Tax Syllabus W Cases

1.
Definition of Taxation
2. Nature of the power of taxation
See also: article VI sec. 1
Article 24
3. Purpose and objectives of taxation
4. Theory and basis of taxation
5. Scope of the power of taxation
6. Power of judicial review in Taxation
7. Limitations on the power of taxation
A. Inherent limitations
a. Public purpose
cases
Lutz vs. Araneta 98 Phil.148
b. Non delegability of taxing power
Exceptions
Article VI section 28(2)
Article X section 5
Cases
Pepsi cola vs. Mun. of Tanauan, Leyte . L-31156 Feb. 27, 1976
Smith Bell & Co. Inc. vs. Commissioner. July 25, 1975
c. Territoriality
Basis of the territoriality rule
Cases:
Wells Fargo Bank vs. Collector 70 Phil. 235
Commissioner vs. British Overseas Airway Corp.
Apr 30,1997
Philippine Guaranty Co. Inc. v Commissioner , G.R. No. L-
22074, April 30,1965
Situs of
1. Property Tax
2. Tax on person
3. Income Tax
4. Privilege Tax
Cases:
Phil. Match Co. Ltd. Vs. City of Cebu L-30745 Jan 18, 1978, 81
SCRA 99
d. Exemption of Government From Taxes
Proprietary function vs. governmental function
e. International Comity Article II sec 2
B. Constitutional Limitations
a. Due Process of Law Article II sec. I
Cases
Pascual vs. Sec. of Public Works 110 Phil. 331
Pepsi vs. Mun. of Tanauan 69 SCRA 460
Testate Estate of Fernandez vs. Fernandez 99 Phil. 934
Villegas v. Hsiu Chiong Chai Pao , L-29646, Nov. 10,1978
b. Equal Protection Article II sec.I
See also
Article VI sec.28 (1)
Cases
People vs. Cayat 68 Phil. 12
Ormoc Sugar Central vs. Treasurer of Ormoc City 22
SCRA 603
Association of Custom Brokers vs. City of Manila 93
Phil 107
Shell Co. vs. Vano 94 Phil. 387, 1954 cant be found
Villegas vs. Hiu Tsing Tai, 86 SCRA 270
c. Non impairment of contracts Article III section 10

see also
Article XIII section 11
Cases:
Cagayan Electric Power and light vs. Commissioner Sept.
25, 1985
d. Non imprisonment for non payment of poll tax Article III
section 20
e. Origin of Revenue Bill Article VI section 24
cases
Tolentino vs. The Secretary of Finance August 25,
1994
f. Delegation of legislative authority to the President
Article VIII section 28(2)
g. Exemption of churches and educational institutions

Cases Art. VI sec. 28(3)
Abra Valley College vs. Aquino June 15, 1988
Lladoc vs. Commissioner 14 SCRA 292
Herrera vs. Quezon City Board of Assessment Appeal
3 SCRA 186
h. Voting requirement for granting of tax exemptions
see also
voting requirement for enacting an ordinary tax law
i. Limitation on revenue laws affecting religion

Art.III sec 5, Art. VI, sec(2)
Cases: American Bible Society vs. City of Manila
101Phil 386
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
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.
SYLLABUS
1. CONSTITUTIONAL LAW; TAXATION; POWER OF STATE TO LEVY TAX IN AND SUPPORT OF SUGAR
INDUSTRY. — As the protection and promotion of the sugar industry is a matter of public concern the Legislature
may determine within reasonable bounds what is necessary for its protection and expedient for its promotion. Here,
the legislative must be allowed full play, subject only to the test of reasonableness; and it is not contended that the
means provided in section 6 of Commonwealth Act No. 567 bear no relation to the objective pursued or are
oppressive in character. If objective an 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. 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).
2. ID.; ID.; POWER OF STATE TO SELECT SUBJECT OF TAXATION. — 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 (Carmicheal vs.
Southern Coal & Coke Co., 301 U.S. 495, 81 L. Ed. 1245, citing numerous authorities, at 1251).
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.
Paras, C. J., Bengzon, Padilla, Reyes, A., Jugo, Bautista Angelo, Labrador, and Concepcion, JJ., concur.
EN BANC
G.R. No. L-31156 February 27, 1976
PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES, INC., plaintiff-appellant,

vs.
MUNICIPALITY OF TANAUAN, LEYTE, THE MUNICIPAL MAYOR, ET AL., defendant appellees.
SYNOPSIS
Pepsi-Cola Bottling Company of the Philippines, Inc., filed a complaint with preliminary injunction before the Court of
First Instance of Leyte to declare Section 2 of R.A. No. 2264, (known as the Local Autonomy Act) unconstitutional as
an undue delegation of the taxing authority and declare null and void Municipal Ordinance No. 23, which levies and
collects from soft drinks producers and manufactures a tax of 1/16 of a centavo for every bottle of soft drinks corked,
and Municipal Ordinance No. 27 which levies and collects on soft drinks produced or manufactured within the
territorial jurisdiction a tax of one centavo on each gallon of volume capacity. The trial court dismissed the complaint
and upheld the constitutionality of Sec. 2 of R.A. No. 2264 and declared Municipal Ordinances Nos. 27 valid and
constitutional. Appealed to the Court of Appeals, the case was certified to the Supreme Court as involving pure
question of law.
The Supreme Court upheld the validity of the delegation to Municipal Corporation or authority to tax and likewise the
validity of Municipal Ordinance No. 27, which repealed Municipal Ordinance No. 23.
SYLLABUS
1. TAXATION; NATURE; NON-DELEGATION OF POWER, EXCEPTION. — The power of taxation is an

essential and inherent attribute of sovereignty, belonging as a matter of right to every independent government,
without being expressly conferred by the people. It is a power that is purely legislative and which the central
legislative body cannot delegate either to the executive or judicial department of government without infringing upon
the theory of separation of powers. The exception, however, lies in the case of municipal corporations, to which, said
theory does not apply. Legislative powers may be delegated to local governments in respect of matters of local
concern. This is sanctioned by immemorial. By necessary implication, the legislative power to create political
corporations for purpose of local self-government carries with it the power to confer on such local government
agencies the power to tax.
2. ID.; ID.; ID.; SCOPE OF LOCAL GOVERNMENT'S POWER TO TAX. — The taxing authority conferred on
local governments under Section 2, Republic Act No. 2264, is broad enough as to extend to almost "everything,
excepting those which are mentioned therein." As long as the tax levied under the authority of a city or municipal
ordinance is not within the exceptions and limitations in the law, the same comes within the ambit of the general rule,
pursuant to the rules of expresio unius est exclusio alterius, and exceptio firmat regulum in casibus non excepti.
Municipalities are empowered to impose not only municipal license taxes upon persons engaged in any business or
occupation but also to levy for public purposes, just and uniform taxes.
3. ID.; ID.; ID.; LIMITATION. — Municipalities and municipal districts are prohibited to impose "any percentage
tax on sales or other in any form based thereon nor impose taxes on articles subject to specific tax, except gasoline,
under the provisions of the National Internal Revenue Code." For purposes of this particular limitation, a municipal
ordinance which prescribes a set of radio between the amount of the tax and the volume of sales of the taxpayer
imposes a sales tax and is null and void for being outside the power of the municipality to enact.
4. ID.; ID.; ID.; DELEGATION OF POWER TO TAX UNDER NEW CONSTITUTION. — Under the New
Constitution, local governments are granted autonomous authority to create their own sources of revenue and to levy
taxes. Section 5, Article XI Provides: "Each local government unit shall have the power to create its sources of
revenue and to levy taxes, subject to such limitations as may be provided by law." Withal, it cannot be said that
Section 2 of Republic Act No. 2264 emanated from beyond the sphere of the legislative power to enact and vest in
local governments the power of local taxation.
5. ID.; ID.; ID.; VALIDITY THEREOF. — The plenary nature of the delegated power of local governments
under Section 2, of R.A. No. 2264 would not suffice to invalidate the law as confiscatory and oppressive. In
delegating the authority, the State is not limited to the measure of that which is exercised by itself. When it is said that
the taxing power may be delegated to municipalities and the like, it is meant that there may be delegated such
measure of power to impose and collect taxes the legislature may deem expedient. Thus, municipalities may be
permitted to tax subjects which for reasons of public policy the State has not deemed wise to tax for more general
purposes.
6. ID.; REQUISITES FOR LAWFUL EXERCISE OF TAXING POWER. — Constitutional injunction against
deprivation of property without due process of law may not be passed over under the guise of the taxing power,
except when the taking of the property is in the lawful exercise of the taxing power, as when, (1) the tax is for a public
purpose; (2) the rule on uniformity of taxation observed; (3) either the person or property taxed is within the
jurisdiction of the government levying the tax; and (4) in the assessment and collection of certain kinds of taxes,
notice and opportunity for hearing are provided.
7. ID.; ID.; INSTANCES WHERE DUE PROCESS IS VIOLATED. — Due process is usually violated where the
tax imposed is for a private as distinguished from the public purposes; a tax a imposed on property outside the State,
i.e., extra-territorial taxation; and arbitrary or oppressive methods are used in assessing and collecting taxes. But, a
tax does not violate the due process clause, as applied to a particular taxpayer, although the purpose of the tax will
result in an injury rather than a benefit to such taxpayer. Due process does not require that the property subject to the
tax or the amount of tax to be raised should be determined by judicial inquiry, and a notice and hearing as to the
amount of tax and the manner in which it shall be apportioned are generally not necessary to due process of law.
8. ID.; DOUBLE TAXATION; GENERALLY NOT FORBIDDEN. — The delegated authority under Section 2 of
the Local Autonomy Act cannot be declared unconstitutional on the theory of double taxation. It must be observed
that the delegating authority specifies the limitations and enumerates the taxes over local taxation may not be
exercised. The reason is that the State has exclusively reversed the same for its own prerogative. Moreover, double
taxation, in general, is not forbidden by the fundamental law, since the injunction against double taxation found in the
Constitution of the United States and some states of the Union has not been adopted as part thereof.
9. ID.; ID.; ID.; EXCEPTION. — Double taxation becomes obnoxious only where the taxpayer is taxed twice for
the benefit of the same governmental entity or by the same jurisdiction for the same purpose, but not in a case where
one tax is imposed by the State and the other by the city or municipality.
10. ID.; ID.; ID.; INSTANT CASE. — Where, as in the case at bar, the municipality of Tanauan enacted
Ordinance No. 27 imposing a tax of one centavo on each gallon of volume capacity while in the previous Ordinance
No. 23, it was 1/16 of a centavo for every bottle corked, it is clear that the intention of the municipal council was to
substitute Ordinance No. 27 to that of Ordinance No. 23, repealing the latter.
11. ID.; TAX LEVIED ON PRODUCE, NOT PERCENTAGE TAX. — The imposition of "a tax of one centavo
(P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity" on all soft drinks produced or manufactured
under Ordinance No. 27 does not partake of a nature of a percentage tax on sales, or other taxes in any form based
thereon. The tax is levied on the produce (whether sold or not) and not on the sales. The volume capacity of the
taxpayer's production of soft drinks is considered solely for purposes of determining the tax rate on the products, but
there is no set ratio between the volume of sales and the amount of tax.
12. ID.; ID.; ID.; MUNICIPALITY ALLOWED TO INCREASE TAX AS LONG AS AMOUNT IS REASONABLE. —
The tax of one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity of all soft drinks, produced
or manufactured or an equivalent of 1-1/2 centavos per case, cannot be considered unjust and unfair. An increase in
the tax alone would not support the claim that the tax is oppressive, unjust and confiscatory. Municipal corporations
are allowed much discretion in determining the rates of impossible taxes. This is in line with the constitutional policy
of according the widest possible autonomy to local government in matters of taxation, an aspect that is given
expression in the Local Tax Code (PD No. 231, July 1, 1973).
13. ID.; SPECIFIC TAXES; ARTICLES SUBJECT TO SPECIFIC TAX. — Specific taxes are those imposed on
specified articles, such as distilled spirits, wines, fermented liquors, products of tobacco other than cigars and
cigarettes, matches, firecrackers, manufactured oils and other fuels, coal bunker fuel oil cinematographic films,
playing cards, saccharine, opium and other habit forming drugs.
FERNANDO, J., concurring:
1. CONSTITUTIONAL LAW; TAXATION; POWER OF MUNICIPAL CORPORATION TO TAX UNDER THE

NEW CONSTITUTION. — The present Constitution is quite explicit as to the power of taxation vested in local and
municipal corporations. It is therein specifically provided: "Each local government unit shall have the power to create
its own sources to revenue and to levy taxes, subject to such limitations as may be provided by law."
2. ID.; ID.; LIMITATION ON POWER TO TAX UNDER THE 1935 CONSTITUTION. — The only limitation on
the authority to tax under the 1935 Constitution was that while the President of the Philippines was vested with the
power of control over all executive departments, bureaus, or offices, he could only "exercise general supervision over
all local governments as may be provided by law." As far as legislative power over local government was concerned,
no restriction whatsoever was placed in the Congress of the Philippines. It would appear therefore that the extent of
the taxing power was solely for the legislative body to decide.
3. ID.; ID.; MUNICIPAL CORPORATION'S POWER TO TAX MUST BE CLEARLY SHOWN. — Although the
scope of municipal taxing power had been enlarged by subsequent legislations, the Court, in Golden Ribbon Lumber
Co. vs. City of Butuan, L-18534, December 24, 1964, reaffirmed the traditional concept, thus: "The rule is well-settled
that municipal corporations, unlike sovereign states, are clothed with no power of taxation; that its charter or a statute
must clearly show an intent to confer that power of the municipal corporation cannot assume and exercise it, and that
any such power granted must be construed strictly, any doubt or ambiguity arising from the terms of the grant to be
resolved against the municipality."
4. ID.; ID.; DOUBLE TAXATION. — The objection to the taxation as double may be laid down on one side. The
14th Amendment (the due process clause) no more forbids double taxation than it does doubling the amount of a tax,
short of confiscation or proceedings unconstitutional on other grounds.
Sabido, Sabido & Associates for appellant.

Provincial Fiscal Zoila M. Redona & Assistant Provincial Fiscal Bonifacio R Matol and Assistant Solicitor General
Conrado T. Limcaoco & Solicitor Enrique M. Reyes for appellees.
MARTIN, J.:
This is an appeal from the decision of the Court of First Instance of Leyte in its Civil Case No. 3294, which was
certified to Us by the Court of Appeals on October 6, 1969, as involving only pure questions of law, challenging the
power of taxation delegated to municipalities under the Local Autonomy Act (Republic Act No. 2264, as amended,
June 19, 1959).
On February 14, 1963, the plaintiff-appellant, Pepsi-Cola Bottling Company of the Philippines, Inc., commenced a
complaint with preliminary injunction before the Court of First Instance of Leyte for that court to declare Section 2 of
Republic Act No. 2264. 1 otherwise known as the Local Autonomy Act, unconstitutional as an undue delegation of
taxing authority as well as to declare Ordinances Nos. 23 and 27, series of 1962, of the municipality of Tanauan,
Leyte, null and void.
On July 23, 1963, the parties entered into a Stipulation of Facts, the material portions of which state that, first, both
Ordinances Nos. 23 and 27 embrace or cover the same subject matter and the production tax rates imposed therein
are practically the same, and second, that on January 17, 1963, the acting Municipal Treasurer of Tanauan, Leyte, as
per his letter addressed to the Manager of the Pepsi-Cola Bottling Plant in said municipality, sought to enforce
compliance by the latter of the provisions of said Ordinance No. 27, series of 1962.
Municipal Ordinance No. 23, of Tanauan, Leyte, which was approved on September 25, 1962, levies and collects
"from soft drinks producers and manufacturers a tai of one-sixteenth (1/16) of a centavo for every bottle of soft drink
corked." 2 For the purpose of computing the taxes due, the person, firm, company or corporation producing soft drinks
shall submit to the Municipal Treasurer a monthly report, of the total number of bottles produced and corked during
the month. 3
On the other hand, Municipal Ordinance No. 27, which was approved on October 28, 1962, levies and collects "on
soft drinks produced or manufactured within the territorial jurisdiction of this municipality a tax of ONE CENTAVO
(P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity." 4 For the purpose of computing the taxes due,
the person, fun company, partnership, corporation or plant producing soft drinks shall submit to the Municipal
Treasurer a monthly report of the total number of gallons produced or manufactured during the month. 5
The tax imposed in both Ordinances Nos. 23 and 27 is denominated as "municipal production tax.'
On October 7, 1963, the Court of First Instance of Leyte rendered judgment "dismissing the complaint and upholding
the constitutionality of [Section 2, Republic Act No. 2264] declaring Ordinance Nos. 23 and 27 legal and
constitutional; ordering the plaintiff to pay the taxes due under the oft the said Ordinances; and to pay the costs."
From this judgment, the plaintiff Pepsi-Cola Bottling Company appealed to the Court of Appeals, which, in turn,
elevated the case to Us pursuant to Section 31 of the Judiciary Act of 1948, as amended.
There are three capital questions raised in this appeal:
1. — Is Section 2, Republic Act No. 2264 an undue delegation of power, confiscatory and
oppressive?
2. — Do Ordinances Nos. 23 and 27 constitute double taxation and impose percentage or specific
taxes?
3. — Are Ordinances Nos. 23 and 27 unjust and unfair?
1. The power of taxation is an essential and inherent attribute of sovereignty, belonging as a matter of right to every
independent government, without being expressly conferred by the people. 6 It is a power that is purely legislative and
which the central legislative body cannot delegate either to the executive or judicial department of the government
without infringing upon the theory of separation of powers. The exception, however, lies in the case of municipal
corporations, to which, said theory does not apply. Legislative powers may be delegated to local governments in
respect of matters of local concern. 7 This is sanctioned by immemorial practice. 8 By necessary implication, the
legislative power to create political corporations for purposes of local self-government carries with it the power to
confer on such local governmental agencies the power to tax. 9 Under the New Constitution, local governments are
granted the autonomous authority to create their own sources of revenue and to levy taxes. Section 5, Article XI
provides: "Each local government unit shall have the power to create its sources of revenue and to levy taxes, subject
to such limitations as may be provided by law." Withal, it cannot be said that Section 2 of Republic Act No. 2264
emanated from beyond the sphere of the legislative power to enact and vest in local governments the power of local
taxation.
The plenary nature of the taxing power thus delegated, contrary to plaintiff-appellant's pretense, would not suffice to
invalidate the said law as confiscatory and oppressive. In delegating the authority, the State is not limited 6 the exact
measure of that which is exercised by itself. When it is said that the taxing power may be delegated to municipalities
and the like, it is meant that there may be delegated such measure of power to impose and collect taxes as the
legislature may deem expedient. Thus, municipalities may be permitted to tax subjects which for reasons of public
policy the State has not deemed wise to tax for more general purposes. 10 This is not to say though that the
constitutional injunction against deprivation of property without due process of law may be passed over under the
guise of the taxing power, except when the taking of the property is in the lawful exercise of the taxing power, as
when (1) the tax is for a public purpose; (2) the rule on uniformity of taxation is observed; (3) either the person or
property taxed is within the jurisdiction of the government levying the tax; and (4) in the assessment and collection of
certain kinds of taxes notice and opportunity for hearing are provided. 11 Due process is usually violated where the tax
imposed is for a private as distinguished from a public purpose; a tax is imposed on property outside the State, i.e.,
extraterritorial taxation; and arbitrary or oppressive methods are used in assessing and collecting taxes. But, a tax
does not violate the due process clause, as applied to a particular taxpayer, although the purpose of the tax will result
in an injury rather than a benefit to such taxpayer. Due process does not require that the property subject to the tax or
the amount of tax to be raised should be determined by judicial inquiry, and a notice and hearing as to the amount of
the tax and the manner in which it shall be apportioned are generally not necessary to due process of law. 12
There is no validity to the assertion that the delegated authority can be declared unconstitutional on the theory of
double taxation. It must be observed that the delegating authority specifies the limitations and enumerates the taxes
over which local taxation may not be exercised. 13 The reason is that the State has exclusively reserved the same for
its own prerogative. Moreover, double taxation, in general, is not forbidden by our fundamental law, since We have
not adopted as part thereof the injunction against double taxation found in the Constitution of the United States and
some states of the Union. 14 Double taxation becomes obnoxious only where the taxpayer is taxed twice for the
benefit of the same governmental entity 15 or by the same jurisdiction for the same purpose, 16 but not in a case where
one tax is imposed by the State and the other by the city or municipality. 17
2. The plaintiff-appellant submits that Ordinance No. 23 and 27 constitute double taxation, because these two
ordinances cover the same subject matter and impose practically the same tax rate. The thesis proceeds from its
assumption that both ordinances are valid and legally enforceable. This is not so. As earlier quoted, Ordinance No.
23, which was approved on September 25, 1962, levies or collects from soft drinks producers or manufacturers a tax
of one-sixteen (1/16) of a centavo for .every bottle corked, irrespective of the volume contents of the bottle used.
When it was discovered that the producer or manufacturer could increase the volume contents of the bottle and still
pay the same tax rate, the Municipality of Tanauan enacted Ordinance No. 27, approved on October 28, 1962,
imposing a tax of one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity. The difference
between the two ordinances clearly lies in the tax rate of the soft drinks produced: in Ordinance No. 23, it was 1/16 of
a centavo for every bottle corked; in Ordinance No. 27, it is one centavo (P0.01) on each gallon (128 fluid ounces,
U.S.) of volume capacity. The intention of the Municipal Council of Tanauan in enacting Ordinance No. 27 is thus
clear: it was intended as a plain substitute for the prior Ordinance No. 23, and operates as a repeal of the latter, even
without words to that effect. 18 Plaintiff-appellant in its brief admitted that defendants-appellees are only seeking to
enforce Ordinance No. 27, series of 1962. Even the stipulation of facts confirms the fact that the Acting Municipal
Treasurer of Tanauan, Leyte sought t6 compel compliance by the plaintiff-appellant of the provisions of said
Ordinance No. 27, series of 1962. The aforementioned admission shows that only Ordinance No. 27, series of 1962
is being enforced by defendants-appellees. Even the Provincial Fiscal, counsel for defendants-appellees admits in his
brief "that Section 7 of Ordinance No. 27, series of 1962 clearly repeals Ordinance No. 23 as the provisions of the
latter are inconsistent with the provisions of the former."
That brings Us to the question of whether the remaining Ordinance No. 27 imposes a percentage or a specific tax.
Undoubtedly, the taxing authority conferred on local governments under Section 2, Republic Act No. 2264, is broad
enough as to extend to almost "everything, accepting those which are mentioned therein." As long as the text levied
under the authority of a city or municipal ordinance is not within the exceptions and limitations in the law, the same
comes within the ambit of the general rule, pursuant to the rules of exclucion attehus and exceptio firmat regulum in
cabisus non excepti 19 The limitation applies, particularly, to the prohibition against municipalities and municipal
districts to impose "any percentage tax or other taxes in any form based thereon nor impose taxes on articles subject
to specific tax except gasoline, under the provisions of the National Internal Revenue Code." For purposes of this
particular limitation, a municipal ordinance which prescribes a set ratio between the amount of the tax and the volume
of sale of the taxpayer imposes a sales tax and is null and void for being outside the power of the municipality to
enact. 20 But, the imposition of "a tax of one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume
capacity" on all soft drinks produced or manufactured under Ordinance No. 27 does not partake of the nature of a
percentage tax on sales, or other taxes in any form based thereon. The tax is levied on the produce (whether sold or
not) and not on the sales. The volume capacity of the taxpayer's production of soft drinks is considered solely for
purposes of determining the tax rate on the products, but there is not set ratio between the volume of sales and the
amount of the tax. 21
Nor can the tax levied be treated as a specific tax. Specific taxes are those imposed on specified articles, such as
distilled spirits, wines, fermented liquors, products of tobacco other than cigars and cigarettes, matches firecrackers,
manufactured oils and other fuels, coal, bunker fuel oil, diesel fuel oil, cinematographic films, playing cards,
saccharine, opium and other habit-forming drugs. 22 Soft drink is not one of those specified.
3. The tax of one (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity on all softdrinks, produced or
manufactured, or an equivalent of 1-½ centavos per case, 23 cannot be considered unjust and unfair. 24 an increase
in the tax alone would not support the claim that the tax is oppressive, unjust and confiscatory. Municipal corporations
are allowed much discretion in determining the reates of imposable taxes. 25 This is in line with the constutional
policy of according the widest possible autonomy to local governments in matters of local taxation, an aspect that is
given expression in the Local Tax Code (PD No. 231, July 1, 1973). 26 Unless the amount is so excessive as to be
prohibitive, courts will go slow in writing off an ordinance as unreasonable. 27 Reluctance should not deter
compliance with an ordinance such as Ordinance No. 27 if the purpose of the law to further strengthen local
autonomy were to be realized. 28
Finally, the municipal license tax of P1,000.00 per corking machine with five but not more than ten crowners or
P2,000.00 with ten but not more than twenty crowners imposed on manufacturers, producers, importers and dealers
of soft drinks and/or mineral waters under Ordinance No. 54, series of 1964, as amended by Ordinance No. 41,
series of 1968, of defendant Municipality, 29 appears not to affect the resolution of the validity of Ordinance No. 27.
Municipalities are empowered to impose, not only municipal license taxes upon persons engaged in any business or
occupation but also to levy for public purposes, just and uniform taxes. The ordinance in question (Ordinance No. 27)
comes within the second power of a municipality.
ACCORDINGLY, the constitutionality of Section 2 of Republic Act No. 2264, otherwise known as the Local Autonomy
Act, as amended, is hereby upheld and Municipal Ordinance No. 27 of the Municipality of Tanauan, Leyte, series of
1962, re-pealing Municipal Ordinance No. 23, same series, is hereby declared of valid and legal effect. Costs against
petitioner-appellant.
SO ORDERED.
Castro, C.J., Teehankee, Barredo, Makasiar, Antonio, Esguerra, Muñoz Palma, Aquino and Concepcion, Jr., JJ.,
concur.
Separate Opinions
The opinion of the Court penned by Justice Martin is impressed with a scholarly and comprehensive character.
Insofar as it shows adherence to tried and tested concepts of the law of municipal taxation, I am only in agreement. If
I limit myself to concurrence in the result, it is primarily because with the article on Local Autonomy found in the
present Constitution, I feel a sense of reluctance in restating doctrines that arose from a different basic premise as to
the scope of such power in accordance with the 1935 Charter. Nonetheless it is well-nigh unavoidable that I do so as
I am unable to share fully what for me are the nuances and implications that could arise from the approach taken by
my brethren. Likewise as to the constitutional aspect of the thorny question of double taxation, I would limit myself to
what has been set forth in City of Baguio v. De Leon. 1
1. The present Constitution is quite explicit as to the power of taxation vested in local and municipal corporations. It is
therein specifically provided: "Each local government unit shall have the power to create its own sources of revenue
and to levy taxes subject to such limitations as may be provided by law. 2 That was not the case under the 1935
Charter. The only limitation then on the authority, plenary in character of the national government, was that while the
President of the Philippines was vested with the power of control over all executive departments, bureaus, or offices,
he could only . It exercise general supervision over all local governments as may be provided by law ... 3 As far as
legislative power over local government was concerned, no restriction whatsoever was placed on the Congress of the
Philippines. It would appear therefore that the extent of the taxing power was solely for the legislative body to decide.
It is true that in 1939, there was a statute that enlarged the scope of the municipal taxing power. 4 Thereafter, in 1959
such competence was further expanded in the Local Autonomy Act. 5 Nevertheless, as late as December of 1964,
five years after its enactment of the Local Autonomy Act, this Court, through Justice Dizon, in Golden Ribbon Lumber
Co. v. City of Butuan, 6 reaffirmed the traditional concept in these words: "The rule is well-settled that municipal
corporations, unlike sovereign states, after clothed with no power of taxation; that its charter or a statute must clearly
show an intent to confer that power or the municipal corporation cannot assume and exercise it, and that any such
power granted must be construed strictly, any doubt or ambiguity arising from the terms of the grant to be resolved
against the municipality." 7
Taxation, according to Justice Parades in the earlier case of Tan v. Municipality of Pagbilao, 8 "is an attribute of
sovereignty which municipal corporations do not enjoy." 9 That case left no doubt either as to weakness of a claim
"based merely by inferences, implications and deductions, [as they have no place in the interpretation of the power to
tax of a municipal corporation." 10 As the conclusion reached by the Court finds support in such grant of the municipal
taxing power, I concur in the result. 2. As to any possible infirmity based on an alleged double taxation, I would prefer
to rely on the doctrine announced by this Court in City of Baguio v. De Leon. 11 Thus: "As to why double taxation is
not violative of due process, Justice Holmes made clear in this language: 'The objection to the taxation as double
may be laid down on one side. ... The 14th Amendment [the due process clause) no more forbids double taxation
than it does doubling the amount of a tax, short of (confiscation or proceedings unconstitutional on other grouse With
that decision rendered at a time when American sovereignty in the Philippines was recognized, it possesses more
than just a persuasive effect. To some, it delivered the coup justice to the bogey of double taxation as a constitutional
bar to the exercise of the taxing power. It would seem though that in the United States, as with us, its ghost, as noted
by an eminent critic, still stalks the juridical stage. 'In a 1947 decision, however, we quoted with approval this excerpt
from a leading American decision: 'Where, as here, Congress has clearly expressed its intention, the statute must be
sustained even though double taxation results. 12
So I would view the issues in this suit and accordingly concur in the result.
Separate Opinions
The opinion of the Court penned by Justice Martin is impressed with a scholarly and comprehensive character.
Insofar as it shows adherence to tried and tested concepts of the law of municipal taxation, I am only in agreement. If
I limit myself to concurrence in the result, it is primarily because with the article on Local Autonomy found in the
present Constitution, I feel a sense of reluctance in restating doctrines that arose from a different basic premise as to
the scope of such power in accordance with the 1935 Charter. Nonetheless it is well-nigh unavoidable that I do so as
I am unable to share fully what for me are the nuances and implications that could arise from the approach taken by
my brethren. Likewise as to the constitutional aspect of the thorny question of double taxation, I would limit myself to
what has been set forth in City of Baguio v. De Leon. 1
1. The present Constitution is quite explicit as to the power of taxation vested in local and municipal corporations. It is
therein specifically provided: "Each local government unit shall have the power to create its own sources of revenue
and to levy taxes subject to such limitations as may be provided by law. 2 That was not the case under the 1935
Charter. The only limitation then on the authority, plenary in character of the national government, was that while the
President of the Philippines was vested with the power of control over all executive departments, bureaus, or offices,
he could only . It exercise general supervision over all local governments as may be provided by law ... 3 As far as
legislative power over local government was concerned, no restriction whatsoever was placed on the Congress of the
Philippines. It would appear therefore that the extent of the taxing power was solely for the legislative body to decide.
It is true that in 1939, there was a statute that enlarged the scope of the municipal taxing power. 4 Thereafter, in 1959
such competence was further expanded in the Local Autonomy Act. 5 Nevertheless, as late as December of 1964,
five years after its enactment of the Local Autonomy Act, this Court, through Justice Dizon, in Golden Ribbon Lumber
Co. v. City of Butuan, 6 reaffirmed the traditional concept in these words: "The rule is well-settled that municipal
corporations, unlike sovereign states, after clothed with no power of taxation; that its charter or a statute must clearly
show an intent to confer that power or the municipal corporation cannot assume and exercise it, and that any such
power granted must be construed strictly, any doubt or ambiguity arising from the terms of the grant to be resolved
against the municipality." 7
Taxation, according to Justice Parades in the earlier case of Tan v. Municipality of Pagbilao, 8 "is an attribute of
sovereignty which municipal corporations do not enjoy." 9 That case left no doubt either as to weakness of a claim
"based merely by inferences, implications and deductions, [as they have no place in the interpretation of the power to
tax of a municipal corporation." 10 As the conclusion reached by the Court finds support in such grant of the municipal
taxing power, I concur in the result. 2. As to any possible infirmity based on an alleged double taxation, I would prefer
to rely on the doctrine announced by this Court in City of Baguio v. De Leon. 11 Thus: "As to why double taxation is
not violative of due process, Justice Holmes made clear in this language: 'The objection to the taxation as double
may be laid down on one side. ... The 14th Amendment [the due process clause) no more forbids double taxation
than it does doubling the amount of a tax, short of (confiscation or proceedings unconstitutional on other grouse With
that decision rendered at a time when American sovereignty in the Philippines was recognized, it possesses more
than just a persuasive effect. To some, it delivered the coup justice to the bogey of double taxation as a constitutional
bar to the exercise of the taxing power. It would seem though that in the United States, as with us, its ghost, as noted
by an eminent critic, still stalks the juridical stage. 'In a 1947 decision, however, we quoted with approval this excerpt
from a leading American decision: 'Where, as here, Congress has clearly expressed its intention, the statute must be
sustained even though double taxation results. 12
So I would view the issues in this suit and accordingly concur in the result.
Footnotes
1 "Sec. 2. Taxation. — Any provision of law to the contrary notwithstanding, all chartered cities,
municipalities and municipal districts shall have authority to impose municipal license taxes or fees
upon persons engaged in any occupation or business, or exercising private in chartered cities,
municipalities and municipal districts by requiring them to secure licenses at rates fixed by the
municipal board or city council of the city, the municipal council of the municipality, or the municipal
district council of the municipal district to collect fees and charges for service rendered by the city,
municipality or municipal district; to regulate and impose reasonable for services rendered in
connection with any business, profession occupation being conducted within the city, municipality
or municipal district and otherwise to levy for public purposes, just and uniform taxes, licenses or
fees: Provided, That municipalities and municipal districts shall, in no case, impose any percentage
tax on sales or other taxes in any form based thereon nor impose taxes on articles subject to
specific tax, except gasoline, under the provisions of the National Internal Revenue Code:
Provided, however, That no city, municipality or municipal district may levy or impose any of the
following:
(a) Residence tax;
(b) Documentary stamp tax;
(c) Taxes on the business of any newspaper engaged in the printing and publication of any
newspaper, magazine, review or bulletin appearing at regular interval and having fixed prices for
subscription and sale, and which is not published primarily for the purpose of publishing
advertisements;
(d) Taxes on persons operating waterworks, irrigation and other public utilities except electric light,
heat and power;
(e) Taxes on forest products and forest concessions;
(f) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa
(g) Taxes on income of any kind whatsoever;
(h) Taxes or fees for the registration of motor vehicles and for the issuance of all kinds of licenses
or permits for the driving thereof;
(i) Customs duties registration, wharfage on wharves owned by the national government, tonnage
and all other kinds of customs fees, charges and dues;
(j) Taxes of any kind on banks, insurance companies, and persons paying franchise tax:
(k) Taxes on premiums paid by owners of property who obtain insurance directly with foreign
insurance companies; and
(i) Taxes, fees or levies, of any kind, which in effect impose a burden on exports of Philippine
finished, manufactured or processed products and products of Philippine cottage industries.
2 Section 2.
3 Section 3.
4 Section 2.
5 Section 3.
6 Cooley, The Law of Taxation, Vol. 1, Fourth Edition, 149-150.
7 Pepsi-Cola Bottling Co. of the Phil., Inc. vs. City of Butuan, L-22814, August 28, 1968, 24 SCRA
793-96.
8 Rubi v. Prov. Brd. of Mindoro, 39 Phil. 702 (1919).
9 Cooley, ante at 190.
10 Idem at 198-200.
11 Malcolm, Philippine Constitutional Law, 513-14.
12 Cooley ante at 334.
13 See footnote 1.
14 Pepsi-Cola Bottling Co. of the Phil. Inc. vs. City of Butuan, 1, 2S 1 4, August 28, 1968, 24 SCRA
793-96. See Sec. 22, Art. VI, 1935
Constitution and Sec. 17 (1), Art. VIII, 1973 Constitution.
15 Commissioner of Internal Revenue v. Lednicky L- 18169, July 31, 1964, 11 SCRA 609.
16 SMB, Inc. v. City of Cebu, L-20312, February 26, 1972, 43 SCRA 280.
17 Punzalan v. Mun. Bd of City of Manila, 50 O.G. 2485; manufacturers Life Ins. Co. v. Meer, 89
Phil. 351 (1951).
18 McQuillin. Municipal Corporations, 3rd. Ed., Vol. 6, at 206.-210.
19 Villanueva v. City of Iloilo, L-26521, December 28, 1968, 26 SCRA 585-86; Nin Bay Mining Co.
v. Mun. of Roxas, Palawan, L-20125, July 20, 1965, 14 SCRA 663-64.
20 Arabay, Inc. v. CFI of Zamboanga del Norte, et al., L-27684, September 10, 1975.
21 SMB, Inc. v. City of Cebu, ante, Footnote 16.
22 Shell Co. of P.I. Ltd. v. Vaño, 94 Phil. 394-95 (1954); Sections 123-148, NIRC; RA No. 953,
Narcotic Drugs Law, June 20, 1953.
23 Brief, defendants-appellees, at 14. A regular bottle of Pepsi-Cola soft drinks contains 8 oz., or
192 oz. per case of 24 bottles; a family-size contains 26 oz., or 312 oz. per case of 12 bottles.
24 See Pepsi-Cola Bottling Co. of the Phil., Inc. v. City of Butuan, ante, Footnote 14, where the tax
rate is P.10 per case of 24 bottles; City of Bacolod v. Gruet, L-18290, January 31, 1963, 7 SCRA
168-69, where the tax is P.03 on every case of bottled Coca-Coal.
25 Northern Philippines Tobacco Corp. v. Mun. of Agoo, La Union, L-26447, January 30, 1971, 31
SCRA 308.
26 William Lines, Inc. v. City of Ozamis, L-350048, April 23, 1974, 56 SCRA 593, Second Division,
per Fernando, J.
27 Victorias Milling Co. v. Mun. of Victorias, L-21183, September 27, 1968, 25 SCRa 205.
28 Procter & Gamble Trading Co. v. Mun. of Medina, Misamis Oriental, L-29125, January 31, 1973,
43 SCRA 133-34.
29 Subject of plaintiff-appellant's Motion for Admission and consideration of Essential Newly

Dissevered Evidence, dated April 30, 1969.
FERNANDO, J.
1 L-24756, October 31, 1968, 25 SCRA 938.
2 Article XI, Section 5 of the present Constitution.
3 Article VII, Section 10 of the 1935 Constitution.
4 Commonwealth Act 472 entitled: "An Act Revising the General Authority of Municipal Councils
and Municipal District Councils to Levy Taxes, Subject to Certain Limitations."
5 Republic Act No. 2264.
6 L-18534, December 24,1964,12 SCRA 611.
7 Ibid, 619. Cf. Cuunjieng v. Potspone, 42 Phil. 818 (1922); De Linan v. Municipal Council of Daet,
44 Phil. 792 (1923); Arquiza Luta v. Municipality of Zamboanga, 50 Phil. 748 (1927; Hercules
Lumber Co. v. Zamboanga, 55 Phil. 653 (1931); Yeo Loby v. Zamboanga, 55 Phil. 656 (1931);
People v. Carreon, 65 Phil. 588 (1939); Yap Tak Wing v. Municipal Board, 68 Phil. 511 (1939);
Eastern Theatrical Co. v. Alfonso 83 Phil. 852 (1949); De la Rosa v. City of Baguio, 91 Phil. 720
(I!)52); Medina v. City of Baguio, 91 Phil. 854 (1952); Standard-Vacuum Oil Co. v. Antigua, 96 Phil.
909 (1955); Municipal Government of Pagsanjan v. Reyes, 98 Phil. 654 (1956), We Wa Yu v. City
of Lipa, Phil. 975 (1956); Municipality of Cotabato v. Santos, 105 Phil. 963 (1959).
8 L-14264, April 30, 1963, 7 SCRA 887.
9 Ibid, 892.
10 Ibid.
11 L-24756, October 31, 1968, 25 SCRA 938.
12 Ibid, 943-944.
EN BANC
G.R. No. L-28271 July 25, 1975
SMITH, BELL AND CO. (PHIL.), INC., petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE, respondent.
Hildawa and Gomez for petitioner.
Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Antonio A. Torres, Solicitor Lolita O.
Gal-lang and Special Attorney Gamaliel H. Mantolino for respondent.
SYNOPSIS
Petitioner imported 119 cases of "Chatteau Gay" wine which it declared as "still wine" under section 134(b) of the Tax
Code and paid thereon the specific tax of P1.00 per liter of volume capacity. To determine the correct amount of
specific tax due on petitioner's importation, the Commissioner ordered it tested and analyzed in the Bureau of Internal
Revenue Laboratory Center. The analyst concluded that the wine should be classified as "sparkling wine" subject to a
higher specific tax of P12.00 per liter of volume capacity. Accordingly, the Commissioner ordered the issuance of the
corresponding deficiency assessment against petitioner. The Court of Tax Appeals affirmed the assessment made by
the Commissioner.
Petitioner claimed that the assessment is unconstitutional since Section 134(a) of the Tax Code on which the
assessment was based lays down an insufficient and hazy standard by which the policy and purpose of the law may
be ascertained and gives the Commissioner a blanket authority to decide what is or is not a sparkling wine; so that
there was an unconstitutional abdication of legislative power and a failure of due process. On the other hand, the
Commissioner argued that Section 134 of the Tax Code is clear as to the categories of the articles subject to specific
taxes and the corresponding amounts of tax to be paid.
The Supreme Court held that Section 134 of the Tax Code clearly and indubitably discloses the legislative will,
leaving to the officers charged with its implementation and execution thereof no more than an administrative function
to determine what kind of wine or imitation wine falls in one class or another, and that the internal revenue officers are
guided by sound established practices and technology of the wine industry. Appealed decision affirmed at petitioner's
costs.
SYLLABUS
1. TAXATION; ASSESSMENT AND COLLECTION; COMMISSIONER OF INTERNAL REVENUE MERELY

EXERCISES ADMINISTRATIVE FUNCTION IN MATTERS OF ASSESSMENT AND COLLECTION OF SPECIFIC
TAXES ON WINES UNDER SECTION 134 OF THE TAX CODE. — There can be no uncertainty that the purpose of
Section 134 of the Tax Code is to impose specific on tax wines and imitation wines. The first clause of said section
states so in plain language. The sub-enumeration that follows unmistakably prescribes the amount of the tax
specifically to be paid for each type of wine or imitation wine so classified and described. The section clearly and
indubitably discloses the legislative will, leaving to the officers charged with implementation and execution thereof no
more than the administrative function of determining whether a particular kind of wine or imitation wine falls in one
class or another. In the performance of this function the internal revenue officers are demonstratively guided by the
sound, established practices and technology of wine industry.
2. ID.; ID.; ONE WHO ENGAGES IN WINE TRADING BUSINESS IS DUTY BOUND TO KNOW THE KINDS
OF WINES HE DEALS IN. — One who has chosen to engage in the wine trading business is duty bound to know the
kinds of wine he deals in, particularly insofar as such knowledge may be relevant to the proper appreciation of tax
liabilities, and cannot take comfort in his pretended ignorance of what a sparkling wine is
CASTRO, J.:
This is a petition for review of the decision of the court of Tax Appeals in case 1733 which affirms the deficiency
assessment made by the Commissioner of Internal Revenue against the petitioner Smith, Bell & Co. in the amount of
P11,713.90.
We affirm the decision of the Court of Tax Appeals.
From August 1963 to August 1965 the petitioner imported 119 cases of "Chatteau Gay" wine which it declared as
"still wine" under Section 134(b)of the Tax Code and paid thereon the specific tax of P1.00 per liter of volume
capacity. To determine the correct amount of the specific tax due on the petitioner's importation, the Commissioner of
Internal Revenue (hereinafter referred to as the Commissioner) ordered it tested and analyzed in the Bureau of
Internal Revenue Laboratory Center. The analyst who conducted the laboratory test reported that Chatteau Gay "is a
delicate table wine, with an alcohol content of 9.5% by volume (volume 745 cc @ 290C), characterized with explosion
upon opening and effervescence due to CO2 (residual)," and concluded that it should be classified as "sparkling
wine." The analyst's conclusion is supported by Herstein and Jacobs who, in their book entitled "Chemistry &
Technology of Wines and Liquors," wrote:
(f) Sparkling wines are bottled before the fermentation has ceased so that they contain carbon
dioxide gas in solution at greater than atmospheric pressure. When they are served, the carbon
dioxide is liberated with effervescence. These gas and alcoholic contents vary according to the
market for which they are intended. They may be dry or sweet, light or strong. Champagne,
sparkling Burgundy, and Asti-Spumante are examples of sparkling wines.
On the basis of the analyst's report and recommendation, the Commissioner, on October 11, 1965, assessed the
petitioner a deficiency specific tax on the 119 cases of imported Chatteau Gay in the sum of P11,713.90 under
Section 134(a) of the Tax Code which imposes a specific tax of P12.00 per liter of volume capacity on sparkling
wines.
The petitioner does not dispute the mathematical correctness of the Commissioner's assessment, but contends that
the assessment is unconstitutional because Section 134(a) of the Tax Code under which it was issued lays down an
insufficient and hazy standard by which the policy and purpose of the law may be ascertained and as well gives the
Commissioner blanket authority to decide what is or is not the meaning of "sparkling wines." The argument is thus
advanced that there is here an abdication of legislative power violative of the established doctrine, delegata potestas
non potest delegate, and the due process clause of the Constitution. The Commissioner disagrees on the ground that
Chapter I, Title IV of the Tax Code in no uncertain terms specifies the articles subject to specific taxes, among which
are wines, and Section 134 does no more than classify wines in several categories and prescribe the corresponding
amounts of tax to be paid. The Commissioner's position was sustained by the Court of Tax Appeals in its decision
dated October 5, 1967.
The contention that in regard to Section 134(a) of the Tax Code there is an unconstitutional surrender of legislative
powers and a failure of due process, need not give us more than a momentary pause.
Section 134 of the Tax Code provides: 1
Specific tax on wines. — On wines and imitation wines there shall be collected, per liter of volume
capacity, the following taxes:
(a) Sparkling wines, regardless of proof, twelve pesos.
(b) Still wines containing fourteen per centum of alcohol or less, except those produced from casuy
and duhat, one peso.
(c) Still wines containing more than fourteen per centum of alcohol, two pesos.
Imitation wines containing more than twenty-five per centum of alcohol shall be taxed as distilled
spirits.
There can be no uncertainty that the purpose of the abovequoted provision is to impose a specific tax on wines and
imitation wines. The first clause of Section 134 states so in plain language. The sole object of the sub-enumeration
that follows is in turn unmistakably to prescribe the amount of the tax specifically to be paid for each type of wine
and/or imitation wine so classified and described. The section therefore clearly and indubitably discloses the
legislative will, leaving to the officers charged with implementation and execution thereof no more than the
administrative function of determining whether a particular kind of wine or imitation wine falls in one class or another.
In the performance of this function, the internal revenue officers are demonstrably guided by the sound established
practices and technology of the wine industry, an industry as aged and widely dispersed as one can care to know.
In the case at bar, the Commissioner had the petitioner's wine examined and analyzed. The petitioner, on the other
hand, does not appear to have made a similar effort. On the bases of the test thus made and the authoritative and
published work on the subject of wines, the Commissioner ordered the corresponding deficiency assessment to be
issued. Having chosen to engage in the wine trading business, the petitioner is duty bound to know the kinds of wine
it deals in, particularly insofar as such knowledge may be relevant to the proper appreciation of its tax liabilities, and
cannot take comfort in its pretended ignorance of what sparkling wine is.
ACCORDINGLY, the decision of the Court of Tax Appeals is affirmed, at petitioner's cost.
Makalintal, C.J., Fernando, Barredo, Makasiar, Antonio, Esguerra, Muñoz Palma, Aquino, Concepcion, Jr., and
Martin, JJ, concur.
Teehankee, J., is on leave.

Footnotes
1 As amended by Republic Acts 56, 219, 589, 724, 955, 1090, 1335 and 2258.
EN BANC
G.R. No. L-46720 June 28, 1940
WELLS FARGO BANK & UNION TRUST COMPANY, petitioner-appellant,

vs.
THE COLLECTOR OF INTERNAL REVENUE, respondent-appellee.
De Witt, Perkins and Ponce Enrile for appellant.

Office of the Solicitor-General Ozaeta and Assistant Solicitor-General Concepcion for appellee.
Ross, Lawrence, Selph and Carrascoso, James Madison Ross and Federico Agrava as amici curiæ.
SYLLABUS
1. DECLARATORY JUDGMENT; SHARES OF STOCK OF NONRESIDENT; RIGHT OF PHILIPPINE

GOVERNMENT TO IMPOSE INHERITANCE TAX. — In the instant case, the actual situs of the shares of stock
is in the Philippines, the corporation being domiciled therein. And besides, the certificates of stock have
remained in this country up to the time when the deceased died in California, and they were in possession of
one S. McK, secretary of the Benguet Consolidated Mining Company, to whom they have been delivered and
indorsed in blank. This indorsement gave S. McK. the right to vote the certificates at the general meetings of
the stockholders, to collect dividends thereon, and dispose of the shares in the manner she may deem fit,
without prejudice to her liability to the owner for violation of instructions. For all practical purposes, then, S.
McK. had the legal title to the certificates of stock held in trust for the true owner thereof. In other words, the
owner residing in California has extended here her activities with respect to her intangibles so as to avail
herself of the protection and benefit of the Philippine laws. Accordingly, the jurisdiction of the Philippine
Government to tax must be upheld.
MORAN, J.:
An appeal from a declaratory judgment rendered by the Court of First Instance of Manila.
Birdie Lillian Eye, wife of Clyde Milton Eye, died on September 16, 1932, at Los Angeles, California, the place of her
alleged last residence and domicile. Among the properties she left her one-half conjugal share in 70,000 shares of
stock in the Benguet Consolidated Mining Company, an anonymous partnership (sociedad anonima), organized and
existing under the laws of the Philippines, with is principal office in the City of Manila. She left a will which was duly
admitted to probate in California where her estate was administered and settled. Petitioner-appellant, Wells Fargo
Bank & Union Trust Company, was duly appointed trustee of the created by the said will. The Federal and State of
California's inheritance taxes due on said shares have been duly paid. Respondent Collector of Internal Revenue
sought to subject anew the aforesaid shares of stock to the Philippine inheritance tax, to which petitioner-appellant
objected. Wherefore, a petition for a declaratory judgment was filed in the lower court, with the statement that, "if it
should be held by a final declaratory judgment that the transfer of the aforesaid shares of stock is legally subject to
the Philippine inheritance tax, the petitioner will pay such tax, interest and penalties (saving error in computation)
without protest and will not file to recover the same; and the petitioner believes and t herefore alleges that it should be
held that such transfer is not subject to said tax, the respondent will not proceed to assess and collect the same." The
Court of First Instance of Manila rendered judgment, holding that the transmission by will of the said 35,000 shares of
stock is subject to Philippine inheritance tax. Hence, this appeal by the petitioner.
Petitioner concedes (1) that the Philippine inheritance tax is not a tax property, but upon transmission by inheritance
(Lorenzo vs. Posadas, 35 Off. Gaz., 2393, 2395), and (2) that as to real and tangible personal property of a non-
resident decedent, located in the Philippines, the Philippine inheritance tax may be imposed upon their transmission
by death, for the self-evident reason that, being a property situated in this country, its transfer is, in some way,
defendant, for its effectiveness, upon Philippine laws. It is contended, however, that, as to intangibles, like the shares
of stock in question, their situs is in the domicile of the owner thereof, and, therefore, their transmission by death
necessarily takes place under his domiciliary laws.
Section 1536 of the Administrative Code, as amended, provides that every transmission by virtue of inheritance of
any share issued by any corporation of sociedad anonima organized or constituted in the Philippines, is subject to the
tax therein provided. This provision has already been applied to shares of stock in a domestic corporation which were
owned by a British subject residing and domiciled in Great Britain. (Knowles vs. Yatco, G. R. No. 42967. See also
Gibbs vs. Government of P. I., G. R. No. 35694.) Petitioner, however, invokes the rule laid down by the United States
Supreme Court in four cases (Farmers Loan & Trust Company vs. Minnesota, 280 U.S. 204; 74 Law. ed., 371;
Baldwin vs. Missouri, 281 U.S., 586; 74 Law. ed., 1056, Beidler vs. South Carolina Tax Commission 282 U. S., 1; 75
Law. ed., 131; First National Bank of Boston vs. Maine, 284 U. S., 312; 52 S. Ct., 174, 76 Law. ed., 313; 77 A. L. R.,
1401), to the effect that an inheritance tax can be imposed with respect to intangibles only by the State where the
decedent was domiciled at the time of his death, and that, under the due-process clause, the State in which a
corporation has been incorporated has no power to impose such tax if the shares of stock in such corporation are
owned by a non-resident decedent. It is to be observed, however, that in a later case (Burnet vs. Brooks, 288 U. S.,
378; 77 Law. ed., 844), the United States Supreme Court upheld the authority of the Federal Government to impose
an inheritance tax on the transmission, by death of a non-resident, of stock in a domestic (America) corporation,
irrespective of the situs of the corresponding certificates of stock. But it is contended that the doctrine in the foregoing
case is not applicable, because the due-process clause is directed at the State and not at the Federal Government,
and that the federal or national power of the United States is to be determined in relation to other countries and their
subjects by applying the principles of jurisdiction recognized in international relations. Be that as it may, the truth is
that the due-process clause is "directed at the protection of the individual and he is entitled to its immunity as much
against the state as against the national government." (Curry vs. McCanless, 307 U. S., 357, 370; 83 Law. ed., 1339,
1349.) Indeed, the rule laid down in the four cases relied upon by the appellant was predicated on a proper regard for
the relation of the states of the American Union, which requires that property should be taxed in only one state and
that jurisdiction to tax is restricted accordingly. In other words, the application to the states of the due-process rule
springs from a proper distribution of their powers and spheres of activity as ordained by the United States
Constitution, and such distribution is enforced and protected by not allowing one state to reach out and tax property in
another. And these considerations do not apply to the Philippines. Our status rests upon a wholly distinct basis and
no analogy, however remote, cam be suggested in the relation of one state of the Union with another or with the
United States. The status of the Philippines has been aptly defined as one which, though a part of the United States
in the international sense, is, nevertheless, foreign thereto in a domestic sense. (Downes vs. Bidwell, 182 U. S., 244,
341.)
At any rate, we see nothing of consequence in drawing any distinct between the operation and effect of the due-
process clause as it applies to the individual states and to the national government of the United States. The question
here involved is essentially not one of due-process, but of the power of the Philippine Government to tax. If that
power be conceded, the guaranty of due process cannot certainly be invoked to frustrate it, unless the law involved is
challenged, which is not, on considerations repugnant to such guaranty of due process of that of the equal protection
of the laws, as, when the law is alleged to be arbitrary, oppressive or discriminatory.
Originally, the settled law in the United States is that intangibles have only one situs for the purpose of inheritance
tax, and that such situs is in the domicile of the decedent at the time of his death. But this rule has, of late, been
relaxed. The maxim mobilia sequuntur personam, upon which the rule rests, has been described as a mere "fiction of
law having its origin in consideration of general convenience and public policy, and cannot be applied to limit or
control the right of the state to tax property within its jurisdiction" (State Board of Assessors vs. Comptoir National
D'Escompte, 191 U. S., 388, 403, 404), and must "yield to established fact of legal ownership, actual presence and
control elsewhere, and cannot be applied if to do so result in inescapable and patent injustice." (Safe Deposit & Trust
Co. vs. Virginia, 280 U. S., 83, 91-92) There is thus a marked shift from artificial postulates of law, formulated for
reasons of convenience, to the actualities of each case.
An examination of the adjudged cases will disclose that the relaxation of the original rule rests on either of two
fundamental considerations: (1) upon the recognition of the inherent power of each government to tax persons,
properties and rights within its jurisdiction and enjoying, thus, the protection of its laws; and (2) upon the principle that
as o intangibles, a single location in space is hardly possible, considering the multiple, distinct relationships which
may be entered into with respect thereto. It is on the basis of the first consideration that the case of Burnet vs.
Brooks, supra, was decided by the Federal Supreme Court, sustaining the power of the Government to impose an
inheritance tax upon transmission, by death of a non-resident, of shares of stock in a domestic (America) corporation,
regardless of the situs of their corresponding certificates; and on the basis of the second consideration, the case of
Cury vs. McCanless, supra.
In Burnet vs. Brooks, the court, in disposing of the argument that the imposition of the federal estate tax is precluded
by the due-process clause of the Fifth Amendment, held:
The point, being solely one of jurisdiction to tax, involves none of the other consideration raised by
confiscatory or arbitrary legislation inconsistent with the fundamental conceptions of justice which are
embodied in the due-process clause for the protection of life, liberty, and property of all persons — citizens
and friendly aliens alike. Russian Volunteer Fleet vs. United States, 282 U. S., 481, 489; 75 Law ed., 473,
476; 41 S. Ct., 229; Nicholas vs. Coolidge, 274 U. S., 531; 542, 71 Law ed., 1184, 1192; 47 S. Ct., 710; 52
A. L. R., 1081; Heiner vs. Donnon, 285 U.S., 312, 326; 76 Law ed., 772, 779; 52 S. Ct., 358. If in the instant
case the Federal Government had jurisdiction to impose the tax, there is manifestly no ground for assailing
it. Knowlton vs. Moore, 178 U.S., 41, 109; 44 Law. ed., 969, 996; 20 S. Ct., 747; MaGray vs. United States,
195 U.S., 27, 61; 49 Law. ed., 78; 97; 24 S. Ct., 769; 1 Ann. Cas., 561; Flint vs. Stone Tracy Co., 220 U.S.,
107, 153, 154; 55 Law. ed., 389, 414, 415; 31 S. Ct., 342; Ann. Cas., 1912B, 1312; Brushaber vs. Union p.
R. Co., 240 U.S., 1, 24; 60 Law. ed., 493, 504; 36 S. Ct., 236; L. R. A., 1917 D; 414, Ann. Cas, 1917B, 713;
United States vs. Doremus, 249 U. S., 86, 93; 63 Law. ed., 439, 496; 39 S. Ct., 214. (Emphasis ours.)
And, in sustaining the power of the Federal Government to tax properties within its borders, wherever its owner may
have been domiciled at the time of his death, the court ruled:
. . . There does not appear, a priori, to be anything contrary to the principles of international law, or hurtful to
the polity of nations, in a State's taxing property physically situated within its borders, wherever its owner
may have been domiciled at the time of his death. . . .
As jurisdiction may exist in more than one government, that is, jurisdiction based on distinct grounds — the
citizenship of the owner, his domicile, the source of income, the situs of the property — efforts have been
made to preclude multiple taxation through the negotiation of appropriate international conventions. These
endeavors, however, have proceeded upon express or implied recognition, and not in denial, of the
sovereign taxing power as exerted by governments in the exercise of jurisdiction upon any one of these
grounds. . . . (See pages 396-397; 399.)
In Curry vs. McCanless, supra, the court, in deciding the question of whether the States of Alabama and Tennessee
may each constitutionally impose death taxes upon the transfer of an interest in intangibles held in trust by an
Alabama trustee but passing under the will of a beneficiary decedent domiciles in Tennessee, sustained the power of
each State to impose the tax. In arriving at this conclusion, the court made the following observations:
In cases where the owner of intangibles confines his activity to the place of his domicile it has been found
convenient to substitute a rule for a reason, cf. New York ex rel., Cohn vs. Graves, 300 U.S., 308, 313; 81
Law. ed., 666, 670; 57 S. Ct., 466; 108 A. L. R., 721; First Bank Stock Corp. vs. Minnesota, 301 U. S., 234,
241; 81 Law. ed., 1061, 1065; 57 S. Ct., 677; 113 A. L. R., 228, by saying that his intangibles are taxed at
their situs and not elsewhere, or perhaps less artificially, by invoking the maxim mobilia sequuntur
personam. Blodgett vs. Silberman, 277 U.S., 1; 72 Law. ed., 749; S. Ct., 410, supra; Baldwin vs. Missouri,
281 U. S., 568; 74 Law. ed., 1056; 50 S. Ct., 436; 72 A. L. R., 1303, supra, which means only that it is the
identify owner at his domicile which gives jurisdiction to tax. But when the taxpayer extends his activities with
respect to his intangibles, so as to avail himself of the protection and benefit of the laws of another state, in
such a way as to bring his person or properly within the reach of the tax gatherer there, the reason for a
single place of taxation no longer obtains, and the rule even workable substitute for the reasons may exist in
any particular case to support the constitutional power of each state concerned to tax. Whether we regard
the right of a state to tax as founded on power over the object taxed, as declared by Chief Justice Marshall
in McCulloch vs. Maryland, 4 Wheat., 316; 4 Law. ed., 579, supra, through dominion over tangibles or over
persons whose relationships are source of intangibles rights, or on the benefit and protection conferred by
the taxing sovereignty, or both, it is undeniable that the state of domicile is not deprived, by the taxpayer's
activities elsewhere, of its constitutional jurisdiction to tax, and consequently that there are many
circumstances in which more than one state may have jurisdiction to impose a tax and measure it by some
or all of the taxpayer's intangibles. Shares or corporate stock be taxed at the domicile of the shareholder and
also at that of the corporation which the taxing state has created and controls; and income may be taxed
both by the state where it is earned and by the state of the recipient's domicile. protection, benefit, and
power over the subject matter are not confined to either state. . . .(p. 1347-1349.)
. . . We find it impossible to say that taxation of intangibles can be reduced in every case to the mere
mechanical operation of locating at a single place, and there taxing, every legal interest growing out of all
the complex legal relationships which may be entered into between persons. This is the case because in
point of actuality those interests may be too diverse in their relationships to various taxing jurisdictions to
admit of unitary treatment without discarding modes of taxation long accepted and applied before the
Fourteen Amendment was adopted, and still recognized by this Court as valid. (P. 1351.)
We need not belabor the doctrines of the foregoing cases. We believe, and so hold, that the issue here involved is
controlled by those doctrines. In the instant case, the actual situs of the shares of stock is in the Philippines, the
corporation being domiciled therein. And besides, the certificates of stock have remained in this country up to the
time when the deceased died in California, and they were in possession of one Syrena McKee, secretary of the
Benguet Consolidated Mining Company, to whom they have been delivered and indorsed in blank. This indorsement
gave Syrena McKee the right to vote the certificates at the general meetings of the stockholders, to collect dividends,
and dispose of the shares in the manner she may deem fit, without prejudice to her liability to the owner for violation
of instructions. For all practical purposes, then, Syrena McKee had the legal title to the certificates of stock held in
trust for the true owner thereof. In other words, the owner residing in California has extended here her activities with
respect to her intangibles so as to avail herself of the protection and benefit of the Philippine laws. Accordingly, the
jurisdiction of the Philippine Government to tax must be upheld.
Judgment is affirmed, with costs against petitioner-appellant.
Avanceña, C.J., Imperial, Diaz and Concepcion, JJ., concur.

EN BANC
[G.R. Nos. L-65773-74. April 30, 1987.]
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. BRITISH OVERSEAS
AIRWAYS CORPORATION and COURT OF TAX APPEALS, respondents.
Quasha, Asperilla, Ancheta, Peña, Valmonte & Marcos for respondent British Airways.
DECISION
MELENCIO-HERRERA, J p:
Petitioner Commissioner of Internal Revenue (CIR) seeks a review on Certiorari of the joint
Decision of the Court of Tax Appeals (CTA) in CTA Cases Nos. 2373 and 2561, dated 26
January 1983, which set aside petitioner's assessment of deficiency income taxes against
respondent British Overseas Airways Corporation (BOAC) for the fiscal years 1959 to 1967,
1968-69 to 1970-71, respectively, as well as its Resolution of 18 November, 1983 denying
reconsideration. cdphil
BOAC is a 100% British Government-owned corporation organized and existing under the laws
of the United Kingdom. It is engaged in the international airline business and is a member-
signatory of the Interline Air Transport Association (IATA). As such, it operates air
transportation service and sells transportation tickets over the routes of the other airline
members. During the periods covered by the disputed assessments, it is admitted that BOAC had
no landing rights for traffic purposes in the Philippines, and was not granted a Certificate of
public convenience and necessity to operate in the Philippines by the Civil Aeronautics Board
(CAB), except for a nine-month period, partly in 1961 and partly in 1962, when it was granted a
temporary landing permit by the CAB. Consequently, it did not carry passengers and/or cargo to
or from the Philippines, although during the period covered by the assessments, it maintained a
general sales agent in the Philippines — Warner Barnes and Company, Ltd., and later Qantas
Airways — which was responsible for selling BOAC tickets covering passengers and cargoes. 1
G.R. No. 65773 (CTA Case No. 2373, the First Case)
On 7 May 1968, petitioner Commissioner of Internal Revenue (CIR, for brevity) assessed BOAC
the aggregate amount of P2,498,358.56 for deficiency income taxes covering the years 1959 to
1963. This was protested by BOAC. Subsequent investigation resulted in the issuance of a new
assessment, dated 16 January 1970 for the years 1959 to 1967 in the amount of P858,307.79.
BOAC paid this new assessment under protest.
On 7 October 1970, BOAC filed a claim for refund of the amount of P858,307.79, which claim
was denied by the CIR on 16 February 1972. But before said denial, BOAC had already filed a
petition for review with the Tax Court on 27 January 1972, assailing the assessment and praying
for the refund of the amount paid.
G.R. No. 65774 (CTA Case No. 2561, the Second Case)
On 17 November 1971, BOAC was assessed deficiency income taxes, interests, and penalty for
the fiscal years 1968/1969 to 1970-1971 in the aggregate amount of P549,327.43, and the
additional amounts of P1,000.00 and P1,800.00 as compromise penalties for violation of Section
46 (requiring the filing of corporation returns) penalized under Section 74 of the National
Internal Revenue Code (NIRC).
On 25 November 1971, BOAC requested that the assessment be countermanded and set aside. In
a letter, dated 16 February 1972, however, the CIR not only denied the BOAC request for refund
in the First Case but also re-issued in the Second Case the deficiency income tax assessment for
P534,132.08 for the years 1969 to 1970-71 plus P1,000.00 as compromise penalty under Section
74 of the Tax Code. BOAC's request for reconsideration was denied by the CIR on 24 August
1973. This prompted BOAC to file the Second Case before the Tax Court praying that it be
absolved of liability for deficiency income tax for the years 1969 to 1971.
This case was subsequently tried jointly with the First Case.
On 26 January 1983, the Tax Court rendered the assailed joint Decision reversing the CIR. The
Tax Court held that the proceeds of sales of BOAC passage tickets in the Philippines by Warner
Barnes and Company, Ltd., and later by Qantas Airways, during the period in question, do not
constitute BOAC income from Philippine sources "since no service of carriage of passengers or
freight was performed by BOAC within the Philippines" and, therefore, said income is not
subject to Philippine income tax. The CTA position was that income from transportation is
income from services so that the place where services are rendered determines the source. Thus,
in the dispositive portion of its Decision, the Tax Court ordered petitioner to credit BOAC with
the sum of P858,307.79, and to cancel the deficiency income tax assessments against BOAC in
the amount of P534,132.08 for the fiscal years 1968-69 to 1970-71.
Hence, this Petition for Review on Certiorari of the Decision of the Tax Court.
The Solicitor General, in representation of the CIR, has aptly defined the issues, thus:
"1. Whether or not the revenue derived by private respondent British Overseas Airways
Corporation (BOAC) from sales of tickets in the Philippines for air transportation, while having
no landing rights here, constitute income of BOAC from Philippine sources, and, accordingly,
taxable.
"2. Whether or not during the fiscal years in question BOAC is a resident foreign corporation
doing business in the Philippines or has an office or place of business in the Philippines.
"3. In the alternative that private respondent may not be considered a resident foreign
corporation but a non-resident foreign corporation, then it is liable to Philippine income tax at the
rate of thirty-five per cent (35%) of its gross income received from all sources within the
Philippines."
Under Section 20 of the 1977 Tax Code:
"(h) the term 'resident foreign corporation' applies to a foreign corporation engaged in trade or
business within the Philippines or having an office or place of business therein.
"(i) The term 'non-resident foreign corporation' applies to a foreign corporation not engaged
in trade or business within the Philippines and not having any office or place of business
therein." LLpr
It is our considered opinion that BOAC is a resident foreign corporation. There is no specific
criterion as to what constitutes "doing" or "engaging in" or "transacting" business. Each case
must be judged in the light of its peculiar environmental circumstances. The term implies a
continuity of commercial dealings and arrangements, and contemplates, to that extent, the
performance of acts or works or the exercise of some of the functions normally incident to, and
in progressive prosecution of commercial gain or for the purpose and object of the business
organization. 2 "In order that a foreign corporation may be regarded as doing business within a
State, there must be continuity of conduct and intention to establish a continuous business, such
as the appointment of a local agent, and not one of a temporary character.' 3
BOAC, during the periods covered by the subject-assessments, maintained a general sales agent
in the Philippines. That general sales agent, from 1959 to 1971, "was engaged in (1) selling and
issuing tickets; (2) breaking down the whole trip into series of trips — each trip in the series
corresponding to a different airline company; (3) receiving the fare from the whole trip; and (4)
consequently allocating to the various airline companies on the basis of their participation in the
services rendered through the mode of interline settlement as prescribed by Article VI of the
Resolution No. 850 of the IATA Agreement." 4 Those activities were in exercise of the functions
which are normally incident to, and are in progressive pursuit of, the purpose and object of its
organization as an international air carrier. In fact, the regular sale of tickets, its main activity, is
the very lifeblood of the airline business, the generation of sales being the paramount objective.
There should be no doubt then that BOAC was "engaged in" business in the Philippines through
a local agent during the period covered by the assessments. Accordingly, it is a resident foreign
corporation subject to tax upon its total net income received in the preceding taxable year from
all sources within the Philippines. 5
"Sec. 24. Rates of tax on corporations. — . . .
"(b) Tax on foreign corporations. — . . .
"(2) Resident corporations. — A corporation organized, authorized, or existing under the laws
of any foreign country, except a foreign life insurance company, engaged in trade or business
within the Philippines, shall be taxable as provided in subsection (a) of this section upon the total
net income received in the preceding taxable year from all sources within the Philippines.
(Emphasis ours)
Next, we address ourselves to the issue of whether or not the revenue from sales of tickets by
BOAC in the Philippines constitutes income from Philippine sources and, accordingly, taxable
under our income tax laws.
The Tax Code defines "gross income" thus:
"'Gross income' includes gains, profits, and income derived from salaries, wages or
compensation for personal service of whatever kind and in whatever form paid, or from
profession, vocations, trades, business, commerce, sales, or dealings in property, whether real or
personal, growing out of the ownership or use of or interest in such property; also from interests,
rents, dividends, securities, or the transactions of any business carried on for gain or profit or
gains, profits, and income derived from any source whatever" (Sec. 29[3]; Emphasis supplied)
The definition is broad and comprehensive to include proceeds from sales of transport
documents. "The words 'income from any source whatever' disclose a legislative policy to
include all income not expressly exempted within the class of taxable income under our laws."
Income means "cash received or its equivalent"; it is the amount of money coming to a person
within a specific time . . .; it means something distinct from principal or capital. For, while
capital is a fund, income is a flow. As used in our income tax law, "income" refers to the flow of
wealth. 6
The records show that the Philippine gross income of BOAC for the fiscal years 1968-69 to
1970-71 amounted to P10,428,368.00. 7
Did such "flow of wealth" come from "sources within the Philippines"?
The source of an income is the property, activity or service that produced the income. 8 For the
source of income to be considered as coming from the Philippines, it is sufficient that the income
is derived from activity within the Philippines. In BOAC's case, the sale of tickets in the
Philippines is the activity that produces the income. The tickets exchanged hands here and
payments for fares were also made here in Philippine currency. The situs of the source of
payments is the Philippines. The flow of wealth proceeded from, and occurred within, Philippine
territory, enjoying the protection accorded by the Philippine government. In consideration of
such protection, the flow of wealth should share the burden of supporting the government.
A transportation ticket is not a mere piece of paper. When issued by a common carrier, it
constitutes the contract between the ticket-holder and the carrier. It gives rise to the obligation of
the purchaser of the ticket to pay the fare and the corresponding obligation of the carrier to
transport the passenger upon the terms and conditions set forth thereon. The ordinary ticket
issued to members of the travelling public in general embraces within its terms all the elements
to constitute it a valid contract, binding upon the parties entering into the relationship. 9
True, Section 37(a) of the Tax Code, which enumerates items of gross income from sources
within the Philippines, namely: (1) interest, (2) dividends, (3) service, (4) rentals and royalties,
(5) sale of real property, and (6) sale of personal property, does not mention income from the
sale of tickets for international transportation. However, that does not render it less an income
from sources within the Philippines. Section 37, by its language, does not intend the enumeration
to be exclusive. It merely directs that the types of income listed therein be treated as income from
sources within the Philippines. A cursory reading of the section will show that it does not state
that it is an all-inclusive enumeration, and that no other kind of income may be so considered. 10
BOAC, however, would impress upon this Court that income derived from transportation is
income for services, with the result that the place where the services are rendered determines the
source; and since BOAC's service of transportation is performed outside the Philippines, the
income derived is from sources without the Philippines and, therefore, not taxable under our
income tax laws. The Tax Court upholds that stand in the joint Decision under review.
The absence of flight operations to and from the Philippines is not determinative of the source of
income or the situs of income taxation. Admittedly, BOAC was an off-line international airline at
the time pertinent to this case. The test of taxability is the "source"; and the source of an income
is that activity . . . which produced the income. 11 Unquestionably, the passage documentations
in these cases were sold in the Philippines and the revenue therefrom was derived from a
business activity regularly pursued within the Philippines. And even if the BOAC tickets sold
covered the "transport of passengers and cargo to and from foreign cities", 12 it cannot alter the
fact that income from the sale of tickets was derived from the Philippines. The word "source"
conveys one essential idea, that of origin, and the origin of the income herein is the Philippines.
13
It should be pointed out, however, that the assessments upheld herein apply only to the fiscal
years covered by the questioned deficiency income tax assessments in these cases, or, from 1959
to 1967, 1968-69 to 1970-71. For, pursuant to Presidential Decree No. 69, promulgated on 24
November, 1972, international carriers are now taxed as follows:
". . . Provided, however, That international carriers shall pay a tax of 2-1/2 per cent on their gross
Philippine billings." (Sec. 24[b] [2], Tax Code).
Presidential Decree No. 1355, promulgated on 21 April, 1978, provided a statutory definition of
the term "gross Philippine billings," thus:
". . . 'Gross Philippine billings' includes gross revenue realized from uplifts anywhere in the
world by any international carrier doing business in the Philippines of passage documents sold
therein, whether for passenger, excess baggage or mail, provided the cargo or mail originates
from the Philippines. . . ."
The foregoing provision ensures that international airlines are taxed on their income from
Philippine sources. The 2-1/2% tax on gross Philippine billings is an income tax. If it had been
intended as an excise or percentage tax it would have been place under Title V of the Tax Code
covering Taxes on Business.
Lastly, we find as untenable the BOAC argument that the dismissal for lack of merit by this
Court of the appeal in JAL vs. Commissioner of Internal Revenue (G.R. No. L-30041) on
February 3, 1969, is res judicata to the present case. The ruling by the Tax Court in that case was
to the effect that the mere sale of tickets, unaccompanied by the physical act of carriage of
transportation, does not render the taxpayer therein subject to the common carrier's tax. As
elucidated by the Tax Court, however, the common carrier's tax is an excise tax, being a tax on
the activity of transporting, conveying or removing passengers and cargo from one place to
another. It purports to tax the business of transportation. 14 Being an excise tax, the same can
be levied by the State only when the acts, privileges or businesses are done or performed within
the jurisdiction of the Philippines. The subject matter of the case under consideration is income
tax, a direct tax on the income of persons and other entities "of whatever kind and in whatever
form derived from any source." Since the two cases treat of a different subject matter, the
decision in one cannot be res judicata to the other.
WHEREFORE, the appealed joint Decision of the Court of Tax Appeals is hereby SET ASIDE.
Private respondent, the British Overseas Airways Corporation (BOAC), is hereby ordered to pay
the amount of P534,132.08 as deficiency income tax for the fiscal years 1968-69 to 1970-71 plus
5% surcharge, and 1% monthly interest from April 16, 1972 for a period not to exceed three (3)
years in accordance with the Tax Code. The BOAC claim for refund in the amount of
P858,307.79 is hereby denied. Without costs.
SO ORDERED.
Paras, Gancayco, Padilla, Bidin, Sarmiento, Yap and Cortes, JJ ., concur.
Fernan, J ., took no part, his brother-in-law being a member of the law firm representing private
respondents.
Separate Opinions
TEEHANKEE, C .J ., concurring:
I concur with the Court's majority judgment upholding the assessments of deficiency income
taxes against respondent BOAC for the fiscal years 1959-1967, 1968-1969 to 1970-1971 and
therefore setting aside the appealed joint decision of respondent Court of Tax Appeals. I just
wish to point out that the conflict between the majority opinion penned by Mme. Justice
Melencio-Herrera and the dissenting opinion penned by Mr. Justice Feliciano as to the proper
characterization of the taxable income derived by respondent BOAC from the sales in the
Philippines of tickets for BOAC flights as sold and issued by its general sales agent in the
Philippines has become moot after November 24, 1972. Both opinions state that by amendment
through P.D. No. 69, promulgated on November 24, 1972, of section 24(b) (2) of the Tax Code
providing for the rate of income tax on foreign corporations, international carriers such as
respondent BOAC, have since then been taxed at a reduced rate of 2-1/2% on their gross
Philippine billings. There is, therefore, no longer any source of substantial conflict between the
two opinions as to the present 2-1/2% tax on their gross Philippine billings charged against such
international carriers as herein respondent foreign corporation. cdrep
FELICIANO, J ., dissenting:
With great respect and reluctance, I record my dissent from the opinion of Mme. Justice A.A.
Melencio-Herrera speaking for the majority. In my opinion, the joint decision of the Court of
Tax Appeals in CTA Cases Nos. 2373 and 2561, dated 26 January 1983, is correct and should be
affirmed.
The fundamental issue raised in this petition for review is whether the British Overseas Airways
Corporation (BOAC), a foreign airline company which does not maintain any flight operations to
and from the Philippines, is liable for Philippine income taxation in respect of "sales of air
tickets" in the Philippines through a general sales agent, relating to the carriage of passengers
and cargo between two points both outside the Philippines. cdtai
1. The Solicitor General has defined as one of the issues in this case the question of:
"2. Whether or not during the fiscal years in question 1 BOAC, [was] a resident foreign
corporation doing business in the Philippines or [had] an office or place of business in the
Philippines."
It is important to note at the outset that the answer to the above-quoted issue is not determinative
of the liability of the BOAC to Philippine income taxation in respect of the income here
involved. The liability of BOAC to Philippine income taxation in respect of such income
depends, not on BOAC's status as a "resident foreign corporation" or alternatively, as a "non-
resident foreign corporation," but rather on whether or not such income is derived from "sources
within the Philippines."
A "resident foreign corporation" or a foreign corporation engaged in trade or business in the
Philippines or having an office or place of business in the Philippines is subject to Philippine
income taxation only in respect of income derived from sources within the Philippines. Section
24 (b) (2) of the National Internal Revenue Code ("Tax Code"), as amended by Republic Act No.
2343, approved 20 June 1959, as it existed up to 3 August 1969, read as follows:
"(2) Resident corporations. — A foreign corporation engaged in trade or business within the
Philippines (except foreign life insurance companies) shall be taxable as provided in subsection
(a) of this section."
Section 24 (a) of the Tax Code in turn provides:
"Rate of tax on corporations. — (a) Tax on domestic corporations. — . . . and a like tax shall be
levied, collected, and paid annually upon the total net income received in the preceeding taxable
year from all sources within the Philippines by every corporation organized, authorized, or
existing under the laws of any foreign country: . . . ." (Emphasis supplied)
Republic Act No. 6110, which took effect on 4 August 1969, made this even clearer when it
amended once more Section 24 (b) (2) of the Tax Code so as to read as follows:
"(2) Resident Corporations. — A corporation, organized, authorized or existing under the
laws of any foreign country, except foreign life insurance company, engaged in trade or business
within the Philippines, shall be taxable as provided in subsection (a) of this section upon the total
net income received in the preceding taxable year from all sources within the Philippines."
(Emphasis supplied)
Exactly the same rule is provided by Section 24 (b) (1) of the Tax Code upon non-resident
foreign corporations. Section 24 (b) (1) as amended by Republic Act No. 3825 approved 22 June
1963, read as follows:
"(b) Tax on foreign corporations. — (1) Non-resident corporations. — There shall be levied,
collected and paid for each taxable year, in lieu of the tax imposed by the preceding paragraph
upon the amount received by every foreign corporation not engaged in trade or business within
the Philippines, from all sources within the Philippines, as interests, dividends, rents, salaries,
wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or
determinative annual or periodical gains, profits and incomes a tax equal to thirty per centum of
such amount: provided, however, that premiums shall not include reinsurance premiums." 2
Clearly, whether the foreign corporate taxpayer is doing business in the Philippines and therefore
a resident foreign corporation, or not doing business in the Philippines and therefore a non-
resident foreign corporation, it is liable to income tax only to the extent that it derives income
from sources within the Philippines. The circumstance that a foreign corporation is resident in
the Philippines yields no inference that all or any part of its income is Philippine source income.
Similarly, the non-resident status of a foreign corporation does not imply that it has no Philippine
source income. Conversely, the receipt of Philippine source income creates no presumption that
the recipient foreign corporation is a resident of the Philippines. The critical issue, for present
purposes, is therefore whether or not BOAC is deriving income from sources within the
Philippines.
2. For purposes of income taxation, it is well to bear in mind that the "source of income"
relates not to the physical sourcing of a flow of money or the physical situs of payment but rather
to the "property, activity or service which produced the income." In Howden and Co., Ltd. vs.
Collector of Internal Revenue, 3 the Court dealt with the issue of the applicable source rule
relating to reinsurance premiums paid by a local insurance company to a foreign reinsurance
company in respect of risks located in the Philippines. The Court said:
"The source of an income is the property, activity or service that produced the income. The
reinsurance premiums remitted to appellants by virtue of the reinsurance contracts, accordingly,
had for their source the undertaking to indemnify Commonwealth Insurance Co. against liability.
Said undertaking is the activity that produced the reinsurance premiums, and the same took place
in the Philippines. — [T]he reinsured, the liabilities insured and the risks originally underwritten
by Commonwealth Insurance Co., upon which the reinsurance premiums and indemnity were
based, were all situated in the Philippines. — " 4
The Court may be seen to be saying that it is the underlying prestation which is properly
regarded as the activity giving rise to the income that is sought to be taxed. In the Howden case,
that underlying prestation was the indemnification of the local insurance company. Such
indemnification could take place only in the Philippines where the risks were located and where
payment from the foreign reinsurer (in case the casualty insured against occurs) would be
received in Philippine pesos under the reinsurance contract. The Court held accordingly that the
reinsurance premiums paid by the local insurance companies constituted Philippine source
income of the foreign reinsurers.
The concept of "source of income" for purposes of income taxation originated in the United
States income tax system. The phrase "sources within the United States" was first introduced into
the U.S. tax system in 1916, and was subsequently embodied in the 1939 U.S. Tax Code. As is
commonly known, our Tax Code (Commonwealth Act 466, as amended) was patterned after the
1939 U.S. Tax Code. It therefore seems useful to refer to a standard U.S. text on federal income
taxation:
"The Supreme Court has said, in a definition much quoted but often debated, that income may be
derived from three possible sources only: (1) capital and/or (2) labor and/or (3) the sale of capital
assets. While the three elements of this attempt at definition need not be accepted as all-
inclusive, they serve as useful guides in any inquiry into whether a particular item is from
'sources within the United States' and suggest an investigation into the nature and location of the
activities or property which produce the income. If the income is from labor (services) the place
where the labor is done should be decisive; if it is done in this country, the income should be
from 'sources within the United States.' If the income is from capital, the place where the capital
is employed should be decisive; if it is employed in this country, the income should be from
'sources within the United States.' If the income is from the sale of capital assets, the place where
the sale is made should be likewise decisive. Much confusion will be avoided by regarding the
term 'source' in this fundamental light. It is not a place; it is an activity or property. As such, it
has a situs or location; and if that situs or location is within the United States the resulting
income is taxable to nonresident aliens and foreign corporations. The intention of Congress in
the 1916 and subsequent statutes was to discard the 1909 and 1913 basis of taxing nonresident
aliens and foreign corporations and to make the test of taxability the 'source,' or situs of the
activities or property which produce the income. . . Thus, if income is to be taxed, the recipient
thereof must be resident within the jurisdiction, or the property or activities out of which the
income issues or is derived must be situated within the jurisdiction so that the source of the
income may be said to have a situs in this country. The underlying theory is that the
consideration for taxation is protection of life and property and that the income rightly to be
levied upon to defray the burdens of the United States Government is that income which is
created by activities and property protected by this Government or obtained by persons enjoying
that protection." 5
3. We turn now to the question of what is the source of income rule applicable in the instant
case. There are two possibly relevant source of income rules that must be confronted: (a) the
source rule applicable in respect of contracts of service; and (b) the source rule applicable in
respect of sales of personal property.
Where a contract for the rendition of service is involved, the applicable source rule may be
simply stated as follows: the income is sourced in the place where the service contracted for is
rendered. Section 37 (a) (3) of our Tax Code reads as follows:
"Section 37. Income from sources within the Philippines.
(a) Gross income from sources within the Philippines. — The following items of gross
income shall be treated as gross income from sources within the Philippines:
xxx xxx xxx
(3) Services. — Compensation for labor or personal services performed in the Philippines; . .
." (Emphasis supplied)
Section 37 (c) (3) of the Tax Code, on the other hand, deals with income from sources without
the Philippines in the following manner:
"(c) Gross income from sources without the Philippines. — The following items of gross
income shall be treated as income from sources without the Philippines:
(3) Compensation for labor or personal services performed without the Philippines; . . . "
(Emphasis supplied)
It should not be supposed that Section 37 (a) (3) and (c) (3) of the Tax Code apply only in
respect of services rendered by individual natural persons; they also apply to services rendered
by or through the medium of a juridical person. 6 Further, a contract of carriage or of
transportation is assimilated in our Tax Code and Revenue Regulations to a contract for services.
Thus, Section 37 (e) of the Tax Code provides as follows:
"(e) Income from sources partly within and partly without the Philippines. — Items of gross
income, expenses, losses and deductions, other than those specified in subsections (a) and (c) of
this section shall be allocated or apportioned to sources within or without the Philippines, under
the rules and regulations prescribed by the Secretary of Finance. . . . Gains, profits, and income
from (1) transportation or other services rendered partly within and partly without the
Philippines, or (2) from the sale of personal property produced (in whole or in part) by the
taxpayer within and sold without the Philippines, or produced (in whole or in part) by the
taxpayer without and sold within the Philippines, shall be treated as derived partly from sources
within and partly from sources without the Philippines. . . ." (Emphasis supplied)
It should be noted that the above underscored portion of Section 37 (e) was derived from the
1939 U.S. Tax Code which "was based upon a recognition that transportation was a service and
that the source of the income derived therefrom was to be treated as being the place where the
service of transportation was rendered." 7
Section 37 (e) of the Tax Code quoted above carries a strong, well-nigh irresistible, implication
that income derived from transportation or other services rendered entirely outside the
Philippines must be treated as derived entirely from sources without the Philippines. This
implication is reinforced by a consideration of certain provisions of Revenue Regulations No. 2
entitled "Income Tax Regulations," as amended, first promulgated by the Department of Finance
on 10 February 1940. Section 155 of Revenue Regulations No. 2 (implementing Section 37 of
the Tax Code) provides in part as follows:
"Section 155. Compensation for labor or personal services. — Gross income from sources
within the Philippines includes compensation for labor or personal services within the
Philippines regardless of the residence of the payor, of the place in which the contract for
services was made, or of the place of payment — " (Emphasis supplied)
Section 163 of Revenue Regulations No. 2 (still relating to Section 37 of the Tax Code) deals
with a particular species of foreign transportation companies — i.e., foreign steamship
companies deriving income from sources partly within and partly without the Philippines:
"Section 163. Foreign steamship companies. — The returns of foreign steamship companies
whose vessels touch ports of the Philippines should include as gross income, the total receipts of
all outgoing business whether freight or passengers. With the gross income thus ascertained, the
ratio existing between it and the gross income from all ports, both within and without the
Philippines of all vessels, whether touching ports of the Philippines or not, should be determined
as the basis upon which allowable deductions may be computed, — ." (Emphasis supplied)
Another type of utility or service enterprise is dealt with in Section 164 of Revenue Regulations
No. 2 (again implementing Section 37 of the Tax Code) which provides as follows:
"Section 164. Telegraph and cable services. — A foreign corporation carrying on the business
of transmission of telegraph or cable messages between points in the Philippines and points
outside the Philippines derives income partly from sources within and partly from sources
without the Philippines.
xxx xxx xxx (Emphasis supplied)
Once more, a very strong inference arises under Sections 163 and 164 of Revenue Regulations
No. 2 that steamship and telegraph and cable services rendered between points both outside the
Philippines give rise to income wholly from sources outside the Philippines, and therefore not
subject to Philippine income taxation.
We turn to the "source of income" rules relating to the sale of personal property, upon the one
hand, and to the purchase and sale of personal property, upon the other hand.
We consider first sales of personal property. Income from the sale of personal property by the
producer or manufacturer of such personal property will be regarded as sourced entirely within
or entirely without the Philippines or as sourced partly within and partly without the Philippines,
depending upon two factors: (a) the place where the sale of such personal property occurs; and
(b) the place where such personal property was produced or manufactured. If the personal
property involved was both produced or manufactured and sold outside the Philippines, the
income derived therefrom will be regarded as sourced entirely outside the Philippines. If,
however, the sale took place within the Philippines, although the personal property had been
produced outside the Philippines, or if the sale of the property takes place outside the Philippines
and the personal property was produced in the Philippines, then, the income derived from the
sale will be deemed partly as income sourced within and partly as income sourced without the
Philippines. In other words, the income (and the related expenses, losses and deductions) will be
allocated between sources within and sources without the Philippines. Thus, Section 37 (e) of the
Tax Code, although already quoted above, may be usefully quoted again:
"(e) Income from sources partly within and partly without the Philippines. . . . Gains, profits
and income from (1) transportation or other services rendered partly within and partly without
the Philippines; or (2) from the sale of personal property produced (in whole or in part) by the
taxpayer within and sold without the Philippines, or produced (in whole or in part) by the
taxpayer without and sold within the Philippines, shall be treated as derived partly from sources
within and partly from sources without the Philippines. . . ." (Emphasis supplied)
In contrast, income derived from the purchase and sale of personal property — i.e., trading — is,
under the Tax Code, regarded as sourced wholly in the place where the personal property is sold.
Section 37 (e) of the Tax Code provides in part as follows:
"(e) Income from sources partly within and partly without the Philippines . . . Gains, profits
and income derived from the purchase of personal property within and its sale without the
Philippines or from the purchase of personal property without and its sale within the Philippines,
shall be treated as derived entirely from sources within the country in which sold." (Emphasis
supplied)
Section 159 of Revenue Regulations No. 2 puts the applicable rule succinctly:
"Section 159. Sale of personal property. Income derived from the purchase and sale of personal
property shall be treated as derived entirely from the country in which sold. The word 'sold'
includes 'exchange.' The 'country' in which 'sold' ordinarily means the place where the property is
marketed. This Section does not apply to income from the sale of personal property produced (in
whole or in part) by the taxpayer within and sold without the Philippines or produced (in whole
or in part) by the taxpayer without and sold within the Philippines. (See Section 162 of these
regulations). (Emphasis supplied)
4. It will be seen that the basic problem is one of characterization of the transactions entered
into by BOAC in the Philippines. Those transactions may be characterized either as sales of
personal property (i.e., "sales of airline tickets") or as entering into a lease of services or a
contract of service or carriage. The applicable "source of income" rules differ depending upon
which characterization is given to the BOAC transactions.
The appropriate characterization, in my opinion, of the BOAC transactions is that of entering
into contracts of service, i.e., carriage of passengers or cargo between points located outside the
Philippines.
The phrase "sale of airline tickets," while widely used in popular parlance, does not appear to be
correct as a matter of tax law. The airline ticket in and of itself has no monetary value, even as
scrap paper. The value of the ticket lies wholly in the right acquired by the "purchaser" — the
passenger — to demand a prestation from BOAC, which prestation consists of the carriage of the
"purchaser" or passenger from one point to another outside the Philippines. The ticket is really
the evidence of the contract of carriage entered into between BOAC and the passenger. The
money paid by the passenger changes hands in the Philippines. But the passenger does not
receive in the Philippines the consideration therefor — the service undertaken to be delivered by
BOAC. The "purchase price of the airline ticket" is quite different from the purchase price of a
physical good or commodity such as a pair of shoes or a refrigerator or an automobile; it is really
the compensation paid for the undertaking of BOAC to transport the passenger or cargo outside
the Philippines.
The characterization of the BOAC transactions either as sales of personal property or as
purchases and sales of personal property, appear entirely inappropriate from another viewpoint.
Consider first purchases and sales: is BOAC properly regarded as engaged in trading — in the
purchase and sale of personal property? Certainly, BOAC was not purchasing tickets outside the
Philippines and selling them in the Philippines. Consider next sales: can BOAC be regarded as
"selling" personal property produced or manufactured by it? In a popular or journalistic sense,
BOAC might be described as "selling" "a product" — its services. However, for the technical
purposes of the law on income taxation, BOAC is in fact entering into contracts of service or
carriage. The very existence of "source" rules" specifically and precisely applicable to the
rendition of services must preclude the application here of "source rules" applying generally to
sales, and purchases and sales, of personal property which can be invoked only by the grace of
popular language. On a slightly more abstract level, BOAC's income is more appropriately
characterized as derived from a "service", rather than from an "activity" (a broader term than
service and including the activity of selling) or from the use of "property." Finally, it is well to
recall that what is here involved is income taxation, and not a sales tax or an excise or privilege
tax.
5. The taxation of international carriers is today effected under Section 24 (b) (2) of the Tax
Code, as amended by Presidential Decree No. 69, promulgated on 24 November 1972 and by
Presidential Decree No. 1355, promulgated on 21 April 1978, in the following manner:
"(2) Resident corporations. — A corporation organized, authorized, or existing under the laws
of any foreign country, engaged in trade or business within the Philippines, shall be taxable as
provided in subsection (a) of this section upon the total net income received in the preceding
taxable year from all sources within the Philippines: Provided, however, That international
carriers shall pay a tax of two and one-half per cent on their gross Philippine billings. 'Gross
Philippine billings' includes gross revenue realized from uplifts anywhere in the world by any
international carrier doing business in the Philippines of passage documents sold therein,
whether for passenger, excess baggage or mail, provided the cargo or mail originates from the
Philippines. The gross revenue realized from the said cargo or mail shall include the gross freight
charge up to final destination. Gross revenues from chartered flights originating from the
Philippines shall likewise form part of 'gross Philippine billings' regardless of the place of sale or
payment of the passage documents. For purposes of determining the taxability of revenues from
chartered flights, the term 'originating from the Philippines' shall include flight of passengers
who stay in the Philippines for more than forty-eight (48) hours prior to embarkation."
(Emphasis supplied)
Under the above-quoted proviso, international carriers issuing for compensation passage
documentation in the Philippines for uplifts from any point in the world to any other point in the
world, are not charged any Philippine income tax on their Philippine billings (i.e., billings in
respect of passenger or cargo originating from the Philippines). Under this new approach,
international carriers who service ports or points in the Philippines are treated in exactly the
same way as international carriers not servicing any port or point in the Philippines. Thus, the
source of income rule applicable, as above discussed, to transportation or other services rendered
partly within and partly without the Philippines, or wholly without the Philippines, has been set
aside. In place of Philippine income taxation, the Tax Code now imposes this 21/2 per cent tax
computed on the basis of billings in respect of passengers and cargo originating from the
Philippines regardless of where embarkation and debarkation would be taking place. This 2-1/2
per cent tax is effectively a tax on gross receipts or an excise or privilege tax and not a tax on
income. Thereby, the Government has done away with the difficulties attending the allocation of
income and related expenses, losses and deductions. Because taxes are the very lifeblood of
government, the resulting potential "loss" or "gain" in the amount of taxes collectible by the state
is sometimes, with varying degrees of consciousness, considered in choosing from among
competing possible characterizations under or interpretations of tax statutes. It is hence perhaps
useful to point out that the determination of the appropriate characterization here — that of
contracts of air carriage rather than sales of airline tickets — entails no down-the-road loss of
income tax revenues to the Government. In lieu thereof, the Government takes in revenues
generated by the 2-1/2 per cent tax on the gross Philippine billings or receipts of international
carriers.
I would vote to affirm the decision of the Court of Tax Appeals.
Narvasa, Gutierrez, Jr. and Cruz JJ ., dissent.
Footnotes
1. Partial Stipulation of Facts, Annex "E" and Annex "4", pp. 74-77 and 87-90, Rollo.
2. The Mentholatum Co., Inc., et al. vs. Anacleto Mangaliman, et al., 72 Phil. 524 (1941);
Section 1, R.A. No. 5455.
3. Pacific Micronesian Line, Inc. vs. Del Rosario and Peligon, 96 Phil. 23, 30, citing
Thompson on Corporations, Vol. 8, 3rd ed., pp. 844-847 and Fisher's Philippine Law of Stock
Corporation, p. 415.
4. P. 11, BOAC Memorandum; p. 261, Rollo.
5. Section 24(b), (2), Tax Code, as amended by R.A. 6110, approved on 4 August 1969.
6. Madrigal and Paternol vs. Rafferty and Concepcion, 38 Phil. 414 (1918).
7. Memorandum for Petitioner, p. 22; p. 299, Rollo.
8. Mertens, Jr., Jacob, Law on Federal Income Taxation, Vol. 8, Section 45.27; cited in
Howden & Co., Ltd. vs. Collector of Internal Revenue, 13 SCRA 601 (1965).
9. 14 Am Jur 2d 813.
10. British Trader's Insurance Co., Ltd. vs. Commissioner of Internal Revenue, 13 SCRA 719
(1965).
11. Howden & Co., Ltd. vs. Collector of Internal Revenue, 13 SCRA 601 (1965).
12. Partial Stipulation of Facts, paragraph 5, p. 89, Rollo.
13. Manila Gas Corporation vs. Collector of Internal Revenue, 62 Phil. 895 (1935).
14. Commissioner of Internal Revenue vs. U.S. Lines, Co., 5 SCRA 175 (1962).
FELICIANO, J., dissenting:
1. I.e., 1959-1969 and 1971.
2. Emphasis, Republic Act No. 6110 continued the above-quoted sub-paragraph, except that
it raised the tax rate from 30% to 35%.
3. 13 SCRA 601 (1965).
4. 13 SCRA, at 604; emphasis supplied.
5. 8 Mertens, Law of Federal Income Taxation, Section 45.27 (1957); underscoring
supplied; footnotes omitted.
6. Commissioner v. Hawaiian Philippine Co., 100 F. 2d 988, 991 (9th Cir. 1939, where the
Court also observed that the sugar milling services rendered by the respondent were not any less
in the nature of "personal" services merely because "they were performed, in part, through the
use of machinery, or because of the magnitude of the taxpayers operations." Id.
7. 8 Mertens, Id., Section 45.43, which goes on to state that: "It was the intention of
Congress under the 1921 law to place the taxation of transportation companies upon a sounder
and more scientific basis (rather than the species of franchise tax previously imposed upon non-
residents in general), and so the principle was adopted of considering income derived from
transportation to be income for services, with the result that the place where the services were
rendered determined the source. The result was income from sources partly within and partly
without the United States." (Id.) (Emphasis supplied)
EN BANC
G.R. No. L-22074 April 30, 1965
THE PHILIPPINE GUARANTY CO., INC., petitioner,

vs.
THE COMMISSIONER OF INTERNAL REVENUE and THE COURT OF TAX APPEALS, respondents.
Josue H. Gustilo and Ramirez and Ortigas for petitioner.

Office of the Solicitor General and Attorney V.G. Saldajena for respondents.
SYLLABUS
1. TAXATION; INCOME TAX; REINSURANCE PREMIUMS CEDED TO FOREIGN REINSURERS SUBJECT

TO WITHHOLDING TAX. — Reinsurance premiums on local risks ceded by domestic insurers to foreign reinsurers
not doing business in the Philippines are subject to withholding tax.
2. ID.; ID.; REINSURANCE PREMIUMS CEDED TO FOREIGN REINSURERS CONSIDERED INCOME

FROM PHILIPPINE SOURCES. — Where the reinsurance contracts show that the activities that constituted the
undertaking to reinsure a domestic insurer against losses arising from the original insurances in the Philippines were
performed in the Philippines, the reinsurance premiums are considered as coming from sources within the Philippines
and are subject to Philippine Income Tax.
3. ID.; ID.; ID.; PLACE OF ACTIVITY CREATING INCOME CONTROLLING. — Section 24 of the Tax Code
does not require a foreign corporation to engage in business in the Philippines in subjecting its income to tax. It
suffices that the activity creating the income is performed or done in the Philippines. What is controlling, therefore, is
not the place of business but the place of activity that created an income.
4. ID.; ID.; SECTION 37 OF TAX CODE NOT ALL INCLUSIVE ENUMERATION. — Section 37 of the Tax
Code is not an all-inclusive enumeration, for it merely directs that the kinds of income mentioned therein should be
treated as income from sources within the Philippines but it does not require that other kinds of income should not be
considered likewise.
5. ID.; ID.; NO ESTOPPEL ON GOVERNMENT FOR MISTAKE OF ITS AGENTS. — The defense of reliance
in good faith on rulings of the Commissioner of Internal Revenue requiring no withholding of the tax due on
reinsurance premiums may free the taxpayer from the payment of surcharges or penalties imposed for failure to pay
the corresponding withholding tax, but it certainly would not exculpate it from liability to pay such withholding tax. The
Government is not estopped from collecting taxes by the mistakes or errors of its agents.
6. ID.; ID.; WITHHOLDING TAX ON REINSURANCE PREMIUMS COMPUTED ON TOTAL AMOUNT CEDED.
— The withholding tax on reinsurance premiums should be computed on the total amount ceded instead of on the
amount actually remitted to foreign reinsurers. Sections 53 and 54 of the Tax Code allow no deduction from the
income therein enumerated in determining the amount to be withheld. Accordingly, in computing the withholding tax
due on the reinsurance premiums no deduction shall be recognized.
BENGZON, J.P., J.:
The Philippine Guaranty Co., Inc., a domestic insurance company, entered into reinsurance contracts, on various
dates, with foreign insurance companies not doing business in the Philippines namely: Imperio Compañia de
Seguros, La Union y El Fenix Español, Overseas Assurance Corp., Ltd., Socieded Anonima de Reaseguros Alianza,
Tokio Marino & Fire Insurance Co., Ltd., Union Assurance Society Ltd., Swiss Reinsurance Company and Tariff
Reinsurance Limited. Philippine Guaranty Co., Inc., thereby agreed to cede to the foreign reinsurers a portion of the
premiums on insurance it has originally underwritten in the Philippines, in consideration for the assumption by the
latter of liability on an equivalent portion of the risks insured. Said reinsurrance contracts were signed by Philippine
Guaranty Co., Inc. in Manila and by the foreign reinsurers outside the Philippines, except the contract with Swiss
Reinsurance Company, which was signed by both parties in Switzerland.
The reinsurance contracts made the commencement of the reinsurers' liability simultaneous with that of Philippine
Guaranty Co., Inc. under the original insurance. Philippine Guaranty Co., Inc. was required to keep a register in
Manila where the risks ceded to the foreign reinsurers where entered, and entry therein was binding upon the
reinsurers. A proportionate amount of taxes on insurance premiums not recovered from the original assured were to
be paid for by the foreign reinsurers. The foreign reinsurers further agreed, in consideration for managing or
administering their affairs in the Philippines, to compensate the Philippine Guaranty Co., Inc., in an amount equal to
5% of the reinsurance premiums. Conflicts and/or differences between the parties under the reinsurance contracts
were to be arbitrated in Manila. Philippine Guaranty Co., Inc. and Swiss Reinsurance Company stipulated that their
contract shall be construed by the laws of the Philippines.
Pursuant to the aforesaid reinsurance contracts, Philippine Guaranty Co., Inc. ceded to the foreign reinsurers the
following premiums:
1953 . . . . . . . . . . . . . . . . . . . . . P842,466.71
1954 . . . . . . . . . . . . . . . . . . . . . 721,471.85
Said premiums were excluded by Philippine Guaranty Co., Inc. from its gross income when it file its income tax
returns for 1953 and 1954. Furthermore, it did not withhold or pay tax on them. Consequently, per letter dated April
13, 1959, the Commissioner of Internal Revenue assessed against Philippine Guaranty Co., Inc. withholding tax on
the ceded reinsurance premiums, thus:
1953
Gross premium per investigation . . . . . . . . . . P768,580.00
Withholding tax due thereon at 24% . . . . . . . . P184,459.00
25% surcharge . . . . . . . . . . . . . . . . . . . . . . . . . . 46,114.00
Compromise for non-filing of withholding
100.00
income tax return . . . . . . . . . . . . . . . . . . . . . . . . .
P230,673.00
TOTAL AMOUNT DUE & COLLECTIBLE . . . .
==========
1954
Gross premium per investigation . . . . . . . . . . P780.880.68
Withholding tax due thereon at 24% . . . . . . . . P184,411.00
25% surcharge . . . . . . . . . . . . . . . . . . . . . . . . . . P184,411.00
Compromise for non-filing of withholding
100.00
income tax return . . . . . . . . . . . . . . . . . . . . . . . . .
P234,364.00
TOTAL AMOUNT DUE & COLLECTIBLE . . . .
==========
Philippine Guaranty Co., Inc., protested the assessment on the ground that reinsurance premiums ceded to foreign
reinsurers not doing business in the Philippines are not subject to withholding tax. Its protest was denied and it
appealed to the Court of Tax Appeals.
On July 6, 1963, the Court of Tax Appeals rendered judgment with this dispositive portion:
IN VIEW OF THE FOREGOING CONSIDERATIONS, petitioner Philippine Guaranty Co., Inc. is hereby
ordered to pay to the Commissioner of Internal Revenue the respective sums of P202,192.00 and
P173,153.00 or the total sum of P375,345.00 as withholding income taxes for the years 1953 and 1954, plus
the statutory delinquency penalties thereon. With costs against petitioner.
Philippine Guaranty Co, Inc. has appealed, questioning the legality of the Commissioner of Internal Revenue's
assessment for withholding tax on the reinsurance premiums ceded in 1953 and 1954 to the foreign reinsurers.
Petitioner maintain that the reinsurance premiums in question did not constitute income from sources within the
Philippines because the foreign reinsurers did not engage in business in the Philippines, nor did they have office
here.
The reinsurance contracts, however, show that the transactions or activities that constituted the undertaking to
reinsure Philippine Guaranty Co., Inc. against loses arising from the original insurances in the Philippines were
performed in the Philippines. The liability of the foreign reinsurers commenced simultaneously with the liability of
Philippine Guaranty Co., Inc. under the original insurances. Philippine Guaranty Co., Inc. kept in Manila a register of
the risks ceded to the foreign reinsurers. Entries made in such register bound the foreign resinsurers, localizing in the
Philippines the actual cession of the risks and premiums and assumption of the reinsurance undertaking by the
foreign reinsurers. Taxes on premiums imposed by Section 259 of the Tax Code for the privilege of doing insurance
business in the Philippines were payable by the foreign reinsurers when the same were not recoverable from the
original assured. The foreign reinsurers paid Philippine Guaranty Co., Inc. an amount equivalent to 5% of the ceded
premiums, in consideration for administration and management by the latter of the affairs of the former in the
Philippines in regard to their reinsurance activities here. Disputes and differences between the parties were subject to
arbitration in the City of Manila. All the reinsurance contracts, except that with Swiss Reinsurance Company, were
signed by Philippine Guaranty Co., Inc. in the Philippines and later signed by the foreign reinsurers abroad. Although
the contract between Philippine Guaranty Co., Inc. and Swiss Reinsurance Company was signed by both parties in
Switzerland, the same specifically provided that its provision shall be construed according to the laws of the
Philippines, thereby manifesting a clear intention of the parties to subject themselves to Philippine law.
Section 24 of the Tax Code subjects foreign corporations to tax on their income from sources within the Philippines.
The word "sources" has been interpreted as the activity, property or service giving rise to the income. 1 The
reinsurance premiums were income created from the undertaking of the foreign reinsurance companies to reinsure
Philippine Guaranty Co., Inc., against liability for loss under original insurances. Such undertaking, as explained
above, took place in the Philippines. These insurance premiums, therefore, came from sources within the Philippines
and, hence, are subject to corporate income tax.
The foreign insurers' place of business should not be confused with their place of activity. Business should not be
continuity and progression of transactions 2 while activity may consist of only a single transaction. An activity may
occur outside the place of business. Section 24 of the Tax Code does not require a foreign corporation to engage in
business in the Philippines in subjecting its income to tax. It suffices that the activity creating the income is performed
or done in the Philippines. What is controlling, therefore, is not the place of business but the place of activity that
created an income.
Petitioner further contends that the reinsurance premiums are not income from sources within the Philippines
because they are not specifically mentioned in Section 37 of the Tax Code. Section 37 is not an all-inclusive
enumeration, for it merely directs that the kinds of income mentioned therein should be treated as income from
sources within the Philippines but it does not require that other kinds of income should not be considered likewise. 1äwphï1.ñët
The power to tax is an attribute of sovereignty. It is a power emanating from necessity. It is a necessary burden to
preserve the State's sovereignty and a means to give the citizenry an army to resist an aggression, a navy to defend
its shores from invasion, a corps of civil servants to serve, public improvement designed for the enjoyment of the
citizenry and those which come within the State's territory, and facilities and protection which a government is
supposed to provide. Considering that the reinsurance premiums in question were afforded protection by the
government and the recipient foreign reinsurers exercised rights and privileges guaranteed by our laws, such
reinsurance premiums and reinsurers should share the burden of maintaining the state.
Petitioner would wish to stress that its reliance in good faith on the rulings of the Commissioner of Internal Revenue
requiring no withholding of the tax due on the reinsurance premiums in question relieved it of the duty to pay the
corresponding withholding tax thereon. This defense of petitioner may free if from the payment of surcharges or
penalties imposed for failure to pay the corresponding withholding tax, but it certainly would not exculpate if from
liability to pay such withholding tax The Government is not estopped from collecting taxes by the mistakes or errors of
its agents.3
In respect to the question of whether or not reinsurance premiums ceded to foreign reinsurers not doing business in
the Philippines are subject to withholding tax under Section 53 and 54 of the Tax Code, suffice it to state that this
question has already been answered in the affirmative in Alexander Howden & Co., Ltd. vs. Collector of Internal
Revenue, L-19393, April 14, 1965.
Finally, petitioner contends that the withholding tax should be computed from the amount actually remitted to the
foreign reinsurers instead of from the total amount ceded. And since it did not remit any amount to its foreign insurers
in 1953 and 1954, no withholding tax was due.
The pertinent section of the Tax Code States:
Sec. 54. Payment of corporation income tax at source. — In the case of foreign corporations subject to
taxation under this Title not engaged in trade or business within the Philippines and not having any office or
place of business therein, there shall be deducted and withheld at the source in the same manner and upon
the same items as is provided in Section fifty-three a tax equal to twenty-four per centum thereof, and such
tax shall be returned and paid in the same manner and subject to the same conditions as provided in that
section.
The applicable portion of Section 53 provides:
(b) Nonresident aliens. — All persons, corporations and general copartnerships (compañias colectivas), in
what ever capacity acting, including lessees or mortgagors of real or personal property, trustees acting in
any trust capacity, executors, administrators, receivers, conservators, fiduciaries, employers, and all officers
and employees of the Government of the Philippines having the control, receipt, custody, disposal, or
payment of interest, dividends, rents, salaries, wages, premiums, annuities, compensation, remunerations,
emoluments, or other fixed or determinable annual or periodical gains, profits, and income of any
nonresident alien individual, not engaged in trade or business within the Philippines and not having any
office or place of business therein, shall (except in the case provided for in subsection [a] of this section)
deduct and withhold from such annual or periodical gains, profits, and income a tax equal to twelve per
centum thereof: Provided That no deductions or withholding shall be required in the case of dividends paid
by a foreign corporation unless (1) such corporation is engaged in trade or business within the Philippines or
has an office or place of business therein, and (2) more than eighty-five per centum of the gross income of
such corporation for the three-year period ending with the close of its taxable year preceding the declaration
of such dividends (or for such part of such period as the corporation has been in existence)was derived from
sources within the Philippines as determined under the provisions of section thirty-seven: Provided, further,
That the Collector of Internal Revenue may authorize such tax to be deducted and withheld from the interest
upon any securities the owners of which are not known to the withholding agent.
The above-quoted provisions allow no deduction from the income therein enumerated in determining the amount to
be withheld. According, in computing the withholding tax due on the reinsurance premium in question, no deduction
shall be recognized.
WHEREFORE, in affirming the decision appealed from, the Philippine Guaranty Co., Inc. is hereby ordered to pay to
the Commissioner of Internal Revenue the sums of P202,192.00 and P173,153.00, or a total amount of P375,345.00,
as withholding tax for the years 1953 and 1954, respectively. If the amount of P375,345.00 is not paid within 30 days
from the date this judgement becomes final, there shall be collected a surcharged of 5% on the amount unpaid, plus
interest at the rate of 1% a month from the date of delinquency to the date of payment, provided that the maximum
amount that may be collected as interest shall not exceed the amount corresponding to a period of three (3) years.
With costs againsts petitioner.
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon and Regala, JJ., concur.
Makalintal and Zaldivar, JJ., took no part.
Footnotes
1
Mertens, Jr., Jacob, Law On Federal Income Taxation, Vol. 8, Section 45.27.
2
Imperial v. Collector of Internal Revenue, L-7924, September 30, 1955.
3
Hilado v. Collector of Internal Revenue, 53 O.G. 2471; Koppel (Philippines), Inc. v. Collector of Internal
Revenues, L-10550, September 19, 1961; Compañia General de Tabacos de Filipinas v. City of Manila, L-
16619, June 29, 1963.
SECOND DIVISION
G.R. No. L-30745 January 18, 1978
PHILIPPINE MATCH CO., LTD., plaintiff-appellant,

vs.
THE CITY OF CEBU and JESUS E. ZABATE, Acting City Treasurer, defendants-appellees.
Pelaez, Pelaez & Pelaez for appellant.
Nazario Pacquiao, Metudio P. Belarmino & Ceferino Jomuad for appellees.
SYNOPSIS
Appellant assailed the legality of the sales tax which the city treasurer of Cebu collected on out-of-town deliveries of
matches, to wit: (1) sales of matches booked and paid for in Cebu City but shipped directly to customers outside of
the city; (2) transfers of matches to salesman assigned to different agencies outside of the city; and (3) shipments of
matches to provincial customers pursuant to salesmen's instructions. Appellant paid under protest the sales tax on
those three categories of out-of-town deliveries.
The trial court sustained the tax imposed on the first transaction, and invalidated the tax in the other two. It
characterized the tax on the other two transactions as a "storage tax", not a sales tax, since the sales were
consummated outside of the city, and hence, beyond the city's taxing power. The city did not appeal from the
decision. But the appellant appealed from that portion of the decision sustaining the tax on sales of matches to
customers outside of the city, which sales were bocked and paid for in Cebu City and also from the dismissal of its
claim for damages against the city treasurer.
In affirming the appealed decisions, the Supreme Court held that the municipal board of Cebu City is empowered "to
provide for the levy and collection of taxes for general and special purposes in accordance with law." The prohibition
against the imposition of percentage taxes refers to municipalities and municipal districts but not to chartered cities.
The fact that the matches were delivered to customers outside the of the city did not place the sales beyond the city's
taxing power. The sales formed part of the merchandising business being carried on by the appellant in the city. As
the city treasurer acted within the scope of his authority and n consonance with his bona fide interpretation of the tax
ordinance, though not sustained completely by the court, his action did not render him liable for damages.
SYLLABUS
1. TAXATION; TAXING POWER OF CITIES AND MUNICIPALITIES, DEFEND BY LOCAL AUTONOMY ACT.
— The taxing power validly delegated to cities and municipalities is defined in the local Autonomy Act, Republic Act
No. 2264 which took effect on June 19, 1959.
2. ID.; CONSTITUTIONAL PROVISIONS. — Article XI of the Constitution provides that "each local government
unit shall have the power to create its own sources of revenue and to levy taxes, subject to such limitations as may
be provided by law". This was implemented by Presidential Decree No. 231, the Local Tax Code, which took effect on
July 1, 1973.
3. ID.; SCOPE OF TAXING POWER OF LOCAL GOVERNMENT. — The taxing power of cities, municipalities
and municipal districts may be used (1) upon any person engaged in any occupation or business, or exercising any
privilege therein; (2) for services rendered by those political subdivisions or rendered in connection with any business,
profession or occupation being conducted therein, and (3) to levy, for public purposes just and uniform taxes. licenses
or fees.
4. ID.; MUNICIPAL BOARDS OF CEBU CITY; EMPOWERED TO PROVIDE FOR THE LEVY AND
COLLECTION OF TAXES. — The municipal board of Cebu City is empowered "to provide for the levy and collection
of taxes for general and special purposes in accordance with law."
5. ID.; MUNICIPAL CORPORATIONS; TAX ON SALES OF GOODS IN THE CITY. — Under a city ordinance
which imposes tax on sales of goods in the city, the city can validly tax sales of matches to customers outside of the
city as long as the orders were booked and paid for, and the matches were delivered to the carrier, in the city. The
matches can be regarded as sold in the city, as contemplated in the ordinance, because delivery to the carrier is
delivery to the buyer. As the sales were finalized in the city and the matches sold were stored in the city, the fact that
the matches were delivered to customers, whose places of business were outside of the city, would not place those
sales beyond the city's taxing power. Those sales formed part of the merchandising business being carried on by the
taxpayer in the city. In essence, they are the same as sales of matches fully consummated in the city.
6. DAMAGES, AWARD OF; ARTICLE 27, NEW CIVIL CODE, CONSTRUED. — Article 27 presupposes that
the refusal or omission of a public official is attributed to malice or inexcusable negligence.
7. PUBLIC OFFICERS; LIABILITY, GENERAL RULE. — As a rule, a public officer, whether judicial, quasi-
judicial or executive, is not personally liable to one injured in consequence of an act performed within the scope of his
official authority, and in the line of his official duty. Where an officer is invested with discretion and is empowered to
exercise his judgment in matters brought before him, he is sometimes called a quasi-judicial officer, and when so
acting he is usually given immunity from liability to persons who may be injured as the result of an erroneous or
mistaken decision, however erroneous his judgment may be, provided the acts complained of are done within the
scope of the officer's authority, and without willfulness, malice of corruption.
8. ID.; CITY TREASURER WHO ACTED WITHIN THE SCOPE OF AUTHORITY, NOT LIABLE. — Where the
city treasurer honestly believed that he was justified under section 9 of the tax ordinance in collecting the sales tax on
out-of-town deliveries, considering that the company's branch office was located in the city and that all out-of-town
purchase orders for matches were filled up by the branch office and the sales were duly reported to it and the city
treasurer acted within the scope of his authority and in consonance with his bona fide interpretation of the tax
ordinance, the fact that his action was not completely sustained by the courts would not render him liable for
damages.
9. ID.; ERRONEOUS INTERPRETATION OF ORDINANCE, NOT GROUND FOR DAMAGES. — An

erroneous interpretation of an ordinance does not constitute nor does it amount to bad faith that would entitle and
aggrieved party to an award for damages.
AQUINO, J.:
This case is about the legality of the tax collected by the City of Cebu on sales of matches stored by the Philippine
Match Co., Ltd. in Cebu City but delivered to customers outside of the City.
Ordinance No. 279 of Cebu City (approved by the mayor on March 10, 1960 and also approved by the provincial
board) is "an ordinance imposing a quarterly tax on gross sales or receipts of merchants, dealers, importers and
manufacturers of any commodity doing business" in Cebu City. It imposes a sales tax of one percent (1%) on the
gross sales, receipts or value of commodities sold, bartered, exchanged or manufactured in the city in excess of
P2,000 a quarter.
Section 9 of the ordinance provides that, for purposes of the tax, "all deliveries of goods or commodities stored in the
City of Cebu, or if not stored are sold" in that city, "shall be considered as sales" in the city and shall be taxable.
Thus, it would seem that under the tax ordinance sales of matches consummated outside of the city are taxable as
long as the matches sold are taken from the company's stock stored in Cebu City.
The Philippine Match Co., Ltd., whose principal office is in Manila, is engaged in the manufacture of matches. Its
factory is located at Punta, Sta. Ana, Manila. It ships cases or cartons of matches from Manila to its branch office in
Cebu City for storage, sale and distribution within the territories and districts under its Cebu branch or the whole
Visayas-Mindanao region. Cebu City itself is just one of the eleven districts under the company's Cebu City branch
office.
The company does not question the tax on the matches of matches consummated in Cebu City, meaning matches
sold and delivered within the city.
It assails the legality of the tax which the city treasurer collected on out-of- town deliveries of matches, to wit: (1)
sales of matches booked and paid for in Cebu City but shipped directly to customers outside of the city; (2) transfers
of matches to newsmen assigned to different agencies outside of the city and (3) shipments of matches to provincial
customers pursuant to salesmen's instructions.
The company paid under protest to the city t the sum of P12,844.61 as one percent sales tax on those three classes
of out-of-town deliveries of matches for the second quarter of 1961 to the second quarter of 1963.
In paying the tax the company accomplished the verified forms furnished by the city treasurers office. It submitted a
statement indicating the four kinds of transactions enumerated above, the total sales, and a summary of the
deliveries to the different agencies, as well as the invoice numbers, names of customers, the value of the sales, the
transfers of matches to salesmen outside of Cebu City, and the computation of taxes.
Sales of matches booked and paid for in Cebu City but shipped directly to customers outside of the city refer to
orders for matches made in the city by the company's customers, by means of personal or phone calls, for which
sales invoices are issued, and then the matches are shipped from the bodega in the city, where the matches had
been stored, to the place of business or residences of the customers outside of the city, duly covered by bills of lading
The matches are used and consumed outside of the city.
Transfers of matches to salesmen assigned to different agencies outside of the city embrace equipments of matches
from the branch office in the city to the salesmen (provided with panel cars) assigned within the province of Cebu and
in the different districts in the Visayas and Mindanao under the jurisdiction or supervision of the Cebu City branch
office. The shipments are covered by bills of lading. No sales invoices whatever are issued. The matches received by
the salesmen constitute their direct cash accountability to the company. The salesmen sell the matches within their
respective territories. They issue cash sales invoices and remit the proceeds of the sales to the company's Cebu
branch office. The value of the unsold matches constitutes their stock liability. The matches are used and consumed
outside of the city.
Shipments of matches to provincial customers pursuant to newsmens instructions embrace orders, by letter or
telegram sent to the branch office by the company's salesmen assigned outside of the city. The matches are shipped
from the company's bodega in the city to the customers residing outside of the city. The salesmen issue the sales
invoices. The proceeds of the sale, for which the salesmen are accountable are remitted to the branch office. As in
the first and seconds of transactions above-mentioned, the matches are consumed and used outside of the city.
The company in its letter of April 15, 1961 to the city treasurer sought the refund of the sales tax paid for out-of-town
deliveries of matches. It invoked Shell Company of the Philippines, Ltd. vs. Municipality of Sipocot, Camarines Sur,
105 Phil. 1263. In that case sales of oil and petroleum products effected outside the territorial limits of Sipocot, were
held not to be subject to the tax imposed by an ordinance of that municipality.
The city treasurer denied the request. His stand is that under section 9 of the ordinance all out-of-town deliveries of
latches stored in the city are subject to the sales tax imposed by the ordinance.
On August 12, 1963 the company filed the complaint herein, praying that the ordinance be d void insofar as it taxed
the deliveries of matches outside of Cebu City, that the city be ordered to refund to the company the said sum of
P12,844.61 as excess sales tax paid, and that the city treasurer be ordered to pay damages.
After hearing, the trial court sustained the tax on the sales of matches booked and paid for in Cebu City although the
matches were shipped directly to customers outside of the city. The lower court held that the said sales were
consummated in Cebu City because delivery to the carrier in the city is deemed to be a delivery to the customers
outside of the city.
But the trial court invalidated the tax on transfers of matches to salesmen assigned to different agencies outside of
the city and on shipments of matches to provincial customers pursuant to the instructions of the newsmen It ordered
the defendants to refund to the plaintiff the sum of P8,923.55 as taxes paid out the said out-of-town deliveries with
legal rate of interest from the respective dates of payment.
The trial court characterized the tax on the other two transactions as a "storage tax" and not a sales tax. It assumed
that the sales were consummated outside of the city and, hence, beyond the city's taxing power.
The city did not appeal from that decision. The company appealed from that portion of the decision upholding the tax
on sales of matches to customers outside of the city but which sales were booked and paid for in Cebu City, and also
from the dismissal of its claim for damages against the city treasurer.
The issue is whether the City of Cebu can tax sales of matches which were perfected and paid for in Cebu City but
the matches were delivered to customers outside of the City.
We hold that the appeal is devoid of merit bemuse the city can validly tax the sales of matches to customers outside
of the city as long as the orders were booked and paid for in the company's branch office in the city. Those matches
can be regarded as sold in the city, as contemplated in the ordinance, because the matches were delivered to the
carrier in Cebu City. Generally, delivery to the carrier is delivery to the buyer (Art. 1523, Civil Code; Behn, Meyer &
Co. vs. Yangco, 38 Phil. 602).
A different interpretation would defeat the tax ordinance in question or encourage tax evasion through the simple
expedient of arranging for the delivery of the matches at the out. skirts of the city through the purchase were effected
and paid for in the company's branch office in the city.
The municipal board of Cebu City is empowered "to provide for the levy and collection of taxes for general and
purposes in accordance with law" (Sec. 17[a], Commonwealth Act No. 58; Sec. 31[l], Rep. Act No. 3857, Revised
Charter of Cebu city).
The taxing power validly delegated to cities and municipalities is defined in the Local Autonomy Act, Republic Act No.
2264 (Pepsi-Cola Bottling Co. of the Philippines, Inc. vs. Municipality of Tanauan, Leyte, L-31156, February 27, 1976,
69 SCRA 460), which took effect on June 19, 1959 and which provides:
SEC. 2. Taxation. — Any provision of law to the contrary notwithstanding, all chartered cities,
municipalities and municipal districts shall have authority to impose municipal license taxes or fees
upon persons engaged in any occupation or business, or exercising privileges in chartered cities,.
municipalities or municipal districts by requiring them to secure licenses at rates fixed by the
municipal board or city council of the city, the municipal council of the municipality, or the municipal
district council of the municipal district; to collect fees and charges for services rendered by the city,
municipality or municipal district; to regulate and impose reasonable fees for services rendered in
connection with any business, profession or occupation being conducted within the city,
municipality or municipal district and otherwise to levy for public purposes, just and uniform taxes,
licenses or fees;
Provided, That municipalities and municipal districts shall, in no case, impose any percentage tax
on sales or other taxes in any form based thereon nor impose taxes on articles subject to specific
tax, except gasoline, under the provisions of the National International Revenue Code;
Provided, however, That no city, municipality or municipal districts may levy or impose any of the
following: (here follows an enumeration of internal revenue taxes)
xxx xxx xxx *
Note that the prohibition against the imposition of percentage taxes (formerly provided for in section 1 of
Commonwealth Act No. 472) refers to municipalities and municipal districts but not to chartered cities. (See Local Tax
Code, P.D. No. 231. Marinduque Iron Mines Agents, Inc. vs. Municipal Council of Hinabangan Samar, 120 Phil. 413;
Ormoc Sugar Co., Inc. vs. Treasurer of Ormoc City, L-23794, February 17, 1968, 22 SCRA 603).
Note further that the taxing power of cities, municipalities and municipal districts may be used (1) "upon any person
engaged in any occupation or business, or exercising any privilege" therein; (2) for services rendered by those
political subdivisions or rendered in connection with any business, profession or occupation being conducted therein,
and (3) to levy, for public purposes, just and uniform taxes, licenses or fees (C. N. Hodges vs. Municipal Board of the
City of Iloilo, 117 Phil. 164, 167. See sec. 31[251, Revised Charter of Cebu City).
Applying that jurisdictional test to the instant case, it is at once obvious that sales of matches to customers outside oil
Cebu City, which sales were booked and paid for in the company's branch office in the city, are subject to the city's
taxing power. The instant case is easily distinguishable from the Shell Company case where the price of the oil sold
was paid outside of the municipality of Sipocot, the entity imposing the tax.
On the other hand, the ruling in Municipality of Jose Panganiban, Province of Camarines Norte vs. Shell Company of
the Philippines, Ltd., L-18349, July 30, 1966, 17 SCRA 778 that the place of delivery determines the taxable situs of
the property to be taxed cannot properly be invoked in this case. Republic Act No. 1435, the law which enabled the
Municipality of Jose Panganiban to levy the sales tax involved in that case, specifies that the tax may be levied upon
oils "distributed within the limits of the city or municipality", meaning the place where the oils were delivered. That
feature of the Jose Panganiban case distinguished it from this case.
The sales in the instant case were in the city and the matches sold were stored in the city. The fact that the matches
were delivered to customers, whose places of business were outside of the city, would not place those sales beyond
the city's taxing power. Those sales formed part of the merchandising business being assigned on by the company in
the city. In essence, they are the same as sales of matches fully consummated in the city.
Furthermore, because the sellers place of business is in Cebu City, it cannot be sensibly argued that such sales
should be considered as transactions subject to the taxing power of the political subdivisions where the customers
resided and accepted delivery of the matches sold.
The company in its second assignment of error contends that the trial court erred in not ordering defendant acting city
treasurer to pay exemplary damages of P20,000 and attorney's fees.
The claim for damages is predicated on articles 19, 20, 21, 27 and 2229 of the Civil Code. It is argued that the city
treasurer refused and neglected without just cause to perform his duty and to act with justice and good faith. The
company faults the city treasurer for not following the opinion of the city fiscals, as legal adviser of the city, that all
out-of-town deliveries of matches are not subject to sales tax because such transactions were effected outside of the
city's territorial limits.
In reply, it is argued for defendant city treasurer that in enforcing the tax ordinance in question he was simply
complying with his duty as collector of taxes (Sec. 50, Revised Charter of Cebu City). Moreover, he had no choice but
to enforce the ordinance because according to section 357 of the Revised Manual of Instruction to Treasurer's "a tax
ordinance win be enforced in accordance with its provisions" until d illegal or void by a competent court, or otherwise
revoked by the council or board from which it originated.
Furthermore, the Secretary of Finance had reminded the city treasurer that a tax ordinance approved by the
provincial board is operative and must be enforced without prejudice to the right of any affected taxpayer to assail its
legality in the judicial forum. The fiscals opinion on the legality of an ordinance is merely advisory and has no binding
effect.
Article 27 of the Civil Code provides that "any person suffering material or moral lose because a public servant or
employee refuses or neglects, without just cause, to perform his official duty may file an action for damages and other
relief against the latter, without prejudice to any disciplinary administrative action that may be taken."
Article 27 presupposes that the refuse or omission of a public official is attributable to malice or inexcusable
negligence. In this case, it cannot be said that the city treasurer acted wilfully or was grossly t in not refunding to the
plaintiff the taxes which it paid under protest on out-of-town sales of matches.
The record clearly reveals that the city treasurer honestly believed that he was justified under section 9 of the tax
ordinance in collecting the sales tax on out-of-town deliveries, considering that the company's branch office was
located in Cebu City and that all out-of-town purchase order for matches were filled up by the branch office and the
sales were duly reported to it.
The city treasurer acted within the scope of his authority and in consonance with his bona fide interpretation of the tax
ordinance. The fact that his action was not completely sustained by the courts would not him liable for We have
upheld his act of taxing sales of matches booked and paid for in the city.
"As a rule, a public officer, whether judicial ,quasi-judicial or executive, is not y liable to one injured in consequence of
an act performed within the scope of his official authority, and in the line of his official duty." "Where an officer is
invested with discretion and is empowered to exercise his judgment in matters brought before him. he is sometimes
called a quasi-judicial officer, and when so acting he is usually given immunity from liability to persons who may be
injured as the result or an erroneous or mistaken decision, however erroneous his judgment may be. provided the
acts complained of are done within the scope of the officer's authority and without malice, or corruption." (63 Am Jur
2nd 798, 799 cited in Philippine Racing Club, Inc. vs. Bonifacio, 109 Phil. 233, 240-241).
It has been held that an erroneous interpretation of an ordinance does not constitute nor does it amount to bad faith
that would entitle an aggrieved party to an award for damages (Cabungcal vs. Cordovan 120 Phil. 667, 572-3). That
salutary in addition to moral temperate, liquidated or compensatory damages (Art. 2229, Civil Code). Attorney's fees
are being claimed herein as actual damages. We find that it would not be just and equitable to award attorney's fees
in this case against the City of Cebu and its (See Art. 2208, Civil Code).
WHEREFORE, the trial court's judgment is affirmed. No costs.
SO ORDERED.
Fernando (Chairman), Antonio and Concepcion, Jr., JJ., concur.
Santos, J., is on leave.
Separate Opinions
BARREDO, J., concurring:
Anent appellant's claim for damages, it should be happy the trial court did not the city fully, which in my opinion, could
have been possible.
Separate Opinions
BARREDO, J., concurring:
Anent appellant's claim for damages, it should be happy the trial court did not the city fully, which in my opinion, could
have been possible.
Footnotes
* Sec. 5, Article XI of the Constitution provides that "each sale government unit shall have the
power to create its own sources of revenue and to levy taxes, subject to such limitations as may be
provided by law".
That Constitutional provision was implemented by Presidential Decree No. 231, the Local Tax
Code, which took effect on July 1, 1973.
EN BANC
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.
SYLLABUS
1. CONSTITUTIONAL LAW; LEGISLATIVE POWERS; APPROPRIATION OF PUBLIC REVENUES ONLY

FOR PUBLIC PURPOSES; WHAT DETERMINES VALIDITY OF A PUBLIC EXPENDITURE. — "It is a general rule
that the legislature is without power to appropriate public revenues 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 interests 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 advantage to the public or to the
state, which results from the promotion of private interests, and the prosperity of private enterprises or business, does
not justify their aid by the use of public money." (23 R. L. C. pp. 398-450).
2. ID.; ID.; ID.; UNDERLYING REASON FOR THE RULE. — Generally, under the express or implied
provisions of the constitution, public funds may be used only for a public purpose. The right of the legislature to
appropriate public 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 appropriate of state funds can be made for other than a public purpose. (81 C.J.S. p. 1147).
3. ID.; ID.; ID.; TEST OF CONSTITUTIONALITY. — The test of the constitutionality of a statute requiring the
use of public funds is whether the statute is designed to promote the public interests, as opposed to the furtherance
of the advantage of individuals, although such advantage to individuals might incidentally serve the public. (81 C.J.S.
p. 1147).
4. ID.; ID.; ID.; ID.; POWERS OF CONGRESS AT THE TIME OF PASSAGE OF A STATUTE SHOULD BE
CONSIDERED. — 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 consist of an
amendment of the organic law, removing, with retrospective operation, the constitutional limitation infringed by said
statute.
5. ID.; ID.; ID.; APPROPRIATION FOR A PRIVATE PURPOSE NULL AND VOID; SUBSEQUENT DONATION
TO GOVERNMENT NOT CURATIVE OF DEFECT. — Where the land on which projected feeder roads are to be
constructed belongs to a private person, an appropriation made by Congress for that purpose is null and void, and a
donation to the Government, made over five (5) months after the approval and effectivity of the Act for the purpose of
giving a "semblance of legality" to the appropriation, does not cure the basic defect. Consequently, a judicial
nullification of said donation need not precede the declaration of unconstitutionality of said appropriation.
6. ID.; ID.; ID.; ID.; RIGHT OF TAXPAYERS TO CONTEST CONSTITUTIONALITY OF A LEGISLATION. —

The relation between the people of the Philippines and its taxpayers, on the one 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 states of the Union. For
this reason, the rule recognizing the right of taxpayers to assailed 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.
7. CONTRACTS; DEFENSE OF ILLEGALITY; EXCEPTIONS TO ARTICLE 1421 OF THE CIVIL CODE. —

Article 1421 of the Civil Code 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 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.
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.
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.
Footnotes
1 For, pursuant to section 19(h) of the existing rules and regulation of the Urban Planning Commission, the
owner of a subdivision is under obligation "to improve, repair and maintain all streets, highways and other
ways in his subdivision until their dedication to public use is accepted by the government."
2 Ex parte Bagwell, 79 P. 2d. 395; Road District No. 4 Shelby County vs. Allred. 68 S.W 2d 164; State ex
rel. Thomson vs. Giessel, 53-N.W. 2d. 726, Attorney General vs. City of Eau Claire, 37 Wis. 400; State ex
rel. Smith vs. Annuity Pension Board, 241 Wis. 625, 6 N.W. 2d. 676; State vs. Smith, 293 N.W. 161; State
vs. Dammann 280 N.W. 698; Sjostrum vs. State Highway Commission 228 P. 2d. 238; Hutton vs. Webb,
126 N.C. 897, 36 S.E. 341; Michigan Sugar Co. vs. Auditor General, 124 Mich. 674, 83 N.W. 625; Oxnard
Beet Sugar Co. vs. State, 105 N.W. 716.
3 Casanovas vs. Hord. 8 Phil., McGirr vs. Hamilton, 30 Phil., 563; Compania General de Tabacos vs. Board
of Public Utility, 34 Phil., 136; Central Capiz vs. Ramirez, 40 Phil., 883; Concepcion vs. Paredes, 42 Phil.,
599; U.S. vs. Ang Tang Ho, 43 Phil., 6; McDaniel vs. Apacible, 44 Phil., 248; People vs. Pomar, 46 Phil.,
440; Agcaoili vs. Suguitan, 48 Phil., 676; Government of P.I. vs. Springer, 50 Phil., 259; Manila Electric Co.
vs. Pasay Transp. Co., 57 Phil., 600; People vs. Linsangan, 62 Phil., 464; People and Hongkong &
Shanghai Banking Corp. vs. Jose O. Vera, 65 Phil., 56; People vs. Carlos, 78 Phil., 535; 44 Off. Gaz. 428; In
re Cunanan, 94 Phil., 534; 50 Off. Gaz., 1602; City of Baguio vs. Nawasa, 106 Phil., 144; City of Cebu vs.
Nawasa, 107 Phil., 1112; Rutter vs. Esteban, 93 Phil., 68; Off. Gaz., [5]1807.
4 In the language of the Supreme Court of Nebraska, "An unconstitutional statute is a legal still birth, which
neither moves, nor breathes, nor holds out any sign of life. It is a form without one vital spark. It is wholly
dead from the time of conception, and, no right, either legal or equitable, arises from such inanimate thing."
(Oxnard Beet Sugar Co. vs. State, 102 N.W. 80.).
5 See, among others, Livermore, vs. Waite, 102 Cal. 113, 25 L.R.A. 312,36 P. 424; Crawford vs. Gilchrist,
64 Fla. 41, 59 So. 963; Lucas vs. American Hawaiian Engineering and Constr. Co., 16 Haw. 80; Castle vs.
Capena, 5 Haw. 27; Littler vs. Jayne, 124 Ill. 123, 16 N.E. 374; Burke vs. Snively, 208 I11. 328, 70 N.E. 372;
Ellingham vs. Dye, 178 Ind. 336, 99 N.E. 1; Christmas vs. Warfield, 105 Md. 536; Sears vs. Steel, 55 Or.
544, 107 Pac. 3; State ex rel. Taylor vs. Pennover, 26 Or. 205, 37 Pac. 906; Carman vs. Woodruf, 10 Or.
123; MacKinley vs. Watson, 145 Pac. 266; Sears vs. James, 47 Or. 50, 82 Pac. 14; Mott vs. Pennsylvania
R. Co., 30 Pa. 9, 72 Am. Dec. 664; Bradly vs. Power County, 37 Am. Dec. 563; Frost vs. Thomas, 26 Colo.
227, 77 Am. St. Rep. 259, 56 Pac. 899; Martin vs. Ingham, 38 Kan. 641, 17 Pac. 162; Martin vs. Lacy, 39
Kan. 703, 18 Pac. 951; Smith vs. Maguerich, 44 Ga. 163; Giddings vs. Blacker, 93 Mich. 1, 16 L.R.A. 402,
52 N.W. 944; Rippe vs. Becker, 56 Minn. 100, 57 N.W. 331; Auditor vs. Treasurer, 4 S.C. 311; McCullough
vs. Brown, 31 S.C. 220, 19 S.E. 458; State ex rel. Lamb vs. Cummingham, 83 Wis. 90, 53 N.W. 35; State ex
rel. Rosenhian vs. Frear, 138 Wis. 173, 119 N.W. 894.
6 Rubs vs. Thompson, 56 N.E. 2d. 761; Reid vs. Smith, 375 Ill. 147, 30N. E. 2d. 908; Fergus vs. Russel, 270
Ill. 304, 110 N.E. 130; Burke vs. Snively, 208 Ill. 328; Jones vs. Connell, 266 Ill. 443, 107 N.E. 731; Dudick
vs. Baumann, 349 [PEPSI] Ill. 46, 181 N.E. 690.
7 Thompson vs. Canal Fund Comps., 2 Abb. Pr. 248; Shieffelin vs. Komfort, 212 N.Y. 520, 106 N.E. 675;
Hutchison vs. Skinmer, 21 Misc. 729, 49N. Y. Supp. 360; Long vs. Johnson, 70 Misc. 308; 127 N.Y. Supp.
756; Whiteback vs. Hooker, 73 Misc. 573, 133 N.Y. Supp. 534; State ex rel. Cranmer vs. Thorson, 9 S.D.
149, 68 N.W. 202; Davenport vs. Elrod, 20 S.D. 567, 107 N.W. 833; Indiana Jones vs. Reed, 3 Wash. 57, 27
Pac. 1067; Birmingham vs. Cheetham, 19 Wash. 657, 54 Pac. 37; Tacoma vs. Bridges, 25 Wash. 221, 65
Pac. 186; Hilger vs. State, 63 Wash. 457, 116 Pac. 19.
8 It has 1,463,530 inhabitants.

EN BANC
[G.R. No. L-9141. September 25, 1956.]
Testate Estate of OLIMPIO FERNANDEZ, deceased. REPUBLIC OF THE PHILIPPINES,
claimant-appellee, vs. ANGELINA OASAN VDA DE FERNANDEZ, PRISCILLA O.
FERNANDEZ, and ESTELA O. FERNANDEZ, oppositors-appellants.
Ramon C. Aquino for appellants.
Solicitor General Ambrosio Padilla and Solicitor Felicisimo R. Rosete for appellee.
SYLLABUS
1. CONSTITUTIONAL LAW; WAR PROFIT TAX LAW; RETROACTIVITY,
VALIDITY OF. — Appellant's contention that the law is invalid or unconstitutional because it
acts retroactively, thus violating the due process of law clause, is not supported by reason or
authority. Property taxes and benefits assessments on real estate, retroactively applied, are not
open to the objection that they infringe upon the due process of law clause of the Constitution;
that taxes on income are not subject to the constitutional objection because of their retroactivity.
The universal practice has been to increase taxes on income already earned; yet notwithstanding
this retroactive operation, income taxes have not been successfully assailed as invalid. The
uniform ruling of the courts in the United State has been to reject the contention that the
retroactive application of revenue acts is a denial of the due process guaranteed by the Fifth
Amendment. In order to declare a tax as transgressing the constitutional limitation, it must be so
harsh and oppressive in its retroactive application. Far from being unjust or harsh and oppressive
our war profit tax is both wise and just.
2. ID.; ID.; NOT HARSH AND OPPRESSIVE. — The law may not be considered harsh
and oppressive because the force of its impact fell on those who had amassed wealth or increased
their wealth during the war, but did not touch the less fortunate. The policy followed is the same
as that which underlie the Income Tax Law, imposing the burden upon those who have relieving
those who have not. No one can dare challenge the law as harsh and oppressive.
3. WAR PROFIT TAX LAW; ON ESTATE OF DECEASED IS A PROPERTY TAX
AND INCOME TAX. — The tax, insofar as applicable to the estate of a deceased, is both a
property tax and a tax on income. It is a property tax in relation to the properties the deceased
had at the outbreak of the war and it is an income tax in relation to the properties which the
deceased acquired during the war.
4. ID.; APPLICABLE TO ESTATE OF DECEASED WHO DIED BEFORE ITS
ENACTMENT. — The contention that a deceased or his estate should not be responsible
because he was no longer living when the law was enacted is absolutely without merit. Where
the deceased died immediately before the liberation and actual cessation of hostilities and he
profited by the war, there is no reason why the incident of his death should relieve his estate
from the tax.
5. ID.; HUSBAND AND WIFE; PROPERTIES ACQUIRED DURING THE MARRIAGE
PRESUMED CONJUGAL. — The property which the deceased was possessed in December,
1941, is presumed to be conjugal and so are the properties which were acquired by him during
the war, because at the time he was married. In the case at bar, there is no claim or evidence to
support the claim that any of the properties were paraphernal properties of the wife so the
presumption stands that they were conjugal properties of the husband and the wife. Under those
circumstances they cannot be considered as properties belonging to two individuals, each of
which shall be subject to the tax independently of the other.
DECISION
LABRADOR, J p:
Appeal from a decision of the Court of Tax Appeals sustaining the validity of a tax amounting to
P7,614.60 against the estate of Olimpio Fernandez under the War Profits Tax Law (Republic Act
No. 55).
Olimpio Fernandez and his wife Angelina Oasan had a net worth of P8,600 on December 8,
1941. During the Japanese occupation the spouses acquired several real properties, and at the
time of his death on February 11, 1945 he had a net worth of P31,489. The Collector of Internal
Revenue assessed a war profits tax on the estate of the deceased at P7,614.60, which his
administratrix refused to pay. The case was brought to the Court of Tax Appeals which sustained
the validity and legality of the assessment. The administratrix has appealed this decision to this
Court.
The most important questions raised by the appellant are: (a) the unconstitutionality of the war
profits tax law for the reason that it is retroactive; (b) the inapplicability of said law to the estate
of the deceased Olimpio Fernandez, because the law taxes individuals; and (c) the separate
taxation of the estate of the deceased Olimpio Fernandez from that of his wife's, because Olimpio
Fernandez died before the law was passed.
Appellant's contention that the law is invalid or unconstitutional because it acts retroactively,
thus violating the due process of law clause, is not supported by reason or authority. The tax,
insofar as applicable to the estate of the deceased Olimpio Fernandez, is both a property tax and
a tax on income. It is a property tax in relation to the properties that Fernandez had in December,
1941; and it is an income tax in relation to the properties which he purchased during the Japanese
occupation. In both cases, however, the war profits tax may not be considered as
unconstitutional.
The doctrine of unconstitutionality raised by appellant is based on the prohibition against ex post
facto laws. But this prohibition applies only to criminal or penal matters, and not to laws which
concern civil matters or proceedings generally, or which affect or regulate civil or private rights
(Ex parte Garland, 18 Law Ed., 366; 16 C. J. S., 889-891).
"At an early day it was settled by authoritative decisions, in opposition to what might
seem the more natural and obvious meaning of the term ex post facto, that in their scope
and purpose these provisions were confined to laws respecting criminal punishments, and
had no relation whatever to retrospective legislation of any other description. And it has,
therefore, been repeatedly held, that retrospective laws, when not of a criminal nature, do
not come in conflict with the national Constitution, unless obnoxious to its provisions on
other grounds than their respective character." (1 Cooley, Constitutional Limitations,
544-545.)
We have applied the above principle in the cases of Mekin vs. Wolf, 2 Phil. 74 and Ongsiako vs.
Gamboa, 47 Off. Gaz., No. 11, 5613, 5616.
It has also been held that property taxes and benefit assessments on real estate, retroactively
applied, are not open to the objection that they infringe upon the due process of law clause of the
Constitution (Wagner vs. Baltimore, 239 U. S. 207, 60 L. Ed. 230); that taxes on income are not
subject to the constitutional objection because of their retroactivity. The universal practice has
been to increase taxes on incomes already earned; yet notwithstanding this retroactive operation,
income taxes have not been successfully assailed as invalid. The uniform ruling of the courts in
the United States has been to reject the contention that the retroactive application of revenue acts
is a denial of the due process guaranteed by the Fifth Amendment (Welch vs. Henry, 305 U. S.
134, 83 L. Ed. 87).
It has also been held that in order to declare a tax as transgressing the constitutional limitation, it
must be so harsh and oppressive in its retroactive application (Idem.). But we hold that far from
being unjust or harsh and oppressive our war profits tax is both wise and just. The last Pacific
war and the Japanese occupation of the Islands have wrought divergent effects upon the different
sectors of the population. The quiet and the timid, who were afraid to go out of their homes or
who refused to have any dealings with the enemy, stopped from exercising their callings or
professions, losing their incomes; and they supported themselves with properties they already
owned, selling these from time to time to raise funds with which to purchase their daily needs.
These were reduced to penury and want. But the bold and the daring, as well as those who were
callous to the criticism of being collaborators, engaged in trading in all forms or sorts of
commodities, from foodstuffs to war materials, earning fabulous incomes and acquiring
properties with their earnings. Those who were able to retain their properties found themselves
possessed of increased wealth because inflation set in, the currency dropped in value and
properties soared in prices. It would have been unrealistic for the legislature to have ignored all
these facts and circumstances. After the war it could not, with justice to all concerned, apportion
the expenses of government equally on all the people irrespective of the vicissitudes of war,
equally on those who had their properties decimated as on those who had become fabulously rich
after the war. Those who were fortunate to increase their wealth during the troubulous period of
the war were made to contribute a portion of their newly-acquired wealth for the maintenance of
the government and defray its expenses. Those who in turn were reduced to penury or whose
incomes suffered reductions could not be compelled to share in the expenses to the same extent
as those who grew rich. This in effect is what the legislature did when it enacted the War Profits
Tax Law. The law may not be considered harsh and oppressive because the force of its impact
fell on those who had amassed wealth or increased their wealth during the war, but did not touch
the less fortunate. The policy followed is the same as that which underlies the Income Tax Law,
imposing the burden upon those who have and relieving those who have not. No one can dare
challenge the law as harsh and oppressive. We declare it to be just and sound and overrule the
objection thereto on the ground of unconstitutionality.
The contention that the deceased Olimpio Fernandez or his estate should not be responsible
because he died in 1945 and was no longer living when the law was enacted at a later date, in
1946, is absolutely without merit. Fernandez died immediately before the liberation and the
actual cessation of hostilities. He profited by the war; there is no reason why the incident of his
death should relieve his estate from the tax. On this matter we agree with the Court of Tax
Appeals that the provisions of section 18 of the Internal Revenue Code have been incorporated in
Republic Act No. 55 by virtue of Section 9 thereof, which provides:
SEC. 9. Administrative remedies. — All administrative, special and general
provisions of law, including the laws in relation to the assessment, remission, collection
and refund of national internal revenue taxes, not inconsistent with the provisions of the
Act, are hereby extended and made applicable to all the provisions of this law, and to the
tax herein imposed."
Under section 84 of the National Internal Revenue Code, the term "person" means an individual,
a trust, estate, corporation, or a duly registered general co-partnership. If the individual is already
dead, property or estate left by him should be subject to the tax in the same manner as if he were
alive.
The last contention is also without merit. The property which Olimpio Fernandez was possessed
of in December, 1941 is presumed to be conjugal property and so are the properties which were
acquired by him during the war, because at that time he was married. There is no claim or
evidence to support the claim that any of the properties were paraphernal properties of the wife;
so the presumption stands that they were conjugal properties of the husband and wife. Under
these circumstances they cannot be considered as properties belonging to two individuals, each
of which shall be subject to the tax independently of the other.
For the foregoing considerations, the judgment appealed from is hereby affirmed, with costs
against the appellants.
Paras, C.J., Padilla, Montemayor, Bautista Angelo, Concepcion, Reyes, J.B.L., Endencia, and
Felix, JJ., concur.
EN BANC
G.R. No. L-29646 November 10, 1978
MAYOR ANTONIO J. VILLEGAS, petitioner,

vs.
HIU CHIONG TSAI PAO HO and JUDGE FRANCISCO ARCA, respondents.
Angel C. Cruz, Gregorio A. Ejercito, Felix C. Chaves & Jose Laureta for petitioner.
Sotero H. Laurel for respondents.
FERNANDEZ, J.:
This is a petition for certiorari to review tile decision dated September 17, 1968 of respondent Judge Francisco Arca
of the Court of First Instance of Manila, Branch I, in Civil Case No. 72797, the dispositive portion of winch reads.
Wherefore, judgment is hereby rendered in favor of the petitioner and against the respondents,
declaring Ordinance No. 6 37 of the City of Manila null and void. The preliminary injunction is made
permanent. No pronouncement as to cost.
SO ORDERED.
Manila, Philippines, September 17, 1968.
(SGD.) FRANCISCO ARCA
Judge 1
The controverted Ordinance No. 6537 was passed by the Municipal Board of Manila on February 22, 1968 and
signed by the herein petitioner Mayor Antonio J. Villegas of Manila on March 27, 1968. 2
City Ordinance No. 6537 is entitled:
AN ORDINANCE MAKING IT UNLAWFUL FOR ANY PERSON NOT A CITIZEN OF THE

PHILIPPINES TO BE EMPLOYED IN ANY PLACE OF EMPLOYMENT OR TO BE ENGAGED IN
ANY KIND OF TRADE, BUSINESS OR OCCUPATION WITHIN THE CITY OF MANILA WITHOUT
FIRST SECURING AN EMPLOYMENT PERMIT FROM THE MAYOR OF MANILA; AND FOR
OTHER PURPOSES. 3
Section 1 of said Ordinance No. 6537 4 prohibits aliens from being employed or to engage or participate in any
position or occupation or business enumerated therein, whether permanent, temporary or casual, without first
securing an employment permit from the Mayor of Manila and paying the permit fee of P50.00 except persons
employed in the diplomatic or consular missions of foreign countries, or in the technical assistance programs of both
the Philippine Government and any foreign government, and those working in their respective households, and
members of religious orders or congregations, sect or denomination, who are not paid monetarily or in kind.
Violations of this ordinance is punishable by an imprisonment of not less than three (3) months to six (6) months or
fine of not less than P100.00 but not more than P200.00 or both such fine and imprisonment, upon conviction. 5
On May 4, 1968, private respondent Hiu Chiong Tsai Pao Ho who was employed in Manila, filed a petition with the
Court of First Instance of Manila, Branch I, denominated as Civil Case No. 72797, praying for the issuance of the writ
of preliminary injunction and restraining order to stop the enforcement of Ordinance No. 6537 as well as for a
judgment declaring said Ordinance No. 6537 null and void. 6
In this petition, Hiu Chiong Tsai Pao Ho assigned the following as his grounds for wanting the ordinance declared null
and void:
1) As a revenue measure imposed on aliens employed in the City of Manila, Ordinance No. 6537 is
discriminatory and violative of the rule of the uniformity in taxation;
2) As a police power measure, it makes no distinction between useful and non-useful occupations,
imposing a fixed P50.00 employment permit, which is out of proportion to the cost of registration
and that it fails to prescribe any standard to guide and/or limit the action of the Mayor, thus,
violating the fundamental principle on illegal delegation of legislative powers:
3) It is arbitrary, oppressive and unreasonable, being applied only to aliens who are thus, deprived
of their rights to life, liberty and property and therefore, violates the due process and equal
protection clauses of the Constitution. 7
On May 24, 1968, respondent Judge issued the writ of preliminary injunction and on September 17, 1968 rendered
judgment declaring Ordinance No. 6537 null and void and making permanent the writ of preliminary injunction. 8
Contesting the aforecited decision of respondent Judge, then Mayor Antonio J. Villegas filed the present petition on
March 27, 1969. Petitioner assigned the following as errors allegedly committed by respondent Judge in the latter's
decision of September 17,1968: 9
THE RESPONDENT JUDGE COMMITTED A SERIOUS AND PATENT ERROR OF LAW IN

RULING THAT ORDINANCE NO. 6537 VIOLATED THE CARDINAL RULE OF UNIFORMITY OF
TAXATION.
II
RESPONDENT JUDGE LIKEWISE COMMITTED A GRAVE AND PATENT ERROR OF LAW IN

RULING THAT ORDINANCE NO. 6537 VIOLATED THE PRINCIPLE AGAINST UNDUE
DESIGNATION OF LEGISLATIVE POWER.
III
RESPONDENT JUDGE FURTHER COMMITTED A SERIOUS AND PATENT ERROR OF LAW IN

RULING THAT ORDINANCE NO. 6537 VIOLATED THE DUE PROCESS AND EQUAL
PROTECTION CLAUSES OF THE CONSTITUTION.
Petitioner Mayor Villegas argues that Ordinance No. 6537 cannot be declared null and void on the ground that it
violated the rule on uniformity of taxation because the rule on uniformity of taxation applies only to purely tax or
revenue measures and that Ordinance No. 6537 is not a tax or revenue measure but is an exercise of the police
power of the state, it being principally a regulatory measure in nature.
The contention that Ordinance No. 6537 is not a purely tax or revenue measure because its principal purpose is
regulatory in nature has no merit. While it is true that the first part which requires that the alien shall secure an
employment permit from the Mayor involves the exercise of discretion and judgment in the processing and approval
or disapproval of applications for employment permits and therefore is regulatory in character the second part which
requires the payment of P50.00 as employee's fee is not regulatory but a revenue measure. There is no logic or
justification in exacting P50.00 from aliens who have been cleared for employment. It is obvious that the purpose of
the ordinance is to raise money under the guise of regulation.
The P50.00 fee is unreasonable not only because it is excessive but because it fails to consider valid substantial
differences in situation among individual aliens who are required to pay it. Although the equal protection clause of the
Constitution does not forbid classification, it is imperative that the classification should be based on real and
substantial differences having a reasonable relation to the subject of the particular legislation. The same amount of
P50.00 is being collected from every employed alien whether he is casual or permanent, part time or full time or
whether he is a lowly employee or a highly paid executive
Ordinance No. 6537 does not lay down any criterion or standard to guide the Mayor in the exercise of his discretion. It
has been held that where an ordinance of a municipality fails to state any policy or to set up any standard to guide or
limit the mayor's action, expresses no purpose to be attained by requiring a permit, enumerates no conditions for its
grant or refusal, and entirely lacks standard, thus conferring upon the Mayor arbitrary and unrestricted power to grant
or deny the issuance of building permits, such ordinance is invalid, being an undefined and unlimited delegation of
power to allow or prevent an activity per se lawful. 10
In Chinese Flour Importers Association vs. Price Stabilization Board, 11 where a law granted a government agency
power to determine the allocation of wheat flour among importers, the Supreme Court ruled against the interpretation
of uncontrolled power as it vested in the administrative officer an arbitrary discretion to be exercised without a policy,
rule, or standard from which it can be measured or controlled.
It was also held in Primicias vs. Fugoso 12 that the authority and discretion to grant and refuse permits of all classes
conferred upon the Mayor of Manila by the Revised Charter of Manila is not uncontrolled discretion but legal
discretion to be exercised within the limits of the law.
Ordinance No. 6537 is void because it does not contain or suggest any standard or criterion to guide the mayor in the
exercise of the power which has been granted to him by the ordinance.
The ordinance in question violates the due process of law and equal protection rule of the Constitution.
Requiring a person before he can be employed to get a permit from the City Mayor of Manila who may withhold or
refuse it at will is tantamount to denying him the basic right of the people in the Philippines to engage in a means of
livelihood. While it is true that the Philippines as a State is not obliged to admit aliens within its territory, once an alien
is admitted, he cannot be deprived of life without due process of law. This guarantee includes the means of livelihood.
The shelter of protection under the due process and equal protection clause is given to all persons, both aliens and
citizens. 13
The trial court did not commit the errors assigned.
WHEREFORE, the decision appealed from is hereby affirmed, without pronouncement as to costs.
SO ORDERED.
Barredo, Makasiar, Muñoz Palma, Santos and Guerrero, JJ., concur.
Castro, C.J., Antonio and Aquino, Fernando, JJ., concur in the result.
Concepcion, Jr., J., took no part.
Separate Opinions
TEEHANKEE, J., concurring:
I concur in the decision penned by Mr. Justice Fernandez which affirms the lower court's judgment declaring
Ordinance No. 6537 of the City of Manila null and void for the reason that the employment of aliens within the country
is a matter of national policy and regulation, which properly pertain to the national government officials and agencies
concerned and not to local governments, such as the City of Manila, which after all are mere creations of the national
government.
The national policy on the matter has been determined in the statutes enacted by the legislature, viz, the various
Philippine nationalization laws which on the whole recognize the right of aliens to obtain gainful employment in the
country with the exception of certain specific fields and areas. Such national policies may not be interfered with,
thwarted or in any manner negated by any local government or its officials since they are not separate from and
independent of the national government.
As stated by the Court in the early case of Phil. Coop. Livestock Ass'n. vs. Earnshaw, 59 Phil. 129: "The City of
Manila is a subordinate body to the Insular (National Government ...). When the Insular (National) Government
adopts a policy, a municipality is without legal authority to nullify and set at naught the action of the superior
authority." Indeed, "not only must all municipal powers be exercised within the limits of the organic laws, but they
must be consistent with the general law and public policy of the particular state ..." (I McQuillin, Municipal
Corporations, 2nd sec. 367, P. 1011).
With more reason are such national policies binding on local governments when they involve our foreign relations
with other countries and their nationals who have been lawfully admitted here, since in such matters the views and
decisions of the Chief of State and of the legislature must prevail over those of subordinate and local governments
and officials who have no authority whatever to take official acts to the contrary.
Separate Opinions
TEEHANKEE, J., concurring:
I concur in the decision penned by Mr. Justice Fernandez which affirms the lower court's judgment declaring
Ordinance No. 6537 of the City of Manila null and void for the reason that the employment of aliens within the country
is a matter of national policy and regulation, which properly pertain to the national government officials and agencies
concerned and not to local governments, such as the City of Manila, which after all are mere creations of the national
government.
The national policy on the matter has been determined in the statutes enacted by the legislature, viz, the various
Philippine nationalization laws which on the whole recognize the right of aliens to obtain gainful employment in the
country with the exception of certain specific fields and areas. Such national policies may not be interfered with,
thwarted or in any manner negated by any local government or its officials since they are not separate from and
independent of the national government.
As stated by the Court in the early case of Phil. Coop. Livestock Ass'n. vs. Earnshaw, 59 Phil. 129: "The City of
Manila is a subordinate body to the Insular (National Government ...). When the Insular (National) Government
adopts a policy, a municipality is without legal authority to nullify and set at naught the action of the superior
authority." Indeed, "not only must all municipal powers be exercised within the limits of the organic laws, but they
must be consistent with the general law and public policy of the particular state ..." (I McQuillin, Municipal
Corporations, 2nd sec. 367, P. 1011).
With more reason are such national policies binding on local governments when they involve our foreign relations
with other countries and their nationals who have been lawfully admitted here, since in such matters the views and
decisions of the Chief of State and of the legislature must prevail over those of subordinate and local governments
and officials who have no authority whatever to take official acts to the contrary.
Footnotes
1 Annex "F", Petition, Rollo, p. 64.
2 Petition, Rollo, p. 28.
3 Annex "A", of Petition, Rollo, p. 37-38.
4 Section 1. It shall he unlawful for any person not a citizen of the Philippines to be employed in
any kind of position or occupation or allowed directly or indirectly to participate in the functions,
administration or management in any office, corporation, store, restaurant, factory, business firm, or
any other place of employment either as consultant, adviser, clerk, employee, technician, teacher,
actor, actress, acrobat, singer or other theatrical performer, laborer, cook, etc., whether temporary,
casual, permanent or otherwise and irrespective of the source or origin of his compensation or
number of hours spent in said office, store, restaurant, factory, corporation or any other place of
employment, or to engage in any kind of business and trade within the City of Manila, without first
securing an employment permit from the Mayor of Manila, and paying the necessary fee therefor to
the City the City Treasurer: PROVIDED, HOWEVER, That persons employed in diplomatic and
consular missions of foreign countries and in technical assistance programs agreed upon by the
Philippine Government and any foreign government, and those working in their respective
households, and members of different congregations or religious orders of any religion, sect or
denomination, who are not paid either monetarily or in kind shag be exempted from the provisions
of this Ordinance.
5 Section 4. Any violation of this Ordinance shall upon conviction, be punished by imprisonment of
not less than three (3) months but not more than six (6) months or by a fine of not less than one
hundred pesos (P100.00) but not more than two hundred pesos (P200.00), or by both such fine
and imprisonment, in the discretion of the Court: PROVIDED, HOWEVER, That in case of juridical
persons, the President, the Vice-President or the person in charge shall be liable.
6 Annex "B", Petition, Rollo, p. 39.
7 Ibid
8 Annex "F", Petition, Rollo, pp. 75-83.
9 Petition, Rollo, p. 31.
10 People vs. Fajardo, 104 Phil. 443, 446.
11 89 Phil. 439, 459-460.
12 80 Phil. 86.
13 Kwong Sing vs. City of Manila, 41 Phil, 103.

EN BANC
G.R. No. L-45987 May 5, 1939
THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,

vs.
CAYAT, defendant-appellant.
Sinai Hamada y Cariño for appellant.

Office of the Solicitor-General Tuason for appellee.
FIRST DIVISION
[G.R. No. 45987. May 5, 1939.]
THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. CAYAT, defendant-appellant.
Sinai Hamada y Cariño for appellant.
Solicitor-General Tuason for appellee.
SYLLABUS
1. CONSTITUTIONAL LAW; GUARANTY OF EQUAL PROTECTION OF THE LAWS; LEGISLATION BASED

ON REASONABLE CLASSIFICATION. — It is an established principle of constitutional law that the guaranty of the
equal protection of the laws is not violated by a legislation based on reasonable classification. And the classification,
to be reasonable, (1) must rest on substantial distinctions; (2) must be germane to the purposes of the law; (3) must
not be limited to existing conditions only; and (4) must apply equally to all members of the same class.
2. ID.; ID.; ID.; NON-CHRISTIAN TRIBES. — Act No. 1639 satisfies these requirements. The classification
rests on real or substantial, not merely imaginary or whimsical, distinctions. It is not based upon "accident of birth or
parentage!' but upon the degree of civilization and culture. The term "non-Christian tribes" refers, ,not to religious
belief, but, in a way, to the geographical area, and, more directly, to natives of the Philippines of a low grade of
civilization, usually living in tribal relationship apart from settled communities.
3. ID.; ID.; ID; ID. — This distinction is unquestionably reasonable, for the Act was intended to meet the
peculiar conditions existing in the non-Christian tribes. The exceptional cases of certain members thereof who at
present have reached a position of cultural equality with their Christian brothers, cannot affect the reasonableness of
the classification thus established.
4. ID.; ID.; ID.; ID. — That the classification i~ germane to the purposes of law cannot be doubted. The
prohibition "to buy, receive, have in his possession, or drink any ardent spirits, ale, beer, wine, or intoxicating liquors
of any kind, other than the so-called native wines and liquors which the members of such tribes have been
accustomed themselves to make prior to the passage of this Act," is unquestionably designed to insure peace and
order in and among the non-Christian tribes. It has been the and experience of the past, as the observations of the
lower court disclose, that the free use of highly intoxicating liquors the non-Christian tribes have often resulted in
lawlessness and crimes, thereby hampering the efforts of the government to raise their standard of life and
civilization.
5. ID.; ID.; ID.; ID. — The law is not limited in its application to conditions existing at the time of its enactment.
It is intended to apply for all times as long as those conditions exist. The act was not predicated upon the assumption
that the non-Christians are "impermeable to any civilizing influence." On the contrary, the Legislature understood that
the civilization of a people is a slow process and that hand in hand with it must go measures of protection and
security.
6. ID.; ID.; ID.; ID. — That the Act applies equally to all members of the class is evident from a perusal thereof.
That it may be unfair in its operation against a certain number of non-Christians by reason of their degree of culture,
is not an argument against the equality of its application.
7. ID.; ID.; ID.; ID.; DUE PROCESS OF LAW. — To constitute due process of law, notice and hearing are not
always necessary. This rule is especially true where much must be left to the discretion of the administrative officials
in applying a law to particular cases. Due process of law means simply: (1) that there shall be a law prescribed in
harmony with the general powers of the legislative department of the government; (2) that it shall be reasonable in its
operation; (3) that it shall be enforced according to the regular methods of procedure prescribed; and (4) that it shall
be applicable alike to 811 citizens of the state or to all of a class.
8. ID.; ID.; ID.; ID.; POLICE POWER OF THE STATE. — Neither is the Act an improper exercise of the police
power of the state. It has been said that the police power is the most insistent and least limitable of all the powers of
the government. It has been aptly described as a power coextensive with self-protection and constitutes the law of
overruling necessity. Any measure intended to promote the health, peace, morals, education and good order of the
people or to increase the industries of the state, develop its resources and add to its wealth and prosperity, is a
legitimate exercise of the police power, and unless shown to be whimsical or capricious as to unduly interfere with the
rights of an individual, the same must be upheld.
9. ID.; ID.; ID.; ID.; ID. — Act No. 1639 is designed to promote peace and order in the non-Christian tribes so
as to remove all obstacles to their moral and intellectual growth and, eventually, to hasten their equalization and
unification with the rest of their Christian brothers. Its ultimate purpose can be no other than to unify the Filipino
people with a view to a greater Philippines. The law, then, does not seek to mark the non-Christian tribes as "an
inferior or less capable race." On the contrary, all measures thus far adopted in the promotion of the public policy
towards them rest upon a recognition of their inherent right to equality in the enjoyment of those privileges now
enjoyed by their Christian brothers. But as there can be no true equality before the law, if there is, in fact, no equality
in education, the government has endeavored, by appropriate measures, to raise their culture and civilization and
secure for them the benefits of their progress, with the ultimate end in view of placing them with their Christian
brothers on the basis of true equality.
10. ID; ID.; ID.; ID; ID.; PRINCIPLE OF "SALUS POPULI SUPREMA EST LEX". — In the constitutional scheme
of our government, this court can go no farther than to inquire whether the Legislature had the power to enact the
law. If the power exists, and we bold it does exist, the wisdom of the policy adopted, and the adequacy under existing
conditions of the measures enacted to forward it, are matters which this court has no authority to pass upon. And, if in
the application of the law, the educated non-Christians shall incidentally suffer, the justification still exists in the all-
comprehending principle of salus populi suprema est lex.
11. ID.; ID.; ID.; ID.; ID.; ID.; PUBLIC AND PRIVATE INTERESTS. — When the public safety or the public
morals require the discontinuance of a certain practice by a certain class of persons, the hand of the Legislature
cannot be stayed from providing for its discontinuance by any incidental inconvenience which some members of the
class may suffer. The private interests of such members must yield to the paramount interests of the nation (Of,
Boston Beer Co. V8. Mass., 97 U. S., 26; 24 Law. ed., 989).
MORAN, J.:
Prosecuted for violation of Act No. 1639 (secs. 2 and 3), the accused, Cayat, a native of Baguio, Benguet, Mountain
Province, was sentenced by the justice of the peace court of Baguio to pay a fine of five pesos (P5) or suffer
subsidiary imprisonment in case of insolvency. On appeal of the Court of First Instance, the following information was
filed against him:
That on or about the 25th day of January, 1937, in the City of Baguio, Commonwealth of the Philippines, and
within the jurisdiction of this court, the above-named accused, Cayat, being a member of the non-Christian
tribes, did then and there willfully, unlawfully, and illegally receive, acquire, and have in his possession and
under his control or custody, one bottle of A-1-1 gin, an intoxicating liquor, other than the so-called native
wines and liquors which the members of such tribes have been accustomed themselves to make prior to the
passage of Act No. 1639.
Accused interposed a demurrer which was overruled. At the trial, he admitted all the facts alleged in the information,
but pleaded not guilty to the charge for the reasons adduced in his demurrer and submitted the case on the
pleadings. The trial court found him guilty of the crime charged and sentenced him to pay a fine of fifty pesos (P50) or
supper subsidiary imprisonment in case of insolvency. The case is now before this court on appeal. Sections 2 and 3
of Act No. 1639 read:
SEC. 2. It shall be unlawful for any native of the Philippine Islands who is a member of a non-Christian tribe
within the meaning of the Act Numbered Thirteen hundred and ninety-seven, to buy, receive, have in his
possession, or drink any ardent spirits, ale, beer, wine, or intoxicating liquors of any kind, other than the so-
called native wines and liquors which the members of such tribes have been accustomed themselves to
make prior to the passage of this Act, except as provided in section one hereof; and it shall be the duty of
any police officer or other duly authorized agent of the Insular or any provincial, municipal or township
government to seize and forthwith destroy any such liquors found unlawfully in the possession of any
member of a non-Christian tribe.
SEC. 3. Any person violating the provisions of section one or section two of this Act shall, upon conviction
thereof, be punishable for each offense by a fine of not exceeding two hundred pesos or by imprisonment for
a term not exceeding six months, in the discretion of the court.
The accused challenges the constitutionality of the Act on the following grounds:
(1) That it is discriminatory and denies the equal protection of the laws;
(2) That it is violative of the due process clause of the Constitution: and.
(3) That it is improper exercise of the police power of the state.

Counsel for the appellant holds out his brief as the "brief for the non-Christian tribes." It is said that as these less
civilized elements of the Filipino population are "jealous of their rights in a democracy," any attempt to treat them with
discrimination or "mark them as inferior or less capable rate or less entitled" will meet with their instant challenge. As
the constitutionality of the Act here involved is questioned for purposes thus mentioned, it becomes imperative to
examine and resolve the issues raised in the light of the policy of the government towards the non-Christian tribes
adopted and consistently followed from the Spanish times to the present, more often with sacrifice and tribulation but
always with conscience and humanity.
As early as 1551, the Spanish Government had assumed an unvarying solicitous attitude toward these inhabitants,
and in the different laws of the Indies, their concentration in so-called "reducciones" (communities) have been
persistently attempted with the end in view of according them the "spiritual and temporal benefits" of civilized life.
Throughout the Spanish regime, it had been regarded by the Spanish Government as a sacred "duty to conscience
and humanity" to civilize these less fortunate people living "in the obscurity of ignorance" and to accord them the "the
moral and material advantages" of community life and the "protection and vigilance afforded them by the same laws."
(Decree of the Governor-General of the Philippines, Jan. 14, 1887.) This policy had not been deflected from during
the American period. President McKinley in his instructions to the Philippine Commission of April 7, 1900, said:
In dealing with the uncivilized tribes of the Islands, the Commission should adopt the same course followed
by Congress in permitting the tribes of our North American Indians to maintain their tribal organization and
government, and under which many of those tribes are now living in peace and contentment, surrounded by
civilization to which they are unable or unwilling to conform. Such tribal government should, however, be
subjected to wise and firm regulation; and, without undue or petty interference, constant and active effort
should be exercised to prevent barbarous practices and introduce civilized customs.
Since then and up to the present, the government has been constantly vexed with the problem of determining "those
practicable means of bringing about their advancement in civilization and material prosperity." (See, Act No. 253.)
"Placed in an alternative of either letting them alone or guiding them in the path of civilization," the present
government "has chosen to adopt the latter measure as one more in accord with humanity and with the national
conscience." (Memorandum of Secretary of the Interior, quoted in Rubi vs. Provincial Board of Mindoro, 39 Phil., 660,
714.) To this end, their homes and firesides have been brought in contact with civilized communities through a
network of highways and communications; the benefits of public education have to them been extended; and more
lately, even the right of suffrage. And to complement this policy of attraction and assimilation, the Legislature has
passed Act No. 1639 undoubtedly to secure for them the blessings of peace and harmony; to facilitate, and not to
mar, their rapid and steady march to civilization and culture. It is, therefore, in this light that the Act must be
understood and applied.
It is an established principle of constitutional law that the guaranty of the equal protection of the laws is not equal
protection of the laws is not violated by a legislation based on reasonable classification. And the classification, to be
reasonable, (1) must rest on substantial distinctions; (2) must be germane to the purposes of the law; (3) must not be
limited to existing conditions only; and (4) must apply equally to all members of the same class. (Borgnis vs. Falk Co.,
133 N.W., 209; Lindsley vs. Natural Carbonic Gas Co., 220 U.S. 61; 55 Law. ed., Rubi vs. Provincial Board of
Mindoro, 39 Phil., 660; People and Hongkong & Shanghai Banking Corporation vs. Vera and Cu Unjieng, 37 Off. Gaz
., 187.)
Act No. 1639 satisfies these requirements. The classification rests on real and substantial, not merely imaginary or
whimsical, distinctions. It is not based upon "accident of birth or parentage," as counsel to the appellant asserts, but
upon the degree of civilization and culture. "The term 'non-Christian tribes' refers, not to religious belief, but, in a way,
to the geographical area, and, more directly, to natives of the Philippine Islands of a low grade of civilization, usually
living in tribal relationship apart from settled communities." (Rubi vs. Provincial Board of Mindoro, supra.) This
distinction is unquestionably reasonable, for the Act was intended to meet the peculiar conditions existing in the non-
Christian tribes. The exceptional cases of certain members thereof who at present have reached a position of cultural
equality with their Christian brothers, cannot affect the reasonableness of the classification thus established.
That it is germane to the purposes of law cannot be doubted. The prohibition "to buy, receive, have in his possession,
or drink any ardent spirits, ale, beer, wine, or intoxicating liquors of any kind, other than the so-called native wines
and liquors which the members of such tribes have been accustomed themselves to make prior to the passage of this
Act.," is unquestionably designed to insure peace and order in and among the non-Christian tribes. It has been the
sad experience of the past, as the observations of the lower court disclose, that the free use of highly intoxicating
liquors by the non-Christian tribes have often resulted in lawlessness and crimes, thereby hampering the efforts of the
government to raise their standard of life and civilization.
The law is not limited in its application to conditions existing at the time of its enactment. It is intended to apply for all
times as long as those conditions exist. The Act was not predicated, as counsel for appellant asserts, upon the
assumption that the non-Christians are "impermeable to any civilizing influence." On the contrary, the Legislature
understood that the civilization of a people is a slow process and that hand in hand with it must go measures of
protection and security.
Finally, that the Act applies equally to all members of the class is evident from a perusal thereof. That it may be unfair
in its operation against a certain number non-Christians by reason of their degree of culture, is not an argument
against the equality of its application.
Appellants contends that that provision of the law empowering any police officer or other duly authorized agent of the
government to seize and forthwith destroy any prohibited liquors found unlawfully in the possession of any member of
the non-Christian tribes is violative of the due process of law provided in the Constitution. But this provision is not
involved in the case at bar. Besides, to constitute due process of law, notice and hearing are not always necessary.
This rule is especially true where much must be left to the discretion of the administrative officials in applying a law to
particular cases. (McGehee, Due Process of Law p. 371, cited with approval in Rubi vs. Provincial Board of Mindoro,
supra.) Due process of law means simply: (1) that there shall be a law prescribed in harmony with the general powers
of the legislative department of the government; (2) that it shall be reasonable in its operation; (3) that it shall be
enforced according to the regular methods of procedure prescribed; and (4) that it shall be applicable alike to all
citizens of the state or to all of the class. (U.S. vs. Ling Su Fan, 10 Phil., 104, affirmed on appeal by the United States
Supreme Court, 218 U.S., 302: 54 Law. ed., 1049.) Thus, a person's property may be seized by the government in
payment of taxes without judicial hearing; or property used in violation of law may be confiscated (U.S. vs. Surla, 20
Phil., 163, 167), or when the property constitutes corpus delicti, as in the instant case (Moreno vs. Ago Chi, 12 Phil.,
439, 442).
Neither is the Act an improper exercise of the police power of the state. It has been said that the police power is the
most insistent and least limitable of all powers of the government. It has been aptly described as a power co-
extensive with self-protection and constitutes the law of overruling necessity. Any measure intended to promote the
health, peace, morals, education and good order of the people or to increase the industries of the state, develop its
resources and add to its wealth and prosperity (Barbier vs. Connolly, 113 U.S., 27), is a legitimate exercise of the
police power, unless shown to be whimsical or capricious as to unduly interfere with the rights of an individual, the
same must be upheld.
Act No. 1639, as above stated, is designed to promote peace and order in the non-Christian tribes so as to remove all
obstacles to their moral and intellectual growth and, eventually, to hasten their equalization and unification with the
rest of their Christian brothers. Its ultimate purpose can be no other than to unify the Filipino people with a view to a
greater Philippines.
The law, then, does not seek to mark the non-Christian tribes as "an inferior or less capable race." On the contrary,
all measures thus far adopted in the promotion of the public policy towards them rest upon a recognition of their
inherent right to equality in tht enjoyment of those privileges now enjoyed by their Christian brothers. But as there can
be no true equality before the law, if there is, in fact, no equality in education, the government has endeavored, by
appropriate measures, to raise their culture and civilization and secure for them the benefits of their progress, with the
ultimate end in view of placing them with their Christian brothers on the basis of true equality. It is indeed gratifying
that the non-Christian tribes "far from retrograding, are definitely asserting themselves in a competitive world," as
appellant's attorney impressively avers, and that they are "a virile, up-and -coming people eager to take their place in
the world's social scheme." As a matter of fact, there are now lawyers, doctors and other professionals educated in
the best institutions here and in America. Their active participation in the multifarious welfare activities of community
life or in the delicate duties of government is certainly a source of pride and gratification to people of the Philippines.
But whether conditions have so changed as to warrant a partial or complete abrogation of the law, is a matter which
rests exclusively within the prerogative of the National Assembly to determine. In the constitutional scheme of our
government, this court can go no farther than to inquire whether the Legislature had the power to enact the law. If the
power exists, and we hold it does exist, the wisdom of the policy adopted, and the adequacy under existing conditions
of the measures enacted to forward it, are matters which this court has no authority to pass upon. And, if in the
application of the law, the educated non-Christians shall incidentally suffer, the justification still exists in the all-
comprehending principle of salus populi suprema est lex. When the public safety or the public morals require the
discontinuance of a certain practice by certain class of persons, the hand of the Legislature cannot be stayed from
providing for its discontinuance by any incidental inconvenience which some members of the class may suffer. The
private interests of such members must yield to the paramount interests of the nation (Cf. Boston Beer Co. vs. Mass.,
97 U.S., 25; 24 law. ed., 989).
Judgment is affirmed, with costs against appellant.
Avanceña, C.J., Villa-Real, Imperial, Diaz, Laurel, and Conception, JJ., concur
EN BANC
G.R. No. L-23794 February 17, 1968
ORMOC SUGAR COMPANY, INC., plaintiff-appellant,

vs.
THE TREASURER OF ORMOC CITY, THE MUNICIPAL BOARD OF ORMOC CITY, HON. ESTEBAN C.
CONEJOS as Mayor of Ormoc City and ORMOC CITY, defendants-appellees.
Ponce Enrile, Siguion Reyna, Montecillo & Belo and Teehankee, Carreon & Tañada for plaintiff-appellant.
Ramon O. de Veyra for defendants-appellees.
SYLLABUS
1. MUNICIPAL CORPORATIONS; POWER TO IMPOSE EXPORT OR IMPORT TAX; REP. ACT 2264, SEC.
2; EFFECT ON SEC. 2287 OF REVISED ADMINISTRATIVE CODE. — Section 2 of Rep. Act 2264 which became
effective on June 19, 1959, gave chartered cities, municipalities and municipal districts authority to levy for public
purposes just and uniform taxes, licenses or fees. This provision of law has repealed Sec. 2287 of the Revised
Administrative Code (Nin Bay Mining Co. vs. Municipality of Roxas, L-20125, July 20, 1965), which withheld from
municipalities the power to impose an import or export tax upon such goods in the guise of an unreasonable charge
for wharfage.
2. CONSTITUTIONAL LAW; EQUAL PROTECTION OF LAW; REASONABLE CLASSIFICATION;

REQUISITES. — The equal protection clause applies only to persons or things identically situated and does not bar a
reasonable classification of the subject of legislation. A classification is reasonable where (1) it is based on
substantial distinctions which make real differences; (2) these are germane to the purpose of the law; (3) the
classification applies not only to present conditions but also to future conditions which are substantially identical to
those of the present; (4) the classification applies only to those who belong to the same class.
3. ID.; ID.; ID.; TAX ORDINANCE SHOULD NOT BE SINGULAR AND EXCLUSIVE. — When the taxing
ordinance was enacted, Ormoc Sugar Co,, Inc. was the only sugar central in the City. A reasonable classification
should be in terms applicable to future conditions as well. The taxing ordinance should not be singular and exclusive
as to exclude any subsequently established sugar central.
4. TAXATION; TAX, REFUND OF; NO INTEREST CAN BE CLAIMED; REASONS. — Appellant is not entitled
to interest on the refund because the taxes were not arbitrarily collected. There is sufficient basis to preclude
arbitrariness. The constitutionality of the statute is presumed until declared otherwise.
BENGZON, J.P., J.:
On January 29, 1964, the Municipal Board of Ormoc City passed 1 Ordinance No. 4, Series of 1964, imposing
"on any and all productions of centrifugal sugar milled at the Ormoc Sugar Company, Inc., in Ormoc City a municipal
tax equivalent to one per centum (1%) per export sale to the United States of America and other foreign countries." 2
Payments for said tax were made, under protest, by Ormoc Sugar Company, Inc. on March 20, 1964 for
P7,087.50 and on April 20, 1964 for P5,000, or a total of P12,087.50.
On June 1, 1964, Ormoc Sugar Company, Inc. filed before the Court of First Instance of Leyte, with service of a
copy upon the Solicitor General, a complaint 3 against the City of Ormoc as well as its Treasurer, Municipal Board and
Mayor, alleging that the afore-stated ordinance is unconstitutional for being violative of the equal protection clause
(Sec. 1[1], Art. III, Constitution) and the rule of uniformity of taxation (Sec. 22[1]), Art. VI, Constitution), aside from
being an export tax forbidden under Section 2287 of the Revised Administrative Code. It further alleged that the tax is
neither a production nor a license tax which Ormoc City under Section 15-kk of its charter and under Section 2 of
Republic Act 2264, otherwise known as the Local Autonomy Act, is authorized to impose; and that the tax amounts to
a customs duty, fee or charge in violation of paragraph 1 of Section 2 of Republic Act 2264 because the tax is on both
the sale and export of sugar.
Answering, the defendants asserted that the tax ordinance was within defendant city's power to enact under
the Local Autonomy Act and that the same did not violate the afore-cited constitutional limitations. After pre-trial and
submission of the case on memoranda, the Court of First Instance, on August 6, 1964, rendered a decision that
upheld the constitutionality of the ordinance and declared the taxing power of defendant chartered city broadened by
the Local Autonomy Act to include all other forms of taxes, licenses or fees not excluded in its charter.
Appeal therefrom was directly taken to Us by plaintiff Ormoc Sugar Company, Inc. Appellant alleges the same
statutory and constitutional violations in the aforesaid taxing ordinance mentioned earlier.
Section 1 of the ordinance states: "There shall be paid to the City Treasurer on any and all productions of
centrifugal sugar milled at the Ormoc Sugar Company, Incorporated, in Ormoc City, a municipal tax equivalent to one
per centum (1%) per export sale to the United States of America and other foreign countries." Though referred to as a
tax on the export of centrifugal sugar produced at Ormoc Sugar Company, Inc. For production of sugar alone is not
taxable; the only time the tax applies is when the sugar produced is exported.
Appellant questions the authority of the defendant Municipal Board to levy such an export tax, in view of
Section 2287 of the Revised Administrative Code which denies from municipal councils the power to impose an
export tax. Section 2287 in part states: "It shall not be in the power of the municipal council to impose a tax in any
form whatever, upon goods and merchandise carried into the municipality, or out of the same, and any attempt to
impose an import or export tax upon such goods in the guise of an unreasonable charge for wharfage use of bridges
or otherwise, shall be void."
Subsequently, however, Section 2 of Republic Act 2264 effective June 19, 1959, gave chartered cities,
municipalities and municipal districts authority to levy for public purposes just and uniform taxes, licenses or fees.
Anent the inconsistency between Section 2287 of the Revised Administrative Code and Section 2 of Republic Act
2264, this Court, in Nin Bay Mining Co. v. Municipality of Roxas 4 held the former to have been repealed by the latter.
And expressing Our awareness of the transcendental effects that municipal export or import taxes or licenses will
have on the national economy, due to Section 2 of Republic Act 2264, We stated that there was no other alternative
until Congress acts to provide remedial measures to forestall any unfavorable results.
The point remains to be determined, however, whether constitutional limits on the power of taxation,
specifically the equal protection clause and rule of uniformity of taxation, were infringed.
The Constitution in the bill of rights provides: ". . . nor shall any person be denied the equal protection of the
laws." (Sec. 1 [1], Art. III) In Felwa vs. Salas, 5 We ruled that the equal protection clause applies only to persons or
things identically situated and does not bar a reasonable classification of the subject of legislation, and a classification
is reasonable where (1) it is based on substantial distinctions which make real differences; (2) these are germane to
the purpose of the law; (3) the classification applies not only to present conditions but also to future conditions which
are substantially identical to those of the present; (4) the classification applies only to those who belong to the same
class.
A perusal of the requisites instantly shows that the questioned ordinance does not meet them, for it taxes only
centrifugal sugar produced and exported by the Ormoc Sugar Company, Inc. and none other. At the time of the taxing
ordinance's enactment, Ormoc Sugar Company, Inc., it is true, was the only sugar central in the city of Ormoc. Still,
the classification, to be reasonable, should be in terms applicable to future conditions as well. The taxing ordinance
should not be singular and exclusive as to exclude any subsequently established sugar central, of the same class as
plaintiff, for the coverage of the tax. As it is now, even if later a similar company is set up, it cannot be subject to the
tax because the ordinance expressly points only to Ormoc City Sugar Company, Inc. as the entity to be levied upon.
Appellant, however, is not entitled to interest; on the refund because the taxes were not arbitrarily collected
(Collector of Internal Revenue v. Binalbagan). 6 At the time of collection, the ordinance provided a sufficient basis to
preclude arbitrariness, the same being then presumed constitutional until declared otherwise.
WHEREFORE, the decision appealed from is hereby reversed, the challenged ordinance is declared
unconstitutional and the defendants-appellees are hereby ordered to refund the P12,087.50 plaintiff-appellant paid
under protest. No costs. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur. 1äwphï1.ñët
Footnotes
1
Resolution No. 30, Series of 1964.
2
Section 1, emphasis supplied.
3
An action for declaratory judgment was also filed on May 23, 1964 (Civil Case No. 665-0) but this and the
present case were tried jointly.
4
L-20125, July 20, 1965.
5
L-26511, Oct. 29, 1966.
6
L-12752, Jan. 30, 1965.
EN BANC
G.R. No. L-4376 May 22, 1953
ASSOCIATION OF CUSTOMS BROKERS, INC. and G. MANLAPIT, INC., petitioners-appellants,

vs.
THE MUNICIPALITY BOARD, THE CITY TREASURER, THE CITY ASSESSOR and THE CITY MAYOR, all of the
City of Manila, respondents-appellees.
Teotimo A. Roja for appellants.

City Fiscal Eugenio Angeles and Assistant Fiscal Eulogio S. Serrano for appellees.
SYLLABUS
1. TAXATION; TAXES ON MOTOR VEHICLES; NO FEES OTHER THAN PROPERTY TAX AND THOSE
PROVIDED IN ACT No. 3992 MAY BE EXACTED ON MOTOR VEHICLES. — Under section 70-b of Act No. 3992 as
amended, no fees may be exacted or demanded for the operation of any motor vehicle other than those therein
provided, the only exception being that which refers to property tax which may be imposed by a municipal
corporation. This provision is all-inclusive in the sense that it applies to all motor vehicles. In this sense, this provision
should be construed as limiting the broad grant of power conferred upon the City of Manila by its Charter to impose
taxes. When Section 18 of said Charter provides that the City of Manila can impose a tax on motor vehicles operating
within its limits, it can only refer to property tax, as a different interpretation would make it repugnant to the Motor
Vehicle Law.
2. ID.; CONSTITUTIONAL LAW; ORDINANCE No. 3379 OF MANILA, INVALID; PROPERTY TAX,
DISTINGUISHED FROM EXCISE TAX OR LICENSE FEE. — While Ordinance No. 3379 of the City of Manila refers
to property tax and it is fixed ad volorem yet we can not reject the idea that it is merely levied on motor vehicles
operating within the said city with the main purpose of raising funds to be expended exclusively for the repair,
maintenance and improvement of the streets and bridges in said city. This is precisely what the Motor Vehicle Law
(Act No. 3992) intends to prevent, for the reason that, under said Act, municipal corporations already participate in
the distribution of the proceeds that are raised for the same purpose of repairing, maintaining and improving bridges
and public highways (Motor Vehicle Law, sec. 73). This prohibition is intended to prevent duplication in the imposition
of fees for the same purpose. It is for this reason that it is believed that the ordinance in question merely imposes a
license fee although under the cloak of an ad valorem tax to circumvent the prohibition adverted to.
3. ID.; ID.; ID.; UNIFORMITY OF TAXATION. — The said ordinance infringes also the rule of uniformity of
taxation ordained by our Constitution. It exacts the tax upon all motor vehicles operating within the City of Manila. It
does not distinguish between a motor vehicle for hire and one which is purely for private use. Neither does it
distinguish between a motor vehicle registered in the City of Manila and one registered in another place but
occasionally comes to Manila and uses its streets and public highways. There is no pretense that the ordinance
equally applies to motor vehicles which come to Manila for a temporary stay or for short errands, and it cannot be
denied that they contribute in no small degree to the deterioration of the streets and public highways. As they are
benefited by their use they should also be made to share the corresponding burden. This is an inequality which is
found in the ordinance in question end which renders it offensive to the Constitution.
BAUTISTA ANGELO, J.:
This is a petition for declaratory relief to test the validity of Ordinance No. 3379 passed by the Municipal Board of the
City of Manila on March 24, 1950.
The Association of Customs Brokers, Inc., which is composed of all brokers and public service operators of motor
vehicles in the City of Manila, and G. Manlapit, Inc., a member of said association, also a public service operator of
the trucks in said City, challenge the validity of said ordinance on the ground that (1) while it levies a so-called
property tax it is in reality a license tax which is beyond the power of the Municipal Board of the City of Manila; (2)
said ordinance offends against the rule of uniformity of taxation; and (3) it constitutes double taxation.
The respondents, represented by the city fiscal, contend on their part that the challenged ordinance imposes a
property tax which is within the power of the City of Manila to impose under its Revised Charter [Section 18 (p) of
Republic Act No. 409], and that the tax in question does not violate the rule of uniformity of taxation, nor does it
constitute double taxation.
The issues having been joined, the Court of First Instance of Manila sustained the validity of the ordinance and
dismissed the petition. Hence this appeal.
The disputed ordinance was passed by the Municipal Board of the City of Manila under the authority conferred by
section 18 (p) of Republic Act No. 409. Said section confers upon the municipal board the power "to tax motor and
other vehicles operating within the City of Manila the provisions of any existing law to the contrary notwithstanding." It
is contended that this power is broad enough to confer upon the City of Manila the power to enact an ordinance
imposing the property tax on motor vehicles operating within the city limits.
In the deciding the issue before us it is necessary to bear in mind the pertinent provisions of the Motor Vehicles Law,
as amended, (Act No. 3992) which has a bearing on the power of the municipal corporation to impose tax on motor
vehicles operating in any highway in the Philippines. The pertinent provisions are contained in section 70 (b) which
provide in part:
No further fees than those fixed in this Act shall be exacted or demanded by any public highway, bridge or
ferry, or for the exercise of the profession of chauffeur, or for the operation of any motor vehicle by the
owner thereof: Provided, however, That nothing in this Act shall be construed to exempt any motor vehicle
from the payment of any lawful and equitable insular, local or municipal property tax imposed thereupon. . . .
Note that under the above section no fees may be exacted or demanded for the operation of any motor vehicle other
than those therein provided, the only exception being that which refers to the property tax which may be imposed by
a municipal corporation. This provision is all-inclusive in that sense that it applies to all motor vehicles. In this sense,
this provision should be construed as limiting the broad grant of power conferred upon the City of Manila by its
Charter to impose taxes. When section 18 of said Charter provides that the City of Manila can impose a tax on motor
vehicles operating within its limit, it can only refers to property tax as a different interpretation would make it
repugnant to the Motor Vehicle Law.
Coming now to the ordinance in question, we find that its title refers to it as "An Ordinance Levying a Property Tax on
All Motor Vehicles Operating Within the City of Manila", and that in its section 1 it provides that the tax should be 1
per cent ad valorem per annum. It also provides that the proceeds of the tax "shall accrue to the Streets and Bridges
Funds of the City and shall be expended exclusively for the repair, maintenance and improvement of its streets and
bridges." Considering the wording used in the ordinance in the light in the purpose for which the tax is created, can
we consider the tax thus imposed as property tax, as claimed by respondents?
While as a rule an ad valorem tax is a property tax, and this rule is supported by some authorities, the rule should not
be taken in its absolute sense if the nature and purpose of the tax as gathered from the context show that it is in
effect an excise or a license tax. Thus, it has been held that "If a tax is in its nature an excise, it does not become a
property tax because it is proportioned in amount to the value of the property used in connection with the occupation,
privilege or act which is taxed. Every excise necessarily must finally fall upon and be paid by property and so may be
indirectly a tax upon property; but if it is really imposed upon the performance of an act, enjoyment of a privilege, or
the engaging in an occupation, it will be considered an excise." (26 R. C. L., 35-36.) It has also been held that
The character of the tax as a property tax or a license or occupation tax must be determined by its incidents,
and from the natural and legal effect of the language employed in the act or ordinance, and not by the name
by which it is described, or by the mode adopted in fixing its amount. If it is clearly a property tax, it will be so
regarded, even though nominally and in form it is a license or occupation tax; and, on the other hand, if the
tax is levied upon persons on account of their business, it will be construed as a license or occupation tax,
even though it is graduated according to the property used in such business, or on the gross receipts of the
business. (37 C.J., 172)
The ordinance in question falls under the foregoing rules. While it refers to property tax and it is fixed ad valorem yet
we cannot reject the idea that it is merely levied on motor vehicles operating within the City of Manila with the main
purpose of raising funds to be expended exclusively for the repair, maintenance and improvement of the streets and
bridges in said city. This is precisely what the Motor Vehicle Law (Act No. 3992) intends to prevent, for the reason
that, under said Act, municipal corporation already participate in the distribution of the proceeds that are raised for the
same purpose of repairing, maintaining and improving bridges and public highway (section 73 of the Motor Vehicle
Law). This prohibition is intended to prevent duplication in the imposition of fees for the same purpose. It is for this
reason that we believe that the ordinance in question merely imposes a license fee although under the cloak of an ad
valorem tax to circumvent the prohibition above adverted to.
It is also our opinion that the ordinance infringes the rule of the uniformity of taxation ordained by our Constitution.
Note that the ordinance exacts the tax upon all motor vehicles operating within the City of Manila. It does not
distinguish between a motor vehicle for hire and one which is purely for private use. Neither does it distinguish
between a motor vehicle registered in the City of Manila and one registered in another place but occasionally comes
to Manila and uses its streets and public highways. The distinction is important if we note that the ordinance intends
to burden with the tax only those registered in the City of Manila as may be inferred from the word "operating" used
therein. The word "operating" denotes a connotation which is akin to a registration, for under the Motor Vehicle Law
no motor vehicle can be operated without previous payment of the registration fees. There is no pretense that the
ordinance equally applies to motor vehicles who come to Manila for a temporary stay or for short errands, and it
cannot be denied that they contribute in no small degree to the deterioration of the streets and public highway. The
fact that they are benefited by their use they should also be made to share the corresponding burden. And yet such is
not the case. This is an inequality which we find in the ordinance, and which renders it offensive to the Constitution.
Wherefore, reversing the decision appealed from, we hereby declare the ordinance null and void.
Paras, C.J., Bengzon and Tuason, JJ., concur.

Montemayor, Reyes, Jugo and Labrador, JJ., concur in the result.
Separate Opinions
FERIA, J., concurring:
I concur on the ground that it is a license tax.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-6093 February 24, 1954
THE SHELL CO. OF P.I., LTD., plaintiff-appellant,

vs.
E. E. VAÑO, as Municipal Treasurer of the Municipality of Cordova, Province of Cebu,
defendant-appellee.
C.J. Johnston and A.P. Deen for appellant.

Provincial Fiscal Jose C. Borromeo and Assistant Provincial Fiscal Ananias V. Maribao for appellee.
PADILLA, J.:
The Municipal Council of Cordova, Province of Cebu, adopted the following ordinances: No. 10,
series of 1946, which imposes an annual tax of P150 on occupation or the exercise of the privilege
of installation manager; No. 9, series of 1947, which imposes an annual tax of P40 for local deposits
in drums of combustible and inflammable materials and an annual tax of P200 for tin can factories;
and No. 11, series of 1948, which imposes an annual tax of P150 on tin can factories having a
maximum output capacity of 30,000 tin cans. The Shell Co. of P.I. Ltd., a foreign corporation, filed
suit for the refund of the taxes paid by it, on the ground that the ordinances imposing such taxes are
ultra vires. The defendant denies that they are so. The controversy was submitted for judgment upon
stipulation of facts which reads as follows:
Come now the parties in the above-entitled case by their undersigned attorneys and hereby
agree to the following stipulation of facts:
1. That the parties admit the allegations contained in Paragraph 1 of the Amended Complaint
referring to residence, personality, and capacity of the parties except the fact that E.E. Vaño
is now replaced by F.A. Corbo as Municipal Treasurer of Cordova, Cebu;
2. That the parties admit the allegations contained in paragraph 2 of the Amended
Complaint. Official Receipts Nos. A-1280606, A-37607422, A-3769852 and A-21030388 are
herein marked as Exhibits A, B, C, and D, respectively for the plaintiff;
3. That the parties admit that payments made under Exhibits B, C, and D were all under
protest and plaintiff admits that Exhibit A was not paid under protest;
4. That the parties admit that Official Receipt No. A-1280606 for P40 and Official Receipt No.
A-3760742 for P200 were collected by the defendant by virtue of Ordinance No. 9, (Secs. E-
4 and E-6, respectively) under Resolution No. 31, series of 1947, enacted December 15,
1947, approved by the Provincial Board of Cebu in its Resolution No. 644, series of 1948.
Copy of said Ordinance No. 9, series of 1947, is herein marked as Exhibit "E" for the plaintiff,
and as Exhibit "I" for the defendant;
5. That the parties admit that Official Receipt No. A-3760852 for P150 was paid for taxes
imposed on Installation Managers, collected by the defendant by virtue of Ordinance No. 10
(section 3, E-12) under Resolution No. 38, series of 1946, approved by the Provincial Board
of Cebu in its Resolution No. 1070, series of 1946. Copy of .said Ordinance No. 10, series of
1946 is marked as Exhibit "F" for the plaintiff and as Exhibit "2" for the defendant;
6. That the parties admit that Official Receipt No. A-21030388 for P5,450 was paid by
plaintiff and that said amount was collected by defendant by virtue of Ordinance No. 11,
series of 1948 (under Resolution No. 46) enacted August 31, 1948 and approved by the
Provincial Board of Cebu in its Resolution No. 115, series of 1949, and same was approved
by the Honorable Secretary of Finance under the provisions of section 4 of Commonwealth
Act No. 472. Copy of said Ordinance No. 11, series of 1948 is herein marked as Exhibit "G"
for the plaintiff, and Exhibit "3" for the defendant. Copy of the approval of the Honorable
Secretary of Finance of the same Ordinance is herein marked as Exhibit "4" for the
defendant.
Wherefore, aside from oral evidence which may be offered by the parties and other points
not covered by this stipulation, this case is hereby submitted upon the foregoing agreed facts
and record of evidence.
Cebu City, Philippines, January 20, 1950.
THE SHELL CO. OF P.I. LTD. C.D. JOHNSTON & A.P. DEEN
(Sgd.) L. DE BLECHYNDEN (Sgd.) A.P. DEEN
Plaintiff Attys. for the plaintiff
THE MUNICIPALITY OF CORDOVA (Sgd.) JOSE C. BORROMEO

(Sgd.) F.A. CORBO Provincial Fiscal
Defendant Attorney for the defendant
(Record on Appeal, pp. 15-18.)
The parties reserved the right to introduce parole evidence but no such evidence was submitted by
either party. From the judgment holding the ordinances valid and dismissing the complaint the
plaintiff has appealed.
It is contended that as the municipal ordinance imposing an annual tax of P40 for "minor local
deposit in drums of combustible and inflammable materials," and of P200 "for tin factory" was
adopted under and pursuant to section 2244 of the Revised Administrative Code, which provides
that the municipal council in the exercise of the regulative authority may require any person engaged
in any business or occupation, such as "storing combustible or explosive materials" or "the
conducting of any other business of an unwholesome, obnoxious, offensive, or dangerous
character," to obtain a permit for which a reasonable fee, in no case to exceed P10 per annum, may
be charged, the annual tax of P40 and P200 are unauthorized and illegal. The permit and the fee
referred to may be required and charged by the Municipal Council of Cordova in the exercise of its
regulative authority, whereas the ordinance which imposes the taxes in question was adopted under
and pursuant to the provisions of Commonwealth Act No. 472, which authorizes municipal councils
and municipal district councils "to impose license taxes upon persons engaged in any occupation or
business, or exercising privileges in the municipality or municipal district, by requiring them to secure
licenses at rates fixed by the municipal council or municipal district council," which shall be just and
uniform but not "percentage taxes and taxes on specified articles." Likewise, Ordinance No. 10,
series of 1946, which imposes an annual tax of P150 on "installation manager" comes under the
provisions of Commonwealth Act No. 472. But it is claimed that "installation manager" is a
designation made by the plaintiff and such designation cannot be deemed to be a "calling" as
defined in section 178 of the National Internal Revenue Code (Com. Act No. 466), and that the
installation manager employed by the plaintiff is a salaried employee which may not be taxed by the
municipal council under the provisions of Commonwealth Act No. 472. This contention is without
merit, because even if the installation manager is a salaried employee of the plaintiff, still it is an
occupation "and one occupation or line of business does not become exempt by being conducted
with some other occupation or business for which such tax has been paid'1 and the occupation tax
must be paid "by each individual engaged in a calling subject thereto."2 And pursuant to section 179
of the National Internal Revenue Code, "The payment of . . . occupation tax shall not exempt any
person from any tax, . . . provided by law or ordinance in places where such . . . occupation in . . .
regulated by municipal law, nor shall the payment of any such tax be held to prohibit any municipality
from placing a tax upon the same . . . occupation, for local purposes, where the imposition of such
tax is authorized by law." It is true that, according to the stipulation of facts, Ordinance No. 10, series
of 1946, was approved by the Provincial Board of Cebu in its Resolution No. 1070, series of 1946,
and that it does not appear that it was approved by the Department of Finance, as provided for and
required in section 4, paragraph 2, of Commonwealth Act No. 472, the rate of municipal tax being in
excess of P50 per annum. But at this point on the approval of the Department of Finance was not
raised in the court below, it cannot be raised for the first time on appeal. The issue joined by the
parties in their pleadings and the point raised by the plaintiff is that the municipal council was not
empowered to adopt the ordinance and not that it was not approved by the Department of Finance.
The fact that it was not stated in the stipulation of facts justifies the presumption that the ordinance
was approved in accordance with law.
The contention that the ordinance is discriminatory and hostile because there is no other person in
the locality who exercises such "designation" or occupation is also without merit, because the fact
that there is no other person in the locality who exercises such a "designation" or calling does not
make the ordinance discriminatory and hostile, inasmuch as it is and will be applicable to any person
or firm who exercises such calling or occupation named or designated as "installation manager."
Lastly, Ordinance No. 11, series of 1948, which imposes a municipal tax of P150 on tin can factories
having a maximum annual output capacity of 30,000 tin cans which, according to the stipulation of
facts, was approved by the Provincial Board of Cebu and the Department of Finance, is valid and
lawful, because it is neither a percentage tax nor one on specified articles which are the only
exceptions provided in section 1, Commonwealth Act No. 472. Neither does it fall under any of the
prohibitions provided for in section 3 of the same Act. Specific taxes enumerated in the National
Internal Revenue Code are those that are imposed upon "things manufactured or produced in the
Philippines for domestic sale or consumption" and upon "things imported from the United States and
foreign countries," such as distilled spirits, domestic denatured alcohol, fermented liquors, products
of tobacco, cigars and cigarettes, matches, mechanical lighters, firecrackers, skimmed milk,
manufactured oils and other fuels, coal, bunker fuel oil, diesel fuel oil, cinematographic films, playing
cards, sacharine.3 And it is not a percentage tax because it is tax on business and the maximum
annual output capacity is not a percentage, because it is not a share or a tax based on the amount
of the proceeds realized out of the sale of the tin cans manufactured therein but on the business of
manufacturing tin cans having a maximum annual output capacity of 30,000 tin cans.
In an action for refund of municipal taxes claimed to have been paid and collected under an illegal
ordinance, the real party in interest is not the municipal treasurer but the municipality concerned that
is empowered to sue and be sued.4
The judgment appealed from is hereby affirmed, with costs against the appellant.
Paras, C.J., Pablo, Bengzon, Montemayor, Reyes, Jugo, Bautista Angelo, Labrador, Concepcion
and Diokno, JJ., concur.
Footnotes
1
Section 178, National Internal Revenue Code (Com. Act. No. 466).
2
Supra.
3
Section 178, National Internal Revenue Code (Com. Act No. 466).
4
Tan vs. De la Fuente et al., 90 Phil., 519.
The Lawphil Project - Arellano Law Foundation

SECOND DIVISION
G.R. No. L-60126 September 25, 1985
CAGAYAN ELECTRIC POWER & LIGHT CO., INC., petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE and COURT OF APPEALS, respondents.
Quasha, De Guzman Makalintal & Barot for petitioner.
AQUINO, J.:
This is about the liability of petitioner Cagayan Electric Power & Light Co., Inc. for income tax amounting to
P75,149.73 for the more than seven-month period of the year 1969 in addition to franchise tax.
The petitioner is the holder of a legislative franchise, Republic Act No. 3247, under which its payment of 3% tax on its
gross earnings from the sale of electric current is "in lieu of all taxes and assessments of whatever authority upon
privileges, earnings, income, franchise, and poles, wires, transformers, and insulators of the grantee, from which
taxes and assessments the grantee is hereby expressly exempted" (Sec. 3).
On June 27, 1968, Republic Act No. 5431 amended section 24 of the Tax Code by making liable for income tax all
corporate taxpayers not specifically exempt under paragraph (c) (1) of said section and section 27 of the Tax Code
notwithstanding the "provisions of existing special or general laws to the contrary". Thus, franchise companies were
subjected to income tax in addition to franchise tax.
However, in petitioner's case, its franchise was amended by Republic Act No. 6020, effective August 4, 1969, by
authorizing the petitioner to furnish electricity to the municipalities of Villanueva and Jasaan, Misamis Oriental in
addition to Cagayan de Oro City and the municipalities of Tagoloan and Opol. The amendment reenacted the tax
exemption in its original charter or neutralized the modification made by Republic Act No. 5431 more than a year
before.
By reason of the amendment to section 24 of the Tax Code, the Commissioner of Internal Revenue in a demand
letter dated February 15, 1973 required the petitioner to pay deficiency income taxes for 1968-to 1971. The petitioner
contested the assessments. The Commissioner cancelled the assessments for 1970 and 1971 but insisted on those
for 1968 and 1969.
The petitioner filed a petition for review with the Tax Court, which on February 26, 1982 held the petitioner liable only
for the income tax for the period from January 1 to August 3, 1969 or before the passage of Republic Act No. 6020
which reiterated its tax exemption. The petitioner appealed to this Court.
It contends that the Tax Court erred (1) in not holding that the franchise tax paid by the petitioner is a commutative
tax which already includes the income tax; (2) in holding that Republic Act No. 5431 as amended, altered or repealed
petitioner's franchise; (3) in holding that petitioner's franchise is a contract which can be impaired by an implied repeal
and (4) in not holding that section 24(d) of the Tax Code should be construed strictly against the Government.
We hold that Congress could impair petitioner's legislative franchise by making it liable for income tax from which
heretofore it was exempted by virtue of the exemption provided for in section 3 of its franchise.
The Constitution provides that a franchise is subject to amendment, alteration or repeal by the Congress when the
public interest so requires (Sec. 8, Art. XIV, 1935 Constitution; Sec. 5, Art. XIV, 1973 Constitution),
Section 1 of petitioner's franchise, Republic Act No. 3247, provides that it is subject to the provisions of the
Constitution and to the terms and conditions established in Act No. 3636 whose section 12 provides that the franchise
is subject to amendment, alteration or repeal by Congress.
Republic Act No. 5431, in amending section 24 of the Tax Code by subjecting to income tax all corporate taxpayers
not expressly exempted therein and in section 27 of the Code, had the effect of withdrawing petitioner's exemption
from income tax.
The Tax Court acted correctly in holding that the exemption was restored by the subsequent enactment on August 4,
1969 of Republic Act No. 6020 which reenacted the said tax exemption. Hence, the petitioner is liable only for the
income tax for the period from January 1 to August 3, 1969 when its tax exemption was modified by Republic Act No.
5431.
It is relevant to note that franchise companies, like the Philippine Long Distance Telephone Company, have been
paying income tax in addition to the franchise tax.
However, it cannot be denied that the said 1969 assessment appears to be highly controversial. The Commissioner
at the outset was not certain as to petitioner's income tax liability. It had reason not to pay income tax because of the
tax exemption in its franchise.
For this reason, it should be liable only for tax proper and should not be held liable for the surcharge and interest.
(Advertising Associates, Inc. vs. Commissioner of Internal Revenue and Court of Tax Appeals, G. R. No. 59758,
December 26, 1984,133 SCRA 765; Imus Electric Co., Inc. vs. Commissioner of Internal Revenue, 125 Phil. 1024;
C.M. Hoskins & Co., Inc. vs. Commissioner of Internal Revenue, L-28383, June 22, 1976, 71 SCRA 511.)
WHEREFORE, the judgment of the Tax Court is affirmed with the modification that the petitioner is liable only for the
tax proper and that it should not pay the delinquency penalties. No costs.
SO ORDERED.
Concepcion, Jr., Abad Santos, Escolin, Cuevas and Alampay, JJ., concur.
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

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
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
and Senate Bill No. 1630 entitled:
PURPOSES SECTIONS 99, 100, 102, 103, 104, 1 106, 107, 108 AND 110 OF TITLE
IV, 112, 115, 117 AND 121 OF TITLE V, ACND 236, 237, AND 238 OF TITLE IX, AND
REPEALING SECTIONS 1113, 114, 116, 119 AND 120 OF TITLE V, ALL OF THE
NATIONAL INTERNAL REVENUE CODE, AS AMENDED AND FOR OTHER
PURPOSES
having met, after full and free conference, has agreed to recommend and do hereby
recommend to their respective Houses that House Bill No. 11197, in consolidation with
Senate Bill No. 1630, be approved in accordance with the attached copy of the bill as
reconciled and approved by the conferees.
Approved.
The Report, it will be noted, explicitly adverts to House Bill No. 11197, it being in fact mentioned ahead of
Senate Bill No. 1630; graphically shows the very close identity of the subjects of both bills (indicated in
their respective titles); and clearly says that the committee met in "full and free conference" on the
"disagreeing provisions" of both bills (obviously in an effort to reconcile them); and that reconciliation of
said "disagreeing provisions" had been effected, the BCC having agreed that "House Bill No. 11197, in
consolidation with Senate Bill No. 1630, be approved in accordance with the attached copy of the bill as
reconciled and approved by the conferees."
It may be concluded, in other words, that, conformably to the procedure provided in the Constitution with
which all the Members of the bicameral conference committee cannot but be presumed to be familiar, and
no proof to the contrary having been adduced on the point, it was the original bill (HB 11197) which said
body had considered and deliberated on in detail, reconciled or harmonized with SB 1630, and used as
basis for drawing up the amended version eventually reported out and submitted to both houses of
Congress.
It is further contended that the BCC was created and convoked prematurely, that SB 1630 should first
have been sent to the House of Representatives for concurrence It is maintained, in other words, that the
latter chamber should have refused the Senate request for a bicameral conference committee to reconcile
the "disagreeing provisions" of both bills, and should have required that SB 1630 be first transmitted to it.
This, seemingly, is nit-picking given the urgency of the proposed legislation as certified by the President
(to both houses, in fact). Time was of the essence, according to the President's best judgment — as
regards which absolutely no one in either chamber of Congress took exception, general acceptance being
on the contrary otherwise manifested — and that judgment the Court will not now question. In light of that
urgency, what was so vital or indispensable about such a transmittal that its absence would invalidate all
else that had been done towards enactment of the law, completely escapes me, specially considering that
the House had immediately acceded without demur to the request for convocation of the conference
committee.
What has just been said should dispose of the argument that the statement in the enrolled bill, that "This
Act which is a consolidation of House Bill No. 11197 and Senate Bill No. 11630 was finally passed by the
House of Representatives and the Senate on April 27, 1994 and May 2, 1994," necessarily signifies that
there were two (2) bills separately introduced, retaining their independent existence until they reached the
bicameral conference committee where they were consolidated, and therefore, the VAT law did not
originate exclusively in the House having originated in part in the Senate as SB 1630, which bill was not
embodied in but merely merged with HB 11197, retaining its separate identity until it was joined by the
BCC with the house measure. The more logical, and fairer, course is to construe the expression,
"consolidation of House Bill No. 11197 and Senate Bill No. 11630" in the context of accompanying and
contemporaneous statements, i.e.: (a) the declaration in the BCC Report, supra, that the committee met to
reconcile the disagreeing provisions of the two bills, "and after full and free conference" on the matter,
agreed and so recommended that "House Bill No. 11197, in consolidation with Senate Bill No. 1630, be
approved in accordance with the attached copy of the bill as reconciled and approved by the conferees;"
and (b) the averment of Senator Herrera, in the Report of the Ways and Means Committee, supra, that the
committee had actually "considered" (discussed) HB No. 11197 and taken it "into consideration" in
recommending that its own version of the measure (SB 1630) be the one approved.
That the Senate might have drawn up its own version of the expanded VAT bill, contemporaneously with
or even before the House did, is of no moment. It bears repeating in this connection that no VAT bill ever
originated in the Senate; neither its SB 1129 or SB 1630 or any of its drafts was ever officially transmitted
to the House as an initiating bill which, as already pointed out, is what the Constitution forbids; it was HB
11197 that was first sent to the Senate, underwent first reading, was referred to Committee on Ways and
Means and there discussed in relation to and in comparison with the counterpart Senate version or
versions — the mere formulation of which was, as also already discussed, not prohibited to it — and
afterwards considered by the Senate itself, also in connection with SB 1630, on second and third
readings. HB 11197 was in the truest sense, the originating bill.
An issue has also arisen respecting the so-called "enrolled bill doctrine" which, it is said, whatever
sacrosanct status it might originally have enjoyed, is now in bad odor with modern scholars on account of
its imputed rigidity and unrealism; it being also submitted that the ruling in Mabanag v. Lopez Vito (78 Phil.
1) and the cases reaffirming it, is no longer good law, it being based on a provision of the Code of Civil
Procedure 3 long since stricken from the statute books.
I would myself consider the "enrolled bill" theory as laying down a presumption of so strong a character as
to be well nigh absolute or conclusive, fully in accord with the familiar and fundamental philosophy of
separation of powers. The result, as far as I am concerned, is to make discussion of the enrolled bill
principle purely academic; for as already pointed out, there is no proof worthy of the name of any facts to
justify its reexamination and, possibly, disregard.
The other question is, what is the nature of the power given to a bicameral conference committee of
reconciling differences between, or "disagreeing provisions" in, a bill originating from the House in relation
to amendments proposed by the Senate — whether as regards some or all of its provisions? Is the mode
of reconciliation, subject to fixed procedure and guidelines? What exactly can the committee do, or not
do? Can it only clarify or revise provisions found in either Senate or House bill? Is it forbidden to propose
additional or new provisions, even on matters necessarily or reasonably connected with or germane to
items in the bills being reconciled?
In answer, it is postulated that the reconciliation function is quite limited. In these cases, the conference
committee should have confined itself to reconciliation of differences or inconsistencies only by (a)
restoring provisions of HB11197 aliminated by SB 1630, or (b) sustaining wholly or partly the Senate
amendments, or (c) as a compromise, agreeing that neither provisions nor amendments be carried into
the final form of HB 11197 for submission to both chambers of the legislature.
The trouble is, it is theorized, the committee incorporated activities or transactions which were not within
the contemplation of both bills; it made additions and deletions which did not enjoy the enlightenment of
initial committee studies; it exercised what is known as an "ex post veto power" granted to it by no law,
rule or regulation, a power that in truth is denied to it by the rules of both the Senate and the House. In
substantiation, the Senate rule is cited, similar to that of the House, providing that "differences shall be
settled by a conference committee" whose report shall contain "detailed and sufficiently explicit statement
of the changes in or amendments to the subject measure, ** (to be) signed by the conferees;" as well as
the "Jefferson's Manual," adopted by the Senate as supplement to its own rules, directing that the
managers of the conference must confine themselves to differences submitted to them; they may not
include subjects not within the disagreements even though germane to a question in issue."
It is significant that the limiting proviso in the relevant rules has been construed and applied as directory,
not mandatory. During the oral argument, counsel for petitioners admitted that the practice for decades
has been for bicameral conference committees to include such provisions in the reconciled bill as they
believed to be germane or necessary and acceptable to both chambers, even if not within any of the
"disagreeing provisions," and the reconciled bills, containing such provisions had invariably been
approved and adopted by both houses of Congress. It is a practice, they say, that should be stopped. But
it is a practice that establishes in no uncertain manner the prevailing concept in both houses of Congress
of the permissible and acceptable modes of reconciliation that their conference committees may adopt,
one whose undesirability is not all that patent if not, indeed, incapable of unquestionable demonstration.
The fact is that conference committees only take up bills which have already been freely and fully
discussed in both chambers of the legislature, but as to which there is need of reconciliation in view of
"disagreeing provisions" between them; and both chambers entrust the function of reconciling the bills to
their delegates at a conference committee with full awareness, and tacit consent, that conformably with
established practice unquestioningly observed over many years, new provisions may be included even if
not within the "disagreeing provisions" but of which, together with other changes, they will be given
detailed and sufficiently explicit information prior to voting on the conference committee version.
In any event, a fairly recent decision written for the Court by Senior Associate Justice Isagani A. Cruz,
promulgated on November 11, 1993 (G.R. No. 105371, The Philippine Judges Association, etc., et al. v.
Hon. Pete Prado, etc., et al.), should leave no doubt of the continuing vitality of the enrolled bill doctrine
and give an insight into the nature of the reconciling function of bicameral conference committees. In that
case, a bilateral conference committee was constituted and met to reconcile Senate Bill No. 720 and
House Bill No. 4200. It adopted a "reconciled" measure that was submitted to and approved by both
chambers of Congress and ultimately signed into law by the President, as R.A. No. 7354. A provision in
this statute (removing the franking privilege from the courts, among others) was assailed as being an
invalid amendment because it was not included in the original version of either the senate or the house bill
and hence had generated no disagreement between them which had to be reconciled. The Court held:
While it is true that a conference committee is the mechanism for compromising

differences between the Senate and the House, it is not limited in its jurisdiction to this
question. Its broader function is described thus:
A conference committee may deal generally with the subject matter or

it may be limited to resolving the precise differences between the two
houses. Even where the conference committee is not by rule limited in
its jurisdiction, legislative custom severely limits the freedom with
which new subject matter can be inserted into the conference bill. But
occasionally a conference committee produces unexpected results,
results beyond its mandate. These excursions occur even where the
rules impose strict limitations on conference committee jurisdiction.
This is symptomatic of the authoritarian power of conference
committee (Davies, Legislative Law and Process: In A Nutshell, 1987
Ed., p. 81).
It is a matter of record that the Conference Committee Report on the bill in question was
returned to and duly approved by both the Senate and the House of Representatives.
Thereafter, the bill was enrolled with its certification by Senate President Neptali A.
Gonzales and Speaker Ramon V. Mitra of the House of Representatives as having been
duly passed by both Houses of Congress. It was then presented to and approved by
President Corazon C. Aquino on April 3, 1992.
Under the doctrine of separation of powers, the Court may not inquire beyond the
certification of the approval of a bill from the presiding officers of Congress. Casco
Philippine Chemical Co. v. Gimenez (7 SCRA 347) laid down the rule that the enrolled
bill is conclusive upon the Judiciary (except in matters that have to be entered in the
journals like the yeas and nays on the final reading of the bill) (Mabanag v. Lopez Vito,
78 Phil. 1). The journals are themselves also binding on the Supreme Court, as we held
in the old (but still valid) case of U.S. v. Pons (34 Phil. 729), where we explained the
reason thus:
To inquire into the veracity of the journals of the Philippine legislature

when they are, as we have said, clear and explicit, would be to violate
both the letter and spirit of the organic laws by which the Philippine
Government was brought into existence, to invade a coordinate and
independent department of the Government, and to interfere with the
legitimate powers and functions of the Legislature. Applying these
principles, we shall decline to look into the petitioners' charges that an
amendment was made upon the last reading of the bill that eventually
R.A. No. 7354 and that copies thereof in its final form were not
distributed among the members of each House. Both the enrolled bill
and the legislative journals certify that the measure was duly enacted
i.e., in accordance with Article VI, Sec. 26 (2) of the Constitution. We
are bound by such official assurances from a coordinate department
of the government, to which we owe, at the very least, a becoming
courtesy.
Withal, an analysis of the changes made by the conference committee in HB 11197 and SB 1630 by way
of reconciling their "disagreeing provisions," — assailed by petitioners as unauthorized or incongrouous —
reveals that many of the changes related to actual "disagreeing provisions," and that those that might
perhaps be considered as entirely new are nevertheless necessarily or logically connected with or
germane to particular matters in the bills being reconciled.
For instance, the change made by the bicameral conference committee (BCC) concerning amendments to
Section 99 of the National Internal Revenue Code (NIRC) — the addition of "lessors of goods or
properties and importers of goods" — is really a reconciliation of disagreeing provisions, for while HB
11197 mentions as among those subject to tax, "one who sells, barters, or exchanges goods or properties
and any person who leases personal properties," SB 1630 does not. The change also merely clarifies the
provision by providing that the contemplated taxpayers includes "importers." The revision as regards the
amendment to Section 100, NIRC, is also simple reconciliation, being nothing more than the adoption by
the BCC of the provision in HB 11197 governing the sale of gold to Bangko Sentral, in contrast to SB 1630
containing no such provision. Similarly, only simple reconciliation was involved as regards approval by the
BCC of a provision declaring as not exempt, the sale of real properties primarily held for sale to customers
or held for lease in the ordinary course of trade or business, which provision is found in HB 11197 but not
in SB 1630; as regards the adoption by the BCC of a provision on life insurance business, contained in SB
1630 but not found in HB 11197; as regards adoption by the BCC of the provision in SB 1630 for
deferment of tax on certain goods and services for no longer than 3 years, as to which there was no
counterpart provision in SB 11197; and as regards the fixing of a period for the adoption of implementing
rules, a period being prescribed in SB 1630 and none in HB 11197.
In respect of other revisions, it would seem that questions logically arose in the course of the discussion of
specific "disagreeing provisions" to which answers were given which, because believed acceptable to both
houses of Congress, were placed in the BCC draft. For example, during consideration of radio and
television time (Sec. 100, NIRC) dealt with in both House and Senate bills, the question apparently came
up, the relevance of which is apparent on its face, relative to satellite transmission and cable television
time. Hence, a provision in the BCC bill on the matter. Again, while deliberating on the definition of goods
or properties in relation to the provision subjecting sales thereof to tax, a question apparently arose,
logically relevant, about real properties intended to be sold by a person in economic difficulties, or
because he wishes to buy a car, i.e., not as part of a business, the BCC evidently resolved to clarify the
matter by excluding from the tax, "real properties held primarily for sale to customers or held for lease in
the ordinary course of business." And in the course of consideration of the term, sale or exchange of
services (Sec 102, NIRC), the inquiry most probably was posed as to whether the term should be
understood as including other services: e.g., services of lessors of property whether real or personal, of
warehousemen, of keepers of resthouses, pension houses, inns, resorts, or of common carriers, etc., and
presumably the BCC resolved to clarify the matter by including the services just mentioned. Surely,
changes of this nature are obviously to be expected in proceedings before bicameral conference
committees and may even be considered grist for their mill, given the history of such BCCs and their
general practice here and abroad
In any case, all the changes and revisions, and deletions, made by the conference committee were all
subsequently considered by and approved by both the Senate and the House, meeting and voting
separately. It is an unacceptable theorization, to repeat, that when the BCC report and its proposed bill
were submitted to the Senate and the House, the members thereof did not bother to read, or what is
worse, having read did not understand, what was before them, or did not realize that there were new
provisions in the reconciled version unrelated to any "disagreeing provisions," or that said new provisions
or revisions were effectively concealed from them
Moreover, it certainly was entirely within the power and prerogative of either legislative chamber to reject
the BCC bill and require the organization of a new bicameral conference committee. That this option was
not exercised by either house only proves that the BCC measure was found to be acceptable as in fact it
was approved and adopted by both chambers.
I vote to DISMISS the petitions for lack of merit.
PADILLA, J.:
I
The original VAT law and the expanded VAT law
In Kapatiran v. Tan, 1 where the ponente was the writer of this Separate Opinion, a unanimous Supreme
Court en banc upheld the validity of the original VAT law (Executive Order No. 273, approved on 25 July
1987). It will, in my view, be pointless at this time to re-open arguments advanced in said case as to why
said VAT law was invalid, and it will be equally redundant to re-state the principles laid down by the Court
in the same case affirming the validity of the VAT law as a tax measure. And yet, the same arguments are,
in effect, marshalled against the merits and substance of the expanded VAT law (Rep. Act. No. 7716,
approved on 5 May 1994). The same Supreme Court decision should therefore dispose, in the main, of
such arguments, for the expanded VAT law is predicated basically on the same principles as the original
VAT law, except that now the tax base of the VAT imposition has been expanded or broadened.
It only needs to be stated — what actually should be obvious — that a tax measure, like the expanded
VAT law (Republic Act. No. 7716), is enacted by Congress and approved by the President in the exercise
of the State's power to tax, which is an attribute of sovereignty. And while the power to tax, if exercised
without limit, is a power to destroy, and should, therefore, not be allowed in such form, it has to be equally
recognized that the power to tax is an essential right of government. Without taxes, basic services to the
people can come to a halt; economic progress will be stunted, and, in the long run, the people will suffer
the pains of stagnation and retrogression.
Consequently, upon careful deliberation, I have no difficulty in reaching the conclusion that the expanded
VAT law comes within the legitimate power of the state to tax. And as I had occasion to previously state:
Constitutional Law, to begin with, is concerned with power not political convenience,
wisdom, exigency, or even necessity. Neither the Executive nor the legislative
(Commission on Appointments) can create power where the Constitution confers none. 2
Likewise, in the first VAT case, I said:
In any event, if petitioners seriously believe that the adoption and continued application
of the VAT are prejudicial to the general welfare or the interests of the majority of the
people, they should seek, recourse and relief from the political branches of the
government. The Court, following the time-honored doctrine of separation of powers,
cannot substitute its judgment for that of the President (and Congress) as to the
wisdom, justice and advisability of the adoption of the VAT. 3
This Court should not, as a rule, concern itself with questions of policy, much less, economic policy. That
is better left to the two (2) political branches of government. That the expanded VAT law is unwise,
unpopular and even anti-poor, among other things said against it, are arguments and considerations
within the realm of policy-debate, which only Congress and the Executive have the authority to decisively
confront, alleviate, remedy and resolve.
II
The procedure followed in the approval of Rep. Act No. 7716
Petitioners however posit that the present case raises a far-reaching constitutional question which the
Court is duty-bound to decide under its expanded jurisdiction in the 1987 Constitution. 4 Petitioners more
specifically question and impugn the manner by which the expanded VAT law (Rep. Act. No. 7716) was
approved by Congress. They contend that it was approved in violation of the Constitution from which fact it
follows, as a consequence, that the law is null and void. Main reliance of the petitioners in their assault in
Section 24, Art. VI of the Constitution which provides:
Sec. 24. All appropriation, revenue or tariff bills, bills authorizing increase of the public
debt, bill of local application, and private bills shall originate exclusively in the House of
Representatives, but the Senate may propose or concur with amendments.
While it should be admitted at the outset that there was no rigorous and strict adherence to the literal
command of the above provision, it may however be said, after careful reflection, that there was
substantial compliance with the provision.
There is no question that House Bill No. 11197 expanding the VAT law originated from the House of
Representatives. It is undeniably a House measure. On the other hand, Senate Bill No. 1129, also
expanding the VAT law, originated from the Senate. It is undeniably a Senate measure which, in point of
time, actually antedated House Bill No. 11197.
But it is of record that when House Bill No. 11197 was, after approval by the House, sent to the Senate, it
was referred to, and considered by the Senate Committee on Ways and Means (after first reading)
together with Senate Bill No. 1129, and the Committee came out with Senate Bill No. 1630 in substitution
of Senate Bill No. 1129 but after expressly taking into consideration House Bill No. 11197.
Since the Senate is, under the above-quoted constitutional provision, empowered to concur with a
revenue measure exclusively originating from the House, or to propose amendments thereto, to the extent
of proposing amendments by SUBSTITUTION to the House measure, the approval by the Senate of
Senate Bill No. 1630, after it had considered House Bill No. 11197, may be taken, in my view, as an
AMENDMENT BY SUBSTITUTION by the Senate not only of Senate Bill No. 1129 but of House Bill No.
11197 as well which, it must be remembered, originated exclusively from the House.
But then, in recognition of the fact that House Bill No. 11197 which originated exclusively from the House
and Senate Bill No. 1630 contained conflicting provisions, both bills (House Bill No. 11197 and Senate Bill
No. 1630) were referred to the Bicameral Conference Committee for joint consideration with a view to
reconciling their conflicting provisions.
The Conference Committee came out eventually with a Conference Committee Bill which was submitted
to both chambers of Congress (the Senate and the House). The Conference Committee reported out a bill
consolidating provisions in House Bill No. 11197 and Senate Bill No. 1630. What transpired in both
chambers after the Conference Committee Report was submitted to them is not clear from the records in
this case. What is clear however is that both chambers voted separately on the bill reported out by the
Conference Committee and both chambers approved the bill of the Conference Committee.
To me then, what should really be important is that both chambers of Congress approved the bill reported
out by the Conference Committee. In my considered view, the act of both chambers of Congress in
approving the Conference Committee bill, should put an end to any inquiry by this Court as to how the bill
came about. What is more, such separate approvals CURED whatever constitutional infirmities may have
arisen in the procedures leading to such approvals. For, if such infirmities were serious enough to impugn
the very validity of the measure itself, there would have been an objection or objections from members of
both chambers to the approval. The Court has been shown no such objection on record in both chambers.
Petitioners contend that there were violations of Sec. 26 paragraph 2, Article VI of the Constitution which
provides:
Sec. 26. . . .
(2) No bill passed by either House shall become a law unless it has passed three
readings on separate days, and printed copies thereof in its final form have been
distributed to its Members three days before its passage, except when the President
certifies to the necessity of its immediate enactment to meet a public calamity or
emergency. Upon the last reading of a bill, no amendment thereto shall be allowed, and
the vote thereon shall be taken immediately thereafter, and the yeas and nays entered
in the Journal.
in that, when Senate Bill No. 1630 (the Senate counterpart of House Bill No. 11197) was approved by the
Senate, after it had been reported out by the Senate Committee on Ways and Means, the bill went
through second and third readings on the same day (not separate days) and printed copies thereof in its
final form were not distributed to the members of the Senate at least three (3) days before its passage by
the Senate. But we are told by the respondents that the reason for this "short cut" was that the President
had certified to the necessity of the bill's immediate enactment to meet an emergency — a certification
that, by leave of the same constitutional provision, dispensed with the second and third readings on
separate days and the printed form at least three (3) days before its passage.
We have here then a situation where the President did certify to the necessity of Senate Bill No. 1630's
immediate enactment to meet an emergency and the Senate responded accordingly. While I would be the
last to say that this Court cannot review the exercise of such power by the President in appropriate cases
ripe for judicial review, I am not prepared however to say that the President gravely abused his discretion
in the exercise of such power as to require that this Court overturn his action. We have been shown no
fact or circumstance which would impugn the judgment of the President, concurred in by the Senate, that
there was an emergency that required the immediate enactment of Senate Bill No. 1630. On the other
hand, a becoming respect for a co-equal and coordinate department of government points that weight and
credibility be given to such Presidential judgment.
The authority or power of the Conference Committee to make insertions in and deletions from the bills
referred to it, namely, House Bill No. 11197 and Senate Bill No. 1630 is likewise assailed by petitioners.
Again, what appears important here is that both chambers approved and ratified the bill as reported out by
the Conference Committee (with the reported insertions and deletions). This is perhaps attributable to the
known legislative practice of allowing a Conference Committee to make insertions in and deletions from
bills referred to it for consideration, as long as they are germane to the subject matter of the bills under
consideration. Besides, when the Conference Committee made the insertions and deletions complained of
by petitioners, was it not actually performing the task assigned to it of reconciling conflicting provisions in
House Bill No. 11197 and Senate Bill No. 1630?
This Court impliedly if not expressly recognized the fact of such legislative practice in Philippine Judges
Association, etc. vs. Hon. Peter Prado, etc., 5 In said case, we stated thus:
The petitioners also invoke Sec. 74 of the Rules of the House of Representatives,
requiring that amendment to any bill when the House and the Senate shall have
differences thereon may be settled by a conference committee of both chambers. They
stress that Sec. 35 was never a subject of any disagreement between both Houses and
so the second paragraph could not have been validly added as an amendment.
These arguments are unacceptable.
While it is true that a conference committee is the mechanism for compromising

differences between the Senate and the House, it is not limited in its jurisdiction to this
question. Its broader function is described thus:
A conference committee may deal generally with the subject matter or

it may be limited to resolving the precise differences between the two
houses. Even where the conference committee is not by rule limited in
its jurisdiction, legislative custom severely limits the freedom with
which new subject matter can be inserted into the conference bill. But
occasionally a conference committee produces unexpected results,
results beyond its mandate. These excursions occurs even where the
rules impose strict limitations on conference committee jurisdiction.
This is symptomatic of the authoritarian power of conference
committee (Davies, Legislative Law and Process: In A Nutshell, 1986
Ed., p. 81).
It is a matter of record that the Conference Committee Report on the bill in question was
returned to and duly approved by both the Senate and the House of Representatives.
Thereafter, the bill was enrolled with its certification by Senate President Neptali A.
Gonzales and Speaker Ramon V. Mitra of the House of Representatives as having been
duly passed by both Houses of Congress. It was then presented to and approved by
President Corazon C. Aquino on April 3, 1992.
It would seem that if corrective measures are in order to clip the powers of the Conference Committee, the
remedy should come from either or both chambers of Congress, not from this Court, under the time-
honored doctrine of separation of powers.
Finally, as certified by the Secretary of the Senate and the Secretary General of the House of
Representatives —
This Act (Rep. Act No. 7716) is a consolidation of House Bill No. 11197 and Senate Bill
No. 1630 (w)as finally passed by the House of Representatives and the Senate on April
27, 1994 and May 2, 1994 respectively.
Under the long-accepted doctrine of the "enrolled bill," the Court in deference to a co-equal and coordinate
branch of government is held to a recognition of Rep. Act No. 7716 as a law validly enacted by Congress
and, thereafter, approved by the President on 5 May 1994. Again, we quote from out recent decision in
Philippine Judges Association, supra:
Under the doctrine of separation of powers, the Court may not inquire beyond the
certification of the approval of a bill from the presiding officers of Congress. Casco
Philippine Chemical Co. v. 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:
debt, bills of local application, and private bills shall originate exclusively in the House of
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:
debt, bills of local application, and private bills shall originate exclusively in the House of
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
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
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

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. 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 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
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
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.
Sec. 85. Conference Committee Reports. — In the event that the House does not agree
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:
The Conference Committee on the disagreeing provisions of House Bill No. 11197,
entitled:
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
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.
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
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
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
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
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.
‘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
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
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

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
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

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.

the Lower House on
second reading - November 11, 1993

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?
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.
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."
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.
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
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:
'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:
The Conference Committee on the disagreeing provisions of House Bill No. 11197, entitled:
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

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.
privilege to use
in the Philippines
of any industrial,
commercial, or
scientific equip-
ment.
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
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.
(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
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
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
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.
#
Footnotes
1 H. Nos. 253, 771, 2450, 7033, 8086, 9030, 9210, 9297, 10012 and 10100. (Respondents'
Consolidated Memorandum, Annexes 3-12)
2 U.S. CONST., Art. I, § 7, cl. 1: "All bills for raising revenue shall originate in the House of
Representatives, but the Senate may propose or concur with amendments, as on other bills."
3 Art. VII, § 21.
4 Art. VI, § 1.
5 U.S. CONST., Art. II, § 2, cl. 2.
6 Rainey v. United States, 232 U.S. 309, 58 L. Ed. 117 (1914).
7 F.A. OGG AND P.O. RAY, INTRODUCTION TO AMERICAN GOVERNMENT 309, n. 2 (1945).
8 Although the 1935 Constitution did not expressly require that bills must pass three readings in
each House, this was clearly implied from its Art. VI, § 21(2) so that the two Houses by their rules
prescribed three readings for the passage of bills. Later the requirement was expressly provided in
the 1973 Constitution from which Art. VI, § 26(2) was taken. Art. VIII, § 19(2) of the 1973 document
provided:
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.
9 Respondents' Consolidated Reply, Annex 14.
10 Memorandum of Petitioner Arturo M. Tolentino, Supplement C.
11 Art. VII, § 10 provides: "The Congress shall, at ten o'clock in the morning of the third day after
the vacancy in the offices of the President and Vice- President occurs, convene in accordance with
its rules without need of a call and within seven days enact a law calling for a special election to
elect a President and a Vice- President to be held not earlier than forty-five days nor later than sixty
days from the time of such call. The bill calling such special election shall be deemed certified
under paragraph 2, Section 26, Article VI of this Constitution and shall become law upon its
approval on third reading by the Congress. Appropriations for the special election shall be charged
against any current appropriations and shall be exempt from the requirements of paragraph 4,
Section 25, Article VI of this Constitution. The convening of the Congress cannot be suspended nor
the special election postponed. No special election shall be called if the vacancy occurs within
eighteen months before the date of the next presidential election."
12 JOURNAL OF THE HOUSE OF REPRESENTATIVES, SIXTH CONGRESS, FOURTH

SESSION 398-399 (1968).
13 Zinn, Conference Procedure in Congress, 38 ABAJ 864-865 (1952).
14 CONG. QUARTERLY 65 (1983); M. JEWELL, THE LEGISLATIVE PROCESS IN THE UNITED

STATES 169 (1986); LEES AND SHAW, COMMITTEES IN LEGISLATURES 163 (1979).
15 W. KEEFE AND M. OGUL, THE AMERICAN LEGISLATIVE PROCESS 149 (1985).
16 W. OLESZEK, CONGRESSIONAL PROCEDURES AND POLICY PROCESS 214 (1984).
17 Philippine Judges Association v. Prado, G.R. No. 105371, Nov. 11, 1993.
18 The charge is an old one. In the United States, the same charge, including claims that important
provisions were being "surreptitiously added" in the committee, was made in the 1940s. But no
satisfactory alternative to the conference committee has been devised. And today, given the
bicameral nature of the U.S. Congress, the charge is no longer heard. Compare the following from
a 1945 comment: "As a devise for oiling the machinery of legislation, committees of conference
are, under American conditions, useful, if not indispensable. Nevertheless, they have shortcomings.
Without exception, they work behind closed doors, hold no hearings, and give their proceedings no
publicity. Doubtless it would be difficult for them to make headway if they did otherwise.
Nevertheless, in view of the power which they wield, strong objection can be, and is, raised. For,
while the committees are supposed to deal only with actual differences between the houses and to
stay well within the bounds set by the extreme positions which the houses have taken, they often
work into measures, as reported, provisions of their own devising, even going so far as to rewrite
whole sections with the sole purpose of incorporating the views which the majority members
happen to hold. . . . In practice, this often results in the adoption of important provisions, more or
less surreptitiously added, without consideration by either house — in other words, legislation
nominally by Congress but actually by conference committee. Any remedy found will probably take
the form of reducing the need for using conference committees at all; and the principal suggestion
to that end is that bills and resolutions be referred, not, as now, to separate committees of the two
houses, but to joint committees, which not only would hold single sets of hearings, but might
deliberate and report back bills to the two houses in such agreed form that further significant
differences would not be likely to develop. Arrangements of this nature yield excellent results in the
legislature of Massachusetts. But there are obstacles to adoption of the plan for Congress, not the
least of them being a natural aversion of House members to joint committees in which senators
seem likely to dominate; and, as indicated below, the outlook for the reform is problematical." F.A.
OGG AND P.O. RAY, supra note 7 at 310-311.
19 Osmeña v. Pendatun, 109 Phil. 863, 871 (1960).
20 E.g., Mabanag v. Lopez Vito, 78 Phil. 1 (1947); Casco (Phil.) Inc. v. Gimenez, 7 SCRA 347
(1963); Morales v. Subido, 27 SCRA 131 (1969).
21 Mabanag v. Lopez Vito, supra note 20.
22 Morales v. Subido, supra note 20.
23 Astorga v. Villegas, 56 SCRA 714 (1974).
24 See, e.g., Alalayan v. National Power Corp., 24 SCRA 172 (1968); Cordero v. Cabatuando, 6
SCRA 418 (1962); Sumulong v. COMELEC, 73 Phil. 288 (1941).
25 40 Phil. 224 (1919).
26 Art. VI, § 28(4) provides: "No law granting any tax exemption shall be passed without the
concurrence of a majority of all the Members of the Congress."
27 Associated Press v. NLRB, 301 U.S. 103, 132, 81 L.Ed. 953, 961 (1937).
28 297 U.S. 233, 80 L.Ed. 660 (1936).
29 297 U.S. at 250, 80 L.Ed. at 669.
30 Minneapolis Star v. Minnesota Commissioner of Revenue, 460 U.S. 575, 75 L.Ed.2d 295
(1983).
31 460 U.S. at 591, 75 L.Ed. 2d at 308-9 (1983).
32 481 U.S. 221, 95 L.Ed. 2d 209 (1987).
33 § 103(t) of the NIRC exempts from the VAT "Sale or lease of goods or properties or the
performance of services other than the transactions mentioned in the preceeding paragraphs, the
gross annual sales and/or receipts [of which] do not exceed the amount prescribed in regulations to
be promulgated by the President upon the recommendation by the Secretary of Finance which
shall not be less than Four hundred eighty thousand pesos (P480,000.00) or more than Seven
hundred twenty thousand pesos (P720,000.00) subject to tax under Section 112 of this Code."
34 297 U.S. at 250, 80 L.Ed. at 668.
35 460 U.S. at 581, 75 L.Ed. 2d at 302.
36 493 U.S. 378, 107 L.Ed. 2d 796 (1990).
37 § 107 of the NIRC provides: "Any person subject to a value-added tax under Sections 100 and
102 of this Code shall register with the appropriate Revenue District Officer and pay an annual
registration fee in the amount of One thousand pesos (P1,000.00) for every separate or distinct
establishment or place of business and every year thereafter on or before the last day of January.
Any person just commencing a business subject to the value-added tax must pay the fee before
engaging therein. . . ."
38 101 Phil. 386 (1957).
39 319 U.S. 105, 113, 87 L.Ed. 1292 (1943).
40 319 U.S. at 114, 87 L.Ed. 1292 at 1298. For the same reason, in People v. Korins, 385 N.Y.S.
2d 474 (1976) a decision of the city court of Utica, Oneida County held that to apply an ordinance
requiring a business license to be obtained before a person could sell newspapers in the streets
would be to impose a prior restraint on press freedom because "a newspaper is not in the same
category as pineapple or a soap powder or a pair of shoes" whose sale may be conditioned on the
possession of a business license.
41 P.A. FREUND, ON UNDERSTANDING THE SUPREME COURT 11 (1950), quoted in Ermita,

Malate Hotel and Motel Operators Ass'n v. City Mayor, 21 SCRA 449, 459 (1967).
42 Art. VI, § 28(1). Related to this argument is the claim that Republic Act No. 7716 likewise
infringes the Due Process and Equal Protection Clauses of the Bill of Rights, Art. III, § 1(1).
43 Neri, "In Support of the Expanded Value-Added Tax," (CRC Economic Policy Papers No. 5,
1994) pp. 3-4.
44 Cf. Lutz v. Araneta, 98 Phil. 148, 153 (1955)
45 Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas Inc. v. Tan, 163 SCRA 371.
46 Cf. Philippine American Life Ins. Co. v. Auditor General, 22 SCRA 135 (1968)
47 See E.M. FERNANDO, THE CONSTITUTION OF THE PHILIPPINES 560-561 (2d Ed., 1977).
48 The term is Professor Jaffe's (JUDICIAL CONTROL OF ADMINISTRATIVE ACTION (1965))

adopted by Justice Harlan in his dissent in Flast v. Cohen, 392 U.S. 83, 119-120, 20 L.Ed.2d 947,
973 (1968) to distinguish between the personal and proprietary interest of traditional plaintiffs and
the public interest of a citizen suing in a public action. The term was mentioned by some members
of this Court in the Lotto case (Kilosbayan, Inc. v. Guingona, G.R. No. 113375, May 5, 1994).
49 Compare Justice Laurel: "Even then, this power of judicial review is limited to actual cases and
controversies to be exercised after full opportunity of argument by the parties, and limited further to
the constitutional question raised or the very lis mota presented. Any attempt at abstraction could
only lead to dialectics and barren legal questions and to sterile conclusions unrelated to
actualities." Angara v. Electoral Commission, 63 Phil. 139, 158 (1936).
50 1 Cranch 137, 2 L.Ed. 60 (1803) (emphasis added).
51 Supra note 49 (emphasis added).
52 People v. Vera, 65 Phil. 56, 94 (1937); Tañada v. Cuenco, 103 Phil. 1051, 1061-2 (1957);
Macias v. COMELEC, 3 SCRA 1, 7-8 (1961).
NARVASA, C.J., concurring:
1 Resolution "Urging the Senate Committee on Ways and Means to Study the Proposal to Exempt
Local Movie Producers from the Payment of the Value-Added Tax as an Incentive to the Production
of Quality and Wholesome Filipino Movies Whenever they Feature an All-Filipino Cast of Actors
and Actresses"
2 Italics supplied
3 Giving "conclusive" character to copies of Acts of the Philippine Commission which have been
signed by its presiding officers and secretaries
PADILLA, J.: Separate Opinion:
1 G.R. No. 81311, 30 June 1988, 163 SCRA 371.
2 Bautista v. Salonga, G.R. No. 86439, 13 April 1989, 172 SCRA 160.
3 Kapatiran, supra at 385
4 Sec. 1, Art. VIII.
5 G.R. No. 103371, 11 November 1993.
6 7 SCRA 347.
7 Mabanag v. Lopez Vito, 78 Phil. 1.
8 34 Phil. 729.
9 Executive Order No. 273, in Sec. 103(f), had exempted this kind of income from the VAT. Rep.
Act. No. 7716 removed the exemption.
10 United States v. Bustos, 37 Phil. 731.
11 297 U.S. 233.
12 372 U.S. 58.
13 American Bible Society v. City of Manila, 101 Phil. 386.
REGALADO, J.: Dissenting:
1 In substitution of H.B. Nos. 253, 771, 2450, 7033, 8086, 9030, 9210, 9297, 10012 and 10100
which were filed over the period from July 22, 1992 to August 3, 1993.
2 P.S. Res. No. 734 had earlier been filed in the Senate on September 10, 1992, while S.B. No.
1129 was filed on March 1, 1993.
3 220 U.S. 107, 55 L.Ed. 389 (1911).
4 Consolidated Comment 36-37.
5 Consolidated Memorandum for Respondents, 56-57.

6 Orquiola, H.M., Annotated Rules of the Senate and Procedure, Precedents and Practices of the
Senate of the Republic of the Philippines since 1946, 1991 Ed., 108.
7 Black's Law Dictionary, 4th Ed. (1951), 381, citing Fairview vs. Durham, 45 Iowa 56.
8 34 Phil. 729 (1916).
9 78 Phil. 1 (1947).
10 L-17931, February 28, 1963, 7 SCRA 347.
11 L-29658, February 27, 1969, 27 SCRA 131.
12 G.R. No. 105371, November 11, 1993, 227 SCRA 703.
13 103 Phil. 1051 (1957).
14 L-46640, October 12, 1976, 73 SCRA 333.
15 G.R. No. 86344, December 21, 1989, 180 SCRA 496.
17 Brailsford vs. Walker, 31 S.E. 2d 385, 387, 388, 205 S.C. 228.
18 110 So. 343, 346.
19 602 South Western Reporter, 2d Series, 402-425, jointly deciding Carrollton Wholesale
Tobaccos, Inc. et al. vs. Department of Revenue, et al., and Bluegrass Provisions Co., Inc., et al.
vs. Department of Revenue, et al.
DAVIDE JR., J.: Dissenting:
1 1971 ed., 1592.
2 Sixth Edition (1990), 565, citing Standard Oil Co. of Texas vs. State, Tex. Civ. App., 142 S.W. 2d
519, 521, 522, 523.
3 21 SCRA 665, 673 [1967].
4 Section 52 and 53, Rule XXIII
5 Section 57, Rule XXV.
6 Section 26(2), Article VI, Constitution; paragraph (7), Section 57, Rule XXV.
7 Section 69, Rule XIV.
8 Section 77, Id.
9 Section 82, Rule XIV.
10 Sections 77-81, Id.
11 Section 82, Id., in relation to Section 26(2), Article VI, Constitution.
12 Section 26(2), Article VI, Constitution.
13 Volume I, Eight Edition, Chapter VI, 267. See Miller vs. Mardo, 2 SCRA 539 [1961]; Everlasting
Pictures, Inc. vs. Fuentes, 3 SCRA 539 [1961].
14 Consolidated Memorandum for Respondents, Annexes "2" to "12," inclusive.
15 Consolidated Memorandum for Respondents, 18.

16 Id., Annex "9."
17 Id., Annex "1."
18 Id., 18.
19 Id., Annex "15." Entitled "An Act Restructuring the Value-Added Tax (VAT) System By
Expanding Its Tax Base, Amending Sections 103, 113, 114, of the National Internal Revenue Code,
as Amended."
20 Id., Annex "17."
21 Id., 20.
22 Emphasis supplied.
24 Consolidated Memorandum for Respondent, Annex "17." Two signed with reservations and four
signed subject to amendments.
25 And companion cases, 220 U.S. 107, 55 L.Ed. 389 [1911].
26 Page 56.
27 232 U.S. 309, 58 L ed. 117 [1914].
28 Introduction to American Government, 309, n. 2 [1945].
29 At 317.
31 Id., Annex "14."
32 Id., Annex "1."
33 Consolidated Memorandum for Respondents, Annex "18."
34 Page 22.
35 Consolidated Memorandum for Respondents, Annex "18."
36 Id., Annex "19."
37 ISAGANI A. CRUZ, Philippine Political Law, 1991 ed., 226; Daza vs. Singson, 180 SCRA 496
[1989]; Coseteng vs. Mitra, 187 SCRA 377 [1990]; Gonzales vs. Macaraig, 191 SCRA 452 [1990];
Llamas vs. Orbos, 202 SCRA 844 [1991]; Bengzon vs. Senate Blue Ribbon Committee, 203 SCRA
767 [1991]; Oposa vs. Factoran, 224 SCRA 792 [1993].
38 56 SCRA 714, 719, 723 [1974].
39 78 Phil. 1 [1947].
40 Mutoc vs. COMELEC, 36 SCRA 228 [1970].
ROMERO, J.: Dissenting:
1 Vitug, Jose C., COMPENDIUM OF TAX LAW AND JURISPRUDENCE, Third Revised Edition,
1993 at 201.
2 Ibid.
3 Ibid.
4 L-81311, June 30, 1988, 163 SCRA 371 with Justice Teodoro R. Padilla as ponente.
5 Ibid at 378.
6 Ibid at 385.
7 Senate Resolution No. 734 filed on September 10, 1992 was entitled "Resolution Urging the
House Committee on Ways and Means to Study the Proposal to Exempt Local Movie Producers
from the Payment of the Value-Added Tax as an Incentive to the Production of Quality and
Wholesome Filipino Movies, Whenever They Feature an All-Filipino Cast of Actors and Actresses."
8 SB No. 1129 sought to include under the VAT Law such items as lease of real properties,
excluding agricultural lands and residential properties with monthly rentals of less than P10,000.00;
hotels; restaurants, eating places, caterers; services by persons in the exercise of their professions;
actors, actresses, talents, singers and professional athletes; and lawyers, accountants, doctors and
other professionals registered with the Philippine Regulatory Commission.
9 On June 1, 1993, President Fidel V. Ramos certified for immediate enactment House Bill No.
9210 entitled "An Act Amending Title IV and Sections 237 and 238 of the National Internal
Revenue Code, as amended, to meet a public emergency."
10 House Bill No. 11197 is 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."
11 Senate Bill No. 1630 is 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."
12 Republic Act No. 7716 is 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."
13 Article VI, Section 24: "All appropriation, revenue or tariff bills, bills authorizing increase of the
public debt, bills of local application, and private bills shall originate exclusively in the House of
Representatives, but the Senate may propose or concur with amendments."
14 Article VI, Section 26, paragraph 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."
15 Article III, Section 1: "No person shall be deprived of life, liberty, or property without due process
of law, nor shall any person be denied the equal protection of the laws."
16 Article III, Section 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."
17 Article III, Section 5: "No law shall be made respecting an establishment of religion, or
prohibiting 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."
18 Article III, Section 10: "No law impairing the obligation of contracts shall be passed."
19 Article VI, Section 28, paragraph 1: "The rules of taxation shall be uniform and equitable. The
Congress shall evolve a progressive system of taxation."
20 Article VI, Section 28, paragraph 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."
21 Constitution, Article VIII, Section 1.

22 Volume One, CONCOM RECORD, p. 436.
23 Luz Farms v. The Hon. Secretary of the Department of Agrarian Reform, G.R. No. 86889,
December 4, 1990, 192 SCRA 51; Dumlao, et al. v. Commission on Elections, G.R. No. 72245,
January 22, 1980, 95 SCRA 392; People v. Vera, 65 Phil. 56 (1937).
24 328 P. 2d 644 (1958).
25 Aruego, Jose M., PHILIPPINE POLITICAL LAW, KNOW YOUR CONSTITUTION, University
Publishing Co., 1950, pp. 65-66.
26 Sinco, Vicente G., PHILIPPINE POLITICAL LAW, Eleventh Edition, p. 196.
27 Remarks of Commissioner Eulogio Lerum: "At a time when we did not have a lawmaking body
after martial law was declared, there were tripartite conferences called by the President for the
purpose of acting as a recommendatory body regarding settlement of labor and management
disputes. During the said conferences, labor had shown that it can act with maturity. As a result, in
1976, an amendment was introduced in the Constitution providing for sectoral representation. In
the Constitution that was approved, the number of sectors was not indicated. However, in the
Election Code of 1978, it provided for three sectors; namely, industrial labor, agricultural labor and
the youth. The agricultural labor was given four seats; two for Luzon, one for the Visayas and one
for Mindanao. The same is true with the industrial labor sector. As far as the youth are concerned,
they were also given four seats: two for Luzon, one for Mindanao and one for the Visayas, with the
condition that there will be an additional two at large. And so, the youth had six representatives plus
four from the agricultural labor sector and four from the industrial labor sector — we had 14 seats.
In 1981, the Constitution was again amended. In the course of the amendment, the labor
representatives in the Batasang Pambansa proposed that sectoral representation be included as a
permanent addition to the lawmaking body.
Again, in that Constitution which was approved in 1981, the number and the name of the sectors
were not indicated. However, in the Election Code that was approved before the 1984 election,
there was really a definition of who will constitute the sectors and how they will be appointed. Let
me quote from that law that was passed in 1984. Under Section 27 of Batas Pambansa Blg. 881,
the scope of the sectors has been defined as follows:
The agricultural labor sector covers all persons who personally and physically till
the land as their principal occupation. It includes agricultural tenants and lessees,
rural workers and farm employees, owner-cultivators, settlers and small
fishermen.
The industrial labor sector includes all nonagricultural workers and employees.
The youth sector embraces persons not more than twenty-five years of age."
(Volume Two, CONCOM RECORD, p. 564).
28 City Mayor, et al. v. The Chief, Philippine Constabulary and Col. Nicanor Garcia, L-20346,
October 31, 1967, 21 SCRA 673.
29 Transcript of the Stenographic Notes (TSN) on the Hearing Had on Thursday, July 7, 1994, pp.
18-19: JUSTICE FLERIDA RUTH P. ROMERO:
Q — Mr. Counsel, may I interrupt at this stage?
When you say that according to the Constitution such Revenue Bills should
originate exclusively from the House. In this instance, did it not originally originate
exclusively from the House.?
The word used was not "solely"; if there were Bills later also introduced, let us
say in the Senate, but the House Bill came ahead.
So, are you using the two (2) words originate "exclusively" and "solely"
synonymously?
SENATOR TOLENTINO:
A — The verb "originate" remains the same, Your Honor, but the word
"exclusively", as I said, means "solely." . . .
30 H.B. 771 — exempting the sale of copra from VAT coverage; H.B. 2450 — exempting the
lessors or distributors of cinematographic films from paying the VAT; H.B. 7033 — amending Sec.
103 of the National Internal Revenue Code, as amended by EO 273; H.B. 8086 — exempting
packaging materials of export products from the VAT; H.B. 9030 — amending Sec. 120 of the
NIRC, as renumbered by EO 273; H.B. 9210 — amending Title IV and Section 237 and 238 of the
NIRC; H.B. 9297 — restructuring the VAT system by expanding its tax base, and amending
Sections 99, 100 (A), 102 (A), 103, 113, 114, 115 and 116 of the NIRC; H.B. 10012 — reducing the
rate of VAT imposed on sale and importation of goods, and sale of services; H.B. 10100 —
amending certain provisions of the NIRC on VAT.
31 Explanatory Note of House Bill No. 9210.
32 Excerpts from the April 19, 1994 meeting of the Bicameral Conference Committee: "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 bill; 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."
33 Article VI, Section 1.
34 Transcript of the Stenographic Notes (TSN) on the Hearing Had on Thursday, July 7, 1994, pp.
45-46.
"Justice Romero: Q: Mr. Counsel, is it not a fact that in the Bicameral Conference Committee, you
presented a Motion to return the Bill as it was to the Lower House with also your proposal that this
be referred to a Referendum for the entire nation to vote upon, then Senator Wigberto Tañada
amended your Motion and convinced you to drop that portion about referral to a Referendum and
you agreed.
So, that Motion of yours to return to the House was the one voted upon by the Bicameral
Conference Committee and it lost.
What can you say to that?
Senator Tolentino: A: No, no, if Your Honor please. My Motion was voted upon by the Senate itself
because I presented that said Motion in order to recall the Bill from the Bicameral Conference
Committee so that the Senate could go back to the period of amendment and see if we could
amend the House Bill itself, but that was defeated. So, it became academic. Thus, what we did we
proceeded with the procedure already being followed by the Senate.
I thought, as a matter of fact, that was the one way of correcting this procedural error, but I was
only one (1), or two (2), or three (3) of us only, then we were defeated in the voting, if Your Honor
please.
Justice Romero: Q: You mean you were outvoted?
Senator Tolentino: A: Yes, Your Honor; we were actually slaughtered in the voting, so to speak, if
Your Honor please."
35 The certification states: "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 7, 1994
and May 2, 1994, respectively."
36 BLACK'S LAW DICTIONARY, 5th Ed. (1979).
37 Field v. Clark, 143 U.S. 649, 36 L ed. 294.
38 Mason, Paul, MASON's MANUAL OF LEGISLATIVE PROCEDURE, 1953.

39 Cohn v. Kingsley, 49 P. 985 (1897).
40 Smith v. Thompson, 258 N.W. 190.
41 602 S.W. 2d 420 (1980).
42 34 Phil. 729 (1916).
43 Ibid at 733.
44 Ibid at 733-734.
45 Ibid at 735.
46 78 Phil. 1 (1947).
47 Ibid at 3.
48 Ibid at 18.
49 117 Phil. 363 (1963).
50 136 Phil. 405, 409 (1969).
51 Ibid at 412.
52 G.R. No. 105371, November 11, 1993, 227 SCRA 703.
53 Davies, Jack, LEGISLATIVE LAW AND PROCESS, 2nd ed., 1986.
54 Petition in G.R. No. 115781, p. 18.
55 Petition in G.R. No. 115543, pp. 2-3.
56 Davies, Jack, supra at 90.
57 Sutherland, J.G., STATUTES AND STATUTORY CONSTRUCTION, Vol. I, 4th ed., pp. 293-
294.
58 Page 261.
59 Page 268.
60 Davies, supra, at 65.
61 Sec. 764, p. 541.
62 Consolidated Memorandum for Respondents, p. 71.
63 Pages 404-405 and 407.
64 Davies, supra, at 81.
65 See: 18 Words and Phrases 482 citing Kennedy v. Truss, Del. Super., 13 A. 2nd 431, 435, 1
Terry 424 (1940).
66 United States Gypsum Co. v. State, Dept. of Revenue, 110 N.W. 2d 698, 71, 363 Mich. 548
(1961).
67 BLACK's DICTIONARY, 6th ed., p. 687 citing State ex. rel. Riley v. District Court of Second
Judicial Dist. in and for Silver Bow County, 103 Mont. 576, 64 P. 2d 115, 119 (1937).
68 CONGRESSIONAL RECORD, May 3, 1951, p. 885 cited in Orquiola, Annotated Rules of the
Senate, 1991 ed., pp. 40-41.
69 Article III, Section 7. "The right of the people to information on matters of public concern shall be
recognized. Access to official records, and to documents, and papers pertaining to official acts,
transactions, or decisions, as well as to government research data used as basis for policy
development, shall be afforded the citizen, subject to such limitations as may be provided by law."
70 Article II, Section 28. "Subject to reasonable conditions prescribed by law, the State adopts and
implements a policy of full public disclosure of all its transactions involving public interest."
71 Article VI, Section 1.
72 D & W Auto Supply v. Department of Revenue, supra.
73 The Philippine Judges Association v. Hon. Pete Prado, G.R. No. 105371, November 11, 1993,
227 SCRA 703, 709.
74 In Osmeña, Jr. v. Pendatun (109 Phil. 863 [1960]), the Court held that parliamentary rules are
merely procedural and they may be waived or disregarded by the legislative body. Hence, 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.
75 State v. Essling, 128 N.W. 2d 307, 316 (1964).
76 Sarasola v. Trinidad, 40 Phil. 252, 262 (1919).
77 Sison, Jr. v. Ancheta, L-59431, July 25, 1984, 130 SCRA 654, 660.
78 McCullock v. Maryland, 4 Wheaton 316.
79 Quoted in Graves. v. New York, 306 U.S. 466, 490.
PUNO, J.: Dissenting:
1 April 13, 19, 20, 21, and 25, 1994.
2 See also Annex "A", Memorandum of Petitioner Kilosbayan in G.R. No. 115781; also the Petition
in G.R. No. 115543, pp. 2-3.
3 See p. 66 of the Consolidated Memorandum for Respondents where they refer to certain
statements from Canlan, Weightson and Beam but without citing their specific book or article.
4 See Rule 49 of the Rules of the Senate.
5 See p. 22 Memorandum of Petitioners in G.R. No. 115781 citing Jefferson's Manual and Rules of
the House of Representatives, by Lewis Deschler, Parliamentarian, U.S. Government Printing
Office, 1967, p. 264.
6 Ibid, citing Riddick, Senate Procedure: Precedents and Practices, US Senate, 1981, US
Government Printing Office, pp. 383-384.
7 Section 2, Article VI.
8 Section 5(1), Article VI.
9 Sutherland, Statutory Construction, 3rd ed., Vol. I, p. 151.
10 Legislative Procedure, 1922 ed., Riverside Press, p. 404.
11 Legislative Law and Process in a Nut Shell, West Publishing Co., 1986 ed., p. 81.
12 Ibid.
13 Manual of Legislative Procedure for Legislative and other Governmental Bodies, McGraw Hill
Co., Inc., 1953 ed., pp. 32-33.
14 82 CJS 136.
15 Statutory Construction, 3rd ed., Vol. I., p. 223.

16 Op. cit., pp. 224-225 citing Barndall Refining v. Welsh, 64 S.D. 647, 269 N.W. 853, 859 [1936].
Jones, Constitutional Provisions Regulating the Mechanics of Enactment in Iowa (1935), 21 Iowa
Law Rev. 79, Charlton, Constitutional Regulation of Legislative Procedure (1936), 21 Iowa Law
Rev. 538; Note (1936) 21 Iowa Law Rev. 573.
17 See Mabanag v. Lopez Vito, 78 Phil. Rep. 1 [1947]; Casco Phil. Chemical Co. v. Gimenez, L-
17931, February 28, 1963; Morales v. Subido, No. L-29658, February 27, 1969 27 SCRA 131; Phil.
Judges Association v. Prado, G.R. No. 105371, November 11, 1993.
18 Record, Constitutional Commission, Vol. I, p. 436; see also, Bernas, The Constitution of the
Republic of the Philippines. A Commentary, 1988 ed., p. 255.
19 Citing Marbury v. Madison, 1 Cranch 137 L. ed [1803].
20 Article VIII, section 2.
24 Article VIII, section 4(1).
28 Article VII, section 18.
BELLOSILLO, J.: Dissenting:
1 See McGee v. Republic, 94 Phil. 821 (1954).
2 See Tañada v. Cuenco, 103 Phil. 1051 (1957).
3 See Majority Opinion, p. 15, citing Rainey v. United States, 232 U.S., 309, 58 Law Ed. 617.
4 Id., citing F.A. Ogg and P.O. Ray, Introduction to American Government, 302, n. 2 (1945).
5 See Note 3.
6 22 U.S. 107.
7 11 Am. Jur., pp. 712-13, 713-715.

SECOND DIVISION
G.R. No. L-39086 June 15, 1988
ABRA VALLEY COLLEGE, INC., represented by PEDRO V. BORGONIA, petitioner,

vs.
HON. JUAN P. AQUINO, Judge, Court of First Instance, Abra; ARMIN M. CARIAGA, Provincial Treasurer,
Abra; GASPAR V. BOSQUE, Municipal Treasurer, Bangued, Abra; HEIRS OF PATERNO MILLARE,
respondents.
PARAS, J.:
This is a petition for review on certiorari of the decision * of the defunct Court of First Instance of Abra, Branch I,
dated June 14, 1974, rendered in Civil Case No. 656, entitled "Abra Valley Junior College, Inc., represented by Pedro
V. Borgonia, plaintiff vs. Armin M. Cariaga as Provincial Treasurer of Abra, Gaspar V. Bosque as Municipal Treasurer
of Bangued, Abra and Paterno Millare, defendants," the decretal portion of which reads:
IN VIEW OF ALL THE FOREGOING, the Court hereby declares:
That the distraint seizure and sale by the Municipal Treasurer of Bangued, Abra, the Provincial
Treasurer of said province against the lot and building of the Abra Valley Junior College, Inc.,
represented by Director Pedro Borgonia located at Bangued, Abra, is valid;
That since the school is not exempt from paying taxes, it should therefore pay all back taxes in the
amount of P5,140.31 and back taxes and penalties from the promulgation of this decision;
That the amount deposited by the plaintaff him the sum of P60,000.00 before the trial, be
confiscated to apply for the payment of the back taxes and for the redemption of the property in
question, if the amount is less than P6,000.00, the remainder must be returned to the Director of
Pedro Borgonia, who represents the plaintiff herein;
That the deposit of the Municipal Treasurer in the amount of P6,000.00 also before the trial must be
returned to said Municipal Treasurer of Bangued, Abra;
And finally the case is hereby ordered dismissed with costs against the plaintiff.
SO ORDERED. (Rollo, pp. 22-23)
Petitioner, an educational corporation and institution of higher learning duly incorporated with the Securities and
Exchange Commission in 1948, filed a complaint (Annex "1" of Answer by the respondents Heirs of Paterno Millare;
Rollo, pp. 95-97) on July 10, 1972 in the court a quo to annul and declare void the "Notice of Seizure' and the "Notice
of Sale" of its lot and building located at Bangued, Abra, for non-payment of real estate taxes and penalties
amounting to P5,140.31. Said "Notice of Seizure" of the college lot and building covered by Original Certificate of Title
No. Q-83 duly registered in the name of petitioner, plaintiff below, on July 6, 1972, by respondents Municipal
Treasurer and Provincial Treasurer, defendants below, was issued for the satisfaction of the said taxes thereon. The
"Notice of Sale" was caused to be served upon the petitioner by the respondent treasurers on July 8, 1972 for the
sale at public auction of said college lot and building, which sale was held on the same date. Dr. Paterno Millare, then
Municipal Mayor of Bangued, Abra, offered the highest bid of P6,000.00 which was duly accepted. The certificate of
sale was correspondingly issued to him.
On August 10, 1972, the respondent Paterno Millare (now deceased) filed through counstel a motion to dismiss the
complaint.
On August 23, 1972, the respondent Provincial Treasurer and Municipal Treasurer, through then Provincial Fiscal
Loreto C. Roldan, filed their answer (Annex "2" of Answer by the respondents Heirs of Patemo Millare; Rollo, pp. 98-
100) to the complaint. This was followed by an amended answer (Annex "3," ibid, Rollo, pp. 101-103) on August 31,
1972.
On September 1, 1972 the respondent Paterno Millare filed his answer (Annex "5," ibid; Rollo, pp. 106-108).
On October 12, 1972, with the aforesaid sale of the school premises at public auction, the respondent Judge, Hon.
Juan P. Aquino of the Court of First Instance of Abra, Branch I, ordered (Annex "6," ibid; Rollo, pp. 109-110) the
respondents provincial and municipal treasurers to deliver to the Clerk of Court the proceeds of the auction sale.
Hence, on December 14, 1972, petitioner, through Director Borgonia, deposited with the trial court the sum of
P6,000.00 evidenced by PNB Check No. 904369.
On April 12, 1973, the parties entered into a stipulation of facts adopted and embodied by the trial court in its
questioned decision. Said Stipulations reads:
STIPULATION OF FACTS
COME NOW the parties, assisted by counsels, and to this Honorable Court respectfully enter into
the following agreed stipulation of facts:
1. That the personal circumstances of the parties as stated in paragraph 1 of the complaint is
admitted; but the particular person of Mr. Armin M. Cariaga is to be substituted, however, by
anyone who is actually holding the position of Provincial Treasurer of the Province of Abra;
2. That the plaintiff Abra Valley Junior College, Inc. is the owner of the lot and buildings thereon
located in Bangued, Abra under Original Certificate of Title No. 0-83;
3. That the defendant Gaspar V. Bosque, as Municipal treasurer of Bangued, Abra caused to be
served upon the Abra Valley Junior College, Inc. a Notice of Seizure on the property of said school
under Original Certificate of Title No. 0-83 for the satisfaction of real property taxes thereon,
amounting to P5,140.31; the Notice of Seizure being the one attached to the complaint as Exhibit
A;
4. That on June 8, 1972 the above properties of the Abra Valley Junior College, Inc. was sold at
public auction for the satisfaction of the unpaid real property taxes thereon and the same was sold
to defendant Paterno Millare who offered the highest bid of P6,000.00 and a Certificate of Sale in
his favor was issued by the defendant Municipal Treasurer.
5. That all other matters not particularly and specially covered by this stipulation of facts will be the
subject of evidence by the parties.
WHEREFORE, it is respectfully prayed of the Honorable Court to consider and admit this
stipulation of facts on the point agreed upon by the parties.
Bangued, Abra, April 12, 1973.
Sgd. Agripino Brillantes

Typ AGRIPINO BRILLANTES
Attorney for Plaintiff
Sgd. Loreto Roldan

Typ LORETO ROLDAN
Provincial Fiscal
Counsel for Defendants
Provincial Treasurer of
Abra and the Municipal
Treasurer of Bangued, Abra
Sgd. Demetrio V. Pre

Typ. DEMETRIO V. PRE
Attorney for Defendant
Paterno Millare (Rollo, pp. 17-18)
Aside from the Stipulation of Facts, the trial court among others, found the following: (a) that the school is recognized
by the government and is offering Primary, High School and College Courses, and has a school population of more
than one thousand students all in all; (b) that it is located right in the heart of the town of Bangued, a few meters from
the plaza and about 120 meters from the Court of First Instance building; (c) that the elementary pupils are housed in
a two-storey building across the street; (d) that the high school and college students are housed in the main building;
(e) that the Director with his family is in the second floor of the main building; and (f) that the annual gross income of
the school reaches more than one hundred thousand pesos.
From all the foregoing, the only issue left for the Court to determine and as agreed by the parties, is whether or not
the lot and building in question are used exclusively for educational purposes. (Rollo, p. 20)
The succeeding Provincial Fiscal, Hon. Jose A. Solomon and his Assistant, Hon. Eustaquio Z. Montero, filed a
Memorandum for the Government on March 25, 1974, and a Supplemental Memorandum on May 7, 1974, wherein
they opined "that based on the evidence, the laws applicable, court decisions and jurisprudence, the school building
and school lot used for educational purposes of the Abra Valley College, Inc., are exempted from the payment of
taxes." (Annexes "B," "B-1" of Petition; Rollo, pp. 24-49; 44 and 49).
Nonetheless, the trial court disagreed because of the use of the second floor by the Director of petitioner school for
residential purposes. He thus ruled for the government and rendered the assailed decision.
After having been granted by the trial court ten (10) days from August 6, 1974 within which to perfect its appeal (Per
Order dated August 6, 1974; Annex "G" of Petition; Rollo, p. 57) petitioner instead availed of the instant petition for
review on certiorari with prayer for preliminary injunction before this Court, which petition was filed on August 17,
1974 (Rollo, p.2).
In the resolution dated August 16, 1974, this Court resolved to give DUE COURSE to the petition (Rollo, p. 58).
Respondents were required to answer said petition (Rollo, p. 74).
Petitioner raised the following assignments of error:
THE COURT A QUO ERRED IN SUSTAINING AS VALID THE SEIZURE AND SALE OF THE COLLEGE LOT AND
BUILDING USED FOR EDUCATIONAL PURPOSES OF THE PETITIONER.
II
THE COURT A QUO ERRED IN DECLARING THAT THE COLLEGE LOT AND BUILDING OF THE PETITIONER
ARE NOT USED EXCLUSIVELY FOR EDUCATIONAL PURPOSES MERELY BECAUSE THE COLLEGE
PRESIDENT RESIDES IN ONE ROOM OF THE COLLEGE BUILDING.
III
THE COURT A QUO ERRED IN DECLARING THAT THE COLLEGE LOT AND BUILDING OF THE PETITIONER
ARE NOT EXEMPT FROM PROPERTY TAXES AND IN ORDERING PETITIONER TO PAY P5,140.31 AS REALTY
TAXES.
IV
THE COURT A QUO ERRED IN ORDERING THE CONFISCATION OF THE P6,000.00 DEPOSIT MADE IN THE
COURT BY PETITIONER AS PAYMENT OF THE P5,140.31 REALTY TAXES. (See Brief for the Petitioner, pp. 1-2)
The main issue in this case is the proper interpretation of the phrase "used exclusively for educational purposes."
Petitioner contends that the primary use of the lot and building for educational purposes, and not the incidental use
thereof, determines and exemption from property taxes under Section 22 (3), Article VI of the 1935 Constitution.
Hence, the seizure and sale of subject college lot and building, which are contrary thereto as well as to the provision
of Commonwealth Act No. 470, otherwise known as the Assessment Law, are without legal basis and therefore void.
On the other hand, private respondents maintain that the college lot and building in question which were subjected to
seizure and sale to answer for the unpaid tax are used: (1) for the educational purposes of the college; (2) as the
permanent residence of the President and Director thereof, Mr. Pedro V. Borgonia, and his family including the in-
laws and grandchildren; and (3) for commercial purposes because the ground floor of the college building is being
used and rented by a commercial establishment, the Northern Marketing Corporation (See photograph attached as
Annex "8" (Comment; Rollo, p. 90]).
Due to its time frame, the constitutional provision which finds application in the case at bar is Section 22, paragraph
3, Article VI, of the then 1935 Philippine Constitution, which expressly grants exemption from realty taxes for
"Cemeteries, churches and parsonages or convents appurtenant thereto, and all lands, buildings, and improvements
used exclusively for religious, charitable or educational purposes ...
Relative thereto, Section 54, paragraph c, Commonwealth Act No. 470 as amended by Republic Act No. 409,
otherwise known as the Assessment Law, provides:
The following are exempted from real property tax under the Assessment Law:
xxx xxx xxx
(c) churches and parsonages or convents appurtenant thereto, and all lands, buildings, and
improvements used exclusively for religious, charitable, scientific or educational purposes.
xxx xxx xxx
In this regard petitioner argues that the primary use of the school lot and building is the basic and controlling guide,
norm and standard to determine tax exemption, and not the mere incidental use thereof.
As early as 1916 in YMCA of Manila vs. Collector of lnternal Revenue, 33 Phil. 217 [1916], this Court ruled that while
it may be true that the YMCA keeps a lodging and a boarding house and maintains a restaurant for its members, still
these do not constitute business in the ordinary acceptance of the word, but an institution used exclusively for
religious, charitable and educational purposes, and as such, it is entitled to be exempted from taxation.
In the case of Bishop of Nueva Segovia v. Provincial Board of Ilocos Norte, 51 Phil. 352 [1972], this Court included in
the exemption a vegetable garden in an adjacent lot and another lot formerly used as a cemetery. It was clarified that
the term "used exclusively" considers incidental use also. Thus, the exemption from payment of land tax in favor of
the convent includes, not only the land actually occupied by the building but also the adjacent garden devoted to the
incidental use of the parish priest. The lot which is not used for commercial purposes but serves solely as a sort of
lodging place, also qualifies for exemption because this constitutes incidental use in religious functions.
The phrase "exclusively used for educational purposes" was further clarified by this Court in the cases of Herrera vs.
Quezon City Board of assessment Appeals, 3 SCRA 186 [1961] and Commissioner of Internal Revenue vs. Bishop of
the Missionary District, 14 SCRA 991 [1965], thus —
Moreover, the exemption in favor of property used exclusively for charitable or educational
purposes is 'not limited to property actually indispensable' therefor (Cooley on Taxation, Vol. 2, p.
1430), but extends to facilities which are incidental to and reasonably necessary for the
accomplishment of said purposes, such as in the case of hospitals, "a school for training nurses, a
nurses' home, property use to provide housing facilities for interns, resident doctors,
superintendents, and other members of the hospital staff, and recreational facilities for student
nurses, interns, and residents' (84 CJS 6621), such as "Athletic fields" including "a firm used for the
inmates of the institution. (Cooley on Taxation, Vol. 2, p. 1430).
The test of exemption from taxation is the use of the property for purposes mentioned in the Constitution (Apostolic
Prefect v. City Treasurer of Baguio, 71 Phil, 547 [1941]).
It must be stressed however, that while this Court allows a more liberal and non-restrictive interpretation of the phrase
"exclusively used for educational purposes" as provided for in Article VI, Section 22, paragraph 3 of the 1935
Philippine Constitution, reasonable emphasis has always been made that exemption extends to facilities which are
incidental to and reasonably necessary for the accomplishment of the main purposes. Otherwise stated, the use of
the school building or lot for commercial purposes is neither contemplated by law, nor by jurisprudence. Thus, while
the use of the second floor of the main building in the case at bar for residential purposes of the Director and his
family, may find justification under the concept of incidental use, which is complimentary to the main or primary
purpose—educational, the lease of the first floor thereof to the Northern Marketing Corporation cannot by any stretch
of the imagination be considered incidental to the purpose of education.
It will be noted however that the aforementioned lease appears to have been raised for the first time in this Court.
That the matter was not taken up in the to court is really apparent in the decision of respondent Judge. No mention
thereof was made in the stipulation of facts, not even in the description of the school building by the trial judge, both
embodied in the decision nor as one of the issues to resolve in order to determine whether or not said properly may
be exempted from payment of real estate taxes (Rollo, pp. 17-23). On the other hand, it is noteworthy that such fact
was not disputed even after it was raised in this Court.
Indeed, it is axiomatic that facts not raised in the lower court cannot be taken up for the first time on appeal.
Nonetheless, as an exception to the rule, this Court has held that although a factual issue is not squarely raised
below, still in the interest of substantial justice, this Court is not prevented from considering a pivotal factual matter.
"The Supreme Court is clothed with ample authority to review palpable errors not assigned as such if it finds that their
consideration is necessary in arriving at a just decision." (Perez vs. Court of Appeals, 127 SCRA 645 [1984]).
Under the 1935 Constitution, the trial court correctly arrived at the conclusion that the school building as well as the
lot where it is built, should be taxed, not because the second floor of the same is being used by the Director and his
family for residential purposes, but because the first floor thereof is being used for commercial purposes. However,
since only a portion is used for purposes of commerce, it is only fair that half of the assessed tax be returned to the
school involved.
PREMISES CONSIDERED, the decision of the Court of First Instance of Abra, Branch I, is hereby AFFIRMED
subject to the modification that half of the assessed tax be returned to the petitioner.
SO ORDERED.
Yap, C.J., Melencio-Herrera, Padilla and Sarmiento, JJ., concur.
Footnotes
* Penned by the respondent Judge, Hon. Judge P. Aquino.

EN BANC
G.R. No. L-19201 June 16, 1965
REV. FR. CASIMIRO LLADOC, petitioner,

vs.
The COMMISSIONER OF INTERNAL REVENUE and The COURT of TAX APPEALS, respondents.
Hilado and Hilado for petitioner.

Office of the Solicitor General for respondents.
SYLLABUS
1. TAXATION; CONSTITUTIONAL EXEMPTION FOR RELIGIOUS PURPOSES REFERS ONLY TO

PROPERTY TAXES. — Section 22 (3), Art. VI of the Constitution of the Philippines, exempts from taxation
cemeteries, churches and personages or convents, appurtenants thereto, and all lands, buildings, and improvements
used exclusively for religious purposes. The exemption is only from the payment of taxes assessed on such
properties enumerated, as property taxes, as contra-distinguished from excise taxes.
2. ID.; ID.; GIFT TAX ON PROPERTY USED FOR RELIGIOUS PURPOSES NOT VIOLATION OF
CONSTITUTION. — A gift tax is not an assessment on the properties themselves. It did not rest upon general
ownership. Rather it is an excise upon the use made of the properties and upon the privilege of receiving them. It is
not, therefore a property tax, but an excise tax imposed on the transfer of property by way of gift inter vivos, the
imposition of which a property used exclusively for religious purposes, does not constitute an impairment of the
Constitution.
3. ID.; ID.; HEAD OF DIOCESE: REAL PARTY IN INTEREST IN GIFT ON CHURCH PROPERTY. — The
head of the diocese and not the parish priest is the real party in interest in the imposition of a donee's tax on property
donated to the church for religious purposes.
PAREDES, J.:
Sometime in 1957, the M.B. Estate, Inc., of Bacolod City, donated P10,000.00 in cash to Rev. Fr. Crispin Ruiz, then
parish priest of Victorias, Negros Occidental, and predecessor of herein petitioner, for the construction of a new
Catholic Church in the locality. The total amount was actually spent for the purpose intended.
On March 3, 1958, the donor M.B. Estate, Inc., filed the donor's gift tax return. Under date of April 29, 1960, the
respondent Commissioner of Internal Revenue issued an assessment for donee's gift tax against the Catholic Parish
of Victorias, Negros Occidental, of which petitioner was the priest. The tax amounted to P1,370.00 including
surcharges, interests of 1% monthly from May 15, 1958 to June 15, 1960, and the compromise for the late filing of the
return.
Petitioner lodged a protest to the assessment and requested the withdrawal thereof. The protest and the motion for
reconsideration presented to the Commissioner of Internal Revenue were denied. The petitioner appealed to the
Court of Tax Appeals on November 2, 1960. In the petition for review, the Rev. Fr. Casimiro Lladoc claimed, among
others, that at the time of the donation, he was not the parish priest in Victorias; that there is no legal entity or juridical
person known as the "Catholic Parish Priest of Victorias," and, therefore, he should not be liable for the donee's gift
tax. It was also asserted that the assessment of the gift tax, even against the Roman Catholic Church, would not be
valid, for such would be a clear violation of the provisions of the Constitution.
After hearing, the CTA rendered judgment, the pertinent portions of which are quoted below:
... . Parish priests of the Roman Catholic Church under canon laws are similarly situated as its Archbishops
and Bishops with respect to the properties of the church within their parish. They are the guardians,
superintendents or administrators of these properties, with the right of succession and may sue and be
sued.
xxx xxx xxx
The petitioner impugns the, fairness of the assessment with the argument that he should not be held liable
for gift taxes on donation which he did not receive personally since he was not yet the parish priest of
Victorias in the year 1957 when said donation was given. It is intimated that if someone has to pay at all, it
should be petitioner's predecessor, the Rev. Fr. Crispin Ruiz, who received the donation in behalf of the
Catholic parish of Victorias or the Roman Catholic Church. Following petitioner's line of thinking, we should
be equally unfair to hold that the assessment now in question should have been addressed to, and collected
from, the Rev. Fr. Crispin Ruiz to be paid from income derived from his present parish where ever it may be.
It does not seem right to indirectly burden the present parishioners of Rev. Fr. Ruiz for donee's gift tax on a
donation to which they were not benefited.
xxx xxx xxx
We saw no legal basis then as we see none now, to include within the Constitutional exemption, taxes which
partake of the nature of an excise upon the use made of the properties or upon the exercise of the privilege
of receiving the properties. (Phipps vs. Commissioner of Internal Revenue, 91 F [2d] 627; 1938, 302 U.S.
742.)
It is a cardinal rule in taxation that exemptions from payment thereof are highly disfavored by law, and the
party claiming exemption must justify his claim by a clear, positive, or express grant of such privilege by law.
(Collector vs. Manila Jockey Club, G.R. No. L-8755, March 23, 1956; 53 O.G. 3762.)
The phrase "exempt from taxation" as employed in Section 22(3), Article VI of the Constitution of the
Philippines, should not be interpreted to mean exemption from all kinds of taxes. Statutes exempting
charitable and religious property from taxation should be construed fairly though strictly and in such manner
as to give effect to the main intent of the lawmakers. (Roman Catholic Church vs. Hastrings 5 Phil. 701.)
xxx xxx xxx
WHEREFORE, in view of the foregoing considerations, the decision of the respondent Commissioner of
Internal Revenue appealed from, is hereby affirmed except with regard to the imposition of the compromise
penalty in the amount of P20.00 (Collector of Internal Revenue v. U.S.T., G.R. No. L-11274, Nov. 28,
1958); ..., and the petitioner, the Rev. Fr. Casimiro Lladoc is hereby ordered to pay to the respondent the
amount of P900.00 as donee's gift tax, plus the surcharge of five per centum (5%) as ad valorem penalty
under Section 119 (c) of the Tax Code, and one per centum (1%) monthly interest from May 15, 1958 to the
date of actual payment. The surcharge of 25% provided in Section 120 for failure to file a return may not be
imposed as the failure to file a return was not due to willful neglect.( ... ) No costs.
The above judgment is now before us on appeal, petitioner assigning two (2) errors allegedly committed by the Tax
Court, all of which converge on the singular issue of whether or not petitioner should be liable for the assessed
donee's gift tax on the P10,000.00 donated for the construction of the Victorias Parish Church.
Section 22 (3), Art. VI of the Constitution of the Philippines, exempts from taxation cemeteries, churches and
parsonages or convents, appurtenant thereto, and all lands, buildings, and improvements used exclusively for
religious purposes. The exemption is only from the payment of taxes assessed on such properties enumerated, as
property taxes, as contra distinguished from excise taxes. In the present case, what the Collector assessed was a
donee's gift tax; the assessment was not on the properties themselves. It did not rest upon general ownership; it was
an excise upon the use made of the properties, upon the exercise of the privilege of receiving the properties (Phipps
vs. Com. of Int. Rec. 91 F 2d 627). Manifestly, gift tax is not within the exempting provisions of the section just
mentioned. A gift tax is not a property tax, but an excise tax imposed on the transfer of property by way of gift inter
vivos, the imposition of which on property used exclusively for religious purposes, does not constitute an impairment
of the Constitution. As well observed by the learned respondent Court, the phrase "exempt from taxation," as
employed in the Constitution (supra) should not be interpreted to mean exemption from all kinds of taxes. And there
being no clear, positive or express grant of such privilege by law, in favor of petitioner, the exemption herein must be
denied.
The next issue which readily presents itself, in view of petitioner's thesis, and Our finding that a tax liability exists, is,
who should be called upon to pay the gift tax? Petitioner postulates that he should not be liable, because at the time
of the donation he was not the priest of Victorias. We note the merit of the above claim, and in order to put things in
their proper light, this Court, in its Resolution of March 15, 1965, ordered the parties to show cause why the Head of
the Diocese to which the parish of Victorias pertains, should not be substituted in lieu of petitioner Rev. Fr. Casimiro
Lladoc it appearing that the Head of such Diocese is the real party in interest. The Solicitor General, in representation
of the Commissioner of Internal Revenue, interposed no objection to such a substitution. Counsel for the petitioner
did not also offer objection thereto.
On April 30, 1965, in a resolution, We ordered the Head of the Diocese to present whatever legal issues and/or
defenses he might wish to raise, to which resolution counsel for petitioner, who also appeared as counsel for the
Head of the Diocese, the Roman Catholic Bishop of Bacolod, manifested that it was submitting itself to the jurisdiction
and orders of this Court and that it was presenting, by reference, the brief of petitioner Rev. Fr. Casimiro Lladoc as its
own and for all purposes.
In view here of and considering that as heretofore stated, the assessment at bar had been properly made and the
imposition of the tax is not a violation of the constitutional provision exempting churches, parsonages or convents,
etc. (Art VI, sec. 22 [3], Constitution), the Head of the Diocese, to which the parish Victorias Pertains, is liable for the
payment thereof.
The decision appealed from should be, as it is hereby affirmed insofar as tax liability is concerned; it is modified, in
the sense that petitioner herein is not personally liable for the said gift tax, and that the Head of the Diocese, herein
substitute petitioner, should pay, as he is presently ordered to pay, the said gift tax, without special, pronouncement
as to costs.
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., and Zaldivar,
JJ., concur.
Barrera, J., took no part.
EN BANC
G.R. No. L-15270 September 30, 1961
JOSE V. HERRERA and ESTER OCHANGCO HERRERA, petitioners,

vs.
THE QUEZON CITY BOARD OF ASSESSMENT APPEALS, respondent.
Angel A. Sison for petitioners.

Jaime Agloro for respondent.
SYLLABUS
1. TAXATION; REAL ESTATE TAXES; CHARITABLE HOSPITALS AND EDUCATIONAL INSTITUTIONS;
WHEN BENEVOLENT CHARACTER OF HOSPITAL NOT DETRACTED BY ADMISSION OF PAY PATIENTS. —
The admission of pay-patients does not detract from the charitable character of a hospital, if all of its funds are
devoted "exclusively to the maintenance of the institution as a public charity" (84 C.J.S., 617; see also, 51 Am. Jur.,
607; Cooley on Taxation, Vol. 2, p. 1562; 144 A.L.R., 1489-1492). In other words, "where rendering charity is its
primary object, and the funds derived from payments made by patients able to pay are devoted to the benevolent
purposes of the institution, the mere fact that a profit has been made will not deprive the hospital of its benevolent
character" (Prairie Du Chian Sanitarium Co. vs. City of Prairie Du Chian, 242 Wis. 262, 7 NW [2d] 832, 144 A.L.R.,
1480). The fact, therefore, that in the case at bar, St. Catherine's Hospital, which is a charitable institution, admits
pay-patients, does not bar it from claiming that it is devoted exclusively to benevolent purposes, it being admitted that
the income derived from pay-patients is devoted to the improvement of the charity wards, which represent almost
two-thirds (2/3) of the bed capacity of the hospital, aside from "out-charity patients" who come only for consultation.
2. ID.; ID.; ID.; EXTENT OF EXEMPTION. — The exemption in favor of property used exclusively for charitable
or educational purposes is "not limited to property actually indispensable" therefor (Cooley on Taxation, Vol. 2, p.
1430), but extends to facilities which are "incidental to and reasonably necessary for" the accomplishment of said
purposes, such as in the case of hospitals, "a school for training nurses, a nurses' home, property used to provide
housing facilities for interns, resident doctors, superintendents, and other members of the hospital staff, and
recreational facilities for student nurses, interns and residents" (84 C.J.S., 621), such as "athletic fields," including "a
farm used for the inmates of the institution" (Cooley on Taxation, Vol. 2, p. 1430).
3. ID.; ID.; ID.; ID.; LANDS BUILDING AND IMPROVEMENTS BEYOND THE TAXING POWER
IRRESPECTIVE OF PROFITS. — The existence of "St. Catherine's School of Midwifery," with an enrollment of about
200 students, who practice partly in St. Catherine's Hospital and partly in St. Mary's Hospital, which, likewise, belongs
to petitioners, does not, and cannot, effect the exemption to which St. Catherine's Hospital is entitled under the
Constitution. The fact that the size of the enrollment and the students, aside from the amount they paid for board and
lodging, warrant the belief that a substantial profit is derived from the operation of the said school, is immaterial to the
issue of whether or not real estate taxes should be paid, because "all lands, buildings and improvements used
exclusively for religious, charitable or educational purposes shall be exempt from taxation," pursuant to the
Constitution, regardless of whether or not material profit are derived from the operation of the institutions in question.
In other words, Congress may, if it deems fit to do so, impose taxes upon such "profits," but said "lands, building and
improvements" are beyond its taxing power.
4. ID.; ID.; ID.; ID.; FACTORS THAT DO NOT AFFECT THE CHARITABLE CHARACTER OF A HOSPITAL.
— The fact that a garage located in the hospital was being used in the operation of the school of midwifery because
the students enrolled therein were entitled to transportation, and that the hospital directress, who received no
compensation, and her family, resided in the building, were incidental to the operation of the hospital, and,
accordingly, did not affect the charitable character of the hospital and the educational nature of the school.
CONCEPCION, J.:
Appeal, by petitioners Jose V. Herrera and Ester Ochangco Herrera, from a decision of the Court of Tax
Appeals affirming that of the Board of Assessment Appeals of Quezon City, which held that certain properties of said
petitioners are subject to assessment for purposes of real estate tax.
The facts and the issue are set forth in the aforementioned decision of the Court of Tax Appeals, from which
we quote:
On July 24, 1952, the Director of the Bureau of Hospitals authorized the petitioners to establish and
operate the "St. Catherine's Hospital", located at 58 D. Tuazon, Sta. Mesa Heights, Quezon City (Exhibit "F-
1", p. 7, BIR rec.). On or about January 3, 1953, the petitioners sent a letter to the Quezon City Assessor
requesting exemption from payment of real estate tax on the lot, building and other improvements
comprising the hospital stating that the same was established for charitable and humanitarian purposes and
not for commercial gain (Exhibit "F-2", pp. 8-9, BIR rec.). After an inspection of the premises in question and
after a careful study of the case, the exemption from real property taxes was granted effective the years
1953, 1954 and 1955.
Subsequently, however, in a letter dated August 10, 1955 (Exhibit "E", p. 65, CTA rec.) the Quezon
City Assessor notified the petitioners that the aforesaid properties were re-classified from exempt to
"taxable" and thus assessed for real property taxes effective 1956, enclosing therewith copies of Tax
Declarations Nos. 19321 to 19322 covering the said properties. The petitioners appealed the assessment to
the Quezon City Board of Assessment Appeals, which, in a decision dated March 31, 1956 and received by
the former on May 17, 1956, affirmed the decision of the City Assessor. A motion for reconsideration thereof
was denied on March 8, 1957. From this decision, the petitioners instituted the instant appeal. 1awphîl.nèt
The building involved in this case is principally used as a hospital. It is mainly a surgical and
orthopedic hospital with emphasis on obstetrical cases, the latter constituting 90% of the total number of
cases registered therein. The hospital has thirty-two (32) beds, of which twenty (20) are for charity-patients
and twelve (12) for pay-patients. From the evidence presented by petitioners, it is made to appear that there
are two kinds of charity patients — (a) those who come for consultation only ("out-charity patients"); and (b)
those who remain in the hospital for treatment ("lying-in-patients"). The out-charity patients are given free
consultation and prescription, although sometimes they are furnished with free medicines which are not
costly like aspirin, sulfatiazole, etc. The charity lying-in-patients are given free medical service and medicine
although the food served to the pay-patients is very much better than that given to the former. Although no
condition is imposed by the hospital on the admission of charity lying-in-patients, they however, usually give
donations to the hospital. On the other hand, the pay-patients are required to pay for hospital services
ranging from the minimum charge of P5.00 to the maximum of P40.00 for each day of stay in the hospital.
The income realized from pay-patients is spent for the improvement of the charity wards. The hospital
personnel is composed of three nurses, two graduate midwives, a resident physician receiving a salary of
P170.00 a month and the petitioner, Dr. Ester Ochangco Herrera, as directress. As such directress, the
latter does not receive any salary.
Petitioners also operate within the premises of the hospital the "St. Catherine's School of Midwifery"
which was granted government recognition by the Secretary of Education on February 1, 1955 (Exhibit "F-
3", p. 10, BIR rec.) This school has an enrollment of about two hundred students. The students are charged
a matriculation fee of P300.00 for 1-½ years, plus P50.00 a month for board and lodging, which includes
transportation to the St. Mary's Hospital. The students practice in the St. Catherine's Hospital, as well as in
the St. Mary's Hospital, which is also owned by the petitioners. A separate set of accounting books is
maintained by the school for midwifery distinct from that kept by the hospital. The petitioners alleged that the
accounts of the school are not included in Exhibits "A", "A-1", "A-2", "B", "B-1", "B-2", "C", "C-1" and "C-2"
which relate to the hospital only. However, the petitioners have refused to submit a separate statement of
accounts of the school. A brief tabulation indicating the amount of income of the hospital for the years 1954,
1955 and 1956, and its operational expenses, is as follows:
1954
Income Expenses Deficit
P 5,280.04 P1,303.80
Charity Ward
P14,779.50 P10,803.26
Pay Ward
P16,083.30
(Exhibits "A", "A-1" and "A-2")
1955
P 6,859.32
Charity Ward
P17,433.30 14,038.92 P3,464.94
Pay Ward
P20,898.24
(Exhibits "B", "B-1" and "B-2")
1956
P 5,559.89 P 341.53
Charity Ward
P21,467.40 16,249.04
Pay Ward
P21,809.93
(Exhibits "C", "C-1" and "C-2")
Aside from the St. Catherine and St. Mary hospitals, the petitioners declared that they also own lands and
coconut plantations in Quezon Province, and other real estate in the City of Manila consisting of apartments for rent.
The petitioner, Jose V. Herrera, is an architect, actively engaged in the practice of his profession, with office at
Tuason Building, Escolta, Manila. He was formerly Chairman, Board of Examiners for Architects and Chairman,
Board of Architects connected with the United Nations. He was also connected with the Allied Technologists which
constructed the Veterans Hospital in Quezon City.
The only issue raised, is whether or not the lot, building and other improvements occupied by the St. Catherine
Hospital are exempt from the real property tax. The resolution of this question boils down to the corollary issue as to
whether or not the said properties are used exclusively for charitable or educational purposes. (Petitioners' brief, pp.
24-29).
The Court of Tax Appeals decided the issue in the negative, upon the ground that the St. Catherine's Hospital
"has a pay ward for ... pay-patients, who are charged for the use of the private rooms, operating room, laboratory
room, delivery room, etc., like other hospitals operated for profit" and that "petitioners and their family occupy a
portion of the building for their residence." With respect to petitioners' claim for exemption based upon the operation
of the school of midwifery, the Court conceded that "the proposition might be proper if the property used for the
school of midwifery were separate and distinct from the hospital." It added, however, that, "in the instant case, the
portions of the building used for classrooms of the school of midwifery have not been shown to be exclusively for
school purposes"; that said portions "rather ... have a dual use, i.e., for classroom and for hospital use, the latter not
being a purpose that renders the property tax exempt;" that part of the building and lot in question "is used as a
hospital, part as residence of the petitioners, part as garage, part as dormitory and part as school"; and that "the
portion dedicated to educational and charitable purposes can not be identified from those destined to other uses; and
the building is itself an indivisible unit of property."
It should be noted, however, that, according to the very statement of facts made in the decision appealed from,
of the thirty-two (32) beds in the hospital, twenty (20) are for charity-patients; that "the income realized from pay-
patients is spent for improvement of the charity wards;" and that "petitioners, Dr. Ester Ochangco Herrera, as
directress" of said hospital, "does not receive any salary," although its resident physician gets a monthly salary of
P170.00. It is well settled, in this connection, that the admission of pay-patients does not detract from the charitable
character of a hospital, if all its funds are devoted "exclusively to the maintenance of the institution" as a "public
charity" (84 C.J.S., 617; see, also, 51 Am. Jur. 607; Cooley on Taxation, Vol. 2, p. 1562; 144 A.L.R., 1489-1492). "In
other words, where rendering charity is its primary object, and the funds derived from payments made by patients
able to pay are devoted to the benevolent purposes of the institution, the mere fact that a profit has been made will
not deprive the hospital of its benevolent character" (Prairie Du Chien Sanitarium Co. vs. City of Prairie Du Chien,
242 Wis. 262, 7 NW [2d] 832, 144 A.L.R. 1480).
Thus, we have held that the U.S.T. Hospital was not established for profit-making purposes, although it had
140 paying beds maintained only to partly finance the expenses of the free wards, containing 203 beds for charity
patients (U.S.T. Hospital Employees Association vs. Sto. Tomas University Hospital, L-6988, May 24, 1954), that St.
Paul's Hospital of Iloilo, a corporation organized for "charitable educational and religious purposes" can not be
considered as engaged in business merely because its pharmacy department charges paying patients the cost of
their medicine, plus 10% thereof, to partly offset the cost of medicines supplied free of charge to charity patients
(Collector of Internal Revenue vs. St. Paul's Hospital of Iloilo, L-12127, May 25, 1959), and that the amendment of
the original articles of incorporation of the University of Visayas to convert it from a non-stock to a stock corporation
and the increase of its assets from P9,000 to P50,000, distributed among the members of the original non-stock
corporation in terms of shares of stock, as well as the subsequent move of its board of trustees to double the stock
dividends of the corporation, in view of a gain of P200,000.00 in property, besides good-will, which was not carried
out, does not justify the inference that the corporation has become one for business and profit, none of its profits
having inured to the benefit of any stockholder or individual (Collector of Internal Revenue vs. University of Visayas,
L-13554, February 28, 1961).
Moreover, the exemption in favor of property used exclusively for charitable or educational purposes is "not
limited to property actually indispensable" therefor (Cooley on Taxation, Vol. 2, p. 1430), but extends to facilities
which are "incidental to and reasonably necessary for" the accomplishment of said purposes, such as, in the case of
hospitals, "a school for training nurses, a nurses' home, property use to provide housing facilities for interns, resident
doctors, superintendents, and other members of the hospital staff, and recreational facilities for student nurses,
interns and residents" (84 C.J.S., 621), such as "athletic fields," including "a farm used for the inmates of the
institution" (Cooley on Taxation, Vol. 2, p. 1430).
Within the purview of the Constitutional exemption from taxation, the St. Catherine's Hospital is, therefore, a
charitable institution, and the fact that it admits pay-patients does not bar it from claiming that it is devoted exclusively
to benevolent purposes, it being admitted that the income derived from pay-patients is devoted to the improvement of
the charity wards, which represent almost two-thirds (2/3) of the bed capacity of the hospital, aside from "out-charity
patients" who come only for consultation.
Again, the existence of "St. Catherine's School of Midwifery", with an enrollment of about 200 students, who
practice partly in St. Catherine's Hospital and partly in St. Mary's Hospital, which, likewise, belongs to petitioners
herein, does not, and cannot, affect the exemption to which St. Catherine's Hospital is entitled under our fundamental
law. On the contrary, it furnishes another ground for exemption. Seemingly, the Court of Tax Appeals was impressed
by the fact that the size of said enrollment and the matriculation fee charged from the students of midwifery, aside
from the amount they paid for board and lodging, including transportation to St. Mary's Hospital, warrants the belief
that petitioners derive a substantial profit from the operation of the school aforementioned. Such factor is, however,
immaterial to the issue in the case at bar, for "all lands, building and improvements used exclusively for religious,
charitable or educational purposes shall be exempt from taxation," pursuant to the Constitution, regardless of whether
or not material profits are derived from the operation of the institutions in question. In other words, Congress may, if it
deems fit to do so, impose taxes upon such "profits", but said "lands, buildings and improvements" are beyond its
taxing power.
Similarly, the garage in the building above referred to — which was obviously essential to the operation of the
school of midwifery, for the students therein enrolled practiced, not only in St. Catherine's Hospital, but, also, in St.
Mary's Hospital, and were entitled to transportation thereto — for Mrs. Herrera received no compensation as
directress of St. Catherine's Hospital — were incidental to the operation of the latter and of said school, and,
accordingly, did not affect the charitable character of said hospital and the educational nature of said school.
WHEREFORE, the decision of the Court of Tax Appeals, as well as that of the Assessment Board of Appeals
of Quezon City, are hereby reversed and set aside, and another one entered declaring that the lot, building and
improvements constituting the St. Catherine's Hospital are exempt from taxation under the provisions of the
Constitution, without special pronouncement as to costs. It is so ordered.
Bengzon, C.J., Padilla, Labrador, Reyes, J.B.L., Paredes and De Leon, JJ., concur.
EN BANC
G.R. No. L-9637 April 30, 1957
AMERICAN BIBLE SOCIETY, plaintiff-appellant,

vs.
CITY OF MANILA, defendant-appellee.
City Fiscal Eugenio Angeles and Juan Nabong for appellant.

Assistant City Fiscal Arsenio Nañawa for appellee.
SYLLABUS
1. STATUTES; SIMULTANEOUS REPEAL AND RE-ENACTMENT; EFFECT OF REPEAL UPON RIGHTS

AND LIABILITIES WHICH ACCRUED UNDER THE ORIGINAL STATUTE. — Where the old statute is repealed in its
entirety and by the same enactment re-enacts all or certain portions of the pre-existing law, the majority view holds
that the rights and liabilities which have accrued under the original statute are preserved and may be enforced, since
the re-enactment neutralizes the repeal, therefore continuing the law in force without interruption. (Crawford,
Statutory Construction, Sec. 322). In the case at bar, Ordinances Nos. 2529 and 3000 of the City of Manila were
enacted by the Municipal Board of the City of Manila by virtue of the power granted to it by section 2444, Subsection
(m-2) of the Revised Administrative Code, superseded on June 13, 1949, by section 13, Subsection (o) of Republic
Act No. 409, known as the Revised Charter of the City of Manila. The only essential difference between these two
provisions is that while Subsection (m-2) prescribes that the combined total tax of any dealer or manufacturer, or
both, enumerated under Subsections (m-1) and (m-2), whether dealing in one or all of the articles mentioned therein,
shall not be in excess of P500 per annum, the corresponding Section 18, subsection (o) of Republic Act No. 409,
does not contain any limitation as to the amount of tax or license fee that the retail dealer has to pay per annum.
Hence, and in accordance with the weight of authorities aforementioned, City ordinances Nos. 2529 and 3000 are still
in force and effect.
2. MUNICIPAL TAX; RETAIL DEALERS IN GENERAL MERCHANDISE; ORDINANCE PRESCRIBING TAX

NEED NOT BE APPROVED BY THE PRESIDENT TO BE EFFECTIVE. — The business of "retail dealers in general
merchandise" is expressly enumerated in subsection (o), section 18 of Republic Act No. 409: hence, an ordinance
prescribing a municipal tax on said business does not have to be approved by the President to be effective, as it is
not among those businesses referred to in subsection (ii) Section 18 of the same Act subject to the approval of the
President.
3. CONSTITUTIONAL LAW; RELIGIOUS FREEDOM; DISSEMINATION OF RELIGIOUS INFORMATION,

WHEN MAY BE RESTRAINED; PAYMENT OF LICENSE FEE, IMPAIRS FREE EXERCISE OF RELIGION. — The
constitutional guaranty of the free exercise and enjoyment of religious profession and worship carries with it the right
to disseminate religious information. Any restraint of such right can only be justified like other restraints of freedom of
expression on the grounds that there is a clear and present danger of any substantive evil which the State has the
right to prevent." (Tañada and Fernando on the Constitution of the Philippines, Vol. I, 4th ed., p. 297). In the case at
bar, plaintiff is engaged in the distribution and sales of bibles and religious articles. The City Treasurer of Manila
informed the plaintiff that it was conducting the business of general merchandise without providing itself with the
necessary Mayor's permit and municipal license, in violation of Ordinance No. 3000, as amended, and Ordinance No.
2529, as amended, and required plaintiff to secure the corresponding permit and license. Plaintiff protested against
this requirement and claimed that it never made any profit from the sale of its bibles. Held: It is true the price asked
for the religious articles was in some instances a little bit higher than the actual cost of the same, but this cannot
mean that plaintiff was engaged in the business or occupation of selling said "merchandise" for profit. For this
reasons, the provisions of City Ordinance No. 2529, as amended, which requires the payment of license fee for
conducting the business of general merchandise, cannot be applied to plaintiff society, for in doing so, it would impair
its free exercise and enjoyment of its religious profession and worship, as well as its rights of dissemination of
religious beliefs. Upon the other hand, City Ordinance No. 3000, as amended, which requires the obtention of the
Mayor's permit before any person can engage in any of the businesses, trades or occupations enumerated therein,
does not impose any charge upon the enjoyment of a right granted by the Constitution, nor tax the exercise of
religious practices. Hence, it cannot be considered unconstitutional, even if applied to plaintiff Society. But as
Ordinance No. 2529 is not applicable to plaintiff and the City of Manila is powerless to license or tax the business of
plaintiff society involved herein, for the reasons above stated, Ordinance No. 3000 is also inapplicable to said
business, trade or occupation of the plaintiff.
FELIX, J.:
Plaintiff-appellant is a foreign, non-stock, non-profit, religious, missionary corporation duly registered and doing
business in the Philippines through its Philippine agency established in Manila in November, 1898, with its principal
office at 636 Isaac Peral in said City. The defendant appellee is a municipal corporation with powers that are to be
exercised in conformity with the provisions of Republic Act No. 409, known as the Revised Charter of the City of
Manila.
In the course of its ministry, plaintiff's Philippine agency has been distributing and selling bibles and/or gospel
portions thereof (except during the Japanese occupation) throughout the Philippines and translating the same into
several Philippine dialects. On May 29 1953, the acting City Treasurer of the City of Manila informed plaintiff that it
was conducting the business of general merchandise since November, 1945, without providing itself with the
necessary Mayor's permit and municipal license, in violation of Ordinance No. 3000, as amended, and Ordinances
Nos. 2529, 3028 and 3364, and required plaintiff to secure, within three days, the corresponding permit and license
fees, together with compromise covering the period from the 4th quarter of 1945 to the 2nd quarter of 1953, in the
total sum of P5,821.45 (Annex A).
Plaintiff protested against this requirement, but the City Treasurer demanded that plaintiff deposit and pay under
protest the sum of P5,891.45, if suit was to be taken in court regarding the same (Annex B). To avoid the closing of
its business as well as further fines and penalties in the premises on October 24, 1953, plaintiff paid to the defendant
under protest the said permit and license fees in the aforementioned amount, giving at the same time notice to the
City Treasurer that suit would be taken in court to question the legality of the ordinances under which, the said fees
were being collected (Annex C), which was done on the same date by filing the complaint that gave rise to this action.
In its complaint plaintiff prays that judgment be rendered declaring the said Municipal Ordinance No. 3000, as
amended, and Ordinances Nos. 2529, 3028 and 3364 illegal and unconstitutional, and that the defendant be ordered
to refund to the plaintiff the sum of P5,891.45 paid under protest, together with legal interest thereon, and the costs,
plaintiff further praying for such other relief and remedy as the court may deem just equitable.
Defendant answered the complaint, maintaining in turn that said ordinances were enacted by the Municipal Board of
the City of Manila by virtue of the power granted to it by section 2444, subsection (m-2) of the Revised Administrative
Code, superseded on June 18, 1949, by section 18, subsection (1) of Republic Act No. 409, known as the Revised
Charter of the City of Manila, and praying that the complaint be dismissed, with costs against plaintiff. This answer
was replied by the plaintiff reiterating the unconstitutionality of the often-repeated ordinances.
Before trial the parties submitted the following stipulation of facts:
COME NOW the parties in the above-entitled case, thru their undersigned attorneys and respectfully submit
the following stipulation of facts:
1. That the plaintiff sold for the use of the purchasers at its principal office at 636 Isaac Peral, Manila, Bibles,
New Testaments, bible portions and bible concordance in English and other foreign languages imported by it
from the United States as well as Bibles, New Testaments and bible portions in the local dialects imported
and/or purchased locally; that from the fourth quarter of 1945 to the first quarter of 1953 inclusive the sales
made by the plaintiff were as follows:
Quarter Amount of Sales
4th quarter 1945 P1,244.21
1st quarter 1946 2,206.85
2nd quarter 1946 1,950.38
3rd quarter 1946 2,235.99
4th quarter 1946 3,256.04
1st quarter 1947 13,241.07
2nd quarter 1947 15,774.55
3rd quarter 1947 14,654.13
4th quarter 1947 12,590.94
1st quarter 1948 11,143.90
2nd quarter 1948 14,715.26
3rd quarter 1948 38,333.83
4th quarter 1948 16,179.90
1st quarter 1949 23,975.10
2nd quarter 1949 17,802.08
3rd quarter 1949 16,640.79
4th quarter 1949 15,961.38
1st quarter 1950 18,562.46
2nd quarter 1950 21,816.32

3rd quarter 1950 25,004.55
4th quarter 1950 45,287.92
1st quarter 1951 37,841.21
2nd quarter 1951 29,103.98
3rd quarter 1951 20,181.10
4th quarter 1951 22,968.91
1st quarter 1952 23,002.65
2nd quarter 1952 17,626.96
3rd quarter 1952 17,921.01
4th quarter 1952 24,180.72
1st quarter 1953 29,516.21
2. That the parties hereby reserve the right to present evidence of other facts not herein stipulated.
WHEREFORE, it is respectfully prayed that this case be set for hearing so that the parties may present
further evidence on their behalf. (Record on Appeal, pp. 15-16).
When the case was set for hearing, plaintiff proved, among other things, that it has been in existence in the
Philippines since 1899, and that its parent society is in New York, United States of America; that its, contiguous real
properties located at Isaac Peral are exempt from real estate taxes; and that it was never required to pay any
municipal license fee or tax before the war, nor does the American Bible Society in the United States pay any license
fee or sales tax for the sale of bible therein. Plaintiff further tried to establish that it never made any profit from the
sale of its bibles, which are disposed of for as low as one third of the cost, and that in order to maintain its operating
cost it obtains substantial remittances from its New York office and voluntary contributions and gifts from certain
churches, both in the United States and in the Philippines, which are interested in its missionary work. Regarding
plaintiff's contention of lack of profit in the sale of bibles, defendant retorts that the admissions of plaintiff-appellant's
lone witness who testified on cross-examination that bibles bearing the price of 70 cents each from plaintiff-
appellant's New York office are sold here by plaintiff-appellant at P1.30 each; those bearing the price of $4.50 each
are sold here at P10 each; those bearing the price of $7 each are sold here at P15 each; and those bearing the price
of $11 each are sold here at P22 each, clearly show that plaintiff's contention that it never makes any profit from the
sale of its bible, is evidently untenable.
After hearing the Court rendered judgment, the last part of which is as follows:
As may be seen from the repealed section (m-2) of the Revised Administrative Code and the repealing
portions (o) of section 18 of Republic Act No. 409, although they seemingly differ in the way the legislative
intent is expressed, yet their meaning is practically the same for the purpose of taxing the merchandise
mentioned in said legal provisions, and that the taxes to be levied by said ordinances is in the nature of
percentage graduated taxes (Sec. 3 of Ordinance No. 3000, as amended, and Sec. 1, Group 2, of
Ordinance No. 2529, as amended by Ordinance No. 3364).
IN VIEW OF THE FOREGOING CONSIDERATIONS, this Court is of the opinion and so holds that this case
should be dismissed, as it is hereby dismissed, for lack of merits, with costs against the plaintiff.
Not satisfied with this verdict plaintiff took up the matter to the Court of Appeals which certified the case to Us for the
reason that the errors assigned to the lower Court involved only questions of law.
Appellant contends that the lower Court erred:
1. In holding that Ordinances Nos. 2529 and 3000, as respectively amended, are not unconstitutional;
2. In holding that subsection m-2 of Section 2444 of the Revised Administrative Code under which
Ordinances Nos. 2592 and 3000 were promulgated, was not repealed by Section 18 of Republic Act No.
409;
3. In not holding that an ordinance providing for taxes based on gross sales or receipts, in order to be valid
under the new Charter of the City of Manila, must first be approved by the President of the Philippines; and
4. In holding that, as the sales made by the plaintiff-appellant have assumed commercial proportions, it
cannot escape from the operation of said municipal ordinances under the cloak of religious privilege.
The issues. — As may be seen from the proceeding statement of the case, the issues involved in the present
controversy may be reduced to the following: (1) whether or not the ordinances of the City of Manila, Nos. 3000, as
amended, and 2529, 3028 and 3364, are constitutional and valid; and (2) whether the provisions of said ordinances
are applicable or not to the case at bar.
Section 1, subsection (7) of Article III of the Constitution of the Republic of the Philippines, provides that:
(7) No law shall be made respecting an establishment of religion, or prohibiting the free exercise thereof,
and the free exercise and enjoyment of religious profession and worship, without discrimination or
preference, shall forever be allowed. No religion test shall be required for the exercise of civil or political
rights.
Predicated on this constitutional mandate, plaintiff-appellant contends that Ordinances Nos. 2529 and 3000, as
respectively amended, are unconstitutional and illegal in so far as its society is concerned, because they provide for
religious censorship and restrain the free exercise and enjoyment of its religious profession, to wit: the distribution
and sale of bibles and other religious literature to the people of the Philippines.
Before entering into a discussion of the constitutional aspect of the case, We shall first consider the provisions of the
questioned ordinances in relation to their application to the sale of bibles, etc. by appellant. The records, show that by
letter of May 29, 1953 (Annex A), the City Treasurer required plaintiff to secure a Mayor's permit in connection with
the society's alleged business of distributing and selling bibles, etc. and to pay permit dues in the sum of P35 for the
period covered in this litigation, plus the sum of P35 for compromise on account of plaintiff's failure to secure the
permit required by Ordinance No. 3000 of the City of Manila, as amended. This Ordinance is of general application
and not particularly directed against institutions like the plaintiff, and it does not contain any provisions whatever
prescribing religious censorship nor restraining the free exercise and enjoyment of any religious profession. Section 1
of Ordinance No. 3000 reads as follows:
SEC. 1. PERMITS NECESSARY. — It shall be unlawful for any person or entity to conduct or engage in any
of the businesses, trades, or occupations enumerated in Section 3 of this Ordinance or other businesses,
trades, or occupations for which a permit is required for the proper supervision and enforcement of existing
laws and ordinances governing the sanitation, security, and welfare of the public and the health of the
employees engaged in the business specified in said section 3 hereof, WITHOUT FIRST HAVING
OBTAINED A PERMIT THEREFOR FROM THE MAYOR AND THE NECESSARY LICENSE FROM THE
CITY TREASURER.
The business, trade or occupation of the plaintiff involved in this case is not particularly mentioned in Section 3 of the
Ordinance, and the record does not show that a permit is required therefor under existing laws and ordinances for the
proper supervision and enforcement of their provisions governing the sanitation, security and welfare of the public
and the health of the employees engaged in the business of the plaintiff. However, sections 3 of Ordinance 3000
contains item No. 79, which reads as follows:
79. All other businesses, trades or occupations not

mentioned in this Ordinance, except those upon which the
City is not empowered to license or to tax P5.00
Therefore, the necessity of the permit is made to depend upon the power of the City to license or tax said business,
trade or occupation.
As to the license fees that the Treasurer of the City of Manila required the society to pay from the 4th quarter of 1945
to the 1st quarter of 1953 in the sum of P5,821.45, including the sum of P50 as compromise, Ordinance No. 2529, as
amended by Ordinances Nos. 2779, 2821 and 3028 prescribes the following:
SEC. 1. FEES. — Subject to the provisions of section 578 of the Revised Ordinances of the City of Manila,
as amended, there shall be paid to the City Treasurer for engaging in any of the businesses or occupations
below enumerated, quarterly, license fees based on gross sales or receipts realized during the preceding
quarter in accordance with the rates herein prescribed: PROVIDED, HOWEVER, That a person engaged in
any businesses or occupation for the first time shall pay the initial license fee based on the probable gross
sales or receipts for the first quarter beginning from the date of the opening of the business as indicated
herein for the corresponding business or occupation.
xxx xxx xxx
GROUP 2. — Retail dealers in new (not yet used) merchandise, which dealers are not yet subject to the
payment of any municipal tax, such as (1) retail dealers in general merchandise; (2) retail dealers
exclusively engaged in the sale of . . . books, including stationery.
xxx xxx xxx
As may be seen, the license fees required to be paid quarterly in Section 1 of said Ordinance No. 2529, as amended,
are not imposed directly upon any religious institution but upon those engaged in any of the business or occupations
therein enumerated, such as retail "dealers in general merchandise" which, it is alleged, cover the business or
occupation of selling bibles, books, etc.
Chapter 60 of the Revised Administrative Code which includes section 2444, subsection (m-2) of said legal body, as
amended by Act No. 3659, approved on December 8, 1929, empowers the Municipal Board of the City of Manila:
(M-2) To tax and fix the license fee on (a) dealers in new automobiles or accessories or both, and (b) retail
dealers in new (not yet used) merchandise, which dealers are not yet subject to the payment of any
municipal tax.
For the purpose of taxation, these retail dealers shall be classified as (1) retail dealers in general
merchandise, and (2) retail dealers exclusively engaged in the sale of (a) textiles . . . (e) books, including
stationery, paper and office supplies, . . .: PROVIDED, HOWEVER, That the combined total tax of any
debtor or manufacturer, or both, enumerated under these subsections (m-1) and (m-2), whether dealing in
one or all of the articles mentioned herein, SHALL NOT BE IN EXCESS OF FIVE HUNDRED PESOS PER
ANNUM.
and appellee's counsel maintains that City Ordinances Nos. 2529 and 3000, as amended, were enacted in virtue of
the power that said Act No. 3669 conferred upon the City of Manila. Appellant, however, contends that said
ordinances are longer in force and effect as the law under which they were promulgated has been expressly repealed
by Section 102 of Republic Act No. 409 passed on June 18, 1949, known as the Revised Manila Charter.
Passing upon this point the lower Court categorically stated that Republic Act No. 409 expressly repealed the
provisions of Chapter 60 of the Revised Administrative Code but in the opinion of the trial Judge, although Section
2444 (m-2) of the former Manila Charter and section 18 (o) of the new seemingly differ in the way the legislative intent
was expressed, yet their meaning is practically the same for the purpose of taxing the merchandise mentioned in both
legal provisions and, consequently, Ordinances Nos. 2529 and 3000, as amended, are to be considered as still in full
force and effect uninterruptedly up to the present.
Often the legislature, instead of simply amending the pre-existing statute, will repeal the old statute in its
entirety and by the same enactment re-enact all or certain portions of the preexisting law. Of course, the
problem created by this sort of legislative action involves mainly the effect of the repeal upon rights and
liabilities which accrued under the original statute. Are those rights and liabilities destroyed or preserved?
The authorities are divided as to the effect of simultaneous repeals and re-enactments. Some adhere to the
view that the rights and liabilities accrued under the repealed act are destroyed, since the statutes from
which they sprang are actually terminated, even though for only a very short period of time. Others, and they
seem to be in the majority, refuse to accept this view of the situation, and consequently maintain that all
rights an liabilities which have accrued under the original statute are preserved and may be enforced, since
the re-enactment neutralizes the repeal, therefore, continuing the law in force without interruption.
(Crawford-Statutory Construction, Sec. 322).
Appellant's counsel states that section 18 (o) of Republic Act No, 409 introduces a new and wider concept of taxation
and is different from the provisions of Section 2444(m-2) that the former cannot be considered as a substantial re-
enactment of the provisions of the latter. We have quoted above the provisions of section 2444(m-2) of the Revised
Administrative Code and We shall now copy hereunder the provisions of Section 18, subdivision (o) of Republic Act
No. 409, which reads as follows:
(o) To tax and fix the license fee on dealers in general merchandise, including importers and indentors,
except those dealers who may be expressly subject to the payment of some other municipal tax under the
provisions of this section.
Dealers in general merchandise shall be classified as (a) wholesale dealers and (b) retail dealers. For
purposes of the tax on retail dealers, general merchandise shall be classified into four main classes: namely
(1) luxury articles, (2) semi-luxury articles, (3) essential commodities, and (4) miscellaneous articles. A
separate license shall be prescribed for each class but where commodities of different classes are sold in
the same establishment, it shall not be compulsory for the owner to secure more than one license if he pays
the higher or highest rate of tax prescribed by ordinance. Wholesale dealers shall pay the license tax as
such, as may be provided by ordinance.
For purposes of this section, the term "General merchandise" shall include poultry and livestock, agricultural
products, fish and other allied products.
The only essential difference that We find between these two provisions that may have any bearing on the case at
bar, is that, while subsection (m-2) prescribes that the combined total tax of any dealer or manufacturer, or both,
enumerated under subsections (m-1) and (m-2), whether dealing in one or all of the articles mentioned therein, shall
not be in excess of P500 per annum, the corresponding section 18, subsection (o) of Republic Act No. 409, does not
contain any limitation as to the amount of tax or license fee that the retail dealer has to pay per annum. Hence, and in
accordance with the weight of the authorities above referred to that maintain that "all rights and liabilities which have
accrued under the original statute are preserved and may be enforced, since the reenactment neutralizes the repeal,
therefore continuing the law in force without interruption", We hold that the questioned ordinances of the City of
Manila are still in force and effect.
Plaintiff, however, argues that the questioned ordinances, to be valid, must first be approved by the President of the
Philippines as per section 18, subsection (ii) of Republic Act No. 409, which reads as follows:
(ii) To tax, license and regulate any business, trade or occupation being conducted within the City of Manila,
not otherwise enumerated in the preceding subsections, including percentage taxes based on gross sales or
receipts, subject to the approval of the PRESIDENT, except amusement taxes.
but this requirement of the President's approval was not contained in section 2444 of the former Charter of the City of
Manila under which Ordinance No. 2529 was promulgated. Anyway, as stated by appellee's counsel, the business of
"retail dealers in general merchandise" is expressly enumerated in subsection (o), section 18 of Republic Act No.
409; hence, an ordinance prescribing a municipal tax on said business does not have to be approved by the
President to be effective, as it is not among those referred to in said subsection (ii). Moreover, the questioned
ordinances are still in force, having been promulgated by the Municipal Board of the City of Manila under the authority
granted to it by law.
The question that now remains to be determined is whether said ordinances are inapplicable, invalid or
unconstitutional if applied to the alleged business of distribution and sale of bibles to the people of the Philippines by
a religious corporation like the American Bible Society, plaintiff herein.
With regard to Ordinance No. 2529, as amended by Ordinances Nos. 2779, 2821 and 3028, appellant contends that
it is unconstitutional and illegal because it restrains the free exercise and enjoyment of the religious profession and
worship of appellant.
Article III, section 1, clause (7) of the Constitution of the Philippines aforequoted, guarantees the freedom of religious
profession and worship. "Religion has been spoken of as a profession of faith to an active power that binds and
elevates man to its Creator" (Aglipay vs. Ruiz, 64 Phil., 201).It has reference to one's views of his relations to His
Creator and to the obligations they impose of reverence to His being and character, and obedience to His Will (Davis
vs. Beason, 133 U.S., 342). The constitutional guaranty of the free exercise and enjoyment of religious profession
and worship carries with it the right to disseminate religious information. Any restraints of such right can only be
justified like other restraints of freedom of expression on the grounds that there is a clear and present danger of any
substantive evil which the State has the right to prevent". (Tañada and Fernando on the Constitution of the
Philippines, Vol. 1, 4th ed., p. 297). In the case at bar the license fee herein involved is imposed upon appellant for its
distribution and sale of bibles and other religious literature:
In the case of Murdock vs. Pennsylvania, it was held that an ordinance requiring that a license be obtained
before a person could canvass or solicit orders for goods, paintings, pictures, wares or merchandise cannot
be made to apply to members of Jehovah's Witnesses who went about from door to door distributing
literature and soliciting people to "purchase" certain religious books and pamphlets, all published by the
Watch Tower Bible & Tract Society. The "price" of the books was twenty-five cents each, the "price" of the
pamphlets five cents each. It was shown that in making the solicitations there was a request for additional
"contribution" of twenty-five cents each for the books and five cents each for the pamphlets. Lesser sum
were accepted, however, and books were even donated in case interested persons were without funds.
On the above facts the Supreme Court held that it could not be said that petitioners were engaged in
commercial rather than a religious venture. Their activities could not be described as embraced in the
occupation of selling books and pamphlets. Then the Court continued:
"We do not mean to say that religious groups and the press are free from all financial burdens of
government. See Grosjean vs. American Press Co., 297 U.S., 233, 250, 80 L. ed. 660, 668, 56 S. Ct. 444.
We have here something quite different, for example, from a tax on the income of one who engages in
religious activities or a tax on property used or employed in connection with activities. It is one thing to
impose a tax on the income or property of a preacher. It is quite another to exact a tax from him for the
privilege of delivering a sermon. The tax imposed by the City of Jeannette is a flat license tax, payment of
which is a condition of the exercise of these constitutional privileges. The power to tax the exercise of a
privilege is the power to control or suppress its enjoyment. . . . Those who can tax the exercise of this
religious practice can make its exercise so costly as to deprive it of the resources necessary for its
maintenance. Those who can tax the privilege of engaging in this form of missionary evangelism can close
all its doors to all those who do not have a full purse. Spreading religious beliefs in this ancient and
honorable manner would thus be denied the needy. . . .
It is contended however that the fact that the license tax can suppress or control this activity is unimportant if
it does not do so. But that is to disregard the nature of this tax. It is a license tax — a flat tax imposed on the
exercise of a privilege granted by the Bill of Rights . . . The power to impose a license tax on the exercise of
these freedom is indeed as potent as the power of censorship which this Court has repeatedly struck down. .
. . It is not a nominal fee imposed as a regulatory measure to defray the expenses of policing the activities in
question. It is in no way apportioned. It is flat license tax levied and collected as a condition to the pursuit of
activities whose enjoyment is guaranteed by the constitutional liberties of press and religion and inevitably
tends to suppress their exercise. That is almost uniformly recognized as the inherent vice and evil of this flat
license tax."
Nor could dissemination of religious information be conditioned upon the approval of an official or manager
even if the town were owned by a corporation as held in the case of Marsh vs. State of Alabama (326 U.S.
501), or by the United States itself as held in the case of Tucker vs. Texas (326 U.S. 517). In the former
case the Supreme Court expressed the opinion that the right to enjoy freedom of the press and religion
occupies a preferred position as against the constitutional right of property owners.
"When we balance the constitutional rights of owners of property against those of the people to enjoy
freedom of press and religion, as we must here, we remain mindful of the fact that the latter occupy a
preferred position. . . . In our view the circumstance that the property rights to the premises where the
deprivation of property here involved, took place, were held by others than the public, is not sufficient to
justify the State's permitting a corporation to govern a community of citizens so as to restrict their
fundamental liberties and the enforcement of such restraint by the application of a State statute." (Tañada
and Fernando on the Constitution of the Philippines, Vol. 1, 4th ed., p. 304-306).
Section 27 of Commonwealth Act No. 466, otherwise known as the National Internal Revenue Code, provides:
SEC. 27. EXEMPTIONS FROM TAX ON CORPORATIONS. — The following organizations shall not be
taxed under this Title in respect to income received by them as such —
(e) Corporations or associations organized and operated exclusively for religious, charitable, . . . or
educational purposes, . . .: Provided, however, That the income of whatever kind and character from any of
its properties, real or personal, or from any activity conducted for profit, regardless of the disposition made of
such income, shall be liable to the tax imposed under this Code;
Appellant's counsel claims that the Collector of Internal Revenue has exempted the plaintiff from this tax and says
that such exemption clearly indicates that the act of distributing and selling bibles, etc. is purely religious and does not
fall under the above legal provisions.
It may be true that in the case at bar the price asked for the bibles and other religious pamphlets was in some
instances a little bit higher than the actual cost of the same but this cannot mean that appellant was engaged in the
business or occupation of selling said "merchandise" for profit. For this reason We believe that the provisions of City
of Manila Ordinance No. 2529, as amended, cannot be applied to appellant, for in doing so it would impair its free
exercise and enjoyment of its religious profession and worship as well as its rights of dissemination of religious
beliefs.
With respect to Ordinance No. 3000, as amended, which requires the obtention the Mayor's permit before any person
can engage in any of the businesses, trades or occupations enumerated therein, We do not find that it imposes any
charge upon the enjoyment of a right granted by the Constitution, nor tax the exercise of religious practices. In the
case of Coleman vs. City of Griffin, 189 S.E. 427, this point was elucidated as follows:
An ordinance by the City of Griffin, declaring that the practice of distributing either by hand or otherwise,
circulars, handbooks, advertising, or literature of any kind, whether said articles are being delivered free, or
whether same are being sold within the city limits of the City of Griffin, without first obtaining written
permission from the city manager of the City of Griffin, shall be deemed a nuisance and punishable as an
offense against the City of Griffin, does not deprive defendant of his constitutional right of the free exercise
and enjoyment of religious profession and worship, even though it prohibits him from introducing and
carrying out a scheme or purpose which he sees fit to claim as a part of his religious system.
It seems clear, therefore, that Ordinance No. 3000 cannot be considered unconstitutional, even if applied to plaintiff
Society. But as Ordinance No. 2529 of the City of Manila, as amended, is not applicable to plaintiff-appellant and
defendant-appellee is powerless to license or tax the business of plaintiff Society involved herein for, as stated
before, it would impair plaintiff's right to the free exercise and enjoyment of its religious profession and worship, as
well as its rights of dissemination of religious beliefs, We find that Ordinance No. 3000, as amended is also
inapplicable to said business, trade or occupation of the plaintiff.
Wherefore, and on the strength of the foregoing considerations, We hereby reverse the decision appealed from,
sentencing defendant return to plaintiff the sum of P5,891.45 unduly collected from it. Without pronouncement as to
costs. It is so ordered.
Bengzon, Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion and Endencia, JJ., concur

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1.

d. Exemption of Government From Taxes

Proprietary function vs. governmental function

e. International Comity Article II sec 2

c. Non impairment of contracts Article III section 10

g. Exemption of churches and educational institutions

i. Limitation on revenue laws affecting religion

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

Ernesto J. Gonzaga for appellant.

REYES, J.B L., J.:

According to section 6 of the law —

G.R. No. L-31156 February 27, 1976

PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES, INC., plaintiff-appellant,

1. TAXATION; NATURE; NON-DELEGATION OF POWER, EXCEPTION. — The power of taxation is an

FERNANDO, J., concurring:

1. CONSTITUTIONAL LAW; TAXATION; POWER OF MUNICIPAL CORPORATION TO TAX UNDER THE

Sabido, Sabido & Associates for appellant.

There are three capital questions raised in this appeal:

3. — Are Ordinances Nos. 23 and 27 unjust and unfair?

FERNANDO, J., concurring:

FERNANDO, J., concurring:

(a) Residence tax;

(b) Documentary stamp tax;

(e) Taxes on forest products and forest concessions;

(g) Taxes on income of any kind whatsoever;

6 Cooley, The Law of Taxation, Vol. 1, Fourth Edition, 149-150.

8 Rubi v. Prov. Brd. of Mindoro, 39 Phil. 702 (1919).

9 Cooley, ante at 190.

11 Malcolm, Philippine Constitutional Law, 513-14.

12 Cooley ante at 334.

Constitution and Sec. 17 (1), Art. VIII, 1973 Constitution.

18 McQuillin. Municipal Corporations, 3rd. Ed., Vol. 6, at 206.-210.

21 SMB, Inc. v. City of Cebu, ante, Footnote 16.

29 Subject of plaintiff-appellant's Motion for Admission and consideration of Essential Newly

1 L-24756, October 31, 1968, 25 SCRA 938.

2 Article XI, Section 5 of the present Constitution.

3 Article VII, Section 10 of the 1935 Constitution.

5 Republic Act No. 2264.

6 L-18534, December 24,1964,12 SCRA 611.

8 L-14264, April 30, 1963, 7 SCRA 887.

G.R. No. L-28271 July 25, 1975

SMITH, BELL AND CO. (PHIL.), INC., petitioner,

Hildawa and Gomez for petitioner.

1. TAXATION; ASSESSMENT AND COLLECTION; COMMISSIONER OF INTERNAL REVENUE MERELY

We affirm the decision of the Court of Tax Appeals.

Section 134 of the Tax Code provides: 1

(a) Sparkling wines, regardless of proof, twelve pesos.

Teehankee, J., is on leave.

G.R. No. L-46720 June 28, 1940

WELLS FARGO BANK & UNION TRUST COMPANY, petitioner-appellant,

De Witt, Perkins and Ponce Enrile for appellant.

1. DECLARATORY JUDGMENT; SHARES OF STOCK OF NONRESIDENT; RIGHT OF PHILIPPINE

Judgment is affirmed, with costs against petitioner-appellant.

Avanceña, C.J., Imperial, Diaz and Concepcion, JJ., concur.

G.R. No. L-22074 April 30, 1965

THE PHILIPPINE GUARANTY CO., INC., petitioner,

Josue H. Gustilo and Ramirez and Ortigas for petitioner.

1. TAXATION; INCOME TAX; REINSURANCE PREMIUMS CEDED TO FOREIGN REINSURERS SUBJECT

2. ID.; ID.; REINSURANCE PREMIUMS CEDED TO FOREIGN REINSURERS CONSIDERED INCOME