIC GAMES) which was approved by the President on May 22, 1992. This Act is a consolidation
of H. No. 22232, which was approved by the House of Representatives on August 2, 1989, and S. No. 807, which was approved
by the Senate on October 21, 1991.
On the other hand, the Ninth Congress passed revenue laws which were also the result of the consolidation of House and
Senate bills. These are the following, with indications of the dates on which the laws were approved by the President and dates
the separate bills of the two chambers of Congress were respectively passed:

1. R.A. NO. 7642

AN ACT INCREASING THE PENALTIES FOR TAX EVASION, AMENDING FOR THIS PURPOSE THE
PERTINENT SECTIONS OF THE NATIONAL INTERNAL REVENUE CODE (December 28, 1992).

House Bill No. 2165, October 5, 1992

Senate Bill No. 32, December 7, 1992

2. R.A. NO. 7643

AN ACT TO EMPOWER THE COMMISSIONER OF INTERNAL REVENUE TO REQUIRE THE

PAYMENT OF THE VALUE-ADDED TAX EVERY MONTH AND TO ALLOW LOCAL GOVERNMENT
UNITS TO SHARE IN VAT REVENUE, AMENDING FOR THIS PURPOSE CERTAIN SECTIONS OF
THE NATIONAL INTERNAL REVENUE CODE (December 28, 1992)

House Bill No. 1503, September 3, 1992

Senate Bill No. 968, December 7, 1992

3. R.A. NO. 7646

AN ACT AUTHORIZING THE COMMISSIONER OF INTERNAL REVENUE TO PRESCRIBE THE

PLACE FOR PAYMENT OF INTERNAL REVENUE TAXES BY LARGE TAXPAYERS, AMENDING FOR
THIS PURPOSE CERTAIN PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS
AMENDED (February 24, 1993)

House Bill No. 1470, October 20, 1992

Senate Bill No. 35, November 19, 1992

4. R.A. NO. 7649

AN ACT REQUIRING THE GOVERNMENT OR ANY OF ITS POLITICAL SUBDIVISIONS,

INSTRUMENTALITIES OR AGENCIES INCLUDING GOVERNMENT-OWNED OR CONTROLLED
CORPORATIONS (GOCCS) TO DEDUCT AND WITHHOLD THE VALUE-ADDED TAX DUE AT THE
RATE OF THREE PERCENT (3%) ON GROSS PAYMENT FOR THE PURCHASE OF GOODS AND SIX
PERCENT (6%) ON GROSS RECEIPTS FOR SERVICES RENDERED BY CONTRACTORS (April 6,
1993)

House Bill No. 5260, January 26, 1993

Senate Bill No. 1141, March 30, 1993

5. R.A. NO. 7656

AN ACT REQUIRING GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS TO DECLARE

DIVIDENDS UNDER CERTAIN CONDITIONS TO THE NATIONAL GOVERNMENT, AND FOR OTHER
PURPOSES (November 9, 1993)

House Bill No. 11024, November 3, 1993

Senate Bill No. 1168, November 3, 1993

6. R.A. NO. 7660

AN ACT RATIONALIZING FURTHER THE STRUCTURE AND ADMINISTRATION OF THE

DOCUMENTARY STAMP TAX, AMENDING FOR THE PURPOSE CERTAIN PROVISIONS OF THE
 NATIONAL INTERNAL REVENUE CODE, AS AMENDED, ALLOCATING FUNDS FOR SPECIFIC
PROGRAMS, AND FOR OTHER PURPOSES (December 23, 1993)

House Bill No. 7789, May 31, 1993

Senate Bill No. 1330, November 18, 1993

7. R.A. NO. 7717

AN ACT IMPOSING A TAX ON THE SALE, BARTER OR EXCHANGE OF SHARES OF STOCK LISTED
AND TRADED THROUGH THE LOCAL STOCK EXCHANGE OR THROUGH INITIAL PUBLIC
OFFERING, AMENDING FOR THE PURPOSE THE NATIONAL INTERNAL REVENUE CODE, AS
AMENDED, BY INSERTING A NEW SECTION AND REPEALING CERTAIN SUBSECTIONS THEREOF
(May 5, 1994)

House Bill No. 9187, November 3, 1993

Senate Bill No. 1127, March 23, 1994

Thus, the enactment of S. No. 1630 is not the only instance in which the Senate, in the exercise of its power to propose
amendments to bills required to originate in the House, passed its own version of a House revenue measure. It is noteworthy
that, in the particular case of S. No. 1630, petitioners Tolentino and Roco, as members of the Senate, voted to approve it on
second and third readings.

On the other hand, amendment by substitution, in the manner urged by petitioner Tolentino, concerns a mere matter of form.
Petitioner has not shown what substantial difference it would make if, as the Senate actually did in this case, a separate bill like
S. No. 1630 is instead enacted as a substitute measure, "taking into Consideration . . . H.B. 11197."

Indeed, so far as pertinent, the Rules of the Senate only provide:

RULE XXIX

AMENDMENTS

xxx xxx xxx

§68. Not more than one amendment to the original amendment shall be considered.

No amendment by substitution shall be entertained unless the text thereof is submitted in writing.

Any of said amendments may be withdrawn before a vote is taken thereon.

§69. No amendment which seeks the inclusion of a legislative provision foreign to the subject matter of a
bill (rider) shall be entertained.

xxx xxx xxx

§70-A. A bill or resolution shall not be amended by substituting it with another which covers a subject
distinct from that proposed in the original bill or resolution. (emphasis added).

Nor is there merit in petitioners' contention that, with regard to revenue bills, the Philippine Senate possesses less power than the
U.S. Senate because of textual differences between constitutional provisions giving them the power to propose or concur with
amendments.

Art. I, §7, cl. 1 of the U.S. Constitution reads:

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.

Art. VI, §24 of our 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.

The addition of the word "exclusively" in the Philippine Constitution and the decision to drop the phrase "as on other Bills" in the
American version, according to petitioners, shows the intention of the framers of our Constitution to restrict the Senate's power to
propose amendments to revenue bills. Petitioner Tolentino contends that the word "exclusively" was inserted to modify "originate"
and "the words 'as in any other bills' (sic) were eliminated so as to show that these bills were not to be like other bills but must be
treated as a special kind."

The history of this provision does not support this contention. The supposed indicia of constitutional intent are nothing but the
relics of an unsuccessful attempt to limit the power of the Senate. It will be recalled that the 1935 Constitution originally provided
for a unicameral National Assembly. When it was decided in 1939 to change to a bicameral legislature, it became necessary to
provide for the procedure for lawmaking by the Senate and the House of Representatives. The work of proposing amendments to
the Constitution was done by the National Assembly, acting as a constituent assembly, some of whose members, jealous of
preserving the Assembly's lawmaking powers, sought to curtail the powers of the proposed Senate. Accordingly they proposed
the following provision:

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 session 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.

The special committee on the revision of laws of the Second National Assembly vetoed the proposal. It deleted everything after
the first sentence. As rewritten, the proposal was approved by the National Assembly and embodied in Resolution No. 38, as
amended by Resolution No. 73. (J. ARUEGO, KNOW YOUR CONSTITUTION 65-66 (1950)). The proposed amendment was
submitted to the people and ratified by them in the elections held on June 18, 1940.

This is the history of Art. VI, §18 (2) of the 1935 Constitution, from which Art. VI, §24 of the present Constitution was derived. It
explains why the word "exclusively" was added to the American text from which the framers of the Philippine Constitution
borrowed and why the phrase "as on other Bills" was not copied. Considering the defeat of the proposal, the power of the Senate
to propose amendments must be understood to be full, plenary and complete "as on other Bills." Thus, because revenue bills are
required to originate exclusively in the House of Representatives, the Senate cannot enact revenue measures of its own without
such bills. After a revenue bill is passed and sent over to it by the House, however, the Senate certainly can pass its own version
on the same subject matter. This follows from the coequality of the two chambers of Congress.

That this is also the understanding of book authors of the scope of the Senate's power to concur is clear from the following
commentaries:

The power of the Senate to propose or concur with amendments is apparently without restriction. It would
seem that by virtue of this power, the Senate can practically re-write a bill required to come from the
House and leave only a trace of the original bill. For example, a general revenue bill passed by the lower
house of the United States Congress contained provisions for the imposition of an inheritance tax . This
was changed by the Senate into a corporation tax. The amending authority of the Senate was declared by
the United States Supreme Court to be sufficiently broad to enable it to make the alteration. [Flint v. Stone
Tracy Company, 220 U.S. 107, 55 L. ed. 389].

(L. TAÑADA AND F. CARREON, POLITICAL LAW OF THE PHILIPPINES 247 (1961))

The above-mentioned bills are supposed to be initiated by the House of Representatives because it is
more numerous in membership and therefore also more representative of the people. Moreover, its
members are presumed to be more familiar with the needs of the country in regard to the enactment of
the legislation involved.

The Senate is, however, allowed much leeway in the exercise of its power to propose or concur with
amendments to the bills initiated by the House of Representatives. Thus, in one case, a bill introduced in
the U.S. House of Representatives was changed by the Senate to make a proposed inheritance tax a
corporation tax. It is also accepted practice for the Senate to introduce what is known as an amendment
by substitution, which may entirely replace the bill initiated in the House of Representatives.
 (I. CRUZ, PHILIPPINE POLITICAL LAW 144-145 (1993)).

In sum, while Art. VI, §24 provides that all appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of
local application, and private bills must "originate exclusively in the House of Representatives," it also adds, "but the Senate may
propose or concur with amendments." In the exercise of this power, the Senate may propose an entirely new bill as a substitute
measure. As petitioner Tolentino states in a high school text, a committee to which a bill is referred may do any of the following:

(1) to endorse the bill without changes; (2) to make changes in the bill omitting or adding sections or
altering its language; (3) to make and endorse an entirely new bill as a substitute, in which case it will be
known as a committee bill; or (4) to make no report at all.

(A. TOLENTINO, THE GOVERNMENT OF THE PHILIPPINES 258 (1950))

To except from this procedure the amendment of bills which are required to originate in the House by prescribing that the number
of the House bill and its other parts up to the enacting clause must be preserved although the text of the Senate amendment may
be incorporated in place of the original body of the bill is to insist on a mere technicality. At any rate there is no rule prescribing
this form. S. No. 1630, as a substitute measure, is therefore as much an amendment of H. No. 11197 as any which the Senate
could have made.

II. S. No. 1630 a mere amendment of H. No. 11197. Petitioners' basic error is that they assume that S. No. 1630 is an
independent and distinct bill. Hence their repeated references to its certification that it was passed by the Senate "in substitution
of S.B. No. 1129, taking into consideration P.S. Res. No. 734 and H.B. No. 11197," implying that there is something substantially
different between the reference to S. No. 1129 and the reference to H. No. 11197. From this premise, they conclude that R.A.
No. 7716 originated both in the House and in the Senate and that it is the product of two "half-baked bills because neither H. No.
11197 nor S. No. 1630 was passed by both houses of Congress."

In point of fact, in several instances the provisions of S. No. 1630, clearly appear to be mere amendments of the corresponding
provisions of H. No. 11197. The very tabular comparison of the provisions of H. No. 11197 and S. No. 1630 attached as
Supplement A to the basic petition of petitioner Tolentino, while showing differences between the two bills, at the same time
indicates that the provisions of the Senate bill were precisely intended to be amendments to the House bill.

Without H. No. 11197, the Senate could not have enacted S. No. 1630. Because the Senate bill was a mere amendment of the
House bill, H. No. 11197 in its original form did not have to pass the Senate on second and three readings. It was enough that
after it was passed on first reading it was referred to the Senate Committee on Ways and Means. Neither was it required that S.
No. 1630 be passed by the House of Representatives before the two bills could be referred to the Conference Committee.

There is legislative precedent for what was done in the case of H. No. 11197 and S. No. 1630. When the House bill and Senate
bill, which became R.A. No. 1405 (Act prohibiting the disclosure of bank deposits), were referred to a conference committee, the
question was raised whether the two bills could be the subject of such conference, considering that the bill from one house had
not been passed by the other and vice versa. As Congressman Duran put the question:

MR. DURAN. Therefore, I raise this question of order as to procedure: If a House bill is passed by the
House but not passed by the Senate, and a Senate bill of a similar nature is passed in the Senate but
never passed in the House, can the two bills be the subject of a conference, and can a law be enacted
from these two bills? I understand that the Senate bill in this particular instance does not refer to
investments in government securities, whereas the bill in the House, which was introduced by the
Speaker, covers two subject matters: not only investigation of deposits in banks but also investigation of
investments in government securities. Now, since the two bills differ in their subject matter, I believe that
no law can be enacted.

Ruling on the point of order raised, the chair (Speaker Jose B. Laurel, Jr.) said:

THE SPEAKER. The report of the conference committee is in order. It is precisely in cases like this where
a conference should be had. If the House bill had been approved by the Senate, there would have been
no need of a conference; but precisely because the Senate passed another bill on the same subject
matter, the conference committee had to be created, and we are now considering the report of that
committee.

(2 CONG. REC. NO. 13, July 27, 1955, pp. 3841-42 (emphasis added))

III. The President's certification. The fallacy in thinking that H. No. 11197 and S. No. 1630 are distinct and unrelated measures
also accounts for the petitioners' (Kilosbayan's and PAL's) contention that because the President separately certified to the need
for the immediate enactment of these measures, his certification was ineffectual and void. The certification had to be made of the
version of the same revenue bill which at the moment was being considered. Otherwise, to follow petitioners' theory, it would be
necessary for the President to certify as many bills as are presented in a house of Congress even though the bills are merely
versions of the bill he has already certified. It is enough that he certifies the bill which, at the time he makes the certification, is
under consideration. Since on March 22, 1994 the Senate was considering S. No. 1630, it was that bill which had to be certified.
For that matter on June 1, 1993 the President had earlier certified H. No. 9210 for immediate enactment because it was the one
which at that time was being considered by the House. This bill was later substituted, together with other bills, by H. No. 11197.

As to what Presidential certification can accomplish, we have already explained in the main decision that the phrase "except
when the President certifies to the necessity of its immediate enactment, etc." in Art. VI, §26 (2) qualifies not only the requirement
that "printed copies [of a bill] in its final form [must be] distributed to the members three days before its passage" but also the
requirement that before a bill can become a law it must have passed "three readings on separate days." There is not only textual
support for such construction but historical basis as well.

Art. VI, §21 (2) of the 1935 Constitution originally provided:

(2) No bill shall be passed by either House unless it shall have been printed and copies thereof in its final
form furnished its Members at least three calendar days prior to its passage, except when the President
shall have certified to the necessity of its immediate enactment. Upon the last reading of a bill, no
amendment thereof shall be allowed and the question upon its passage shall be taken immediately
thereafter, and the yeas and nays entered on the Journal.

When the 1973 Constitution was adopted, it was provided in Art. VIII, §19 (2):

(2) No bill 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 the Members three days before its passage, except when
the Prime Minister 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.

This provision of the 1973 document, with slight modification, was adopted in Art. VI, §26 (2) of the present Constitution, thus:

(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.

The exception is based on the prudential consideration that if in all cases three readings on separate days are required and a bill
has to be printed in final form before it can be passed, the need for a law may be rendered academic by the occurrence of the
very emergency or public calamity which it is meant to address.

Petitioners further contend that a "growing budget deficit" is not an emergency, especially in a country like the Philippines where
budget deficit is a chronic condition. Even if this were the case, an enormous budget deficit does not make the need for R.A. No.
7716 any less urgent or the situation calling for its enactment any less an emergency.

Apparently, the members of the Senate (including some of the petitioners in these cases) believed that there was an urgent need
for consideration of S. No. 1630, because they responded to the call of the President by voting on the bill on second and third
readings on the same day. While the judicial department is not bound by the Senate's acceptance of the President's certification,
the respect due coequal departments of the government in matters committed to them by the Constitution and the absence of a
clear showing of grave abuse of discretion caution a stay of the judicial hand.

At any rate, we are satisfied that S. No. 1630 received thorough consideration in the Senate where it was discussed for six days.
Only its distribution in advance in its final printed form was actually dispensed with by holding the voting on second and third
readings on the same day (March 24, 1994). Otherwise, sufficient time between the submission of the bill on February 8, 1994 on
second reading and its approval on March 24, 1994 elapsed before it was finally voted on by the Senate on third reading.

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. (1 J. G. SUTHERLAND, STATUTES
AND STATUTORY CONSTRUCTION §10.04, p. 282 (1972)). These purposes were substantially achieved in the case of R.A.
No. 7716.

IV. Power of Conference Committee. It is contended (principally by Kilosbayan, Inc. and the Movement of Attorneys for
Brotherhood, Integrity and Nationalism, Inc. (MABINI)) that in violation of the constitutional policy of full public disclosure and the
people's right to know (Art. II, §28 and Art. III, §7) the Conference Committee met for two days in executive session with only the
conferees present.

As pointed out in our main decision, even in the United States it was customary to hold such sessions with only the conferees
and their staffs in attendance and it was only in 1975 when a new rule was adopted requiring open sessions. Unlike its American
counterpart, the Philippine Congress has not adopted a rule prescribing open hearings for conference committees.

It is nevertheless claimed that in the United States, before the adoption of the rule in 1975, at least staff members were present.
These were staff members of the Senators and Congressmen, however, who may be presumed to be their confidential men, not
stenographers as in this case who on the last two days of the conference were excluded. There is no showing that the conferees
themselves did not take notes of their proceedings so as to give petitioner Kilosbayan basis for claiming that even in secret
diplomatic negotiations involving state interests, conferees keep notes of their meetings. Above all, the public's right to know was
fully served because the Conference Committee in this case submitted a report showing the changes made on the differing
versions of the House and the Senate.

Petitioners cite the rules of both houses which provide that conference committee reports must contain "a detailed, sufficiently
explicit statement of the changes in or other amendments." These changes are shown in the bill attached to the Conference
Committee Report. The members of both houses could thus ascertain what changes had been made in the original bills without
the need of a statement detailing the changes.

The same question now presented was raised when the bill which became R.A. No. 1400 (Land Reform Act of 1955) was
reported by the Conference Committee. Congressman Bengzon raised a point of order. He said:

MR. BENGZON. My point of order is that it is out of order to consider the report of the conference
committee regarding House Bill No. 2557 by reason of the provision of Section 11, Article XII, of the Rules
of this House which provides specifically that the conference report must be accompanied by a detailed
statement of the effects of the amendment on the bill of the House. This conference committee report is
not accompanied by that detailed statement, Mr. Speaker. Therefore it is out of order to consider it.

Petitioner Tolentino, then the Majority Floor Leader, answered:

MR. TOLENTINO. Mr. Speaker, I should just like to say a few words in connection with the point of order
raised by the gentleman from Pangasinan.

There is no question about the provision of the Rule cited by the gentleman from Pangasinan, but this
provision applies to those cases where only portions of the bill have been amended. In this case before
us an entire bill is presented; therefore, it can be easily seen from the reading of the bill what the
provisions are. Besides, this procedure has been an established practice.

After some interruption, he continued:

MR. TOLENTINO. As I was saying, Mr. Speaker, we have to look into the reason for the provisions of the
Rules, and the reason for the requirement in the provision cited by the gentleman from Pangasinan is
when there are only certain words or phrases inserted in or deleted from the provisions of the bill included
in the conference report, and we cannot understand what those words and phrases mean and their
relation to the bill. In that case, it is necessary to make a detailed statement on how those words and
phrases will affect the bill as a whole; but when the entire bill itself is copied verbatim in the conference
report, that is not necessary. So when the reason for the Rule does not exist, the Rule does not exist.

(2 CONG. REC. NO. 2, p. 4056. (emphasis added))

Congressman Tolentino was sustained by the chair. The record shows that when the ruling was appealed, it was upheld by viva
voce and when a division of the House was called, it was sustained by a vote of 48 to 5. (Id.,
p. 4058)

Nor is there any doubt about the power of a conference committee to insert new provisions as long as these are germane to the
subject of the conference. As this Court held in Philippine Judges Association v. Prado, 227 SCRA 703 (1993), in an opinion
written by then Justice Cruz, the jurisdiction of the conference committee is not limited to resolving differences between the
Senate and the House. It may propose an entirely new provision. What is important is that its report is subsequently approved by
the respective houses of Congress. This Court ruled that it would not entertain allegations that, because new provisions had
been added by the conference committee, there was thereby a violation of the constitutional injunction that "upon the last reading
of a bill, no amendment thereto shall be allowed."
 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.

(Id. at 710. (emphasis added))

It is interesting to note the following description of conference committees in the Philippines in a 1979 study:

Conference committees may be of two types: free or instructed. These committees may be given
instructions by their parent bodies or they may be left without instructions. Normally the conference
committees are without instructions, and this is why they are often critically referred to as "the little
legislatures." Once bills have been sent to them, the conferees have almost unlimited authority to change
the clauses of the bills and in fact sometimes introduce new measures that were not in the original
legislation. No minutes are kept, and members' activities on conference committees are difficult to
determine. One congressman known for his idealism put it this way: "I killed a bill on export incentives for
my interest group [copra] in the conference committee but I could not have done so anywhere else." The
conference committee submits a report to both houses, and usually it is accepted. If the report is not
accepted, then the committee is discharged and new members are appointed.

(R. Jackson, Committees in the Philippine Congress, in COMMITTEES AND LEGISLATURES: A

COMPARATIVE ANALYSIS 163 (J. D. LEES AND M. SHAW, eds.)).

In citing this study, we pass no judgment on the methods of conference committees. We cite it only to say that conference
committees here are no different from their counterparts in the United States whose vast powers we noted in Philippine Judges
Association v. Prado, supra. At all events, under Art. VI, §16(3) each house has the power "to determine the rules of its
proceedings," including those of its committees. Any meaningful change in the method and procedures of Congress or its
committees must therefore be sought in that body itself.

V. The titles of S. No. 1630 and H. No. 11197. PAL maintains that R.A. No. 7716 violates Art. VI, §26 (1) of the Constitution
which provides that "Every bill passed by Congress shall embrace only one subject which shall be expressed in the title thereof."
PAL contends that the amendment of its franchise by the withdrawal of its exemption from the VAT is not expressed in the title of
the law.

Pursuant to §13 of P.D. No. 1590, PAL pays a franchise tax of 2% on its gross revenue "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."

PAL was exempted from the payment of the VAT along with other entities by §103 of the National Internal Revenue Code, which
provides as follows:

§103. Exempt transactions. — The following shall be exempt from the value-added tax:

xxx xxx xxx

(q) Transactions which are exempt under special laws or international agreements to which the
Philippines is a signatory.

R.A. No. 7716 seeks to withdraw certain exemptions, including that granted to PAL, by amending §103, as follows:

§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 Decree
Nos. 66, 529, 972, 1491, 1590. . . .

The amendment of §103 is expressed in the title of R.A. No. 7716 which reads:

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.

By stating that R.A. No. 7716 seeks to "[RESTRUCTURE] THE VALUE-ADDED TAX (VAT) SYSTEM [BY] 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,"
Congress thereby clearly expresses its intention to amend any provision of the NIRC which stands in the way of accomplishing
the purpose of the law.

PAL asserts that the amendment of its franchise must be reflected in the title of the law by specific reference to P.D. No. 1590. It
is unnecessary to do this in order to comply with the constitutional requirement, since it is already stated in the title that the law
seeks to amend the pertinent provisions of the NIRC, among which is §103(q), in order to widen the base of the VAT. Actually, it
is the bill which becomes a law that is required to express in its title the subject of legislation. The titles of H. No. 11197 and S.
No. 1630 in fact specifically referred to §103 of the NIRC as among the provisions sought to be amended. We are satisfied that
sufficient notice had been given of the pendency of these bills in Congress before they were enacted into what is now R.A.
No. 7716.

In Philippine Judges Association v. Prado, supra, a similar argument as that now made by PAL was rejected. R.A. No. 7354 is
entitled AN ACT CREATING THE PHILIPPINE POSTAL CORPORATION, DEFINING ITS POWERS, FUNCTIONS AND
RESPONSIBILITIES, PROVIDING FOR REGULATION OF THE INDUSTRY AND FOR OTHER PURPOSES CONNECTED
THEREWITH. It contained a provision repealing all franking privileges. It was contended that the withdrawal of franking privileges
was not expressed in the title of the law. In holding that there was sufficient description of the subject of the law in its title,
including the repeal of franking privileges, this Court held:

To require every end and means necessary for the accomplishment of the general objectives of the
statute to be expressed in its title would not only be unreasonable but would actually render legislation
impossible. [Cooley, Constitutional Limitations, 8th Ed., p. 297] As has been correctly explained:

The details of a legislative act need not be specifically stated in its title, but matter
germane to the subject as expressed in the title, and adopted to the accomplishment of
the object in view, may properly be included in the act. Thus, it is proper to create in the
same act the machinery by which the act is to be enforced, to prescribe the penalties for
its infraction, and to remove obstacles in the way of its execution. If such matters are
properly connected with the subject as expressed in the title, it is unnecessary that they
should also have special mention in the title. (Southern Pac. Co. v. Bartine, 170 Fed. 725)

(227 SCRA at 707-708)

VI. Claims of press freedom and religious liberty. We have held that, as a general proposition, the press is not exempt from the
taxing power of the State and that what the constitutional guarantee of free press prohibits are laws which single out the press or
target a group belonging to the press for special treatment or which in any way discriminate against the press on the basis of the
content of the publication, and R.A. No. 7716 is none of these.

Now it is contended by the PPI that by removing the exemption of the press from the VAT while maintaining those granted to
others, the law discriminates against the press. At any rate, it is averred, "even nondiscriminatory taxation of constitutionally
guaranteed freedom is unconstitutional."

With respect to the first contention, it would suffice to say that since the law granted the press a privilege, the law could take back
the privilege anytime without offense to the Constitution. The reason is simple: by granting exemptions, the State does not
forever waive the exercise of its sovereign prerogative.

Indeed, in withdrawing the exemption, the law merely subjects the press to the same tax burden to which other businesses have
long ago been subject. It is thus different from the tax involved in the cases invoked by the PPI. The license tax in Grosjean v.
American Press Co., 297 U.S. 233, 80 L. Ed. 660 (1936) was found to be discriminatory because it was laid on the gross
advertising receipts only of newspapers whose weekly circulation was over 20,000, with the result that the tax applied only to 13
out of 124 publishers in Louisiana. These large papers were critical of Senator Huey Long who controlled the state legislature
which enacted the license tax. The censorial motivation for the law was thus evident.

On the other hand, in Minneapolis Star & Tribune Co. v. Minnesota Comm'r of Revenue, 460 U.S. 575, 75 L. Ed. 2d 295 (1983),
the tax was found to be discriminatory because although it could have been made liable for the sales tax or, in lieu thereof, for
the use tax on the privilege of using, storing or consuming tangible goods, the press was not. Instead, the press was exempted
from both taxes. It was, however, later made to pay a special use tax on the cost of paper and ink which made these items "the
only items subject to the use tax that were component of goods to be sold at retail." The U.S. Supreme Court held that the
differential treatment of the press "suggests that the goal of regulation is not related to suppression of expression, and such goal
is presumptively unconstitutional." It would therefore appear that even a law that favors the press is constitutionally suspect. (See
the dissent of Rehnquist, J. in that case)

Nor is it true that only two exemptions previously granted by E.O. No. 273 are withdrawn "absolutely and unqualifiedly" by R.A.
No. 7716. Other exemptions from the VAT, such as those previously granted to PAL, petroleum concessionaires, enterprises
registered with the Export Processing Zone Authority, and many more are likewise totally withdrawn, in addition to exemptions
which are partially withdrawn, in an effort to broaden the base of the tax.

The PPI says that the discriminatory treatment of the press is highlighted by the fact that transactions, which are profit oriented,
continue to enjoy exemption under R.A. No. 7716. An enumeration of some of these transactions will suffice to show that by and
large this is not so and that the exemptions are granted for a purpose. As the Solicitor General says, such exemptions are
granted, in some cases, to encourage agricultural production and, in other cases, for the personal benefit of the end-user rather
than for profit. The exempt transactions are:

(a) Goods for consumption or use which are in their original state (agricultural, marine and forest
products, cotton seeds in their original state, fertilizers, seeds, seedlings, fingerlings, fish, prawn livestock
and poultry feeds) and goods or services to enhance agriculture (milling of palay, corn, sugar cane and
raw sugar, livestock, poultry feeds, fertilizer, ingredients used for the manufacture of feeds).

(b) Goods used for personal consumption or use (household and personal effects of citizens returning to
the Philippines) or for professional use, like professional instruments and implements, by persons coming
to the Philippines to settle here.

(c) Goods subject to excise tax such as petroleum products or to be used for manufacture of petroleum
products subject to excise tax and services subject to percentage tax.

(d) Educational services, medical, dental, hospital and veterinary services, and services rendered under
employer-employee relationship.

(e) Works of art and similar creations sold by the artist himself.

(f) Transactions exempted under special laws, or international agreements.

(g) Export-sales by persons not VAT-registered.

(h) Goods or services with gross annual sale or receipt not exceeding P500,000.00.

(Respondents' Consolidated Comment on the Motions for Reconsideration, pp. 58-60)

The PPI asserts that it does not really matter that the law does not discriminate against the press because "even
nondiscriminatory taxation on constitutionally guaranteed freedom is unconstitutional." PPI cites in support of this assertion the
following statement in Murdock v. Pennsylvania, 319 U.S. 105, 87 L. Ed. 1292 (1943):

The fact that the ordinance is "nondiscriminatory" is immaterial. The protection afforded by the First
Amendment is not so restricted. A license tax certainly does not acquire constitutional validity because it
classifies the privileges protected by the First Amendment along with the wares and merchandise of
hucksters and peddlers and treats them all alike. Such equality in treatment does not save the ordinance.
Freedom of press, freedom of speech, freedom of religion are in preferred position.

The Court was speaking in that case of a license tax, which, unlike an ordinary tax, is mainly for regulation. Its imposition on the
press is unconstitutional because it lays a prior restraint on the exercise of its right. Hence, although its application to others,
such those selling goods, is valid, its application to the press or to religious groups, such as the Jehovah's Witnesses, in
connection with the latter's sale of religious books and pamphlets, is unconstitutional. As the U.S. Supreme Court put it, "it is one
thing to impose a tax on income or property of a preacher. It is quite another thing to exact a tax on him for delivering a sermon."

A similar ruling was made by this Court in American Bible Society v. City of Manila, 101 Phil. 386 (1957) which invalidated a city
ordinance requiring a business license fee on those engaged in the sale of general merchandise. It was held that the tax could
not be imposed on the sale of bibles by the American Bible Society without restraining the free exercise of its right to propagate.

The VAT is, however, different. It is not a license tax. It is not a tax on the exercise of a privilege, much less a constitutional right.
It is imposed on the sale, barter, lease or exchange of goods or properties or the sale or exchange of services and the lease of
properties purely for revenue purposes. To subject the press to its payment is not to burden the exercise of its right any more
than to make the press pay income tax or subject it to general regulation is not to violate its freedom under the Constitution.

Additionally, the Philippine Bible Society, Inc. claims that although it sells bibles, the proceeds derived from the sales are used to
subsidize the cost of printing copies which are given free to those who cannot afford to pay so that to tax the sales would be to
increase the price, while reducing the volume of sale. Granting that to be the case, the resulting burden on the exercise of
religious freedom is so incidental as to make it difficult to differentiate it from any other economic imposition that might make the
right to disseminate religious doctrines costly. Otherwise, to follow the petitioner's argument, to increase the tax on the sale of
vestments would be to lay an impermissible burden on the right of the preacher to make a sermon.

On the other hand the registration fee of P1,000.00 imposed by §107 of the NIRC, as amended by §7 of R.A. No. 7716, although
fixed in amount, is really just to pay for the expenses of registration and enforcement of provisions such as those relating to
accounting in §108 of the NIRC. That the PBS distributes free bibles and therefore is not liable to pay the VAT does not excuse it
from the payment of this fee because it also sells some copies. At any rate whether the PBS is liable for the VAT must be
decided in concrete cases, in the event it is assessed this tax by the Commissioner of Internal Revenue.

VII. Alleged violations of the due process, equal protection and contract clauses and the rule on taxation. CREBA asserts that
R.A. No. 7716 (1) impairs the obligations of contracts, (2) classifies transactions as covered or exempt without reasonable basis
and (3) violates the rule that taxes should be uniform and equitable and that Congress shall "evolve a progressive system of
taxation."

With respect to the first contention, it is claimed that the application of the tax to existing contracts of the sale of real property by
installment or on deferred payment basis would result in substantial increases in the monthly amortizations to be paid because of
the 10% VAT. The additional amount, it is pointed out, is something that the buyer did not anticipate at the time he entered into
the contract.

The short answer to this is the one given by this Court in an early case: "Authorities from numerous sources are cited by the
plaintiffs, but none of them show that a lawful tax on a new subject, or an increased tax on an old one, interferes with a contract
or impairs its obligation, within the meaning of the Constitution. Even though such taxation may affect particular contracts, as it
may increase the debt of one person and lessen the security of another, or may impose additional burdens upon one class and
release the burdens of another, still the tax must be paid unless prohibited by the Constitution, nor can it be said that it impairs
the obligation of any existing contract in its true legal sense." (La Insular v. Machuca Go-Tauco and Nubla Co-Siong, 39 Phil.
567, 574 (1919)). Indeed not only existing laws but also "the reservation of the essential attributes of sovereignty, is . . . read into
contracts as a postulate of the legal order." (Philippine-American Life Ins. Co. v. Auditor General, 22 SCRA 135, 147 (1968))
Contracts must be understood as having been made in reference to the possible exercise of the rightful authority of the
government and no obligation of contract can extend to the defeat of that authority. (Norman v. Baltimore and Ohio R.R., 79 L.
Ed. 885 (1935)).

It is next pointed out that while §4 of R.A. No. 7716 exempts such transactions as the sale of agricultural products, food items,
petroleum, and medical and veterinary services, it grants no exemption on the sale of real property which is equally essential.
The sale of real property for socialized and low-cost housing is exempted from the tax, but CREBA claims that real estate
transactions of "the less poor," i.e., the middle class, who are equally homeless, should likewise be exempted.

The sale of food items, petroleum, medical and veterinary services, etc., which are essential goods and services was already
exempt under §103, pars. (b) (d) (1) of the NIRC before the enactment of R.A. No. 7716. Petitioner is in error in claiming that
R.A. No. 7716 granted exemption to these transactions, while subjecting those of petitioner to the payment of the VAT.
Moreover, there is a difference between the "homeless poor" and the "homeless less poor" in the example given by petitioner,
because the second group or middle class can afford to rent houses in the meantime that they cannot yet buy their own homes.
The two social classes are thus differently situated in life. "It is inherent in the power to tax that the 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.'" (Lutz v. Araneta, 98 Phil. 148, 153 (1955). Accord, City of Baguio v.
De Leon, 134 Phil. 912 (1968); Sison, Jr. v. Ancheta, 130 SCRA 654, 663 (1984); Kapatiran ng mga Naglilingkod sa Pamahalaan
ng Pilipinas, Inc. v. Tan, 163 SCRA 371 (1988)).

Finally, it is contended, for the reasons already noted, that R.A. No. 7716 also violates Art. VI, §28(1) which provides that "The
rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation."

Equality and uniformity of taxation means that all taxable articles or kinds of property of the same class be taxed at the same
rate. The taxing power has the authority to make reasonable and natural classifications for purposes of taxation. To satisfy this
requirement it is enough that the statute or ordinance applies equally to all persons, forms and corporations placed in similar
situation. (City of Baguio v. De Leon, supra; Sison, Jr. v. Ancheta, supra)

Indeed, the VAT was already provided in E.O. No. 273 long before R.A. No. 7716 was enacted. R.A. No. 7716 merely expands
the base of the tax. The validity of the original VAT Law was questioned in Kapatiran ng Naglilingkod sa Pamahalaan ng
Pilipinas, Inc. v. Tan, 163 SCRA 383 (1988) on grounds similar to those made in these cases, namely, that the law was
"oppressive, discriminatory, unjust and regressive in violation of Art. VI, §28(1) of the Constitution." (At 382) Rejecting the
challenge to the law, this Court held:

As the Court sees it, EO 273 satisfies all the requirements of a valid tax. It is uniform. . . .

The sales tax adopted in EO 273 is applied similarly on all goods and services sold to the public, which
are not exempt, at the constant rate of 0% or 10%.

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 P200,000.00. 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.

(At 382-383)

The CREBA claims that the VAT is regressive. A similar claim is made by the Cooperative Union of the Philippines, Inc. (CUP),
while petitioner Juan T. David argues that the law contravenes the mandate of Congress to provide for a progressive system of
taxation because the law imposes a flat rate of 10% and thus places the tax burden on all taxpayers without regard to their ability
to pay.

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).

Thus, the following transactions involving basic and essential goods and services are exempted from the VAT:

(a) Goods for consumption or use which are in their original state (agricultural, marine and forest
products, cotton seeds in their original state, fertilizers, seeds, seedlings, fingerlings, fish, prawn livestock
and poultry feeds) and goods or services to enhance agriculture (milling of palay, corn sugar cane and
raw sugar, livestock, poultry feeds, fertilizer, ingredients used for the manufacture of feeds).

(b) Goods used for personal consumption or use (household and personal effects of citizens returning to
the Philippines) and or professional use, like professional instruments and implements, by persons
coming to the Philippines to settle here.

(c) Goods subject to excise tax such as petroleum products or to be used for manufacture of petroleum
products subject to excise tax and services subject to percentage tax.

(d) Educational services, medical, dental, hospital and veterinary services, and services rendered under
employer-employee relationship.

(e) Works of art and similar creations sold by the artist himself.

(f) Transactions exempted under special laws, or international agreements.

(g) Export-sales by persons not VAT-registered.

(h) Goods or services with gross annual sale or receipt not exceeding P500,000.00.

(Respondents' Consolidated Comment on the Motions for Reconsideration, pp. 58-60)

On the other hand, the transactions which are subject to the VAT are those which involve goods and services which are used or
availed of mainly by higher income groups. These include real properties held primarily for sale to customers or for lease in the
ordinary course of trade or business, the right or privilege to use patent, copyright, and other similar property or right, the right or
privilege to use industrial, commercial or scientific equipment, motion picture films, tapes and discs, radio, television, satellite
transmission and cable television time, hotels, restaurants and similar places, securities, lending investments, taxicabs, utility
cars for rent, tourist buses, and other common carriers, services of franchise grantees of telephone and telegraph.

The problem with CREBA's petition is that it presents broad claims of constitutional violations by tendering issues not at retail but
at wholesale and in the abstract. There is no fully developed record which can impart to adjudication the impact of actuality.
There is no factual foundation to show in the concrete the application of the law to actual contracts and exemplify its effect on
property rights. For the fact is that petitioner's members have not even been assessed the VAT. Petitioner's case is not made
concrete by a series of hypothetical questions asked which are no different from those dealt with in advisory opinions.

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.

(Sison, Jr. v. Ancheta, 130 SCRA at 661)

Adjudication of these broad claims must await the development of a concrete case. It may be that postponement of adjudication
would result in a multiplicity of suits. This need not be the case, however. Enforcement of the law may give rise to such a case. A
test case, provided it is an actual case and not an abstract or hypothetical one, may thus be presented.

Nor is hardship to taxpayers alone an adequate justification for adjudicating abstract issues. Otherwise, adjudication would be no
different from the giving of advisory opinion that does not really settle legal issues.

We are told that it is our duty under Art. VIII, §1, ¶2 to decide whenever a claim is made that "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." This duty
can only arise if an actual case or controversy is before us. Under Art . VIII, §5 our jurisdiction is defined in terms of "cases" and
all that Art. VIII, §1, ¶2 can plausibly mean is that in the exercise of that jurisdiction we have the judicial power to determine
questions of grave abuse of discretion by any branch or instrumentality of the government.

Put in another way, what is granted in Art. VIII, §1, ¶2 is "judicial power," which is "the power of a court to hear and decide cases
pending between parties who have the right to sue and be sued in the courts of law and equity" (Lamb v. Phipps, 22 Phil. 456,
559 (1912)), as distinguished from legislative and executive power. This power cannot be directly appropriated until it is
apportioned among several courts either by the Constitution, as in the case of Art. VIII, §5, or by statute, as in the case of the
Judiciary Act of 1948 (R.A. No. 296) and the Judiciary Reorganization Act of 1980 (B.P. Blg. 129). The power thus apportioned
constitutes the court's "jurisdiction," defined as "the power conferred by law upon a court or judge to take cognizance of a case,
to the exclusion of all others." (United States v. Arceo, 6 Phil. 29 (1906)) Without an actual case coming within its jurisdiction, this
Court cannot inquire into any allegation of grave abuse of discretion by the other departments of the government.

VIII. Alleged violation of policy towards cooperatives. On the other hand, the Cooperative Union of the Philippines (CUP), after
briefly surveying the course of legislation, argues that it was to adopt a definite policy of granting tax exemption to cooperatives
that the present Constitution embodies provisions on cooperatives. To subject cooperatives to the VAT would therefore be to
infringe a constitutional policy. Petitioner claims that in 1973, P.D. No. 175 was promulgated exempting cooperatives from the
payment of income taxes and sales taxes but in 1984, because of the crisis which menaced the national economy, this
exemption was withdrawn by P.D. No. 1955; that in 1986, P.D. No. 2008 again granted cooperatives exemption from income and
sales taxes until December 31, 1991, but, in the same year, E.O. No. 93 revoked the exemption; and that finally in 1987 the
framers of the Constitution "repudiated the previous actions of the government adverse to the interests of the cooperatives, that
is, the repeated revocation of the tax exemption to cooperatives and instead upheld the policy of strengthening the cooperatives
by way of the grant of tax exemptions," by providing the following in Art. XII:

§1. The goals of the national economy are a more equitable distribution of opportunities, income, and
wealth; a sustained increase in the amount of goods and services produced by the nation for the benefit
of the people; and an expanding productivity as the key to raising the quality of life for all, especially the
underprivileged.

The State shall promote industrialization and full employment based on sound agricultural development
and agrarian reform, through industries that make full and efficient use of human and natural resources,
and which are competitive in both domestic and foreign markets. However, the State shall protect Filipino
 enterprises against unfair foreign competition and trade practices.

In the pursuit of these goals, all sectors of the economy and all regions of the country shall be given
optimum opportunity to develop. Private enterprises, including corporations, cooperatives, and similar
collective organizations, shall be encouraged to broaden the base of their ownership.

§15. The Congress shall create an agency to promote the viability and growth of cooperatives as
instruments for social justice and economic development.

Petitioner's contention has no merit. In the first place, it is not true that P.D. No. 1955 singled out cooperatives by withdrawing
their exemption from income and sales taxes under P.D. No. 175, §5. What P.D. No. 1955, §1 did was to withdraw the
exemptions and preferential treatments theretofore granted to private business enterprises in general, in view of the economic
crisis which then beset the nation. It is true that after P.D. No. 2008, §2 had restored the tax exemptions of cooperatives in 1986,
the exemption was again repealed by E.O. No. 93, §1, but then again cooperatives were not the only ones whose exemptions
were withdrawn. The withdrawal of tax incentives applied to all, including government and private entities. In the second place,
the Constitution does not really require that cooperatives be granted tax exemptions in order to promote their growth and viability.
Hence, there is no basis for petitioner's assertion that the government's policy toward cooperatives had been one of vacillation,
as far as the grant of tax privileges was concerned, and that it was to put an end to this indecision that the constitutional
provisions cited were adopted. Perhaps as a matter of policy cooperatives should be granted tax exemptions, but that is left to
the discretion of Congress. If Congress does not grant exemption and there is no discrimination to cooperatives, no violation of
any constitutional policy can be charged.

Indeed, petitioner's theory amounts to saying that under the Constitution cooperatives are exempt from taxation. Such theory is
contrary to the Constitution under which only the following are exempt from taxation: charitable institutions, churches and
parsonages, by reason of Art. VI, §28 (3), and non-stock, non-profit educational institutions by reason of Art. XIV, §4 (3).

CUP's further ground for seeking the invalidation of R.A. No. 7716 is that it denies cooperatives the equal protection of the law
because electric cooperatives are exempted from the VAT. The classification between electric and other cooperatives (farmers
cooperatives, producers cooperatives, marketing cooperatives, etc.) apparently rests on a congressional determination that there
is greater need to provide cheaper electric power to as many people as possible, especially those living in the rural areas, than
there is to provide them with other necessities in life. We cannot say that such classification is unreasonable.

We have carefully read the various arguments raised against the constitutional validity of R.A. No. 7716. We have in fact taken
the extraordinary step of enjoining its enforcement pending resolution of these cases. We have now come to the conclusion that
the law suffers from none of the infirmities attributed to it by petitioners and that its enactment by the other branches of the
government does not constitute a grave abuse of discretion. Any question as to its necessity, desirability or expediency must be
addressed to Congress as the body which is electorally responsible, remembering that, as Justice Holmes has said, "legislators
are the ultimate guardians of the liberties and welfare of the people in quite as great a degree as are the courts." (Missouri,
Kansas & Texas Ry. Co. v. May, 194 U.S. 267, 270, 48 L. Ed. 971, 973 (1904)). It is not right, as petitioner in G.R. No. 115543
does in arguing that we should enforce the public accountability of legislators, that those who took part in passing the law in
question by voting for it in Congress should later thrust to the courts the burden of reviewing measures in the flush of enactment.
This Court does not sit as a third branch of the legislature, much less exercise a veto power over legislation.

WHEREFORE, the motions for reconsideration are denied with finality and the temporary restraining order previously issued is
hereby lifted.

SO ORDERED.

Narvasa, C.J., Feliciano, Melo, Kapunan, Francisco and Hermosisima, Jr., JJ., concur.

Padilla and Vitug, JJ., maintained their separate opinion.

Regalado, Davide, Jr., Romero, Bellosillo and Puno, JJ, maintained their dissenting opinion.

Panganiban, J., took no part.

The Lawphil Project - Arellano Law Foundation

EN BANC

BRITISH AMERICAN TOBACCO, G.R. No. 163583

Petitioner,
Present:

Puno, C.J.,

Quisumbing,

Ynares-Santiago,

Carpio,

Austria-Martinez,

Corona,

- versus - Carpio Morales,

Tinga,

Chico-Nazario,

Velasco, Jr.,

Nachura,

Leonardo-De Castro,

Brion,

Peralta, and

Bersamin, JJ.

JOSE ISIDRO N. CAMACHO,

in his capacity as Secretary of

the Department of Finance and

GUILLERMO L. PARAYNO, JR.,

in his capacity as Commissioner of

the Bureau of Internal Revenue,

Respondents.

PHILIP MORRIS PHILIPPINES

MANUFACTURING, INC.,

FORTUNE TOBACCO, CORP., Promulgated:

MIGHTY CORPOR.A.TION, and

JT INTERNATIONAL, S.A.,

Respondents-in-Intervention. April 15, 2009

x ---------------------------------------------------------------------------------------- x
RESOLUTION

YNARES-SANTIAGO, J.:

On August 20, 2008, the Court rendered a Decision partially granting the
petition in this case, viz:

WHEREFORE, the petition is PARTIALLY GRANTED and the decision of the

Regional Trial Court of Makati, Branch 61, in Civil Case No. 03-1032, is AFFIRMED
with MODIFICATION. As modified, this Court declares that:

(1) Section 145 of the NIRC, as amended by Republic Act No. 9334, is
CONSTITUTIONAL; and that

(2) Section 4(B)(e)(c), 2nd paragraph of Revenue Regulations No. 1-97,

as amended by Section 2 of Revenue Regulations 9-2003, and Sections II(1)(b),
II(4)(b), II(6), II(7), III (Large Tax Payers Assistance Division II) II(b) of Revenue
Memorandum Order No. 6-2003, insofar as pertinent to cigarettes packed by
machine, are INVALID insofar as they grant the BIR the power to reclassify or
update the classification of new brands every two years or earlier.

SO ORDERED.

In its Motion for Reconsideration, petitioner insists that the assailed

provisions (1) violate the equal protection and uniformity of taxation clauses of
the Constitution, (2) contravene Section 19,76 Article XII of the Constitution on
unfair competition, and (3) infringe the constitutional provisions on regressive
and inequitable taxation. Petitioner further argues that assuming the assailed

76
The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint
of trade or unfair competition shall be allowed.
provisions are constitutional, petitioner is entitled to a downward reclassification
of Lucky Strike from the premium-priced to the high-priced tax bracket.

The Court is not persuaded.

The assailed law does not violate the equal

protection and uniformity of taxation
clauses.

Petitioner argues that the classification freeze provision violates the equal
protection and uniformity of taxation clauses because Annex D brands are taxed
based on their 1996 net retail prices while new brands are taxed based on their
present day net retail prices. Citing Ormoc Sugar Co. v. Treasurer of Ormoc City,77
petitioner asserts that the assailed provisions accord a special or privileged status
to Annex D brands while at the same time discriminate against other brands.

These contentions are without merit and a rehash of petitioners previous

arguments before this Court. As held in the assailed Decision, the instant case
neither involves a suspect classification nor impinges on a fundamental right.
Consequently, the rational basis test was properly applied to gauge the
constitutionality of the assailed law in the face of an equal protection challenge. It
has been held that in the areas of social and economic policy, a statutory
classification that neither proceeds along suspect lines nor infringes constitutional
rights must be upheld against equal protection challenge if there is any
reasonably conceivable state of facts that could provide a rational basis for the
classification.78 Under the rational basis test, it is sufficient that the legislative

77
G.R. No. L-23794, February 17, 1968, 22 SCRA 603.
78
Federal Communications Commission v. Beach Communications, Inc., 508 U.S. 307, 313 (1993).
classification is rationally related to achieving some legitimate State interest. As
the Court ruled in the assailed Decision, viz:

A legislative classification that is reasonable does not offend the

constitutional guaranty of the equal protection of the laws. The classification is
considered valid and reasonable provided that: (1) it rests on substantial
distinctions; (2) it is germane to the purpose of the law; (3) it applies, all things
being equal, to both present and future conditions; and (4) it applies equally to
all those belonging to the same class.

The first, third and fourth requisites are satisfied. The classification freeze
provision was inserted in the law for reasons of practicality and expediency. That
is, since a new brand was not yet in existence at the time of the passage of RA
8240, then Congress needed a uniform mechanism to fix the tax bracket of a
new brand. The current net retail price, similar to what was used to classify the
brands under Annex D as of October 1, 1996, was thus the logical and practical
choice. Further, with the amendments introduced by RA 9334, the freezing of
the tax classifications now expressly applies not just to Annex D brands but to
newer brands introduced after the effectivity of RA 8240 on January 1, 1997 and
any new brand that will be introduced in the future. (However, as will be
discussed later, the intent to apply the freezing mechanism to newer brands was
already in place even prior to the amendments introduced by RA 9334 to RA
8240.) This does not explain, however, why the classification is frozen after its
determination based on current net retail price and how this is germane to the
purpose of the assailed law. An examination of the legislative history of RA 8240
provides interesting answers to this question.

xxxx

From the foregoing, it is quite evident that the classification freeze

provision could hardly be considered arbitrary, or motivated by a hostile or
oppressive attitude to unduly favor older brands over newer brands. Congress
was unequivocal in its unwillingness to delegate the power to periodically adjust
the excise tax rate and tax brackets as well as to periodically resurvey and
reclassify the cigarette brands based on the increase in the consumer price index
to the DOF and the BIR. Congress doubted the constitutionality of such
delegation of power, and likewise, considered the ethical implications thereof.
Curiously, the classification freeze provision was put in place of the periodic
adjustment and reclassification provision because of the belief that the latter
would foster an anti-competitive atmosphere in the market. Yet, as it is, this
same criticism is being foisted by petitioner upon the classification freeze
provision.

To our mind, the classification freeze provision was in the main the result
of Congresss earnest efforts to improve the efficiency and effectivity of the tax
administration over sin products while trying to balance the same with other
State interests. In particular, the questioned provision addressed Congresss
administrative concerns regarding delegating too much authority to the DOF and
BIR as this will open the tax system to potential areas for abuse and corruption.
Congress may have reasonably conceived that a tax system which would give the
least amount of discretion to the tax implementers would address the problems
of tax avoidance and tax evasion.

To elaborate a little, Congress could have reasonably foreseen that,

under the DOF proposal and the Senate Version, the periodic reclassification of
brands would tempt the cigarette manufacturers to manipulate their price levels
or bribe the tax implementers in order to allow their brands to be classified at a
lower tax bracket even if their net retail prices have already migrated to a higher
tax bracket after the adjustment of the tax brackets to the increase in the
consumer price index. Presumably, this could be done when a resurvey and
reclassification is forthcoming. As briefly touched upon in the Congressional
deliberations, the difference of the excise tax rate between the medium-priced
and the high-priced tax brackets under RA 8240, prior to its amendment, was
P3.36. For a moderately popular brand which sells around 100 million packs per
year, this easily translates to P336,000,000. The incentive for tax avoidance, if
not outright tax evasion, would clearly be present. Then again, the tax
implementers may use the power to periodically adjust the tax rate and
reclassify the brands as a tool to unduly oppress the taxpayer in order for the
government to achieve its revenue targets for a given year.

Thus, Congress sought to, among others, simplify the whole tax system
for sin products to remove these potential areas of abuse and corruption from
both the side of the taxpayer and the government. Without doubt, the
classification freeze provision was an integral part of this overall plan. This is in
line with one of the avowed objectives of the assailed law to simplify the tax
administration and compliance with the tax laws that are about to unfold in
order to minimize losses arising from inefficiencies and tax avoidance scheme, if
not outright tax evasion. RA 9334 did not alter this classification freeze provision
of RA 8240. On the contrary, Congress affirmed this freezing mechanism by
clarifying the wording of the law. We can thus reasonably conclude, as the
deliberations on RA 9334 readily show, that the administrative concerns in tax
administration, which moved Congress to enact the classification freeze
provision in RA 8240, were merely continued by RA 9334. Indeed, administrative
 concerns may provide a legitimate, rational basis for legislative classification. In
the case at bar, these administrative concerns in the measurement and
collection of excise taxes on sin products are readily apparent as afore-discussed.

Aside from the major concern regarding the elimination of potential

areas for abuse and corruption from the tax administration of sin products, the
legislative deliberations also show that the classification freeze provision was
intended to generate buoyant and stable revenues for government. With the
frozen tax classifications, the revenue inflow would remain stable and the
government would be able to predict with a greater degree of certainty the
amount of taxes that a cigarette manufacturer would pay given the trend in its
sales volume over time. The reason for this is that the previously classified
cigarette brands would be prevented from moving either upward or downward
their tax brackets despite the changes in their net retail prices in the future and,
as a result, the amount of taxes due from them would remain predictable. The
classification freeze provision would, thus, aid in the revenue planning of the
government.

All in all, the classification freeze provision addressed Congresss

administrative concerns in the simplification of tax administration of sin
products, elimination of potential areas for abuse and corruption in tax
collection, buoyant and stable revenue generation, and ease of projection of
revenues. Consequently, there can be no denial of the equal protection of the
laws since the rational-basis test is amply satisfied.

Moreover, petitioners contention that the assailed provisions violate the

uniformity of taxation clause is similarly unavailing. In Churchill v. Concepcion,79
we explained that a tax is uniform when it operates with the same force and
effect in every place where the subject of it is found.80 It does not signify an
intrinsic but simply a geographical uniformity.81 A levy of tax is not
unconstitutional because it is not intrinsically equal and uniform in its operation.82
The uniformity rule does not prohibit classification for purposes of taxation.83 As
ruled in Tan v. Del Rosario, Jr.:84

79
34 Phil. 969, 976-977 (1916).
80
Id. at 976.
81
Id.
82
Bernas, The 1987 Constitution of the Republic of the Philippines: A Commentary (2003), p. 777.
83
Id.
84
G.R. No. 109289, October 3, 1994, 237 SCRA 324.
 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 (citations omitted). 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 (citations omitted).85

In the instant case, there is no question that the classification freeze provision
meets the geographical uniformity requirement because the assailed law applies
to all cigarette brands in the Philippines. And, for reasons already adverted to in
our August 20, 2008 Decision, the above four-fold test has been met in the
present case.

Petitioners reliance on Ormoc Sugar Co. is misplaced. In said case, the

controverted municipal ordinance specifically named and taxed only the Ormoc
Sugar Company, and excluded any subsequently established sugar central from its
coverage. Thus, the ordinance was found unconstitutional on equal protection
grounds because its terms do not apply to future conditions as well. This is not
the case here. The classification freeze provision uniformly applies to all cigarette
brands whether existing or to be introduced in the market at some future time. It
does not purport to exempt any brand from its operation nor single out a brand
for the purpose of imposition of excise taxes.

At any rate, petitioners real disagreement lies with the legitimate State
interests. Although it concedes that the Court utilized the rationality test and that
the classification freeze provision was necessitated by several legitimate State
interests, however, it refuses to accept the justifications given by Congress for the
classification freeze provision. As we elucidated in our August 20, 2008 Decision,
this line of argumentation revolves around the wisdom and expediency of the
85
Id. at 331.
assailed law which we cannot inquire into, much less overrule. Equal protection is
not a license for courts to judge the wisdom, fairness, or logic of legislative
choices.86 We reiterate, therefore, that petitioners remedy is with Congress and
not this Court.

The assailed provisions do not violate the

constitutional prohibition on unfair
competition.

Petitioner asserts that the Court erroneously applied the rational basis test
allegedly because this test does not apply in a constitutional challenge based on a
violation of Section 19, Article XII of the Constitution on unfair competition. Citing
Tatad v. Secretary of the Department of Energy,87 it argues that the classification
freeze provision gives the brands under Annex D a decisive edge because it
constitutes a substantial barrier to the entry of prospective players; that the
Annex D provision is no different from the 4% tariff differential which we
invalidated in Tatad; that some of the new brands, like Astro, Memphis, Capri,
L&M, Bowling Green, Forbes, and Canon, which were introduced into the market
after the effectivity of the assailed law on January 1, 1997, were killed by Annex D
brands because the former brands were reclassified by the BIR to higher tax
brackets; that the finding that price is not the only factor in the market as there
are other factors like consumer preference, active ingredients, etc. is contrary to
the evidence presented and the deliberations in Congress; that the classification
freeze provision will encourage predatory pricing in contravention of the
constitutional prohibition on unfair competition; and that the cumulative effect of
the operation of the classification freeze provision is to perpetuate the oligopoly
of intervenors Philip Morris and Fortune Tobacco in contravention of the

86
Supra note 3.
87
346 Phil. 321 (1997).
constitutional edict for the State to regulate or prohibit monopolies, and to
disallow combinations in restraint of trade and unfair competition.

The argument lacks merit. While previously arguing that the rational basis
test was not satisfied, petitioner now asserts that this test does not apply in this
case and that the proper matrix to evaluate the constitutionality of the assailed
law is the prohibition on unfair competition under Section 19, Article XII of the
Constitution. It should be noted that during the trial below, petitioner did not
invoke said constitutional provision as it relied solely on the alleged violation of
the equal protection and uniformity of taxation clauses. Well-settled is the rule
that points of law, theories, issues and arguments not adequately brought to the
attention of the lower court will not be ordinarily considered by a reviewing court
as they cannot be raised for the first time on appeal.88 At any rate, even if we
were to relax this rule, as previously stated, the evidence presented before the
trial court is insufficient to establish the alleged violation of the constitutional
proscription against unfair competition.

Indeed, in Tatad we ruled that a law which imposes substantial barriers to

the entry and exit of new players in our downstream oil industry may be struck
down for being violative of Section 19, Article XII of the Constitution.89 However,
we went on to say in that case that if they are insignificant impediments, they
need not be stricken down.90 As we stated in our August 20, 2008 Decision,
petitioner failed to convincingly prove that there is a substantial barrier to the
entry of new brands in the cigarette market due to the classification freeze
provision. We further observed that several new brands were introduced in the
market after the assailed law went into effect thus negating petitioners sweeping
claim that the classification freeze provision is an insurmountable barrier to the

88
Natalia v. Court of Appeals, G.R. No. 116216, June 20, 1997, 274 SCRA 527, 538-539.
89
Supra note 12 at 368.
90
Id.
entry of new brands. We also noted that price is not the only factor affecting
competition in the market for there are other factors such as taste, brand loyalty,
etc.

We see no reason to depart from these findings for the following reasons:

First, petitioner did not lay down the factual foundations, as supported by
verifiable documentary proof, which would establish, among others, the cigarette
brands in competition with each other; the current net retail prices of Annex D
brands, as determined through a market survey, to provide a sufficient point of
comparison with those covered by the BIRs market survey of new brands; and the
causal connection with as well as the extent of the impact on the competition in
the cigarette market of the classification freeze provision. Other than petitioners
self-serving allegations and testimonial evidence, no adequate documentary
evidence was presented to substantiate its claims. Absent ample documentary
proof, we cannot accept petitioners claim that the classification freeze provision is
an insurmountable barrier to the entry of new players.

Second, we cannot lend credence to petitioners claim that it cannot

produce cigarettes that can compete with Marlboro and Philip Morris in the high-
priced tax bracket. Except for its self-serving testimonial evidence, no sufficient
documentary evidence was presented to substantiate this claim. The current net
retail price, which is the basis for determining the tax bracket of a cigarette brand,
more or less consists of the costs of raw materials, labor, advertising and profit
margin. To a large extent, these factors are controllable by the manufacturer, as
such, the decision to enter which tax bracket will depend on the pricing strategy
adopted by the individual manufacturer. The same holds true for its claims that
other new brands, like Astro, Memphis, Capri, L&M, Bowling Green, Forbes, and
Canon, were killed by Annex D brands due to the effects of the operation of the
classification freeze provision over time. The evidence that petitioner presented
before the trial court failed to substantiate the basis for these claims.

Essentially, petitioner would want us to accept its conclusions of law

without first laying down the factual foundations of its arguments. This Court,
which is not a trier of facts, cannot take judicial notice of the factual premises of
these arguments as petitioner now seems to suggest. The evidence should have
been presented before the trial court to allow it to examine and determine for
itself whether such factual premises, as supported by sufficient documentary
evidence, provide reasonable basis for petitioners conclusion that there arose an
unconstitutional unfair competition due to the operation of the classification
freeze provision. Petitioner should be reminded that it appealed this case from
the adverse ruling of the trial court directly to this Court on pure questions of law
instead of resorting to the Court of Appeals.

Third, Tatad is not applicable to the instant case. In Tatad, we found that
the 4% tariff differential between imported crude oil and imported refined
petroleum products erects a high barrier to the entry of new players because (1)
it imposes an undue burden on new players to spend billions of pesos to build
refineries in order to compete with the old players, and (2) new players, who opt
not to build refineries, suffer from the huge disadvantage of increasing their
product cost by 4%.91 The tariff was imposed on the raw materials uniformly used
by the players in the oil industry. Thus, the adverse effect on competition arising
from this discriminatory treatment was readily apparent. In contrast, the excise
tax under the assailed law is imposed based on the current net retail price of a
cigarette brand. As previously explained, the current net retail price is determined
by the pricing strategy of the manufacturer. This Court cannot simply speculate

91
Id. at 369.
that the reason why a new brand cannot enter a specific tax bracket and compete
with the brands therein was because of the classification freeze provision, rather
than the manufacturers own pricing decision or some other factor solely
attributable to the manufacturer. Again, the burden of proof in this regard is on
petitioner which it failed to muster.

Fourth, the finding in our August 20, 2008 Decision that price is not the only
factor which affects consumer behavior in the cigarette market is based on
petitioners own evidence. On cross-examination, petitioners witness admitted
that notwithstanding the change in price, a cigarette smoker may prefer the old
brand because of its addictive formulation.92 As a result, even if we were to
assume that the classification freeze provision distorts the pricing scheme of the
market players, it is not clear whether a substantial barrier to the entry of new
players would thereby be created because of these other factors affecting
consumer behavior.

Last, the claim that the assailed provisions encourage predatory pricing was
never raised nor substantiated before the trial court. It is merely an afterthought
and cannot be given weight.

In sum, the totality of the evidence presented by petitioner before the trial
court failed to convincingly establish the alleged violation of the constitutional
prohibition on unfair competition. It is a basic postulate that the one who
challenges the constitutionality of a law carries the heavy burden of proof for laws

92
Q- In other words, Mr. Witness, you are also suggesting in your expert opinion that there is also a possibility that
notwithstanding the change in the price of the particular cigarette product considering that cigarette smoking is habit
forming, and considering also that that cigarette product won or satisfied the taste of the market, there is a tendency
that notwithstanding the price, a particular consumer would still stick on the particular product?
A- Yes, by your own word, you say that it is habit forming. So, it is loyalty to the brand. (Testimony of Dennis
Belgira, TSN February 20, 2004, records, vol. II, pp. 679-680.)
enjoy a strong presumption of constitutionality as it is an act of a co-equal branch
of government. Petitioner failed to carry this burden.

The assailed law does not transgress the

constitutional provisions on regressive and
inequitable taxation.

Petitioner argues that the classification freeze provision is a form of

regressive and inequitable tax system which is proscribed under Article VI, Section
28(1)93 of the Constitution. It claims that people in equal positions should be
treated alike. The use of different tax bases for brands under Annex D vis--vis new
brands is discriminatory, and thus, iniquitous. Petitioner further posits that the
classification freeze provision is regressive in character. It asserts that the
harmonization of revenue flow projections and ease of tax administration cannot
override this constitutional command.

We note that the points raised by petitioner with respect to alleged

inequitable taxation perpetuated by the classification freeze provision are a mere
reformulation of its equal protection challenge. As stated earlier, the assailed
provisions do not infringe the equal protection clause because the four-fold test is
satisfied. In particular, the classification freeze provision has been found to
rationally further legitimate State interests consistent with rationality review.
Petitioners repackaged argument has, therefore, no merit.

Anent the issue of regressivity, it may be conceded that the assailed law
imposes an excise tax on cigarettes which is a form of indirect tax, and thus,

93
Section 28(1). The rule of taxation shall be uniform and equitable. The Congress shall evolve a
progressive system of taxation.
regressive in character. While there was an attempt to make the imposition of the
excise tax more equitable by creating a four-tiered taxation system where higher
priced cigarettes are taxed at a higher rate, still, every consumer, whether rich or
poor, of a cigarette brand within a specific tax bracket pays the same tax rate. To
this extent, the tax does not take into account the persons ability to pay.
Nevertheless, this does not mean that the assailed law may be declared
unconstitutional for being regressive in character because the Constitution does
not prohibit the imposition of indirect taxes but merely provides that Congress
shall evolve a progressive system of taxation. As we explained in Tolentino v.
Secretary of Finance:94

[R]egressivity 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, Section 1] or for
the promotion of the right to "quality education" [Art. XIV, Section 1]. These
provisions are put in the Constitution as moral incentives to legislation, not as
judicially enforceable rights.95

Petitioner is not entitled to a downward

reclassification of Lucky Strike.

Petitioner alleges that assuming the assailed law is constitutional, its Lucky
Strike brand should be reclassified from the premium-priced to the high-priced
tax bracket. Relying on BIR Ruling No. 018-2001 dated May 10, 2001, it claims that
it timely sought redress from the BIR to have the market survey conducted within
three months from product launch, as provided for under Section 4(B) 96 of

94
G.R. No. 115455, August 25, 1994, 235 SCRA 630.
95
Id. at 684-685.
96
Section 4. Classification and Manner of Taxation of Existing Brands, New Brands and Variant of
Existing Brands.
xxxx
Revenue Regulations No. 1-97, in order to determine the actual current net retail
price of Lucky Strike, and thus, fix its tax classification. Further, the upward
reclassification of Lucky Strike amounts to deprivation of property right without
due process of law. The conduct of the market survey after two years from
product launch constitutes gross neglect on the part of the BIR. Consequently, for
failure of the BIR to conduct a timely market survey, Lucky Strikes classification
based on its suggested gross retail price should be deemed its official tax
classification. Finally, petitioner asserts that had the market survey been timely
conducted sometime in 2001, the current net retail price of Lucky Strike would
have been found to be under the high-priced tax bracket.

These contentions are untenable and misleading.

First, BIR Ruling No. 018-2001 was requested by petitioner for the purpose
of fixing Lucky Strikes initial tax classification based on its suggested gross retail
price relative to its planned introduction of Lucky Strike in the market sometime
in 2001 and not for the conduct of the market survey within three months from
product launch. In fact, the said Ruling contained an express reservation that the
tax classification of Lucky Strike set therein is without prejudice, however, to the
subsequent conduct of a survey x x x in order to determine if the actual gross

B. New Brand
New brands shall be classified according to their current net retail price. In the meantime
that the current net retail price has not yet been established, the suggested net retail price shall be
used to determine the specific tax classification. Thereafter, a survey shall be conducted in 20
major supermarkets or retail outlets in Metro Manila (for brands of cigarette marketed nationally)
or in five (5) major supermarkets or retail outlets in the region (for brands which are marketed
only outside Metro Manila) at which the cigarette is sold on retail in reams/carton, three (3)
months after the initial removal of the new brand to determine the actual net retail price excluding
the excise tax and value added tax which shall then be the basis in determining the specific tax
classification. In case the current net retail price is higher than the suggested net retail price, the
former shall prevail. Otherwise, the suggested net retail price shall prevail. Any difference in the
specific tax due shall be assessed and collected inclusive of increments as provided for by the
National Internal Revenue Code, as amended.
The survey contemplated herein to establish the current net retail price on locally
manufactured and imported cigarettes shall be conducted by the duly authorized representatives of
the Commissioner of Internal Revenue together with a representative of the Regional Director
from each Regional Office having jurisdiction over the retail outlet within the Region being
surveyed, and who shall submit, without delay, their consolidated written report to the
Commissioner of Internal Revenue.
retail price thereof is consistent with [petitioners] suggested gross retail price.97 In
short, petitioner acknowledged that the initial tax classification of Lucky Strike
may be modified depending on the outcome of the survey which will determine
the actual current net retail price of Lucky Strike in the market.

Second, there was no upward reclassification of Lucky Strike because it was

taxed based on its suggested gross retail price from the time of its introduction in
the market in 2001 until the BIR market survey in 2003. We reiterate that Lucky
Strikes actual current net retail price was surveyed for the first time in 2003 and
was found to be from P10.34 to P11.53 per pack, which is within the premium-
priced tax bracket. There was, thus, no prohibited upward reclassification of Lucky
Strike by the BIR based on its current net retail price.

Third, the failure of the BIR to conduct the market survey within the three-
month period under the revenue regulations then in force can in no way make the
initial tax classification of Lucky Strike based on its suggested gross retail price
permanent. Otherwise, this would contravene the clear mandate of the law which
provides that the basis for the tax classification of a new brand shall be the
current net retail price and not the suggested gross retail price. It is a basic
principle of law that the State cannot be estopped by the mistakes of its agents.

Last, the issue of timeliness of the market survey was never raised before
the trial court because petitioners theory of the case was wholly anchored on the
alleged unconstitutionality of the classification freeze provision. As a
consequence, no documentary evidence as to the actual net retail price of Lucky
Strike in 2001, based on a market survey at least comparable to the one
mandated by law, was presented before the trial court. Evidently, it cannot be

97
Records, vol. 1, p. 66.
assumed that had the BIR conducted the market survey within three months from
its product launch sometime in 2001, Lucky Strike would have been found to fall
under the high-priced tax bracket and not the premium-priced tax bracket. To so
hold would run roughshod over the States right to due process. Verily, petitioner
prosecuted its case before the trial court solely on the theory that the assailed
law is unconstitutional instead of merely challenging the timeliness of the market
survey. The rule is that a party is bound by the theory he adopts and by the cause
of action he stands on. He cannot be permitted after having lost thereon to
repudiate his theory and cause of action, and thereafter, adopt another and seek
to re-litigate the matter anew either in the same forum or on appeal.98 Having
pursued one theory and lost thereon, petitioner may no longer pursue another
inconsistent theory without thereby trifling with court processes and burdening
the courts with endless litigation.

WHEREFORE, the motion for reconsideration is DENIED.

98
Bashier v. Commission on Elections, G.R. No. L-33692, February 24, 1972, 43 SCRA 238, 266.
 SO ORDERED.

CONSUELO YNARES-SANTIAGO

Associate Justice

WE CONCUR:

REYNATO S. PUNO

Chief Justice

LEONARDO A. QUISUMBING ANTONIO T. CARPIO

Associate Justice Associate Justice

MA. ALICIA AUSTRIA-MARTINEZ RENATO C. CORONA

Associate Justice Associate Justice
CONCHITA CARPIO MORALES DANTE O. TINGA
Associate Justice Associate Justice

MINITA V. CHICO-NAZARIO PRESBITERO J. VELASCO, JR.

Associate Justice Associate Justice

ANTONIO EDUARDO B. NACHURA TERESITA J. LEONARDO-DE CASTRO

Associate Justice Associate Justice

 ARTURO D. BRION DIOSDADO M. PERALTA

Associate Justice Associate Justice

LUCAS P. BERSAMIN

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified

that the conclusions in the above Resolution were reached in consultation before
the case was assigned to the writer of the opinion of the Court.

REYNATO S. PUNO
 Chief Justice

EN BANC

[G.R. No. 144104. June 29, 2004]

LUNG CENTER OF THE PHILIPPINES, petitioner, vs. QUEZON CITY

and CONSTANTINO P. ROSAS, in his capacity as City Assessor
of Quezon City, respondents.

DECISION
CALLEJO, SR., J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court, as
amended, of the Decision99 dated July 17, 2000 of the Court of Appeals in CA-G.R. SP
No. 57014 which affirmed the decision of the Central Board of Assessment Appeals
holding that the lot owned by the petitioner and its hospital building constructed thereon
are subject to assessment for purposes of real property tax.

The Antecedents

The petitioner Lung Center of the Philippines is a non-stock and non-profit entity
established on January 16, 1981 by virtue of Presidential Decree No. 1823. 100 It is the

99 Penned by Associate Justice Remedios A. Salazar-Fernando, with Associate Justices Fermin A.

Martin, Jr. and Salvador J. Valdez, Jr. concurring.
100 SECTION 1. CREATION OF THE LUNG CENTER OF THE PHILIPPINES. There is hereby created a
trust, under the name and style of Lung Center of the Philippines, which, subject to the provisions
of this Decree, shall be administered, according to the Articles of Incorporation, By-Laws and
Objectives of the Lung Center of the Philippines, Inc., duly registered (reg. No. 85886) with the
Securities and Exchange Commission of the Republic of the Philippines, by the Office of the
President, in coordination with the Ministry of Human Settlements and the Ministry of Health.
registered owner of a parcel of land, particularly described as Lot No. RP-3-B-3A-1-B-1,
SWO-04-000495, located at Quezon Avenue corner Elliptical Road, Central District,
Quezon City. The lot has an area of 121,463 square meters and is covered by Transfer
Certificate of Title (TCT) No. 261320 of the Registry of Deeds of Quezon City. Erected
in the middle of the aforesaid lot is a hospital known as the Lung Center of the
Philippines. A big space at the ground floor is being leased to private parties, for
canteen and small store spaces, and to medical or professional practitioners who use
the same as their private clinics for their patients whom they charge for their
professional services. Almost one-half of the entire area on the left side of the building
along Quezon Avenue is vacant and idle, while a big portion on the right side, at the
corner of Quezon Avenue and Elliptical Road, is being leased for commercial purposes
to a private enterprise known as the Elliptical Orchids and Garden Center.
The petitioner accepts paying and non-paying patients. It also renders medical
services to out-patients, both paying and non-paying. Aside from its income from paying
patients, the petitioner receives annual subsidies from the government.
On June 7, 1993, both the land and the hospital building of the petitioner were
assessed for real property taxes in the amount of P4,554,860 by the City Assessor of
Quezon City.101 Accordingly, Tax Declaration Nos. C-021-01226 (16-2518) and C-021-
01231 (15-2518-A) were issued for the land and the hospital building, respectively.102
On August 25, 1993, the petitioner filed a Claim for Exemption 103 from real property
taxes with the City Assessor, predicated on its claim that it is a charitable institution. The
petitioners request was denied, and a petition was, thereafter, filed before the Local
Board of Assessment Appeals of Quezon City (QC-LBAA, for brevity) for the reversal of
the resolution of the City Assessor. The petitioner alleged that under Section 28,
paragraph 3 of the 1987 Constitution, the property is exempt from real property taxes. It
averred that a minimum of 60% of its hospital beds are exclusively used for charity
patients and that the major thrust of its hospital operation is to serve charity patients.
The petitioner contends that it is a charitable institution and, as such, is exempt from
real property taxes. The QC-LBAA rendered judgment dismissing the petition and
holding the petitioner liable for real property taxes.104
The QC-LBAAs decision was, likewise, affirmed on appeal by the Central Board of
Assessment Appeals of Quezon City (CBAA, for brevity) 105 which ruled that the
petitioner was not a charitable institution and that its real properties were not actually,
directly and exclusively used for charitable purposes; hence, it was not entitled to real
property tax exemption under the constitution and the law. The petitioner sought relief
from the Court of Appeals, which rendered judgment affirming the decision of the
CBAA.106
Undaunted, the petitioner filed its petition in this Court contending that:
A. THE COURT A QUO ERRED IN DECLARING PETITIONER AS NOT ENTITLED
TO REALTY TAX EXEMPTIONS ON THE GROUND THAT ITS LAND, BUILDING
AND IMPROVEMENTS, SUBJECT OF ASSESSMENT, ARE NOT ACTUALLY,
DIRECTLY AND EXCLUSIVELY DEVOTED FOR CHARITABLE PURPOSES.
B. WHILE PETITIONER IS NOT DECLARED AS REAL PROPERTY TAX EXEMPT
UNDER ITS CHARTER, PD 1823, SAID EXEMPTION MAY NEVERTHELESS BE
EXTENDED UPON PROPER APPLICATION.

101 Annex C, Rollo, p. 49.

102 Annexes 2 & 2-A, id. at 93-94.
103 Annex D, id. at 50-52.
104 Annex E, id. at 53-55.
105 Annexes 4 & 5, id. at 100-109.
106 Annex A, id. at 33-41.
 The petitioner avers that it is a charitable institution within the context of Section
28(3), Article VI of the 1987 Constitution. It asserts that its character as a charitable
institution is not altered by the fact that it admits paying patients and renders medical
services to them, leases portions of the land to private parties, and rents out portions of
the hospital to private medical practitioners from which it derives income to be used for
operational expenses. The petitioner points out that for the years 1995 to 1999, 100% of
its out-patients were charity patients and of the hospitals 282-bed capacity, 60%
thereof, or 170 beds, is allotted to charity patients. It asserts that the fact that it receives
subsidies from the government attests to its character as a charitable institution. It
contends that the exclusivity required in the Constitution does not necessarily mean
solely. Hence, even if a portion of its real estate is leased out to private individuals from
whom it derives income, it does not lose its character as a charitable institution, and its
exemption from the payment of real estate taxes on its real property. The petitioner
cited our ruling in Herrera v. QC-BAA107 to bolster its pose. The petitioner further
contends that even if P.D. No. 1823 does not exempt it from the payment of real estate
taxes, it is not precluded from seeking tax exemption under the 1987 Constitution.
In their comment on the petition, the respondents aver that the petitioner is not a
charitable entity. The petitioners real property is not exempt from the payment of real
estate taxes under P.D. No. 1823 and even under the 1987 Constitution because it
failed to prove that it is a charitable institution and that the said property is actually,
directly and exclusively used for charitable purposes. The respondents noted that in a
newspaper report, it appears that graft charges were filed with the Sandiganbayan
against the director of the petitioner, its administrative officer, and Zenaida Rivera, the
proprietress of the Elliptical Orchids and Garden Center, for entering into a lease
contract over 7,663.13 square meters of the property in 1990 for only P20,000 a month,
when the monthly rental should be P357,000 a month as determined by the
Commission on Audit; and that instead of complying with the directive of the COA for
the cancellation of the contract for being grossly prejudicial to the government, the
petitioner renewed the same on March 13, 1995 for a monthly rental of only P24,000.
They assert that the petitioner uses the subsidies granted by the government for charity
patients and uses the rest of its income from the property for the benefit of paying
patients, among other purposes. They aver that the petitioner failed to adduce
substantial evidence that 100% of its out-patients and 170 beds in the hospital are
reserved for indigent patients. The respondents further assert, thus:
13. That the claims/allegations of the Petitioner LCP do not speak well of its
record of service. That before a patient is admitted for treatment in the Center, first
impression is that it is pay-patient and required to pay a certain amount as deposit.
That even if a patient is living below the poverty line, he is charged with high hospital
bills. And, without these bills being first settled, the poor patient cannot be allowed to
leave the hospital or be discharged without first paying the hospital bills or issue a
promissory note guaranteed and indorsed by an influential agency or person known
only to the Center; that even the remains of deceased poor patients suffered the same
fate. Moreover, before a patient is admitted for treatment as free or charity patient, one
must undergo a series of interviews and must submit all the requirements needed by
the Center, usually accompanied by endorsement by an influential agency or person
known only to the Center. These facts were heard and admitted by the Petitioner LCP
during the hearings before the Honorable QC-BAA and Honorable CBAA. These are
the reasons of indigent patients, instead of seeking treatment with the Center, they
prefer to be treated at the Quezon Institute. Can such practice by the Center be called
charitable?108

The Issues

107 3 SCRA 187 (1961).

108 Rollo, pp. 83-84.
 The issues for resolution are the following: (a) whether the petitioner is a charitable
institution within the context of Presidential Decree No. 1823 and the 1973 and 1987
Constitutions and Section 234(b) of Republic Act No. 7160; and (b) whether the real
properties of the petitioner are exempt from real property taxes.

The Courts Ruling

The petition is partially granted.

On the first issue, we hold that the petitioner is a charitable institution within the
context of the 1973 and 1987 Constitutions. To determine whether an enterprise is a
charitable institution/entity or not, the elements which should be considered include the
statute creating the enterprise, its corporate purposes, its constitution and by-laws, the
methods of administration, the nature of the actual work performed, the character of the
services rendered, the indefiniteness of the beneficiaries, and the use and occupation of
the properties.109
In the legal sense, a charity may be fully defined as a gift, to be applied consistently
with existing laws, for the benefit of an indefinite number of persons, either by bringing
their minds and hearts under the influence of education or religion, by assisting them to
establish themselves in life or otherwise lessening the burden of government. 110 It may
be applied to almost anything that tend to promote the well-doing and well-being of
social man. It embraces the improvement and promotion of the happiness of man. 111
The word charitable is not restricted to relief of the poor or sick.112 The test of a charity
and a charitable organization are in law the same. The test whether an enterprise is
charitable or not is whether it exists to carry out a purpose reorganized in law as
charitable or whether it is maintained for gain, profit, or private advantage.
Under P.D. No. 1823, the petitioner is a non-profit and non-stock corporation which,
subject to the provisions of the decree, is to be administered by the Office of the
President of the Philippines with the Ministry of Health and the Ministry of Human
Settlements. It was organized for the welfare and benefit of the Filipino people
principally to help combat the high incidence of lung and pulmonary diseases in the
Philippines. The raison detre for the creation of the petitioner is stated in the decree, viz:
Whereas, for decades, respiratory diseases have been a priority concern, having
been the leading cause of illness and death in the Philippines, comprising more than
45% of the total annual deaths from all causes, thus, exacting a tremendous toll on
human resources, which ailments are likely to increase and degenerate into serious
lung diseases on account of unabated pollution, industrialization and unchecked
cigarette smoking in the country;
Whereas, the more common lung diseases are, to a great extent, preventable, and
curable with early and adequate medical care, immunization and through prompt and
intensive prevention and health education programs;
Whereas, there is an urgent need to consolidate and reinforce existing programs,
strategies and efforts at preventing, treating and rehabilitating people affected by lung
diseases, and to undertake research and training on the cure and prevention of lung
diseases, through a Lung Center which will house and nurture the above and related
activities and provide tertiary-level care for more difficult and problematical cases;

109 See Workmens Circle Educational Center of Springfield v. Board of Assessors of City of Springfield,
51 N.E.2d 313 (1943).
110 Congregational Sunday School & Publishing Society v. Board of Review, 125 N.E. 7 (1919), citing
Jackson v. Philipps, 14 Allen (Mass.) 539.
111 Bader Realty & Investment Co. v. St. Louis Housing Authority, 217 S.W.2d 489 (1949).
112 Board of Assessors of Boston v. Garland School of Homemaking, 6 N.E.2d 379.
 Whereas, to achieve this purpose, the Government intends to provide material and
financial support towards the establishment and maintenance of a Lung Center for the
welfare and benefit of the Filipino people.113
The purposes for which the petitioner was created are spelled out in its Articles of
Incorporation, thus:
SECOND: That the purposes for which such corporation is formed are as
follows:
1. To construct, establish, equip, maintain, administer and conduct an
integrated medical institution which shall specialize in the treatment, care, rehabilitation
and/or relief of lung and allied diseases in line with the concern of the government to
assist and provide material and financial support in the establishment and maintenance
of a lung center primarily to benefit the people of the Philippines and in pursuance of
the policy of the State to secure the well-being of the people by providing them
specialized health and medical services and by minimizing the incidence of lung
diseases in the country and elsewhere.
2. To promote the noble undertaking of scientific research related to the
prevention of lung or pulmonary ailments and the care of lung patients, including the
holding of a series of relevant congresses, conventions, seminars and conferences;
3. To stimulate and, whenever possible, underwrite scientific researches on the
biological, demographic, social, economic, eugenic and physiological aspects of lung
or pulmonary diseases and their control; and to collect and publish the findings of such
research for public consumption;
4. To facilitate the dissemination of ideas and public acceptance of information
on lung consciousness or awareness, and the development of fact-finding, information
and reporting facilities for and in aid of the general purposes or objects aforesaid,
especially in human lung requirements, general health and physical fitness, and other
relevant or related fields;
5. To encourage the training of physicians, nurses, health officers, social
workers and medical and technical personnel in the practical and scientific
implementation of services to lung patients;
6. To assist universities and research institutions in their studies about lung
diseases, to encourage advanced training in matters of the lung and related fields and
to support educational programs of value to general health;
7. To encourage the formation of other organizations on the national, provincial
and/or city and local levels; and to coordinate their various efforts and activities for the
purpose of achieving a more effective programmatic approach on the common
problems relative to the objectives enumerated herein;
8. To seek and obtain assistance in any form from both international and local
foundations and organizations; and to administer grants and funds that may be given to
the organization;
9. To extend, whenever possible and expedient, medical services to the public
and, in general, to promote and protect the health of the masses of our people, which
has long been recognized as an economic asset and a social blessing;
10. To help prevent, relieve and alleviate the lung or pulmonary afflictions and
maladies of the people in any and all walks of life, including those who are poor and
needy, all without regard to or discrimination, because of race, creed, color or political
belief of the persons helped; and to enable them to obtain treatment when such
disorders occur;
11. To participate, as circumstances may warrant, in any activity designed and
carried on to promote the general health of the community;
12. To acquire and/or borrow funds and to own all funds or equipment,

113 Rollo, pp. 119-120.

 educational materials and supplies by purchase, donation, or otherwise and to dispose
of and distribute the same in such manner, and, on such basis as the Center shall,
from time to time, deem proper and best, under the particular circumstances, to serve
its general and non-profit purposes and objectives;
13. To buy, purchase, acquire, own, lease, hold, sell, exchange, transfer and
dispose of properties, whether real or personal, for purposes herein mentioned; and
14. To do everything necessary, proper, advisable or convenient for the
accomplishment of any of the powers herein set forth and to do every other act and
thing incidental thereto or connected therewith.114
Hence, the medical services of the petitioner are to be rendered to the public in
general in any and all walks of life including those who are poor and the needy without
discrimination. After all, any person, the rich as well as the poor, may fall sick or be
injured or wounded and become a subject of charity.115
As a general principle, a charitable institution does not lose its character as such
and its exemption from taxes simply because it derives income from paying patients,
whether out-patient, or confined in the hospital, or receives subsidies from the
government, so long as the money received is devoted or used altogether to the
charitable object which it is intended to achieve; and no money inures to the private
benefit of the persons managing or operating the institution.116 In Congregational
Sunday School, etc. v. Board of Review,117 the State Supreme Court of Illinois held,
thus:
[A]n institution does not lose its charitable character, and consequent exemption
from taxation, by reason of the fact that those recipients of its benefits who are able to
pay are required to do so, where no profit is made by the institution and the amounts
so received are applied in furthering its charitable purposes, and those benefits are
refused to none on account of inability to pay therefor. The fundamental ground upon
which all exemptions in favor of charitable institutions are based is the benefit
conferred upon the public by them, and a consequent relief, to some extent, of the
burden upon the state to care for and advance the interests of its citizens.118
As aptly stated by the State Supreme Court of South Dakota in Lutheran Hospital
Association of South Dakota v. Baker:119
[T]he fact that paying patients are taken, the profits derived from attendance upon
these patients being exclusively devoted to the maintenance of the charity, seems
rather to enhance the usefulness of the institution to the poor; for it is a matter of
common observation amongst those who have gone about at all amongst the suffering
classes, that the deserving poor can with difficulty be persuaded to enter an asylum of
any kind confined to the reception of objects of charity; and that their honest pride is
much less wounded by being placed in an institution in which paying patients are also
received. The fact of receiving money from some of the patients does not, we think, at
all impair the character of the charity, so long as the money thus received is devoted
altogether to the charitable object which the institution is intended to further.120
The money received by the petitioner becomes a part of the trust fund and must be

114 Id. at 123-125.

115 Scripps Memorial Hospital v. California Employment Commission, 24 Cal.2d 669, 151 P.2d 109
(1944).
116 Sisters of Third Order of St. Frances v. Board of Review of Peoria County, 83 N.E. 272.
117 See note 12.
118 Id. at 10.
119 167 N.W. 148 (1918), citing State v. Powers, 10 Mo. App. 263, 74 Mo. 476.
120 Id. at 149.
devoted to public trust purposes and cannot be diverted to private profit or benefit. 121
Under P.D. No. 1823, the petitioner is entitled to receive donations. The petitioner
does not lose its character as a charitable institution simply because the gift or donation
is in the form of subsidies granted by the government. As held by the State Supreme
Court of Utah in Yorgason v. County Board of Equalization of Salt Lake County:122
Second, the government subsidy payments are provided to the project. Thus, those
payments are like a gift or donation of any other kind except they come from the
government. In both Intermountain Health Care and the present case, the crux is the
presence or absence of material reciprocity. It is entirely irrelevant to this analysis that
the government, rather than a private benefactor, chose to make up the deficit resulting
from the exchange between St. Marks Tower and the tenants by making a contribution
to the landlord, just as it would have been irrelevant in Intermountain Health Care if the
patients income supplements had come from private individuals rather than the
government.
Therefore, the fact that subsidization of part of the cost of furnishing such housing
is by the government rather than private charitable contributions does not dictate the
denial of a charitable exemption if the facts otherwise support such an exemption, as
they do here.123
In this case, the petitioner adduced substantial evidence that it spent its income,
including the subsidies from the government for 1991 and 1992 for its patients and for
the operation of the hospital. It even incurred a net loss in 1991 and 1992 from its
operations.
Even as we find that the petitioner is a charitable institution, we hold, anent the
second issue, that those portions of its real property that are leased to private entities
are not exempt from real property taxes as these are not actually, directly and
exclusively used for charitable purposes.
The settled rule in this jurisdiction is 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 effect of an exemption is
equivalent to an appropriation. Hence, a claim for exemption from tax payments must
be clearly shown and based on language in the law too plain to be mistaken. 124 As held
in Salvation Army v. Hoehn:125
An intention on the part of the legislature to grant an exemption from the taxing power
of the state will never be implied from language which will admit of any other
reasonable construction. Such an intention must be expressed in clear and
unmistakable terms, or must appear by necessary implication from the language used,
for it is a well settled principle that, when a special privilege or exemption is claimed
under a statute, charter or act of incorporation, it is to be construed strictly against the
property owner and in favor of the public. This principle applies with peculiar force to a
claim of exemption from taxation . 126
Section 2 of Presidential Decree No. 1823, relied upon by the petitioner, specifically
provides that the petitioner shall enjoy the tax exemptions and privileges:
SEC. 2. TAX EXEMPTIONS AND PRIVILEGES. Being a non-profit, non-stock
corporation organized primarily to help combat the high incidence of lung and
pulmonary diseases in the Philippines, all donations, contributions, endowments and

121 See Obrien v. Physicians Hospital Association, 116 N.E. 975 (1917).
122 714 P.2d 653 (1986).
123 Id. at 660-661.
124 Commissioner of Internal Revenue v. Court of Appeals, 298 SCRA 83 (1998).
125 188 S.W.2d. 826 (1945).
126 Id. at 829.
 equipment and supplies to be imported by authorized entities or persons and by the
Board of Trustees of the Lung Center of the Philippines, Inc., for the actual use and
benefit of the Lung Center, shall be exempt from income and gift taxes, the same
further deductible in full for the purpose of determining the maximum deductible
amount under Section 30, paragraph (h), of the National Internal Revenue Code, as
amended.
The Lung Center of the Philippines shall be exempt from the payment of taxes,
charges and fees imposed by the Government or any political subdivision or
instrumentality thereof with respect to equipment purchases made by, or for the Lung
Center.127
It is plain as day that under the decree, the petitioner does not enjoy any property
tax exemption privileges for its real properties as well as the building constructed
thereon. If the intentions were otherwise, the same should have been among the
enumeration of tax exempt privileges under Section 2:
It is a settled rule of statutory construction that the express mention of one person,
thing, or consequence implies the exclusion of all others. The rule is expressed in the
familiar maxim, expressio unius est exclusio alterius.
The rule of expressio unius est exclusio alterius is formulated in a number of ways.
One variation of the rule is principle that what is expressed puts an end to that which is
implied. Expressium facit cessare tacitum. Thus, where a statute, by its terms, is
expressly limited to certain matters, it may not, by interpretation or construction, be
extended to other matters.
...
The rule of expressio unius est exclusio alterius and its variations are canons of
restrictive interpretation. They are based on the rules of logic and the natural workings
of the human mind. They are predicated upon ones own voluntary act and not upon
that of others. They proceed from the premise that the legislature would not have made
specified enumeration in a statute had the intention been not to restrict its meaning and
confine its terms to those expressly mentioned.128
The exemption must not be so enlarged by construction since the reasonable
presumption is that the State has granted in express terms all it intended to grant at all,
and that unless the privilege is limited to the very terms of the statute the favor would be
intended beyond what was meant.129
Section 28(3), Article VI of the 1987 Philippine Constitution provides, thus:
(3) Charitable institutions, churches and parsonages or convents appurtenant
thereto, mosques, non-profit cemeteries, and all lands, buildings, and improvements,
actually, directly and exclusively used for religious, charitable or educational purposes
shall be exempt from taxation.130
The tax exemption under this constitutional provision covers property taxes only.131
As Chief Justice Hilario G. Davide, Jr., then a member of the 1986 Constitutional
Commission, explained: . . . what is exempted is not the institution itself . . .; those
exempted from real estate taxes are lands, buildings and improvements actually,
directly and exclusively used for religious, charitable or educational purposes.132
Consequently, the constitutional provision is implemented by Section 234(b) of

127 Rollo, p. 120. (Underscoring supplied.)

128 Malinias v. COMELEC, 390 SCRA 480 (2002).
129 St. Louis Young Mens Christian Association v. Gehner, 47 S.W.2d 776 (1932).
130 Underscoring supplied.
131 Commissioner of Internal Revenue v. Court of Appeals, supra.
132 Ibid. Citing II RECORDS OF THE CONSTITUTIONAL COMMISSION 90.
Republic Act No. 7160 (otherwise known as the Local Government Code of 1991) as
follows:
SECTION 234. Exemptions from Real Property Tax. The following are exempted
from payment of the real property tax:
...
(b) Charitable institutions, churches, parsonages or convents appurtenant thereto,
mosques, non-profit or religious cemeteries and all lands, buildings, and improvements
actually, directly, and exclusively used for religious, charitable or educational
purposes.133
We note that under the 1935 Constitution, ... all lands, buildings, and improvements
used exclusively for charitable purposes shall be exempt from taxation. 134 However,
under the 1973 and the present Constitutions, for lands, buildings, and improvements of
the charitable institution to be considered exempt, the same should not only be
exclusively used for charitable purposes; it is required that such property be used
actually and directly for such purposes.135
In light of the foregoing substantial changes in the Constitution, the petitioner cannot
rely on our ruling in Herrera v. Quezon City Board of Assessment Appeals which was
promulgated on September 30, 1961 before the 1973 and 1987 Constitutions took
effect.136 As this Court held in Province of Abra v. Hernando:137
Under the 1935 Constitution: Cemeteries, churches, and parsonages or convents
appurtenant thereto, and all lands, buildings, and improvements used exclusively for
religious, charitable, or educational purposes shall be exempt from taxation. The
present Constitution added charitable institutions, mosques, and non-profit cemeteries
and required that for the exemption of lands, buildings, and improvements, they should
not only be exclusively but also actually and directly used for religious or charitable
purposes. The Constitution is worded differently. The change should not be ignored. It
must be duly taken into consideration. Reliance on past decisions would have sufficed
were the words actually as well as directly not added. There must be proof therefore of
the actual and direct use of the lands, buildings, and improvements for religious or
charitable purposes to be exempt from taxation.
Under the 1973 and 1987 Constitutions and Rep. Act No. 7160 in order to be
entitled to the exemption, the petitioner is burdened to prove, by clear and unequivocal
proof, that (a) it is a charitable institution; and (b) its real properties are ACTUALLY,
DIRECTLY and EXCLUSIVELY used for charitable purposes. Exclusive is defined as
possessed and enjoyed to the exclusion of others; debarred from participation or
enjoyment; and exclusively is defined, in a manner to exclude; as enjoying a privilege
exclusively.138 If real property is used for one or more commercial purposes, it is not
exclusively used for the exempted purposes but is subject to taxation.139 The words
dominant use or principal use cannot be substituted for the words used exclusively

133 Underscoring supplied.

134 Article VI, Section 22, par. (3) of the 1935 Constitution provides that, Cemeteries, churches and
parsonages or convents appurtenant thereto, and all lands, buildings, and improvements used
exclusively for religious, charitable, or educational purposes shall be exempt from taxation.
135 Article VIII, Section 17, par. (3) of the 1973 Constitution provides that, Charitable institutions,
churches, parsonages or convents appurtenant thereto, mosques, and non-profit cemeteries, and
all lands, buildings, and improvements actually, directly, and exclusively used for religious or
charitable purposes shall be exempt from taxation.
136 3 SCRA 186 (1961).
137 107 SCRA 105 (1981).
138 Young Mens Christian Association of Omaha v. Douglas County, 83 N.W. 924 (1900).
139 St. Louis Young Mens Christian Association v. Gehner, supra.
without doing violence to the Constitutions and the law. 140 Solely is synonymous with
exclusively.141
What is meant by actual, direct and exclusive use of the property for charitable
purposes is the direct and immediate and actual application of the property itself to the
purposes for which the charitable institution is organized. It is not the use of the income
from the real property that is determinative of whether the property is used for tax-
exempt purposes.142
The petitioner failed to discharge its burden to prove that the entirety of its real
property is actually, directly and exclusively used for charitable purposes. While portions
of the hospital are used for the treatment of patients and the dispensation of medical
services to them, whether paying or non-paying, other portions thereof are being leased
to private individuals for their clinics and a canteen. Further, a portion of the land is
being leased to a private individual for her business enterprise under the business name
Elliptical Orchids and Garden Center. Indeed, the petitioners evidence shows that it
collected P1,136,483.45 as rentals in 1991 and P1,679,999.28 for 1992 from the said
lessees.
Accordingly, we hold that the portions of the land leased to private entities as well
as those parts of the hospital leased to private individuals are not exempt from such
taxes.143 On the other hand, the portions of the land occupied by the hospital and
portions of the hospital used for its patients, whether paying or non-paying, are exempt
from real property taxes.
IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The
respondent Quezon City Assessor is hereby DIRECTED to determine, after due
hearing, the precise portions of the land and the area thereof which are leased to
private persons, and to compute the real property taxes due thereon as provided for by
law.
SO ORDERED.
Davide, Jr., C.J., Puno, Panganiban, Quisumbing, Sandoval-Gutierrez, Carpio,
Corona, Carpio-Morales, Azcuna, and Tinga, JJ., concur.
Vitug, J., on official leave.
Ynares-Santiago, and Austria-Martinez, JJ., on leave.

140 See State ex rel Koeln v. St. Louis Y.M.C.A., 168 S.W. 589 (1914).
141 Lodge v. Nashville, 154 S.W. 141.
142 Christian Business College v. Kalamanzoo, 131 N.W. 553.
143 See Young Mens Christian Association of Omaha v. Douglas County, supra; Martin v. City of New
Orleans, 58 Am. 194 (1886).