1st Assignment

G.R. No.
119286 October 13, 2004
PASEO REALTY & DEVELOPMENT CORPORATION, petitioner,
vs.
COURT OF APPEALS, COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE, respondents.
DECISION
TINGA, J.:
The changes in the reportorial requirements and payment schedules of corporate income taxes from
annual to quarterly have created problems, especially on the matter of tax refunds.1 In this case, the
Court is called to resolve the question of whether alleged excess taxes paid by a corporation during a
taxable year should be refunded or credited against its tax liabilities for the succeeding year.
Paseo Realty and Development Corporation, a domestic corporation engaged in the lease of two (2)
parcels of land at Paseo de Roxas in Makati City, seeks a review of the Decision2 of the Court of Appeals
dismissing its petition for review of the resolution3 of the Court of Tax Appeals (CTA) which, in turn,
denied its claim for refund.
The factual antecedents4 are as follows:
On April 16, 1990, petitioner filed its Income Tax Return for the calendar year 1989 declaring a gross
income of ₱1,855,000.00, deductions of ₱1,775,991.00, net income of ₱79,009.00, an income tax due
thereon in the amount of ₱27,653.00, prior year’s excess credit of ₱146,026.00, and creditable taxes
withheld in 1989 of ₱54,104.00 or a total tax credit of ₱200,130.00 and credit balance of ₱172,477.00.
On November 14, 1991, petitioner filed with respondent a claim for "the refund of excess creditable
withholding and income taxes for the years 1989 and 1990 in the aggregate amount of ₱147,036.15."
On December 27, 1991 alleging that the prescriptive period for refunds for 1989 would expire on
December 30, 1991 and that it was necessary to interrupt the prescriptive period, petitioner filed with
the respondent Court of Tax Appeals a petition for review praying for the refund of "₱54,104.00
representing creditable taxes withheld from income payments of petitioner for the calendar year ending
December 31, 1989."
On February 25, 1992, respondent Commissioner filed an Answer and by way of special and/or
affirmative defenses averred the following: a) the petition states no cause of action for failure to allege
the dates when the taxes sought to be refunded were paid; b) petitioner’s claim for refund is still under
investigation by respondent Commissioner; c) the taxes claimed are deemed to have been paid and
collected in accordance with law and existing pertinent rules and regulations; d) petitioner failed to
allege that it is entitled to the refund or deductions claimed; e) petitioner’s contention that it has
available tax credit for the current and prior year is gratuitous and does not ipso facto warrant the
refund; f) petitioner failed to show that it has complied with the provision of Section 230 in relation to
Section 204 of the Tax Code.
After trial, the respondent Court rendered a decision ordering respondent Commissioner "to refund in
favor of petitioner the amount of ₱54,104.00, representing excess creditable withholding taxes paid for
January to July1989."
Respondent Commissioner moved for reconsideration of the decision, alleging that the ₱54,104.00
ordered to be refunded "has already been included and is part and parcel of the ₱172,477.00 which
petitioner automatically applied as tax credit for the succeeding taxable year 1990."
In a resolution dated October 21, 1993 Respondent Court reconsidered its decision of July 29, 1993 and
dismissed the petition for review, stating that it has "overlooked the fact that the petitioner’s 1989
Corporate Income Tax Return (Exh. "A") indicated that the amount of ₱54,104.00 subject of petitioner’s
claim for refund has already been included as part and parcel of the ₱172,477.00 which the petitioner
automatically applied as tax credit for the succeeding taxable year 1990."
Petitioner filed a Motion for Reconsideration which was denied by respondent Court on March 10,
1994.5
Petitioner filed a Petition for Review6 dated April 3, 1994 with the Court of Appeals. Resolving the twin
issues of whether petitioner is entitled to a refund of ₱54,104.00 representing creditable taxes withheld
in 1989 and whether petitioner applied such creditable taxes withheld to its 1990 income tax liability,
the appellate court held that petitioner is not entitled to a refund because it had already elected to
apply the total amount of ₱172,447.00, which includes the ₱54,104.00 refund claimed, against its
income tax liability for 1990. The appellate court elucidated on the reason for its dismissal of petitioner’s
claim for refund, thus:
In the instant case, it appears that when petitioner filed its income tax return for the year 1989, it filled
up the box stating that the total amount of ₱172,477.00 shall be applied against its income tax liabilities
for the succeeding taxable year.
Petitioner did not specify in its return the amount to be refunded and the amount to be applied as tax
credit to the succeeding taxable year, but merely marked an "x" to the box indicating "to be applied as
tax credit to the succeeding taxable year." Unlike what petitioner had done when it filed its income tax
return for the year 1988, it specifically stated that out of the ₱146,026.00 the entire refundable amount,
only ₱64,623.00 will be made available as tax credit, while the amount of ₱81,403.00 will be refunded.
In its 1989 income tax return, petitioner filled up the box "to be applied as tax credit to succeeding
taxable year," which signified that instead of refund, petitioner will apply the total amount of
₱172,447.00, which includes the amount of ₱54,104.00 sought to be refunded, as tax credit for its tax
liabilities in 1990. Thus, there is really nothing left to be refunded to petitioner for the year 1989. To
grant petitioner’s claim for refund is tantamount to granting twice the refund herein sought to be
refunded, to the prejudice of the Government.
The Court of Appeals denied petitioner’s Motion for Reconsideration7 dated November 8, 1994 in its
Resolution8 dated February 21, 1995 because the motion merely restated the grounds which have
already been considered and passed upon in its Decision.9
Petitioner thus filed the instant Petition for Review10 dated April 14, 1995 arguing that the evidence
presented before the lower courts conclusively shows that it did not apply the ₱54,104.00 to its 1990
income tax liability; that the Decision subject of the instant petition is inconsistent with a final
decision11 of the Sixteenth Division of the appellate court in C.A.-G.R. Sp. No. 32890 involving the same
parties and subject matter; and that the affirmation of the questioned Decision would lead to absurd
results in the manner of claiming refunds or in the application of prior years’ excess tax credits.
The Office of the Solicitor General (OSG) filed a Comment12 dated May 16, 1996 on behalf of
respondents asserting that the claimed refund of ₱54,104.00 was, by petitioner’s election in its
Corporate Annual Income Tax Return for 1989, to be applied against its tax liability for 1990. Not having
submitted its tax return for 1990 to show whether the said amount was indeed applied against its tax
liability for 1990, petitioner’s election in its tax return stands. The OSG also contends that petitioner’s
election to apply its overpaid income tax as tax credit against its tax liabilities for the succeeding taxable
year is mandatory and irrevocable.
On September 2, 1997, petitioner filed a Reply13 dated August 31, 1996 insisting that the issue in this
case is not whether the amount of ₱54,104.00 was included as tax credit to be applied against its 1990
income tax liability but whether the same amount was actually applied as tax credit for 1990. Petitioner
claims that there is no need to show that the amount of ₱54,104.00 had not been automatically applied
against its 1990 income tax liability because the appellate court’s decision in C.A.-G.R. Sp. No. 32890
clearly held that petitioner charged its 1990 income tax liability against its tax credit for 1988 and not
1989. Petitioner also disputes the OSG’s assertion that the taxpayer’s election as to the application of
excess taxes is irrevocable averring that there is nothing in the law that prohibits a taxpayer from
changing its mind especially if subsequent events leave the latter no choice but to change its election.
The OSG filed a Rejoinder14 dated March 5, 1997 stating that petitioner’s 1988 tax return shows a prior
year’s excess credit of ₱81,403.00, creditable tax withheld of ₱92,750.00 and tax due of ₱27,127.00.
Petitioner indicated that the prior year’s excess credit of ₱81,403.00 was to be refunded, while the
remaining amount of ₱64,623.00 (₱92,750.00 - ₱27,127.00) shall be considered as tax credit for 1989.
However, in its 1989 tax return, petitioner included the ₱81,403.00 which had already been segregated
for refund in the computation of its excess credit, and specified that the full amount of ₱172,479.00*
(₱81,403.00 + ₱64,623.00 + ₱54,104.00** - ₱27,653.00***) be considered as its tax credit for 1990.
Considering that it had obtained a favorable ruling for the refund of its excess credit for 1988 in CA-G.R.
SP. No. 32890, its remaining tax credit for 1989 should be the excess credit to be applied against its 1990
tax liability. In fine, the OSG argues that by its own election, petitioner can no longer ask for a refund of
its creditable taxes withheld in 1989 as the same had been applied against its 1990 tax due.
In its Resolution15 dated July 16, 1997, the Court gave due course to the petition and required the
parties to simultaneously file their respective memoranda within 30 days from notice. In compliance
with this directive, petitioner submitted its Memorandum16 dated September 18, 1997 in due time,
while the OSG filed its Memorandum17 dated April 27, 1998 only on April 29, 1998 after several
extensions.
The petition must be denied.
As a matter of principle, it is not advisable for this Court to set aside the conclusion reached by an
agency such as the CTA which is, by the very nature of its functions, dedicated exclusively to the study
and consideration of tax problems and has necessarily developed an expertise on the subject, unless
there has been an abuse or improvident exercise of its authority.18
This interdiction finds particular application in this case since the CTA, after careful consideration of the
merits of the Commissioner of Internal Revenue’s motion for reconsideration, reconsidered its earlier
decision which ordered the latter to refund the amount of ₱54,104.00 to petitioner. Its resolution
cannot be successfully assailed based, as it is, on the pertinent laws as applied to the facts.
Petitioner’s 1989 tax return indicates an aggregate creditable tax of ₱172,477.00, representing its 1988
excess credit of ₱146,026.00 and 1989 creditable tax of ₱54,104.00 less tax due for 1989, which it
elected to apply as tax credit for the succeeding taxable year.19 According to petitioner, it successively
utilized this amount when it obtained refunds in CTA Case No. 4439 (C.A.-G.R. Sp. No. 32300) and CTA
Case No. 4528 (C.A.-G.R. Sp. No. 32890), and applied its 1990 tax liability, leaving a balance of
₱54,104.00, the amount subject of the instant claim for refund.20 Represented mathematically,
petitioner accounts for its claim in this wise:
₱172,477.00
Amount indicated in petitioner’s 1989 tax return to be applied as tax credit for the succeeding taxable
year
- 25,623.00
Claim for refund in CTA Case No. 4439 (C.A.-G.R. Sp. No. 32300)
₱146,854.00
Balance as of April 16, 1990

- 59,510.00
Claim for refund in CTA Case No. 4528 (C.A.-G.R. Sp. No. 32890)
₱87,344.00
Balance as of January 2, 1991
- 33,240.00
Income tax liability for calendar year 1990 applied as of April 15, 1991
₱54,104.00
Balance as of April 15, 1991 now subject of the instant claim for refund21
Other than its own bare allegations, however, petitioner offers no proof to the effect that its creditable
tax of ₱172,477.00 was applied as claimed above. Instead, it anchors its assertion of entitlement to
refund on an alleged finding in C.A.-G.R. Sp. No. 3289022 involving the same parties to the effect that
petitioner charged its 1990 income tax liability to its tax credit for 1988 and not its 1989 tax credit.
Hence, its excess creditable taxes withheld of ₱54,104.00 for 1989 was left untouched and may be
refunded.
Note should be taken, however, that nowhere in the case referred to by petitioner did the Court of
Appeals make a categorical determination that petitioner’s tax liability for 1990 was applied against its
1988 tax credit. The statement adverted to by petitioner was actually presented in the appellate court’s
decision in CA-G.R. Sp No. 32890 as part of petitioner’s own narration of facts. The pertinent portion of
the decision reads:
It would appear from petitioner’s submission as follows:
x x x since it has already applied to its prior year’s excess credit of ₱81,403.00 (which petitioner wanted
refunded when it filed its 1988 Income Tax Return on April 14, 1989) the income tax liability for 1988 of
₱28,127.00 and the income tax liability for 1989 of ₱27,653.00, leaving a balance refundable of
₱25,623.00 subject of C.T.A. Case No. 4439, the ₱92,750.00 (₱64,623.00 plus ₱28,127.00, since this
second amount was already applied to the amount refundable of ₱81,403.00) should be the refundable
amount. But since the taxpayer again used part of it to satisfy its income tax liability of ₱33,240.00 for
1990, the amount refundable was ₱59,510.00, which is the amount prayed for in the claim for refund
and also in the petitioner (sic) for review.
That the present claim for refund already consolidates its claims for refund for 1988, 1989, and 1990,
when it filed a claim for refund of ₱59,510.00 in this case (CTA Case No. 4528). Hence, the present claim
should be resolved together with the previous claims.23
The confusion as to petitioner’s entitlement to a refund could altogether have been avoided had it
presented its tax return for 1990. Such return would have shown whether petitioner actually applied its
1989 tax credit of ₱172,477.00, which includes the ₱54,104.00 creditable taxes withheld for 1989
subject of the instant claim for refund, against its 1990 tax liability as it had elected in its 1989 return, or
at least, whether petitioner’s tax credit of ₱172,477.00 was applied to its approved refunds as it claims.
The return would also have shown whether there remained an excess credit refundable to petitioner
after deducting its tax liability for 1990. As it is, we only have petitioner’s allegation that its tax due for
1990 was ₱33,240.00 and that this was applied against its remaining tax credits using its own "first in,
first out" method of computation.
It would have been different had petitioner not included the ₱54,104.00 creditable taxes for 1989 in the
total amount it elected to apply against its 1990 tax liabilities. Then, all that would have been required
of petitioner are: proof that it filed a claim for refund within the two (2)-year prescriptive period
provided under Section 230 of the NIRC; evidence that the income upon which the taxes were withheld
was included in its return; and to establish the fact of withholding by a copy of the statement (BIR Form
No. 1743.1) issued by the payor24 to the payee showing the amount paid and the amount of tax
withheld therefrom. However, since petitioner opted to apply its aggregate excess credits as tax credit
for 1990, it was incumbent upon it to present its tax return for 1990 to show that the claimed refund
had not been automatically credited and applied to its 1990 tax liabilities.
The grant of a refund is founded on the assumption that the tax return is valid, i.e., that the facts stated
therein are true and correct.25 Without the tax return, it is error to grant a refund since it would be
virtually impossible to determine whether the proper taxes have been assessed and paid.
Why petitioner failed to present such a vital piece of evidence confounds the Court. Petitioner could
very well have attached a copy of its final adjustment return for 1990 when it filed its claim for refund on
November 13, 1991. Annex "B" of its Petition for Review26 dated December 26, 1991 filed with the CTA,
in fact, states that its annual tax return for 1990 was submitted in support of its claim. Yet, petitioner’s
tax return for 1990 is nowhere to be found in the records of this case.
Had petitioner presented its 1990 tax return in refutation of respondent Commissioner’s allegation that
it did not present evidence to prove that its claimed refund had already been automatically credited
against its 1990 tax liability, the CTA would not have reconsidered its earlier Decision. As it is, the
absence of petitioner’s 1990 tax return was the principal basis of the CTA’s Resolution reconsidering its
earlier Decision to grant petitioner’s claim for refund.
Petitioner could even still have attached a copy of its 1990 tax return to its petition for review before the
Court of Appeals. The appellate court, being a trier of facts, is authorized to receive it in evidence and
would likely have taken it into account in its disposition of the petition.
In BPI-Family Savings Bank v. Court of Appeals,27 although petitioner failed to present its 1990 tax
return, it presented other evidence to prove its claim that it did not apply and could not have applied
the amount in dispute as tax credit. Importantly, petitioner therein attached a copy of its final
adjustment return for 1990 to its motion for reconsideration before the CTA buttressing its claim that it
incurred a net loss and is thus entitled to refund. Considering this fact, the Court held that there is no
reason for the BIR to withhold the tax refund.
In this case, petitioner’s failure to present sufficient evidence to prove its claim for refund is fatal to its
cause. After all, it is axiomatic that a claimant has the burden of proof to establish the factual basis of his
or her claim for tax credit or refund. Tax refunds, like tax exemptions, are construed strictly against the
taxpayer.28
Section 69, Chapter IX, Title II of the National Internal Revenue Code of the Philippines (NIRC) provides:
Sec. 69. Final Adjustment Return.—Every corporation liable to tax under Section 24 shall file a final
adjustment return covering the total net income for the preceding calendar or fiscal year. If the sum of
the quarterly tax payments made during the said taxable year is not equal to the total tax due on the
entire taxable net income of that year the corporation shall either:
(a) Pay the excess tax still due; or
(b) Be refunded the excess amount paid, as the case may be.
In case the corporation is entitled to a refund of the excess estimated quarterly income taxes paid, the
refundable amount shown on its final adjustment return may be credited against the estimated
quarterly income tax liabilities for the taxable quarters of the succeeding taxable year. [Emphasis
supplied]
Revenue Regulation No. 10-77 of the Bureau of Internal Revenue clarifies:
SEC. 7. Filing of final or adjustment return and final payment of income tax. – A final or an adjustment
return on B.I.R. Form No. 1702 covering the total taxable income of the corporation for the preceding
calendar or fiscal year shall be filed on or before the 15th day of the fourth month following the close of
the calendar or fiscal year. The return shall include all the items of gross income and deductions for the
taxable year. The amount of income tax to be paid shall be the balance of the total income tax shown on
the final or adjustment return after deducting therefrom the total quarterly income taxes paid during
the preceding first three quarters of the same calendar or fiscal year.
Any excess of the total quarterly payments over the actual income tax computed and shown in the
adjustment or final corporate income tax return shall either (a) be refunded to the corporation, or (b)
may be credited against the estimated quarterly income tax liabilities for the quarters of the succeeding
taxable year. The corporation must signify in its annual corporate adjustment return its intention
whether to request for refund of the overpaid income tax or claim for automatic credit to be applied
against its income tax liabilities for the quarters of the succeeding taxable year by filling up the
appropriate box on the corporate tax return (B.I.R. Form No. 1702). [Emphasis supplied]
As clearly shown from the above-quoted provisions, in case the corporation is entitled to a refund of the
excess estimated quarterly income taxes paid, the refundable amount shown on its final adjustment
return may be credited against the estimated quarterly income tax liabilities for the taxable quarters of
the succeeding year. The carrying forward of any excess or overpaid income tax for a given taxable year
is limited to the succeeding taxable year only.
In the recent case of AB Leasing and Finance Corporation v. Commissioner of Internal Revenue,29 where
the Court declared that "[T]he carrying forward of any excess or overpaid income tax for a given taxable
year then is limited to the succeeding taxable year only," we ruled that since the case involved a claim
for refund of overpaid taxes for 1993, petitioner could only have applied the 1993 excess tax credits to
its 1994 income tax liabilities. To further carry-over to 1995 the 1993 excess tax credits is violative of
Section 69 of the NIRC.
In this case, petitioner included its 1988 excess credit of ₱146,026.00 in the computation of its total
excess credit for 1989. It indicated this amount, plus the 1989 creditable taxes withheld of ₱54,104.00 or
a total of ₱172,477.00, as its total excess credit to be applied as tax credit for 1990. By its own
disclosure, petitioner effectively combined its 1988 and 1989 tax credits and applied its 1990 tax due of
₱33,240.00 against the total, and not against its creditable taxes for 1989 only as allowed by Section 69.
This is a clear admission that petitioner’s 1988 tax credit was incorrectly and illegally applied against its
1990 tax liabilities.
Parenthetically, while a taxpayer is given the choice whether to claim for refund or have its excess taxes
applied as tax credit for the succeeding taxable year, such election is not final. Prior verification and
approval by the Commissioner of Internal Revenue is required. The availment of the remedy of tax credit
is not absolute and mandatory. It does not confer an absolute right on the taxpayer to avail of the tax
credit scheme if it so chooses. Neither does it impose a duty on the part of the government to sit back
and allow an important facet of tax collection to be at the sole control and discretion of the taxpayer.30
Contrary to petitioner’s assertion however, the taxpayer’s election, signified by the ticking of boxes in
Item 10 of BIR Form No. 1702, is not a mere technical exercise. It aids in the proper management of
claims for refund or tax credit by leading tax authorities to the direction they should take in addressing
the claim.
The amendment of Section 69 by what is now Section 76 of Republic Act No. 842431 emphasizes that it
is imperative to indicate in the tax return or the final adjustment return whether a tax credit or refund is
sought by making the taxpayer’s choice irrevocable. Section 76 provides:
SEC. 76. Final Adjustment Return.—Every corporation liable to tax under Section 27 shall file a final
adjustment return covering the total taxable income for the preceding calendar or fiscal year. If the sum
of the quarterly tax payments made during the said taxable year is not equal to the total tax due on the
entire taxable income of that year, the corporation shall either:
(A) Pay the balance of the tax still due; or
(B) Carry-over the excess credit; or
(C) Be credited or refunded with the excess amount paid, as the case may be.
In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly income
taxes paid, the excess amount shown on its final adjustment return may be carried over and credited
against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable
years. Once the option to carry-over and apply the excess quarterly income tax against income tax due
for the taxable quarters of the succeeding taxable years has been made, such option shall be considered
irrevocable for that taxable period and no application for cash refund or issuance of a tax credit
certificate shall be allowed therefore. [Emphasis supplied]
As clearly seen from this provision, the taxpayer is allowed three (3) options if the sum of its quarterly
tax payments made during the taxable year is not equal to the total tax due for that year: (a) pay the
balance of the tax still due; (b) carry-over the excess credit; or (c) be credited or refunded the amount
paid. If the taxpayer has paid excess quarterly income taxes, it may be entitled to a tax credit or refund
as shown in its final adjustment return which may be carried over and applied against the estimated
quarterly income tax liabilities for the taxable quarters of the succeeding taxable years. However, once
the taxpayer has exercised the option to carry-over and to apply the excess quarterly income tax against
income tax due for the taxable quarters of the succeeding taxable years, such option is irrevocable for
that taxable period and no application for cash refund or issuance of a tax credit certificate shall be
allowed.
Had this provision been in effect when the present claim for refund was filed, petitioner’s excess credits
for 1988 could have been properly applied to its 1990 tax liabilities. Unfortunately for petitioner, this is
not the case.
Taxation is a destructive power which interferes with the personal and property rights of the people and
takes from them a portion of their property for the support of the government. And since taxes are what
we pay for civilized society, or are the lifeblood of the nation, the law frowns against exemptions from
taxation and statutes granting tax exemptions are thus construed strictissimi juris against the taxpayer
and liberally in favor of the taxing authority. A claim of refund or exemption from tax payments must be
clearly shown and be based on language in the law too plain to be mistaken. Elsewise stated, taxation is
the rule, exemption therefrom is the exception.32
WHEREFORE, the instant petition is DENIED. The challenged decision of the Court of Appeals is hereby
AFFIRMED. No pronouncement as to costs.
SO ORDERED.
Puno, Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.
Footnotes
* Should be ₱172,477.00.
** Representing the creditable taxes withheld at source for 1989.
*** Representing the tax due for 1989.
1 The provision on the filing of corporate returns was first amended by P.D. 1158-A (June 3, 1977), which
required the filing of quarterly income tax returns. The amendment was incorporated in the National
Internal Revenue Code of 1977. P.D. 1705 (August 1, 1980) and P.D. 1773 (January 16, 1981) further
amended the provision. The amendment was incorporated in subsequent tax codes up to the present
Tax Reform Act of 1997.
2 Dated October 14, 1994 penned by Associate Justice Consuelo Ynares-Santiago (now an
Associate Justice of this Court) and concurred in by Associate Justices Emeterio C. Cui and Conchita
Carpio Morales (now also an Associate Justice of this Court); Annex "B" of the instant Petition for
Review; Rollo, pp. 37-40.
3 Dated October 21, 1993; CTA Records, pp. 72-75.
4 Supra, note 1.
5 Id. at 37, pp. 1-2 of the Decision.
6 Id. at 24-34, Annex "A" of the instant petition.
7 Id. at 41-46, Annex "C" of the instant petition.
8 Id. at 53, Annex "E" of the instant petition.
9 Ibid.
10 Rollo, pp. 10-64, with Annexes.
11 Penned by Associate Justice Minerva P. Gonzaga-Reyes (now retired Associate Justice of this Court);
Annex "F" of the instant petition, Rollo, pp. 55-64.
12 Id. at 109-118.
13 Id. at 123-131.
14 Id. at 196-199.
15 Id. at 201.
16 Id. at 206-216.
17 Id. at 251-264.
18 Sea-Land Service, Inc. v. Court of Appeals, G.R. No. 122605, April 30, 201, 357 SCRA 441; Reyes v.
Commissioner of Internal Revenue, G.R. Nos. L-24020-21, July 29, 1968, 24 SCRA 198.
19 Supra, note 3 at 3; Exh. "A" of the petition for review dated December 26, 1991.
20 Supra, note 2 at 212-213, petitioner’s Memorandum.
21 Ibid.
22 Supra, note 11.
23 Supra, note 2 at 62-63.
24 In this case, the lessee of petitioner’s properties, Citibank.
25 Commissioner of Internal Revenue v. Court of Tax Appeals, G.R. No. 106611, July 21, 1994, 234 SCRA
348.
26 Supra, note 3 at 16.
27 386 Phil. 719 (2000).
28 Citibank, N.A. v. Court of Appeals, 345 Phil. 695 (1997), 280 SCRA 459; Commissioner of Internal
Revenue v. Tokyo Shipping Co., Ltd., 314 Phil. 220 (1995).
29 G.R. No. 138342, July 8, 2003, 405 SCRA 380.
30 San Carlos Milling Co. Inc. v. Commissioner of Internal Revenue, G.R. No. 103379, November 23,
1993.
31 Tax Reform Act of 1997.
32 Mactan Cebu International Airport Authority v. Marcos, 330 Phil. 392 (1996), citations omitted; See
also Commissioner of Internal Revenue v. S.C. Johnson & Son, Inc., 368 Phil. 388 (1999).
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 92585 May 8, 1992

CALTEX PHILIPPINES, INC., petitioner,
vs.
THE HONORABLE COMMISSION ON AUDIT, HONORABLE COMMISSIONER BARTOLOME C. FERNANDEZ

and HONORABLE COMMISSIONER ALBERTO P. CRUZ, respondents.
DAVIDE, JR., J.:
This is a petition erroneously brought under Rule 44 of the Rules of Court 1 questioning the authority of
the Commission on Audit (COA) in disallowing petitioner's claims for reimbursement from the Oil Price
Stabilization Fund (OPSF) and seeking the reversal of said Commission's decision denying its claims for
recovery of financing charges from the Fund and reimbursement of underrecovery arising from sales to
the National Power Corporation, Atlas Consolidated Mining and Development Corporation (ATLAS) and
Marcopper Mining Corporation (MAR-COPPER), preventing it from exercising the right to offset its
remittances against its reimbursement vis-a-vis the OPSF and disallowing its claims which are still
pending resolution before the Office of Energy Affairs (OEA) and the Department of Finance (DOF).
Pursuant to the 1987 Constitution, 2 any decision, order or ruling of the Constitutional Commissions 3
may be brought to this Court on certiorari by the aggrieved party within thirty (30) days from receipt of
a copy thereof. The certiorari referred to is the special civil action for certiorari under Rule 65 of the
Rules of Court. 4
Considering, however, that the allegations that the COA acted with:
(a) total lack of jurisdiction in completely ignoring and showing absolutely no respect for the findings
and rulings of the administrator of the fund itself and in disallowing a claim which is still pending
resolution at the OEA level, and (b) "grave abuse of discretion and completely without jurisdiction" 5 in
declaring that petitioner cannot avail of the right to offset any amount that it may be required under the
law to remit to the OPSF against any amount that it may receive by way of reimbursement therefrom
are sufficient to bring this petition within Rule 65 of the Rules of Court, and, considering further the
importance of the issues raised, the error in the designation of the remedy pursued will, in this instance,
be excused.
The issues raised revolve around the OPSF created under Section 8 of Presidential Decree (P.D.) No.
1956, as amended by Executive Order (E.O.) No. 137. As amended, said Section 8 reads as follows:
Sec. 8 . There is hereby created a Trust Account in the books of accounts of the Ministry of Energy to be
designated as Oil Price Stabilization Fund (OPSF) for the purpose of minimizing frequent price changes
brought about by exchange rate adjustments and/or changes in world market prices of crude oil and
imported petroleum products. The Oil Price Stabilization Fund may be sourced from any of the
following:
a) Any increase in the tax collection from ad valorem tax or customs duty imposed on petroleum
products subject to tax under this Decree arising from exchange rate adjustment, as may be determined
by the Minister of Finance in consultation with the Board of Energy;
b) Any increase in the tax collection as a result of the lifting of tax exemptions of government
corporations, as may be determined by the Minister of Finance in consultation with the Board of Energy;
c) Any additional amount to be imposed on petroleum products to augment the resources of the Fund
through an appropriate Order that may be issued by the Board of Energy requiring payment by persons
or companies engaged in the business of importing, manufacturing and/or marketing petroleum
products;
d) Any resulting peso cost differentials in case the actual peso costs paid by oil companies in the
importation of crude oil and petroleum products is less than the peso costs computed using the
reference foreign exchange rate as fixed by the Board of Energy.
The Fund herein created shall be used for the following:
1) To reimburse the oil companies for cost increases in crude oil and imported petroleum products
resulting from exchange rate adjustment and/or increase in world market prices of crude oil;
2) To reimburse the oil companies for possible cost under-recovery incurred as a result of the reduction
of domestic prices of petroleum products. The magnitude of the underrecovery, if any, shall be
determined by the Ministry of Finance. "Cost underrecovery" shall include the following:
i. Reduction in oil company take as directed by the Board of Energy without the corresponding reduction
in the landed cost of oil inventories in the possession of the oil companies at the time of the price
change;
ii. Reduction in internal ad valorem taxes as a result of foregoing government mandated price
reductions;
iii. Other factors as may be determined by the Ministry of Finance to result in cost underrecovery.
The Oil Price Stabilization Fund (OPSF) shall be administered by the Ministry of Energy.
The material operative facts of this case, as gathered from the pleadings of the parties, are not disputed.
On 2 February 1989, the COA sent a letter to Caltex Philippines, Inc. (CPI), hereinafter referred to as
Petitioner, directing the latter to remit to the OPSF its collection, excluding that unremitted for the years
1986 and 1988, of the additional tax on petroleum products authorized under the aforesaid Section 8 of
P.D. No. 1956 which, as of 31 December 1987, amounted to P335,037,649.00 and informing it that,
pending such remittance, all of its claims for reimbursement from the OPSF shall be held in abeyance. 6
On 9 March 1989, the COA sent another letter to petitioner informing it that partial verification with the
OEA showed that the grand total of its unremitted collections of the above tax is P1,287,668,820.00,
broken down as follows:
1986 — P233,190,916.00
1987 — 335,065,650.00
1988 — 719,412,254.00;
directing it to remit the same, with interest and surcharges thereon, within sixty (60) days from receipt
of the letter; advising it that the COA will hold in abeyance the audit of all its claims for reimbursement
from the OPSF; and directing it to desist from further offsetting the taxes collected against outstanding
claims in 1989 and subsequent periods. 7
In its letter of 3 May 1989, petitioner requested the COA for an early release of its reimbursement
certificates from the OPSF covering claims with the Office of Energy Affairs since June 1987 up to March
1989, invoking in support thereof COA Circular No. 89-299 on the lifting of pre-audit of government
transactions of national government agencies and government-owned or controlled corporations. 8
In its Answer dated 8 May 1989, the COA denied petitioner's request for the early release of the
reimbursement certificates from the OPSF and repeated its earlier directive to petitioner to forward
payment of the latter's unremitted collections to the OPSF to facilitate COA's audit action on the
reimbursement claims. 9
By way of a reply, petitioner, in a letter dated 31 May 1989, submitted to the COA a proposal for the
payment of the collections and the recovery of claims, since the outright payment of the sum of P1.287
billion to the OEA as a prerequisite for the processing of said claims against the OPSF will cause a very
serious impairment of its cash position. 10 The proposal reads:
We, therefore, very respectfully propose the following:
(1) Any procedural arrangement acceptable to COA to facilitate monitoring of payments and
reimbursements will be administered by the ERB/Finance Dept./OEA, as agencies designated by law to
administer/regulate OPSF.
(2) For the retroactive period, Caltex will deliver to OEA, P1.287 billion as payment to OPSF, similarly
OEA will deliver to Caltex the same amount in cash reimbursement from OPSF.
(3) The COA audit will commence immediately and will be conducted expeditiously.
(4) The review of current claims (1989) will be conducted expeditiously to preclude further accumulation
of reimbursement from OPSF.
On 7 June 1989, the COA, with the Chairman taking no part, handed down Decision No. 921 accepting
the above-stated proposal but prohibiting petitioner from further offsetting remittances and
reimbursements for the current and ensuing years. 11 Decision No. 921 reads:
This pertains to the within separate requests of Mr. Manuel A. Estrella, President, Petron Corporation,
and Mr. Francis Ablan, President and Managing Director, Caltex (Philippines) Inc., for reconsideration of
this Commission's adverse action embodied in its letters dated February 2, 1989 and March 9, 1989, the
former directing immediate remittance to the Oil Price Stabilization Fund of collections made by the
firms pursuant to P.D. 1956, as amended by E.O. No. 137, S. 1987, and the latter reiterating the same
directive but further advising the firms to desist from offsetting collections against their claims with the
notice that "this Commission will hold in abeyance the audit of all . . . claims for reimbursement from the
OPSF."
It appears that under letters of authority issued by the Chairman, Energy Regulatory Board, the
aforenamed oil companies were allowed to offset the amounts due to the Oil Price Stabilization Fund
against their outstanding claims from the said Fund for the calendar years 1987 and 1988, pending with
the then Ministry of Energy, the government entity charged with administering the OPSF. This
Commission, however, expressing serious doubts as to the propriety of the offsetting of all types of
reimbursements from the OPSF against all categories of remittances, advised these oil companies that
such offsetting was bereft of legal basis. Aggrieved thereby, these companies now seek reconsideration
and in support thereof clearly manifest their intent to make arrangements for the remittance to the
Office of Energy Affairs of the amount of collections equivalent to what has been previously offset,
provided that this Commission authorizes the Office of Energy Affairs to prepare the corresponding
checks representing reimbursement from the OPSF. It is alleged that the implementation of such an
arrangement, whereby the remittance of collections due to the OPSF and the reimbursement of claims
from the Fund shall be made within a period of not more than one week from each other, will benefit
the Fund and not unduly jeopardize the continuing daily cash requirements of these firms.
Upon a circumspect evaluation of the circumstances herein obtaining, this Commission perceives no
further objectionable feature in the proposed arrangement, provided that 15% of whatever amount is
due from the Fund is retained by the Office of Energy Affairs, the same to be answerable for suspensions
or disallowances, errors or discrepancies which may be noted in the course of audit and surcharges for
late remittances without prejudice to similar future retentions to answer for any deficiency in such
surcharges, and provided further that no offsetting of remittances and reimbursements for the current
and ensuing years shall be allowed.
Pursuant to this decision, the COA, on 18 August 1989, sent the following letter to Executive Director
Wenceslao R. De la Paz of the Office of Energy Affairs: 12
Dear Atty. dela Paz:
Pursuant to the Commission on Audit Decision No. 921 dated June 7, 1989, and based on our initial
verification of documents submitted to us by your Office in support of Caltex (Philippines), Inc. offsets
(sic) for the year 1986 to May 31, 1989, as well as its outstanding claims against the Oil Price
Stabilization Fund (OPSF) as of May 31, 1989, we are pleased to inform your Office that Caltex
(Philippines), Inc. shall be required to remit to OPSF an amount of P1,505,668,906, representing
remittances to the OPSF which were offset against its claims reimbursements (net of unsubmitted
claims). In addition, the Commission hereby authorize (sic) the Office of Energy Affairs (OEA) to cause
payment of P1,959,182,612 to Caltex, representing claims initially allowed in audit, the details of which
are presented hereunder: . . .
As presented in the foregoing computation the disallowances totalled P387,683,535, which included
P130,420,235 representing those claims disallowed by OEA, details of which is (sic) shown in Schedule 1
as summarized as follows:
Disallowance of COA
Particulars Amount
Recovery of financing charges P162,728,475 /a
Product sales 48,402,398 /b
Inventory losses
Borrow loan arrangement 14,034,786 /c
Sales to Atlas/Marcopper 32,097,083 /d

Sales to NPC 558
——————
P257,263,300
Disallowances of OEA 130,420,235
————————— ——————
Total P387,683,535
The reasons for the disallowances are discussed hereunder:
a. Recovery of Financing Charges
Review of the provisions of P.D. 1596 as amended by E.O. 137 seems to indicate that recovery of
financing charges by oil companies is not among the items for which the OPSF may be utilized.
Therefore, it is our view that recovery of financing charges has no legal basis. The mechanism for such
claims is provided in DOF Circular 1-87.
b. Product Sales –– Sales to International Vessels/Airlines
BOE Resolution No. 87-01 dated February 7, 1987 as implemented by OEA Order No. 87-03-095
indicating that (sic) February 7, 1987 as the effectivity date that (sic) oil companies should pay OPSF
impost on export sales of petroleum products. Effective February 7, 1987 sales to international
vessels/airlines should not be included as part of its domestic sales. Changing the effectivity date of the
resolution from February 7, 1987 to October 20, 1987 as covered by subsequent ERB Resolution No. 88-
12 dated November 18, 1988 has allowed Caltex to include in their domestic sales volumes to
international vessels/airlines and claim the corresponding reimbursements from OPSF during the period.
It is our opinion that the effectivity of the said resolution should be February 7, 1987.
c. Inventory losses –– Settlement of Ad Valorem

We reviewed the system of handling Borrow and Loan (BLA) transactions including the related BLA
agreement, as they affect the claims for reimbursements of ad valorem taxes. We observed that oil
companies immediately settle ad valorem taxes for BLA transaction (sic). Loan balances therefore are
not tax paid inventories of Caltex subject to reimbursements but those of the borrower. Hence, we
recommend reduction of the claim for July, August, and November, 1987 amounting to P14,034,786.
d. Sales to Atlas/Marcopper
LOI No. 1416 dated July 17, 1984 provides that "I hereby order and direct the suspension of payment of
all taxes, duties, fees, imposts and other charges whether direct or indirect due and payable by the
copper mining companies in distress to the national and local governments." It is our opinion that LOI
1416 which implements the exemption from payment of OPSF imposts as effected by OEA has no legal
basis.
Furthermore, we wish to emphasize that payment to Caltex (Phil.) Inc., of the amount as herein
authorized shall be subject to availability of funds of OPSF as of May 31, 1989 and applicable auditing
rules and regulations. With regard to the disallowances, it is further informed that the aggrieved party
has 30 days within which to appeal the decision of the Commission in accordance with law.
On 8 September 1989, petitioner filed an Omnibus Request for the Reconsideration of the decision
based on the following grounds: 13
A) COA-DISALLOWED CLAIMS ARE AUTHORIZED UNDER EXISTING RULES, ORDERS, RESOLUTIONS,

CIRCULARS ISSUED BY THE DEPARTMENT OF FINANCE AND THE ENERGY REGULATORY BOARD
PURSUANT TO EXECUTIVE ORDER NO. 137.
xxx xxx xxx
B) ADMINISTRATIVE INTERPRETATIONS IN THE COURSE OF EXERCISE OF EXECUTIVE POWER BY

DEPARTMENT OF FINANCE AND ENERGY REGULATORY BOARD ARE LEGAL AND SHOULD BE RESPECTED
AND APPLIED UNLESS DECLARED NULL AND VOID BY COURTS OR REPEALED BY LEGISLATION.
xxx xxx xxx
C) LEGAL BASIS FOR RETENTION OF OFFSET ARRANGEMENT, AS AUTHORIZED BY THE EXECUTIVE

BRANCH OF GOVERNMENT, REMAINS VALID.
xxx xxx xxx
On 6 November 1989, petitioner filed with the COA a Supplemental Omnibus Request for
Reconsideration. 14
On 16 February 1990, the COA, with Chairman Domingo taking no part and with Commissioner
Fernandez dissenting in part, handed down Decision No. 1171 affirming the disallowance for recovery of
financing charges, inventory losses, and sales to MARCOPPER and ATLAS, while allowing the recovery of
product sales or those arising from export sales. 15 Decision No. 1171 reads as follows:
Anent the recovery of financing charges you contend that Caltex Phil. Inc. has the .authority to recover
financing charges from the OPSF on the basis of Department of Finance (DOF) Circular 1-87, dated
February 18, 1987, which allowed oil companies to "recover cost of financing working capital associated
with crude oil shipments," and provided a schedule of reimbursement in terms of peso per barrel. It
appears that on November 6, 1989, the DOF issued a memorandum to the President of the Philippines
explaining the nature of these financing charges and justifying their reimbursement as follows:
As part of your program to promote economic recovery, . . . oil companies (were authorized) to
refinance their imports of crude oil and petroleum products from the normal trade credit of 30 days up
to 360 days from date of loading . . . Conformably . . ., the oil companies deferred their foreign exchange
remittances for purchases by refinancing their import bills from the normal 30-day payment term up to
the desired 360 days. This refinancing of importations carried additional costs (financing charges) which
then became, due to government mandate, an inherent part of the cost of the purchases of our
country's oil requirement.
We beg to disagree with such contention. The justification that financing charges increased oil costs and
the schedule of reimbursement rate in peso per barrel (Exhibit 1) used to support alleged increase (sic)
were not validated in our independent inquiry. As manifested in Exhibit 2, using the same formula which
the DOF used in arriving at the reimbursement rate but using comparable percentages instead of pesos,
the ineluctable conclusion is that the oil companies are actually gaining rather than losing from the
extension of credit because such extension enables them to invest the collections in marketable
securities which have much higher rates than those they incur due to the extension. The Data we used
were obtained from CPI (CALTEX) Management and can easily be verified from our records.
With respect to product sales or those arising from sales to international vessels or airlines, . . ., it is
believed that export sales (product sales) are entitled to claim refund from the OPSF.
As regard your claim for underrecovery arising from inventory losses, . . . It is the considered view of this
Commission that the OPSF is not liable to refund such surtax on inventory losses because these are paid
to BIR and not OPSF, in view of which CPI (CALTEX) should seek refund from BIR. . . .
Finally, as regards the sales to Atlas and Marcopper, it is represented that you are entitled to claim
recovery from the OPSF pursuant to LOI 1416 issued on July 17, 1984, since these copper mining
companies did not pay CPI (CALTEX) and OPSF imposts which were added to the selling price.
Upon a circumspect evaluation, this Commission believes and so holds that the CPI (CALTEX) has no
authority to claim reimbursement for this uncollected OPSF impost because LOI 1416 dated July 17,
1984, which exempts distressed mining companies from "all taxes, duties, import fees and other
charges" was issued when OPSF was not yet in existence and could not have contemplated OPSF
imposts at the time of its formulation. Moreover, it is evident that OPSF was not created to aid
distressed mining companies but rather to help the domestic oil industry by stabilizing oil prices.
Unsatisfied with the decision, petitioner filed on 28 March 1990 the present petition wherein it imputes
to the COA the commission of the following errors: 16
I
RESPONDENT COMMISSION ERRED IN DISALLOWING RECOVERY OF FINANCING CHARGES FROM THE
OPSF.
II
RESPONDENT COMMISSION ERRED IN DISALLOWING
CPI's 17 CLAIM FOR REIMBURSEMENT OF UNDERRECOVERY ARISING FROM SALES TO NPC.
III
RESPONDENT COMMISSION ERRED IN DENYING CPI's CLAIMS FOR REIMBURSEMENT ON SALES TO

ATLAS AND MARCOPPER.
IV
RESPONDENT COMMISSION ERRED IN PREVENTING CPI FROM EXERCISING ITS LEGAL RIGHT TO OFFSET
ITS REMITTANCES AGAINST ITS REIMBURSEMENT VIS-A-VIS THE OPSF.
RESPONDENT COMMISSION ERRED IN DISALLOWING CPI's CLAIMS WHICH ARE STILL PENDING
RESOLUTION BY (SIC) THE OEA AND THE DOF.
In the Resolution of 5 April 1990, this Court required the respondents to comment on the petition within
ten (10) days from notice. 18
On 6 September 1990, respondents COA and Commissioners Fernandez and Cruz, assisted by the Office
of the Solicitor General, filed their Comment. 19
This Court resolved to give due course to this petition on 30 May 1991 and required the parties to file
their respective Memoranda within twenty (20) days from notice. 20
In a Manifestation dated 18 July 1991, the Office of the Solicitor General prays that the Comment filed
on 6 September 1990 be considered as the Memorandum for respondents. 21
Upon the other hand, petitioner filed its Memorandum on 14 August 1991.
I. Petitioner dwells lengthily on its first assigned error contending, in support thereof, that:
(1) In view of the expanded role of the OPSF pursuant to Executive Order No. 137, which added a second
purpose, to wit:
2) To reimburse the oil companies for possible cost underrecovery incurred as a result of the reduction
of domestic prices of petroleum products. The magnitude of the underrecovery, if any, shall be
determined by the Ministry of Finance. "Cost underrecovery" shall include the following:
i. Reduction in oil company take as directed by the Board of Energy without the corresponding reduction
in the landed cost of oil inventories in the possession of the oil companies at the time of the price
change;
reductions;
the "other factors" mentioned therein that may be determined by the Ministry (now Department) of
Finance may include financing charges for "in essence, financing charges constitute unrecovered cost of
acquisition of crude oil incurred by the oil companies," as explained in the 6 November 1989
Memorandum to the President of the Department of Finance; they "directly translate to cost
underrecovery in cases where the money market placement rates decline and at the same time the tax
on interest income increases. The relationship is such that the presence of underrecovery or
overrecovery is directly dependent on the amount and extent of financing charges."
(2) The claim for recovery of financing charges has clear legal and factual basis; it was filed on the basis
of Department of Finance Circular No.
1-87, dated 18 February 1987, which provides:
To allow oil companies to recover the costs of financing working capital associated with crude oil
shipments, the following guidelines on the utilization of the Oil Price Stabilization Fund pertaining to the
payment of the foregoing (sic) exchange risk premium and recovery of financing charges will be
implemented:
1. The OPSF foreign exchange premium shall be reduced to a flat rate of one (1) percent for the first (6)
months and 1/32 of one percent per month thereafter up to a maximum period of one year, to be
applied on crude oil' shipments from January 1, 1987. Shipments with outstanding financing as of
January 1, 1987 shall be charged on the basis of the fee applicable to the remaining period of financing.
2. In addition, for shipments loaded after January 1987, oil companies shall be allowed to recover
financing charges directly from the OPSF per barrel of crude oil based on the following schedule:
Financing Period Reimbursement Rate
Pesos per Barrel
Less than 180 days None
180 days to 239 days 1.90
241 (sic) days to 299 4.02
300 days to 369 (sic) days 6.16

360 days or more 8.28
The above rates shall be subject to review every sixty
days. 22
Pursuant to this circular, the Department of Finance, in its letter of 18 February 1987, advised the Office
of Energy Affairs as follows:
HON. VICENTE T. PATERNO
Deputy Executive Secretary
For Energy Affairs
Office of the President
Makati, Metro Manila
Dear Sir:
This refers to the letters of the Oil Industry dated December 4, 1986 and February 5, 1987 and
subsequent discussions held by the Price Review committee on February 6, 1987.
On the basis of the representations made, the Department of Finance recognizes the necessity to reduce
the foreign exchange risk premium accruing to the Oil Price Stabilization Fund (OPSF). Such a reduction
would allow the industry to recover partly associated financing charges on crude oil imports.
Accordingly, the OPSF foreign exchange risk fee shall be reduced to a flat charge of 1% for the first six (6)
months plus 1/32% of 1% per month thereafter up to a maximum period of one year, effective January
1, 1987. In addition, since the prevailing company take would still leave unrecovered financing charges,
reimbursement may be secured from the OPSF in accordance with the provisions of the attached
Department of Finance circular. 23
Acting on this letter, the OEA issued on 4 May 1987 Order No. 87-05-096 which contains the guidelines
for the computation of the foreign exchange risk fee and the recovery of financing charges from the
OPSF, to wit:
B. FINANCE CHARGES
1. Oil companies shall be allowed to recover financing charges directly from the OPSF for both crude and
product shipments loaded after January 1, 1987 based on the following rates:
Financing Period Reimbursement Rate
(PBbl.)
Less than 180 days None
240 days to 229 (sic) days 4.02
360 days to more 8.28
2. The above rates shall be subject to review every sixty days. 24
Then on 22 November 1988, the Department of Finance issued Circular No. 4-88 imposing further
guidelines on the recoverability of financing charges, to wit:
Following are the supplemental rules to Department of Finance Circular No. 1-87 dated February 18,
1987 which allowed the recovery of financing charges directly from the Oil Price Stabilization Fund.
(OPSF):
1. The Claim for reimbursement shall be on a per shipment basis.

2. The claim shall be filed with the Office of Energy Affairs together with the claim on peso cost
differential for a particular shipment and duly certified supporting documents provided for under
Ministry of Finance No. 11-85.
3. The reimbursement shall be on the form of reimbursement certificate (Annex A) to be issued by the
Office of Energy Affairs. The said certificate may be used to offset against amounts payable to the OPSF.
The oil companies may also redeem said certificates in cash if not utilized, subject to availability of
funds. 25
The OEA disseminated this Circular to all oil companies in its Memorandum Circular No. 88-12-017. 26
The COA can neither ignore these issuances nor formulate its own interpretation of the laws in the light
of the determination of executive agencies. The determination by the Department of Finance and the
OEA that financing charges are recoverable from the OPSF is entitled to great weight and consideration.
27 The function of the COA, particularly in the matter of allowing or disallowing certain expenditures, is
limited to the promulgation of accounting and auditing rules for, among others, the disallowance of
irregular, unnecessary, excessive, extravagant, or unconscionable expenditures, or uses of government
funds and properties. 28
(3) Denial of petitioner's claim for reimbursement would be inequitable. Additionally, COA's claim that
petitioner is gaining, instead of losing, from the extension of credit, is belatedly raised and not
supported by expert analysis.
In impeaching the validity of petitioner's assertions, the respondents argue that:
1. The Constitution gives the COA discretionary power to disapprove irregular or unnecessary
government expenditures and as the monetary claims of petitioner are not allowed by law, the COA
acted within its jurisdiction in denying them;
2. P.D. No. 1956 and E.O. No. 137 do not allow reimbursement of financing charges from the OPSF;
3. Under the principle of ejusdem generis, the "other factors" mentioned in the second purpose of the
OPSF pursuant to E.O. No. 137 can only include "factors which are of the same nature or analogous to
those enumerated;"
4. In allowing reimbursement of financing charges from OPSF, Circular No. 1-87 of the Department of
Finance violates P.D. No. 1956 and E.O. No. 137; and
5. Department of Finance rules and regulations implementing P.D. No. 1956 do not likewise allow
reimbursement of financing
charges. 29
We find no merit in the first assigned error.
As to the power of the COA, which must first be resolved in view of its primacy, We find the theory of
petitioner –– that such does not extend to the disallowance of irregular, unnecessary, excessive,
extravagant, or unconscionable expenditures, or use of government funds and properties, but only to
the promulgation of accounting and auditing rules for, among others, such disallowance –– to be
untenable in the light of the provisions of the 1987 Constitution and related laws.
Section 2, Subdivision D, Article IX of the 1987 Constitution expressly provides:
Sec. 2(l). The Commission on Audit shall have the power, authority, and duty to examine, audit, and
settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and
property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions,
agencies, or instrumentalities, including government-owned and controlled corporations with original
charters, and on a post-audit basis: (a) constitutional bodies, commissions and offices that have been
granted fiscal autonomy under this Constitution; (b) autonomous state colleges and universities; (c)
other government-owned or controlled corporations and their subsidiaries; and (d) such non-
governmental entities receiving subsidy or equity, directly or indirectly, from or through the
government, which are required by law or the granting institution to submit to such audit as a condition
of subsidy or equity. However, where the internal control system of the audited agencies is inadequate,
the Commission may adopt such measures, including temporary or special pre-audit, as are necessary
and appropriate to correct the deficiencies. It shall keep the general accounts, of the Government and,
for such period as may be provided by law, preserve the vouchers and other supporting papers
pertaining thereto.
(2) The Commission shall have exclusive authority, subject to the limitations in this Article, to define the
scope of its audit and examination, establish the techniques and methods required therefor, and
promulgate accounting and auditing rules and regulations, including those for the prevention and
disallowance of irregular, unnecessary, excessive, extravagant, or, unconscionable expenditures, or uses
of government funds and properties.
These present powers, consistent with the declared independence of the Commission, 30 are broader
and more extensive than that conferred by the 1973 Constitution. Under the latter, the Commission was
empowered to:
Examine, audit, and settle, in accordance with law and regulations, all accounts pertaining to the
revenues, and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or
pertaining to, the Government, or any of its subdivisions, agencies, or instrumentalities including
government-owned or controlled corporations, keep the general accounts of the Government and, for
such period as may be provided by law, preserve the vouchers pertaining thereto; and promulgate
accounting and auditing rules and regulations including those for the prevention of irregular,
unnecessary, excessive, or extravagant expenditures or uses of funds and property. 31
Upon the other hand, under the 1935 Constitution, the power and authority of the COA's precursor, the
General Auditing Office, were, unfortunately, limited; its very role was markedly passive. Section 2 of
Article XI thereof provided:
Sec. 2. The Auditor General shall examine, audit, and settle all accounts pertaining to the revenues and
receipts from whatever source, including trust funds derived from bond issues; and audit, in accordance
with law and administrative regulations, all expenditures of funds or property pertaining to or held in
trust by the Government or the provinces or municipalities thereof. He shall keep the general accounts
of the Government and the preserve the vouchers pertaining thereto. It shall be the duty of the Auditor
General to bring to the attention of the proper administrative officer expenditures of funds or property
which, in his opinion, are irregular, unnecessary, excessive, or extravagant. He shall also perform such
other functions as may be prescribed by law.
As clearly shown above, in respect to irregular, unnecessary, excessive or extravagant expenditures or
uses of funds, the 1935 Constitution did not grant the Auditor General the power to issue rules and
regulations to prevent the same. His was merely to bring that matter to the attention of the proper
administrative officer.
The ruling on this particular point, quoted by petitioner from the cases of Guevarra vs. Gimenez 32 and
Ramos vs. Aquino, 33 are no longer controlling as the two (2) were decided in the light of the 1935
Constitution.
There can be no doubt, however, that the audit power of the Auditor General under the 1935
Constitution and the Commission on Audit under the 1973 Constitution authorized them to disallow
illegal expenditures of funds or uses of funds and property. Our present Constitution retains that same
power and authority, further strengthened by the definition of the COA's general jurisdiction in Section
26 of the Government Auditing Code of the Philippines 34 and Administrative Code of 1987. 35 Pursuant
to its power to promulgate accounting and auditing rules and regulations for the prevention of irregular,
unnecessary, excessive or extravagant expenditures or uses of funds, 36 the COA promulgated on 29
March 1977 COA Circular No. 77-55. Since the COA is responsible for the enforcement of the rules and
regulations, it goes without saying that failure to comply with them is a ground for disapproving the
payment of the proposed expenditure. As observed by one of the Commissioners of the 1986
Constitutional Commission, Fr. Joaquin G. Bernas: 37
It should be noted, however, that whereas under Article XI, Section 2, of the 1935 Constitution the
Auditor General could not correct "irregular, unnecessary, excessive or extravagant" expenditures of
public funds but could only "bring [the matter] to the attention of the proper administrative officer,"
under the 1987 Constitution, as also under the 1973 Constitution, the Commission on Audit can
"promulgate accounting and auditing rules and regulations including those for the prevention and
disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures or uses
of government funds and properties." Hence, since the Commission on Audit must ultimately be
responsible for the enforcement of these rules and regulations, the failure to comply with these
regulations can be a ground for disapproving the payment of a proposed expenditure.
Indeed, when the framers of the last two (2) Constitutions conferred upon the COA a more active role
and invested it with broader and more extensive powers, they did not intend merely to make the COA a
toothless tiger, but rather envisioned a dynamic, effective, efficient and independent watchdog of the
Government.
The issue of the financing charges boils down to the validity of Department of Finance Circular No. 1-87,
Department of Finance Circular No. 4-88 and the implementing circulars of the OEA, issued pursuant to
Section 8, P.D. No. 1956, as amended by E.O. No. 137, authorizing it to determine "other factors" which
may result in cost underrecovery and a consequent reimbursement from the OPSF.
The Solicitor General maintains that, following the doctrine of ejusdem generis, financing charges are
not included in "cost underrecovery" and, therefore, cannot be considered as one of the "other factors."
Section 8 of P.D. No. 1956, as amended by E.O. No. 137, does not explicitly define what "cost
underrecovery" is. It merely states what it includes. Thus:
. . . "Cost underrecovery" shall include the following:
i. Reduction in oil company takes as directed by the Board of Energy without the corresponding
reduction in the landed cost of oil inventories in the possession of the oil companies at the time of the
price change;
reductions;
These "other factors" can include only those which are of the same class or nature as the two specifically
enumerated in subparagraphs (i) and (ii). A common characteristic of both is that they are in the nature
of government mandated price reductions. Hence, any other factor which seeks to be a part of the
enumeration, or which could qualify as a cost underrecovery, must be of the same class or nature as
those specifically enumerated.
Petitioner, however, suggests that E.O. No. 137 intended to grant the Department of Finance broad and
unrestricted authority to determine or define "other factors."
Both views are unacceptable to this Court.
The rule of ejusdem generis states that "[w]here general words follow an enumeration of persons or
things, by words of a particular and specific meaning, such general words are not to be construed in
their widest extent, but are held to be as applying only to persons or things of the same kind or class as
those specifically mentioned. 38 A reading of subparagraphs (i) and (ii) easily discloses that they do not
have a common characteristic. The first relates to price reduction as directed by the Board of Energy
while the second refers to reduction in internal ad valorem taxes. Therefore, subparagraph (iii) cannot
be limited by the enumeration in these subparagraphs. What should be considered for purposes of
determining the "other factors" in subparagraph (iii) is the first sentence of paragraph (2) of the Section
which explicitly allows cost underrecovery only if such were incurred as a result of the reduction of
domestic prices of petroleum products.
Although petitioner's financing losses, if indeed incurred, may constitute cost underrecovery in the
sense that such were incurred as a result of the inability to fully offset financing expenses from yields in
money market placements, they do not, however, fall under the foregoing provision of P.D. No. 1956, as
amended, because the same did not result from the reduction of the domestic price of petroleum
products. Until paragraph (2), Section 8 of the decree, as amended, is further amended by Congress, this
Court can do nothing. The duty of this Court is not to legislate, but to apply or interpret the law. Be that
as it may, this Court wishes to emphasize that as the facts in this case have shown, it was at the behest
of the Government that petitioner refinanced its oil import payments from the normal 30-day trade
credit to a maximum of 360 days. Petitioner could be correct in its assertion that owing to the extended
period for payment, the financial institution which refinanced said payments charged a higher interest,
thereby resulting in higher financing expenses for the petitioner. It would appear then that equity
considerations dictate that petitioner should somehow be allowed to recover its financing losses, if any,
which may have been sustained because it accommodated the request of the Government. Although
under Section 29 of the National Internal Revenue Code such losses may be deducted from gross
income, the effect of that loss would be merely to reduce its taxable income, but not to actually wipe
out such losses. The Government then may consider some positive measures to help petitioner and
others similarly situated to obtain substantial relief. An amendment, as aforestated, may then be in
order.
Upon the other hand, to accept petitioner's theory of "unrestricted authority" on the part of the
Department of Finance to determine or define "other factors" is to uphold an undue delegation of
legislative power, it clearly appearing that the subject provision does not provide any standard for the
exercise of the authority. It is a fundamental rule that delegation of legislative power may be sustained
only upon the ground that some standard for its exercise is provided and that the legislature, in making
the delegation, has prescribed the manner of the exercise of the delegated authority. 39
Finally, whether petitioner gained or lost by reason of the extensive credit is rendered irrelevant by
reason of the foregoing disquisitions. It may nevertheless be stated that petitioner failed to disprove
COA's claim that it had in fact gained in the process. Otherwise stated, petitioner failed to sufficiently
show that it incurred a loss. Such being the case, how can petitioner claim for reimbursement? It cannot
have its cake and eat it too.
II. Anent the claims arising from sales to the National Power Corporation, We find for the petitioner. The
respondents themselves admit in their Comment that underrecovery arising from sales to NPC are
reimbursable because NPC was granted full exemption from the payment of taxes; to prove this,
respondents trace the laws providing for such exemption. 40 The last law cited is the Fiscal Incentives
Regulatory Board's Resolution No. 17-87 of 24 June 1987 which provides, in part, "that the tax and duty
exemption privileges of the National Power Corporation, including those pertaining to its domestic
purchases of petroleum and petroleum products . . . are restored effective March 10, 1987." In a
Memorandum issued on 5 October 1987 by the Office of the President, NPC's tax exemption was
confirmed and approved.
Furthermore, as pointed out by respondents, the intention to exempt sales of petroleum products to
the NPC is evident in the recently passed Republic Act No. 6952 establishing the Petroleum Price
Standby Fund to support the OPSF. 41 The pertinent part of Section 2, Republic Act No. 6952 provides:
Sec. 2. Application of the Fund shall be subject to the following conditions:
(1) That the Fund shall be used to reimburse the oil companies for (a) cost increases of imported crude
oil and finished petroleum products resulting from foreign exchange rate adjustments and/or increases
in world market prices of crude oil; (b) cost underrecovery incurred as a result of fuel oil sales to the
National Power Corporation (NPC); and (c) other cost underrecoveries incurred as may be finally decided
by the Supreme
Court; . . .
Hence, petitioner can recover its claim arising from sales of petroleum products to the National Power
Corporation.
III. With respect to its claim for reimbursement on sales to ATLAS and MARCOPPER, petitioner relies on
Letter of Instruction (LOI) 1416, dated 17 July 1984, which ordered the suspension of payments of all
taxes, duties, fees and other charges, whether direct or indirect, due and payable by the copper mining
companies in distress to the national government. Pursuant to this LOI, then Minister of Energy, Hon.
Geronimo Velasco, issued Memorandum Circular No. 84-11-22 advising the oil companies that Atlas
Consolidated Mining Corporation and Marcopper Mining Corporation are among those declared to be in
distress.
In denying the claims arising from sales to ATLAS and MARCOPPER, the COA, in its 18 August 1989 letter
to Executive Director Wenceslao R. de la Paz, states that "it is our opinion that LOI 1416 which
implements the exemption from payment of OPSF imposts as effected by OEA has no legal basis;" 42 in
its Decision No. 1171, it ruled that "the CPI (CALTEX) (Caltex) has no authority to claim reimbursement
for this uncollected impost because LOI 1416 dated July 17, 1984, . . . was issued when OPSF was not yet
in existence and could not have contemplated OPSF imposts at the time of its formulation." 43 It is
further stated that: "Moreover, it is evident that OPSF was not created to aid distressed mining
companies but rather to help the domestic oil industry by stabilizing oil prices."
In sustaining COA's stand, respondents vigorously maintain that LOI 1416 could not have intended to
exempt said distressed mining companies from the payment of OPSF dues for the following reasons:
a. LOI 1416 granting the alleged exemption was issued on July 17, 1984. P.D. 1956 creating the OPSF was
promulgated on October 10, 1984, while E.O. 137, amending P.D. 1956, was issued on February 25,
1987.
b. LOI 1416 was issued in 1984 to assist distressed copper mining companies in line with the
government's effort to prevent the collapse of the copper industry. P.D No. 1956, as amended, was
issued for the purpose of minimizing frequent price changes brought about by exchange rate
adjustments and/or changes in world market prices of crude oil and imported petroleum product's; and
c. LOI 1416 caused the "suspension of all taxes, duties, fees, imposts and other charges, whether direct
or indirect, due and payable by the copper mining companies in distress to the Notional and Local
Governments . . ." On the other hand, OPSF dues are not payable by (sic) distressed copper companies
but by oil companies. It is to be noted that the copper mining companies do not pay OPSF dues. Rather,
such imposts are built in or already incorporated in the prices of oil products. 44
Lastly, respondents allege that while LOI 1416 suspends the payment of taxes by distressed mining
companies, it does not accord petitioner the same privilege with respect to its obligation to pay OPSF
dues.
We concur with the disquisitions of the respondents. Aside from such reasons, however, it is apparent
that LOI 1416 was never published in the Official Gazette 45 as required by Article 2 of the Civil Code,
which reads:
Laws shall take effect after fifteen days following the completion of their publication in the Official
Gazette, unless it is otherwise provided. . . .
In applying said provision, this Court ruled in the case of Tañada vs. Tuvera: 46
WHEREFORE, the Court hereby orders respondents to publish in the Official Gazette all unpublished
presidential issuances which are of general application, and unless so published they shall have no
binding force and effect.
Resolving the motion for reconsideration of said decision, this Court, in its Resolution promulgated on
29 December 1986, 47 ruled:
We hold therefore that all statutes, including those of local application and private laws, shall be
published as a condition for their effectivity, which shall begin fifteen days after publication unless a
different effectivity date is fixed by the legislature.
Covered by this rule are presidential decrees and executive orders promulgated by the President in the
exercise of legislative powers whenever the same are validly delegated by the legislature or, at present,
directly conferred by the Constitution. Administrative rules and regulations must also be published if
their purpose is to enforce or implement existing laws pursuant also to a valid delegation.
xxx xxx xxx

WHEREFORE, it is hereby declared that all laws as above defined shall immediately upon their approval,
or as soon thereafter as possible, be published in full in the Official Gazette, to become effective only
after fifteen days from their publication, or on another date specified by the legislature, in accordance
with Article 2 of the Civil Code.
LOI 1416 has, therefore, no binding force or effect as it was never published in the Official Gazette after
its issuance or at any time after the decision in the abovementioned cases.
Article 2 of the Civil Code was, however, later amended by Executive Order No. 200, issued on 18 June
1987. As amended, the said provision now reads:
Laws shall take effect after fifteen days following the completion of their publication either in the Official
Gazette or in a newspaper of general circulation in the Philippines, unless it is otherwise provided.
We are not aware of the publication of LOI 1416 in any newspaper of general circulation pursuant to
Executive Order No. 200.
Furthermore, even granting arguendo that LOI 1416 has force and effect, petitioner's claim must still fail.
Tax exemptions as a general rule are construed strictly against the grantee and liberally in favor of the
taxing authority. 48 The burden of proof rests upon the party claiming exemption to prove that it is in
fact covered by the exemption so claimed. The party claiming exemption must therefore be expressly
mentioned in the exempting law or at least be within its purview by clear legislative intent.
In the case at bar, petitioner failed to prove that it is entitled, as a consequence of its sales to ATLAS and
MARCOPPER, to claim reimbursement from the OPSF under LOI 1416. Though LOI 1416 may suspend
the payment of taxes by copper mining companies, it does not give petitioner the same privilege with
respect to the payment of OPSF dues.
IV. As to COA's disallowance of the amount of P130,420,235.00, petitioner maintains that the
Department of Finance has still to issue a final and definitive ruling thereon; accordingly, it was
premature for COA to disallow it. By doing so, the latter acted beyond its jurisdiction. 49 Respondents,
on the other hand, contend that said amount was already disallowed by the OEA for failure to
substantiate it. 50 In fact, when OEA submitted the claims of petitioner for pre-audit, the
abovementioned amount was already excluded.
An examination of the records of this case shows that petitioner failed to prove or substantiate its
contention that the amount of P130,420,235.00 is still pending before the OEA and the DOF.
Additionally, We find no reason to doubt the submission of respondents that said amount has already
been passed upon by the OEA. Hence, the ruling of respondent COA disapproving said claim must be
upheld.
V. The last issue to be resolved in this case is whether or not the amounts due to the OPSF from
petitioner may be offset against petitioner's outstanding claims from said fund. Petitioner contends that
it should be allowed to offset its claims from the OPSF against its contributions to the fund as this has
been allowed in the past, particularly in the years 1987 and 1988. 51
Furthermore, petitioner cites, as bases for offsetting, the provisions of the New Civil Code on
compensation and Section 21, Book V, Title I-B of the Revised Administrative Code which provides for
"Retention of Money for Satisfaction of Indebtedness to Government." 52 Petitioner also mentions
communications from the Board of Energy and the Department of Finance that supposedly authorize
compensation.
Respondents, on the other hand, citing Francia vs. IAC and Fernandez, 53 contend that there can be no
offsetting of taxes against the claims that a taxpayer may have against the government, as taxes do not
arise from contracts or depend upon the will of the taxpayer, but are imposed by law. Respondents also
allege that petitioner's reliance on Section 21, Book V, Title I-B of the Revised Administrative Code, is
misplaced because "while this provision empowers the COA to withhold payment of a government
indebtedness to a person who is also indebted to the government and apply the government
indebtedness to the satisfaction of the obligation of the person to the government, like authority or
right to make compensation is not given to the private person." 54 The reason for this, as stated in
Commissioner of Internal Revenue vs. Algue, Inc., 55 is that money due the government, either in the
form of taxes or other dues, is its lifeblood and should be collected without hindrance. Thus, instead of
giving petitioner a reason for compensation or set-off, the Revised Administrative Code makes it the
respondents' duty to collect petitioner's indebtedness to the OPSF.
Refuting respondents' contention, petitioner claims that the amounts due from it do not arise as a result
of taxation because "P.D. 1956, amended, did not create a source of taxation; it instead established a
special fund . . .," 56 and that the OPSF contributions do not go to the general fund of the state and are
not used for public purpose, i.e., not for the support of the government, the administration of law, or
the payment of public expenses. This alleged lack of a public purpose behind OPSF exactions
distinguishes such from a tax. Hence, the ruling in the Francia case is inapplicable.
Lastly, petitioner cites R.A. No. 6952 creating the Petroleum Price Standby Fund to support the OPSF;
the said law provides in part that:
Sec. 2. Application of the fund shall be subject to the following conditions:
xxx xxx xxx
(3) That no amount of the Petroleum Price Standby Fund shall be used to pay any oil company which has
an outstanding obligation to the Government without said obligation being offset first, subject to the
requirements of compensation or offset under the Civil Code.
We find no merit in petitioner's contention that the OPSF contributions are not for a public purpose
because they go to a special fund of the government. Taxation is no longer envisioned as a measure
merely to raise revenue to support the existence of the government; taxes may be levied with a
regulatory purpose to provide means for the rehabilitation and stabilization of a threatened industry
which is affected with public interest as to be within the police power of the state. 57 There can be no
doubt that the oil industry is greatly imbued with public interest as it vitally affects the general welfare.
Any unregulated increase in oil prices could hurt the lives of a majority of the people and cause
economic crisis of untold proportions. It would have a chain reaction in terms of, among others,
demands for wage increases and upward spiralling of the cost of basic commodities. The stabilization
then of oil prices is of prime concern which the state, via its police power, may properly address.
Also, P.D. No. 1956, as amended by E.O. No. 137, explicitly provides that the source of OPSF is taxation.
No amount of semantical juggleries could dim this fact.
It is settled that a taxpayer may not offset taxes due from the claims that he may have against the
government. 58 Taxes cannot be the subject of compensation because the government and taxpayer are
not mutually creditors and debtors of each other and a claim for taxes is not such a debt, demand,
contract or judgment as is allowed to be set-off. 59
We may even further state that technically, in respect to the taxes for the OPSF, the oil companies
merely act as agents for the Government in the latter's collection since the taxes are, in reality, passed
unto the end-users –– the consuming public. In that capacity, the petitioner, as one of such companies,
has the primary obligation to account for and remit the taxes collected to the administrator of the OPSF.
This duty stems from the fiduciary relationship between the two; petitioner certainly cannot be
considered merely as a debtor. In respect, therefore, to its collection for the OPSF vis-a-vis its claims for
reimbursement, no compensation is likewise legally feasible. Firstly, the Government and the petitioner
cannot be said to be mutually debtors and creditors of each other. Secondly, there is no proof that
petitioner's claim is already due and liquidated. Under Article 1279 of the Civil Code, in order that
compensation may be proper, it is necessary that:
(1) each one of the obligors be bound principally, and that he be at the same time a principal creditor of
the other;
(2) both debts consist in a sum of :money, or if the things due are consumable, they be of the same kind,
and also of the same quality if the latter has been stated;
(3) the two (2) debts be due;
(4) they be liquidated and demandable;
(5) over neither of them there be any retention or controversy, commenced by third persons and
communicated in due time to the debtor.
That compensation had been the practice in the past can set no valid precedent. Such a practice has no
legal basis. Lastly, R.A. No. 6952 does not authorize oil companies to offset their claims against their
OPSF contributions. Instead, it prohibits the government from paying any amount from the Petroleum
Price Standby Fund to oil companies which have outstanding obligations with the government, without
said obligation being offset first subject to the rules on compensation in the Civil Code.
WHEREFORE, in view of the foregoing, judgment is hereby rendered AFFIRMING the challenged decision
of the Commission on Audit, except that portion thereof disallowing petitioner's claim for
reimbursement of underrecovery arising from sales to the National Power Corporation, which is hereby
allowed.
With costs against petitioner.
SO ORDERED.
Narvasa, C.J., Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Padilla, Bidin, Griño-Aquino, Medialdea,
Regalado, Romero and Nocon, JJ., concur.
Footnotes
1 Petitioner explicitly states in the opening paragraph of the petition that its petition is for review under
Section 1, Rule 44 of the Rules of Court.
2 Sec. 7, Subdivision A, Article IX; see also Section 35, Chapter 5, Subtitle B, Title I, Book V,
Administrative Code of 1987.
3 The Civil Service Commission, the Commission on Elections and the Commission on Audit.
4 Land Bank of the Philippines vs. COA, 190 SCRA 154 [1990].
5 Rollo, 6-7.
6 Rollo, 65.
7 Id., 66.
8 Rollo, 67-68.
9 Id., 76.
10 Id., 77.
11 Rollo, 58-59.
12 Rollo, 60-62.
13 Rollo, 78-89.
14 Id., 89-90.
15 Rollo, 53-56. Commissioner Fernandez is of the opinion that petitioner should allowed to recover
financing charges stating:
I find merit in claimants (sic) reliance on and invocation of Department of Finance Circular No. 1-87,
dated February 18, 1987, in support of such claims. To my mind, the authority embodied in such circular
coupled with the justification therefor as set forth by the Secretary of Finance in his letter of even date
to the then Deputy Secretary for Energy Affairs as well as the Memorandum for the President dated
November 6, 1989 from the Acting Secretary of Finance, alluded to and subjoined herein, cannot but
deserve full faith and credit. I perceive no compelling reason for this Commission to overturn or disturb
these pronouncements which treat of a policy matter the resolution which (sic) appropriately pertains to
the executive agency concerned, the Department of Finance in this case.
16 Rollo, 8-9.
17 Caltex Philippines, Inc., petitioner herein.
18 Op. cit., 124.
19 Rollo, 143-185.
20 Id., 188.
21 Id., 191.
22 Rollo, 23.
23 Rollo, 24-25.
24 Id., 25.
25 Rollo, 25-26.
26 Id., 26.
27 Citing Ramos vs. CIR, 21 SCRA 1282 [1967]; Sagun vs. PHHC, 162 SCRA 411 [1988]; Hijo Plantation, Inc.
vs. Central Bank, 164 SCRA 192 [1988]; Beautifont, Inc. vs. Court of Appeals, 157 SCRA 481 [1988].
28 Citing Section 11, Book V. Administrative Code of 1987; Guevara vs. Gimenez, 6 SCRA 807 [1962].
29 Rollo, 155-164.
30 Sec. 1, Subdivision A, Article IX.
31 Paragraph 1, Section 2, Subdivision D, Article XII.
32 Supra.
33 39 SCRA 641 [1971].
34 P.D. No. 1445.
35 Sec. 11, Chapter 4, Subtitle B, Book V.
36 The 1987 Constitution adds one (1) more category of such expenditure on use –– unconscionable.
37 BERNAS, J., The Constitution of the Republic of the Philippines: A Commentary, vol. II, 1988 ed., 372.
38 Smith Bell and Co., Ltd. vs. Register of Deeds of Davao, 96 Phil. 53 [1954], citing BLACK on
Interpretation of Law. 2nd ed., 203; see also Republic vs. Migrino, 189 SCRA 289 [1990].
39 Philippine Communications Satellite Corp. vs. Alcuaz, et al., 180 SCRA 218 [1989].
40 Rollo, 176-177.
41 Id., 184.
42 Rollo, 62; Annex "C," 3.
43 Id., 56; Annex "A."
44 Rollo, 174-176.
45 As verified from the National Printing Office. A certification to this effect, dated 19 November 1991,
signed by Heriberto Bacalla, Chief, Official Gazette Publication, of the National Printing Office, is
attached to the rollo.
46 136 SCRA 27 [1985].
47 146 SCRA 446 [1986].
48 CIR vs. Mitsubishi Corp., 181 SCRA 214 [1990]; CIR vs. P.J. Kiener Co., Ltd., 65 SCRA 142 [1975].
49 Rollo, 49.
50 Id., 173.
51 Rollo, 42-47.
52 Id., 48-49.
53 162 SCRA 753 [1988].
54 Op. cit., 171.
55 158 SCRA 9 [1988].
56 Petitioner's Memorandum, 8.
57 Lutz vs. Araneta, 98 Phil. 148 [1955]; Gaston vs. Republic Planters Bank, 158 SCRA 626 [1988].
58 Francia vs. IAC, supra.; Republic vs. Mambulao Lumber Co., 4 SCRA 622 [1962].
59 Cordero vs. Gonda, 18 SCRA 331 [1966].
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.
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.
SUPREME COURT
Manila
EN BANC
G.R. No. L- 41383 August 15, 1988
PHILIPPINE AIRLINES, INC., plaintiff-appellant,
vs.
ROMEO F. EDU in his capacity as Land Transportation Commissioner, and UBALDO CARBONELL, in his
capacity as National Treasurer, defendants-appellants.
Ricardo V. Puno, Jr. and Conrado A. Boro for plaintiff-appellant.
GUTIERREZ, JR., J.:
What is the nature of motor vehicle registration fees? Are they taxes or regulatory fees?
This question has been brought before this Court in the past. The parties are, in effect, asking for a re-
examination of the latest decision on this issue.
This appeal was certified to us as one involving a pure question of law by the Court of Appeals in a case
where the then Court of First Instance of Rizal dismissed the portion-about complaint for refund of
registration fees paid under protest.
The disputed registration fees were imposed by the appellee, Commissioner Romeo F. Elevate pursuant
to Section 8, Republic Act No. 4136, otherwise known as the Land Transportation and Traffic Code.
The Philippine Airlines (PAL) is a corporation organized and existing under the laws of the Philippines
and engaged in the air transportation business under a legislative franchise, Act No. 42739, as amended
by Republic Act Nos. 25). and 269.1 Under its franchise, PAL is exempt from the payment of taxes. The
pertinent provision of the franchise provides as follows:
Section 13. In consideration of the franchise and rights hereby granted, the grantee shall pay to the
National Government during the life of this franchise a tax of two per cent of the gross revenue or gross
earning derived by the grantee from its operations under this franchise. Such tax shall be due and
payable quarterly and shall be in lieu of all taxes of any kind, nature or description, levied, established or
collected by any municipal, provincial or national automobiles, Provided, that if, after the audit of the
accounts of the grantee by the Commissioner of Internal Revenue, a deficiency tax is shown to be due,
the deficiency tax shall be payable within the ten days from the receipt of the assessment. The grantee
shall pay the tax on its real property in conformity with existing law.
On the strength of an opinion of the Secretary of Justice (Op. No. 307, series of 1956) PAL has, since
1956, not been paying motor vehicle registration fees.
Sometime in 1971, however, appellee Commissioner Romeo F. Elevate issued a regulation requiring all
tax exempt entities, among them PAL to pay motor vehicle registration fees.
Despite PAL's protestations, the appellee refused to register the appellant's motor vehicles unless the
amounts imposed under Republic Act 4136 were paid. The appellant thus paid, under protest, the
amount of P19,529.75 as registration fees of its motor vehicles.
After paying under protest, PAL through counsel, wrote a letter dated May 19,1971, to Commissioner
Edu demanding a refund of the amounts paid, invoking the ruling in Calalang v. Lorenzo (97 Phil. 212
[1951]) where it was held that motor vehicle registration fees are in reality taxes from the payment of
which PAL is exempt by virtue of its legislative franchise.
Appellee Edu denied the request for refund basing his action on the decision in Republic v. Philippine
Rabbit Bus Lines, Inc., (32 SCRA 211, March 30, 1970) to the effect that motor vehicle registration fees
are regulatory exceptional. and not revenue measures and, therefore, do not come within the
exemption granted to PAL? under its franchise. Hence, PAL filed the complaint against Land
Transportation Commissioner Romeo F. Edu and National Treasurer Ubaldo Carbonell with the Court of
First Instance of Rizal, Branch 18 where it was docketed as Civil Case No. Q-15862.
Appellee Romeo F. Elevate in his capacity as LTC Commissioner, and LOI Carbonell in his capacity as
National Treasurer, filed a motion to dismiss alleging that the complaint states no cause of action. In
support of the motion to dismiss, defendants repatriation the ruling in Republic v. Philippine Rabbit Bus
Lines, Inc., (supra) that registration fees of motor vehicles are not taxes, but regulatory fees imposed as
an incident of the exercise of the police power of the state. They contended that while Act 4271
exempts PAL from the payment of any tax except two per cent on its gross revenue or earnings, it does
not exempt the plaintiff from paying regulatory fees, such as motor vehicle registration fees. The
resolution of the motion to dismiss was deferred by the Court until after trial on the merits.
On April 24, 1973, the trial court rendered a decision dismissing the appellant's complaint "moved by
the later ruling laid down by the Supreme Court in the case or Republic v. Philippine Rabbit Bus Lines,
Inc., (supra)." From this judgment, PAL appealed to the Court of Appeals which certified the case to us.
Calalang v. Lorenzo (supra) and Republic v. Philippine Rabbit Bus Lines, Inc. (supra) cited by PAL and
Commissioner Romeo F. Edu respectively, discuss the main points of contention in the case at bar.
Resolving the issue in the Philippine Rabbit case, this Court held:
"The registration fee which defendant-appellee had to pay was imposed by Section 8 of the Revised
Motor Vehicle Law (Republic Act No. 587 [1950]). Its heading speaks of "registration fees." The term is
repeated four times in the body thereof. Equally so, mention is made of the "fee for registration." (Ibid.,
Subsection G) A subsection starts with a categorical statement "No fees shall be charged." (lbid.,
Subsection H) The conclusion is difficult to resist therefore that the Motor Vehicle Act requires the
payment not of a tax but of a registration fee under the police power. Hence the incipient, of the section
relied upon by defendant-appellee under the Back Pay Law, It is not held liable for a tax but for a
registration fee. It therefore cannot make use of a backpay certificate to meet such an obligation.
Any vestige of any doubt as to the correctness of the above conclusion should be dissipated by Republic
Act No. 5448. ([1968]. Section 3 thereof as to the imposition of additional tax on privately-owned
passenger automobiles, motorcycles and scooters was amended by Republic Act No. 5470 which is (sic)
approved on May 30, 1969.) A special science fund was thereby created and its title expressly sets forth
that a tax on privately-owned passenger automobiles, motorcycles and scooters was imposed. The rates
thereof were provided for in its Section 3 which clearly specifies the" Philippine tax."(Cooley to be paid
as distinguished from the registration fee under the Motor Vehicle Act. There cannot be any clearer
expression therefore of the legislative will, even on the assumption that the earlier legislation could by
subdivision the point be susceptible of the interpretation that a tax rather than a fee was levied. What is
thus most apparent is that where the legislative body relies on its authority to tax it expressly so states,
and where it is enacting a regulatory measure, it is equally exploded (at p. 22,1969
In direct refutation is the ruling in Calalang v. Lorenzo (supra), where the Court, on the other hand, held:
The charges prescribed by the Revised Motor Vehicle Law for the registration of motor vehicles are in
section 8 of that law called "fees". But the appellation is no impediment to their being considered taxes
if taxes they really are. For not the name but the object of the charge determines whether it is a tax or a
fee. Geveia speaking, taxes are for revenue, whereas fees are exceptional. for purposes of regulation
and inspection and are for that reason limited in amount to what is necessary to cover the cost of the
services rendered in that connection. Hence, a charge fixed by statute for the service to be person,-
When by an officer, where the charge has no relation to the value of the services performed and where
the amount collected eventually finds its way into the treasury of the branch of the government whose
officer or officers collected the chauffeur, is not a fee but a tax."(Cooley on Taxation, Vol. 1, 4th ed., p.
110.)
From the data submitted in the court below, it appears that the expenditures of the Motor Vehicle
Office are but a small portion—about 5 per centum—of the total collections from motor vehicle
registration fees. And as proof that the money collected is not intended for the expenditures of that
office, the law itself provides that all such money shall accrue to the funds for the construction and
maintenance of public roads, streets and bridges. It is thus obvious that the fees are not collected for
regulatory purposes, that is to say, as an incident to the enforcement of regulations governing the
operation of motor vehicles on public highways, for their express object is to provide revenue with
which the Government is to discharge one of its principal functions—the construction and maintenance
of public highways for everybody's use. They are veritable taxes, not merely fees.
As a matter of fact, the Revised Motor Vehicle Law itself now regards those fees as taxes, for it provides
that "no other taxes or fees than those prescribed in this Act shall be imposed," thus implying that the
charges therein imposed—though called fees—are of the category of taxes. The provision is contained in
section 70, of subsection (b), of the law, as amended by section 17 of Republic Act 587, which reads:
Sec. 70(b) No other taxes or fees than those prescribed in this Act shall be imposed for the registration
or operation or on the ownership of any motor vehicle, or for the exercise of the profession of
chauffeur, by any municipal corporation, the provisions of any city charter to the contrary
notwithstanding: Provided, however, That any provincial board, city or municipal council or board, or
other competent authority may exact and collect such reasonable and equitable toll fees for the use of
such bridges and ferries, within their respective jurisdiction, as may be authorized and approved by the
Secretary of Public Works and Communications, and also for the use of such public roads, as may be
authorized by the President of the Philippines upon the recommendation of the Secretary of Public
Works and Communications, but in none of these cases, shall any toll fee." be charged or collected until
and unless the approved schedule of tolls shall have been posted levied, in a conspicuous place at such
toll station. (at pp. 213-214)
Motor vehicle registration fees were matters originally governed by the Revised Motor Vehicle Law (Act
3992 [19511) as amended by Commonwealth Act 123 and Republic Acts Nos. 587 and 1621.
Today, the matter is governed by Rep. Act 4136 [1968]), otherwise known as the Land Transportation
Code, (as amended by Rep. Acts Nos. 5715 and 64-67, P.D. Nos. 382, 843, 896, 110.) and BP Blg. 43, 74
and 398).
Section 73 of Commonwealth Act 123 (which amended Sec. 73 of Act 3992 and remained unsegregated,
by Rep. Act Nos. 587 and 1603) states:
Section 73. Disposal of moneys collected.—Twenty per centum of the money collected under the
provisions of this Act shall accrue to the road and bridge funds of the different provinces and chartered
cities in proportion to the centum shall during the next previous year and the remaining eighty per
centum shall be deposited in the Philippine Treasury to create a special fund for the construction and
maintenance of national and provincial roads and bridges. as well as the streets and bridges in the
chartered cities to be alloted by the Secretary of Public Works and Communications for projects
recommended by the Director of Public Works in the different provinces and chartered cities. ....
Presently, Sec. 61 of the Land Transportation and Traffic Code provides:
Sec. 61. Disposal of Mortgage. Collected—Monies collected under the provisions of this Act shall be
deposited in a special trust account in the National Treasury to constitute the Highway Special Fund,
which shall be apportioned and expended in accordance with the provisions of the" Philippine Highway
Act of 1935. "Provided, however, That the amount necessary to maintain and equip the Land
Transportation Commission but not to exceed twenty per cent of the total collection during one year,
shall be set aside for the purpose. (As amended by RA 64-67, approved August 6, 1971).
It appears clear from the above provisions that the legislative intent and purpose behind the law
requiring owners of vehicles to pay for their registration is mainly to raise funds for the construction and
maintenance of highways and to a much lesser degree, pay for the operating expenses of the
administering agency. On the other hand, the Philippine Rabbit case mentions a presumption arising
from the use of the term "fees," which appears to have been favored by the legislature to distinguish
fees from other taxes such as those mentioned in Section 13 of Rep. Act 4136 which reads:
Sec. 13. Payment of taxes upon registration.—No original registration of motor vehicles subject to
payment of taxes, customs s duties or other charges shall be accepted unless proof of payment of the
taxes due thereon has been presented to the Commission.
referring to taxes other than those imposed on the registration, operation or ownership of a motor
vehicle (Sec. 59, b, Rep. Act 4136, as amended).
Fees may be properly regarded as taxes even though they also serve as an instrument of regulation, As
stated by a former presiding judge of the Court of Tax Appeals and writer on various aspects of
taxpayers
It is possible for an exaction to be both tax arose. regulation. License fees are changes. looked to as a
source of revenue as well as a means of regulation (Sonzinky v. U.S., 300 U.S. 506) This is true, for
example, of automobile license fees. Isabela such case, the fees may properly be regarded as taxes even
though they also serve as an instrument of regulation. If the purpose is primarily revenue, or if revenue
is at least one of the real and substantial purposes, then the exaction is properly called a tax. (1955 CCH
Fed. tax Course, Par. 3101, citing Cooley on Taxation (2nd Ed.) 592, 593; Calalang v. Lorenzo. 97 Phil.
213-214) Lutz v. Araneta 98 Phil. 198.) These exactions are sometimes called regulatory taxes. (See Secs.
4701, 4711, 4741, 4801, 4811, 4851, and 4881, U.S. Internal Revenue Code of 1954, which classify taxes
on tobacco and alcohol as regulatory taxes.) (Umali, Reviewer in Taxation, 1980, pp. 12-13, citing Cooley
on Taxation, 2nd Edition, 591-593).
Indeed, taxation may be made the implement of the state's police power (Lutz v. Araneta, 98 Phil. 148).
If the purpose is primarily revenue, or if revenue is, at least, one of the real and substantial purposes,
then the exaction is properly called a tax (Umali, Id.) Such is the case of motor vehicle registration fees.
The conclusions become inescapable in view of Section 70(b) of Rep. Act 587 quoted in the Calalang
case. The same provision appears as Section 591-593). in the Land Transportation code. It is patent
therefrom that the legislators had in mind a regulatory tax as the law refers to the imposition on the
registration, operation or ownership of a motor vehicle as a "tax or fee." Though nowhere in Rep. Act
4136 does the law specifically state that the imposition is a tax, Section 591-593). speaks of "taxes." or
fees ... for the registration or operation or on the ownership of any motor vehicle, or for the exercise of
the profession of chauffeur ..." making the intent to impose a tax more apparent. Thus, even Rep. Act
5448 cited by the respondents, speak of an "additional" tax," where the law could have referred to an
original tax and not one in addition to the tax already imposed on the registration, operation, or
ownership of a motor vehicle under Rep. Act 41383. Simply put, if the exaction under Rep. Act 4136
were merely a regulatory fee, the imposition in Rep. Act 5448 need not be an "additional" tax. Rep. Act
4136 also speaks of other "fees," such as the special permit fees for certain types of motor vehicles (Sec.
10) and additional fees for change of registration (Sec. 11). These are not to be understood as taxes
because such fees are very minimal to be revenue-raising. Thus, they are not mentioned by Sec. 591-
593). of the Code as taxes like the motor vehicle registration fee and chauffers' license fee. Such fees are
to go into the expenditures of the Land Transportation Commission as provided for in the last proviso of
see. 61, aforequoted.
It is quite apparent that vehicle registration fees were originally simple exceptional. intended only for
rigidly purposes in the exercise of the State's police powers. Over the years, however, as vehicular traffic
exploded in number and motor vehicles became absolute necessities without which modem life as we
know it would stand still, Congress found the registration of vehicles a very convenient way of raising
much needed revenues. Without changing the earlier deputy. of registration payments as "fees," their
nature has become that of "taxes."
In view of the foregoing, we rule that motor vehicle registration fees as at present exacted pursuant to
the Land Transportation and Traffic Code are actually taxes intended for additional revenues. of
government even if one fifth or less of the amount collected is set aside for the operating expenses of
the agency administering the program.
May the respondent administrative agency be required to refund the amounts stated in the complaint
of PAL?
The answer is NO.
The claim for refund is made for payments given in 1971. It is not clear from the records as to what
payments were made in succeeding years. We have ruled that Section 24 of Rep. Act No. 5448 dated
June 27, 1968, repealed all earlier tax exemptions Of corporate taxpayers found in legislative franchises
similar to that invoked by PAL in this case.
In Radio Communications of the Philippines, Inc. v. Court of Tax Appeals, et al. (G.R. No. 615)." July 11,
1985), this Court ruled:
Under its original franchise, Republic Act No. 21); enacted in 1957, petitioner Radio Communications of
the Philippines, Inc., was subject to both the franchise tax and income tax. In 1964, however, petitioner's
franchise was amended by Republic Act No. 41-42). to the effect that its franchise tax of one and one-
half percentum (1-1/2%) of all gross receipts was provided as "in lieu of any and all taxes of any kind,
nature, or description levied, established, or collected by any authority whatsoever, municipal,
provincial, or national from which taxes the grantee is hereby expressly exempted." The issue raised to
this Court now is the validity of the respondent court's decision which ruled that the exemption under
Republic Act No. 41-42). was repealed by Section 24 of Republic Act No. 5448 dated June 27, 1968 which
reads:
"(d) The provisions of existing special or general laws to the contrary notwithstanding, all corporate
taxpayers not specifically exempt under Sections 24 (c) (1) of this Code shall pay the rates provided in
this section. All corporations, agencies, or instrumentalities owned or controlled by the government,
including the Government Service Insurance System and the Social Security System but excluding
educational institutions, shall pay such rate of tax upon their taxable net income as are imposed by this
section upon associations or corporations engaged in a similar business or industry. "
An examination of Section 24 of the Tax Code as amended shows clearly that the law intended all
corporate taxpayers to pay income tax as provided by the statute. There can be no doubt as to the
power of Congress to repeal the earlier exemption it granted. Article XIV, Section 8 of the 1935
Constitution and Article XIV, Section 5 of the Constitution as amended in 1973 expressly provide that no
franchise shall be granted to any individual, firm, or corporation except under the condition that it shall
be subject to amendment, alteration, or repeal by the legislature when the public interest so requires.
There is no question as to the public interest involved. The country needs increased revenues. The
repealing clause is clear and unambiguous. There is a listing of entities entitled to tax exemption. The
petitioner is not covered by the provision. Considering the foregoing, the Court Resolved to DENY the
petition for lack of merit. The decision of the respondent court is affirmed.
Any registration fees collected between June 27, 1968 and April 9, 1979, were correctly imposed
because the tax exemption in the franchise of PAL was repealed during the period. However, an
amended franchise was given to PAL in 1979. Section 13 of Presidential Decree No. 1590, now provides:
In consideration of the franchise and rights hereby granted, the grantee shall pay to the Philippine
Government during the lifetime of this franchise whichever of subsections (a) and (b) hereunder will
result in a lower taxes.)
(a) The basic corporate income tax based on the grantee's annual net taxable income computed in
accordance with the provisions of the Internal Revenue Code; or
(b) A franchise tax of two per cent (2%) of the gross revenues. derived by the grantees from all specific.
without distinction as to transport or nontransport corporations; provided that with respect to
international airtransport service, only the gross passengers, mail, and freight revenues. from its
outgoing flights shall be subject to this law.
The tax paid by the grantee under either of the above alternatives shall be in lieu of all other taxes,
duties, royalties, registration, license and other fees and charges of any kind, nature or description
imposed, levied, established, assessed, or collected by any municipal, city, provincial, or national
authority or government, agency, now or in the future, including but not limited to the following:
xxx xxx xxx
(5) All taxes, fees and other charges on the registration, license, acquisition, and transfer of airtransport
equipment, motor vehicles, and all other personal or real property of the gravitates (Pres. Decree 1590,
75 OG No. 15, 3259, April 9, 1979).
PAL's current franchise is clear and specific. It has removed the ambiguity found in the earlier law. PAL is
now exempt from the payment of any tax, fee, or other charge on the registration and licensing of
motor vehicles. Such payments are already included in the basic tax or franchise tax provided in
Subsections (a) and (b) of Section 13, P.D. 1590, and may no longer be exacted.
WHEREFORE, the petition is hereby partially GRANTED. The prayed for refund of registration fees paid in
1971 is DENIED. The Land Transportation Franchising and Regulatory Board (LTFRB) is enjoined
functions-the collecting any tax, fee, or other charge on the registration and licensing of the petitioner's
motor vehicles from April 9, 1979 as provided in Presidential Decree No. 1590.
SO ORDERED.
Fernan, C.J., Narvasa, Melencio-Herrera, Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Sarmiento,
Cortes, Griño Aquino and Medialdea, JJ., concur.
SUPREME COURT
Manila
EN BANC
G.R. No. 115455 August 25, 1994
ARTURO M. TOLENTINO, petitioner,
vs.
THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, respondents.
G.R. No. 115525 August 25, 1994
JUAN T. DAVID, petitioner,
vs.
TEOFISTO T. GUINGONA, JR., as Executive Secretary; ROBERTO DE OCAMPO, as Secretary of Finance;

LIWAYWAY VINZONS-CHATO, as Commissioner of Internal Revenue; and their AUTHORIZED AGENTS OR
REPRESENTATIVES, respondents.
G.R. No. 115543 August 25, 1994
RAUL S. ROCO and the INTEGRATED BAR OF THE PHILIPPINES, petitioners,
vs.
THE SECRETARY OF THE DEPARTMENT OF FINANCE; THE COMMISSIONERS OF THE BUREAU OF

INTERNAL REVENUE AND BUREAU OF CUSTOMS, respondents.
G.R. No. 115544 August 25, 1994

PHILIPPINE PRESS INSTITUTE, INC.; EGP PUBLISHING CO., INC.; PUBLISHING CORPORATION; PHILIPPINE
JOURNALISTS, INC.; JOSE L. PAVIA; and OFELIA L. DIMALANTA, petitioners,
vs.
HON. LIWAYWAY V. CHATO, in her capacity as Commissioner of Internal Revenue; HON. TEOFISTO T.
GUINGONA, JR., in his capacity as Executive Secretary; and HON. ROBERTO B. DE OCAMPO, in his
capacity as Secretary of Finance, respondents.
G.R. No. 115754 August 25, 1994
CHAMBER OF REAL ESTATE AND BUILDERS ASSOCIATIONS, INC., (CREBA), petitioner,
vs.
THE COMMISSIONER OF INTERNAL REVENUE, respondent.
G.R. No. 115781 August 25, 1994
KILOSBAYAN, INC., JOVITO R. SALONGA, CIRILO A. RIGOS, ERME CAMBA, EMILIO C. CAPULONG, JR., JOSE
T. APOLO, EPHRAIM TENDERO, FERNANDO SANTIAGO, JOSE ABCEDE, CHRISTINE TAN, FELIPE L. GOZON,
RAFAEL G. FERNANDO, RAOUL V. VICTORINO, JOSE CUNANAN, QUINTIN S. DOROMAL, MOVEMENT OF
ATTORNEYS FOR BROTHERHOOD, INTEGRITY AND NATIONALISM, INC. ("MABINI"), FREEDOM FROM
DEBT COALITION, INC., PHILIPPINE BIBLE SOCIETY, INC., and WIGBERTO TAÑADA, petitioners,
vs.
THE EXECUTIVE SECRETARY, THE SECRETARY OF FINANCE, THE COMMISSIONER OF INTERNAL REVENUE
and THE COMMISSIONER OF CUSTOMS, respondents.
G.R. No. 115852 August 25, 1994
PHILIPPINE AIRLINES, INC., petitioner,
vs.
THE SECRETARY OF FINANCE, and COMMISSIONER OF INTERNAL REVENUE, respondents.

G.R. No. 115873 August 25, 1994
COOPERATIVE UNION OF THE PHILIPPINES, petitioners,
vs.
HON. LIWAYWAY V. CHATO, in her capacity as the Commissioner of Internal Revenue, HON. TEOFISTO T.
GUINGONA, JR., in his capacity as Executive Secretary, and HON. ROBERTO B. DE OCAMPO, in his
capacity as Secretary of Finance, respondents.
G.R. No. 115931 August 25, 1994
PHILIPPINE EDUCATIONAL PUBLISHERS ASSOCIATION, INC., and ASSOCIATION OF PHILIPPINE BOOK-

SELLERS, petitioners,
vs.
HON. ROBERTO B. DE OCAMPO, as the Secretary of Finance; HON. LIWAYWAY V. CHATO, as the
Commissioner of Internal Revenue and HON. GUILLERMO PARAYNO, JR., in his capacity as the
Commissioner of Customs, respondents.
Arturo M. Tolentino for and in his behalf.
Donna Celeste D. Feliciano and Juan T. David for petitioners in G.R. No. 115525.
Roco, Bunag, Kapunan, Migallos and Jardeleza for petitioner R.S. Roco.
Villaranza and Cruz for petitioners in G.R. No. 115544.
Carlos A. Raneses and Manuel M. Serrano for petitioner in G.R. No. 115754.
Salonga, Hernandez & Allado for Freedon From Debts Coalition, Inc. & Phil. Bible Society.
Estelito P. Mendoza for petitioner in G.R. No. 115852.
Panganiban, Benitez, Parlade, Africa & Barinaga Law Offices for petitioners in G.R. No. 115873.
R.B. Rodriguez & Associates for petitioners in G.R. No. 115931.
Reve A.V. Saguisag for MABINI.
MENDOZA, J.:
The value-added tax (VAT) is levied on the sale, barter or exchange of goods and properties as well as on
the sale or exchange of services. It is equivalent to 10% of the gross selling price or gross value in money
of goods or properties sold, bartered or exchanged or of the gross receipts from the sale or exchange of
services. Republic Act No. 7716 seeks to widen the tax base of the existing VAT system and enhance its
administration by amending the National Internal Revenue Code.
These are various suits for certiorari and prohibition, challenging the constitutionality of Republic Act
No. 7716 on various grounds summarized in the resolution of July 6, 1994 of this Court, as follows:
I. Procedural Issues:
A. Does Republic Act No. 7716 violate Art. VI, § 24 of the Constitution?
B. Does it violate Art. VI, § 26(2) of the Constitution?
C. What is the extent of the power of the Bicameral Conference Committee?
II. Substantive Issues:
A. Does the law violate the following provisions in the Bill of Rights (Art. III)?
1. §1
2. § 4
3. § 5
4. § 10
B. Does the law violate the following other provisions of the Constitution?
1. Art. VI, § 28(1)
2. Art. VI, § 28(3)
These questions will be dealt in the order they are stated above. As will presently be explained not all of
these questions are judicially cognizable, because not all provisions of the Constitution are self executing
and, therefore, judicially enforceable. The other departments of the government are equally charged
with the enforcement of the Constitution, especially the provisions relating to them.
I. PROCEDURAL ISSUES
The contention of petitioners is that in enacting Republic Act No. 7716, or the Expanded Value-Added
Tax Law, Congress violated the Constitution because, although H. No. 11197 had originated in the House
of Representatives, it was not passed by the Senate but was simply consolidated with the Senate version
(S. No. 1630) in the Conference Committee to produce the bill which the President signed into law. The
following provisions of the Constitution are cited in support of the proposition that because Republic Act
No. 7716 was passed in this manner, it did not originate in the House of Representatives and it has not
thereby become a law:
Art. VI, § 24: All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of
local application, and private bills shall originate exclusively in the House of Representatives, but the
Senate may propose or concur with amendments.
Id., § 26(2): No bill passed by either House shall become a law unless it has passed three readings on
separate days, and printed copies thereof in its final form have been distributed to its Members three
days before its passage, except when the President certifies to the necessity of its immediate enactment
to meet a public calamity or emergency. Upon the last reading of a bill, no amendment thereto shall be
allowed, and the vote thereon shall be taken immediately thereafter, and the yeas and nays entered in
the Journal.
It appears that on various dates between July 22, 1992 and August 31, 1993, several bills 1 were
introduced in the House of Representatives seeking to amend certain provisions of the National Internal
Revenue Code relative to the value-added tax or VAT. These bills were referred to the House Ways and
Means Committee which recommended for approval a substitute measure, H. No. 11197, entitled
AN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT) SYSTEM TO WIDEN ITS TAX BASE AND ENHANCE
ITS ADMINISTRATION, AMENDING FOR THESE PURPOSES SECTIONS 99, 100, 102, 103, 104, 105, 106,
107, 108 AND 110 OF TITLE IV, 112, 115 AND 116 OF TITLE V, AND 236, 237 AND 238 OF TITLE IX, AND
REPEALING SECTIONS 113 AND 114 OF TITLE V, ALL OF THE NATIONAL INTERNAL REVENUE CODE, AS
AMENDED
The bill (H. No. 11197) was considered on second reading starting November 6, 1993 and, on November
17, 1993, it was approved by the House of Representatives after third and final reading.
It was sent to the Senate on November 23, 1993 and later referred by that body to its Committee on
Ways and Means.
On February 7, 1994, the Senate Committee submitted its report recommending approval of S. No.
1630, entitled
AN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT) SYSTEM TO WIDEN ITS TAX BASE AND ENHANCE
108, AND 110 OF TITLE IV, 112 OF TITLE V, AND 236, 237, AND 238 OF TITLE IX, AND REPEALING
SECTIONS 113, 114 and 116 OF TITLE V, ALL OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED,
AND FOR OTHER PURPOSES
It was stated that the bill was being submitted "in substitution of Senate Bill No. 1129, taking into
consideration P.S. Res. No. 734 and H.B. No. 11197."
On February 8, 1994, the Senate began consideration of the bill (S. No. 1630). It finished debates on the
bill and approved it on second reading on March 24, 1994. On the same day, it approved the bill on third
reading by the affirmative votes of 13 of its members, with one abstention.
H. No. 11197 and its Senate version (S. No. 1630) were then referred to a conference committee which,
after meeting four times (April 13, 19, 21 and 25, 1994), recommended that "House Bill No. 11197, in
consolidation with Senate Bill No. 1630, be approved in accordance with the attached copy of the bill as
reconciled and approved by the conferees."
The Conference Committee bill, entitled "AN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT)
SYSTEM, WIDENING ITS TAX BASE AND ENHANCING ITS ADMINISTRATION AND FOR THESE PURPOSES
AMENDING AND REPEALING THE RELEVANT PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE,
AS AMENDED, AND FOR OTHER PURPOSES," was thereafter approved by the House of Representatives
on April 27, 1994 and by the Senate on May 2, 1994. The enrolled bill was then presented to the
President of the Philippines who, on May 5, 1994, signed it. It became Republic Act No. 7716. On May
12, 1994, Republic Act No. 7716 was published in two newspapers of general circulation and, on May 28,
1994, it took effect, although its implementation was suspended until June 30, 1994 to allow time for
the registration of business entities. It would have been enforced on July 1, 1994 but its enforcement
was stopped because the Court, by the vote of 11 to 4 of its members, granted a temporary restraining
order on June 30, 1994.
First. Petitioners' contention is that Republic Act No. 7716 did not "originate exclusively" in the House of
Representatives as required by Art. VI, §24 of the Constitution, because it is in fact the result of the
consolidation of two distinct bills, H. No. 11197 and S. No. 1630. In this connection, petitioners point out
that although Art. VI, SS 24 was adopted from the American Federal Constitution, 2 it is notable in two
respects: the verb "shall originate" is qualified in the Philippine Constitution by the word "exclusively"
and the phrase "as on other bills" in the American version is omitted. This means, according to them,
that to be considered as having originated in the House, Republic Act No. 7716 must retain the essence
of H. No. 11197.
This argument will not bear analysis. To begin with, it is not the law — but the revenue bill — which is
required by the Constitution to "originate exclusively" in the House of Representatives. It is important to
emphasize this, because a bill originating in the House may undergo such extensive changes in the
Senate that the result may be a rewriting of the whole. The possibility of a third version by the
conference committee will be discussed later. At this point, what is important to note is that, as a result
of the Senate action, a distinct bill may be produced. To insist that a revenue statute — and not only the
bill which initiated the legislative process culminating in the enactment of the law — must substantially
be the same as the House bill would be to deny the Senate's power not only to "concur with
amendments" but also to "propose amendments." It would be to violate the coequality of legislative
power of the two houses of Congress and in fact make the House superior to the Senate.
The contention that the constitutional design is to limit the Senate's power in respect of revenue bills in
order to compensate for the grant to the Senate of the treaty-ratifying power 3 and thereby equalize its
powers and those of the House overlooks the fact that the powers being compared are different. We are
dealing here with the legislative power which under the Constitution is vested not in any particular
chamber but in the Congress of the Philippines, consisting of "a Senate and a House of Representatives."
4 The exercise of the treaty-ratifying power is not the exercise of legislative power. It is the exercise of a
check on the executive power. There is, therefore, no justification for comparing the legislative powers
of the House and of the Senate on the basis of the possession of such nonlegislative power by the
Senate. The possession of a similar power by the U.S. Senate 5 has never been thought of as giving it
more legislative powers than the House of Representatives.
In the United States, the validity of a provision (§ 37) imposing an ad valorem tax based on the weight of
vessels, which the U.S. Senate had inserted in the Tariff Act of 1909, was upheld against the claim that
the provision was a revenue bill which originated in the Senate in contravention of Art. I, § 7 of the U.S.
Constitution. 6 Nor is the power to amend limited to adding a provision or two in a revenue bill
emanating from the House. The U.S. Senate has gone so far as changing the whole of bills following the
enacting clause and substituting its own versions. In 1883, for example, it struck out everything after the
enacting clause of a tariff bill and wrote in its place its own measure, and the House subsequently
accepted the amendment. The U.S. Senate likewise added 847 amendments to what later became the
Payne-Aldrich Tariff Act of 1909; it dictated the schedules of the Tariff Act of 1921; it rewrote an
extensive tax revision bill in the same year and recast most of the tariff bill of 1922. 7 Given, then, the
power of the Senate to propose amendments, the Senate can propose its own version even with respect
to bills which are required by the Constitution to originate in the House.
It is insisted, however, that S. No. 1630 was passed not in substitution of H. No. 11197 but of another
Senate bill (S. No. 1129) earlier filed and that what the Senate did was merely to "take [H. No. 11197]
into consideration" in enacting S. No. 1630. There is really no difference between the Senate preserving
H. No. 11197 up to the enacting clause and then writing its own version following the enacting clause
(which, it would seem, petitioners admit is an amendment by substitution), and, on the other hand,
separately presenting a bill of its own on the same subject matter. In either case the result are two bills
on the same subject.
Indeed, what the Constitution simply means is that the initiative for filing revenue, tariff, or tax bills, bills
authorizing an increase of the public debt, private bills and bills of local application must come from the
House of Representatives on the theory that, elected as they are from the districts, the members of the
House can be expected to be more sensitive to the local needs and problems. On the other hand, the
senators, who are elected at large, are expected to approach the same problems from the national
perspective. Both views are thereby made to bear on the enactment of such laws.
Nor does the Constitution prohibit the filing in the Senate of a substitute bill in anticipation of its receipt
of the bill from the House, so long as action by the Senate as a body is withheld pending receipt of the
House bill. The Court cannot, therefore, understand the alarm expressed over the fact that on March 1,
1993, eight months before the House passed H. No. 11197, S. No. 1129 had been filed in the Senate.
After all it does not appear that the Senate ever considered it. It was only after the Senate had received
H. No. 11197 on November 23, 1993 that the process of legislation in respect of it began with the
referral to the Senate Committee on Ways and Means of H. No. 11197 and the submission by the
Committee on February 7, 1994 of S. No. 1630. For that matter, if the question were simply the priority
in the time of filing of bills, the fact is that it was in the House that a bill (H. No. 253) to amend the VAT
law was first filed on July 22, 1992. Several other bills had been filed in the House before S. No. 1129
was filed in the Senate, and H. No. 11197 was only a substitute of those earlier bills.
Second. Enough has been said to show that it was within the power of the Senate to propose S. No.
1630. We now pass to the next argument of petitioners that S. No. 1630 did not pass three readings on
separate days as required by the Constitution 8 because the second and third readings were done on
the same day, March 24, 1994. But this was because on February 24, 1994 9 and again on March 22,
1994, 10 the President had certified S. No. 1630 as urgent. The presidential certification dispensed with
the requirement not only of printing but also that of reading the bill on separate days. The phrase
"except when the President certifies to the necessity of its immediate enactment, etc." in Art. VI, § 26(2)
qualifies the two stated conditions before a bill can become a law: (i) the bill has passed three readings
on separate days and (ii) it has been printed in its final form and distributed three days before it is finally
approved.
In other words, the "unless" clause must be read in relation to the "except" clause, because the two are
really coordinate clauses of the same sentence. To construe the "except" clause as simply dispensing
with the second requirement in the "unless" clause (i.e., printing and distribution three days before final
approval) would not only violate the rules of grammar. It would also negate the very premise of the
"except" clause: the necessity of securing the immediate enactment of a bill which is certified in order to
meet a public calamity or emergency. For if it is only the printing that is dispensed with by presidential
certification, the time saved would be so negligible as to be of any use in insuring immediate enactment.
It may well be doubted whether doing away with the necessity of printing and distributing copies of the
bill three days before the third reading would insure speedy enactment of a law in the face of an
emergency requiring the calling of a special election for President and Vice-President. Under the
Constitution such a law is required to be made within seven days of the convening of Congress in
emergency session. 11
That upon the certification of a bill by the President the requirement of three readings on separate days
and of printing and distribution can be dispensed with is supported by the weight of legislative practice.
For example, the bill defining the certiorari jurisdiction of this Court which, in consolidation with the
Senate version, became Republic Act No. 5440, was passed on second and third readings in the House of
Representatives on the same day (May 14, 1968) after the bill had been certified by the President as
urgent. 12
There is, therefore, no merit in the contention that presidential certification dispenses only with the
requirement for the printing of the bill and its distribution three days before its passage but not with the
requirement of three readings on separate days, also.
It is nonetheless urged that the certification of the bill in this case was invalid because there was no
emergency, the condition stated in the certification of a "growing budget deficit" not being an unusual
condition in this country.
It is noteworthy that no member of the Senate saw fit to controvert the reality of the factual basis of the
certification. To the contrary, by passing S. No. 1630 on second and third readings on March 24, 1994,
the Senate accepted the President's certification. Should such certification be now reviewed by this
Court, especially when no evidence has been shown that, because S. No. 1630 was taken up on second
and third readings on the same day, the members of the Senate were deprived of the time needed for
the study of a vital piece of legislation?
The sufficiency of the factual basis of the suspension of the writ of habeas corpus or declaration of
martial law under Art. VII, § 18, or the existence of a national emergency justifying the delegation of
extraordinary powers to the President under Art. VI, § 23(2), is subject to judicial review because basic
rights of individuals may be at hazard. But the factual basis of presidential certification of bills, which
involves doing away with procedural requirements designed to insure that bills are duly considered by
members of Congress, certainly should elicit a different standard of review.
Petitioners also invite attention to the fact that the President certified S. No. 1630 and not H. No. 11197.
That is because S. No. 1630 was what the Senate was considering. When the matter was before the
House, the President likewise certified H. No. 9210 the pending in the House.
Third. Finally it is contended that the bill which became Republic Act No. 7716 is the bill which the
Conference Committee prepared by consolidating H. No. 11197 and S. No. 1630. It is claimed that the
Conference Committee report included provisions not found in either the House bill or the Senate bill
and that these provisions were "surreptitiously" inserted by the Conference Committee. Much is made
of the fact that in the last two days of its session on April 21 and 25, 1994 the Committee met behind
closed doors. We are not told, however, whether the provisions were not the result of the give and take
that often mark the proceedings of conference committees.
Nor is there anything unusual or extraordinary about the fact that the Conference Committee met in
executive sessions. Often the only way to reach agreement on conflicting provisions is to meet behind
closed doors, with only the conferees present. Otherwise, no compromise is likely to be made. The
Court is not about to take the suggestion of a cabal or sinister motive attributed to the conferees on the
basis solely of their "secret meetings" on April 21 and 25, 1994, nor read anything into the incomplete
remarks of the members, marked in the transcript of stenographic notes by ellipses. The incomplete
sentences are probably due to the stenographer's own limitations or to the incoherence that sometimes
characterize conversations. William Safire noted some such lapses in recorded talks even by recent past
Presidents of the United States.
In any event, in the United States conference committees had been customarily held in executive
sessions with only the conferees and their staffs in attendance. 13 Only in November 1975 was a new
rule adopted requiring open sessions. Even then a majority of either chamber's conferees may vote in
public to close the meetings. 14
As to the possibility of an entirely new bill emerging out of a Conference Committee, it has been
explained:
Under congressional rules of procedure, conference committees are not expected to make any material
change in the measure at issue, either by deleting provisions to which both houses have already agreed
or by inserting new provisions. But this is a difficult provision to enforce. Note the problem when one
house amends a proposal originating in either house by striking out everything following the enacting
clause and substituting provisions which make it an entirely new bill. The versions are now altogether
different, permitting a conference committee to draft essentially a new bill. . . . 15
The result is a third version, which is considered an "amendment in the nature of a substitute," the only
requirement for which being that the third version be germane to the subject of the House and Senate
bills. 16
Indeed, this Court recently held that it is within the power of a conference committee to include in its
report an entirely new provision that is not found either in the House bill or in the Senate bill. 17 If the
committee can propose an amendment consisting of one or two provisions, there is no reason why it
cannot propose several provisions, collectively considered as an "amendment in the nature of a
substitute," so long as such amendment is germane to the subject of the bills before the committee.
After all, its report was not final but needed the approval of both houses of Congress to become valid as
an act of the legislative department. The charge that in this case the Conference Committee acted as a
third legislative chamber is thus without any basis. 18
Nonetheless, it is argued that under the respective Rules of the Senate and the House of
Representatives a conference committee can only act on the differing provisions of a Senate bill and a
House bill, and that contrary to these Rules the Conference Committee inserted provisions not found in
the bills submitted to it. The following provisions are cited in support of this contention:
Rules of the Senate
Rule XII:
§ 26. In the event that the Senate does not agree with the House of Representatives on the provision of
any bill or joint resolution, the differences shall be settled by a conference committee of both Houses
which shall meet within ten days after their composition.
The President shall designate the members of the conference committee in accordance with
subparagraph (c), Section 3 of Rule III.
Each Conference Committee Report shall contain a detailed and sufficiently explicit statement of the
changes in or amendments to the subject measure, and shall be signed by the conferees.
The consideration of such report shall not be in order unless the report has been filed with the Secretary
of the Senate and copies thereof have been distributed to the Members.
(Emphasis added)
Rules of the House of Representatives

Rule XIV:
§ 85. Conference Committee Reports. — In the event that the House does not agree with the Senate on
the amendments to any bill or joint resolution, the differences may be settled by conference committees
of both Chambers.
The consideration of conference committee reports shall always be in order, except when the journal is
being read, while the roll is being called or the House is dividing on any question. Each of the pages of
such reports shall be signed by the conferees. Each report shall contain a detailed, sufficiently explicit
statement of the changes in or amendments to the subject measure.
The consideration of such report shall not be in order unless copies thereof are distributed to the
Members: Provided, That in the last fifteen days of each session period it shall be deemed sufficient that
three copies of the report, signed as above provided, are deposited in the office of the Secretary
General.
(Emphasis added)
To be sure, nothing in the Rules limits a conference committee to a consideration of conflicting

provisions. But Rule XLIV, § 112 of the Rules of the Senate is cited to the effect that "If there is no Rule
applicable to a specific case the precedents of the Legislative Department of the Philippines shall be
resorted to, and as a supplement of these, the Rules contained in Jefferson's Manual." The following is
then quoted from the Jefferson's Manual:
The managers of a conference must confine themselves to the differences committed to them. . . and
may not include subjects not within disagreements, even though germane to a question in issue.
Note that, according to Rule XLIX, § 112, in case there is no specific rule applicable, resort must be to the
legislative practice. The Jefferson's Manual is resorted to only as supplement. It is common place in
Congress that conference committee reports include new matters which, though germane, have not
been committed to the committee. This practice was admitted by Senator Raul S. Roco, petitioner in G.R.
No. 115543, during the oral argument in these cases. Whatever, then, may be provided in the Jefferson's
Manual must be considered to have been modified by the legislative practice. If a change is desired in
the practice it must be sought in Congress since this question is not covered by any constitutional
provision but is only an internal rule of each house. Thus, Art. VI, § 16(3) of the Constitution provides
that "Each House may determine the rules of its proceedings. . . ."
This observation applies to the other contention that the Rules of the two chambers were likewise
disregarded in the preparation of the Conference Committee Report because the Report did not contain
a "detailed and sufficiently explicit statement of changes in, or amendments to, the subject measure."
The Report used brackets and capital letters to indicate the changes. This is a standard practice in bill-
drafting. We cannot say that in using these marks and symbols the Committee violated the Rules of the
Senate and the House. Moreover, this Court is not the proper forum for the enforcement of these
internal Rules. To the contrary, as we have already ruled, "parliamentary rules are merely procedural
and with their observance the courts have no concern." 19 Our concern is with the procedural
requirements of the Constitution for the enactment of laws. As far as these requirements are
concerned, we are satisfied that they have been faithfully observed in these cases.
Nor is there any reason for requiring that the Committee's Report in these cases must have undergone
three readings in each of the two houses. If that be the case, there would be no end to negotiation since
each house may seek modifications of the compromise bill. The nature of the bill, therefore, requires
that it be acted upon by each house on a "take it or leave it" basis, with the only alternative that if it is
not approved by both houses, another conference committee must be appointed. But then again the
result would still be a compromise measure that may not be wholly satisfying to both houses.
Art. VI, § 26(2) must, therefore, be construed as referring only to bills introduced for the first time in
either house of Congress, not to the conference committee report. For if the purpose of requiring three
readings is to give members of Congress time to study bills, it cannot be gainsaid that H. No. 11197 was
passed in the House after three readings; that in the Senate it was considered on first reading and then
referred to a committee of that body; that although the Senate committee did not report out the House
bill, it submitted a version (S. No. 1630) which it had prepared by "taking into consideration" the House
bill; that for its part the Conference Committee consolidated the two bills and prepared a compromise
version; that the Conference Committee Report was thereafter approved by the House and the Senate,
presumably after appropriate study by their members. We cannot say that, as a matter of fact, the
members of Congress were not fully informed of the provisions of the bill. The allegation that the
Conference Committee usurped the legislative power of Congress is, in our view, without warrant in fact
and in law.
Fourth. Whatever doubts there may be as to the formal validity of Republic Act No. 7716 must be
resolved in its favor. Our cases 20 manifest firm adherence to the rule that an enrolled copy of a bill is
conclusive not only of its provisions but also of its due enactment. Not even claims that a proposed
constitutional amendment was invalid because the requisite votes for its approval had not been
obtained 21 or that certain provisions of a statute had been "smuggled" in the printing of the bill 22
have moved or persuaded us to look behind the proceedings of a coequal branch of the government.
There is no reason now to depart from this rule.
No claim is here made that the "enrolled bill" rule is absolute. In fact in one case 23 we "went behind"
an enrolled bill and consulted the Journal to determine whether certain provisions of a statute had been
approved by the Senate in view of the fact that the President of the Senate himself, who had signed the
enrolled bill, admitted a mistake and withdrew his signature, so that in effect there was no longer an
enrolled bill to consider.
But where allegations that the constitutional procedures for the passage of bills have not been observed
have no more basis than another allegation that the Conference Committee "surreptitiously" inserted
provisions into a bill which it had prepared, we should decline the invitation to go behind the enrolled
copy of the bill. To disregard the "enrolled bill" rule in such cases would be to disregard the respect due
the other two departments of our government.
Fifth. An additional attack on the formal validity of Republic Act No. 7716 is made by the Philippine
Airlines, Inc., petitioner in G.R. No. 11582, namely, that it violates Art. VI, § 26(1) which provides that
"Every bill passed by Congress shall embrace only one subject which shall be expressed in the title
thereof." It is contended that neither H. No. 11197 nor S. No. 1630 provided for removal of exemption
of PAL transactions from the payment of the VAT and that this was made only in the Conference
Committee bill which became Republic Act No. 7716 without reflecting this fact in its title.
The title of Republic Act No. 7716 is:
AN ACT RESTRUCTURING THE VALUE- ADDED TAX (VAT) SYSTEM, WIDENING ITS TAX BASE AND
ENHANCING ITS ADMINISTRATION, AND FOR THESE PURPOSES AMENDING AND REPEALING THE
RELEVANT PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER
PURPOSES.
Among the provisions of the NIRC amended is § 103, which originally read:
§ 103. Exempt transactions. — The following shall be exempt from the value-added tax:
....
(q) Transactions which are exempt under special laws or international agreements to which the
Philippines is a signatory. Among the transactions exempted from the VAT were those of PAL because it
was exempted under its franchise (P.D. No. 1590) from the payment of all "other taxes . . . now or in the
near future," in consideration of the payment by it either of the corporate income tax or a franchise tax
of 2%.
As a result of its amendment by Republic Act No. 7716, § 103 of the NIRC now provides:
§ 103. Exempt transactions. — The following shall be exempt from the value-added tax:
....
(q) Transactions which are exempt under special laws, except those granted under Presidential Decree
Nos. 66, 529, 972, 1491, 1590. . . .
The effect of the amendment is to remove the exemption granted to PAL, as far as the VAT is concerned.
The question is whether this amendment of § 103 of the NIRC is fairly embraced in the title of Republic
Act No. 7716, although no mention is made therein of P.D. No. 1590 as among those which the statute
amends. We think it is, since the title states that the purpose of the statute is to expand the VAT system,
and one way of doing this is to widen its base by withdrawing some of the exemptions granted before.
To insist that P.D. No. 1590 be mentioned in the title of the law, in addition to § 103 of the NIRC, in
which it is specifically referred to, would be to insist that the title of a bill should be a complete index of
its content.
The constitutional requirement that every bill passed by Congress shall embrace only one subject which
shall be expressed in its title is intended to prevent surprise upon the members of Congress and to
inform the people of pending legislation so that, if they wish to, they can be heard regarding it. If, in the
case at bar, petitioner did not know before that its exemption had been withdrawn, it is not because of
any defect in the title but perhaps for the same reason other statutes, although published, pass
unnoticed until some event somehow calls attention to their existence. Indeed, the title of Republic Act
No. 7716 is not any more general than the title of PAL's own franchise under P.D. No. 1590, and yet no
mention is made of its tax exemption. The title of P.D. No. 1590 is:
AN ACT GRANTING A NEW FRANCHISE TO PHILIPPINE AIRLINES, INC. TO ESTABLISH, OPERATE, AND
MAINTAIN AIR-TRANSPORT SERVICES IN THE PHILIPPINES AND BETWEEN THE PHILIPPINES AND OTHER
COUNTRIES.
The trend in our cases is to construe the constitutional requirement in such a manner that courts do not
unduly interfere with the enactment of necessary legislation and to consider it sufficient if the title
expresses the general subject of the statute and all its provisions are germane to the general subject
thus expressed. 24
It is further contended that amendment of petitioner's franchise may only be made by special law, in
view of § 24 of P.D. No. 1590 which provides:
This franchise, as amended, or any section or provision hereof may only be modified, amended, or
repealed expressly by a special law or decree that shall specifically modify, amend, or repeal this
franchise or any section or provision thereof.
This provision is evidently intended to prevent the amendment of the franchise by mere implication
resulting from the enactment of a later inconsistent statute, in consideration of the fact that a franchise
is a contract which can be altered only by consent of the parties. Thus in Manila Railroad Co. v.
Rafferty, 25 it was held that an Act of the U.S. Congress, which provided for the payment of tax on
certain goods and articles imported into the Philippines, did not amend the franchise of plaintiff, which
exempted it from all taxes except those mentioned in its franchise. It was held that a special law cannot
be amended by a general law.
In contrast, in the case at bar, Republic Act No. 7716 expressly amends PAL's franchise (P.D. No. 1590)
by specifically excepting from the grant of exemptions from the VAT PAL's exemption under P.D. No.
1590. This is within the power of Congress to do under Art. XII, § 11 of the Constitution, which provides
that the grant of a franchise for the operation of a public utility is subject to amendment, alteration or
repeal by Congress when the common good so requires.
II. SUBSTANTIVE ISSUES
A. Claims of Press Freedom, Freedom of Thought and Religious Freedom
The Philippine Press Institute (PPI), petitioner in G.R. No. 115544, is a nonprofit organization of
newspaper publishers established for the improvement of journalism in the Philippines. On the other
hand, petitioner in G.R. No. 115781, the Philippine Bible Society (PBS), is a nonprofit organization
engaged in the printing and distribution of bibles and other religious articles. Both petitioners claim
violations of their rights under § § 4 and 5 of the Bill of Rights as a result of the enactment of the VAT
Law.
The PPI questions the law insofar as it has withdrawn the exemption previously granted to the press
under § 103 (f) of the NIRC. Although the exemption was subsequently restored by administrative
regulation with respect to the circulation income of newspapers, the PPI presses its claim because of the
possibility that the exemption may still be removed by mere revocation of the regulation of the
Secretary of Finance. On the other hand, the PBS goes so far as to question the Secretary's power to
grant exemption for two reasons: (1) The Secretary of Finance has no power to grant tax exemption
because this is vested in Congress and requires for its exercise the vote of a majority of all its members
26 and (2) the Secretary's duty is to execute the law.
§ 103 of the NIRC contains a list of transactions exempted from VAT. Among the transactions previously
granted exemption were:
(f) Printing, publication, importation or sale of books and any newspaper, magazine, review, or bulletin
which appears at regular intervals with fixed prices for subscription and sale and which is devoted
principally to the publication of advertisements.
Republic Act No. 7716 amended § 103 by deleting ¶ (f) with the result that print media became subject
to the VAT with respect to all aspects of their operations. Later, however, based on a memorandum of
the Secretary of Justice, respondent Secretary of Finance issued Revenue Regulations No. 11-94, dated
June 27, 1994, exempting the "circulation income of print media pursuant to § 4 Article III of the 1987
Philippine Constitution guaranteeing against abridgment of freedom of the press, among others." The
exemption of "circulation income" has left income from advertisements still subject to the VAT.
It is unnecessary to pass upon the contention that the exemption granted is beyond the authority of the
Secretary of Finance to give, in view of PPI's contention that even with the exemption of the circulation
revenue of print media there is still an unconstitutional abridgment of press freedom because of the
imposition of the VAT on the gross receipts of newspapers from advertisements and on their acquisition
of paper, ink and services for publication. Even on the assumption that no exemption has effectively
been granted to print media transactions, we find no violation of press freedom in these cases.
To be sure, we are not dealing here with a statute that on its face operates in the area of press freedom.
The PPI's claim is simply that, as applied to newspapers, the law abridges press freedom. Even with due
recognition of its high estate and its importance in a democratic society, however, the press is not
immune from general regulation by the State. It has been held:
The publisher of a newspaper has no immunity from the application of general laws. He has no special
privilege to invade the rights and liberties of others. He must answer for libel. He may be punished for
contempt of court. . . . Like others, he must pay equitable and nondiscriminatory taxes on his
business. . . . 27
The PPI does not dispute this point, either.
What it contends is that by withdrawing the exemption previously granted to print media transactions
involving printing, publication, importation or sale of newspapers, Republic Act No. 7716 has singled out
the press for discriminatory treatment and that within the class of mass media the law discriminates
against print media by giving broadcast media favored treatment. We have carefully examined this
argument, but we are unable to find a differential treatment of the press by the law, much less any
censorial motivation for its enactment. If the press is now required to pay a value-added tax on its
transactions, it is not because it is being singled out, much less targeted, for special treatment but only
because of the removal of the exemption previously granted to it by law. The withdrawal of exemption
is all that is involved in these cases. Other transactions, likewise previously granted exemption, have
been delisted as part of the scheme to expand the base and the scope of the VAT system. The law would
perhaps be open to the charge of discriminatory treatment if the only privilege withdrawn had been
that granted to the press. But that is not the case.
The situation in the case at bar is indeed a far cry from those cited by the PPI in support of its claim that
Republic Act No. 7716 subjects the press to discriminatory taxation. In the cases cited, the
discriminatory purpose was clear either from the background of the law or from its operation. For
example, in Grosjean v. American Press Co., 28 the law imposed a license tax equivalent to 2% of the
gross receipts derived from advertisements only on newspapers which had a circulation of more than
20,000 copies per week. Because the tax was not based on the volume of advertisement alone but was
measured by the extent of its circulation as well, the law applied only to the thirteen large newspapers
in Louisiana, leaving untaxed four papers with circulation of only slightly less than 20,000 copies a week
and 120 weekly newspapers which were in serious competition with the thirteen newspapers in
question. It was well known that the thirteen newspapers had been critical of Senator Huey Long, and
the Long-dominated legislature of Louisiana respondent by taxing what Long described as the "lying
newspapers" by imposing on them "a tax on lying." The effect of the tax was to curtail both their
revenue and their circulation. As the U.S. Supreme Court noted, the tax was "a deliberate and calculated
device in the guise of a tax to limit the circulation of information to which the public is entitled in virtue
of the constitutional guaranties." 29 The case is a classic illustration of the warning that the power to tax
is the power to destroy.
In the other case 30 invoked by the PPI, the press was also found to have been singled out because
everything was exempt from the "use tax" on ink and paper, except the press. Minnesota imposed a tax
on the sales of goods in that state. To protect the sales tax, it enacted a complementary tax on the
privilege of "using, storing or consuming in that state tangible personal property" by eliminating the
residents' incentive to get goods from outside states where the sales tax might be lower. The Minnesota
Star Tribune was exempted from both taxes from 1967 to 1971. In 1971, however, the state legislature
amended the tax scheme by imposing the "use tax" on the cost of paper and ink used for publication.
The law was held to have singled out the press because (1) there was no reason for imposing the "use
tax" since the press was exempt from the sales tax and (2) the "use tax" was laid on an "intermediate
transaction rather than the ultimate retail sale." Minnesota had a heavy burden of justifying the
differential treatment and it failed to do so. In addition, the U.S. Supreme Court found the law to be
discriminatory because the legislature, by again amending the law so as to exempt the first $100,000 of
paper and ink used, further narrowed the coverage of the tax so that "only a handful of publishers pay
any tax at all and even fewer pay any significant amount of tax." 31 The discriminatory purpose was thus
very clear.
More recently, in Arkansas Writers' Project, Inc. v. Ragland, 32 it was held that a law which taxed
general interest magazines but not newspapers and religious, professional, trade and sports journals
was discriminatory because while the tax did not single out the press as a whole, it targeted a small
group within the press. What is more, by differentiating on the basis of contents (i.e., between general
interest and special interests such as religion or sports) the law became "entirely incompatible with the
First Amendment's guarantee of freedom of the press."
These cases come down to this: that unless justified, the differential treatment of the press creates risks
of suppression of expression. In contrast, in the cases at bar, the statute applies to a wide range of
goods and services. The argument that, by imposing the VAT only on print media whose gross sales
exceeds P480,000 but not more than P750,000, the law discriminates 33 is without merit since it has not
been shown that as a result the class subject to tax has been unreasonably narrowed. The fact is that
this limitation does not apply to the press along but to all sales. Nor is impermissible motive shown by
the fact that print media and broadcast media are treated differently. The press is taxed on its
transactions involving printing and publication, which are different from the transactions of broadcast
media. There is thus a reasonable basis for the classification.
The cases canvassed, it must be stressed, eschew any suggestion that "owners of newspapers are
immune from any forms of ordinary taxation." The license tax in the Grosjean case was declared invalid
because it was "one single in kind, with a long history of hostile misuse against the freedom of the
press." 34 On the other hand, Minneapolis Star acknowledged that "The First Amendment does not
prohibit all regulation of the press [and that] the States and the Federal Government can subject
newspapers to generally applicable economic regulations without creating constitutional problems." 35
What has been said above also disposes of the allegations of the PBS that the removal of the exemption
of printing, publication or importation of books and religious articles, as well as their printing and
publication, likewise violates freedom of thought and of conscience. For as the U.S. Supreme Court
unanimously held in Jimmy Swaggart Ministries v. Board of Equalization, 36 the Free Exercise of Religion
Clause does not prohibit imposing a generally applicable sales and use tax on the sale of religious
materials by a religious organization.
This brings us to the question whether the registration provision of the law, 37 although of general
applicability, nonetheless is invalid when applied to the press because it lays a prior restraint on its
essential freedom. The case of American Bible Society v. City of Manila 38 is cited by both the PBS and
the PPI in support of their contention that the law imposes censorship. There, this Court held that an
ordinance of the City of Manila, which imposed a license fee on those engaged in the business of general
merchandise, could not be applied to the appellant's sale of bibles and other religious literature. This
Court relied on Murdock v. Pennsylvania, 39 in which it was held that, as a license fee is fixed in amount
and unrelated to the receipts of the taxpayer, the license fee, when applied to a religious sect, was
actually being imposed as a condition for the exercise of the sect's right under the Constitution. For that
reason, it was held, the license fee "restrains in advance those constitutional liberties of press and
religion and inevitably tends to suppress their exercise." 40
But, in this case, the fee in § 107, although a fixed amount (P1,000), is not imposed for the exercise of a
privilege but only for the purpose of defraying part of the cost of registration. The registration
requirement is a central feature of the VAT system. It is designed to provide a record of tax credits
because any person who is subject to the payment of the VAT pays an input tax, even as he collects an
output tax on sales made or services rendered. The registration fee is thus a mere administrative fee,
one not imposed on the exercise of a privilege, much less a constitutional right.
For the foregoing reasons, we find the attack on Republic Act No. 7716 on the ground that it offends the
free speech, press and freedom of religion guarantees of the Constitution to be without merit. For the
same reasons, we find the claim of the Philippine Educational Publishers Association (PEPA) in G.R. No.
115931 that the increase in the price of books and other educational materials as a result of the VAT
would violate the constitutional mandate to the government to give priority to education, science and
technology (Art. II, § 17) to be untenable.
B. Claims of Regressivity, Denial of Due Process, Equal Protection, and Impairment
of Contracts
There is basis for passing upon claims that on its face the statute violates the guarantees of freedom of
speech, press and religion. The possible "chilling effect" which it may have on the essential freedom of
the mind and conscience and the need to assure that the channels of communication are open and
operating importunately demand the exercise of this Court's power of review.
There is, however, no justification for passing upon the claims that the law also violates the rule that
taxation must be progressive and that it denies petitioners' right to due process and that equal
protection of the laws. The reason for this different treatment has been cogently stated by an eminent
authority on constitutional law thus: "[W]hen freedom of the mind is imperiled by law, it is freedom that
commands a momentum of respect; when property is imperiled it is the lawmakers' judgment that
commands respect. This dual standard may not precisely reverse the presumption of constitutionality in
civil liberties cases, but obviously it does set up a hierarchy of values within the due process clause." 41
Indeed, the absence of threat of immediate harm makes the need for judicial intervention less evident
and underscores the essential nature of petitioners' attack on the law on the grounds of regressivity,
denial of due process and equal protection and impairment of contracts as a mere academic discussion
of the merits of the law. For the fact is that there have even been no notices of assessments issued to
petitioners and no determinations at the administrative levels of their claims so as to illuminate the
actual operation of the law and enable us to reach sound judgment regarding so fundamental questions
as those raised in these suits.
Thus, the broad argument against the VAT is that it is regressive and that it violates the requirement
that "The rule of taxation shall be uniform and equitable [and] Congress shall evolve a progressive
system of taxation." 42 Petitioners in G.R. No. 115781 quote from a paper, entitled "VAT Policy Issues:
Structure, Regressivity, Inflation and Exports" by Alan A. Tait of the International Monetary Fund, that
"VAT payment by low-income households will be a higher proportion of their incomes (and
expenditures) than payments by higher-income households. That is, the VAT will be regressive."
Petitioners contend that as a result of the uniform 10% VAT, the tax on consumption goods of those
who are in the higher-income bracket, which before were taxed at a rate higher than 10%, has been
reduced, while basic commodities, which before were taxed at rates ranging from 3% to 5%, are now
taxed at a higher rate.
Just as vigorously as it is asserted that the law is regressive, the opposite claim is pressed by
respondents that in fact it distributes the tax burden to as many goods and services as possible
particularly to those which are within the reach of higher-income groups, even as the law exempts basic
goods and services. It is thus equitable. The goods and properties subject to the VAT are those used or
consumed by higher-income groups. These include real properties held primarily for sale to customers
or held for lease in the ordinary course of business, the right or privilege to use industrial, commercial or
scientific equipment, hotels, restaurants and similar places, tourist buses, and the like. On the other
hand, small business establishments, with annual gross sales of less than P500,000, are exempted. This,
according to respondents, removes from the coverage of the law some 30,000 business establishments.
On the other hand, an occasional paper 43 of the Center for Research and Communication cities a NEDA
study that the VAT has minimal impact on inflation and income distribution and that while additional
expenditure for the lowest income class is only P301 or 1.49% a year, that for a family earning P500,000
a year or more is P8,340 or 2.2%.
Lacking empirical data on which to base any conclusion regarding these arguments, any discussion
whether the VAT is regressive in the sense that it will hit the "poor" and middle-income group in society
harder than it will the "rich," as the Cooperative Union of the Philippines (CUP) claims in G.R. No.
115873, is largely an academic exercise. On the other hand, the CUP's contention that Congress'
withdrawal of exemption of producers cooperatives, marketing cooperatives, and service cooperatives,
while maintaining that granted to electric cooperatives, not only goes against the constitutional policy to
promote cooperatives as instruments of social justice (Art. XII, § 15) but also denies such cooperatives
the equal protection of the law is actually a policy argument. The legislature is not required to adhere to
a policy of "all or none" in choosing the subject of taxation. 44
Nor is the contention of the Chamber of Real Estate and Builders Association (CREBA), petitioner in G.R.
115754, that the VAT will reduce the mark up of its members by as much as 85% to 90% any more
concrete. It is a mere allegation. On the other hand, the claim of the Philippine Press Institute, petitioner
in G.R. No. 115544, that the VAT will drive some of its members out of circulation because their profits
from advertisements will not be enough to pay for their tax liability, while purporting to be based on the
financial statements of the newspapers in question, still falls short of the establishment of facts by
evidence so necessary for adjudicating the question whether the tax is oppressive and confiscatory.
Indeed, regressivity is not a negative standard for courts to enforce. What Congress is required by the
Constitution to do is to "evolve a progressive system of taxation." This is a directive to Congress, just like
the directive to it to give priority to the enactment of laws for the enhancement of human dignity and
the reduction of social, economic and political inequalities (Art. XIII, § 1), or for the promotion of the
right to "quality education" (Art. XIV, § 1). These provisions are put in the Constitution as moral
incentives to legislation, not as judicially enforceable rights.
At all events, our 1988 decision in Kapatiran 45 should have laid to rest the questions now raised against
the VAT. There similar arguments made against the original VAT Law (Executive Order No. 273) were
held to be hypothetical, with no more basis than newspaper articles which this Court found to be
"hearsay and [without] evidentiary value." As Republic Act No. 7716 merely expands the base of the VAT
system and its coverage as provided in the original VAT Law, further debate on the desirability and
wisdom of the law should have shifted to Congress.
Only slightly less abstract but nonetheless hypothetical is the contention of CREBA that the imposition of
the VAT on the sales and leases of real estate by virtue of contracts entered into prior to the effectivity
of the law would violate the constitutional provision that "No law impairing the obligation of contracts
shall be passed." It is enough to say that the parties to a contract cannot, through the exercise of
prophetic discernment, fetter the exercise of the taxing power of the State. For not only are existing
laws read into contracts in order to fix obligations as between parties, but the reservation of essential
attributes of sovereign power is also read into contracts as a basic postulate of the legal order. The
policy of protecting contracts against impairment presupposes the maintenance of a government which
retains adequate authority to secure the peace and good order of society. 46
In truth, the Contract Clause has never been thought as a limitation on the exercise of the State's power
of taxation save only where a tax exemption has been granted for a valid consideration. 47 Such is not
the case of PAL in G.R. No. 115852, and we do not understand it to make this claim. Rather, its position,
as discussed above, is that the removal of its tax exemption cannot be made by a general, but only by a
specific, law.
The substantive issues raised in some of the cases are presented in abstract, hypothetical form because
of the lack of a concrete record. We accept that this Court does not only adjudicate private cases; that
public actions by "non-Hohfeldian" 48 or ideological plaintiffs are now cognizable provided they meet
the standing requirement of the Constitution; that under Art. VIII, § 1, ¶ 2 the Court has a "special
function" of vindicating constitutional rights. Nonetheless the feeling cannot be escaped that we do not
have before us in these cases a fully developed factual record that alone can impart to our adjudication
the impact of actuality 49 to insure that decision-making is informed and well grounded. Needless to
say, we do not have power to render advisory opinions or even jurisdiction over petitions for declaratory
judgment. In effect we are being asked to do what the Conference Committee is precisely accused of
having done in these cases — to sit as a third legislative chamber to review legislation.
We are told, however, that the power of judicial review is not so much power as it is duty imposed on
this Court by the Constitution and that we would be remiss in the performance of that duty if we decline
to look behind the barriers set by the principle of separation of powers. Art. VIII, § 1, ¶ 2 is cited in
support of this view:
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights
which are legally demandable and enforceable, and to determine whether or not there has been a grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.
To view the judicial power of review as a duty is nothing new. Chief Justice Marshall said so in 1803, to
justify the assertion of this power in Marbury v. Madison:
It is emphatically the province and duty of the judicial department to say what the law is. Those who
apply the rule to particular cases must of necessity expound and interpret that rule. If two laws conflict
with each other, the courts must decide on the operation of each. 50
Justice Laurel echoed this justification in 1936 in Angara v. Electoral Commission:
And when the judiciary mediates to allocate constitutional boundaries, it does not assert any superiority
over the other departments; it does not in reality nullify or invalidate an act of the legislature, but only
asserts the solemn and sacred obligation assigned to it by the Constitution to determine conflicting
claims of authority under the Constitution and to establish for the parties in an actual controversy the
rights which that instrument secures and guarantees to them. 51
This conception of the judicial power has been affirmed in several
cases 52 of this Court following Angara.
It does not add anything, therefore, to invoke this "duty" to justify this Court's intervention in what is
essentially a case that at best is not ripe for adjudication. That duty must still be performed in the
context of a concrete case or controversy, as Art. VIII, § 5(2) clearly defines our jurisdiction in terms of
"cases," and nothing but "cases." That the other departments of the government may have committed a
grave abuse of discretion is not an independent ground for exercising our power. Disregard of the
essential limits imposed by the case and controversy requirement can in the long run only result in
undermining our authority as a court of law. For, as judges, what we are called upon to render is
judgment according to law, not according to what may appear to be the opinion of the day.
_______________________________
In the preceeding pages we have endeavored to discuss, within limits, the validity of Republic Act No.
7716 in its formal and substantive aspects as this has been raised in the various cases before us. To sum
up, we hold:
(1) That the procedural requirements of the Constitution have been complied with by Congress in the
enactment of the statute;
(2) That judicial inquiry whether the formal requirements for the enactment of statutes — beyond those
prescribed by the Constitution — have been observed is precluded by the principle of separation of
powers;
(3) That the law does not abridge freedom of speech, expression or the press, nor interfere with the free
exercise of religion, nor deny to any of the parties the right to an education; and
(4) That, in view of the absence of a factual foundation of record, claims that the law is regressive,
oppressive and confiscatory and that it violates vested rights protected under the Contract Clause are
prematurely raised and do not justify the grant of prospective relief by writ of prohibition.
WHEREFORE, the petitions in these cases are DISMISSED.
Bidin, Quiason, and Kapunan, JJ., concur.
Separate Opinions
NARVASA, C.J.:
I fully concur with the conclusions set forth in the scholarly opinion of my learned colleague, Mr. Justice
Vicente V. Mendoza. I write this separate opinion to express my own views relative to the procedural
issues raised by the various petitions and death with by some other Members of the Court in their
separate opinions.
By their very nature, it would seem, discussions of constitutional issues prove fertile ground for a not
uncommon phenomenon: debate marked by passionate partisanship amounting sometimes to
impatience with adverse views, an eagerness on the part of the proponents on each side to assume the
role of, or be perceived as, staunch defenders of constitutional principles, manifesting itself in flights of
rhetoric, even hyperbole. The peril in this, obviously, is a diminution of objectivity — that quality which,
on the part of those charged with the duty and authority of interpreting the fundamental law, is of the
essence of their great function. For the Court, more perhaps than for any other person or group, it is
necessary to maintain that desirable objectivity. It must make certain that on this as on any other
occasion, the judicial function is meticulously performed, the facts ascertained as comprehensively and
as accurately as possible, all the issues particularly identified, all the arguments clearly understood; else,
it may itself be accused, by its own members or by others, of a lack of adherence to, or a careless
observance of, its own procedures, the signatures of its individual members on its enrolled verdicts
notwithstanding.
In the matter now before the Court, and whatever reservations some people may entertain about their
intellectual limitations or moral scruples, I cannot bring myself to accept the thesis which necessarily
implies that the members of our august Congress, in enacting the expanded VAT law, exposed their
ignorance, or indifference to the observance, of the rules of procedure set down by the Constitution or
by their respective chambers, or what is worse, deliberately ignored those rules for some yet
undiscovered purpose nefarious in nature, or at least some purpose other than the public weal; or that a
few of their fellows, acting as a bicameral conference committee, by devious schemes and cunning
maneuvers, and in conspiracy with officials of the Executive Department and others, succeeded in
"pulling the wool over the eyes" of all their other colleagues and foisting on them a bill containing
provisions that neither chamber of our bicameral legislature conceived or contemplated. This is the
thesis that the petitioners would have this Court approve. It is a thesis I consider bereft of any factual or
logical foundation.
Other than the bare declarations of some of the petitioners, or arguments from the use and import of
the language employed in the relevant documents and records, there is no evidence before the Court
adequate to support a finding that the legislators concerned, whether of the upper or lower chamber,
acted otherwise than in good faith, in the honest discharge of their functions, in the sincere belief that
the established procedures were being regularly observed or, at least, that there occurred no serious or
fatal deviation therefrom. There is no evidence on which reasonably to rest a conclusion that any
executive or other official took part in or unduly influenced the proceedings before the bicameral
conference committee, or that the members of the latter were motivated by a desire to surreptitiously
introduce improper revisions in the bills which they were required to reconcile, or that after agreement
had been reached on the mode and manner of reconciliation of the "disagreeing provisions," had
resorted to stratragems or employed under-handed ploys to ensure their approval and adoption by
either House. Neither is there any proof that in voting on the Bicameral Conference Committee (BCC)
version of the reconciled bills, the members of the Senate and the House did so in ignorance of, or
without understanding, the contents thereof or the bills therein reconciled.
Also unacceptable is the theory that since the Constitution requires appropriation and revenue bills to
originate exclusively in the House of Representatives, it is improper if not unconstitutional for the
Senate to formulate, or even think about formulating, its own draft of this type of measure in
anticipation of receipt of one transmitted by the lower Chamber. This is specially cogent as regards
much-publicized suggestions for legislation (like the expanded VAT Law) emanating from one or more
legislators, or from the Executive Department, or the private sector, etc. which understandably could be
expected to forthwith generate much Congressional cogitation.
Exclusive origination, I submit, should have no reference to time of conception. As a practical matter,
origination should refer to the affirmative act which effectively puts the bicameral legislative procedure
in motion, i.e., the transmission by one chamber to the other of a bill for its adoption. This is the
purposeful act which sets the legislative machinery in operation to effectively lead to the enactment of a
statute. Until this transmission takes place, the formulation and discussions, or the reading for three or
more times of proposed measures in either chamber, would be meaningless in the context of the
activity leading towards concrete legislation. Unless transmitted to the other chamber, a bill prepared by
either house cannot possibly become law. In other words, the first affirmative, efficacious step, the
operative act as it were, leading to actual enactment of a statute, is the transmission of a bill from one
house to the other for action by the latter. This is the origination that is spoken of in the Constitution in
its Article VI, Section 24, in reference to appropriation, revenue, or tariff bills, etc.
It may be that in the Senate, revenue or tax measures are discussed, even drafted, and this before a
similar activity takes place in the House. This is of no moment, so long as those measures or bill remain
in the Senate and are not sent over the House. There is no origination of revenue or tax measures by the
Senate in this case. However, once the House completes the drawing up of a similar tax measure in
accordance with the prescribed procedure, ven if this is done subsequent to the Senate’s own measure
— indeed, even if this be inspired by information that measure of the Senate — and after third reading
transmits its bill to the Senate, there is origination by (or in) the House within the contemplation of the
Constitution.
So it is entirely possible, as intimated, that in expectation of the receipt of a revenue or tax bill from the
House of Representatives, the Senate commences deliberations on its own concept of such a legislative
measure. This, possibly to save time, so that when the House bill raches it, its thoughts and views on the
matter are already formed and even reduced to writing in the form of a draft statute. This should not be
thought ilegal, as interdicted by the Constitution. What the Constitution prohibits is for the Senate to
begin the legislative process first, by sending its own revenue bill to the House of Representatives for its
consideration and action. This is the initiation that is prohibited to the Senate.
But petitioners claims that this last was what in fact happened, that the went through the legislative mill
and was finally approved as R.A. No. 7716, was the Senate version, SB 1630. This is disputed by the
respondents. They claim it was House Bill 11197 that, after being transmitted to the Senate, was
referred after first reading to its Committee on Ways and Means; was reported out by said Committee;
underwent second and third readings, was sent to the bicameral conference committee and then, after
appropriate proceedings therein culminating in extensive amendments thereof, was finally approved by
both Houses and became the Expanded VAT Law.
On whose side does the truth lie? If it is not possible to make that determination from the pleadings and
records before this Court, shall it require evidence to be presented? No, on both law and principle. The
Court will reject a case where the legal issues raised, whatever they may be, depend for their resolution
on still unsettled questions of fact. Petitioners may not, by raising what are Court to assume the role of a
trier of facts. It is on the contrary their obligation, before raising those questions to this Court, to see to
it that all issues of fact are settled in accordance with the procedures laid down by law for proof of facts.
Failing this, petitioners would have only themselves to blame for a peremptory dismissal.
Now, what is really proven about what happened to HB 11197 after it was transmitted to the Senate? It
seems to be admitted on all sides that after going through first reading, HB 11197 was referred to the
Committee on Ways and Means chaired by Senator Ernesto Herrera.
It is however surmised that after this initial step, HB 11197 was never afterwards deliberated on in the
Senate, that it was there given nothing more than a "passing glance," and that it never went through a
proper second and third reading. There is no competent proof to substantiate this claim. What is certain
is that on February 7, 1994, the Senate Committee on Ways and Means submitted its Report (No. 349)
stating that HB 11197 was considered, and recommending that SB 1630 be approved "in substitution of
S.B. No. 1129, taking into consideration P.S. Res. No. 734 1 and H.B. No. 11197." This Report made
known to the Senate, and clearly indicates, that H.B. No. 11197 was indeed deliberated on by the
Committee; in truth, as Senator Herrera pointed out, the BCC later "agreed to adopt (a broader coverage
of the VAT) which is closely adhering to the Senate version ** ** with some new provisions or
amendments." The plain implication is that the Senate Committee had indeed discussed HB 11197 in
comparison with the inconsistent parts of SB 1129 and afterwards proposed amendments to the former
in the form of a new bill (No. 1630) more closely akin to the Senate bill (No. 1129).
And it is as reasonable to suppose as not that later, during the second and third readings on March 24,
1994, the Senators, assembled as a body, had before them copies of HB 11197 and SB 1129, as well as of
the Committee's new "SB 1630" that had been recommended for their approval, or at the very least
were otherwise perfectly aware that they were considering the particular provisions of these bills. That
there was such a deliberation in the Senate on HB 11197 in light of inconsistent portions of SB 1630,
may further be necessarily inferred from the request, made by the Senate on the same day, March 24,
1994, for the convocation of a bicameral conference committee to reconcile "the disagreeing provisions
of said bill (SB 1630) and House Bill No. 11197," a request that could not have been made had not the
Senators more or less closely examined the provisions of HB 11197 and compared them with those of
the counterpart Senate measures.
Were the proceedings before the bicameral conference committee fatally flawed? The affirmative is
suggested because the committee allegedly overlooked or ignored the fact that SB 1630 could not
validly originate in the Senate, and that HB 11197 and SB 1630 never properly passed both chambers.
The untenability of these contentions has already been demonstrated. Now, demonstration of the
indefensibility of other arguments purporting to establish the impropriety of the BCC proceedings will be
attempted.
There is the argument, for instance, that the conference committee never used HB 11197 even as
"frame of reference" because it does not appear that the suggestion therefor (made by House Penal
Chairman Exequiel Javier at the bicameral conference committee's meeting on April 19, 1994, with the
concurrence of Senator Maceda) was ever resolved, the minutes being regrettably vague as to what
occurred after that suggestion was made. It is, however, as reasonable to assume that it was, as it was
not, given the vagueness of the minutes already alluded to. In fact, a reading of the BCC Report
persuasively demonstrates that HB 11197 was not only utilized as a "frame of reference" but actually
discussed and deliberated on.
Said BCC Report pertinently states: 2
CONFERENCE COMMITTEE REPORT
The Conference Committee on the disagreeing provisions of House Bill No. 11197, entitled:
AN ACT RESTRUCTURING THE VALUE ADDED TAX (VAT) SYSTEM TO WIDEN ITS TAX BASE AND ENHANCE
107, 108 AND 110 OF TITLE IV, 112, 115 AND 116 OF TITLE V, AND 236, 237, AND 238 OF TITLE IX, AND
REPEALING SECTIONS 113SD AND 114 OF TITLE V, ALL OF THE NATIONAL INTERNAL REVENUE CODE, AS
AMENDED
and Senate Bill No. 1630 entitled:
ITS ADMINISTRATION, AMENDING FOR THESE PURPOSES SECTIONS 99, 100, 102, 103, 104, 1 106, 107,
108 AND 110 OF TITLE IV, 112, 115, 117 AND 121 OF TITLE V, ACND 236, 237, AND 238 OF TITLE IX, AND
REPEALING SECTIONS 1113, 114, 116, 119 AND 120 OF TITLE V, ALL OF THE NATIONAL INTERNAL
REVENUE CODE, AS AMENDED AND FOR OTHER PURPOSES
having met, after full and free conference, has agreed to recommend and do hereby recommend to
their respective Houses that House Bill No. 11197, in consolidation with Senate Bill No. 1630, be
approved in accordance with the attached copy of the bill as reconciled and approved by the conferees.
Approved.
The Report, it will be noted, explicitly adverts to House Bill No. 11197, it being in fact mentioned ahead
of Senate Bill No. 1630; graphically shows the very close identity of the subjects of both bills (indicated
in their respective titles); and clearly says that the committee met in "full and free conference" on the
"disagreeing provisions" of both bills (obviously in an effort to reconcile them); and that reconciliation of
said "disagreeing provisions" had been effected, the BCC having agreed that "House Bill No. 11197, in
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.
described thus:
results, results beyond its mandate. These excursions occurs even where the rules impose strict
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:
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:
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
III
Press Freedom and Religious Freedom and Rep. Act No. 7716
The validity of the passage of Rep. Act No. 7716 notwithstanding, certain provisions of the law have to
be examined separately and carefully.
Rep. Act. No. 7716 in imposing a value-added tax on circulation income of newspapers and similar
publications and on income derived from publishing advertisements in newspapers 9, to my mind,
violates Sec. 4, Art. III of the Constitution. Indeed, even the Executive Department has tried to cure this
defect by the issuance of the BIR Regulation No. 11-94 precluding implementation of the tax in this area.
It should be clear, however, that the BIR regulation cannot amend the law (Rep. Act No. 7716). Only
legislation (as distinguished from administration regulation) can amend an existing law.
Freedom of the press was virtually unknown in the Philippines before 1900. In fact, a prime cause of the
revolution against Spain at the turn of the 19th century was the repression of the freedom of speech
and expression and of the press. No less than our national hero, Dr. Jose P. Rizal, in "Filipinas Despues de
Cien Anos" (The Philippines a Century Hence) describing the reforms sine quibus non which the Filipinos
were insisting upon, stated: "The minister . . . who wants his reforms to be reforms, must begin by
declaring the press in the Philippines free . . . ". 10
Press freedom in the Philippines has met repressions, most notable of which was the closure of almost
all forms of existing mass media upon the imposition of martial law on 21 September 1972.
Section 4, Art. III of the Constitution maybe traced to the United States Federal Constitution. The
guarantee of freedom of expression was planted in the Philippines by President McKinley in the Magna
Carta of Philippine Liberty, Instructions to the Second Philippine Commission on 7 April 1900.
The present constitutional provision which reads:
Sec. 4 No law shall be passed abridging the freedom of speech, of expression, or of the press, or the
right of the people peaceably to assemble and petition the government for redress of grievances.
is essentially the same as that guaranteed in the U.S. Federal Constitution, for which reason, American
case law giving judicial expression as to its meaning is highly persuasive in the Philippines.
The plain words of the provision reveal the clear intention that no prior restraint can be imposed on the
exercise of free speech and expression if they are to remain effective and meaningful.
The U.S. Supreme Court in the leading case of Grosjean v. American Press Co. Inc.11 declared a statute
imposing a gross receipts license tax of 2% on circulation and advertising income of newspaper
publishers as constituting a prior restraint which is contrary to the guarantee of freedom of the press.
In Bantam Books, Inc. v. Sullivan 12, the U.S. Supreme Court stated: "Any system of prior restraint of
expression comes to this Court bearing a heavy presumption against its constitutionality."
In this jurisdiction, prior restraint on the exercise of free expression can be justified only on the ground
that there is a clear and present danger of a substantive evil which the State has the right to prevent 13.
In the present case, the tax imposed on circulation and advertising income of newspaper publishers is in
the nature of a prior restraint on circulation and free expression and, absent a clear showing that the
requisite for prior restraint is present, the constitutional flaw in the law is at once apparent and should
not be allowed to proliferate.
Similarly, the imposition of the VAT on the sale and distribution of religious articles must be struck down
for being contrary to Sec. 5, Art. III of the Constitution which provides:
Sec. 5. No law shall be made respecting an establishment of religion, or prohibiting the free exercise
thereof. The free exercise and enjoyment of religious profession and worship, without discrimination or
preference, shall forever be allowed. No religious test shall be required for the exercise of civil or
political rights.
That such a tax on the sale and distribution of religious articles is unconstitutional, has been long settled
in American Bible Society, supra.
Insofar, therefore, as Rep. Act No. 7716 imposes a value-added tax on the exercise of the above-
discussed two (2) basic constitutional rights, Rep. Act No. 7716 should be declared unconstitutional and
of no legal force and effect.
IV
Petitions of CREBA and PAL and Rep. Act No. 7716
The Chamber of Real Estate and Builder's Association, Inc. (CREBA) filed its own petition (GR No. 11574)
arguing that the provisions of Rep. Act No. 7716 imposing a 10% value-added tax on the gross selling
price or gross value in money of every sale, barter or exchange of goods or properties (Section 2) and a
10% value-added tax on gross receipts derived from the sale or exchange of services, including the use
or lease of properties (Section 3), violate the equal protection, due process and non-impairment
provisions of the Constitution as well as the rule that taxation should be uniform, equitable and
progressive.
The issue of whether or not the value-added tax is uniform, equitable and progressive has been settled
in Kapatiran.
CREBA which specifically assails the 10% value-added tax on the gross selling price of real properties,
fails to distinguish between a sale of real properties primarily held for sale to customers or held for lease
in the ordinary course of trade or business and isolated sales by individual real property owners (Sec.
103[s]). That those engaged in the business of real estate development realize great profits is of
common knowledge and need not be discussed at length here. The qualification in the law that the 10%
VAT covers only sales of real property primarily held for sale to customers, i.e. for trade or business thus
takes into consideration a taxpayer's capacity to pay. There is no showing that the consequent
distinction in real estate sales is arbitrary and in violation of the equal protection clause of the
Constitution. The inherent power to tax of the State, which is vested in the legislature, includes the
power to determine whom or what to tax, as well as how much to tax. In the absence of a clear showing
that the tax violates the due process and equal protection clauses of the Constitution, this Court, in
keeping with the doctrine of separation of powers, has to defer to the discretion and judgment of
Congress on this point.
Philippine Airlines (PAL) in a separate petition (G.R. No. 115852) claims that its franchise under PD No.
1590 which makes it liable for a franchise tax of only 2% of gross revenues "in lieu of all the other fees
and charges of any kind, nature or description, imposed, levied, established, assessed or collected by
any municipal, city, provincial, or national authority or government agency, now or in the future,"
cannot be amended by Rep. Act No. 7716 as to make it (PAL) liable for a 10% value-added tax on
revenues, because Sec. 24 of PD No. 1590 provides that PAL's franchise can only be amended, modified
or repealed by a special law specifically for that purpose.
The validity of PAL's above argument can be tested by ascertaining the true intention of Congress in
enacting Rep. Act No. 7716. Sec. 4 thereof dealing with Exempt Transactions states:
Sec. 103. Exempt Transactions. — The following shall be exempt from the value-added tax:
xxx xxx xxx
(q) Transactions which are exempt under special laws, except those granted under Presidential Decrees
No. 66, 529, 972, 1491,
1590, . . . " (Emphasis supplied)

The repealing clause of Rep. Act No. 7716 further reads:
Sec. 20. Repealing clauses. — The provisions of any special law relative to the rate of franchise taxes are
hereby expressly repealed.
xxx xxx xxx
All other laws, orders, issuances, rules and regulations or parts thereof inconsistent with this Act are
hereby repealed, amended or modified accordingly (Emphasis supplied)
There can be no dispute, in my mind, that the clear intent of Congress was to modify PAL's franchise
with respect to the taxes it has to pay. To this extent, Rep. Act No. 7716 can be considered as a special
law amending PAL's franchise and its tax liability thereunder. That Rep. Act. No. 7716 imposes the value-
added taxes on other subjects does not make it a general law which cannot amend PD No. 1590.
To sum up: it is my considered view that Rep. Act No. 7716 (the expanded value-added tax) is a valid
law, viewed from both substantive and procedural standards, except only insofar as it violates Secs. 4
and 5, Art. III of the Constitution (the guarantees of freedom of expression and the free exercise of
religion). To that extent, it is, in its present form, unconstitutional.
I, therefore, vote to DISMISS the petitions, subject to the above qualification.
VITUG, J.:
Lest we be lost by a quagmire of trifles, the real threshold and prejudicial issue, to my mind, is whether
or not this Court is ready to assume and to take upon itself with an overriding authority the awesome
responsibility of overseeing the entire bureaucracy. Far from it, ours is merely to construe and to apply
the law regardless of its wisdom and salutariness, and to strike it down only when it clearly disregards
constitutional proscriptions. It is what the fundamental law mandates, and it is what the Court must do.
I cannot yet concede to the novel theory, so challengingly provocative as it might be, that under the
1987 Constitution the Court may now at good liberty intrude, in the guise of the people's imprimatur,
into every affair of the government. What significance can still then remain, I ask, of the time honored
and widely acclaimed principle of separation of powers, if at every turn the Court allows itself to pass
upon, at will, the disposition of a co-equal, independent and coordinate branch in our system of
government. I dread to think of the so varied uncertainties that such an undue interference can lead to.
The respect for long standing doctrines in our jurisprudence, nourished through time, is one of maturity
not timidity, of stability rather than quiescence.
It has never occurred to me, and neither do I believe it has been intended, that judicial tyranny is
envisioned, let alone institutionalized, by our people in the 1987 Constitution. The test of tyranny is not
solely on how it is wielded but on how, in the first place, it can be capable of being exercised. It is time
that any such perception of judicial omnipotence is corrected.
Against all that has been said, I see, in actuality in these cases at bench, neither a constitutional
infringement of substance, judging from precedents already laid down by this Court in previous cases,
nor a justiciability even now of the issues raised, more than an attempt to sadly highlight the perceived
shortcomings in the procedural enactment of laws, a matter which is internal to Congress and an area
that is best left to its own basic concern. The fact of the matter is that the legislative enactment, in its
final form, has received the ultimate approval of both houses of Congress. The finest rhetoric, indeed
fashionable in the early part of this closing century, would still be a poor substitute for tangibility. I join,
nonetheless, some of my colleagues in respectfully inviting the kind attention of the honorable members
of our Congress in the suggested circumspect observance of their own rules.
A final remark. I should like to make it clear that this opinion does not necessarily foreclose the right,
peculiar to any taxpayer adversely affected, to pursue at the proper time, in appropriate proceedings,
and in proper fora, the specific remedies prescribed therefor by the National Internal Revenue Code,
Republic Act 1125, and other laws, as well as rules of procedure, such as may be pertinent. Some
petitions filed with this Court are, in essence, although styled differently, in the nature of declaratory
relief over which this Court is bereft of original jurisdiction.
All considered, I, therefore, join my colleagues who are voting for the dismissal of the petitions.
CRUZ, J.:
It is a curious and almost incredible fact that at the hearing of these cases on July 7, 1994, the lawyers
who argued for the petitioners — two of them former presidents of the Senate and the third also a
member of that body — all asked this Court to look into the internal operations of their Chamber and
correct the irregularities they claimed had been committed there as well as in the House of
Representatives and in the bicameral conference committee.
While a member of the legislative would normally resist such intervention and invoke the doctrine of
separation of powers to protect Congress from what he would call judicial intrusion, these counsel
practically implored the Court to examine the questioned proceedings and to this end go beyond the
journals of each House, scrutinize the minutes of the committee, and investigate all other matters
relating to the passage of the bill (or bills) that eventually became R.A. No. 7716.
In effect, the petitioners would have us disregard the time-honored inhibitions laid down by the Court
upon itself in the landmark case of U.S. v. Pons (34 Phil. 725), where it refused to consider extraneous
evidence to disprove the recitals in the journals of the Philippine Legislature that it had adjourned sine
die at midnight of February 28, 1914. Although it was generally known then that the special session had
actually exceeded the deadline fixed by the Governor-General in his proclamation, the Court chose to be
guided solely by the legislative journals, holding significantly as follows:
. . . From their very nature and object, the records of the legislature are as important as those of the
judiciary, and to inquire into the veracity of the journals of the Philippine Legislature, when they are, as
we have said, clear and explicit, would be to violate both the letter and the spirit of the organic laws by
which the Philippine Government was brought into existence, to invade a coordinate and independent
department of the Government, and to interfere with the legitimate powers and functions of the
Legislature. But counsel in his argument says that the public knows that the Assembly's clock was
stopped on February 28, 1914, at midnight and left so until the determination of the discussion of all
pending matters. Or, in other words, the hands of the clock were stayed in order to enable the Assembly
to effect an adjournment apparently within the fixed time by the Governor's proclamation for the
expiration of the special session, in direct violation of the Act of Congress of July 1, 1902. If the clock
was, in fact, stopped, as here suggested, "the resultant evil might be slight as compared with that of
altering the probative force and character of legislative records, and making the proof of legislative
action depend upon uncertain oral evidence, liable to loss by death or absence, and so imperfect on
account of the treachery of memory.
. . . The journals say that the Legislature adjourned at 12 midnight on February 28, 1914. This settles the
question, and the court did not err in declining to go beyond the journals.
As one who has always respected the rationale of the separation of powers, I realize only too well the
serious implications of the relaxation of the doctrine except only for the weightiest of reasons. The
lowering of the barriers now dividing the three major branches of the government could lead to
individious incursions by one department into the exclusive domains of the other departments to the
detriment of the proper discharge of the functions assigned to each of them by the Constitution.
Still, while acknowledging the value of tradition and the reasons for judicial non-interference announced
in Pons, I am not disinclined to take a second look at the ruling from a more pragmatic viewpoint and to
tear down, if we must, the iron curtain it has hung, perhaps improvidently, around the proceedings of
the legislature.
I am persuaded even now that where a specific procedure is fixed by the Constitution itself, it should not
suffice for Congress to simply say that the rules have been observed and flatly consider the matter
closed. It does not have to be as final as that. I would imagine that the judiciary, and particularly this
Court, should be able to verify that statement and determine for itself, through the exercise of its own
powers, if the Constitution has, indeed, been obeyed.
In fact, the Court had already said that the question of whether certain procedural rules have been
followed is justiciable rather than political because what is involved is the legality and not the wisdom of
the act in question. So we ruled in Sanidad v. Commission on Elections (73 SCRA 333) on the amendment
of the Constitution; in Daza v. Singson (180 SCRA 496) on the composition of the Commission on
Appointments; and in the earlier case of Tañada v. Cuenco (100 SCRA 1101) on the organization of the
Senate Electoral Tribunal, among several other cases.
By the same token, the ascertainment of whether a bill underwent the obligatory three readings in both
Houses of Congress should not be considered an invasion of the territory of the legislature as this would
not involve an inquiry into its discretion in approving the measure but only the manner in which the
measure was enacted.
These views may upset the conservatives among us who are most comfortable when they allow
themselves to be petrified by precedents instead of venturing into uncharted waters. To be sure, there
is much to be said of the wisdom of the past expressed by vanished judges talking to the future. Via trita
est tuttisima. Except when there is a need to revise them because of an altered situation or an emergent
idea, precedents should tell us that, indeed, the trodden path is the safest path.
It could be that the altered situation has arrived to welcome the emergent idea. The jurisdiction of this
Court has been expanded by the Constitution, to possibly include the review the petitioners would have
us make of the congressional proceedings being questioned. Perhaps it is also time to declare that the
activities of Congress can no longer be smoke-screened in the inviolate recitals of its journals to prevent
examination of its sacrosanct records in the name of the separation of powers.
But then again, perhaps all this is not yet necessary at this time and all these observations are but
wishful musings for a more activist judiciary. For I find that this is not even necessary, at least for me, to
leave the trodden path in the search for new adventures in the byways of the law. The answer we seek,
as I see it, is not far afield. It seems to me that it can be found through a study of the enrolled bill alone
and that we do not have to go beyond that measure to ascertain if R.A. No. 7716 has been validly
enacted.
It is settled in this jurisdiction that in case of conflict between the enrolled bill and the legislative
journals, it is the former that should prevail except only as to matters that the Constitution requires to
be entered in the journals. (Mabanag v. Lopez Vito, 78 Phil. 1). These are the yeas and nays on the final
reading of a bill or on any question at the request of at least one-fifth of the member of the House
(Constitution, Art. VI, Sec. 16[4]), the objections of the President to a vetoed bill or item (Ibid, Sec. 27
[1]), and the names of the members voting for or against the overriding of his veto (Id. Section 27 [1]),
The original of a bill is not specifically required by the Constitution to be entered in the journals. Hence,
on this particular manner, it is the recitals in the enrolled bill and not in the journals that must control.
Article VI, Section 24, of the Constitution provides:

Sec. 24. All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local
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
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:
Webster's Third New International Dictionary 1 defines originate as follows:
vt 1: to cause the beginning of: give rise to: INITIATE . . . 2. to start (a person or thing) on a course or
journey . . . vi: to take or have origin: be derived: ARISE, BEGIN, START . . .
Black's Law Dictionary 2 defines the word exclusively in this wise:
Apart from all others; only; solely; substantially all or for the greater part. To the exclusion of all others;
without admission of others to participation; in a manner to exclude.
In City Mayor vs. The Chief of Philippine Constabulary,3 this Court said:
The term "exclusive" in its usual and generally accepted sense, means possessed to the exclusion of
others; appertaining to the subject alone, not including, admitting or pertaining to another or others,
undivided, sole. (15 Words and Phrases, p. 510, citing Mitchel v. Tulsa Water, Light, Heat and Power Co.,
95 P. 961, 21 Okl. 243; and p. 513, citing Commonwealth v. Superintendent of House of Correction, 64
Pa. Super. 613, 615).
Indisputably then, only the House can cause the beginning or initiate the passage of any appropriation,
revenue, or tarriff bill, any bill increasing the public debt, any bill of local application, or any private bill.
The Senate can only "propose or concur with amendments."
Under the Rules of the Senate, the first reading is the reading of the title of the bill and its referral to the
corresponding committee; the second reading consists of the reading of the bill in the form
recommended by the corresponding committee; and the third reading is the reading of the bill in the
form it will be after approval on second reading. 4 During the second reading, the following takes place:
(1) Second reading of the bill;
(2) Sponsorship by the Committee Chairman or any member designated by the corresponding
committee;
(3) If a debate ensues, turns for and against the bill shall be taken alternately;
(4) The sponsor of the bill closes the debate;
(5) After the close of the debate, the period of amendments follows;
(6) Then, after the period of amendments is closed, the voting on the bill on second reading. 5
After approval on second readings, printed copies thereof in its final form shall be distributed to the
Members of the Senate at least three days prior to the third reading, except in cases of certified bills. At
the third reading, the final vote shall be taken and the yeas and nays shall be entered in the Journal. 6
Under the Rules of the House, the first reading of a bill consists of a reading of the number, title, and
author followed by the referral to the appropriate committees; 7 the second reading consists of the
reading in full of the bill with the amendments proposed by the committee, it any; 8 and the third
reading is the reading of the bill in the form as approved on second reading and takes place only after
printed copies thereof in its final form have been distributed to the Members at least three days before,
unless the bill is
certified.9 At the second reading, the following takes place:

(1) Reading of the bill;
(2) Sponsorship;
(3) Debates;
(4) Period of Amendments; and
(5) Voting on Second Reading. 10
At the third reading, the votes shall be taken immediately and the yeas and nays entered in the Journal.
11
Clearly, whether in the Senate or in the House, every bill must pass the three readings on separate days,
except when the bill is certified. Amendments to the bill on third reading are constitutionally prohibited.
12
After its passage by one chamber, the bill should then be transmitted to the other chamber for its
concurrence. Section 83, Rule XIV of the Rules of the House expressly provides:
Sec. 83. Transmittal to Senate. — The Secretary General, without need of express order, shall transmit
to the Senate for its concurrence all the bills and joint or concurrent resolutions approved by the House
or the amendments of the House to the bills or resolutions of the Senate, as the case may be. If the
measures approved without amendments are bills or resolutions of the Senate, or if amendments of the
Senate to bills of the House are accepted, he shall forthwith notify the Senate of the action taken.
Simplified, this rule means that:

1. As to a bill originating in the House:
(a) Upon its approval by the House, the bill shall be transmitted to the Senate;
(b) The Senate may approve it with or without amendments;
(c) The Senate returns the bill to the House;
(d) The House may accept the Senate amendments; if it does not, the Secretary General shall notify the
Senate of that action. As hereinafter be shown, a request for conference shall then be in order.
2. As to bills originating in the Senate;
(a) Upon its approval by the Senate, the bill shall be transmitted to the House;
(b) The House may approve it with or without amendments;
(c) The House then returns it to the Senate, informing it of the action taken;
(d) The Senate may accept the House amendements; if it does not, it shall notify the House and make a
request for conference.
The transmitted bill shall then pass three readings in the other chamber on separate days. Section 84,
Rule XIV of the Rules of the House states:
Sec. 84. Bills from the Senate. — The bills, resolutions and communications of the Senate shall be
referred to the corresponding committee in the same manner as bills presented by Members of the
House.
and Section 51, Rule XXIII of the Rules of the Senate provides:
Sec. 51. Prior to their final approval, bills and joint resolutions shall be read at least three times.
It is only when the period of disagreement is reached, i.e., amended proposed by one chamber to a bill
originating from the other are not accepted by the latter, that a request for conference is made or is in
order. The request for conference is specifically covered by Section 26, Rule XII of the Rules of the
Senate which reads:
Sec. 26. In the event that the Senate does not agree with the House of Representatives on the provision
of any bill or joint resolution, the differences shall be settled by a conference committee of both Houses
which shall meet within ten days after its composition.
and Section 85, Rule XIV of the Rules of the House which reads:
Sec. 85. Conference Committee Reports. — In the event that the House does not agree with the Senate
on the amendments to any bill or joint resolution, the differences may be settled by conference
committees of both Chambers.
The foregoing provisions of the Constitution and the Rules of both chambers of Congress are mandatory.
In his Treatise On the Constitutional Limitations, 13 more particularly on enactment of bill, Cooley
states:
Where, for an instance, the legislative power is to be exercised by two houses, and by settled and well-
understood parliamentary law these two houses are to hold separate sessions for their deliberations,
and the determination of the one upon a proposes law is to be submitted to the separate determination
of the other, the constitution, in providing for two houses, has evidently spoken in reference to this
settled custom, incorporating it as a rule of constitutional interpretation; so that it would require no
prohibitory clause to forbid the two houses from combining in one, and jointly enacting laws by the vote
of a majority of all. All those rules which are of the essentials of law-making must be observed and
followed; and it is only the customary rules of order and routine, such as in every deliberative body are
always understood to be under its control, and subject to constant change at its will, that the
constitution can be understood to have left as matters of discretion, to be established, modified, or
abolished by the bodies for whose government in non-essential matters they exist.
In respect of appropriation, revenue, or tariff bills, bills increasing the public debt, bills of local
application, or private bills, the return thereof to the House after the Senate shall have "proposed or
concurred with amendments" for the former either to accept or reject the amendments would not only
be in conformity with the foregoing rules but is also implicit from Section 24 of Article VI.
With the foregoing as our guiding light, I shall now show the violations of the Constitution and of the
Rules of the Senate and of the House in the passage of R.A. No. 7716.
VIOLATIONS OF SECTION 24, ARTICLE VI
OF THE CONSTITUTION:
First violation. — Since R.A. No. 7716 is a revenue measure, it must originate exclusively in the House —
not in the Senate. As correctly asserted by petitioner Tolentino, on the face of the enrolled copy of R.A.
No. 7716, it is a "CONSOLIDATION OF HOUSE BILL NO. 11197 AND SENATE BILL NO. 1630." In short, it is
an illicit marriage of a bill which originated in the House and a bill which originated in the Senate.
Therefore, R.A. No. 7716 did not originate exclusively in the House.
The only bill which could serve as a valid basis for R.A. No. 7716 is House Bill (HB) No. 11197. This bill,
which is the substitute bill recommended by the House Committee on Ways and Means in substitution
of House Bills Nos. 253, 771, 2450, 7033, 8086, 9030, 9210, 9397, 10012, and 10100, and covered by its
Committee Report No. 367, 14 was approved on third reading by the House on 17 November 1993. 15
Interestingly, HB No. 9210, 16 which was filed by Representative Exequiel B. Javier on 19 May 1993, was
certified by the President in his letter to Speaker Jose de Venecia, Jr. of 1 June 1993. 17 Yet, HB No.
11197, which substituted HB No. 9210 and the others above-stated, was not. Its certification seemed to
have been entirely forgotten.
On 18 November 1993, the Secretary-General of the House, pursuant to Section 83, Rule XIV of the
Rules of the House, transmitted to the President of the Senate HB No. 11197 and requested the
concurrence of the Senate therewith. 18
However, HB No. 11197 had passed only its first reading in that Senate by its referral to its Committee
on Ways and Means. That Committee never deliberated on HB No. 11197 as it should have. It acted only
on Senate Bill (SB) No. 1129 19 introduced by Senator Ernesto F. Herrera on 1 March 1993. It then
prepared and proposed SB No. 1630, and in its Committee Report No.
349 20 which was submitted to the Senate on 7 February 1994, 21 it recommended that SB No. 1630 be
approved "in substitution of S.B. No. 1129, taking into consideration P.S. Res. No. 734 and H.B. No.
11197." 22 It must be carefully noted that SB No. 1630 was proposed and submitted for approval by the
Senate in SUBSTITUTION of SB No. 1129, and not HB No. 11197. Obviously, the principal measure which
the Committee deliberated on and acted upon was SB No. 1129 and not HB No. 11197. The latter,
instead of being the only measure to be taken up, deliberated upon, and reported back to the Senate for
its consideration on second reading and, eventually, on third reading, was, at the most, merely given by
the Committee a passing glance.
This specific unequivocal action of the Senate Committee on Ways and Means, i.e., proposing and
recommending approval of SB No. 1630 as a substitute for or in substitution of SB No. 1129 demolishes
at once the thesis of the Solicitor General that:
Assuming that SB 1630 is distinct from HB 11197, amendment by substitution is within the purview of
Section 24, Article VI of the Constitution.
because, according to him, (a) "Section 68, Rule XXIX of the Rules of the Senate authorizes an
amendment by substitution and the only condition required is that "the text thereof is submitted in
writing"; and (b) "[I]n Flint vs. Stone Tracy Co. (220 U.S. 107) the United Stated Supreme Court,
interpreting the provision in the United States Constitution similar to Section 24, Article VI of the
Philippine Constitution, stated that the power of the Senate to amend a revenue bill includes
substitution of an entirely new measure for the one originally proposed by the House of
Representatives." 23
This thesis is utterly without merit. In the first place, it reads into the Committee Report something
which it had not contemplated, that is, to propose SB No. 1630 in substitution of HB No. 11197; or
speculates that the Committee may have committed an error in stating that it is SB No. 1129, and not HB
No. 11197, which is to be substituted by SB No. 1630. Either, of course, is unwarranted because the
words of the Report, solemnly signed by the Chairman, Vice-Chairman (who dissented), seven members,
and three ex-officio
members, 24 leave no room for doubt that although SB No. 1129, P.S. Res No. 734, and HB No. 11197
were referred to and considered by the Committee, it had prepared the attached SB No. 1630 which it
recommends for approval "in substitution of S.B. No. 11197, taking into consideration P.S. No. 734 and
H.B. No. 11197 with Senators Herrera, Angara, Romulo, Sotto, Ople and Shahani as authors." To do as
suggested would be to substitute the judgment of the Committee with another that is completely
inconsistent with it, or, simply, to capriciously ignore the facts.
In the second place, the Office of the Solicitor General intentionally made it appear, to mislead rather
than to persuade us, that in Flint vs. Stone Tracy
Co. 25 The U.S. Supreme Court ruled, as quoted by it in the Consolidated Memorandum for
Respondents, as follows: 26
The Senate has the power to amend a revenue bill. This power to amend is not confined to the
elimination of provisions contained in the original act, but embraces as well the addition of such
provisions thereto as may render the original act satisfactory to the body which is called upon to support
it. It has, in fact, been held that the substitution of an entirely new measure for the one originally
proposed can be supported as a valid amendment.
xxx xxx xxx
It is contended in the first place that this section of the act is unconstitutional, because it is a revenue
measure, and originated in the Senate in violation of Section 7 of article 1 of the Constitution, providing
that "all bills for raising revenue shall originate in the House of Representatives, but the Senate may
propose or concur with the amendments, as on other bills."
The first part is not a statement of the Court, but a summary of the arguments of counsel in one of the
companion cases (No. 425, entitled, "Gay vs. Baltic Mining Co."). The second part is the second
paragraph of the opinion of the Court delivered by Mr. Justice Day. The misrepresentation that the first
part is a statement of the Court is highly contemptuous. To show such deliberate misrepresentation, it is
well to quote what actually are found in 55 L.Ed. 408, 410, to wit:
Messrs. Charles A. Snow and Joseph H. Knight filed a brief for appellees in No. 425:
xxx xxx xxx
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.
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
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. 7347 - September 10, 1992
HB No. 7033 - February 3, 1993
SB No. 11298 - March 1, 1993
HB No. 8086 - March 9, 1993
HB No. 9030 - May 11, 1993
HB No. 9210 9 - May 19, 1993
HB No. 9297 - May 25, 1993
HB No. 10012 - July 28, 1993
HB No. 10100 - August 3, 1993
HB No. 11197 in substitution of HB Nos. 253, 771, 2450, 7033, 8086, 9030, 9210, 9297, 10012 and
10100 10 - November 5, 1993
We now trace the course taken by H.B. No. 11197 and S.B. No. 1129.
HB/SB No.
HB No. 11197 was approved in the Lower House onsecond reading - November 11, 1993
HB No. 11197 was approved in
the Lower House on third
reading and voted upon
with 114 Yeas and 12 Nays - November 17, 1993
HB No. 11197 was transmitted
to the Senate - November 18, 1993
Senate Committee on Ways and
Means submitted Com.
Report No. 349 recommeding
for approval SB No. 1630 in
substitution of SB No. 1129,
taking into consideration PS Res. No.
734 and HB No. 11197 11 - February 7, 1994
Certification by President Fidel V.
Ramos of Senate Bill No.
1630 for immediate enactment
to meet a public emergency - March 22, 1994
SB No. 1630 was approved by

the Senate on second and third
readings and subsequently
voted upon with 13 yeas, none
against and one abstention - March 24, 1994
Transmittal by the Senate to the
Lower House of a request
for a conference in view of
disagreeing provisions of
SB No. 1630 and HB NO.
11197 - March 24, 1994
The Bicameral Conference Committee
conducted various meetings to
reconcile the proposals on the
VAT - April 13, 19, 20, 21, 25
The House agreed on the Conference
Committee Report - April 27, 1994
The Senate agreed on the Conference
Committee Report - May 2, 1994
The President signed Republic Act
No. 7716 - The Expanded

VAT Law 12 - May 5, 1994
Republic Act No. 7716 was
published in two newspapers
of general circulation - May 12, 1994
Republic Act No. 7716 became
effective - May 28, 1994
Republic Act No. 7716 merely expanded the base of the VAT law even as the tax retained its multi-stage
character.
At the oral hearing held on July 7, 1994, this Court delimited petitioners' arguments to the following
issues culled from their respective petitions.
PROCEDURAL ISSUES
Does Republic Act No. 7716 violate Article VI, Section 24, of the Constitution? 13
Does it violate Article VI, Section 26, paragraph 2, of the
Constitution? 14
What is the extent of the power of the Bicameral Conference Committee?
SUBSTANTIVE ISSUES
Does the law violate the following provisions in Article III (Bill of Rights) of the Constitution:
1. Section 1 15
2. Section 4 16
3. Section 5 17
4. Section 10 18
Does the law violate the following other provisions of the Constitution?
1. Article VI, Section 28, paragraph 1 19
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:
application, and private bills, shall originate exclusively in the House of Representatives, but the Senate
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
(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
we have said clear and explicit, would be to violate both the letter and the spirit of the organic laws by
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.
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 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
committee of both Chambers.
such reports shall contain a detailed, sufficiently explicit statement of the changes in or amendments to
the subject measure.
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:
described thus:
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:
AMENDED
ITS ADMINISTRATION, AMENDING FOR THESE PURPOSES SECTIONS 99, 100, 102, 103, 104, 106, 107, 108
AND 110 OF TITLE IV, 112, 115, 117 AND 121 OF TITLE V, AND 236, 237, AND 238 OF TITLE IX, AND
Approved.
The Report was approved by the House on April 27, 1994. The Senate approved it on May 2, 1994. On
May 5, 1994, the President signed the bill into law as R.A. No. 7716.
There is no question that the Bicameral Conference Committee did more than reconcile differences
between House Bill No. 11197 and Senate Bill No. 1630. In several instances, it either added new
provisions or deleted provisions already approved in House Bill No. 11197 and Senate Bill No. 1630.
These insertions/deletions numbering twenty four (24) are specified in detail by petitioner Tolentino as
follows: 2
SOME SALIENT POINTS ON THE
(AMENDMENTS TO THE VATE LAW [EO 273])
SHOWING ADDITIONS/INSERTIONS MADE BY BICAMERAL
CONFERENCE COMMITTEE TO SB 1630 & HB 11197
I On Sec. 99 of the NIRC
H.B. 11197 amends this section by including, as liable to VAT, any person who in the course of trade of
business, sells, barters, or exchanges goods or PROPERTIES and any person who LEASES PERSONAL
PROPERTIES.
Senate Bill 1630 deleted Sec. 99 to give way for a new Section 99 — DEFINITION OF TERMS — where
eleven (11) terms were defined. A new Section, Section 99-A was incorporated which included as subject
to VAT, one who sells, exchanges, barters PROPERTIES and one who imports PROPERTIES.
The BCC version (R.A. 7716) makes LESSORS of goods OR PROPERTIES and importers of goods LIABLE to
VAT.
II On Section 100 (VAT on sale of goods)
A. The H.B., S.B., and the BCC (R.A. 7716) all included sale of PROPERTIES as subject to VAT.
The term GOODS or PROPERTIES includes the following:
HB (pls. refer
SB (pls. refer
BCC (RA 7716
to Sec. 2)
To Sec. 1(4)
(Sec. 2)
1. Right or the
1. The same
1. The same
privilege to use
patent, copyright,
design, or model,
plan, secret
formula or process,
goodwill trademark,
tradebrand or other
like property or
right.
2. Right or the
2. The same
2. The same
privilege to use
in the Philippines
of any industrial,
commercial, or
scientific equip-
ment.
3. Right or the
3. The same
3. The same
privilege to use
motion picture films,

films, tapes and
discs.
4. Radio and
4. The same
4. In addition
Television time
to radio and
television time the
following were
included:
SATELLITE TRANSMISSION
and CABLE
TELEVISION TIME
5. Other Similar
5. The Same
5. 'Other
properties
similar properties'
was deleted
6. -
6. -
6. Real
properties held
primarily for sale to
customers or held
for lease in the
ordinary course or
business
B. The HB and the BCC Bills has each a provision which includes THE SALE OF GOLD TO BANGKO
SENTRAL NG PILIPINAS as falling under the term Export Sales, hence subject to 0% VAT. The Senate Bill
does not contain such provision (See Section 102-A thereof).
III. On Section 102

This section was amended to include as subject to a 10% VAT the gross receipts derived from THE SALE
OR EXCHANGE OF SERVICES, INCLUDING THE USE OR LEASE OF PROPERTIES.
The SB, HB, and BCC have the same provisions on this.
However, on what are included in the term SALE OR EXCHANGE OF SERVICES, the BCC included/inserted
the following (not found in either the House or Senate Bills):
1. Services of lessors of property WHETHER PERSONAL OR REAL; (See BCC Report/Bill p. 7)
2. WAREHOUSING SERVICES (Ibid.,)
3. Keepers of RESTHOUSES, PENSION HOUSES, INNS, RESORTS (Ibid.,)
4. Common carriers by LAND, AIR AND SEA (Ibid.,)
5. SERVICES OF FRANCHISE GRANTEES OF TELEPHONE AND TELEGRAPH;
6. RADIO AND TELEVISION BROADCASTING
7. ALL OTHER FRANCHISE GRANTEES EXCEPT THOSE UNDER SECTION 117 OF THIS CODE
8. SERVICES OF SURETY, FIDELITY, INDEMNITY, AND BONDING COMPANIES.
9. Also inserted by the BCC (on page B thereof) is the LEASE OR USE OF OR THE RIGHT TO USE OF
SATTELITE TRANSMISSION AND CABLE TELEVISION TIME
IV. On Section 103 (Exempt Transactions)
The BCC deleted subsection (f) in its entirety, despite its retention in both the House and Senate Bills,
thus under RA 7716, the "printing, publication, importation or sale of books and any newspaper,
magazine, review, or bulletin which appears at regular intervals with fixed prices for subscription and
sale and which is not devoted principally to the publication of advertisements" is subject to VAT.
Subsection (g) was amended by the BCC (both Senate and House Bills did not) by changing the word TEN
to FIVE, thus: "Importation of passenger and/or cargo vessel of more than five thousand ton to ocean
going, including engine and spare parts of said vessel to be used by the importer himself as operator
thereof." In short, importation of vessels with tonnage of more than 5 thousand is VAT exempt.
Subsection L, was amended by the BCC by adding the qualifying phrase: EXCEPT THOSE RENDERED BY
PROFESSIONALS.
Subsection U which exempts from VAT "Transactions which are exempt under special laws", was
amended by BCC by adding the phrase: EXCEPT THOSE GRANTED UNDER PD NOS. 66, 529, 972, 1491,
and 1590, and NON-ELECTRIC COOPERATIVES under RA 6938. This is the reason why cooperatives are
now subject to VAT.
While the SALE OF REAL PROPERTIES was included in the exempt transactions under the House Bill, the
BCC made a qualification by stating:
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.
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
amendment or else rejected in toto. The impulse is to get done with the matter and so the motion to
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.
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
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
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
REPEALING SECTIONS 113SD AND 114 OF TITLE V, ALL OF THE NATIONAL INTERNAL REVENUE CODE, AS
AMENDED
ITS ADMINISTRATION, AMENDING FOR THESE PURPOSES SECTIONS 99, 100, 102, 103, 104, 1 106, 107,
108 AND 110 OF TITLE IV, 112, 115, 117 AND 121 OF TITLE V, ACND 236, 237, AND 238 OF TITLE IX, AND
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
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:
described thus:
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:
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
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
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
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.
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
results, results beyond its mandate. These excursions occurs even where the rules impose strict
conference committee (Davies, Legislative Law and Process: In A Nutshell, 1986 Ed., p. 81).’
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:
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,
of the Government, and to interfere with the legitimate powers and functions of the Legislature.’
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.
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
we have said, clear and explicit, would be to violate both the letter and the spirit of the organic laws by
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:
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
journal.
The "three readings" refers to the three readings in both chambers.
There are, however, bills which must originate exclusively in the House. Section 24, Article VI of the
Constitution enumerates them:
SEC. 24. All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local
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
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
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
xxx xxx xxx
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
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.
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:
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
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
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:
application, and private bills, shall originate exclusively in the House of Representatives, but the Senate
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
(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
we have said clear and explicit, would be to violate both the letter and the spirit of the organic laws by
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 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
committee of both Chambers.
such reports shall contain a detailed, sufficiently explicit statement of the changes in or amendments to
the subject measure.
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
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:
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:
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
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:
AMENDED
ITS ADMINISTRATION, AMENDING FOR THESE PURPOSES SECTIONS 99, 100, 102, 103, 104, 106, 107, 108
AND 110 OF TITLE IV, 112, 115, 117 AND 121 OF TITLE V, AND 236, 237, AND 238 OF TITLE IX, AND
Approved.
The Report was approved by the House on April 27, 1994. The Senate approved it on May 2, 1994. On
May 5, 1994, the President signed the bill into law as R.A. No. 7716.
There is no question that the Bicameral Conference Committee did more than reconcile differences
between House Bill No. 11197 and Senate Bill No. 1630. In several instances, it either added new
provisions or deleted provisions already approved in House Bill No. 11197 and Senate Bill No. 1630.
These insertions/deletions numbering twenty four (24) are specified in detail by petitioner Tolentino as
follows: 2
SOME SALIENT POINTS ON THE
(AMENDMENTS TO THE VATE LAW [EO 273])
SHOWING ADDITIONS/INSERTIONS MADE BY BICAMERAL
CONFERENCE COMMITTEE TO SB 1630 & HB 11197
I On Sec. 99 of the NIRC
H.B. 11197 amends this section by including, as liable to VAT, any person who in the course of trade of
business, sells, barters, or exchanges goods or PROPERTIES and any person who LEASES PERSONAL
PROPERTIES.
Senate Bill 1630 deleted Sec. 99 to give way for a new Section 99 - DEFINITION OF TERMS - where eleven
(11) terms were defined. A new Section, Section 99-A was incorporated which included as subject to
VAT, one who sells, exchanges, barters PROPERTIES and one who imports PROPERTIES.
The BCC version (R.A. 7716) makes LESSORS of goods OR PROPERTIES and importers of goods LIABLE to
VAT.
II On Section 100 (VAT on sale of goods)
A. The H.B., S.B., and the BCC (R.A. 7716) all included sale of PROPERTIES as subject to VAT.
The term GOODS or PROPERTIES includes the following:
HB (pls. refer
SB (pls. refer
BCC (RA 7716
to Sec. 2)
To Sec. 1(4)
(Sec. 2)
1. Right or the
1. The same
1. The same
privilege to use
patent, copyright,
design, or model,
plan, secret
formula or process,
goodwill trademark,
tradebrand or other
like property or
right.
2. Right or the
2. The same
2. The same
privilege to use
in the Philippines
of any industrial,
commercial, or
scientific equip-
ment.
3. Right or the
3. The same
3. The same
privilege to use
motion picture films,

films, tapes and
discs.
4. Radio and
4. The same
4. In addition
Television time
to radio and
television time the
following were
included:
SATELLITE TRANSMISSION
and CABLE
TELEVISION TIME
5. Other Similar
5. The Same
5. 'Other
properties
similar properties'
was deleted
6. -
6. -
6. Real
properties held
primarily for sale to
customers or held
for lease in the
ordinary course or
business
B. The HB and the BCC Bills has each a provision which includes THE SALE OF GOLD TO BANGKO
SENTRAL NG PILIPINAS as falling under the term Export Sales, hence subject to 0% VAT. The Senate Bill
does not contain such provision (See Section 102-A thereof).
III. On Section 102
This section was amended to include as subject to a 10% VAT the gross receipts derived from THE SALE
OR EXCHANGE OF SERVICES, INCLUDING THE USE OR LEASE OF PROPERTIES.
The SB, HB, and BCC have the same provisions on this.
However, on what are included in the term SALE OR EXCHANGE OF SERVICES, the BCC included/inserted
the following (not found in either the House or Senate Bills):
1. Services of lessors of property WHETHER PERSONAL OR REAL; (See BCC Report/Bill p. 7)
2. WAREHOUSING SERVICES (Ibid.,)
3. Keepers of RESTHOUSES, PENSION HOUSES, INNS, RESORTS (Ibid.,)
4. Common carriers by LAND, AIR AND SEA (Ibid.,)
5. SERVICES OF FRANCHISE GRANTEES OF TELEPHONE AND TELEGRAPH;
6. RADIO AND TELEVISION BROADCASTING
7. ALL OTHER FRANCHISE GRANTEES EXCEPT THOSE UNDER SECTION 117 OF THIS CODE
8. SERVICES OF SURETY, FIDELITY, INDEMNITY, AND BONDING COMPANIES.
9. Also inserted by the BCC (on page B thereof) is the LEASE OR USE OF OR THE RIGHT TO USE OF
SATTELITE TRANSMISSION AND CABLE TELEVISION TIME
IV. On Section 103 (Exempt Transactions)
The BCC deleted subsection (f) in its entirety, despite its retention in both the House and Senate Bills,
thus under RA 7716, the 'printing, publication, importation or sale of books and any newspaper,
magazine, review, or bulletin which appears at regular intervals with fixed prices for subscription and
sale and which is not devoted principally to the publication of advertisements' is subject to VAT.
Subsection (g) was amended by the BCC (both Senate and House Bills did not) by changing the word TEN
to FIVE, thus: "Importation of passenger and/or cargo vessel of more than five thousand ton to ocean
going, including engine and spare parts of said vessel to be used by the importer himself as operator
thereof." In short, importation of vessels with tonnage of more than 5 thousand is VAT exempt.
Subsection L, was amended by the BCC by adding the qualifying phrase: EXCEPT THOSE RENDERED BY
PROFESSIONALS.
Subsection U which exempts from VAT "Transactions which are exempt under special laws", was
amended by BCC by adding the phrase: EXCEPT THOSE GRANTED UNDER PD NOS. 66, 529, 972, 1491,
and 1590, and NON-ELECTRIC COOPERATIVES under RA 6938. This is the reason why cooperatives are
now subject to VAT.
While the SALE OF REAL PROPERTIES was included in the exempt transactions under the House Bill, the
BCC made a qualification by stating:
'(S) SALE OF REAL PROPERTIES NOT PRIMARILY HELD FOR SALE TO CUSTOMERS OR HELD FOR LEASE IN
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.
changes in or amendments to the subject measure, and shall be signed by the conferees. (Italics
supplied)
The counterpart rule of the House of Representatives is cast in near identical language. Section 85 of the
Rules of the House of Representatives pertinently provides:
In the event that the House does not agree with the Senate on the amendments to any bill or joint
resolution, the differences may be settled by a conference committee of both chambers.
... . Each report shall contain a detailed, sufficiently explicit statement of the changes in or amendments
to the subject measure. (Italics supplied)
The Jefferson's Manual has been adopted 4 as a supplement to our parliamentary rules and practice.
Section 456 of Jefferson's Manual similarly confines the powers of a conference committee, viz: 5
The managers of a conference must confine themselves to the differences committed to them ... and
may not include subjects not within the disagreements, even though germane to a question in issue.
This rule of antiquity has been honed and honored in practice by the Congress of the United States.
Thus, it is chronicled by Floyd Biddick, Parliamentarian Emeritus of the United States Senate, viz: 6
Committees of conference are appointed for the sole purpose of compromising and adjusting the
differing and conflicting opinions of the two Houses and the committees of conference alone can grant
compromises and modify propositions of either Houses within the limits of the disagreement. Conferees
are limited to the consideration of differences between the two Houses.
Conferees shall not insert in their report matters not committed to them by either House, nor shall they
strike from the bill matters agreed to by both Houses. No matter on which there is nothing in either the
Senate or House passed versions of a bill may be included in the conference report and actions to the
contrary would subject the report to a point of order. (Italics ours)
In fine, there is neither a sound nor a syllable in the Rules of the Senate and the House of Representative
to support the thesis of the respondents that a bicameral conference committee is clothed with an ex
post veto power.
But the thesis that a Bicameral Conference Committee can wield ex post veto power does not only
contravene the rules of both the Senate and the House. It wages war against our settled ideals of
representative democracy. For the inevitable, catastrophic effect of the thesis is to install a Bicameral
Conference Committee as the Third Chamber of our Congress, similarly vested with the power to make
laws but with the dissimilarity that its laws are not the subject of a free and full discussion of both
Houses of Congress. With such a vagrant power, a Bicameral Conference Committee acting as a Third
Chamber will be a constitutional monstrosity.
It needs no omniscience to perceive that our Constitution did not provide for a Congress composed of
three chambers. On the contrary, section 1, Article VI of the Constitution provides in clear and certain
language: "The legislative power shall be vested in the Congress of the Philippines which shall consist of
a Senate and a House of Representatives ..." Note that in vesting legislative power exclusively to the
Senate and the House, the Constitution used the word "shall." Its command for a Congress of two
houses is mandatory. It is not mandatory sometimes.
In vesting legislative power to the Senate, the Constitution means the Senate "... composed of twenty-
four Senators ... elected at large by the qualified voters of the Philippines ... ." 7 Similarly, when the
Constitution vested the legislative power to the House, it means the House "... composed of not more
than two hundred and fifty members ... who shall be elected from legislative districts ... and those
who ... shall be elected through a party-list system of registered national, regional, and sectoral parties
or organizations." 8 The Constitution thus, did not vest on a Bicameral Conference Committee with an
ad hoc membership the power to legislate for it exclusively vested legislative power to the Senate and
the House as co-equal bodies. To be sure, the Constitution does not mention the Bicameral Conference
Committees of Congress. No constitutional status is accorded to them. They are not even statutory
creations. They owe their existence from the internal rules of the two Houses of Congress. Yet,
respondents peddle the disconcerting idea that they should be recognized as a Third Chamber of
Congress and with ex post veto power at that.
The thesis that a Bicameral Conference Committee can exercise law making power with ex post veto
power is freighted with mischief. Law making is a power that can be used for good or for ill, hence, our
Constitution carefully laid out a plan and a procedure for its exercise. Firstly, it vouchsafed that the
power to make laws should be exercised by no other body except the Senate and the House. It ought to
be indubitable that what is contemplated is the Senate acting as a full Senate and the House acting as a
full House. It is only when the Senate and the House act as whole bodies that they truly represent the
people. And it is only when they represent the people that they can legitimately pass laws. Laws that are
not enacted by the people's rightful representatives subvert the people's sovereignty. Bicameral
Conference Committees, with their ad hoc character and limited membership, cannot pass laws for they
do not represent the people. The Constitution does not allow the tyranny of the majority. Yet, the
respondents will impose the worst kind of tyranny - the tyranny of the minority over the majority.
Secondly, the Constitution delineated in deft strokes the steps to be followed in making laws. The
overriding purpose of these procedural rules is to assure that only bills that successfully survive the
searching scrutiny of the proper committees of Congress and the full and unfettered deliberations of
both Houses can become laws. For this reason, a bill has to undergo three (3) mandatory separate
readings in each House. In the case at bench, the additions and deletions made by the Bicameral
Conference Committee did not enjoy the enlightened studies of appropriate committees. It is meet to
note that the complexities of modern day legislations have made our committee system a significant
part of the legislative process. Thomas Reed called the committee system as "the eye, the ear, the hand,
and very often the brain of the house." President Woodrow Wilson of the United States once referred to
the government of the United States as "a government by the Chairman of the Standing Committees of
Congress... " 9 Neither did these additions and deletions of the Bicameral Conference Committee pass
through the coils of collective deliberation of the members of the two Houses acting separately. Due to
this shortcircuiting of the constitutional procedure of making laws, confusion shrouds the enactment of
R.A. No. 7716. Who inserted the additions and deletions remains a mystery. Why they were inserted is a
riddle. To use a Churchillian phrase, lawmaking should not be a riddle wrapped in an enigma. It cannot
be, for Article II, section 28 of the Constitution mandates the State to adopt and implement a "policy of
full public disclosure of all its transactions involving public interest." The Constitution could not have
contemplated a Congress of invisible and unaccountable John and Mary Does. A law whose rationale is a
riddle and whose authorship is obscure cannot bind the people.
All these notwithstanding, respondents resort to the legal cosmetology that these additions and
deletions should govern the people as laws because the Bicameral Conference Committee Report was
anyway submitted to and approved by the Senate and the House of Representatives. The submission
may have some merit with respect to provisions agreed upon by the Committee in the process of
reconciling conflicts between S.B. No. 1630 and H.B. No. 11197. In these instances, the conflicting
provisions had been previously screened by the proper committees, deliberated upon by both Houses
and approved by them. It is, however, a different matter with respect to additions and deletions which
were entirely new and which were made not to reconcile inconsistencies between S.B. No. 1630 and
H.B. No. 11197. The members of the Bicameral Conference Committee did not have any authority to add
new provisions or delete provisions already approved by both Houses as it was not necessary to
discharge their limited task of reconciling differences in bills. At that late stage of law making, the
Conference Committee cannot add/delete provisions which can become laws without undergoing the
study and deliberation of both chambers given to bills on 1st, 2nd, and 3rd readings. Even the Senate
and the House cannot enact a law which will not undergo these mandatory three (3) readings required
by the Constitution. If the Senate and the House cannot enact such a law, neither can the lesser
Bicameral Conference Committee.
Moreover, the so-called choice given to the members of both Houses to either approve or disapprove
the said additions and deletions is more of an optical illusion. These additions and deletions are not
submitted separately for approval. They are tucked to the entire bill. The vote is on the bill as a package,
i.e., together with the insertions and deletions. And the vote is either "aye" or "nay," without any
further debate and deliberation. Quite often, legislators vote "yes" because they approve of the bill as a
whole although they may object to its amendments by the Conference Committee. This lack of real
choice is well observed by Robert Luce: 10
amendment or else rejected in toto. The impulse is to get done with the matter and so the motion to
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.
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
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
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.
EN BANC
June 18, 1987
G.R. No. L-75697

VALENTIN TIO doing business under the name and style of OMI ENTERPRISES, petitioner,
vs.
VIDEOGRAM REGULATORY BOARD, MINISTER OF FINANCE, METRO MANILA COMMISSION, CITY MAYOR
and CITY TREASURER OF MANILA, respondents.
Nelson Y. Ng for petitioner.
The City Legal Officer for respondents City Mayor and City Treasurer.
MELENCIO-HERRERA, J.:
This petition was filed on September 1, 1986 by petitioner on his own behalf and purportedly on behalf
of other videogram operators adversely affected. It assails the constitutionality of Presidential Decree
No. 1987 entitled "An Act Creating the Videogram Regulatory Board" with broad powers to regulate and
supervise the videogram industry (hereinafter briefly referred to as the BOARD). The Decree was
promulgated on October 5, 1985 and took effect on April 10, 1986, fifteen (15) days after completion of
its publication in the Official Gazette.
On November 5, 1985, a month after the promulgation of the abovementioned decree, Presidential
Decree No. 1994 amended the National Internal Revenue Code providing, inter alia:
SEC. 134. Video Tapes. — There shall be collected on each processed video-tape cassette, ready for
playback, regardless of length, an annual tax of five pesos; Provided, That locally manufactured or
imported blank video tapes shall be subject to sales tax.
On October 23, 1986, the Greater Manila Theaters Association, Integrated Movie Producers, Importers
and Distributors Association of the Philippines, and Philippine Motion Pictures Producers Association,
hereinafter collectively referred to as the Intervenors, were permitted by the Court to intervene in the
case, over petitioner's opposition, upon the allegations that intervention was necessary for the complete
protection of their rights and that their "survival and very existence is threatened by the unregulated
proliferation of film piracy." The Intervenors were thereafter allowed to file their Comment in
Intervention.
The rationale behind the enactment of the DECREE, is set out in its preambular clauses as follows:
1. WHEREAS, the proliferation and unregulated circulation of videograms including, among others,
videotapes, discs, cassettes or any technical improvement or variation thereof, have greatly prejudiced
the operations of moviehouses and theaters, and have caused a sharp decline in theatrical attendance
by at least forty percent (40%) and a tremendous drop in the collection of sales, contractor's specific,
amusement and other taxes, thereby resulting in substantial losses estimated at P450 Million annually in
government revenues;
2. WHEREAS, videogram(s) establishments collectively earn around P600 Million per annum from
rentals, sales and disposition of videograms, and such earnings have not been subjected to tax, thereby
depriving the Government of approximately P180 Million in taxes each year;
3. WHEREAS, the unregulated activities of videogram establishments have also affected the viability of
the movie industry, particularly the more than 1,200 movie houses and theaters throughout the
country, and occasioned industry-wide displacement and unemployment due to the shutdown of
numerous moviehouses and theaters;
4. "WHEREAS, in order to ensure national economic recovery, it is imperative for the Government to
create an environment conducive to growth and development of all business industries, including the
movie industry which has an accumulated investment of about P3 Billion;
5. WHEREAS, proper taxation of the activities of videogram establishments will not only alleviate the
dire financial condition of the movie industry upon which more than 75,000 families and 500,000
workers depend for their livelihood, but also provide an additional source of revenue for the
Government, and at the same time rationalize the heretofore uncontrolled distribution of videograms;
6. WHEREAS, the rampant and unregulated showing of obscene videogram features constitutes a clear
and present danger to the moral and spiritual well-being of the youth, and impairs the mandate of the
Constitution for the State to support the rearing of the youth for civic efficiency and the development of
moral character and promote their physical, intellectual, and social well-being;
7. WHEREAS, civic-minded citizens and groups have called for remedial measures to curb these blatant
malpractices which have flaunted our censorship and copyright laws;
8. WHEREAS, in the face of these grave emergencies corroding the moral values of the people and
betraying the national economic recovery program, bold emergency measures must be adopted with
dispatch; ... (Numbering of paragraphs supplied).
Petitioner's attack on the constitutionality of the DECREE rests on the following grounds:
1. Section 10 thereof, which imposes a tax of 30% on the gross receipts payable to the local government
is a RIDER and the same is not germane to the subject matter thereof;
2. The tax imposed is harsh, confiscatory, oppressive and/or in unlawful restraint of trade in violation of
the due process clause of the Constitution;
3. There is no factual nor legal basis for the exercise by the President of the vast powers conferred upon
him by Amendment No. 6;
4. There is undue delegation of power and authority;
5. The Decree is an ex-post facto law; and
6. There is over regulation of the video industry as if it were a nuisance, which it is not.
We shall consider the foregoing objections in seriatim.

1. The Constitutional requirement that "every bill shall embrace only one subject which shall be
expressed in the title thereof" 1 is sufficiently complied with if the title be comprehensive enough to
include the general purpose which a statute seeks to achieve. It is not necessary that the title express
each and every end that the statute wishes to accomplish. The requirement is satisfied if all the parts of
the statute are related, and are germane to the subject matter expressed in the title, or as long as they
are not inconsistent with or foreign to the general subject and title. 2 An act having a single general
subject, indicated in the title, may contain any number of provisions, no matter how diverse they may
be, so long as they are not inconsistent with or foreign to the general subject, and may be considered in
furtherance of such subject by providing for the method and means of carrying out the general object."
3 The rule also is that the constitutional requirement as to the title of a bill should not be so narrowly
construed as to cripple or impede the power of legislation. 4 It should be given practical rather than
technical construction. 5
Tested by the foregoing criteria, petitioner's contention that the tax provision of the DECREE is a rider is
without merit. That section reads, inter alia:
Section 10. Tax on Sale, Lease or Disposition of Videograms. — Notwithstanding any provision of law to
the contrary, the province shall collect a tax of thirty percent (30%) of the purchase price or rental rate,
as the case may be, for every sale, lease or disposition of a videogram containing a reproduction of any
motion picture or audiovisual program. Fifty percent (50%) of the proceeds of the tax collected shall
accrue to the province, and the other fifty percent (50%) shall acrrue to the municipality where the tax is
collected; PROVIDED, That in Metropolitan Manila, the tax shall be shared equally by the
City/Municipality and the Metropolitan Manila Commission.
xxx xxx xxx
The foregoing provision is allied and germane to, and is reasonably necessary for the accomplishment
of, the general object of the DECREE, which is the regulation of the video industry through the
Videogram Regulatory Board as expressed in its title. The tax provision is not inconsistent with, nor
foreign to that general subject and title. As a tool for regulation 6 it is simply one of the regulatory and
control mechanisms scattered throughout the DECREE. The express purpose of the DECREE to include
taxation of the video industry in order to regulate and rationalize the heretofore uncontrolled
distribution of videograms is evident from Preambles 2 and 5, supra. Those preambles explain the
motives of the lawmaker in presenting the measure. The title of the DECREE, which is the creation of the
Videogram Regulatory Board, is comprehensive enough to include the purposes expressed in its
Preamble and reasonably covers all its provisions. It is unnecessary to express all those objectives in the
title or that the latter be an index to the body of the DECREE. 7
2. Petitioner also submits that the thirty percent (30%) tax imposed is harsh and oppressive,
confiscatory, and in restraint of trade. However, it is beyond serious question that a tax does not cease
to be valid merely because it regulates, discourages, or even definitely deters the activities taxed. 8 The
power to impose taxes is one so unlimited in force and so searching in extent, that the courts scarcely
venture to declare that it is subject to any restrictions whatever, except such as rest in the discretion of
the authority which exercises it. 9 In imposing a tax, the legislature acts upon its constituents. This is, in
general, a sufficient security against erroneous and oppressive taxation. 10
The tax imposed by the DECREE is not only a regulatory but also a revenue measure prompted by the
realization that earnings of videogram establishments of around P600 million per annum have not been
subjected to tax, thereby depriving the Government of an additional source of revenue. It is an end-user
tax, imposed on retailers for every videogram they make available for public viewing. It is similar to the
30% amusement tax imposed or borne by the movie industry which the theater-owners pay to the
government, but which is passed on to the entire cost of the admission ticket, thus shifting the tax
burden on the buying or the viewing public. It is a tax that is imposed uniformly on all videogram
operators.
The levy of the 30% tax is for a public purpose. It was imposed primarily to answer the need for
regulating the video industry, particularly because of the rampant film piracy, the flagrant violation of
intellectual property rights, and the proliferation of pornographic video tapes. And while it was also an
objective of the DECREE to protect the movie industry, the tax remains a valid imposition.
The public purpose of a tax may legally exist even if the motive which impelled the legislature to impose
the tax was to favor one industry over another. 11
It is inherent in the power to tax that a state be free to select the subjects of taxation, and it has been
repeatedly held that "inequities which result from a singling out of one particular class for taxation or
exemption infringe no constitutional limitation". 12 Taxation has been made the implement of the
state's police power.13
At bottom, the rate of tax is a matter better addressed to the taxing legislature.
3. Petitioner argues that there was no legal nor factual basis for the promulgation of the DECREE by the
former President under Amendment No. 6 of the 1973 Constitution providing that "whenever in the
judgment of the President ... , there exists a grave emergency or a threat or imminence thereof, or
whenever the interim Batasang Pambansa or the regular National Assembly fails or is unable to act
adequately on any matter for any reason that in his judgment requires immediate action, he may, in
order to meet the exigency, issue the necessary decrees, orders, or letters of instructions, which shall
form part of the law of the land."
In refutation, the Intervenors and the Solicitor General's Office aver that the 8th "whereas" clause
sufficiently summarizes the justification in that grave emergencies corroding the moral values of the
people and betraying the national economic recovery program necessitated bold emergency measures
to be adopted with dispatch. Whatever the reasons "in the judgment" of the then President, considering
that the issue of the validity of the exercise of legislative power under the said Amendment still pends
resolution in several other cases, we reserve resolution of the question raised at the proper time.
4. Neither can it be successfully argued that the DECREE contains an undue delegation of legislative
power. The grant in Section 11 of the DECREE of authority to the BOARD to "solicit the direct assistance
of other agencies and units of the government and deputize, for a fixed and limited period, the heads or
personnel of such agencies and units to perform enforcement functions for the Board" is not a
delegation of the power to legislate but merely a conferment of authority or discretion as to its
execution, enforcement, and implementation. "The true distinction is between the delegation of power
to make the law, which necessarily involves a discretion as to what it shall be, and conferring authority
or discretion as to its execution to be exercised under and in pursuance of the law. The first cannot be
done; to the latter, no valid objection can be made." 14 Besides, in the very language of the decree, the
authority of the BOARD to solicit such assistance is for a "fixed and limited period" with the deputized
agencies concerned being "subject to the direction and control of the BOARD." That the grant of such
authority might be the source of graft and corruption would not stigmatize the DECREE as
unconstitutional. Should the eventuality occur, the aggrieved parties will not be without adequate
remedy in law.
5. The DECREE is not violative of the ex post facto principle. An ex post facto law is, among other
categories, one which "alters the legal rules of evidence, and authorizes conviction upon less or different
testimony than the law required at the time of the commission of the offense." It is petitioner's position
that Section 15 of the DECREE in providing that:
All videogram establishments in the Philippines are hereby given a period of forty-five (45) days after the
effectivity of this Decree within which to register with and secure a permit from the BOARD to engage in
the videogram business and to register with the BOARD all their inventories of videograms, including
videotapes, discs, cassettes or other technical improvements or variations thereof, before they could be
sold, leased, or otherwise disposed of. Thereafter any videogram found in the possession of any person
engaged in the videogram business without the required proof of registration by the BOARD, shall be
prima facie evidence of violation of the Decree, whether the possession of such videogram be for
private showing and/or public exhibition.
raises immediately a prima facie evidence of violation of the DECREE when the required proof of
registration of any videogram cannot be presented and thus partakes of the nature of an ex post facto
law.
The argument is untenable. As this Court held in the recent case of Vallarta vs. Court of Appeals, et al. 15
... it is now well settled that "there is no constitutional objection to the passage of a law providing that
the presumption of innocence may be overcome by a contrary presumption founded upon the
experience of human conduct, and enacting what evidence shall be sufficient to overcome such
presumption of innocence" (People vs. Mingoa 92 Phil. 856 [1953] at 858-59, citing 1 COOLEY, A
TREATISE ON THE CONSTITUTIONAL LIMITATIONS, 639-641). And the "legislature may enact that when
certain facts have been proved that they shall be prima facie evidence of the existence of the guilt of the
accused and shift the burden of proof provided there be a rational connection between the facts proved
and the ultimate facts presumed so that the inference of the one from proof of the others is not
unreasonable and arbitrary because of lack of connection between the two in common experience". 16
Applied to the challenged provision, there is no question that there is a rational connection between the
fact proved, which is non-registration, and the ultimate fact presumed which is violation of the DECREE,
besides the fact that the prima facie presumption of violation of the DECREE attaches only after a forty-
five-day period counted from its effectivity and is, therefore, neither retrospective in character.
6. We do not share petitioner's fears that the video industry is being over-regulated and being eased out
of existence as if it were a nuisance. Being a relatively new industry, the need for its regulation was
apparent. While the underlying objective of the DECREE is to protect the moribund movie industry,
there is no question that public welfare is at bottom of its enactment, considering "the unfair
competition posed by rampant film piracy; the erosion of the moral fiber of the viewing public brought
about by the availability of unclassified and unreviewed video tapes containing pornographic films and
films with brutally violent sequences; and losses in government revenues due to the drop in theatrical
attendance, not to mention the fact that the activities of video establishments are virtually untaxed
since mere payment of Mayor's permit and municipal license fees are required to engage in business. 17
The enactment of the Decree since April 10, 1986 has not brought about the "demise" of the video
industry. On the contrary, video establishments are seen to have proliferated in many places
notwithstanding the 30% tax imposed.
In the last analysis, what petitioner basically questions is the necessity, wisdom and expediency of the
DECREE. These considerations, however, are primarily and exclusively a matter of legislative concern.
Only congressional power or competence, not the wisdom of the action taken, may be the basis for
declaring a statute invalid. This is as it ought to be. The principle of separation of powers has in the main
wisely allocated the respective authority of each department and confined its jurisdiction to such a
sphere. There would then be intrusion not allowable under the Constitution if on a matter left to the
discretion of a coordinate branch, the judiciary would substitute its own. If there be adherence to the
rule of law, as there ought to be, the last offender should be courts of justice, to which rightly litigants
submit their controversy precisely to maintain unimpaired the supremacy of legal norms and
prescriptions. The attack on the validity of the challenged provision likewise insofar as there may be
objections, even if valid and cogent on its wisdom cannot be sustained. 18
In fine, petitioner has not overcome the presumption of validity which attaches to a challenged statute.
We find no clear violation of the Constitution which would justify us in pronouncing Presidential Decree
No. 1987 as unconstitutional and void.
WHEREFORE, the instant Petition is hereby dismissed.
No costs.
SO ORDERED.
Teehankee, (C.J.), Yap, Fernan, Narvasa, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin,
Sarmiento and Cortes, JJ., concur.
Footnotes
1 Section 19[1], Article VIII, 1973 Constitution; Section 26[l] Article VI, 1987 Constitution.
2 Sumulong vs. COMELEC, No. 48609, October 10, 1941, 73 Phil. 288; Cordero vs. Hon. Jose Cabatuando,
et al., L-14542, Oct. 31, 1962,6 SCRA 418.
3 Public Service Co., Recktenwald, 290 III. 314, 8 ALR 466, 470.
4 Government vs. Hongkong & Shanghai Banking Corporation, No. 44257, November 22, 1938, 66 Phil.
483; Cordero vs. Cabatuando, et al., supra.
5 Sumulong vs. Commission on Elections, supra.
6 United States vs. Sanchez, 340 U.S. 42, 44, 1950, cited in Bernas, Philippines Constitutional Law, p. 594.
7 People vs. Carlos, L-239, June 30, 1947, 78 Phil. 535.
8 U.S. vs. Sanchez, supra.
9 II Cooley, A Treatise on the Constitutional Limitations, p. 986.
10 ibid., p. 987.
11 Magnano Co. vs. Hamilton, 292, U.S. 40.
12 Lutz vs. Araneta, L-7859, December 22, 1955, 98 Phil. 148, citing Carmichael vs. Southern Coal and
Coke Co., 301 U.S. 495, 81 L. Ed. 1245.
13 ibid., citing Great Atl. and Pacific 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.
14 Cincinnati, W & Z.R. Co. vs. Clinton County Comrs (1852) 1 Ohio St. 88.
15 G. R. No. L-40195, May 29, 1987.
16 ibid., citing People vs. Mingoa, supra, See also U.S. vs. Luling No. 11162, August 12, 1916,34 Phil. 725.
17 Solicitor General's Comments, p. 102, Rollo.
18 Morfe vs. Mutuc, L-20387, January 31, 1968, 22 SCRA 424, 450-451.videogram
SUPREME COURT
Manila
EN BANC
G.R. No. L-25043 April 26, 1968

ANTONIO ROXAS, EDUARDO ROXAS and ROXAS Y CIA., in their own respective behalf and as judicial co-
guardians of JOSE ROXAS, petitioners,
vs.
COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE, respondents.
Leido, Andrada, Perez and Associates for petitioners.
Office of the Solicitor General for respondents.
BENGZON, J.P., J.:
Don Pedro Roxas and Dona Carmen Ayala, Spanish subjects, transmitted to their grandchildren by
hereditary succession the following properties:
(1) Agricultural lands with a total area of 19,000 hectares, situated in the municipality of Nasugbu,
Batangas province;
(2) A residential house and lot located at Wright St., Malate, Manila; and
(3) Shares of stocks in different corporations.
To manage the above-mentioned properties, said children, namely, Antonio Roxas, Eduardo Roxas and
Jose Roxas, formed a partnership called Roxas y Compania.
AGRICULTURAL LANDS
At the conclusion of the Second World War, the tenants who have all been tilling the lands in Nasugbu
for generations expressed their desire to purchase from Roxas y Cia. the parcels which they actually
occupied. For its part, the Government, in consonance with the constitutional mandate to acquire big
landed estates and apportion them among landless tenants-farmers, persuaded the Roxas brothers to
part with their landholdings. Conferences were held with the farmers in the early part of 1948 and
finally the Roxas brothers agreed to sell 13,500 hectares to the Government for distribution to actual
occupants for a price of P2,079,048.47 plus P300,000.00 for survey and subdivision expenses.
It turned out however that the Government did not have funds to cover the purchase price, and so a
special arrangement was made for the Rehabilitation Finance Corporation to advance to Roxas y Cia. the
amount of P1,500,000.00 as loan. Collateral for such loan were the lands proposed to be sold to the
farmers. Under the arrangement, Roxas y Cia. allowed the farmers to buy the lands for the same price
but by installment, and contracted with the Rehabilitation Finance Corporation to pay its loan from the
proceeds of the yearly amortizations paid by the farmers.
In 1953 and 1955 Roxas y Cia. derived from said installment payments a net gain of P42,480.83 and
P29,500.71. Fifty percent of said net gain was reported for income tax purposes as gain on the sale of
capital asset held for more than one year pursuant to Section 34 of the Tax Code.
RESIDENTIAL HOUSE
During their bachelor days the Roxas brothers lived in the residential house at Wright St., Malate,
Manila, which they inherited from their grandparents. After Antonio and Eduardo got married, they
resided somewhere else leaving only Jose in the old house. In fairness to his brothers, Jose paid to Roxas
y Cia. rentals for the house in the sum of P8,000.00 a year.
ASSESSMENTS
On June 17, 1958, the Commissioner of Internal Revenue demanded from Roxas y Cia the payment of
real estate dealer's tax for 1952 in the amount of P150.00 plus P10.00 compromise penalty for late
payment, and P150.00 tax for dealers of securities for 1952 plus P10.00 compromise penalty for late
payment. The assessment for real estate dealer's tax was based on the fact that Roxas y Cia. received
house rentals from Jose Roxas in the amount of P8,000.00. Pursuant to Sec. 194 of the Tax Code, an
owner of a real estate who derives a yearly rental income therefrom in the amount of P3,000.00 or
more is considered a real estate dealer and is liable to pay the corresponding fixed tax.
The Commissioner of Internal Revenue justified his demand for the fixed tax on dealers of securities
against Roxas y Cia., on the fact that said partnership made profits from the purchase and sale of
securities.
In the same assessment, the Commissioner assessed deficiency income taxes against the Roxas Brothers
for the years 1953 and 1955, as follows:
1953 1955
Antonio Roxas P7,010.00 P5,813.00
Eduardo Roxas 7,281.00 5,828.00
Jose Roxas 6,323.00 5,588.00
The deficiency income taxes resulted from the inclusion as income of Roxas y Cia. of the unreported 50%
of the net profits for 1953 and 1955 derived from the sale of the Nasugbu farm lands to the tenants, and
the disallowance of deductions from gross income of various business expenses and contributions
claimed by Roxas y Cia. and the Roxas brothers. For the reason that Roxas y Cia. subdivided its Nasugbu
farm lands and sold them to the farmers on installment, the Commissioner considered the partnership
as engaged in the business of real estate, hence, 100% of the profits derived therefrom was taxed.
The following deductions were disallowed:
ROXAS Y CIA.:
1953
Tickets for Banquet in honor of
S. Osmeña P 40.00
Gifts of San Miguel beer28.00
Contributions to —
Philippine Air Force Chapel
100.00
Manila Police Trust Fund
150.00
Philippines Herald's fund for Manila's neediest families
100.00
1955
Contributions to Contribution to
Our Lady of Fatima Chapel, FEU 50.00
ANTONIO ROXAS:
1953
Pasay City Firemen Christmas Fund
25.00
Pasay City Police Dept. X'mas fund
50.00
1955
Baguio City Police Christmas fund
25.00
Pasay City Firemen Christmas fund
25.00
Pasay City Police Christmas fund
50.00
EDUARDO ROXAS:
1953
Hijas de Jesus' Retiro de Manresa
450.00
Philippines Herald's fund for Manila's neediest families
100.00
1955
Contributions to Philippines
Herald's fund for Manila's
neediest families 120.00
JOSE ROXAS:
1955
Contributions to Philippines
Herald's fund for Manila's
neediest families 120.00
The Roxas brothers protested the assessment but inasmuch as said protest was denied, they instituted
an appeal in the Court of Tax Appeals on January 9, 1961. The Tax Court heard the appeal and rendered
judgment on July 31, 1965 sustaining the assessment except the demand for the payment of the fixed
tax on dealer of securities and the disallowance of the deductions for contributions to the Philippine Air
Force Chapel and Hijas de Jesus' Retiro de Manresa. The Tax Court's judgment reads:
WHEREFORE, the decision appealed from is hereby affirmed with respect to petitioners Antonio Roxas,
Eduardo Roxas, and Jose Roxas who are hereby ordered to pay the respondent Commissioner of Internal
Revenue the amounts of P12,808.00, P12,887.00 and P11,857.00, respectively, as deficiency income
taxes for the years 1953 and 1955, plus 5% surcharge and 1% monthly interest as provided for in Sec.
51(a) of the Revenue Code; and modified with respect to the partnership Roxas y Cia. in the sense that it
should pay only P150.00, as real estate dealer's tax. With costs against petitioners.
Not satisfied, Roxas y Cia. and the Roxas brothers appealed to this Court. The Commissioner of Internal
Revenue did not appeal.
The issues:
(1) Is the gain derived from the sale of the Nasugbu farm lands an ordinary gain, hence 100% taxable?
(2) Are the deductions for business expenses and contributions deductible?
(3) Is Roxas y Cia. liable for the payment of the fixed tax on real estate dealers?
The Commissioner of Internal Revenue contends that Roxas y Cia. could be considered a real estate
dealer because it engaged in the business of selling real estate. The business activity alluded to was the
act of subdividing the Nasugbu farm lands and selling them to the farmers-occupants on installment. To
bolster his stand on the point, he cites one of the purposes of Roxas y Cia. as contained in its articles of
partnership, quoted below:
4. (a) La explotacion de fincas urbanes pertenecientes a la misma o que pueden pertenecer a ella en el
futuro, alquilandoles por los plazos y demas condiciones, estime convenientes y vendiendo aquellas que
a juicio de sus gerentes no deben conservarse;
The above-quoted purpose notwithstanding, the proposition of the Commissioner of Internal Revenue
cannot be favorably accepted by Us in this isolated transaction with its peculiar circumstances in spite of
the fact that there were hundreds of vendees. Although they paid for their respective holdings in
installment for a period of ten years, it would nevertheless not make the vendor Roxas y Cia. a real
estate dealer during the ten-year amortization period.
It should be borne in mind that the sale of the Nasugbu farm lands to the very farmers who tilled them
for generations was not only in consonance with, but more in obedience to the request and pursuant to
the policy of our Government to allocate lands to the landless. It was the bounden duty of the
Government to pay the agreed compensation after it had persuaded Roxas y Cia. to sell its haciendas,
and to subsequently subdivide them among the farmers at very reasonable terms and prices. However,
the Government could not comply with its duty for lack of funds. Obligingly, Roxas y Cia. shouldered the
Government's burden, went out of its way and sold lands directly to the farmers in the same way and
under the same terms as would have been the case had the Government done it itself. For this
magnanimous act, the municipal council of Nasugbu passed a resolution expressing the people's
gratitude.
The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised
with caution to minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly,
equally and uniformly, lest the tax collector kill the "hen that lays the golden egg". And, in order to
maintain the general public's trust and confidence in the Government this power must be used justly
and not treacherously. It does not conform with Our sense of justice in the instant case for the
Government to persuade the taxpayer to lend it a helping hand and later on to penalize him for duly
answering the urgent call.
In fine, Roxas y Cia. cannot be considered a real estate dealer for the sale in question. Hence, pursuant
to Section 34 of the Tax Code the lands sold to the farmers are capital assets, and the gain derived from
the sale thereof is capital gain, taxable only to the extent of 50%.
DISALLOWED DEDUCTIONS
Roxas y Cia. deducted from its gross income the amount of P40.00 for tickets to a banquet given in
honor of Sergio Osmena and P28.00 for San Miguel beer given as gifts to various persons. The deduction
were claimed as representation expenses. Representation expenses are deductible from gross income as
expenditures incurred in carrying on a trade or business under Section 30(a) of the Tax Code provided
the taxpayer proves that they are reasonable in amount, ordinary and necessary, and incurred in
connection with his business. In the case at bar, the evidence does not show such link between the
expenses and the business of Roxas y Cia. The findings of the Court of Tax Appeals must therefore be
sustained.
The petitioners also claim deductions for contributions to the Pasay City Police, Pasay City Firemen, and
Baguio City Police Christmas funds, Manila Police Trust Fund, Philippines Herald's fund for Manila's
neediest families and Our Lady of Fatima chapel at Far Eastern University.
The contributions to the Christmas funds of the Pasay City Police, Pasay City Firemen and Baguio City
Police are not deductible for the reason that the Christmas funds were not spent for public purposes but
as Christmas gifts to the families of the members of said entities. Under Section 39(h), a contribution to
a government entity is deductible when used exclusively for public purposes. For this reason, the
disallowance must be sustained. On the other hand, the contribution to the Manila Police trust fund is
an allowable deduction for said trust fund belongs to the Manila Police, a government entity, intended
to be used exclusively for its public functions.
The contributions to the Philippines Herald's fund for Manila's neediest families were disallowed on the
ground that the Philippines Herald is not a corporation or an association contemplated in Section 30 (h)
of the Tax Code. It should be noted however that the contributions were not made to the Philippines
Herald but to a group of civic spirited citizens organized by the Philippines Herald solely for charitable
purposes. There is no question that the members of this group of citizens do not receive profits, for all
the funds they raised were for Manila's neediest families. Such a group of citizens may be classified as an
association organized exclusively for charitable purposes mentioned in Section 30(h) of the Tax Code.
Rightly, the Commissioner of Internal Revenue disallowed the contribution to Our Lady of Fatima chapel
at the Far Eastern University on the ground that the said university gives dividends to its stockholders.
Located within the premises of the university, the chapel in question has not been shown to belong to
the Catholic Church or any religious organization. On the other hand, the lower court found that it
belongs to the Far Eastern University, contributions to which are not deductible under Section 30(h) of
the Tax Code for the reason that the net income of said university injures to the benefit of its
stockholders. The disallowance should be sustained.
Lastly, Roxas y Cia. questions the imposition of the real estate dealer's fixed tax upon it, because
although it earned a rental income of P8,000.00 per annum in 1952, said rental income came from Jose
Roxas, one of the partners. Section 194 of the Tax Code, in considering as real estate dealers owners of
real estate receiving rentals of at least P3,000.00 a year, does not provide any qualification as to the
persons paying the rentals. The law, which states: 1äwphï1.ñët
. . . "Real estate dealer" includes any person engaged in the business of buying, selling, exchanging,
leasing or renting property on his own account as principal and holding himself out as a full or part-time
dealer in real estate or as an owner of rental property or properties rented or offered to rent for an
aggregate amount of three thousand pesos or more a year: . . . (Emphasis supplied) .
is too clear and explicit to admit construction. The findings of the Court of Tax Appeals or, this point is
sustained.1äwphï1.ñët
To Summarize, no deficiency income tax is due for 1953 from Antonio Roxas, Eduardo Roxas and Jose
Roxas. For 1955 they are liable to pay deficiency income tax in the sum of P109.00, P91.00 and P49.00,
respectively, computed as follows: *
ANTONIO ROXAS
Net income per return P315,476.59
Add: 1/3 share, profits in Roxas y Cia. P 153,249.15
Less amount declared 146,135.46
Amount understated
P 7,113.69
Contributions disallowed 115.00
P 7,228.69
Less 1/3 share of contributions amounting to P21,126.06 disallowed from partnership but allowed to
partners 7,042.02 186.67
Net income per review
P315,663.26
Less: Exemptions
4,200.00
Net taxable income
P311,463.26
Tax due 154,169.00
Tax paid 154,060.00

Deficiency
P 109.00
==========
EDUARDO ROXAS
Net income per return
P 304,166.92
Add: 1/3 share, profits in Roxas y Cia P 153,249.15
Less profits declared 146,052.58
Amount understated
P 7,196.57
Less 1/3 share in contributions amounting to P21,126.06 disallowed from partnership but allowed to
partners 7,042.02 155.55
P304,322.47
Less: Exemptions
4,800.00
Net taxable income
P299,592.47
Tax DueP147,250.00
Tax paid 147,159.00
Deficiency
P91.00
===========
JOSE ROXAS
Net income per return

P222,681.76
Add: 1/3 share, profits in Roxas y Cia. P153,429.15
Less amount reported 146,135.46
Amount understated
7,113.69
Less 1/3 share of contributions disallowed from partnership but allowed as deductions to partners
7,042.02 71.67
P222,753.43
Less: Exemption
1,800.00
Net income subject to tax
P220,953.43
Tax due P102,763.00
Tax paid 102,714.00
Deficiency
P 49.00
===========
WHEREFORE, the decision appealed from is modified. Roxas y Cia. is hereby ordered to pay the sum of
P150.00 as real estate dealer's fixed tax for 1952, and Antonio Roxas, Eduardo Roxas and Jose Roxas are
ordered to pay the respective sums of P109.00, P91.00 and P49.00 as their individual deficiency income
tax all corresponding for the year 1955. No costs. So ordered.
Reyes, J.B.L., Dizon, Makalintal, Sanchez, Castro, Angeles and Fernando, JJ., concur.
Zaldivar, J., took no part.
Concepcion, C.J., is on leave.

Footnotes
*See BIR Records, p. 387.
SUPREME COURT
Manila
EN BANC
G.R. No. 118295 May 2, 1997
WIGBERTO E. TAÑADA and ANNA DOMINIQUE COSETENG, as members of the Philippine Senate and as
taxpayers; GREGORIO ANDOLANA and JOKER ARROYO as members of the House of Representatives and
as taxpayers; NICANOR P. PERLAS and HORACIO R. MORALES, both as taxpayers; CIVIL LIBERTIES UNION,
NATIONAL ECONOMIC PROTECTIONISM ASSOCIATION, CENTER FOR ALTERNATIVE DEVELOPMENT
INITIATIVES, LIKAS-KAYANG KAUNLARAN FOUNDATION, INC., PHILIPPINE RURAL RECONSTRUCTION
MOVEMENT, DEMOKRATIKONG KILUSAN NG MAGBUBUKID NG PILIPINAS, INC., and PHILIPPINE
PEASANT INSTITUTE, in representation of various taxpayers and as non-governmental organizations,
petitioners,
vs.
EDGARDO ANGARA, ALBERTO ROMULO, LETICIA RAMOS-SHAHANI, HEHERSON ALVAREZ, AGAPITO

AQUINO, RODOLFO BIAZON, NEPTALI GONZALES, ERNESTO HERRERA, JOSE LINA, GLORIA. MACAPAGAL-
ARROYO, ORLANDO MERCADO, BLAS OPLE, JOHN OSMEÑA, SANTANINA RASUL, RAMON REVILLA, RAUL
ROCO, FRANCISCO TATAD and FREDDIE WEBB, in their respective capacities as members of the
Philippine Senate who concurred in the ratification by the President of the Philippines of the Agreement
Establishing the World Trade Organization; SALVADOR ENRIQUEZ, in his capacity as Secretary of Budget
and Management; CARIDAD VALDEHUESA, in her capacity as National Treasurer; RIZALINO NAVARRO, in
his capacity as Secretary of Trade and Industry; ROBERTO SEBASTIAN, in his capacity as Secretary of
Agriculture; ROBERTO DE OCAMPO, in his capacity as Secretary of Finance; ROBERTO ROMULO, in his
capacity as Secretary of Foreign Affairs; and TEOFISTO T. GUINGONA, in his capacity as Executive
Secretary, respondents.
PANGANIBAN, J.:
The emergence on January 1, 1995 of the World Trade Organization, abetted by the membership
thereto of the vast majority of countries has revolutionized international business and economic
relations amongst states. It has irreversibly propelled the world towards trade liberalization and
economic globalization. Liberalization, globalization, deregulation and privatization, the third-
millennium buzz words, are ushering in a new borderless world of business by sweeping away as mere
historical relics the heretofore traditional modes of promoting and protecting national economies like
tariffs, export subsidies, import quotas, quantitative restrictions, tax exemptions and currency controls.
Finding market niches and becoming the best in specific industries in a market-driven and export-
oriented global scenario are replacing age-old "beggar-thy-neighbor" policies that unilaterally protect
weak and inefficient domestic producers of goods and services. In the words of Peter Drucker, the well-
known management guru, "Increased participation in the world economy has become the key to
domestic economic growth and prosperity."
Brief Historical Background
To hasten worldwide recovery from the devastation wrought by the Second World War, plans for the
establishment of three multilateral institutions — inspired by that grand political body, the United
Nations — were discussed at Dumbarton Oaks and Bretton Woods. The first was the World Bank (WB)
which was to address the rehabilitation and reconstruction of war-ravaged and later developing
countries; the second, the International Monetary Fund (IMF) which was to deal with currency
problems; and the third, the International Trade Organization (ITO), which was to foster order and
predictability in world trade and to minimize unilateral protectionist policies that invite challenge, even
retaliation, from other states. However, for a variety of reasons, including its non-ratification by the
United States, the ITO, unlike the IMF and WB, never took off. What remained was only GATT — the
General Agreement on Tariffs and Trade. GATT was a collection of treaties governing access to the
economies of treaty adherents with no institutionalized body administering the agreements or
dependable system of dispute settlement.
After half a century and several dizzying rounds of negotiations, principally the Kennedy Round, the
Tokyo Round and the Uruguay Round, the world finally gave birth to that administering body — the
World Trade Organization — with the signing of the "Final Act" in Marrakesh, Morocco and the
ratification of the WTO Agreement by its members.1
Like many other developing countries, the Philippines joined WTO as a founding member with the goal,
as articulated by President Fidel V. Ramos in two letters to the Senate (infra), of improving "Philippine
access to foreign markets, especially its major trading partners, through the reduction of tariffs on its
exports, particularly agricultural and industrial products." The President also saw in the WTO the
opening of "new opportunities for the services sector . . . , (the reduction of) costs and uncertainty
associated with exporting . . . , and (the attraction of) more investments into the country." Although the
Chief Executive did not expressly mention it in his letter, the Philippines — and this is of special interest
to the legal profession — will benefit from the WTO system of dispute settlement by judicial
adjudication through the independent WTO settlement bodies called (1) Dispute Settlement Panels and
(2) Appellate Tribunal. Heretofore, trade disputes were settled mainly through negotiations where
solutions were arrived at frequently on the basis of relative bargaining strengths, and where naturally,
weak and underdeveloped countries were at a disadvantage.
The Petition in Brief
Arguing mainly (1) that the WTO requires the Philippines "to place nationals and products of member-
countries on the same footing as Filipinos and local products" and (2) that the WTO "intrudes, limits
and/or impairs" the constitutional powers of both Congress and the Supreme Court, the instant petition
before this Court assails the WTO Agreement for violating the mandate of the 1987 Constitution to
"develop a self-reliant and independent national economy effectively controlled by Filipinos . . . (to) give
preference to qualified Filipinos (and to) promote the preferential use of Filipino labor, domestic
materials and locally produced goods."
Simply stated, does the Philippine Constitution prohibit Philippine participation in worldwide trade
liberalization and economic globalization? Does it proscribe Philippine integration into a global economy
that is liberalized, deregulated and privatized? These are the main questions raised in this petition for
certiorari, prohibition and mandamus under Rule 65 of the Rules of Court praying (1) for the
nullification, on constitutional grounds, of the concurrence of the Philippine Senate in the ratification by
the President of the Philippines of the Agreement Establishing the World Trade Organization (WTO
Agreement, for brevity) and (2) for the prohibition of its implementation and enforcement through the
release and utilization of public funds, the assignment of public officials and employees, as well as the
use of government properties and resources by respondent-heads of various executive offices
concerned therewith. This concurrence is embodied in Senate Resolution No. 97, dated December 14,
1994.
The Facts
On April 15, 1994, Respondent Rizalino Navarro, then Secretary of The Department of Trade and
Industry (Secretary Navarro, for brevity), representing the Government of the Republic of the
Philippines, signed in Marrakesh, Morocco, the Final Act Embodying the Results of the Uruguay Round of
Multilateral Negotiations (Final Act, for brevity).
By signing the Final Act,2 Secretary Navarro on behalf of the Republic of the Philippines, agreed:
(a) to submit, as appropriate, the WTO Agreement for the consideration of their respective competent
authorities, with a view to seeking approval of the Agreement in accordance with their procedures; and
(b) to adopt the Ministerial Declarations and Decisions.
On August 12, 1994, the members of the Philippine Senate received a letter dated August 11, 1994 from
the President of the Philippines,3 stating among others that "the Uruguay Round Final Act is hereby
submitted to the Senate for its concurrence pursuant to Section 21, Article VII of the Constitution."
On August 13, 1994, the members of the Philippine Senate received another letter from the President of
the Philippines4 likewise dated August 11, 1994, which stated among others that "the Uruguay Round
Final Act, the Agreement Establishing the World Trade Organization, the Ministerial Declarations and
Decisions, and the Understanding on Commitments in Financial Services are hereby submitted to the
Senate for its concurrence pursuant to Section 21, Article VII of the Constitution."
On December 9, 1994, the President of the Philippines certified the necessity of the immediate adoption
of P.S. 1083, a resolution entitled "Concurring in the Ratification of the Agreement Establishing the
World Trade Organization."5
On December 14, 1994, the Philippine Senate adopted Resolution No. 97 which "Resolved, as it is hereby
resolved, that the Senate concur, as it hereby concurs, in the ratification by the President of the
Philippines of the Agreement Establishing the World Trade Organization."6 The text of the WTO
Agreement is written on pages 137 et seq. of Volume I of the 36-volume Uruguay Round of Multilateral
Trade Negotiations and includes various agreements and associated legal instruments (identified in the
said Agreement as Annexes 1, 2 and 3 thereto and collectively referred to as Multilateral Trade
Agreements, for brevity) as follows:
ANNEX 1
Annex 1A: Multilateral Agreement on Trade in Goods
General Agreement on Tariffs and Trade 1994
Agreement on Agriculture
Agreement on the Application of Sanitary and
Phytosanitary Measures
Agreement on Textiles and Clothing
Agreement on Technical Barriers to Trade
Agreement on Trade-Related Investment Measures
Agreement on Implementation of Article VI of he
General Agreement on Tariffs and Trade
1994
Agreement on Implementation of Article VII of the
General on Tariffs and Trade 1994
Agreement on Pre-Shipment Inspection
Agreement on Rules of Origin

Agreement on Imports Licensing Procedures
Agreement on Subsidies and Coordinating
Measures
Agreement on Safeguards
Annex 1B: General Agreement on Trade in Services and Annexes
Annex 1C: Agreement on Trade-Related Aspects of Intellectual
Property Rights
ANNEX 2
Understanding on Rules and Procedures Governing
the Settlement of Disputes
ANNEX 3
Trade Policy Review Mechanism
On December 16, 1994, the President of the Philippines signed7 the Instrument of Ratification,
declaring:
NOW THEREFORE, be it known that I, FIDEL V. RAMOS, President of the Republic of the Philippines, after
having seen and considered the aforementioned Agreement Establishing the World Trade Organization
and the agreements and associated legal instruments included in Annexes one (1), two (2) and three (3)
of that Agreement which are integral parts thereof, signed at Marrakesh, Morocco on 15 April 1994, do
hereby ratify and confirm the same and every Article and Clause thereof.
To emphasize, the WTO Agreement ratified by the President of the Philippines is composed of the
Agreement Proper and "the associated legal instruments included in Annexes one (1), two (2) and three
(3) of that Agreement which are integral parts thereof."
On the other hand, the Final Act signed by Secretary Navarro embodies not only the WTO Agreement
(and its integral annexes aforementioned) but also (1) the Ministerial Declarations and Decisions and (2)
the Understanding on Commitments in Financial Services. In his Memorandum dated May 13, 1996,8
the Solicitor General describes these two latter documents as follows:
The Ministerial Decisions and Declarations are twenty-five declarations and decisions on a wide range of
matters, such as measures in favor of least developed countries, notification procedures, relationship of
WTO with the International Monetary Fund (IMF), and agreements on technical barriers to trade and on
dispute settlement.
The Understanding on Commitments in Financial Services dwell on, among other things, standstill or
limitations and qualifications of commitments to existing non-conforming measures, market access,
national treatment, and definitions of non-resident supplier of financial services, commercial presence
and new financial service.
On December 29, 1994, the present petition was filed. After careful deliberation on respondents'
comment and petitioners' reply thereto, the Court resolved on December 12, 1995, to give due course
to the petition, and the parties thereafter filed their respective memoranda. The court also requested
the Honorable Lilia R. Bautista, the Philippine Ambassador to the United Nations stationed in Geneva,
Switzerland, to submit a paper, hereafter referred to as "Bautista Paper,"9 for brevity, (1) providing a
historical background of and (2) summarizing the said agreements.
During the Oral Argument held on August 27, 1996, the Court directed:
(a) the petitioners to submit the (1) Senate Committee Report on the matter in controversy and (2) the
transcript of proceedings/hearings in the Senate; and
(b) the Solicitor General, as counsel for respondents, to file (1) a list of Philippine treaties signed prior to
the Philippine adherence to the WTO Agreement, which derogate from Philippine sovereignty and (2)
copies of the multi-volume WTO Agreement and other documents mentioned in the Final Act, as soon as
possible.
After receipt of the foregoing documents, the Court said it would consider the case submitted for
resolution. In a Compliance dated September 16, 1996, the Solicitor General submitted a printed copy of
the 36-volume Uruguay Round of Multilateral Trade Negotiations, and in another Compliance dated
October 24, 1996, he listed the various "bilateral or multilateral treaties or international instruments
involving derogation of Philippine sovereignty." Petitioners, on the other hand, submitted their
Compliance dated January 28, 1997, on January 30, 1997.
The Issues
In their Memorandum dated March 11, 1996, petitioners summarized the issues as follows:
A. Whether the petition presents a political question or is otherwise not justiciable.
B. Whether the petitioner members of the Senate who participated in the deliberations and voting
leading to the concurrence are estopped from impugning the validity of the Agreement Establishing the
World Trade Organization or of the validity of the concurrence.
C. Whether the provisions of the Agreement Establishing the World Trade Organization contravene the
provisions of Sec. 19, Article II, and Secs. 10 and 12, Article XII, all of the 1987 Philippine Constitution.
D. Whether provisions of the Agreement Establishing the World Trade Organization unduly limit, restrict
and impair Philippine sovereignty specifically the legislative power which, under Sec. 2, Article VI, 1987
Philippine Constitution is "vested in the Congress of the Philippines";
E. Whether provisions of the Agreement Establishing the World Trade Organization interfere with the
exercise of judicial power.
F. Whether the respondent members of the Senate acted in grave abuse of discretion amounting to lack
or excess of jurisdiction when they voted for concurrence in the ratification of the constitutionally-infirm
Agreement Establishing the World Trade Organization.
G. Whether the respondent members of the Senate acted in grave abuse of discretion amounting to lack
or excess of jurisdiction when they concurred only in the ratification of the Agreement Establishing the
World Trade Organization, and not with the Presidential submission which included the Final Act,
Ministerial Declaration and Decisions, and the Understanding on Commitments in Financial Services.
On the other hand, the Solicitor General as counsel for respondents "synthesized the several issues
raised by petitioners into the following": 10
1. Whether or not the provisions of the "Agreement Establishing the World Trade Organization and the
Agreements and Associated Legal Instruments included in Annexes one (1), two (2) and three (3) of that
agreement" cited by petitioners directly contravene or undermine the letter, spirit and intent of Section
19, Article II and Sections 10 and 12, Article XII of the 1987 Constitution.
2. Whether or not certain provisions of the Agreement unduly limit, restrict or impair the exercise of
legislative power by Congress.
3. Whether or not certain provisions of the Agreement impair the exercise of judicial power by this
Honorable Court in promulgating the rules of evidence.
4. Whether or not the concurrence of the Senate "in the ratification by the President of the Philippines
of the Agreement establishing the World Trade Organization" implied rejection of the treaty embodied
in the Final Act.
By raising and arguing only four issues against the seven presented by petitioners, the Solicitor General
has effectively ignored three, namely: (1) whether the petition presents a political question or is
otherwise not justiciable; (2) whether petitioner-members of the Senate (Wigberto E. Tañada and Anna
Dominique Coseteng) are estopped from joining this suit; and (3) whether the respondent-members of
the Senate acted in grave abuse of discretion when they voted for concurrence in the ratification of the
WTO Agreement. The foregoing notwithstanding, this Court resolved to deal with these three issues
thus:
(1) The "political question" issue — being very fundamental and vital, and being a matter that probes
into the very jurisdiction of this Court to hear and decide this case — was deliberated upon by the Court
and will thus be ruled upon as the first issue;
(2) The matter of estoppel will not be taken up because this defense is waivable and the respondents
have effectively waived it by not pursuing it in any of their pleadings; in any event, this issue, even if
ruled in respondents' favor, will not cause the petition's dismissal as there are petitioners other than the
two senators, who are not vulnerable to the defense of estoppel; and
(3) The issue of alleged grave abuse of discretion on the part of the respondent senators will be taken up
as an integral part of the disposition of the four issues raised by the Solicitor General.
During its deliberations on the case, the Court noted that the respondents did not question the locus
standi of petitioners. Hence, they are also deemed to have waived the benefit of such issue. They
probably realized that grave constitutional issues, expenditures of public funds and serious international
commitments of the nation are involved here, and that transcendental public interest requires that the
substantive issues be met head on and decided on the merits, rather than skirted or deflected by
procedural matters. 11
To recapitulate, the issues that will be ruled upon shortly are:
(1) DOES THE PETITION PRESENT A JUSTICIABLE CONTROVERSY? OTHERWISE STATED, DOES THE
PETITION INVOLVE A POLITICAL QUESTION OVER WHICH THIS COURT HAS NO JURISDICTION?
(2) DO THE PROVISIONS OF THE WTO AGREEMENT AND ITS THREE ANNEXES CONTRAVENE SEC. 19,
ARTICLE II, AND SECS. 10 AND 12, ARTICLE XII, OF THE PHILIPPINE CONSTITUTION?
(3) DO THE PROVISIONS OF SAID AGREEMENT AND ITS ANNEXES LIMIT, RESTRICT, OR IMPAIR THE
EXERCISE OF LEGISLATIVE POWER BY CONGRESS?
(4) DO SAID PROVISIONS UNDULY IMPAIR OR INTERFERE WITH THE EXERCISE OF JUDICIAL POWER BY
THIS COURT IN PROMULGATING RULES ON EVIDENCE?
(5) WAS THE CONCURRENCE OF THE SENATE IN THE WTO AGREEMENT AND ITS ANNEXES SUFFICIENT
AND/OR VALID, CONSIDERING THAT IT DID NOT INCLUDE THE FINAL ACT, MINISTERIAL DECLARATIONS
AND DECISIONS, AND THE UNDERSTANDING ON COMMITMENTS IN FINANCIAL SERVICES?
The First Issue: Does the Court
Have Jurisdiction Over the Controversy?
In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the Constitution,
the petition no doubt raises a justiciable controversy. Where an action of the legislative branch is
seriously alleged to have infringed the Constitution, it becomes not only the right but in fact the duty of
the judiciary to settle the dispute. "The question thus posed is judicial rather than political. The duty (to
adjudicate) remains to assure that the supremacy of the Constitution is upheld." 12 Once a "controversy
as to the application or interpretation of a constitutional provision is raised before this Court (as in the
instant case), it becomes a legal issue which the Court is bound by constitutional mandate to decide." 13
The jurisdiction of this Court to adjudicate the matters 14 raised in the petition is clearly set out in the
1987 Constitution, 15 as follows:
instrumentality of the government.
The foregoing text emphasizes the judicial department's duty and power to strike down grave abuse of
discretion on the part of any branch or instrumentality of government including Congress. It is an
innovation in our political law. 16 As explained by former Chief Justice Roberto Concepcion, 17 "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."
As this Court has repeatedly and firmly emphasized in many cases, 18 it will not shirk, digress from or
abandon its sacred duty and authority to uphold the Constitution in matters that involve grave abuse of
discretion brought before it in appropriate cases, committed by any officer, agency, instrumentality or
department of the government.
As the petition alleges grave abuse of discretion and as there is no other plain, speedy or adequate
remedy in the ordinary course of law, we have no hesitation at all in holding that this petition should be
given due course and the vital questions raised therein ruled upon under Rule 65 of the Rules of Court.
Indeed, certiorari, prohibition and mandamus are appropriate remedies to raise constitutional issues
and to review and/or prohibit/nullify, when proper, acts of legislative and executive officials. On this, we
have no equivocation.
We should stress that, in deciding to take jurisdiction over this petition, this Court will not review the
wisdom of the decision of the President and the Senate in enlisting the country into the WTO, or pass
upon the merits of trade liberalization as a policy espoused by said international body. Neither will it
rule on the propriety of the government's economic policy of reducing/removing tariffs, taxes, subsidies,
quantitative restrictions, and other import/trade barriers. Rather, it will only exercise its constitutional
duty "to determine whether or not there had been a grave abuse of discretion amounting to lack or
excess of jurisdiction" on the part of the Senate in ratifying the WTO Agreement and its three annexes.
Second Issue: The WTO Agreement
and Economic Nationalism
This is the lis mota, the main issue, raised by the petition.
Petitioners vigorously argue that the "letter, spirit and intent" of the Constitution mandating "economic
nationalism" are violated by the so-called "parity provisions" and "national treatment" clauses scattered
in various parts not only of the WTO Agreement and its annexes but also in the Ministerial Decisions and
Declarations and in the Understanding on Commitments in Financial Services.
Specifically, the "flagship" constitutional provisions referred to are Sec 19, Article II, and Secs. 10 and 12,
Article XII, of the Constitution, which are worded as follows:
Article II
DECLARATION OF PRINCIPLES
AND STATE POLICIES
xxx xxx xxx
Sec. 19. The State shall develop a self-reliant and independent national economy effectively controlled
by Filipinos.
xxx xxx xxx
Article XII
NATIONAL ECONOMY AND PATRIMONY
xxx xxx xxx
Sec. 10. . . . The Congress shall enact measures that will encourage the formation and operation of
enterprises whose capital is wholly owned by Filipinos.
In the grant of rights, privileges, and concessions covering the national economy and patrimony, the
State shall give preference to qualified Filipinos.
xxx xxx xxx
Sec. 12. The State shall promote the preferential use of Filipino labor, domestic materials and locally
produced goods, and adopt measures that help make them competitive.
Petitioners aver that these sacred constitutional principles are desecrated by the following WTO
provisions quoted in their memorandum: 19
a) In the area of investment measures related to trade in goods (TRIMS, for brevity):
Article 2
National Treatment and Quantitative Restrictions.
1. Without prejudice to other rights and obligations under GATT 1994, no Member shall apply any TRIM
that is inconsistent with the provisions of Article II or Article XI of GATT 1994.
2. An illustrative list of TRIMS that are inconsistent with the obligations of general elimination of
quantitative restrictions provided for in paragraph I of Article XI of GATT 1994 is contained in the Annex
to this Agreement." (Agreement on Trade-Related Investment Measures, Vol. 27, Uruguay Round, Legal
Instruments, p. 22121, emphasis supplied).
The Annex referred to reads as follows:
ANNEX
Illustrative List
1. TRIMS that are inconsistent with the obligation of national treatment provided for in paragraph 4 of
Article III of GATT 1994 include those which are mandatory or enforceable under domestic law or under
administrative rulings, or compliance with which is necessary to obtain an advantage, and which require:
(a) the purchase or use by an enterprise of products of domestic origin or from any domestic source,
whether specified in terms of particular products, in terms of volume or value of products, or in terms of
proportion of volume or value of its local production; or
(b) that an enterprise's purchases or use of imported products be limited to an amount related to the
volume or value of local products that it exports.
2. TRIMS that are inconsistent with the obligations of general elimination of quantitative restrictions
provided for in paragraph 1 of Article XI of GATT 1994 include those which are mandatory or
enforceable under domestic laws or under administrative rulings, or compliance with which is necessary
to obtain an advantage, and which restrict:
(a) the importation by an enterprise of products used in or related to the local production that it
exports;
(b) the importation by an enterprise of products used in or related to its local production by restricting
its access to foreign exchange inflows attributable to the enterprise; or
(c) the exportation or sale for export specified in terms of particular products, in terms of volume or
value of products, or in terms of a preparation of volume or value of its local production. (Annex to the
Agreement on Trade-Related Investment Measures, Vol. 27, Uruguay Round Legal Documents, p. 22125,
emphasis supplied).
The paragraph 4 of Article III of GATT 1994 referred to is quoted as follows:

The products of the territory of any contracting party imported into the territory of any other
contracting party shall be accorded treatment no less favorable than that accorded to like products of
national origin in respect of laws, regulations and requirements affecting their internal sale, offering for
sale, purchase, transportation, distribution or use, the provisions of this paragraph shall not prevent the
application of differential internal transportation charges which are based exclusively on the economic
operation of the means of transport and not on the nationality of the product." (Article III, GATT 1947,
as amended by the Protocol Modifying Part II, and Article XXVI of GATT, 14 September 1948, 62 UMTS
82-84 in relation to paragraph 1(a) of the General Agreement on Tariffs and Trade 1994, Vol. 1, Uruguay
Round, Legal Instruments p. 177, emphasis supplied).
(b) In the area of trade related aspects of intellectual property rights (TRIPS, for brevity):
Each Member shall accord to the nationals of other Members treatment no less favourable than that it
accords to its own nationals with regard to the protection of intellectual property. . . (par. 1 Article 3,
Agreement on Trade-Related Aspect of Intellectual Property rights, Vol. 31, Uruguay Round, Legal
Instruments, p. 25432 (emphasis supplied)
(c) In the area of the General Agreement on Trade in Services:
National Treatment
1. In the sectors inscribed in its schedule, and subject to any conditions and qualifications set out
therein, each Member shall accord to services and service suppliers of any other Member, in respect of
all measures affecting the supply of services, treatment no less favourable than it accords to its own like
services and service suppliers.
2. A Member may meet the requirement of paragraph I by according to services and service suppliers of
any other Member, either formally suppliers of any other Member, either formally identical treatment
or formally different treatment to that it accords to its own like services and service suppliers.
3. Formally identical or formally different treatment shall be considered to be less favourable if it
modifies the conditions of completion in favour of services or service suppliers of the Member
compared to like services or service suppliers of any other Member. (Article XVII, General Agreement on
Trade in Services, Vol. 28, Uruguay Round Legal Instruments, p. 22610 emphasis supplied).
It is petitioners' position that the foregoing "national treatment" and "parity provisions" of the WTO
Agreement "place nationals and products of member countries on the same footing as Filipinos and
local products," in contravention of the "Filipino First" policy of the Constitution. They allegedly render
meaningless the phrase "effectively controlled by Filipinos." The constitutional conflict becomes more
manifest when viewed in the context of the clear duty imposed on the Philippines as a WTO member to
ensure the conformity of its laws, regulations and administrative procedures with its obligations as
provided in the annexed agreements. 20 Petitioners further argue that these provisions contravene
constitutional limitations on the role exports play in national development and negate the preferential
treatment accorded to Filipino labor, domestic materials and locally produced goods.
On the other hand, respondents through the Solicitor General counter (1) that such Charter provisions
are not self-executing and merely set out general policies; (2) that these nationalistic portions of the
Constitution invoked by petitioners should not be read in isolation but should be related to other
relevant provisions of Art. XII, particularly Secs. 1 and 13 thereof; (3) that read properly, the cited WTO
clauses do not conflict with Constitution; and (4) that the WTO Agreement contains sufficient provisions
to protect developing countries like the Philippines from the harshness of sudden trade liberalization.
We shall now discuss and rule on these arguments.
Declaration of Principles
Not Self-Executing
By its very title, Article II of the Constitution is a "declaration of principles and state policies." The
counterpart of this article in the 1935 Constitution 21 is called the "basic political creed of the nation" by
Dean Vicente Sinco. 22 These principles in Article II are not intended to be self-executing principles
ready for enforcement through the courts. 23 They are used by the judiciary as aids or as guides in the
exercise of its power of judicial review, and by the legislature in its enactment of laws. As held in the
leading case of Kilosbayan, Incorporated vs. Morato, 24 the principles and state policies enumerated in
Article II and some sections of Article XII are not "self-executing provisions, the disregard of which can
give rise to a cause of action in the courts. They do not embody judicially enforceable constitutional
rights but guidelines for legislation."
In the same light, we held in Basco vs. Pagcor 25 that broad constitutional principles need legislative
enactments to implement the, thus:
On petitioners' allegation that P.D. 1869 violates Sections 11 (Personal Dignity) 12 (Family) and 13 (Role
of Youth) of Article II; Section 13 (Social Justice) of Article XIII and Section 2 (Educational Values) of
Article XIV of the 1987 Constitution, suffice it to state also that these are merely statements of principles
and policies. As such, they are basically not self-executing, meaning a law should be passed by Congress
to clearly define and effectuate such principles.
In general, therefore, the 1935 provisions were not intended to be self-executing principles ready for
enforcement through the courts. They were rather directives addressed to the executive and to the
legislature. If the executive and the legislature failed to heed the directives of the article, the available
remedy was not judicial but political. The electorate could express their displeasure with the failure of
the executive and the legislature through the language of the ballot. (Bernas, Vol. II, p. 2).
The reasons for denying a cause of action to an alleged infringement of board constitutional principles
are sourced from basic considerations of due process and the lack of judicial authority to wade "into the
uncharted ocean of social and economic policy making." Mr. Justice Florentino P. Feliciano in his
concurring opinion in Oposa vs. Factoran, Jr., 26 explained these reasons as follows:
My suggestion is simply that petitioners must, before the trial court, show a more specific legal right — a
right cast in language of a significantly lower order of generality than Article II (15) of the Constitution —
that is or may be violated by the actions, or failures to act, imputed to the public respondent by
petitioners so that the trial court can validly render judgment grating all or part of the relief prayed for.
To my mind, the court should be understood as simply saying that such a more specific legal right or
rights may well exist in our corpus of law, considering the general policy principles found in the
Constitution and the existence of the Philippine Environment Code, and that the trial court should have
given petitioners an effective opportunity so to demonstrate, instead of aborting the proceedings on a
motion to dismiss.
It seems to me important that the legal right which is an essential component of a cause of action be a
specific, operable legal right, rather than a constitutional or statutory policy, for at least two (2) reasons.
One is that unless the legal right claimed to have been violated or disregarded is given specification in
operational terms, defendants may well be unable to defend themselves intelligently and effectively; in
other words, there are due process dimensions to this matter.
The second is a broader-gauge consideration — where a specific violation of law or applicable regulation
is not alleged or proved, petitioners can be expected to fall back on the expanded conception of judicial
power in the second paragraph of Section 1 of Article VIII of the Constitution which reads:
Sec. 1. . . .
instrumentality of the Government. (Emphasis supplied)
When substantive standards as general as "the right to a balanced and healthy ecology" and "the right
to health" are combined with remedial standards as broad ranging as "a grave abuse of discretion
amounting to lack or excess of jurisdiction," the result will be, it is respectfully submitted, to propel
courts into the uncharted ocean of social and economic policy making. At least in respect of the vast
area of environmental protection and management, our courts have no claim to special technical
competence and experience and professional qualification. Where no specific, operable norms and
standards are shown to exist, then the policy making departments — the legislative and executive
departments — must be given a real and effective opportunity to fashion and promulgate those norms
and standards, and to implement them before the courts should intervene.
Economic Nationalism Should Be Read with
Other Constitutional Mandates to Attain
Balanced Development of Economy

On the other hand, Secs. 10 and 12 of Article XII, apart from merely laying down general principles
relating to the national economy and patrimony, should be read and understood in relation to the other
sections in said article, especially Secs. 1 and 13 thereof which read:
Sec. 1. The goals of the national economy are a more equitable distribution of opportunities, income,
and wealth; a sustained increase in the amount of goods and services produced by the nation for the
benefit of the people; and an expanding productivity as the key to raising the quality of life for all
especially the underprivileged.
The State shall promote industrialization and full employment based on sound agricultural development
and agrarian reform, through industries that make full and efficient use of human and natural resources,
and which are competitive in both domestic and foreign markets. However, the State shall protect
Filipino enterprises against unfair foreign competition and trade practices.
In the pursuit of these goals, all sectors of the economy and all regions of the country shall be given
optimum opportunity to develop. . . .
xxx xxx xxx
Sec. 13. The State shall pursue a trade policy that serves the general welfare and utilizes all forms and
arrangements of exchange on the basis of equality and reciprocity.
As pointed out by the Solicitor General, Sec. 1 lays down the basic goals of national economic
development, as follows:
1. A more equitable distribution of opportunities, income and wealth;
2. A sustained increase in the amount of goods and services provided by the nation for the benefit of the
people; and
3. An expanding productivity as the key to raising the quality of life for all especially the underprivileged.
With these goals in context, the Constitution then ordains the ideals of economic nationalism (1) by
expressing preference in favor of qualified Filipinos "in the grant of rights, privileges and concessions
covering the national economy and patrimony" 27 and in the use of "Filipino labor, domestic materials
and locally-produced goods"; (2) by mandating the State to "adopt measures that help make them
competitive; 28 and (3) by requiring the State to "develop a self-reliant and independent national
economy effectively controlled by Filipinos." 29 In similar language, the Constitution takes into account
the realities of the outside world as it requires the pursuit of "a trade policy that serves the general
welfare and utilizes all forms and arrangements of exchange on the basis of equality ad reciprocity"; 30
and speaks of industries "which are competitive in both domestic and foreign markets" as well as of the
protection of "Filipino enterprises against unfair foreign competition and trade practices."
It is true that in the recent case of Manila Prince Hotel vs. Government Service Insurance System, et al.,
31 this Court held that "Sec. 10, second par., Art. XII of the 1987 Constitution is a mandatory, positive
command which is complete in itself and which needs no further guidelines or implementing laws or
rule for its enforcement. From its very words the provision does not require any legislation to put it in
operation. It is per se judicially enforceable." However, as the constitutional provision itself states, it is
enforceable only in regard to "the grants of rights, privileges and concessions covering national economy
and patrimony" and not to every aspect of trade and commerce. It refers to exceptions rather than the
rule. The issue here is not whether this paragraph of Sec. 10 of Art. XII is self-executing or not. Rather,
the issue is whether, as a rule, there are enough balancing provisions in the Constitution to allow the
Senate to ratify the Philippine concurrence in the WTO Agreement. And we hold that there are.
All told, while the Constitution indeed mandates a bias in favor of Filipino goods, services, labor and
enterprises, at the same time, it recognizes the need for business exchange with the rest of the world on
the bases of equality and reciprocity and limits protection of Filipino enterprises only against foreign
competition and trade practices that are unfair. 32 In other words, the Constitution did not intend to
pursue an isolationist policy. It did not shut out foreign investments, goods and services in the
development of the Philippine economy. While the Constitution does not encourage the unlimited entry
of foreign goods, services and investments into the country, it does not prohibit them either. In fact, it
allows an exchange on the basis of equality and reciprocity, frowning only on foreign competition that is
unfair.
WTO Recognizes Need to
Protect Weak Economies

Upon the other hand, respondents maintain that the WTO itself has some built-in advantages to protect
weak and developing economies, which comprise the vast majority of its members. Unlike in the UN
where major states have permanent seats and veto powers in the Security Council, in the WTO,
decisions are made on the basis of sovereign equality, with each member's vote equal in weight to that
of any other. There is no WTO equivalent of the UN Security Council.
WTO decides by consensus whenever possible, otherwise, decisions of the Ministerial Conference and
the General Council shall be taken by the majority of the votes cast, except in cases of interpretation of
the Agreement or waiver of the obligation of a member which would require three fourths vote.
Amendments would require two thirds vote in general. Amendments to MFN provisions and the
Amendments provision will require assent of all members. Any member may withdraw from the
Agreement upon the expiration of six months from the date of notice of withdrawals. 33
Hence, poor countries can protect their common interests more effectively through the WTO than
through one-on-one negotiations with developed countries. Within the WTO, developing countries can
form powerful blocs to push their economic agenda more decisively than outside the Organization. This
is not merely a matter of practical alliances but a negotiating strategy rooted in law. Thus, the basic
principles underlying the WTO Agreement recognize the need of developing countries like the
Philippines to "share in the growth in international trade commensurate with the needs of their
economic development." These basic principles are found in the preamble 34 of the WTO Agreement as
follows:
The Parties to this Agreement,
Recognizing that their relations in the field of trade and economic endeavour should be conducted with
a view to raising standards of living, ensuring full employment and a large and steadily growing volume
of real income and effective demand, and expanding the production of and trade in goods and services,
while allowing for the optimal use of the world's resources in accordance with the objective of
sustainable development, seeking both to protect and preserve the environment and to enhance the
means for doing so in a manner consistent with their respective needs and concerns at different levels of
economic development,
Recognizing further that there is need for positive efforts designed to ensure that developing countries,
and especially the least developed among them, secure a share in the growth in international trade
commensurate with the needs of their economic development,
Being desirous of contributing to these objectives by entering into reciprocal and mutually advantageous
arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the
elimination of discriminatory treatment in international trade relations,
Resolved, therefore, to develop an integrated, more viable and durable multilateral trading system
encompassing the General Agreement on Tariffs and Trade, the results of past trade liberalization
efforts, and all of the results of the Uruguay Round of Multilateral Trade Negotiations,
Determined to preserve the basic principles and to further the objectives underlying this multilateral
trading system, . . . (emphasis supplied.)
Specific WTO Provisos
Protect Developing Countries
So too, the Solicitor General points out that pursuant to and consistent with the foregoing basic
principles, the WTO Agreement grants developing countries a more lenient treatment, giving their
domestic industries some protection from the rush of foreign competition. Thus, with respect to tariffs
in general, preferential treatment is given to developing countries in terms of the amount of tariff
reduction and the period within which the reduction is to be spread out. Specifically, GATT requires an
average tariff reduction rate of 36% for developed countries to be effected within a period of six (6)
years while developing countries — including the Philippines — are required to effect an average tariff
reduction of only 24% within ten (10) years.
In respect to domestic subsidy, GATT requires developed countries to reduce domestic support to
agricultural products by 20% over six (6) years, as compared to only 13% for developing countries to be
effected within ten (10) years.
In regard to export subsidy for agricultural products, GATT requires developed countries to reduce their
budgetary outlays for export subsidy by 36% and export volumes receiving export subsidy by 21% within
a period of six (6) years. For developing countries, however, the reduction rate is only two-thirds of that
prescribed for developed countries and a longer period of ten (10) years within which to effect such
reduction.
Moreover, GATT itself has provided built-in protection from unfair foreign competition and trade
practices including anti-dumping measures, countervailing measures and safeguards against import
surges. Where local businesses are jeopardized by unfair foreign competition, the Philippines can avail
of these measures. There is hardly therefore any basis for the statement that under the WTO, local
industries and enterprises will all be wiped out and that Filipinos will be deprived of control of the
economy. Quite the contrary, the weaker situations of developing nations like the Philippines have been
taken into account; thus, there would be no basis to say that in joining the WTO, the respondents have
gravely abused their discretion. True, they have made a bold decision to steer the ship of state into the
yet uncharted sea of economic liberalization. But such decision cannot be set aside on the ground of
grave abuse of discretion, simply because we disagree with it or simply because we believe only in other
economic policies. As earlier stated, the Court in taking jurisdiction of this case will not pass upon the
advantages and disadvantages of trade liberalization as an economic policy. It will only perform its
constitutional duty of determining whether the Senate committed grave abuse of discretion.
Constitution Does Not
Rule Out Foreign Competition
Furthermore, the constitutional policy of a "self-reliant and independent national economy" 35 does not
necessarily rule out the entry of foreign investments, goods and services. It contemplates neither
"economic seclusion" nor "mendicancy in the international community." As explained by Constitutional
Commissioner Bernardo Villegas, sponsor of this constitutional policy:
Economic self-reliance is a primary objective of a developing country that is keenly aware of

overdependence on external assistance for even its most basic needs. It does not mean autarky or
economic seclusion; rather, it means avoiding mendicancy in the international community.
Independence refers to the freedom from undue foreign control of the national economy, especially in
such strategic industries as in the development of natural resources and public utilities. 36
The WTO reliance on "most favored nation," "national treatment," and "trade without discrimination"
cannot be struck down as unconstitutional as in fact they are rules of equality and reciprocity that apply
to all WTO members. Aside from envisioning a trade policy based on "equality and reciprocity," 37 the
fundamental law encourages industries that are "competitive in both domestic and foreign markets,"
thereby demonstrating a clear policy against a sheltered domestic trade environment, but one in favor
of the gradual development of robust industries that can compete with the best in the foreign markets.
Indeed, Filipino managers and Filipino enterprises have shown capability and tenacity to compete
internationally. And given a free trade environment, Filipino entrepreneurs and managers in Hongkong
have demonstrated the Filipino capacity to grow and to prosper against the best offered under a policy
of laissez faire.
Constitution Favors Consumers,
Not Industries or Enterprises
The Constitution has not really shown any unbalanced bias in favor of any business or enterprise, nor
does it contain any specific pronouncement that Filipino companies should be pampered with a total
proscription of foreign competition. On the other hand, respondents claim that WTO/GATT aims to
make available to the Filipino consumer the best goods and services obtainable anywhere in the world
at the most reasonable prices. Consequently, the question boils down to whether WTO/GATT will favor
the general welfare of the public at large.
Will adherence to the WTO treaty bring this ideal (of favoring the general welfare) to reality?
Will WTO/GATT succeed in promoting the Filipinos' general welfare because it will — as promised by its
promoters — expand the country's exports and generate more employment?
Will it bring more prosperity, employment, purchasing power and quality products at the most
reasonable rates to the Filipino public?
The responses to these questions involve "judgment calls" by our policy makers, for which they are
answerable to our people during appropriate electoral exercises. Such questions and the answers
thereto are not subject to judicial pronouncements based on grave abuse of discretion.
Constitution Designed to Meet
Future Events and Contingencies
No doubt, the WTO Agreement was not yet in existence when the Constitution was drafted and ratified
in 1987. That does not mean however that the Charter is necessarily flawed in the sense that its framers
might not have anticipated the advent of a borderless world of business. By the same token, the United
Nations was not yet in existence when the 1935 Constitution became effective. Did that necessarily
mean that the then Constitution might not have contemplated a diminution of the absoluteness of
sovereignty when the Philippines signed the UN Charter, thereby effectively surrendering part of its
control over its foreign relations to the decisions of various UN organs like the Security Council?
It is not difficult to answer this question. Constitutions are designed to meet not only the vagaries of
contemporary events. They should be interpreted to cover even future and unknown circumstances. It is
to the credit of its drafters that a Constitution can withstand the assaults of bigots and infidels but at the
same time bend with the refreshing winds of change necessitated by unfolding events. As one eminent
political law writer and respected jurist 38 explains:
The Constitution must be quintessential rather than superficial, the root and not the blossom, the base
and frame-work only of the edifice that is yet to rise. It is but the core of the dream that must take
shape, not in a twinkling by mandate of our delegates, but slowly "in the crucible of Filipino minds and
hearts," where it will in time develop its sinews and gradually gather its strength and finally achieve its
substance. In fine, the Constitution cannot, like the goddess Athena, rise full-grown from the brow of
the Constitutional Convention, nor can it conjure by mere fiat an instant Utopia. It must grow with the
society it seeks to re-structure and march apace with the progress of the race, drawing from the
vicissitudes of history the dynamism and vitality that will keep it, far from becoming a petrified rule, a
pulsing, living law attuned to the heartbeat of the nation.
Third Issue: The WTO Agreement and Legislative Power
The WTO Agreement provides that "(e)ach Member shall ensure the conformity of its laws, regulations
and administrative procedures with its obligations as provided in the annexed Agreements." 39
Petitioners maintain that this undertaking "unduly limits, restricts and impairs Philippine sovereignty,
specifically the legislative power which under Sec. 2, Article VI of the 1987 Philippine Constitution is
vested in the Congress of the Philippines. It is an assault on the sovereign powers of the Philippines
because this means that Congress could not pass legislation that will be good for our national interest
and general welfare if such legislation will not conform with the WTO Agreement, which not only relates
to the trade in goods . . . but also to the flow of investments and money . . . as well as to a whole slew of
agreements on socio-cultural matters . . . 40
More specifically, petitioners claim that said WTO proviso derogates from the power to tax, which is
lodged in the Congress. 41 And while the Constitution allows Congress to authorize the President to fix
tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts, such
authority is subject to "specified limits and . . . such limitations and restrictions" as Congress may
provide, 42 as in fact it did under Sec. 401 of the Tariff and Customs Code.
Sovereignty Limited by
International Law and Treaties
This Court notes and appreciates the ferocity and passion by which petitioners stressed their arguments
on this issue. However, while sovereignty has traditionally been deemed absolute and all-encompassing
on the domestic level, it is however subject to restrictions and limitations voluntarily agreed to by the
Philippines, expressly or impliedly, as a member of the family of nations. Unquestionably, the
Constitution did not envision a hermit-type isolation of the country from the rest of the world. In its
Declaration of Principles and State Policies, the Constitution "adopts the generally accepted principles of
international law as part of the law of the land, and adheres to the policy of peace, equality, justice,
freedom, cooperation and amity, with all nations." 43 By the doctrine of incorporation, the country is
bound by generally accepted principles of international law, which are considered to be automatically
part of our own laws. 44 One of the oldest and most fundamental rules in international law is pacta sunt
servanda — international agreements must be performed in good faith. "A treaty engagement is not a
mere moral obligation but creates a legally binding obligation on the parties . . . A state which has
contracted valid international obligations is bound to make in its legislations such modifications as may
be necessary to ensure the fulfillment of the obligations undertaken." 45
By their inherent nature, treaties really limit or restrict the absoluteness of sovereignty. By their
voluntary act, nations may surrender some aspects of their state power in exchange for greater benefits
granted by or derived from a convention or pact. After all, states, like individuals, live with coequals, and
in pursuit of mutually covenanted objectives and benefits, they also commonly agree to limit the
exercise of their otherwise absolute rights. Thus, treaties have been used to record agreements
between States concerning such widely diverse matters as, for example, the lease of naval bases, the
sale or cession of territory, the termination of war, the regulation of conduct of hostilities, the formation
of alliances, the regulation of commercial relations, the settling of claims, the laying down of rules
governing conduct in peace and the establishment of international organizations. 46 The sovereignty of
a state therefore cannot in fact and in reality be considered absolute. Certain restrictions enter into the
picture: (1) limitations imposed by the very nature of membership in the family of nations and (2)
limitations imposed by treaty stipulations. As aptly put by John F. Kennedy, "Today, no nation can build
its destiny alone. The age of self-sufficient nationalism is over. The age of interdependence is here." 47
UN Charter and Other Treaties
Limit Sovereignty
Thus, when the Philippines joined the United Nations as one of its 51 charter members, it consented to
restrict its sovereign rights under the "concept of sovereignty as auto-limitation."47-A Under Article 2 of
the UN Charter, "(a)ll members shall give the United Nations every assistance in any action it takes in
accordance with the present Charter, and shall refrain from giving assistance to any state against which
the United Nations is taking preventive or enforcement action." Such assistance includes payment of its
corresponding share not merely in administrative expenses but also in expenditures for the peace-
keeping operations of the organization. In its advisory opinion of July 20, 1961, the International Court
of Justice held that money used by the United Nations Emergency Force in the Middle East and in the
Congo were "expenses of the United Nations" under Article 17, paragraph 2, of the UN Charter. Hence,
all its members must bear their corresponding share in such expenses. In this sense, the Philippine
Congress is restricted in its power to appropriate. It is compelled to appropriate funds whether it agrees
with such peace-keeping expenses or not. So too, under Article 105 of the said Charter, the UN and its
representatives enjoy diplomatic privileges and immunities, thereby limiting again the exercise of
sovereignty of members within their own territory. Another example: although "sovereign equality" and
"domestic jurisdiction" of all members are set forth as underlying principles in the UN Charter, such
provisos are however subject to enforcement measures decided by the Security Council for the
maintenance of international peace and security under Chapter VII of the Charter. A final example:
under Article 103, "(i)n the event of a conflict between the obligations of the Members of the United
Nations under the present Charter and their obligations under any other international agreement, their
obligation under the present charter shall prevail," thus unquestionably denying the Philippines — as a
member — the sovereign power to make a choice as to which of conflicting obligations, if any, to honor.
Apart from the UN Treaty, the Philippines has entered into many other international pacts — both
bilateral and multilateral — that involve limitations on Philippine sovereignty. These are enumerated by
the Solicitor General in his Compliance dated October 24, 1996, as follows:
(a) Bilateral convention with the United States regarding taxes on income, where the Philippines agreed,
among others, to exempt from tax, income received in the Philippines by, among others, the Federal
Reserve Bank of the United States, the Export/Import Bank of the United States, the Overseas Private
Investment Corporation of the United States. Likewise, in said convention, wages, salaries and similar
remunerations paid by the United States to its citizens for labor and personal services performed by
them as employees or officials of the United States are exempt from income tax by the Philippines.
(b) Bilateral agreement with Belgium, providing, among others, for the avoidance of double taxation
with respect to taxes on income.
(c) Bilateral convention with the Kingdom of Sweden for the avoidance of double taxation.
(d) Bilateral convention with the French Republic for the avoidance of double taxation.
(e) Bilateral air transport agreement with Korea where the Philippines agreed to exempt from all
customs duties, inspection fees and other duties or taxes aircrafts of South Korea and the regular
equipment, spare parts and supplies arriving with said aircrafts.
(f) Bilateral air service agreement with Japan, where the Philippines agreed to exempt from customs
duties, excise taxes, inspection fees and other similar duties, taxes or charges fuel, lubricating oils, spare
parts, regular equipment, stores on board Japanese aircrafts while on Philippine soil.
(g) Bilateral air service agreement with Belgium where the Philippines granted Belgian air carriers the
same privileges as those granted to Japanese and Korean air carriers under separate air service
agreements.
(h) Bilateral notes with Israel for the abolition of transit and visitor visas where the Philippines exempted
Israeli nationals from the requirement of obtaining transit or visitor visas for a sojourn in the Philippines
not exceeding 59 days.
(i) Bilateral agreement with France exempting French nationals from the requirement of obtaining
transit and visitor visa for a sojourn not exceeding 59 days.
(j) Multilateral Convention on Special Missions, where the Philippines agreed that premises of Special
Missions in the Philippines are inviolable and its agents can not enter said premises without consent of
the Head of Mission concerned. Special Missions are also exempted from customs duties, taxes and
related charges.
(k) Multilateral convention on the Law of Treaties. In this convention, the Philippines agreed to be
governed by the Vienna Convention on the Law of Treaties.
(l) Declaration of the President of the Philippines accepting compulsory jurisdiction of the International
Court of Justice. The International Court of Justice has jurisdiction in all legal disputes concerning the
interpretation of a treaty, any question of international law, the existence of any fact which, if
established, would constitute a breach "of international obligation."
In the foregoing treaties, the Philippines has effectively agreed to limit the exercise of its sovereign
powers of taxation, eminent domain and police power. The underlying consideration in this partial
surrender of sovereignty is the reciprocal commitment of the other contracting states in granting the
same privilege and immunities to the Philippines, its officials and its citizens. The same reciprocity
characterizes the Philippine commitments under WTO-GATT.
International treaties, whether relating to nuclear disarmament, human rights, the environment, the law
of the sea, or trade, constrain domestic political sovereignty through the assumption of external
obligations. But unless anarchy in international relations is preferred as an alternative, in most cases we
accept that the benefits of the reciprocal obligations involved outweigh the costs associated with any
loss of political sovereignty. (T)rade treaties that structure relations by reference to durable, well-
defined substantive norms and objective dispute resolution procedures reduce the risks of larger
countries exploiting raw economic power to bully smaller countries, by subjecting power relations to
some form of legal ordering. In addition, smaller countries typically stand to gain disproportionately
from trade liberalization. This is due to the simple fact that liberalization will provide access to a larger
set of potential new trading relationship than in case of the larger country gaining enhanced success to
the smaller country's market. 48
The point is that, as shown by the foregoing treaties, a portion of sovereignty may be waived without
violating the Constitution, based on the rationale that the Philippines "adopts the generally accepted
principles of international law as part of the law of the land and adheres to the policy of . . . cooperation
and amity with all nations."
Fourth Issue: The WTO Agreement and Judicial Power
Petitioners aver that paragraph 1, Article 34 of the General Provisions and Basic Principles of the
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) 49 intrudes on the power of
the Supreme Court to promulgate rules concerning pleading, practice and procedures. 50
To understand the scope and meaning of Article 34, TRIPS, 51 it will be fruitful to restate its full text as
follows:
Article 34
Process Patents: Burden of Proof
1. For the purposes of civil proceedings in respect of the infringement of the rights of the owner referred
to in paragraph 1 (b) of Article 28, if the subject matter of a patent is a process for obtaining a product,
the judicial authorities shall have the authority to order the defendant to prove that the process to
obtain an identical product is different from the patented process. Therefore, Members shall provide, in
at least one of the following circumstances, that any identical product when produced without the
consent of the patent owner shall, in the absence of proof to the contrary, be deemed to have been
obtained by the patented process:
(a) if the product obtained by the patented process is new;
(b) if there is a substantial likelihood that the identical product was made by the process and the owner
of the patent has been unable through reasonable efforts to determine the process actually used.
2. Any Member shall be free to provide that the burden of proof indicated in paragraph 1 shall be on the
alleged infringer only if the condition referred to in subparagraph (a) is fulfilled or only if the condition
referred to in subparagraph (b) is fulfilled.
3. In the adduction of proof to the contrary, the legitimate interests of defendants in protecting their
manufacturing and business secrets shall be taken into account.
From the above, a WTO Member is required to provide a rule of disputable (not the words "in the
absence of proof to the contrary") presumption that a product shown to be identical to one produced
with the use of a patented process shall be deemed to have been obtained by the (illegal) use of the said
patented process, (1) where such product obtained by the patented product is new, or (2) where there
is "substantial likelihood" that the identical product was made with the use of the said patented process
but the owner of the patent could not determine the exact process used in obtaining such identical
product. Hence, the "burden of proof" contemplated by Article 34 should actually be understood as the
duty of the alleged patent infringer to overthrow such presumption. Such burden, properly understood,
actually refers to the "burden of evidence" (burden of going forward) placed on the producer of the
identical (or fake) product to show that his product was produced without the use of the patented
process.
The foregoing notwithstanding, the patent owner still has the "burden of proof" since, regardless of the
presumption provided under paragraph 1 of Article 34, such owner still has to introduce evidence of the
existence of the alleged identical product, the fact that it is "identical" to the genuine one produced by
the patented process and the fact of "newness" of the genuine product or the fact of "substantial
likelihood" that the identical product was made by the patented process.
The foregoing should really present no problem in changing the rules of evidence as the present law on
the subject, Republic Act No. 165, as amended, otherwise known as the Patent Law, provides a similar
presumption in cases of infringement of patented design or utility model, thus:
Sec. 60. Infringement. — Infringement of a design patent or of a patent for utility model shall consist in
unauthorized copying of the patented design or utility model for the purpose of trade or industry in the
article or product and in the making, using or selling of the article or product copying the patented
design or utility model. Identity or substantial identity with the patented design or utility model shall
constitute evidence of copying. (emphasis supplied)
Moreover, it should be noted that the requirement of Article 34 to provide a disputable presumption
applies only if (1) the product obtained by the patented process in NEW or (2) there is a substantial
likelihood that the identical product was made by the process and the process owner has not been able
through reasonable effort to determine the process used. Where either of these two provisos does not
obtain, members shall be free to determine the appropriate method of implementing the provisions of
TRIPS within their own internal systems and processes.
By and large, the arguments adduced in connection with our disposition of the third issue — derogation
of legislative power — will apply to this fourth issue also. Suffice it to say that the reciprocity clause
more than justifies such intrusion, if any actually exists. Besides, Article 34 does not contain an
unreasonable burden, consistent as it is with due process and the concept of adversarial dispute
settlement inherent in our judicial system.
So too, since the Philippine is a signatory to most international conventions on patents, trademarks and
copyrights, the adjustment in legislation and rules of procedure will not be substantial. 52
Fifth Issue: Concurrence Only in the WTO Agreement and
Not in Other Documents Contained in the Final Act
Petitioners allege that the Senate concurrence in the WTO Agreement and its annexes — but not in the
other documents referred to in the Final Act, namely the Ministerial Declaration and Decisions and the
Understanding on Commitments in Financial Services — is defective and insufficient and thus constitutes
abuse of discretion. They submit that such concurrence in the WTO Agreement alone is flawed because
it is in effect a rejection of the Final Act, which in turn was the document signed by Secretary Navarro, in
representation of the Republic upon authority of the President. They contend that the second letter of
the President to the Senate 53 which enumerated what constitutes the Final Act should have been the
subject of concurrence of the Senate.
"A final act, sometimes called protocol de cloture, is an instrument which records the winding up of the
proceedings of a diplomatic conference and usually includes a reproduction of the texts of treaties,
conventions, recommendations and other acts agreed upon and signed by the plenipotentiaries
attending the conference." 54 It is not the treaty itself. It is rather a summary of the proceedings of a
protracted conference which may have taken place over several years. The text of the "Final Act
Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations" is contained in just one
page 55 in Vol. I of the 36-volume Uruguay Round of Multilateral Trade Negotiations. By signing said
Final Act, Secretary Navarro as representative of the Republic of the Philippines undertook:
authorities with a view to seeking approval of the Agreement in accordance with their procedures; and
The assailed Senate Resolution No. 97 expressed concurrence in exactly what the Final Act required
from its signatories, namely, concurrence of the Senate in the WTO Agreement.
The Ministerial Declarations and Decisions were deemed adopted without need for ratification. They
were approved by the ministers by virtue of Article XXV: 1 of GATT which provides that representatives
of the members can meet "to give effect to those provisions of this Agreement which invoke joint
action, and generally with a view to facilitating the operation and furthering the objectives of this
Agreement." 56
The Understanding on Commitments in Financial Services also approved in Marrakesh does not apply to
the Philippines. It applies only to those 27 Members which "have indicated in their respective schedules
of commitments on standstill, elimination of monopoly, expansion of operation of existing financial
service suppliers, temporary entry of personnel, free transfer and processing of information, and
national treatment with respect to access to payment, clearing systems and refinancing available in the
normal course of business."57
On the other hand, the WTO Agreement itself expresses what multilateral agreements are deemed
included as its integral parts, 58 as follows:
Article II
Scope of the WTO

1. The WTO shall provide the common institutional frame-work for the conduct of trade relations among
its Members in matters to the agreements and associated legal instruments included in the Annexes to
this Agreement.
2. The Agreements and associated legal instruments included in Annexes 1, 2, and 3, (hereinafter
referred to as "Multilateral Agreements") are integral parts of this Agreement, binding on all Members.
3. The Agreements and associated legal instruments included in Annex 4 (hereinafter referred to as
"Plurilateral Trade Agreements") are also part of this Agreement for those Members that have accepted
them, and are binding on those Members. The Plurilateral Trade Agreements do not create either
obligation or rights for Members that have not accepted them.
4. The General Agreement on Tariffs and Trade 1994 as specified in annex 1A (hereinafter referred to as
"GATT 1994") is legally distinct from the General Agreement on Tariffs and Trade, dated 30 October
1947, annexed to the Final Act adopted at the conclusion of the Second Session of the Preparatory
Committee of the United Nations Conference on Trade and Employment, as subsequently rectified,
amended or modified (hereinafter referred to as "GATT 1947").
It should be added that the Senate was well-aware of what it was concurring in as shown by the
members' deliberation on August 25, 1994. After reading the letter of President Ramos dated August 11,
1994, 59 the senators
of the Republic minutely dissected what the Senate was concurring in, as follows: 60
THE CHAIRMAN: Yes. Now, the question of the validity of the submission came up in the first day
hearing of this Committee yesterday. Was the observation made by Senator Tañada that what was
submitted to the Senate was not the agreement on establishing the World Trade Organization by the
final act of the Uruguay Round which is not the same as the agreement establishing the World Trade
Organization? And on that basis, Senator Tolentino raised a point of order which, however, he agreed to
withdraw upon understanding that his suggestion for an alternative solution at that time was
acceptable. That suggestion was to treat the proceedings of the Committee as being in the nature of
briefings for Senators until the question of the submission could be clarified.
And so, Secretary Romulo, in effect, is the President submitting a new . . . is he making a new submission
which improves on the clarity of the first submission?
MR. ROMULO: Mr. Chairman, to make sure that it is clear cut and there should be no misunderstanding,
it was his intention to clarify all matters by giving this letter.
THE CHAIRMAN: Thank you.
Can this Committee hear from Senator Tañada and later on Senator Tolentino since they were the ones
that raised this question yesterday?
Senator Tañada, please.
SEN. TAÑADA: Thank you, Mr. Chairman.
Based on what Secretary Romulo has read, it would now clearly appear that what is being submitted to
the Senate for ratification is not the Final Act of the Uruguay Round, but rather the Agreement on the
World Trade Organization as well as the Ministerial Declarations and Decisions, and the Understanding
and Commitments in Financial Services.
I am now satisfied with the wording of the new submission of President Ramos.
SEN. TAÑADA. . . . of President Ramos, Mr. Chairman.
THE CHAIRMAN. Thank you, Senator Tañada. Can we hear from Senator Tolentino? And after him
Senator Neptali Gonzales and Senator Lina.
SEN. TOLENTINO, Mr. Chairman, I have not seen the new submission actually transmitted to us but I saw
the draft of his earlier, and I think it now complies with the provisions of the Constitution, and with the
Final Act itself . The Constitution does not require us to ratify the Final Act. It requires us to ratify the
Agreement which is now being submitted. The Final Act itself specifies what is going to be submitted to
with the governments of the participants.
In paragraph 2 of the Final Act, we read and I quote:
By signing the present Final Act, the representatives agree: (a) to submit as appropriate the WTO
Agreement for the consideration of the respective competent authorities with a view to seeking
approval of the Agreement in accordance with their procedures.
In other words, it is not the Final Act that was agreed to be submitted to the governments for ratification
or acceptance as whatever their constitutional procedures may provide but it is the World Trade
Organization Agreement. And if that is the one that is being submitted now, I think it satisfies both the
Constitution and the Final Act itself .
Thank you, Mr. Chairman.
THE CHAIRMAN. Thank you, Senator Tolentino, May I call on Senator Gonzales.
SEN. GONZALES. Mr. Chairman, my views on this matter are already a matter of record. And they had
been adequately reflected in the journal of yesterday's session and I don't see any need for repeating
the same.
Now, I would consider the new submission as an act ex abudante cautela.
THE CHAIRMAN. Thank you, Senator Gonzales. Senator Lina, do you want to make any comment on this?
SEN. LINA. Mr. President, I agree with the observation just made by Senator Gonzales out of the
abundance of question. Then the new submission is, I believe, stating the obvious and therefore I have
no further comment to make.
Epilogue
In praying for the nullification of the Philippine ratification of the WTO Agreement, petitioners are
invoking this Court's constitutionally imposed duty "to determine whether or not there has been grave
abuse of discretion amounting to lack or excess of jurisdiction" on the part of the Senate in giving its
concurrence therein via Senate Resolution No. 97. Procedurally, a writ of certiorari grounded on grave
abuse of discretion may be issued by the Court under Rule 65 of the Rules of Court when it is amply
shown that petitioners have no other plain, speedy and adequate remedy in the ordinary course of law.
By grave abuse of discretion is meant such capricious and whimsical exercise of judgment as is
equivalent to lack of jurisdiction. 61 Mere abuse of discretion is not enough. It must be grave abuse of
discretion as when the power is exercised in an arbitrary or despotic manner by reason of passion or
personal hostility, and must be so patent and so gross as to amount to an evasion of a positive duty or to
a virtual refusal to perform the duty enjoined or to act at all in contemplation of law. 62 Failure on the
part of the petitioner to show grave abuse of discretion will result in the dismissal of the petition. 63
In rendering this Decision, this Court never forgets that the Senate, whose act is under review, is one of
two sovereign houses of Congress and is thus entitled to great respect in its actions. It is itself a
constitutional body independent and coordinate, and thus its actions are presumed regular and done in
good faith. Unless convincing proof and persuasive arguments are presented to overthrow such
presumptions, this Court will resolve every doubt in its favor. Using the foregoing well-accepted
definition of grave abuse of discretion and the presumption of regularity in the Senate's processes, this
Court cannot find any cogent reason to impute grave abuse of discretion to the Senate's exercise of its
power of concurrence in the WTO Agreement granted it by Sec. 21 of Article VII of the Constitution. 64
It is true, as alleged by petitioners, that broad constitutional principles require the State to develop an
independent national economy effectively controlled by Filipinos; and to protect and/or prefer Filipino
labor, products, domestic materials and locally produced goods. But it is equally true that such principles
— while serving as judicial and legislative guides — are not in themselves sources of causes of action.
Moreover, there are other equally fundamental constitutional principles relied upon by the Senate
which mandate the pursuit of a "trade policy that serves the general welfare and utilizes all forms and
arrangements of exchange on the basis of equality and reciprocity" and the promotion of industries
"which are competitive in both domestic and foreign markets," thereby justifying its acceptance of said
treaty. So too, the alleged impairment of sovereignty in the exercise of legislative and judicial powers is
balanced by the adoption of the generally accepted principles of international law as part of the law of
the land and the adherence of the Constitution to the policy of cooperation and amity with all nations.
That the Senate, after deliberation and voting, voluntarily and overwhelmingly gave its consent to the
WTO Agreement thereby making it "a part of the law of the land" is a legitimate exercise of its sovereign
duty and power. We find no "patent and gross" arbitrariness or despotism "by reason of passion or
personal hostility" in such exercise. It is not impossible to surmise that this Court, or at least some of its
members, may even agree with petitioners that it is more advantageous to the national interest to strike
down Senate Resolution No. 97. But that is not a legal reason to attribute grave abuse of discretion to
the Senate and to nullify its decision. To do so would constitute grave abuse in the exercise of our own
judicial power and duty. Ineludably, what the Senate did was a valid exercise of its authority. As to
whether such exercise was wise, beneficial or viable is outside the realm of judicial inquiry and review.
That is a matter between the elected policy makers and the people. As to whether the nation should join
the worldwide march toward trade liberalization and economic globalization is a matter that our people
should determine in electing their policy makers. After all, the WTO Agreement allows withdrawal of
membership, should this be the political desire of a member.
The eminent futurist John Naisbitt, author of the best seller Megatrends, predicts an Asian Renaissance
65 where "the East will become the dominant region of the world economically, politically and culturally
in the next century." He refers to the "free market" espoused by WTO as the "catalyst" in this coming
Asian ascendancy. There are at present about 31 countries including China, Russia and Saudi Arabia
negotiating for membership in the WTO. Notwithstanding objections against possible limitations on
national sovereignty, the WTO remains as the only viable structure for multilateral trading and the
veritable forum for the development of international trade law. The alternative to WTO is isolation,
stagnation, if not economic self-destruction. Duly enriched with original membership, keenly aware of
the advantages and disadvantages of globalization with its on-line experience, and endowed with a
vision of the future, the Philippines now straddles the crossroads of an international strategy for
economic prosperity and stability in the new millennium. Let the people, through their duly authorized
elected officers, make their free choice.
WHEREFORE, the petition is DISMISSED for lack of merit.
SO ORDERED.
Narvasa, C.J., Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Kapunan, Mendoza, Francisco,
Hermosisima, Jr. and Torres, Jr., JJ., concur.
Padilla and Vitug, JJ., concur in the result.
Footnotes
1 In Annex "A" of her Memorandum, dated August 8, 1996, received by this Court on August 12, 1996,
Philippine Ambassador to the United Nations, World Trade Organization and other international
organizations Lilia R. Bautista (hereafter referred to as "Bautista Paper") submitted a "46-year
Chronology" of GATT as follows:
1947 The birth of GATT. On 30 October 1947, the General Agreement on Tariffs and Trade (GATT) was
signed by 23 nations at the Palais des Nations in Geneva. The Agreement contained tariff concessions
agreed to in the first multilateral trade negotiations and a set of rules designed to prevent these
concessions from being frustrated by restrictive trade measures.
The 23 founding contracting parties were members of the Preparatory Committee established by the
United Nations Economic and Social Council in 1946 to draft the charter of the International Trade
Organization (ITO). The ITO was envisaged as the final leg of a triad of post-War economic agencies (the
other two were the International Monetary Fund and the International Bank for Reconstruction — later
the World Bank).
In parallel with this task, the Committee members decided to negotiate tariff concessions among
themselves. From April to October 1947, the participants completed some 123 negotiations and
established 20 schedules containing the tariff reductions and bindings which became an integral part of
GATT. These schedules resulting from the first Round covered some 45,000 tariff concessions and about
$10 billion in trade.
GATT was conceived as an interim measure that put into effect the commercial-policy provisions of the
ITO. In November, delegations from 56 countries met in Havana, Cuba, to consider the to ITO draft as a
whole. After long and difficult negotiations, some 53 countries signed the Final Act authenticating the
text of the Havana Charter in March 1948. There was no commitment, however, from governments to
ratification and, in the end, the ITO was stillborn, leaving GATT as the only international instrument
governing the conduct of world trade.
1948 Entry into force. On 1 January 1948, GATT entered into force. The 23 founding members were:
Australia, Belgium, Brazil, Burma, Canada, Ceylon, Chile, China, Cuba, Czechoslovakia, France, India,
Lebanon, Luxembourg, Netherlands, New Zealand, Norway, Pakistan, Southern Rhodesia, Syria, South
Africa, United Kingdom and the United States. The first Session of the Contracting Parties was held from
February to March in Havana, Cuba. The secretariat of the Interim Commission for the ITO, which served
as the ad hoc secretariat of GATT, moved from Lake Placid, New York, to Geneva. The Contracting
Parties held their second session in Geneva from August to September.
1949 Second Round at Annecy. During the second Round of trade negotiations, held from April to
August at Annecy, France, the contracting parties exchanged some 5,000 tariff concessions. At their
third Session, they also dealt with the accession of ten more countries.
1950 Third Round at Torquay. From September 1950 to April 1951, the contracting parties exchanged
some 8,700 tariff concessions in the English town, yielding tariff reduction of about 25 per cent in
relation to the 1948 level. Four more countries acceded to GATT. During the fifth Session of the
Contracting Parties, the United States indicated that the ITO Charter would not be re-submitted to the
US Congress; this, in effect, meant that ITO would not come into operation.
1956 Fourth Round at Geneva. The fourth Round was completed in May and produced some $2.5 billion
worth of tariff reductions. At the beginning of the year, the GATT commercial policy course for officials
of developing countries was inaugurated.
1958 The Haberler Report. GATT published Trends in International Trade in October. Known as the
"Haberler Report" in honour of Professor Gottfried Haberler, the chairman of the panel of eminent
economists, it provided initial guidelines for the work of GATT. The Contracting Parties at their 13th
Sessions, attended by Ministers, subsequently established three committees in GATT: Committee I to
convene a further tariff negotiating conference; Committee II to review the agricultural policies of
member governments and Committee III to tackle the problem facing developing countries in their
trade. The establishment of the European Economic Community during the previous year also
demanded large-scale tariff negotiations under Article XXIV: 6 of the General Agreement.
1960 The Dillon Round. The fifth Round opened in September and was divided into two phases: the first
was concerned with negotiations with EEC member states for the creation of a single schedule of
concessions for the Community based on its Common External Tariff; and the second was a further
general round of tariff negotiations. Named in honour of US Under-Secretary of State Douglas Dillon
who proposed the negotiations, the Round was concluded in July 1962 and resulted in about 4,400 tariff
concessions covering $4.9 billion of trade.
1961 The Short-Term Arrangement covering cotton textiles was agreed as an exception to the GATT
rules. The arrangement permitted the negotiation of quota restrictions affecting the exports of cotton-
producing countries. In 1962 the "Short Term" Arrangement became the "Long term" Arrangement,
lasting until 1974 when the Multifibre Arrangement entered into force.
1964 The Kennedy Round. Meeting at Ministerial level, a Trade Negotiations Committee formally
opened the Kennedy Round in May. In June 1967, the Round's Final Act was signed by some 50
participating countries which together accounted for 75 per cent of world trade. For the first time,
negotiations departed from the product-by-product approach used in the previous Rounds to an across-
the-board or linear method of cutting tariffs for industrial goods. The working hypothesis of a 50 per
cent target cut in tariff levels was achieved in many areas. Concessions covered an estimated total value
of trade of about $410 billion. Separate agreements were reached on grains, chemical products and a
Code on Anti-Dumping.
1965 A New Chapter. The early 1960s marked the accession to the general Agreement of many newly-
independent developing countries. In February, the Contracting Parties, meeting in a special session,
adopted the text of Part IV on Trade and Development. The additional chapter to the GATT required
developed countries to accord high priority to the reduction of trade barriers to products of developing
countries. A Committee on Trade and Development was established to oversee the functioning of the
new GATT provisions. In the preceding year, GATT had established the International Trade Centre (ITC)
to help developing countries in trade promotion and identification of potential markets. Since 1968, the
ITC had been jointly operated by GATT and the UN Conference on Trade and Development (UNCTAD).
1973 The Tokyo Round. The seventh Round was launched by Ministers in September at the Japanese
capital. Some 99 countries participated in negotiating a comprehensive body of agreements covering
both tariff and non-tariff matters. At the end of the Round in November 1979, participants exchanged
tariff reductions and bindings which covered more than $300 billion of trade. As a result of these cuts,
the weighted average tariff on manufactured goods in the world's nine major industrial markets
declined from 7.0 to 4.7 per cent. Agreements were reached in the following areas: subsidies and
countervailing measures, technical barriers to trade, import licensing procedures, government
procurement, customs valuation, a revised anti-dumping code, trade in bovine meat, trade in dairy
products and trade in civil aircraft. The first concrete result of the Round was the reduction of import
duties and other trade barriers by industrial countries on tropical products exported by developing
countries.
1974 On 1 January 1974, the Arrangement Regarding International Trade in Textiles, otherwise known as
the Multifibre Arrangement (MFA), entered into force. It superseded the arrangements that had been
governing trade in cotton textiles since 1961. The MFA seeks to promote the expansion and progressive
liberalization of trade in textile products while at the same time avoiding disruptive effects in individual
markets and lines of production. The MFA was extended in 1978, 1982, 1986, 1991 and 1992. MFA
members account for most of the world exports of textiles and clothing which in 1986 amounted to
US$128 billion.
1982 Ministerial Meeting. Meeting for the first time in nearly ten years, the GATT Ministers in November
at Geneva reaffirmed the validity of GATT rules for the conduct of international trade and committed
themselves to combating protectionist pressures. They also established a wide-ranging work programme
for the GATT which was to lay down the groundwork for a new Round 1986. The Uruguay Round. The
GATT Trade Ministers meeting at Punta del Este, Uruguay, launched the eighth Round of trade
negotiations on 20 September. The Punta del Este Declaration, while representing a single political
undertaking, was divided into two sections. The first covered negotiations on trade in goods and the
second initiated negotiation on trade in services. In the area of trade in goods, the Ministers committed
themselves to a "standstill" on new trade measures inconsistent with their GATT obligations and to a
"rollback" programme aimed at phasing out existing inconsistent measures. Envisaged to last four years,
negotiations started in early February 1987 in the following areas tariffs, non-tariff measures, tropical
products, natural resource-based products, textiles and clothing, agriculture, subsidies, safe-guards,
trade-related aspects of intellectual property rights including trade in counterfeit goods, and trade-
related investment measures. The work of other groups included a review of GATT articles, the GATT
dispute settlement procedure, the Tokyo Round agreements, as well as the functioning of the GATT
system as a whole.
1994 "GATT 1994" is the updated version of GATT 1947 and takes into account the substantive and
institutional changes negotiated in the Uruguay Round GATT 1994 is an integral part of the World Trade
Organization established on 1 January 1995. It is agreed that there be a one year transition period
during which certain GATT 1947 bodies and commitments would co-exist with those of the World Trade
Organization.
2 The Final Act was signed by representatives of 125 entities, namely Algeria, Angola, Antigua and
Barbuda, Argentine Republic, Australia, Republic of Austria, State of Bahrain, People's Republic of
Bangladesh, Barbados, The Kingdom of Belgium Belize, Republic of Benin, Bolivia, Botswana, Brazil,
Brunei Darussalam, Burkina Faso, Burundi, Cameroon, Canada, Central African Republic, Chad, Chile,
People's Republic of China, Colombia, Congo, Costa Rica, Republic of Cote d'Ivoire, Cuba, Cyprus, Czech
Republic, Kingdom of Denmark, Commonwealth of Dominica, Dominican Republic, Arab Republic of
Egypt, El Salvador, European Communities, Republic of Fiji, Finland, French Republic, Gabonese
Republic, Gambia, Federal Republic of Germany, Ghana, Hellenic Republic, Grenada, Guatemala,
Republic of Guinea-Bissau, Republic of Guyana, Haiti, Honduras, Hong Kong, Hungary, Iceland, India,
Indonesia, Ireland, State of Israel, Italian Republic, Jamaica, Japan, Kenya, Korea, State of Kuwait,
Kingdom of Lesotho, Principality of Liechtenstein, Grand Duchy of Luxembourg, Macau, Republic of
Madagascar, Republic of Malawi, Malaysia, Republic of Maldives, Republic of Mali, Republic of Malta,
Islamic Republic of Mauritania, Republic of Mauritius, United Mexican States, Kingdom of Morocco,
Republic of Mozambique, Union of Myanmar, Republic of Namibia, Kingdom of the Netherlands, New
Zealand, Nicaragua, Republic of Niger, Federal Republic of Nigeria, Kingdom of Norway, Islamic Republic
of Pakistan, Paraguay, Peru, Philippines, Poland, Potuguese Republic, State of Qatar, Romania,
Rwandese Republic, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Senegal, Sierra
Leone, Singapore, Slovak Republic, South Africa, Kingdom of Spain, Democratic Socialist Republic of Sri
Lanka, Republic of Surinam, Kingdom of Swaziland, Kingdom of Sweden, Swiss Confederation, United
Republic of Tanzania, Kingdom of Thailand, Togolese Republic, Republic of Trinidad and Tobago, Tunisia,
Turkey, Uganda, United Arab Emirates, United Kingdom of Great Britain and Northern Ireland, United
States of America, Eastern Republic of Uruguay, Venezuela, Republic of Zaire, Republic of Zambia,
Republic of Zimbabwe; see pp. 6-25, Vol. 1, Uruguay Round of Multilateral Trade Negotiations.
3 11 August 1994
The Honorable Members
Senate
Through Senate President Edgardo Angara
Manila
Ladies and Gentlemen:
I have the honor to forward herewith an authenticated copy of the Uruguay Round Final Act signed by
Department of Trade and Industry Secretary Rizalino S. Navarro for the Philippines on 15 April 1994 in
Marrakesh, Morocco.
The Uruguay Round Final Act aims to liberalize and expand world trade and strengthen the
interrelationship between trade and economic policies affecting growth and development.
The Final Act will improve Philippine access to foreign markets, especially its major trading partners
through the reduction of tariffs on its exports particularly agricultural and industrial products. These
concessions may be availed of by the Philippines, only if it is a member of the World Trade Organization.
By GATT estimates, the Philippines can acquire additional export from $2.2 to $2.7 Billion annually under
Uruguay Round. This will be on top of the normal increase in exports that the Philippines may
experience.
The Final Act will also open up new opportunities for the services sector in such areas as the movement
of personnel, (e.g. professional services and construction services), cross-border supply (e.g. computer-
related services), consumption abroad (e.g. tourism, convention services, etc.) and commercial
presence.
The clarified and improved rules and disciplines on anti-dumping and countervailing measures will also
benefit Philippine exporters by reducing the costs ad uncertainty associated with exporting while at the
same time providing means for domestic industries to safeguard themselves against unfair imports.
Likewise, the provision of adequate protection for intellectual property rights is expected to attract
more investments into the country and to make it less vulnerable to unilateral actions by its trading
partners (e.g. Sec. 301 of the United States' Omnibus Trade Law).
In view of the foregoing, the Uruguay Round Final Act is hereby submitted to the Senate for its
concurrence pursuant to Section 21, Article VII of the Constitution.
A draft of a proposed Resolution giving its concurrence to the aforesaid Agreement is enclosed.
Very truly yours,
(SGD.) FIDEL V. RAMOS
4 11 August 1994
The Honorable Members
Senate
Through Senate President Edgardo Angara
Manila
Ladies and Gentlemen:
I have the honor to forward herewith an authenticated copy of the Uruguay Round Final Act signed by
Department of Trade and Industry Secretary Rizalino S. Navarro for the Philippines on 13 April 1994 in
Marrakech (sic), Morocco.
Members of the trade negotiations committee, which included the Philippines, agreed that the
Agreement Establishing the World Trade Organization, the Ministerial Declarations and Decisions, and
the Understanding on Commitments in Financial Services embody the results of their negotiations and
form an integral part of the Uruguay Round Final Act.
By signing the Uruguay Round Final Act, the Philippines, through Secretary Navarro, agreed:
(a) To submit the Agreement Establishing the World Trade Organization to the Senate for its
concurrence pursuant to Section 21, Article VII of the Constitution; and
(b) To adopt the Ministerial Declarations and Decisions.
The Uruguay Round Final Act aims to liberalize and expand world trade and strengthen the
interrelationship between trade and economic policies affecting growth and development.
The Final Act will improve Philippine access to foreign markets, especially its major trading partners
through the reduction of tariffs on its exports particularly agricultural and industrial products. These
concessions may be availed of by the Philippines, only if it is a member of the World Trade Organization.
By GATT estimates, the Philippines can acquire additional export revenues from $2.2 to $2.7 Billion
annually under Uruguay Round. This will be on top of the normal increase in the exports that the
Philippines may experience.
The Final Act will also open up new opportunities for the services sector in such areas as the movement
of personnel, (e.g., professional services and construction services), cross-border supply (e.g., computer-
related services), consumption abroad (e.g., tourism, convention services, etc.) and commercial
presence.
The clarified and improved rules ad disciplines on anti-dumping and countervailing measures will also
benefit Philippine exporters by reducing the costs and uncertainty associated with exporting while at the
same time providing a means for domestic industries to safeguard themselves against unfair imports.
Likewise, the provision of adequate protection for intellectual property rights is expected to attract
more investments into the country and to make it a less vulnerable to unilateral actions by its trading
partners (e.g., Sec. 301 of the United States Omnibus Trade Law).
In view of the foregoing, the Uruguay Round Final Act, the Agreement Establishing the World Trade
Organization, the Ministerial Declarations and Decisions, and the Understanding on Commitments in
Financial Services, as embodied in the Uruguay Round Final Act and forming and integral part thereof
are hereby submitted to the Senate for its concurrence pursuant to Section 21, Article VII of the
Constitution.
A draft of a proposed Resolution giving its concurrence to the aforesaid Agreement is enclosed.
Very truly yours,
5 December 9, 1994
HON. EDGARDO J. ANGARA
Senate President
Senate Manila
Dear Senate President Angara:

Pursuant to the provisions of Sec. 26 (2) Article VI of the Constitution, I hereby certify to the necessity of
the immediate adoption of P.S. 1083 entitled:
CONCURRING IN THE RATIFICATION OF THE AGREEMENT ESTABLISHING THE WORLD TRADE

ORGANIZATION
to meet a public emergency consisting of the need for immediate membership in the WTO in order to
assure the benefits to the Philippine economy arising from such membership.
Very truly yours,
6 Attached as Annex A, Petition; rollo, p. 52. P.S. 1083 is the forerunner of assailed Senate Resolution
No. 97. It was prepared by the Committee of the Whole on the General Agreement on Tariffs and Trade
chaired by Sen. Blas F. Ople and co-chaired by Sen. Gloria Macapagal-Arroyo; see Annex C, Compliance
of petitioners dated January 28, 1997.
7 The Philippines is thus considered an original or founding member of WTO, which as of July 26, 1996
had 123 members as follows: Antigua and Barbuda, Argentina, Australia, Austria, Bahrain, Bangladesh,
Barbados, Belguim, Belize, Benin, Bolivia, Botswana, Brazil, Brunei Darussalam, Burkina Faso, Burundi,
Cameroon, Canada, Central African Republic, Chili, Colombia, Costa Rica, Cote d'Ivoire, Cuba, Cyprus,
Czech Republic, Denmark, Djibouti, Dominica, Dominican Republic, Ecuador, Egypt, El Salvador,
European Community, Fiji, Finland, France, Gabon, Germany, Ghana, Greece, Grenada, Guatemala,
Guinea, Guinea Bissau, Guyana, Haiti, Honduras, Honkong, Hungary, Iceland, India, Indonesia, Ireland,
Israel, Italy, Jamaica, Japan, Kenya, Korea, Kuwait, Lesotho, Liechtenstein, Luxembourg, Macau,
Madagascar, Malawi, Malaysia, Maldives, Mali, Malta, Mauritania, Mauritius, Mexico, Morocco,
Mozambique, Myanmar, Namibia, Netherlands — for the Kingdom in Europe and for the Netherlands
Antilles, New Zealand, Nicaragua, Nigeria, Norway, Pakistan, Papua New Guinea, Paraguay, Peru,
Philippines, Poland, Portugal, Qatar, Romania, Rwanda, Saint Kitts and Nevis, Saint Lucia, Saint Vincent &
the Grenadines, Senegal, Sierra Leone, Singapore, Slovak Republic, Slovenia, Solomon Islands, South
Africa, Spain, Sri Lanka, Surinam, Swaziland, Sweden, Switzerland, Tanzania, Thailand, Togo, Trinidad and
Tobago, Tunisia, Turkey, Uganda, United Arab Emirates, United Kingdom, United States, Uruguay,
Venezuela, Zambia, and Zimbabwe. See Annex A, Bautista Paper, infra.
8 Page 6; rollo p. 261.
9 In compliance, Ambassador Bautista submitted to the Court on August 12, 1996, a Memorandum (the
"Bautista Paper") consisting of 56 pages excluding annexes. This is the same document mentioned in
footnote no. 1.
10 Memorandum for Respondents, p. 13; rollo, p. 268.
11 Cf . Kilosbayan Incorporated vs. Morato, 246 SCRA 540, July 17, 1995 for a discussion on locus standi.
See also the Concurring Opinion of Mr. Justice Vicente V. Mendoza in Tatad vs. Garcia, Jr., 243 SCRA 473,
April 6, 1995, as well as Kilusang Mayo Uno Labor Center vs. Garcia, Jr., 239 SCRA 386, 414, December
23, 1994.
12 Aquino, Jr. vs. Ponce Enrile, 59 SCRA 183, 196, September 17, 1974, cited in Bondoc vs. Pineda, 201
SCRA 792, 795, September 26, 1991.
13 Guingona, Jr. vs. Gonzales, 219 SCRA 326, 337, March 1, 1993.
14 See Tañada and Macapagal vs. Cuenco, et al., 103 Phil. 1051 for a discussion on the scope of "political
question."
15 Section 1, Article VIII, (par. 2).
16 In a privilege speech on May 17, 1993, entitled "Supreme Court — Potential Tyrant?" Senator Arturo
Tolentino concedes that this new provision gives the Supreme Court a duty "to intrude into the
jurisdiction of the Congress or the President."
17 I Record of the Constitutional Commission 436.

18 Cf . Daza vs. Singson, 180 SCRA 496, December 21, 1989.
19 Memorandum for Petitioners, pp. 14-16; rollo, pp. 204-206.
20 Par. 4, Article XVI, WTO Agreement, Uruguay Round of Multilateral Trade Negotiations, Vol. 1. p. 146.
21 Also entitled "Declaration of Principles." The nomenclature in the 1973 Charter is identical with that
in the 1987's.
22 Philippine Political Law, 1962 Ed., p. 116.
23 Bernas, The Constitution of the Philippines: A Commentary, Vol. II, 1988 Ed., p. 2. In the very recent
case of Manila Prince Hotel v. GSIS, G.R. No. 122156, February 3, 1997, p. 8, it was held that "A provision
which lays down a general principle, such as those found in Art. II of the 1987 Constitution, is usually not
self-executing."
24 246 SCRA 540, 564, July 17, 1995. See also Tolentino vs. Secretary of Finance, G.R. No. 115455 and
consolidated cases, August 25, 1995.
25 197 SCRA 52, 68, May 14, 1991.
26 224 SCRA 792, 817, July 30, 1993.
27 Sec. 10, Article XII.
28 Sec. 12, Article XII.

29 Sec. 19, Art. II.
30 Sec. 13, Art. XII.
31 G.R. No. 122156, February 3, 1997, pp. 13-14.
32 Sec. 1, Art. XII.
33 Bautista Paper, p. 19.
34 Preamble, WTO Agreement p. 137, Vol. 1, Uruguay Round of Multilateral Trade Negotiations.
Emphasis supplied.
35 Sec. 19, Article II, Constitution.
36 III Records of the Constitutional Commission 252.
37 Sec. 13, Article XII, Constitution.
38 Justice Isagani A. Cruz, Philippine Political Law, 1995 Ed., p. 13, quoting his own article entitled, "A
Quintessential Constitution" earlier published in the San Beda Law Journal, April 1972; emphasis
supplied.
39 Par. 4, Article XVI (Miscellaneous Provisions), WTO Agreement, p. 146, Vol. 1, Uruguay Round of
Multilateral Trade Negotiations.
40 Memorandum for the Petitioners, p. 29; rollo, p. 219.
41 Sec. 24, Article VI, Constitution.
42 Subsection (2), Sec. 28, Article VI, Constitution.
43 Sec. 2, Article II, Constitution.
44 Cruz, Philippine Political Law, 1995 Ed., p. 55.
45 Salonga and Yap, op cit 305.
46 Salonga, op. cit., p. 287.
47 Quoted in Paras and Paras, Jr., International Law and World Politics, 1994 Ed., p. 178.
47-A Reagan vs. Commission of Internal Revenue, 30 SCRA 968, 973, December 27, 1969.
48 Trebilcock and Howse. The Regulation of International Trade, p. 14, London, 1995, cited on p. 55-56,
Bautista Paper.
49 Uruguay Round of Multilateral Trade Negotiations, Vol. 31, p. 25445.
50 Item 5, Sec. 5, Article VIII, Constitution.
51 Uruguay Round of Multilateral Trade Negotiations, Vol. 31, p. 25445.

53 See footnote 3 of the text of this letter.
54 Salonga and Yap, op cit., pp. 289-290.
55 The full text, without the signatures, of the Final Act is as follows:
Final Act Embodying the Results of the
Uruguay Round of Multilateral Trade Negotiations
1. Having met in order to conclude the Uruguay Round of Multilateral Trade Negotiations,
representatives of the governments and of the European Communities, members of the Trade
Negotiations Committee, agree that the Agreement Establishing the World Trade Organization (referred
to in the Final Act as the "WTO Agreement"), the Ministerial Declarations and Decisions, and the
Understanding on Commitments in Financial Services, as annexed hereto, embody the results of their
negotiations and form an integral part of this Final Act.
2. By signing to the present Final Act, the representatives agree.
authorities with a view to seeking approval of the Agreement in accordance with their procedures; and

3. The representatives agree on the desirability of acceptance of the WTO Agreement by all participants
in the Uruguay Round of Multilateral Trade Negotiations (hereinafter referred to as "participants") with
a view to its entry into force by 1 January 1995, or as early as possible thereafter. Not later than late
1994, Ministers will meet, in accordance with the final paragraph of the Punta del Este Ministerial
Declarations, to decide on the international implementation of the results, including the timing of their
entry into force.
4. the representatives agree that the WTO Agreement shall be open for acceptance as a whole, by
signature or otherwise, by all participants pursuant to Article XIV thereof. The acceptance and entry into
force of a Plurilateral Trade Agreement included in Annex 4 of the WTO Agreement shall be governed by
the provisions of that Plurilateral Trade Agreement.
5. Before accepting the WTO Agreement, participants which are not contracting parties to the General
Agreement on Tariffs and Trade must first have concluded negotiations for their accession to the
General Agreement and become contracting parties thereto. For participants which are not contracting
parties to the general Agreement as of the date of the Final Act, the Schedules are not definitive and
shall be subsequently completed for the purpose of their accession to the General Agreement and
acceptance of the WTO Agreement.
6. This Final Act and the texts annexed hereto shall be deposited with the Director-General to the
CONTRACTING PARTIES to the General Agreement on Tariffs and Trade who shall promptly furnish to
each participant a certified copy thereof.
DONE at Marrakesh this fifteenth day of April one thousand nine hundred and ninety-four, in a single
copy, in the English, French and Spanish languages, each text being authentic.
57 Baustista Paper, p. 16.
58 Uruguay Round of Multilateral Trade Negotiations, Vol. I, pp. 137-138.

59 See footnote 3 for complete text.
60 Taken from pp. 63-85, "Respondent" Memorandum.
61 Zarate vs. Olegario, G.R. No. 90655, October 7, 1996.
62 San Sebastian College vs. Court of Appeals, 197 SCRA 138, 144, May 15, 1991; Commissioner of
Internal Revenue vs. Court of Tax Appeals, 195 SCRA 444, 458 March 20, 1991; Simon vs. Civil Service
Commission, 215 SCRA 410, November 5, 1992; Bustamante vs. Commissioner on Audit, 216 SCRA 134,
136, November 27, 1992.
63 Paredes vs. Civil Service Commission, 192 SCRA 84, 94, December 4, 1990.
64 Sec. 21. No treaty or international agreement shall be valid and effective unless concurred in by at
least two-thirds of all the Members of the Senate."
65 Reader's Digest, December 1996 issue, p. 28.
THIRD DIVISION
[G.R. No. 131512. January 20, 2000.]
LAND TRANSPORTATION OFFICE [LTO], represented by Assistant Secretary Manuel F. Bruan, LTO
Regional Office, Region X represented by its Regional Director, Timoteo A. Garcia; and LTO Butuan
represented by Rosita G. Sadiaga, its Registrar, Petitioners, v. CITY OF BUTUAN, represented in this case
by Democrito D. Plaza II, City Mayor, Respondents.
DECISION
VITUG, J.:
The 1987 Constitution enunciates the policy that the territorial and political subdivisions shall enjoy local
autonomy. 1 In obedience to that, mandate of the fundamental law, Republic Act ("R.A.") No.7160,
otherwise known as the Local Government Code, 2 expresses that the territorial and political
subdivisions of the State shall enjoy genuine and meaningful local autonomy in order to enable them to
attain their fullest development as self-reliant communities and make them more effective partners in
the attainment of national goals, and that it is a basic aim of the State to provide for a more responsive
and accountable local government structure instituted through a system of decentralization whereby
local government units shall be given more powers, authority, responsibilities and resources.chanrobles
virtual lawlibrary
While the Constitution seeks to strengthen local units and ensure their viability, clearly, however, it has
never been the intention of that organic law to create an imperium in imperio and install an intra
sovereign political subdivision independent of a single sovereign state.
The Court is asked in this instance to resolve the issue of whether under the present set up the power of
the Land Registration Office ("LTO") to register, tricycles in particular, as well as to issue licenses for the
driving thereof, has likewise devolved to local government units.
The Regional Trial Court (Branch 2) of Butuan City held: 3 that the authority to register tricycles, the
grant of the corresponding franchise, the issuance of tricycle drivers’ license, and the collection of fees
therefor had all been vested in the Local Government Units ("LGUs"). Accordingly, it decreed the
issuance of a permanent writ of injunction against LTO, prohibiting and enjoining LTO, as well as its
employees and other persons acting in its behalf, from (a) registering tricycles and (b) issuing licenses to
drivers of tricycles. The Court of Appeals, on appeal to it, sustained the trial court.
The adverse rulings of both the court a quo and the appellate court prompted the LTO to file the instant
petition for review on certiorari to annul and set aside the decision, 4 dated 17 November 1997, of the
Court of Appeals affirming the permanent injunctive writ order of the Regional Trial Court (Branch 2) of
Butuan City.
Respondent City of Butuan asserts that one of the salient provisions introduced by the Local
Government Code is in the area of local taxation which allows LGUs to collect registration fees or
charges along with, in its view, the corresponding issuance of all kinds of licenses or permits for the
driving of tricycles.
The 1987 Constitution provides:jgc:chanrobles.com.ph
"Each local government unit shall have the power to create its own sources of revenues and to levy
taxes, fees, and charges subject to such guidelines and limitations as the Congress may provide,
consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively
to the local governments." 5
Section 129 and Section 133 of the Local Government Code read:jgc:chanrobles.com.ph
"SECTION 129. Power to Create Sources of Revenue. — Each local government unit shall exercise its
power to create its own sources of revenue and to levy taxes, fees, and charges subject to the provisions
herein, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue
exclusively to the local government units."cralaw virtua1aw library
"SECTION 133. Common Limitations on the Taxing Powers of Local Government Units. — Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and
barangays shall not extend to the levy of the following:jgc:chanrobles.com.ph
"x x x.
"(I) Taxes, fees or charges for the registration of motor vehicles and for the issuance of all kinds of
licenses or permits for the driving thereof, except tricycles."cralaw virtua1aw library
Relying on the foregoing provisions of the law, the Sangguniang Panlungsod ("SP") of Butuan, on 16
August 1992, passed SP Ordinance No.916-92 entitled "An Ordinance Regulating the Operation of
Tricycles-for-Hire, providing mechanism for the issuance of Franchise, Registration and Permit, and
Imposing Penalties for Violations thereof and for other Purposes." The ordinance provided for, among
other things, the payment of franchise fees for the grant of the franchise of tricycles-for-hire, fees for
the registration of the vehicle, and fees for the issuance of a permit for the driving thereof.
Petitioner LTO explains that one of the functions of the national government that, indeed, has been
transferred to local government units is the franchising authority over tricycles-for-hire of the Land
Transportation Franchising and Regulatory Board ("LTFRB") but not, it asseverates, the authority of LTO
to register all motor vehicles and to issue to qualified persons of licenses to drive such vehicles.
In order to settle the variant positions of the parties, the City of Butuan, represented by its City Mayor
Democrito D. Plaza, filed on 28 June 1994 with the trial court a petition for "prohibition, mandamus,
injunction with a prayer for preliminary restraining order ex-parte" seeking the declaration of the
validity of SP Ordinance No.962-93 and the prohibition of the registration of tricycles-for-hire and the
issuance of licenses for the driving thereof by the LTO.
LTO opposed the prayer in the petition.
On 20 March 1995, the trial court rendered a resolution; the dispositive portion
read:chanroblesvirtuallawlibrary
"In view of the foregoing, let a permanent injunctive writ be issued against the respondent Land
Transportation Office and the other respondents, prohibiting and enjoining them, their employees,
officers, attorney’s or other persons acting in their behalf from forcing or compelling Tricycles to be
registered with, and drivers to secure their licenses from respondent LTO or secure franchise from LTFRB
and from collecting fees thereon. It should be understood that the registration, franchise of tricycles and
driver’s license/permit granted or issued by the City of Butuan are valid only within the territorial limits
of Butuan City.
"No pronouncement as to costs." 6

Petitioners timely moved for a reconsideration of the above resolution but it was to no avail. Petitioners
then appealed to the Court of Appeals. In its now assailed decision, the appellate court, on 17 November
1997, sustained the trial court. It ruled:jgc:chanrobles.com.ph
"WHEREFORE, the petition is hereby DISMISSED and the questioned permanent injunctive writ issued by
the court a quo dated March 20, 1995 AFFIRMED." 7
Coming up to this Court, petitioners raise this sole assignment of error, to wit:jgc:chanrobles.com.ph
"The Court of Appeals [has] erred in sustaining the validity of the writ of injunction issued by the trial
court which enjoined LTO from (1) registering tricycles-for-hire and (2) issuing licenses for the driving
thereof since the Local Government Code devolved only the franchising authority of the LTFRB.
Functions of the LTO were not devolved to the LGU’s." 8
The petition is impressed with merit.
The Department of Transportation and Communications 9 ("DOTC"), through the LTO and the LTFRB, has
since been tasked with implementing laws pertaining to land transportation. The LTO is a line agency
under the DOTC whose powers and functions, pursuant to Article III, Section 4 (d) (1), 10 of R.A.
No.4136, otherwise known as Land Transportation and Traffic Code, as amended, deal primarily with the
registration of all motor vehicles and the licensing of drivers thereof. The LTFRB, upon the other hand, is
the governing body tasked by E.O. No. 202, dated 19 June 1987, to regulate the operation of public
utility or "for hire" vehicles and to grant franchises or certificates of public convenience ("CPC"). 11
Finely put, registration and licensing functions are vested in the LTO while franchising and regulatory
responsibilities had been vested in the LTFRB.
Under the Local Government Code, certain functions of the DOTC were transferred to the LGUs,
thusly:jgc:chanrobles.com.ph
"SECTION 458. Powers, Duties, Functions and Compensation. —

"x x x
"(3) Subject to the provisions of Book II of this Code, enact ordinances granting franchises and
authorizing the issuance of permits or licenses, upon such conditions and for such purposes intended to
promote the general welfare of the inhabitants of the city and pursuant to this legislative authority
shall:jgc:chanrobles.com.ph
"x x x.
"(VI) Subject to the guidelines prescribed by the Department of Transportation and Communications,
regulate the operation of tricycles and grant franchises for the operation thereof within the territorial
jurisdiction of the city." (Emphasis supplied)
LGUs indubitably now have the power to regulate the operation of tricycles-for-hire and to grant
franchises for the operation thereof. "To regulate" means to fix, establish, or control; to adjust by rule,
method, or established mode; to direct by rule or restriction; or to subject to governing principles or
laws. 12 A franchise is defined to be a special privilege to do certain things conferred by government on
an individual or corporation, and which does not belong to citizens generally of common right. 13 On the
other hand, "to register" means to record formally and exactly, to enroll, or to enter precisely in a list or
the like, 14 and a "driver’s license" is the certificate or license issued by the government which
authorizes a person to operate a motor vehicle. 15 The devolution of the functions of the DOTC,
performed by the LTFRB, to the LGUs, as so aptly observed by the Solicitor General, is aimed at curbing
the alarming increase of accidents in national highways involving tricycles. It has been the perception
that local governments are in good position to achieve the end desired by the law-making body because
of their proximity to the situation that can enable them to address that serious concern better than the
national government.
It may not be amiss to state, nevertheless, that under Article 458 (a)[3-VI] of the Local Government
Code, the power of LGUs to regulate the operation of tricycles and to grant franchises for the operation
thereof is still subject to the guidelines prescribed by the DOTC. In compliance therewith, the
Department of Transportation and Communications ("DOTC") issued "Guidelines to Implement the
Devolution of LTFRBs Franchising Authority over Tricycles-For-Hire to Local Government units pursuant
to the Local Government Code." Pertinent provisions of the guidelines state:chanrobles.com :
chanrobles.com.ph
"In lieu of the Land Transportation Franchising and Regulatory Board (LTFRB) in the DOTC, the
Sangguniang Bayan/Sangguniang Panlungsod (SB/SP) shall perform the following:jgc:chanrobles.com.ph
"(a) Issue, amend, revise, renew, suspend, or cancel MTOP and prescribe the appropriate terms and
conditions therefor;
"x x x.
"Operating Conditions:jgc:chanrobles.com.ph
"1. For safety reasons, no tricycles should operate on national highways utilized by 4 wheel vehicles
greater than 4 tons and where normal speed exceed 40 KPH. However, the SB/SP may provide
exceptions if there is no alternative routs.
"2. Zones must be within the boundaries of the municipality/city. However, existing zones within more
than one municipality/city shall be maintained, provided that operators serving said zone shall secure
MTOP’s from each of the municipalities/cities having jurisdiction over the areas covered by the zone.
"3. A common color for tricycles-for-hire operating in the same zone may be imposed. Each unit shall be
assigned and bear an identification number, aside from its LTO license plate number.
"4. An operator wishing to stop service completely, or to suspend service for more than one month,
should report in writing such termination or suspension to the SB/SP which originally granted the MTOP
prior thereto. Transfer to another zone may be permitted upon application.
"5. The MTOP shall be valid for three (3) years, renewable for the same period. Transfer to another
zone, change of ownership of unit or transfer of MTOP shall be construed as an amendment to an MTOP
and shall require appropriate approval of the SB/SP.
"6. Operators shall employ only drivers duly licensed by LTO for tricycles-for-hire.
"7. No tricycle-for-hire shall be allowed to carry more passengers and/or goods than it is designed for.
"8. A tricycle-for-hire shall be allowed to operate like a taxi service, i.e., service is rendered upon
demand and without a fixed route within a zone." 16
Such as can be gleaned from the explicit language of the statute, as well as the corresponding guidelines
issued by DOTC, the newly delegated powers pertain to the franchising and regulatory powers
theretofore exercised by the LTFRB and not to the functions of the LTO relative to the registration of
motor vehicles and issuance of licenses for the driving thereof . Clearly unaffected by the Local
Government Code are the powers of LTO under R.A. No.4136 requiring the registration of all kinds of
motor vehicles "used or operated on or upon any public highway" in the country. Thus —
"SECTION 5. All motor vehicles and other vehicles must be registered. — (a) No motor vehicle shall be
used or operated on or upon any public highway of the Philippines unless the same is properly
registered for the current year in accordance with the provisions of this Act (Article 1, Chapter II, R.A.
No. 4136).
The Commissioner of Land Transportation and his deputies are empowered at anytime to examine and
inspect such motor vehicles to determine whether said vehicles are registered, or are unsightly, unsafe,
improperly marked or equipped, or otherwise unfit to be operated on because of possible excessive
damage to highways, bridges and other infrastructures. 17 The LTO is additionally charged with being
the central repository and custodian of all records of all motor vehicles. 18
The Court shares the apprehension of the Solicitor General if the above functions were to likewise
devolve to local government units; he states:jgc:chanrobles.com.ph
"If the tricycle registration function of respondent LTO is decentralized, the incidence of theft of tricycles
will most certainly go up, and stolen tricycles registered in one local government could be registered in
another with ease. The determination of ownership thereof will also become very difficult.
"Fake driver’s licenses will likewise proliferate. This likely scenario unfolds where a tricycle driver, not
qualified by petitioner LTO’s testing, could secure a license from one municipality, and when the same is
confiscated, could just go another municipality to secure another license.chanrobles.com :
virtuallawlibrary
"Devolution will entail the hiring of additional personnel charged with inspecting tricycles for road
worthiness, testing drivers, and documentation. Revenues raised from tricycle registration may not be
enough to meet salaries of additional personnel and incidental costs for tools and equipment." 19
The reliance made by respondents on the broad taxing power of local government units, specifically
under Section 133 of the Local Government Code, is tangential. Police power and taxation, along with
eminent domain, are inherent powers of sovereignty which the State might share with local government
units by delegation given under a constitutional or a statutory fiat. All these inherent powers are for a
public purpose and legislative in nature but the similarities just about end there. The basic aim of police
power is public good and welfare. Taxation, in its case, focuses on the power of government to raise
revenue in order to support its existence and carry out its legitimate objectives. Although correlative to
each other in many respects, the grant of one does not necessarily carry with it the grant of the other.
The two powers are, by tradition and jurisprudence, separate and distinct powers, varying in their
respective concepts, character, scopes and limitations. To construe the tax provisions of Section 133(1)
indistinctively would result in the repeal to that extent of LTO’s regulatory power which evidently has
not been intended. If it were otherwise, the law could have just said so in Section 447 and 458 of Book
III of the Local Government Code in the same manner that the specific devolution of LTFRB’s power on
franchising of tricycles has been provided. Repeal by implication is not favored. 20 The power over
tricycles granted under Section 458(a)(3)(VI) of the Local Government Code to LGUs is the power to
regulate their operation and to grant franchises for the operation thereof. The exclusionary clause
contained in the tax provisions of Section 133(1) of the Local Government Code must not be held to
have had the effect of withdrawing the express power of LTO to cause the registration of all motor
vehicles and the issuance of licenses for the driving thereof. These functions of the LTO are essentially
regulatory in nature, exercised pursuant to the police power of the State, whose basic objectives are to
achieve road safety by insuring the road worthiness of these motor vehicles and the competence of
drivers prescribed by R. A. 4136. Not insignificant is the rule that a statute must not be construed in
isolation but must be taken in harmony with the extant body of laws. 21
The Court cannot end this decision without expressing its own serious concern over the seeming laxity in
the grant of franchises for the operation of tricycles-for-hire and in allowing the indiscriminate use by
such vehicles on public highways and principal thoroughfares. Senator Aquilino C. Pimentel, Jr., the
principal author, and sponsor of the bill that eventually has become to be known as the Local
Government Code, has aptly remarked:jgc:chanrobles.com.ph
"Tricycles are a popular means of transportation, specially in the countryside. They are, unfortunately,
being allowed to drive along highways and principal thoroughfares where they pose hazards to their
passengers arising from potential collisions with buses, cars and jeepneys.
"The operation of tricycles within a municipality may be regulated by the Sangguniang Bayan. In this
connection, the Sangguniang concerned would do well to consider prohibiting the operation of tricycles
along or across highways invite collisions with faster and bigger vehicles and impede the flow of traffic."
22
The need for ensuring public safety and convenience to commuters and pedestrians alike is paramount.
It might be well, indeed, for public officials concerned to pay heed to a number of provisions in our laws
that can warrant in appropriate cases an incurrence of criminal and civil liabilities. Thus —
The Revised Penal Code —
"ARTICLE 208. Prosecution of offenses; negligence and tolerance. — The penalty of prision correccional
in its minimum period and suspension shall be imposed upon any public officer, or officer of the law,
who, in dereliction of the duties of his office, shall maliciously refrain from instituting prosecution for the
punishment of violators of the law, or shall tolerate the commission of offenses."cralaw virtua1aw
library
The Civil Code —
"ARTICLE 27. Any person suffering material or moral loss 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."cralaw virtua1aw library
"ARTICLE 34. When a member of a city or municipal police force refuses or fails to render aid or
protection to any person in case of danger to life or property, such peace officer shall be primarily liable
for damages, and the city or municipality shall be subsidiarily responsible therefor. The civil action
herein recognized shall be independent of any criminal, proceedings, and a preponderance of evidence
shall suffice to support such action."cralaw virtua1aw library
"ARTICLE 2189. Provinces, cities and municipalities shall be liable for damages for the death of, or
injuries suffered by, any person by reason of the defective condition of roads, streets, bridges, public
buildings, and other public works under their control or supervision."cralaw virtua1aw library
The Local Government Code —
"SECTION 24. Liability for Damages. — Local government units and their officials are not exempt from
liability for death or injury to persons or damage to property." chanroblesvirtuallawlibrary
WHEREFORE, the assailed decision which enjoins the Land Transportation Office from requiring the due
registration of tricycles and a license for the driving thereof is REVERSED and SET ASIDE.
No pronouncements on costs.
Let copies of this decision be likewise furnished the Department of Interior and Local Governments, the
Department of Public Works and Highways and the Department of Transportation and Communication.
SO ORDERED.chanrobles virtual lawlibrary
Melo, Panganiban, Purisima and Gonzaga-Reyes, JJ., concur.
Endnotes:
1. Section 2, Article X of the 1987 Constitution.

2. The law was approved on 10 October 1991 and it became effective on 01 January 1992.
3. Per Judge Rosarito Dabalos.
4. Penned by Justice Jorge S. Imperial, concurred in by Justices Ramon U. Mabutas, Jr. and Hilarion L.
Aquino.
5. Sec. 5, Art. X.
6. Rollo, p. 34.
7. Rollo, p. 31.
8. Rollo, pp.10-11.
9. Book IV, Title XV, Chapter 1, Section 2 of the Administrative Code of 1987
reads:jgc:chanrobles.com.ph
"SEC. 2. Mandate. The Department of Transportation and Communications shall be the primary policy,
planning, programming, coordinating, implementing, regulating and administrative entity of the
Executive Branch of the government in the promotion, development and regulation of dependable and
coordinated networks of transportation and communication system as well as in the fast, safe, efficient
and reliable postal, transportation and communications services."cralaw virtua1aw library
10. (1) With the approval of the Secretary of Public Works (Transportation) and Communications, to
issue rules and regulations not in conflict with the provisions of this Act, prescribing the procedure for
the examination, licensing and bonding of drivers; the registration and re-registration of motor vehicles,
transfer of ownership, change of status; the replacement of lost certificates, licenses, badges, permits or
number plates; and to prescribe the minimum standards and specifications including allowable gross
weight, allowable length, width and height of motor vehicles, distribution of loads, allowable loads on
tires, change of tire sizes, body design or carrying capacity subsequent to registration and all other
special cases which may arise for which no specific provision is otherwise made in this Act." (Emphasis
supplied)
11. "SEC. 5. Powers and Functions of the Land Transportation Franchising and Regulatory Board. — The
Board shall have the following powers and functions:chanrob1es virtual 1aw library
a. To prescribe and regulate routes of service. economically viable capacities and zones or areas of
operation of public land transportation services provided by motorized vehicles in accordance with the
public land transportation development plans and programs approved by the Department of
Transportation and Communications; b. To issue, amend, revise, suspend or cancel Certificates of Public
Convenience or permits authorizing the operation of public land transportation services provided by
motorized vehicles. and to prescribe the appropriate terms and conditions therefor;"
12. Black’s Law Dictionary, Sixth edition, p. 1286.
13. Ibid., p.658.
14. Ibid., p. 1283.
15. Ibid., p. 495.
16. Rollo, pp. 153-154.
17. Section 4(d)(6). Article III, Chapter I.
18. Section 4(d)(2). Article III, Chapter I. reads in full:" (2) To compile and arrange all applications,
certificates, permits, licenses, and to enter, note and record thereon transfers, notifications,
suspensions, revocations, or judgments of conviction rendered by competent courts concerning
violations of this Act, with the end in view of preserving and making easily available such documents and
records to public officers and private persons properly and legitimately interested therein."cralaw
virtua1aw library
19. Rollo, pp. 159-160.
20. In Laguna Lake Development Authority v. Court of Appeals, 20 this Court has ruled that a special law
cannot be repealed, amended or altered by a subsequent general law by mere supposition, and that the
charter of LLDA which embodies a valid exercise of police power should prevail over the Local
Government Code on matters affecting the lake.
21. Sajonas v. CA, 258 SCRA 79.
22. Rollo, pp. 152.153.
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 127937 July 28, 1999
NATIONAL TELECOMMUNICATIONS COMMISSION, petitioner,
vs.
HONORABLE COURT OF APPEALS and PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, respondents.
PURISIMA, J.:
At bar is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court seeking to
modify the October 30, 1996 Decision 1 and the January 27, 1997 Resolution 2 of the Court of Appeals 3
in CA-G.R. SP No. 34063.1âwphi1.nêt
The antecedent facts that matter can be culled as follows:
Sometime in 1988, the National Telecommunications Commission (NTC) served on the Philippine Long
Distance Telephone Company (PLDT) the following assessment notices and demands for payment:
1. the amount of P7,495,161.00 as supervision and regulation fee under Section 40 (e) of the PSA for the
said year, 1988, computed at P0.50 per P100.00 of the Protestant's (PLDT) outstanding capital stock as
at December 31, 1987 which then consisted of Serial Preferred Stock amounting to P1,277,934,390.00
(Billion) and Common Stock of P221,097,785 (Million) or a total of P1,499,032,175.00 (Billion).
2. the amount of P9.0 Million as permit fee under Section 40 (f) of the PSA for the approval of the
protestant's increase of its authorized capital stock from P2.7 Billion to P4.5 Billion; and
3. the amounts of P12,261,600.00 and P33,472,030.00 as permit fees under Section 40 (g) of the PSA in
connection with the Commission's decisions in NTC Cases Nos. 86-13 and 87-008 respectively, approving
the Protestant's equity participation in the Fiber Optic Interpacific Cable systems and X-5 Service
Improvement and Expansion Program. 4
In its two letter-protests 5 dated February 23, 1988 and July 14, 1988, and position papers 6 dated
November 8, 1990 and March 12, 1991, respectively, the PLDT challenged the aforesaid assessments,
theorizing inter alia that:
(a) The assessments were being made to raise revenues and not as mere reimbursements for actual
regulatory expenses in violation of the doctrine in PLDT vs. PSC, 66 SCRA 341 [1975];
(b) The assessment under Section 40 (e) should only have been on the basis of the par values of private
respondent's outstanding capital stock;
(c) Petitioner has no authority to compel private respondents payment of the assessed fees under
Section 40 (f) for the increase of its authorized capital stock since petitioner did not render any
supervisory or regulatory activity and incurred no expenses in relation thereto.
xxx xxx xxx 7
On September 29, 1993, the NTC rendered a Decision 8 in NTC Case No. 90-223, denying the protest of
PLDT and disposing thus:
FOR ALL THE FOREGOING, finding PLDT's protest to be without merit, the Commission has no alternative
but to uphold the law and DENIES the protest of PLDT. Unless otherwise restrained by a competent
court of law, the Common Carrier Authorization Department (CCAD) is hereby directed to update its
assessments and collections on PLDT and all public telecommunications carriers for the payment of the
fees in accordance with the provisions of Section 40 (e) (f) and (g) of the Revised NTC Schedule of Fees
and Charges.
This decision takes effect immediately.
SO ORDERED.
On October 22, 1993, PLDT interposed a Motion for Reconsideration, 9 which was denied by NTC in an
Order 10 issued on May 3, 1994.
On May 12, 1994, PLDT appealed the aforesaid Decision to the Court of Appeals, which came out with its
questioned Decision of October 30, 1996, modifying the disposition of NTC as follows:
WHEREFORE, the assailed decision and order of the respondent Commission dated September 29, 1993
and May 03, 1994, respectively, in NTC Case No. 90-223 are hereby MODIFIED. The Commission is
ordered to recompute its assessments and demands for payment from petitioner PLDT as follows.
A. For annual supervision and regulation fees (SRF) under Section 40 (e) of the Public Service Act, as
amended, they should be computed at fifty centavos for each one hundred pesos or fraction thereof of
the par value of the capital stock subscribed or paid excluding stock dividends, premiums or capital in
excess of par.
B. For permit fees for the approval of petitioner's increase of authorized capital stock under Section 40
(f) of the same Act, they should be computed at fifty for each one hundred pesos or fraction thereof,
regardless of any regulatory service or expense incurred by respondent.
On November 20, 1996, NTC moved for partial reconsideration of the abovementioned Decision, with
respect to the basis of the assessment under Section 40 (e), i.e., par value of the subscribed capital
stock. It also sought a partial reconsideration of the fee of fifty (P0.50) centavos for the issuance or
increasing of the capital stock under Section 40 (f). 11
With the denial of its motions for reconsideration by the Resolution of the Court of Appeals dated
January 27, 1997, petitioner found its way to this Court via the present Petition; posing as sole issue:
WHETHER THE COURT OF APPEALS ERRED IN HOLDING THAT THE COMPUTATION OF SUPERVISION AND
REGULATION FEES UNDER SECTION 40 (F) OF THE PUBLIC SERVICE ACT SHOULD BE BASED ON THE PAR
VALUE OF THE SUBSCRIBED CAPITAL STOCK.
Simply put, the submission of NTC is that the fee under Section 40 (e) should be based on the market
value of PLDT's outstanding capital stock inclusive of stock dividends and premium, and not on the par
value of PLDT's capital stock excluding stock dividends and premium, as contended by PLDT.
Succinct and clear is the ruling of this Court in the case of Philippine Long Distance Telephone Company
vs. Public Service Commission, 66 SCRA 341, that the basis for computation of the fee to be charged by
NTC on PLDT, is " the capital stock subscribed or paid and not, alternatively, the property and
equipment."
The law in point is clear and categorical. There is no room for construction. It simply calls for application.
To repeat, the fee in question is based on the capital stock subscribed or paid, nothing less nothing
more.
It bears stressing that it is not the NTC that imposed such a fee. It is the legislature itself. Since Congress
has the power to exercise the State inherent powers of Police Power, Eminent Domain and Taxation, the
distinction between police power and the power to tax, which could be significant if the exercising
authority were mere political subdivisions (since delegation by it to such political subdivisions of one
power does not necessarily include the other), would not be of any moment when, as in the case under
consideration, Congress itself exercises the power. All that is to be done would be to apply and enforce
the law when sufficiently definitive and not constitutional infirm.
The term "capital" and other terms used to describe the capital structure of a corporation are of
universal acceptance, and their usages have long been established in jurisprudence. Briefly, capital
refers to the value of the property or assets of a corporation. The capital subscribed is the total amount
of the capital that persons (subscribers or shareholders) have agreed to take and pay for, which need
not necessarily be, and can be more than, the par value of the shares. In fine, it is the amount that the
corporation receives, inclusive of the premiums if any, in consideration of the original issuance of the
shares. In the case of stock dividends, it is the amount that the corporation transfers from its surplus
profit account to its capital account. It is the same amount that can loosely be termed as the "trust
fund" of the corporation. The "Trust Fund" doctrine considers this subscribed capital as a trust fund for
the payment of the debts of the corporation, to which the creditors may look for satisfaction. Until the
liquidation of the corporation, no part of the subscribed capital may be returned or released to the
stockholder (except in the redemption of redeemable shares) without violating this principle. Thus,
dividends must never impair the subscribed capital; subscription commitments cannot be condoned or
remitted; nor can the corporation buy its own shares using the subscribed capital as the consideration
therefor. 12
In the same way that the Court in PLDT vs. PSC has rejected the "value of the property and equipment"
as being the proper basis for the fee imposed by Section 40(e) of the Public Service Act, as amended by
Republic Act No. 3792, so also must the Court disallow the idea of computing the fee on "the par value
of [PLDT's] capital stock subscribed or paid excluding stock dividends, premiums, or capital in excess of
par." Neither, however, is the assessment made by the National Telecommunications Commission on
the basis of the market value of the subscribed or paid-in capital stock acceptable since it is itself a
deviation from the explicit language of the law.
From the pleadings on hand, it can be gleaned that the assessment for supervision and regulation fee
under Section 40(e) made by NTC for 1988, computed at P0.50 per 100 of PLDT's outstanding capital
stock as of December 31, 1987, amounted to P7,495,161.00. The same was based on the amount of
P1,277,934,390.00 of serial preferred stocks and P221,097,785.00 of common stocks or a total of
P1,499,032,175.00. The assessment was reported to include stock dividends, premium on issued
common shares and premium on preferred shares converted into common stock. 13 The actual capital
paid or the amount of capital stock paid and for which PLDT received actual payments were not
disclosed or extant in the records before the Court. The only other item available is the amount assessed
by petitioner from PLDT, which had been based on market value of the outstanding capital stock on
given dates. 14
All things studiedly considered, and mindful of the aforesaid ruling of this Court in the case of Philippine
Long Distance Telephone Company vs. Public Service Commission, it should be reiterated that the
proper basis for the computation of subject fee under Section 40(e) of the Public Service Act, as
amended by Republic Act No. 3792, is "the capital stock subscribed or paid and not, alternatively, the
property and equipment.1âwphi1.nêt
WHEREFORE, the decision of the Court of Appeals, dated October 30, 1996, and its Resolution, dated
January 27, 1997, in CA G.R. SP No. 34063, as well as the decision of the National Telecommunication
Commission, dated September 29, 1993, and Order, dated May 3, 1994, in NTC case No. 90-223, are
hereby SET ASIDE and the National Telecommunication Commission is hereby ordered to make a re-
computation of the fee to be imposed on Philippine Long Distance Telephone Company on the basis of
the latter's capital stock subscribed or paid and strictly in accordance with the foregoing disquisition and
conclusion.
No pronouncement as to costs.
SO ORDERED.
Romero, Vitug and Gonzaga-Reyes, JJ., concur.
Panganiban, J., no part. Former counsel of a party.
Footnotes
1 Rollo, pp. 30-52.
2 Rollo, pp. 54-55.
3 Special Thirteenth Division composed of Justices F.A. Martin. Jr., (Chairman); Ma. Alicia Austria-
Martinez (Member); and Ruben T. Reyes (Ponente).
4 Petition, p. 3, Rollo, p. 11.
5 Annexes "G" and "H," Petition; Rollo, pp. 59-71.
6 Annexes "I" and "J," Petition, Rollo, pp. 72; 92-93.
7 Petition, p. 5; Rollo, p. 13.
8 Annex "K," Petition; Rollo, pp. 94-106.

9 Annex "M," Petition, Rollo, pp. 120-125.
10 NTC's Order, "Annex" N, "Petition; Rollo, pp. 126-136.
11 See Annex "V," Petition ; Rollo, pp. 231-236.
12 See Sec. 122, Corporation Code.
13 Rollo, p. 158.
14 Rollo, pp. 108-109; pp. 139-140.

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G.R. No.

119286 October 13, 2004

PASEO REALTY & DEVELOPMENT CORPORATION, petitioner,

The factual antecedents4 are as follows:

Balance as of April 16, 1990

Balance as of January 2, 1991

It would appear from petitioner’s submission as follows:

(a) Pay the excess tax still due; or

Revenue Regulation No. 10-77 of the Bureau of Internal Revenue clarifies:

(A) Pay the balance of the tax still due; or

(B) Carry-over the excess credit; or

Puno, Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.

** Representing the creditable taxes withheld at source for 1989.

*** Representing the tax due for 1989.

3 Dated October 21, 1993; CTA Records, pp. 72-75.

5 Id. at 37, pp. 1-2 of the Decision.

6 Id. at 24-34, Annex "A" of the instant petition.

7 Id. at 41-46, Annex "C" of the instant petition.

8 Id. at 53, Annex "E" of the instant petition.

10 Rollo, pp. 10-64, with Annexes.

20 Supra, note 2 at 212-213, petitioner’s Memorandum.

22 Supra, note 11.

23 Supra, note 2 at 62-63.

24 In this case, the lessee of petitioner’s properties, Citibank.

27 386 Phil. 719 (2000).

29 G.R. No. 138342, July 8, 2003, 405 SCRA 380.

31 Tax Reform Act of 1997.

Republic of the Philippines

G.R. No. 92585 May 8, 1992

THE HONORABLE COMMISSION ON AUDIT, HONORABLE COMMISSIONER BARTOLOME C. FERNANDEZ

DAVIDE, JR., J.:

The Fund herein created shall be used for the following:

We, therefore, very respectfully propose the following:

Dear Atty. dela Paz:

Recovery of financing charges P162,728,475 /a

Product sales 48,402,398 /b

Borrow loan arrangement 14,034,786 /c

Sales to Atlas/Marcopper 32,097,083 /d

Disallowances of OEA 130,420,235

The reasons for the disallowances are discussed hereunder:

a. Recovery of Financing Charges

b. Product Sales –– Sales to International Vessels/Airlines

c. Inventory losses –– Settlement of Ad Valorem

A) COA-DISALLOWED CLAIMS ARE AUTHORIZED UNDER EXISTING RULES, ORDERS, RESOLUTIONS,

xxx xxx xxx

B) ADMINISTRATIVE INTERPRETATIONS IN THE COURSE OF EXERCISE OF EXECUTIVE POWER BY

C) LEGAL BASIS FOR RETENTION OF OFFSET ARRANGEMENT, AS AUTHORIZED BY THE EXECUTIVE

xxx xxx xxx

RESPONDENT COMMISSION ERRED IN DISALLOWING

CPI's 17 CLAIM FOR REIMBURSEMENT OF UNDERRECOVERY ARISING FROM SALES TO NPC.

RESPONDENT COMMISSION ERRED IN DENYING CPI's CLAIMS FOR REIMBURSEMENT ON SALES TO

1-87, dated 18 February 1987, which provides:

Financing Period Reimbursement Rate

Pesos per Barrel

Less than 180 days None

180 days to 239 days 1.90

241 (sic) days to 299 4.02

300 days to 369 (sic) days 6.16

The above rates shall be subject to review every sixty

HON. VICENTE T. PATERNO

Deputy Executive Secretary

For Energy Affairs

Office of the President