G.R. No. L-28896 February 17, 1988 COMMISSIONER OF INTERNAL REVEN E, petitioner, vs. ALG E, INC., a!

" T#E CO RT OF TA$ A%%EALS, respondents. CR &, J.: Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance On the other hand, such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself. It is therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxation, which is the promotion of the common good, may be achieved. The main issue in this case is whether or not the Collector of Internal Revenue correctly disallowed the P !,"""."" deduction claimed by private respondent #lgue as legitimate business expenses in its income tax returns. The corollary issue is whether or not the appeal of the private respondent from the decision of the Collector of Internal Revenue was made on time and in accordance with law. $e deal first with the procedural %uestion. The record shows that on &anuary '(, ')*!, the private respondent, a domestic corporation engaged in engineering, construction and other allied activities, received a letter from the petitioner assessing it in the total amount of P+,,'+,.+! as delin%uency income taxes for the years ')!+ and ')!). 1 On &anuary '+, ')*!, #lgue flied a letter of protest or re%uest for reconsideration, which letter was stamp received on the same day in the office of the petitioner. 2 On -arch '., ')*!, a warrant of distraint and levy was presented to the private respondent, through its counsel, #tty. #lberto /uevara, &r., who refused to receive it on the ground of the pending protest. ' # search of the protest in the doc0ets of the case proved fruitless. #tty. /uevara produced his file copy and gave a photostat to 1IR agent Ramon Reyes, who deferred service of the warrant. ( On #pril , ')*!, #tty. /uevara was finally informed that the 1IR was not ta0ing any action on the protest and it was only then that he accepted the warrant of distraint and levy earlier sought to be served. ) 2ixteen days later, on #pril .,, ')*!, #lgue filed a petition for review of the decision of the Commissioner of Internal Revenue with the Court of Tax #ppeals. 6 The above chronology shows that the petition was filed seasonably. #ccording to Rep. #ct 3o. ''.!, the appeal may be made within thirty days after receipt of the decision or ruling challenged. 7 It is true that as a rule the warrant of distraint and levy is 4proof of the finality of the assessment4 8 and renders hopeless a re%uest for

reconsideration,4 9 being 4tantamount to an outright denial thereof and ma0es the said re%uest deemed re5ected.41* 1ut there is a special circumstance in the case at bar that prevents application of this accepted doctrine. The proven fact is that four days after the private respondent received the petitioner6s notice of assessment, it filed its letter of protest. This was apparently not ta0en into account before the warrant of distraint and levy was issued7 indeed, such protest could not be located in the office of the petitioner. It was only after #tty. /uevara gave the 1IR a copy of the protest that it was, if at all, considered by the tax authorities. 8uring the intervening period, the warrant was premature and could therefore not be served. #s the Court of Tax #ppeals correctly noted,4 11 the protest filed by private respondent was not pro forma and was based on strong legal considerations. It thus had the effect of suspending on &anuary '+, ')*!, when it was filed, the reglementary period which started on the date the assessment was received, vi9., &anuary '(, ')*!. The period started running again only on #pril , ')*!, when the private respondent was definitely informed of the implied re5ection of the said protest and the warrant was finally served on it. :ence, when the appeal was filed on #pril .,, ')*!, only ." days of the reglementary period had been consumed. 3ow for the substantive %uestion. The petitioner contends that the claimed deduction of P !,"""."" was properly disallowed because it was not an ordinary reasonable or necessary business expense. The Court of Tax #ppeals had seen it differently. #greeing with #lgue, it held that the said amount had been legitimately paid by the private respondent for actual services rendered. The payment was in the form of promotional fees. These were collected by the Payees for their wor0 in the creation of the ;egetable Oil Investment Corporation of the Philippines and its subse%uent purchase of the properties of the Philippine 2ugar <state 8evelopment Company. Parenthetically, it may be observed that the petitioner had Originally claimed these promotional fees to be personal holding company income 12 but later conformed to the decision of the respondent court re5ecting this assertion. 1' In fact, as the said court found, the amount was earned through the 5oint efforts of the persons among whom it was distributed It has been established that the Philippine 2ugar <state 8evelopment Company had earlier appointed #lgue as its agent, authori9ing it to sell its land, factories and oil manufacturing process. Pursuant to such authority, #lberto /uevara, &r., <duardo /uevara, Isabel /uevara, <dith, O6=arell, and Pablo 2anche9, wor0ed for the formation of the ;egetable Oil Investment Corporation, inducing other

persons to invest in it. 1( >ltimately, after its incorporation largely through the promotion of the said persons, this new corporation purchased the P2<8C properties. 1) =or this sale, #lgue received as agent a commission of P'.*,"""."", and it was from this commission that the P !,"""."" promotional fees were paid to the aforenamed individuals. 16 There is no dispute that the payees duly reported their respective shares of the fees in their income tax returns and paid the corresponding taxes thereon. 17 The Court of Tax #ppeals also found, after examining the evidence, that no distribution of dividends was involved. 18 The petitioner claims that these payments are fictitious because most of the payees are members of the same family in control of #lgue. It is argued that no indication was made as to how such payments were made, whether by chec0 or in cash, and there is not enough substantiation of such payments. In short, the petitioner suggests a tax dodge, an attempt to evade a legitimate assessment by involving an imaginary deduction. $e find that these suspicions were ade%uately met by the private respondent when its President, #lberto /uevara, and the accountant, Cecilia ;. de &esus, testified that the payments were not made in one lump sum but periodically and in different amounts as each payee6s need arose. 19 It should be remembered that this was a family corporation where strict business procedures were not applied and immediate issuance of receipts was not re%uired. <ven so, at the end of the year, when the boo0s were to be closed, each payee made an accounting of all of the fees received by him or her, to ma0e up the total of P !,"""."". 2* #dmittedly, everything seemed to be informal. This arrangement was understandable, however, in view of the close relationship among the persons in the family corporation. $e agree with the respondent court that the amount of the promotional fees was not excessive. The total commission paid by the Philippine 2ugar <state 8evelopment Co. to the private respondent was P'.!,"""."". 21#fter deducting the said fees, #lgue still had a balance of P!","""."" as clear profit from the transaction. The amount of P !,"""."" was *"? of the total commission. This was a reasonable proportion, considering that it was the payees who did practically everything, from the formation of the ;egetable Oil Investment Corporation to the actual purchase by it of the 2ugar <state properties. This finding of the respondent court is in accord with the following provision of the Tax Code@ 2<C. ,". Deductions from gross income.AAIn computing net income there shall be allowed as deductions B CaD <xpenses@

C'D In general.AA#ll the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered7 ... 22 and Revenue Regulations 3o. ., 2ection " C'D, reading as follows@ 2<C. ". Compensation for personal services.AA#mong the ordinary and necessary expenses paid or incurred in carrying on any trade or business may be included a reasonable allowance for salaries or other compensation for personal services actually rendered. The test of deductibility in the case of compensation payments is whether they are reasonable and are, in fact, payments purely for service. This test and deductibility in the case of compensation payments is whether they are reasonable and are, in fact, payments purely for service. This test and its practical application may be further stated and illustrated as follows@ #ny amount paid in the form of compensation, but not in fact as the purchase price of services, is not deductible. CaD #n ostensible salary paid by a corporation may be a distribution of a dividend on stoc0. This is li0ely to occur in the case of a corporation having few stoc0holders, Practically all of whom draw salaries. If in such a case the salaries are in excess of those ordinarily paid for similar services, and the excessive payment correspond or bear a close relationship to the stoc0holdings of the officers of employees, it would seem li0ely that the salaries are not paid wholly for services rendered, but the excessive payments are a distribution of earnings upon the stoc0. . . . CPromulgated =eb. '', '),', ," O./. 3o. '+, ,.!.D It is worth noting at this point that most of the payees were not in the regular employ of #lgue nor were they its controlling stoc0holders. 2' The 2olicitor /eneral is correct when he says that the burden is on the taxpayer to prove the validity of the claimed deduction. In the present case, however, we find that the onus has been discharged satisfactorily. The private respondent has proved that the payment of the

fees was necessary and reasonable in the light of the efforts exerted by the payees in inducing investors and prominent businessmen to venture in an experimental enterprise and involve themselves in a new business re%uiring millions of pesos. This was no mean feat and should be, as it was, sufficiently recompensed. It is said that taxes are what we pay for civili9ation society. $ithout taxes, the government would be paraly9ed for lac0 of the motive power to activate and operate it. :ence, despite the natural reluctance to surrender part of one6s hard earned income to the taxing authorities, every person who is able to must contribute his share in the running of the government. The government for its part, is expected to respond in the form of tangible and intangible benefits intended to improve the lives of the people and enhance their moral and material values. This symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that it is an arbitrary method of exaction by those in the seat of power. 1ut even as we concede the inevitability and indispensability of taxation, it is a re%uirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure. If it is not, then the taxpayer has a right to complain and the courts will then come to his succor. =or all the awesome power of the tax collector, he may still be stopped in his trac0s if the taxpayer can demonstrate, as it has here, that the law has not been observed. $e hold that the appeal of the private respondent from the decision of the petitioner was filed on time with the respondent court in accordance with Rep. #ct 3o. ''.!. #nd we also find that the claimed deduction by the private respondent was permitted under the Internal Revenue Code and should therefore not have been disallowed by the petitioner. #CCOR8I3/EF, the appealed decision of the Court of Tax #ppeals is #==IR-<8 in toto, without costs. 2O OR8<R<8. Teehankee, C.J., Narvasa, Gancayco and Grio !"uino, JJ., concur. G.R. No. 166**6 Mar+, 1(, 2**8 %LANTERS %RO- CTS, INC., Petitioner, vs. FERTI%#IL COR%ORATION, Respondent. 8<CI2IO3 RE.ES, R.T., J.: T:< Regional Trial Courts CRTCD have the authority and 5urisdiction to consider the constitutionality of statutes, executive orders, presidential decrees and other issuances. The Constitution vests that power not only in the 2upreme Court but in all Regional Trial Courts.

The principle is relevant in this petition for review on certiorari of the 8ecision' of the Court of #ppeals CC#D affirming with modification that of the RTC in -a0ati City,. finding petitioner Planters Products, Inc. CPPID liable to private respondent =ertiphil Corporation C=ertiphilD for the levies it paid under Eetter of Instruction CEOID 3o. '(*!. T,e Fa+/0 Petitioner PPI and private respondent =ertiphil are private corporations incorporated under Philippine laws., They are both engaged in the importation and distribution of fertili9ers, pesticides and agricultural chemicals. On &une ,, ')+!, then President =erdinand -arcos, exercising his legislative powers, issued EOI 3o. '(*! which provided, among others, for the imposition of a capital recovery component CCRCD on the domestic sale of all grades of fertili9ers in the Philippines.( The EOI provides@ ,. The #dministrator of the =ertili9er Pesticide #uthority to include in its fertili9er pricing formula a capital contribution component of not less than P'" per bag. This capital contribution shall be collected until ade%uate capital is raised to ma0e PPI viable. 2uch capital contribution shall be applied by =P# to all domestic sales of fertili9ers in the Philippines.! C>nderscoring suppliedD Pursuant to the EOI, =ertiphil paid P'" for every bag of fertili9er it sold in the domestic mar0et to the =ertili9er and Pesticide #uthority C=P#D. =P# then remitted the amount collected to the =ar <ast 1an0 and Trust Company, the depositary ban0 of PPI. =ertiphil paid P*,*+),'(( to =P# from &uly +, ')+! to &anuary .(, ')+*.* #fter the ')+* <dsa Revolution, =P# voluntarily stopped the imposition of the P'" levy. $ith the return of democracy, =ertiphil demanded from PPI a refund of the amounts it paid under EOI 3o. '(*!, but PPI refused to accede to the demand. =ertiphil filed a complaint for collection and damages+ against =P# and PPI with the RTC in -a0ati. It %uestioned the constitutionality of EOI 3o. '(*! for being un5ust, unreasonable, oppressive, invalid and an unlawful imposition that amounted to a denial of due process of law.) =ertiphil alleged that the EOI solely favored PPI, a privately owned corporation, which used the proceeds to maintain its monopoly of the fertili9er industry. In its #nswer,'" =P#, through the 2olicitor /eneral, countered that the issuance of EOI 3o. '(*! was a valid exercise of the police power of the 2tate in ensuring the stability of the fertili9er industry in the country. It also averred that =ertiphil did not sustain any damage from

the EOI because the burden imposed by the levy fell on the ultimate consumer, not the seller. RTC -102o01/1o! On 3ovember .", '))', the RTC rendered 5udgment in favor of =ertiphil, disposing as follows@ $:<R<=OR<, in view of the foregoing, the Court hereby renders 5udgment in favor of the plaintiff and against the defendant Planters Product, Inc., ordering the latter to pay the former@ 'D the sum of P*,*)+,'((."" with interest at '.? from the time of 5udicial demand7 .D the sum of P'"",""" as attorneyGs fees7 ,D the cost of suit. 2O OR8<R<8.'' Ruling that the imposition of the P'" CRC was an exercise of the 2tateGs inherent power of taxation, the RTC invalidated the levy for violating the basic principle that taxes can only be levied for public purpose, vi9.@ It is apparent that the imposition of P'" per fertili9er bag sold in the country by EOI '(*! is purportedly in the exercise of the power of taxation. It is a settled principle that the power of taxation by the state is plenary. Comprehensive and supreme, the principal chec0 upon its abuse resting in the responsibility of the members of the legislature to their constituents. :owever, there are two 0inds of limitations on the power of taxation@ the inherent limitations and the constitutional limitations. One of the inherent limitations is that a tax may be levied only for public purposes@ The power to tax can be resorted to only for a constitutionally valid public purpose. 1y the same to0en, taxes may not be levied for purely private purposes, for building up of private fortunes, or for the redress of private wrongs. They cannot be levied for the improvement of private property, or for the benefit, and promotion of private enterprises, except where the aid is incident to the public benefit. It is wellAsettled principle of constitutional law that no general tax can be levied except for the purpose of raising money which is to be expended for public use. =unds cannot be exacted under the guise of taxation to promote a purpose that is not of public interest. $ithout such limitation, the power to tax could be exercised or employed as an authority to destroy the economy of the people. # tax, however, is not held void on the ground of want of public interest unless the want of such interest is clear. C ' #m. &ur. pp. , 'A, .D In the case at bar, the plaintiff paid the amount of P*,*)+,'((."" to the =ertili9er and Pesticide #uthority pursuant to the P'" per bag of fertili9er sold imposition under EOI '(*! which, in turn, remitted the amount to the defendant Planters Products, Inc. thru the latterGs depository ban0, =ar <ast 1an0 and Trust Co. Thus, by virtue of EOI '(*! the plaintiff, =ertiphil Corporation,

which is a private domestic corporation, became poorer by the amount ofP*,*)+,'((."" and the defendant, Planters Product, Inc., another private domestic corporation, became richer by the amount of P*,*)+,'((."". Tested by the standards of constitutionality as set forth in the aforeA%uoted 5urisprudence, it is %uite evident that EOI '(*! insofar as it imposes the amount of P'" per fertili9er bag sold in the country and orders that the said amount should go to the defendant Planters Product, Inc. is unlawful because it violates the mandate that a tax can be levied only for a public purpose and not to benefit, aid and promote a private enterprise such as Planters Product, Inc.'. PPI moved for reconsideration but its motion was denied.', PPI then filed a notice of appeal with the RTC but it failed to pay the re%uisite appeal doc0et fee. In a separate but related proceeding, this Court'( allowed the appeal of PPI and remanded the case to the C# for proper disposition. CA -e+101o! On 3ovember .+, ."",, the C# handed down its decision affirming with modification that of the RTC, with the following fallo@ I3 ;I<$ O= #EE T:< =OR</OI3/, the decision appealed from is hereby #==IR-<8, sub5ect to the -O8I=IC#TIO3 that the award of attorneyGs fees is hereby 8<E<T<8.'! In affirming the RTC decision, the C# ruled that the lis mota of the complaint for collection was the constitutionality of EOI 3o. '(*!, thus@ The %uestion then is whether it was proper for the trial court to exercise its power to 5udicially determine the constitutionality of the sub5ect statute in the instant case. #s a rule, where the controversy can be settled on other grounds, the courts will not resolve the constitutionality of a law CEim v. Pac%uing, .(" 2CR# *() H'))!ID. The policy of the courts is to avoid ruling on constitutional %uestions and to presume that the acts of political departments are valid, absent a clear and unmista0able showing to the contrary. :owever, the courts are not precluded from exercising such power when the following re%uisites are obtaining in a controversy before it@ =irst, there must be before the court an actual case calling for the exercise of 5udicial review. 2econd, the %uestion must be ripe for ad5udication. Third, the person challenging the validity of the act must have standing to challenge. =ourth, the %uestion of constitutionality must have been raised at the earliest opportunity7 and lastly, the issue of constitutionality must be the very lis mota of the case CIntegrated 1ar of the Philippines v. Jamora, ,,+ 2CR# +' H."""ID.

Indisputably, the present case was primarily instituted for collection and damages. :owever, a perusal of the complaint also reveals that the instant action is founded on the claim that the levy imposed was an unlawful and unconstitutional special assessment. Conse%uently, the re%uisite that the constitutionality of the law in %uestion be the very lis mota of the case is present, ma0ing it proper for the trial court to rule on the constitutionality of EOI '(*!.'* The C# held that even on the assumption that EOI 3o. '(*! was issued under the police power of the state, it is still unconstitutional because it did not promote public welfare. The C# explained@ In declaring EOI '(*! unconstitutional, the trial court held that the levy imposed under the said law was an invalid exercise of the 2tateGs power of taxation inasmuch as it violated the inherent and constitutional prescription that taxes be levied only for public purposes. It reasoned out that the amount collected under the levy was remitted to the depository ban0 of PPI, which the latter used to advance its private interest. On the other hand, appellant submits that the sub5ect statuteGs passage was a valid exercise of police power. In addition, it disputes the court a %uoGs findings arguing that the collections under EOI '(*! was for the benefit of Planters =oundation, Incorporated CP=ID, a foundation created by law to hold in trust for millions of farmers, the stoc0 ownership of PPI. Of the three fundamental powers of the 2tate, the exercise of police power has been characteri9ed as the most essential, insistent and the least limitable of powers, extending as it does to all the great public needs. It may be exercised as long as the activity or the property sought to be regulated has some relevance to public welfare CConstitutional Eaw, by Isagani #. Cru9, p. ,+, '))! <ditionD. ;ast as the power is, however, it must be exercised within the limits set by the Constitution, which re%uires the concurrence of a lawful sub5ect and a lawful method. Thus, our courts have laid down the test to determine the validity of a police measure as follows@ C'D the interests of the public generally, as distinguished from those of a particular class, re%uires its exercise7 and C.D the means employed are reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals C3ational 8evelopment Company v. Philippine ;eterans 1an0, '). 2CR# .! H'))"ID. It is upon applying this established tests that $e sustain the trial courtGs holding EOI '(*! unconstitutional. To be sure, ensuring the continued supply and distribution of fertili9er in the country is an underta0ing imbued with public interest. :owever, the method by which EOI '(*! sought to achieve this is by no means a measure that

will promote the public welfare. The governmentGs commitment to support the successful rehabilitation and continued viability of PPI, a private corporation, is an unmista0able attempt to mas0 the sub5ect statuteGs impartiality. There is no way to treat the selfAinterest of a favored entity, li0e PPI, as identical with the general interest of the countryGs farmers or even the =ilipino people in general. $ell to stress, substantive due process exacts fairness and e%ual protection disallows distinction where none is needed. $hen a statuteGs public purpose is spoiled by private interest, the use of police power becomes a travesty which must be struc0 down for being an arbitrary exercise of government power. To rule in favor of appellant would contravene the general principle that revenues derived from taxes cannot be used for purely private purposes or for the exclusive benefit of private individuals.' The C# did not accept PPIGs claim that the levy imposed under EOI 3o. '(*! was for the benefit of Planters =oundation, Inc., a foundation created to hold in trust the stoc0 ownership of PPI. The C# stated@ #ppellant next claims that the collections under EOI '(*! was for the benefit of Planters =oundation, Incorporated CP=ID, a foundation created by law to hold in trust for millions of farmers, the stoc0 ownership of P=I on the strength of Eetter of >nderta0ing CEO>D issued by then Prime -inister Cesar ;irata on #pril '+, ')+! and affirmed by the 2ecretary of &ustice in an Opinion dated October '., ')+ , to wit@ 4.. >pon the effective date of this Eetter of >nderta0ing, the Republic shall cause =P# to include in its fertili9er pricing formula a capital recovery component, the proceeds of which will be used initially for the purpose of funding the unpaid portion of the outstanding capital stoc0 of Planters presently held in trust by Planters =oundation, Inc. CPlanters =oundationD, which unpaid capital is estimated at approximately P."* million Csub5ect to validation by Planters and Planters =oundationD Csuch unpaid portion of the outstanding capital stoc0 of Planters being hereafter referred to as the K>npaid CapitalGD, and subse%uently for such capital increases as may be re%uired for the continuing viability of Planters. The capital recovery component shall be in the minimum amount of P'" per bag, which will be added to the price of all domestic sales of fertili9er in the Philippines by any importer andLor fertili9er mother company. In this connection, the Republic hereby ac0nowledges that the advances by Planters to Planters =oundation which were applied to the payment of the Planters shares now held in trust by Planters =oundation, have been assigned to, among others, the Creditors. #ccordingly, the Republic, through =P#, hereby agrees to deposit the proceeds of the capital recovery component in the special trust

account designated in the notice dated #pril ., ')+!, addressed by counsel for the Creditors to Planters =oundation. 2uch proceeds shall be deposited by =P# on or before the '!th day of each month. The capital recovery component shall continue to be charged and collected until payment in full of CaD the >npaid Capital andLor CbD any shortfall in the payment of the 2ubsidy Receivables, CcD any carrying cost accruing from the date hereof on the amounts which may be outstanding from time to time of the >npaid Capital andLor the 2ubsidy Receivables and CdD the capital increases contemplated in paragraph . hereof. =or the purpose of the foregoing clause CcD, the Kcarrying costG shall be at such rate as will represent the full and reasonable cost to Planters of servicing its debts, ta0ing into account both its peso and foreign currencyA denominated obligations.4 CRecords, pp. (.A(,D #ppellantGs proposition is open to %uestion, to say the least. The EO> issued by then Prime -inister ;irata ta0en together with the &ustice 2ecretaryGs Opinion does not preponderantly demonstrate that the collections made were held in trust in favor of millions of farmers. >nfortunately for appellant, in the absence of sufficient evidence to establish its claims, this Court is constrained to rely on what is explicitly provided in EOI '(*! M that one of the primary aims in imposing the levy is to support the successful rehabilitation and continued viability of PPI.'+ PPI moved for reconsideration but its motion was denied.') It then filed the present petition with this Court. I00ue0 Petitioner PPI raises four issues for Our consideration, vi9.@ I T:< CO32TIT>TIO3#EITF O= EOI '(*! C#33OT 1< COEE#T<R#EEF #TT#CN<8 #38 1< 8<CR<<8 ;I# # 8<=#>ET &>8/-<3T I3 # C#2< =IE<8 =OR COEE<CTIO3 #38 8#-#/<2 $:<R< T:< I22>< O= CO32TIT>TIO3#EITF I2 3OT T:< ;<RF EI2 -OT# O= T:< C#2<. 3<IT:<R C#3 EOI '(*! 1< C:#EE<3/<8 1F #3F P<R2O3 OR <3TITF $:IC: :#2 3O 2T#38I3/ TO 8O 2O. II EOI '(*!, 1<I3/ # E#$ I-PE<-<3T<8 =OR T:< P>RPO2< O= #22>RI3/ T:< =<RTIEIJ<R 2>PPEF #38 8I2TRI1>TIO3 I3 T:< CO>3TRF, #38 =OR 1<3<=ITI3/ # =O>38#TIO3 CR<#T<8 1F E#$ TO :OE8 I3 TR>2T =OR -IEEIO32 O= =#R-<R2 T:<IR 2TOCN O$3<R2:IP I3 PPI CO32TIT>T<2 # ;#EI8 E</I2E#TIO3 P>R2>#3T TO T:< <O<RCI2< O= T#O#TIO3 #38 POEIC< PO$<R =OR P>1EIC P>RPO2<2. III

T:< #-O>3T COEE<CT<8 >38<R T:< C#PIT#E R<CO;<RF CO-PO3<3T $#2 R<-ITT<8 TO T:< /O;<R3-<3T, #38 1<C#-< /O;<R3-<3T =>382 P>R2>#3T TO #3 <==<CTI;< #38 ;#EI8EF <3#CT<8 E#$ $:IC: I-PO2<8 8>TI<2 #38 CO3=<RR<8 RI/:T2 1F ;IRT>< O= T:< PRI3CIPE< O= 4OP<R#TI;< =#CT4 PRIOR TO #3F 8<CE#R#TIO3 O= >3CO32TIT>TIO3#EITF O= EOI '(*!. I; T:< PRI3CIPE< O= >3&>2T ;<O#TIO3 C2:O>E8 1< <3RIC:-<3TD =I382 3O #PPEIC#TIO3 I3 T:< I32T#3T C#2<.." C>nderscoring suppliedD Our Ru31!4 $e shall first tac0le the procedural issues of locus standi and the 5urisdiction of the RTC to resolve constitutional issues. =ertiphil has locus standi because it suffered direct in5ury7 doctrine of standing is a mere procedural technicality which may be waived. PPI argues that =ertiphil has no locus standi to %uestion the constitutionality of EOI 3o. '(*! because it does not have a 4personal and substantial interest in the case or will sustain direct in5ury as a result of its enforcement.4.' It asserts that =ertiphil did not suffer any damage from the CRC imposition because 4incidence of the levy fell on the ultimate consumer or the farmers themselves, not on the seller fertili9er company.4 .. $e cannot agree. The doctrine of locus standi or the right of appearance in a court of 5ustice has been ade%uately discussed by this Court in a catena of cases. 2uccinctly put, the doctrine re%uires a litigant to have a material interest in the outcome of a case. In private suits, locus standi re%uires a litigant to be a 4real party in interest,4 which is defined as 4the party who stands to be benefited or in5ured by the 5udgment in the suit or the party entitled to the avails of the suit.4., In public suits, this Court recogni9es the difficulty of applying the doctrine especially when plaintiff asserts a public right on behalf of the general public because of conflicting public policy issues. .( On one end, there is the right of the ordinary citi9en to petition the courts to be freed from unlawful government intrusion and illegal official action. #t the other end, there is the public policy precluding excessive 5udicial interference in official acts, which may unnecessarily hinder the delivery of basic public services. In this 5urisdiction, $e have adopted the 4direct in5ury test4 to determine locus standi in public suits. In People v. ;era,.! it was held that a person who impugns the validity of a statute must have 4a personal and substantial interest in the case such that he has sustained, or will sustain direct in5ury as a result.4 The 4direct in5ury test4 in public suits is similar to the 4real

party in interest4 rule for private suits under 2ection ., Rule , of the ')) Rules of Civil Procedure..* Recogni9ing that a strict application of the 4direct in5ury4 test may hamper public interest, this Court relaxed the re%uirement in cases of 4transcendental importance4 or with 4far reaching implications.4 1eing a mere procedural technicality, it has also been held that locus standi may be waived in the public interest.. $hether or not the complaint for collection is characteri9ed as a private or public suit, =ertiphil has locus standi to file it. =ertiphil suffered a direct in5ury from the enforcement of EOI 3o. '(*!. It was re%uired, and it did pay, theP'" levy imposed for every bag of fertili9er sold on the domestic mar0et. It may be true that =ertiphil has passed some or all of the levy to the ultimate consumer, but that does not dis%ualify it from attac0ing the constitutionality of the EOI or from see0ing a refund. #s seller, it bore the ultimate burden of paying the levy. It faced the possibility of severe sanctions for failure to pay the levy. The fact of payment is sufficient in5ury to =ertiphil. -oreover, =ertiphil suffered harm from the enforcement of the EOI because it was compelled to factor in its product the levy. The levy certainly rendered the fertili9er products of =ertiphil and other domestic sellers much more expensive. The harm to their business consists not only in fewer clients because of the increased price, but also in adopting alternative corporate strategies to meet the demands of EOI 3o. '(*!. =ertiphil and other fertili9er sellers may have shouldered all or part of the levy 5ust to be competitive in the mar0et. The harm occasioned on the business of =ertiphil is sufficient in5ury for purposes of locus standi. <ven assuming arguendo that there is no direct in5ury, $e find that the liberal policy consistently adopted by this Court on locus standi must apply. The issues raised by =ertiphil are of paramount public importance. It involves not only the constitutionality of a tax law but, more importantly, the use of taxes for public purpose. =ormer President -arcos issued EOI 3o. '(*! with the intention of rehabilitating an ailing private company. This is clear from the text of the EOI. PPI is expressly named in the EOI as the direct beneficiary of the levy. $orse, the levy was made dependent and conditional upon PPI becoming financially viable. The EOI provided that 4the capital contribution shall be collected until ade%uate capital is raised to ma0e PPI viable.4 The constitutionality of the levy is already in doubt on a plain reading of the statute. It is Our constitutional duty to s%uarely resolve the issue as the final arbiter of all 5usticiable controversies. The doctrine of standing, being a mere procedural technicality, should be waived, if at all, to ade%uately thresh out an important constitutional issue.

RTC may resolve constitutional issues7 the constitutional issue was ade%uately raised in the complaint7 it is the lis mota of the case. PPI insists that the RTC and the C# erred in ruling on the constitutionality of the EOI. It asserts that the constitutionality of the EOI cannot be collaterally attac0ed in a complaint for collection..+ #lternatively, the resolution of the constitutional issue is not necessary for a determination of the complaint for collection. .) =ertiphil counters that the constitutionality of the EOI was ade%uately pleaded in its complaint. It claims that the constitutionality of EOI 3o. '(*! is the very lis mota of the case because the trial court cannot determine its claim without resolving the issue.," It is settled that the RTC has 5urisdiction to resolve the constitutionality of a statute, presidential decree or an executive order. This is clear from 2ection !, #rticle ;III of the ')+ Constitution, which provides@ 2<CTIO3 !. The 2upreme Court shall have the following powers@ xxxx C.D Review, revise, reverse, modify, or affirm on appeal or certiorari, as the law or the Rules of Court may provide,final 5udgments and orders of lower courts in@ CaD #ll cases in which the constitutionality or validity of any treaty, international or executive agreement, law, presidential decree, proclamation, order, instruction, ordinance, or regulation is in %uestion. C>nderscoring suppliedD In -irasol v. Court of #ppeals,,' this Court recogni9ed the power of the RTC to resolve constitutional issues, thus@ On the first issue. It is settled that Regional Trial Courts have the authority and 5urisdiction to consider the constitutionality of a statute, presidential decree, or executive order. The Constitution vests the power of 5udicial review or the power to declare a law, treaty, international or executive agreement, presidential decree, order, instruction, ordinance, or regulation not only in this Court, but in all Regional Trial Courts.,. In the recent case of <%uiA#sia Placement, Inc. v. 8epartment of =oreign #ffairs,,, this Court reiterated@ There is no denying that regular courts have 5urisdiction over cases involving the validity or constitutionality of a rule or regulation issued by administrative agencies. 2uch 5urisdiction, however, is not limited to the Court of #ppeals or to this Court alone for even the regional trial courts can ta0e cogni9ance of actions assailing a specific rule or set of rules promulgated by administrative bodies. Indeed, the Constitution vests the power of 5udicial review or the power to declare a law, treaty, international or executive agreement, presidential decree, order, instruction, ordinance, or regulation in the courts, including the regional trial courts.,(

&udicial review of official acts on the ground of unconstitutionality may be sought or availed of through any of the actions cogni9able by courts of 5ustice, not necessarily in a suit for declaratory relief. 2uch review may be had in criminal actions, as in People v. =errer,! involving the constitutionality of the now defunct #ntiA2ubversion law, or in ordinary actions, as in Nriven0o v. Register of 8eeds,* involving the constitutionality of laws prohibiting aliens from ac%uiring public lands. The constitutional issue, however, CaD must be properly raised and presented in the case, and CbD its resolution is necessary to a determination of the case, i.e., the issue of constitutionality must be the very lis mota presented., Contrary to PPIGs claim, the constitutionality of EOI 3o. '(*! was properly and ade%uately raised in the complaint for collection filed with the RTC. The pertinent portions of the complaint allege@ *. The CRC of P'" per bag levied under EOI '(*! on domestic sales of all grades of fertili9er in the Philippines, isunlawful, un5ust, uncalled for, unreasonable, ine%uitable and oppressive because@ xxxx CcD It favors only one private domestic corporation, i.e., defendant PPPI, and imposed at the expense and disadvantage of the other fertili9er importersLdistributors who were themselves in tight business situation and were then exerting all efforts and maximi9ing management and mar0eting s0ills to remain viable7 xxxx CeD It was a glaring example of crony capitalism, a forced program through which the PPI, having been presumptuously mas%ueraded as 4the4 fertili9er industry itself, was the sole and anointed beneficiary7 . The CRC was an unlawful7 and unconstitutional special assessment and its imposition is tantamount to illegal exaction amounting to a denial of due process since the persons of entities which had to bear the burden of paying the CRC derived no benefit therefrom7 that on the contrary it was used by PPI in trying to regain its former despicable monopoly of the fertili9er industry to the detriment of other distributors and importers.,+ C>nderscoring suppliedD The constitutionality of EOI 3o. '(*! is also the very lis mota of the complaint for collection. =ertiphil filed the complaint to compel PPI to refund the levies paid under the statute on the ground that the law imposing the levy is unconstitutional. The thesis is that an unconstitutional law is void. It has no legal effect. 1eing void, =ertiphil had no legal obligation to pay the levy. 3ecessarily, all levies duly paid pursuant to an unconstitutional law should be refunded under the civil code principle against un5ust enrichment. The refund is a mere conse%uence of the law being declared unconstitutional. The RTC surely

cannot order PPI to refund =ertiphil if it does not declare the EOI unconstitutional. It is the unconstitutionality of the EOI which triggers the refund. The issue of constitutionality is the very lis mota of the complaint with the RTC. The P'" levy under EOI 3o. '(*! is an exercise of the power of taxation. #t any rate, the Court holds that the RTC and the C# did not err in ruling against the constitutionality of the EOI. PPI insists that EOI 3o. '(*! is a valid exercise either of the police power or the power of taxation. It claims that the EOI was implemented for the purpose of assuring the fertili9er supply and distribution in the country and for benefiting a foundation created by law to hold in trust for millions of farmers their stoc0 ownership in PPI. =ertiphil counters that the EOI is unconstitutional because it was enacted to give benefit to a private company. The levy was imposed to pay the corporate debt of PPI. =ertiphil also argues that, even if the EOI is enacted under the police power, it is still unconstitutional because it did not promote the general welfare of the people or public interest. Police power and the power of taxation are inherent powers of the 2tate. These powers are distinct and have different tests for validity. Police power is the power of the 2tate to enact legislation that may interfere with personal liberty or property in order to promote the general welfare,,) while the power of taxation is the power to levy taxes to be used for public purpose. The main purpose of police power is the regulation of a behavior or conduct, while taxation is revenue generation. The 4lawful sub5ects4 and 4lawful means4 tests are used to determine the validity of a law enacted under the police power.(" The power of taxation, on the other hand, is circumscribed by inherent and constitutional limitations. $e agree with the RTC that the imposition of the levy was an exercise by the 2tate of its taxation power. $hile it is true that the power of taxation can be used as an implement of police power,(' the primary purpose of the levy is revenue generation. If the purpose is primarily revenue, or if revenue is, at least, one of the real and substantial purposes, then the exaction is properly called a tax.(. In Philippine #irlines, Inc. v. <du,(, it was held that the imposition of a vehicle registration fee is not an exercise by the 2tate of its police power, but of its taxation power, thus@ It is clear from the provisions of 2ection , of Commonwealth #ct '., and 2ection *' of the Eand Transportation and Traffic Code that the legislative intent and purpose behind the law re%uiring owners of vehicles to pay for their registration is mainly to raise funds for the construction and maintenance of highways and to a

much lesser degree, pay for the operating expenses of the administering agency. x x x =ees may be properly regarded as taxes even though they also serve as an instrument of regulation. Taxation may be made the implement of the state6s police power CEut9 v. #raneta, )+ Phil. '(+D. 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. 2uch is the case of motor vehicle registration fees. The same provision appears as 2ection !)CbD in the Eand 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 4tax or fee.4 x x x 2imply put, if the exaction under Rep. #ct (',* were merely a regulatory fee, the imposition in Rep. #ct !((+ need not be an 4additional4 tax. Rep. #ct (',* also spea0s of other 4fees4 such as the special permit fees for certain types of motor vehicles C2ec. '"D and additional fees for change of registration C2ec. ''D. These are not to be understood as taxes because such fees are very minimal to be revenueAraising. Thus, they are not mentioned by 2ec. !)CbD of the Code as taxes li0e the motor vehicle registration fee and chauffeursG license fee. 2uch fees are to go into the expenditures of the Eand Transportation Commission as provided for in the last proviso of 2ec. *'.((C>nderscoring suppliedD The P'" levy under EOI 3o. '(*! is too excessive to serve a mere regulatory purpose. The levy, no doubt, was a big burden on the seller or the ultimate consumer. It increased the price of a bag of fertili9er by as much as five percent.(! # plain reading of the EOI also supports the conclusion that the levy was for revenue generation. The EOI expressly provided that the levy was imposed 4until ade%uate capital is raised to ma0e PPI viable.4 Taxes are exacted only for a public purpose. The P'" levy is unconstitutional because it was not for a public purpose. The levy was imposed to give undue benefit to PPI. #n inherent limitation on the power of taxation is public purpose. Taxes are exacted only for a public purpose. They cannot be used for purely private purposes or for the exclusive benefit of private persons.(* The reason for this is simple. The power to tax exists for the general welfare7 hence, implicit in its power is the limitation that it should be used only for a public purpose. It would be a robbery for the 2tate to tax its citi9ens and use the funds generated for a private purpose. #s an old >nited 2tates case bluntly put it@ 4To lay with one hand, the power of the government on the property of the citi9en, and with the other to bestow it upon favored individuals to aid private enterprises and build up private fortunes, is

nonetheless a robbery because it is done under the forms of law and is called taxation.4( The term 4public purpose4 is not defined. It is an elastic concept that can be hammered to fit modern standards. &urisprudence states that 4public purpose4 should be given a broad interpretation. It does not only pertain to those purposes which are traditionally viewed as essentially government functions, such as building roads and delivery of basic services, but also includes those purposes designed to promote social 5ustice. Thus, public money may now be used for the relocation of illegal settlers, lowAcost housing and urban or agrarian reform. $hile the categories of what may constitute a public purpose are continually expanding in light of the expansion of government functions, the inherent re%uirement that taxes can only be exacted for a public purpose still stands. Public purpose is the heart of a tax law. $hen a tax law is only a mas0 to exact funds from the public when its true intent is to give undue benefit and advantage to a private enterprise, that law will not satisfy the re%uirement of 4public purpose.4 The purpose of a law is evident from its text or inferable from other secondary sources. :ere, $e agree with the RTC and that C# that the levy imposed under EOI 3o. '(*! was not for a public purpose. =irst, the EOI expressly provided that the levy be imposed to benefit PPI, a private company. The purpose is explicit from Clause , of the law, thus@ ,. The #dministrator of the =ertili9er Pesticide #uthority to include in its fertili9er pricing formula a capital contribution component of not less than P'" per bag. This capital contribution shall be collected until ade%uate capital is raised to ma0e PPI viable. 2uch capital contribution shall be applied by =P# to all domestic sales of fertili9ers in the Philippines.(+ C>nderscoring suppliedD It is a basic rule of statutory construction that the text of a statute should be given a literal meaning. In this case, the text of the EOI is plain that the levy was imposed in order to raise capital for PPI. The framers of the EOI did not even hide the insidious purpose of the law. They were cavalier enough to name PPI as the ultimate beneficiary of the taxes levied under the EOI. $e find it utterly repulsive that a tax law would expressly name a private company as the ultimate beneficiary of the taxes to be levied from the public. This is a clear case of crony capitalism. 2econd, the EOI provides that the imposition of the P'" levy was conditional and dependent upon PPI becoming financially 4viable.4 This suggests that the levy was actually imposed to benefit PPI. The EOI notably does not fix a maximum amount when PPI is deemed financially 4viable.4 $orse, the liability of =ertiphil and

other domestic sellers of fertili9er to pay the levy is made indefinite. They are re%uired to continuously pay the levy until ade%uate capital is raised for PPI. Third, the RTC and the C# held that the levies paid under the EOI were directly remitted and deposited by =P# to =ar <ast 1an0 and Trust Company, the depositary ban0 of PPI.() This proves that PPI benefited from the EOI. It is also proves that the main purpose of the law was to give undue benefit and advantage to PPI. =ourth, the levy was used to pay the corporate debts of PPI. # reading of the Eetter of >nderstanding !" dated -ay '+, ')+! signed by then Prime -inister Cesar ;irata reveals that PPI was in deep financial problem because of its huge corporate debts. There were pending petitions for rehabilitation against PPI before the 2ecurities and <xchange Commission. The government guaranteed payment of PPIGs debts to its foreign creditors. To fund the payment, President -arcos issued EOI 3o. '(*!. The pertinent portions of the letter of understanding read@ Republic of the Philippines Office of the Prime -inister -anila E<TT<R O= >38<RT#NI3/ -ay '+, ')+! TO@ T:< 1#3NI3/ #38 =I3#3CI#E I32TIT>TIO32 EI2T<8 I3 #33<O # :<R<TO $:IC: #R< CR<8ITOR2 CCOEE<CTI;<EF, T:< 4CR<8ITOR24D O= PE#3T<R2 PRO8>CT2, I3C. C4PE#3T<R24D /entlemen@ This has reference to Planters which is the principal importer and distributor of fertili9er, pesticides and agricultural chemicals in the Philippines. #s regards Planters, the Philippine /overnment confirms its awareness of the following@ C'D that Planters has outstanding obligations in foreign currency andLor pesos, to the Creditors, C.D that Planters is currently experiencing financial difficulties, and C,D thatthere are presently pending with the 2ecurities and <xchange Commission of the Philippines a petition filed at PlantersG own behest for the suspension of payment of all its obligations, and a separate petition filed by -anufacturers :anover Trust Company, -anila Offshore 1ranch for the appointment of a rehabilitation receiver for Planters. In connection with the foregoing, the Republic of the Philippines Cthe 4Republic4D confirms that it considers and continues to consider Planters as a ma5or fertili9er distributor. #ccordingly, for and in consideration of your expressed willingness to consider and participate in the effort to rehabilitate Planters, the Republic hereby manifests its full and un%ualified support of the successful rehabilitation and continuing viability of

Planters, and to that end, hereby binds and obligates itself to the creditors and Planters, as follows@ xxxx .. >pon the effective date of this Eetter of >nderta0ing, the Republic shall cause =P# to include in its fertili9er pricing formula a capital recovery component, the proceeds of which will be used initially for the purpose of funding the unpaid portion of the outstanding capital stoc0 of Planters presently held in trust by Planters =oundation, Inc. C4Planters =oundation4D, which unpaid capital is estimated at approximately P."* million Csub5ect to validation by Planters and Planters =oundationD such unpaid portion of the outstanding capital stoc0 of Planters being hereafter referred to as the 4>npaid Capital4D, and subse%uently for such capital increases as may be re%uired for the continuing viability of Planters. xxxx The capital recovery component shall continue to be charged and collected until payment in full of CaD the >npaid Capital andLor CbD any shortfall in the payment of the 2ubsidy Receivables, CcD any carrying cost accruing from the date hereof on the amounts which may be outstanding from time to time of the >npaid Capital andLor the 2ubsidy Receivables, and CdD the capital increases contemplated in paragraph . hereof. =or the purpose of the foregoing clause CcD, the 4carrying cost4 shall be at such rate as will represent the full and reasonable cost to Planters of servicing its debts, ta0ing into account both its peso and foreign currencyA denominated obligations. R<P>1EIC O= T:< P:IEIPPI3<2 1y@ CsignedD C<2#R <. #. ;IR#T# Prime -inister and -inister of =inance!' It is clear from the Eetter of >nderstanding that the levy was imposed precisely to pay the corporate debts of PPI. $e cannot agree with PPI that the levy was imposed to ensure the stability of the fertili9er industry in the country. The letter of understanding and the plain text of the EOI clearly indicate that the levy was exacted for the benefit of a private corporation. #ll told, the RTC and the C# did not err in holding that the levy imposed under EOI 3o. '(*! was not for a public purpose. EOI 3o. '(*! failed to comply with the public purpose re%uirement for tax laws. The EOI is still unconstitutional even if enacted under the police power7 it did not promote public interest. <ven if $e consider EOI 3o. '*)! enacted under the police power of the 2tate, it would still be invalid for failing to comply with the test of 4lawful sub5ects4 and 4lawful means.4 &urisprudence states the test as follows@ C'D the interest of the public generally, as distinguished

10

from those of particular class, re%uires its exercise7 and C.D the means employed are reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals.!. =or the same reasons as discussed, EOI 3o. '*)! is invalid because it did not promote public interest. The law was enacted to give undue advantage to a private corporation. $e %uote with approval the C# ratiocination on this point, thus@ It is upon applying this established tests that $e sustain the trial courtGs holding EOI '(*! unconstitutional.#a$phil To be sure, ensuring the continued supply and distribution of fertili9er in the country is an underta0ing imbued with public interest. :owever, the method by which EOI '(*! sought to achieve this is by no means a measure that will promote the public welfare. The governmentGs commitment to support the successful rehabilitation and continued viability of PPI, a private corporation, is an unmista0able attempt to mas0 the sub5ect statuteGs impartiality. There is no way to treat the selfAinterest of a favored entity, li0e PPI, as identical with the general interest of the countryGs farmers or even the =ilipino people in general. $ell to stress, substantive due process exacts fairness and e%ual protection disallows distinction where none is needed. $hen a statuteGs public purpose is spoiled by private interest, the use of police power becomes a travesty which must be struc0 down for being an arbitrary exercise of government power. To rule in favor of appellant would contravene the general principle that revenues derived from taxes cannot be used for purely private purposes or for the exclusive benefit of private individuals. C>nderscoring suppliedD The general rule is that an unconstitutional law is void7 the doctrine of operative fact is inapplicable. PPI also argues that =ertiphil cannot see0 a refund even if EOI 3o. '(*! is declared unconstitutional. It ban0s on the doctrine of operative fact, which provides that an unconstitutional law has an effect before being declared unconstitutional. PPI wants to retain the levies paid under EOI 3o. '(*! even if it is subse%uently declared to be unconstitutional. $e cannot agree. It is settled that no %uestion, issue or argument will be entertained on appeal, unless it has been raised in the court a %uo.!, PPI did not raise the applicability of the doctrine of operative fact with the RTC and the C#. It cannot belatedly raise the issue with >s in order to extricate itself from the dire effects of an unconstitutional law. #t any rate, $e find the doctrine inapplicable. The general rule is that an unconstitutional law is void. It produces no rights, imposes no duties and affords no protection. It has no legal effect. It is, in legal contemplation, inoperative as if it has not been

passed.!( 1eing void, =ertiphil is not re%uired to pay the levy. #ll levies paid should be refunded in accordance with the general civil code principle against un5ust enrichment. The general rule is supported by #rticle of the Civil Code, which provides@ #RT. . Eaws are repealed only by subse%uent ones, and their violation or nonAobservance shall not be excused by disuse or custom or practice to the contrary. $hen the courts declare a law to be inconsistent with the Constitution, the former shall be void and the latter shall govern. The doctrine of operative fact, as an exception to the general rule, only applies as a matter of e%uity and fair play.!! It nullifies the effects of an unconstitutional law by recogni9ing that the existence of a statute prior to a determination of unconstitutionality is an operative fact and may have conse%uences which cannot always be ignored. The past cannot always be erased by a new 5udicial declaration.!* The doctrine is applicable when a declaration of unconstitutionality will impose an undue burden on those who have relied on the invalid law. Thus, it was applied to a criminal case when a declaration of unconstitutionality would put the accused in double 5eopardy! or would put in limbo the acts done by a municipality in reliance upon a law creating it.!+ :ere, $e do not find anything ini%uitous in ordering PPI to refund the amounts paid by =ertiphil under EOI 3o. '(*!. It unduly benefited from the levy. It was proven during the trial that the levies paid were remitted and deposited to its ban0 account. Puite the reverse, it would be ine%uitable and un5ust not to order a refund. To do so would un5ustly enrich PPI at the expense of =ertiphil. #rticle .. of the Civil Code explicitly provides that 4every person who, through an act of performance by another comes into possession of something at the expense of the latter without 5ust or legal ground shall return the same to him.4 $e cannot allow PPI to profit from an unconstitutional law. &ustice and e%uity dictate that PPI must refund the amounts paid by =ertiphil. $:<R<=OR<, the petition is 8<3I<8. The Court of #ppeals 8ecision dated 3ovember .+, ."", is #==IR-<8. 2O OR8<R<8. G.R. No. 11)()) Au4u0/ 2), 199( ART RO M. TOLENTINO, petitioner, vs. T#E SECRETAR. OF FINANCE a!" T#E COMMISSIONER OF INTERNAL REVEN E, respondents. G.R. No. 11))2) Au4u0/ 2), 199( 5 AN T. -AVI-, petitioner,

11

MEN-O&A, J.: The valueAadded tax C;#TD is levied on the sale, barter or exchange of goods and properties as well as on the sale or exchange of services. It is e%uivalent to '"? 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 #ct 3o. '* see0s to widen the tax base of the existing ;#T system and enhance its administration by amending the 3ational Internal Revenue Code. These are various suits for certiorari and prohibition, challenging the constitutionality of Republic #ct 3o. '* on various grounds summari9ed in the resolution of &uly *, '))( of this Court, as follows@ I. Procedural Issues@ #. 8oes Republic #ct 3o. '* violate #rt. ;I, Q .( of the ConstitutionR 1. 8oes it violate #rt. ;I, Q .*C.D of the ConstitutionR C. $hat is the extent of the power of the 1icameral Conference CommitteeR II. 2ubstantive Issues@ #. 8oes the law violate the following provisions in the 1ill of Rights C#rt. IIIDR '. Q' .. Q ( ,. Q ! (. Q '" 1. 8oes the law violate the following other provisions of the ConstitutionR '. #rt. ;I, Q .+C'D .. #rt. ;I, Q .+C,D These %uestions will be dealt in the order they are stated above. #s will presently be explained not all of these %uestions are 5udicially cogni9able, because not all provisions of the Constitution are self executing and, therefore, 5udicially enforceable. The other departments of the government are e%ually charged with the enforcement of the Constitution, especially the provisions relating to them. I. PROC<8>R#E I22><2 The contention of petitioners is that in enacting Republic #ct 3o. '*, or the <xpanded ;alueA#dded Tax Eaw, Congress violated the Constitution because, although :. 3o. ''') had originated in the :ouse of Representatives, it was not passed by the 2enate but was simply consolidated with the 2enate version C2. 3o. '*,"D 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 #ct 3o. '* was passed in this manner, it did not originate in the :ouse of Representatives and it has not thereby become a law@

!rt. %I, & '(@ #ll appropriation, revenue or tariff bills, bills authori9ing increase of the public debt, bills of local application, and private bills shall originate exclusively in the :ouse of Representatives, but the 2enate may propose or concur with amendments. Id., & ')*'+@ 3o bill passed by either :ouse 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 -embers three days before its passage, except when the President certifies to the necessity of its immediate enactment to meet a public calamity or emergency. >pon the last reading of a bill, no amendment thereto shall be allowed, and the vote thereon shall be ta0en immediately thereafter, and the yeasand nays entered in the &ournal. It appears that on various dates between &uly .., ')). and #ugust ,', ')),, several bills 1 were introduced in the :ouse of Representatives see0ing to amend certain provisions of the 3ational Internal Revenue Code relative to the valueAadded tax or ;#T. These bills were referred to the :ouse $ays and -eans Committee which recommended for approval a substitute measure, :. 3o. ''') , entitled #3 #CT R<2TR>CT>RI3/ T:< ;#E><A#88<8 T#O C;#TD 2F2T<TO $I8<3 IT2 T#O 1#2< #38 <3:#3C< IT2 #8-I3I2TR#TIO3, #-<38I3/ =OR T:<2< P>RPO2<2 2<CTIO32 )), '"", '"., '",, '"(, '"!, '"*, '" , '"+ #38 ''" O= TITE< I;, ''., ''! #38 ''* O= TITE< ;, #38 .,*, ., #38 .,+ O= TITE< IO, #38 R<P<#EI3/ 2<CTIO32 '', #38 ''( O= TITE< ;, #EE O= T:< 3#TIO3#E I3T<R3#E R<;<3>< CO8<, #2 #-<38<8 The bill C:. 3o. ''') D was considered on second reading starting 3ovember *, ')), and, on 3ovember ' , ')),, it was approved by the :ouse of Representatives after third and final reading. It was sent to the 2enate on 3ovember .,, ')), and later referred by that body to its Committee on $ays and -eans. On =ebruary , '))(, the 2enate Committee submitted its report recommending approval of 2. 3o. '*,", entitled

12

#3 #CT R<2TR>CT>RI3/ T:< ;#E><A#88<8 T#O C;#TD 2F2T<TO $I8<3 IT2 T#O 1#2< #38 <3:#3C< IT2 #8-I3I2TR#TIO3, #-<38I3/ =OR T:<2< P>RPO2<2 2<CTIO32 )), '"", '"., '",, '"(, '"!, '" , '"+, #38 ''" O= TITE< I;, ''. O= TITE< ;, #38 .,*, ., , #38 .,+ O= TITE< IO, #38 R<P<#EI3/ 2<CTIO32 '',, ''( and ''* O= TITE< ;, #EE O= T:< 3#TIO3#E I3T<R3#E R<;<3>< CO8<, #2 #-<38<8, #38 =OR OT:<R P>RPO2<2 It was stated that the bill was being submitted 4in substitution of 2enate 1ill 3o. ''.), ta0ing into consideration P.2. Res. 3o. ,( and :.1. 3o. ''') .4 On =ebruary +, '))(, the 2enate began consideration of the bill C2. 3o. '*,"D. It finished debates on the bill and approved it on second reading on -arch .(, '))(. On the same day, it approved the bill on third reading by the affirmative votes of ', of its members, with one abstention. :. 3o. ''') and its 2enate version C2. 3o. '*,"D were then referred to a conference committee which, after meeting four times C#pril ',, '), .' and .!, '))(D, recommended that 4:ouse 1ill 3o. ''') , in consolidation with 2enate 1ill 3o. '*,", be approved in accordance with the attached copy of the bill as reconciled and approved by the conferees.4 The Conference Committee bill, entitled 4#3 #CT R<2TR>CT>RI3/ T:< ;#E><A#88<8 T#O C;#TD 2F2T<-, $I8<3I3/ IT2 T#O 1#2< #38 <3:#3CI3/ IT2 #8-I3I2TR#TIO3 #38 =OR T:<2< P>RPO2<2 #-<38I3/ #38 R<P<#EI3/ T:< R<E<;#3T PRO;I2IO32 O= T:< 3#TIO3#E I3T<R3#E R<;<3>< CO8<, #2 #-<38<8, #38 =OR OT:<R P>RPO2<2,4 was thereafter approved by the :ouse of Representatives on #pril . , '))( and by the 2enate on -ay ., '))(. The enrolled bill was then presented to the President of the Philippines who, on -ay !, '))(, signed it. It became Republic #ct 3o. '*. On -ay '., '))(, Republic #ct 3o. '* was published in two newspapers of general circulation and, on -ay .+, '))(, it too0 effect, although its implementation was suspended until &une ,", '))( to allow time for the registration of business entities. It would have been enforced on &uly ', '))( but its enforcement was stopped because the Court, by the vote of '' to ( of its members, granted a temporary restraining order on &une ,", '))(. ,irst. Petitioners6 contention is that Republic #ct 3o. '* did not 4originate exclusively4 in the :ouse of Representatives as re%uired by #rt. ;I, Q.( of the Constitution, because it is in fact the result of the

consolidation of two distinct bills, :. 3o. ''') and 2. 3o. '*,". In this connection, petitioners point out that although #rt. ;I, 22 .( was adopted from the #merican =ederal Constitution, 2 it is notable in two respects@ the verb 4shall originate4 is %ualified in the Philippine Constitution by the word 4exclusively4 and the phrase 4as on other bills4 in the #merican version is omitted. This means, according to them, that to be considered as having originated in the :ouse, Republic #ct 3o. '* must retain the essence of :. 3o. ''') . This argument will not bear analysis. To begin with, it is not the law B but the revenue bill B which is re%uired by the Constitution to 4originate exclusively4 in the :ouse of Representatives. It is important to emphasi9e this, because a bill originating in the :ouse may undergo such extensive changes in the 2enate that the result may be a rewriting of the whole. The possibility of a third version by the conference committee will be discussed later. #t this point, what is important to note is that, as a result of the 2enate action, a distinct bill may be produced. To insist that a revenue statute B and not only the bill which initiated the legislative process culminating in the enactment of the law B must substantially be the same as the :ouse bill would be to deny the 2enate6s power not only to 4concur with amendments4 but also to 4propose amendments.4 It would be to violate the coe%uality of legislative power of the two houses of Congress and in fact ma0e the :ouse superior to the 2enate. The contention that the constitutional design is to limit the 2enate6s power in respect of revenue bills in order to compensate for the grant to the 2enate of the treatyA ratifying power ' and thereby e%uali9e its powers and those of the :ouse overloo0s the fact that the powers being compared are different. $e 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 4a 2enate and a :ouse of Representatives.4 ( The exercise of the treatyAratifying power is not the exercise of legislative power. It is the exercise of a chec0 on the executive power. There is, therefore, no 5ustification for comparing the legislative powers of the :ouse and of the 2enate on the basis of the possession of such nonlegislative power by the 2enate. The possession of a similar power by the >.2. 2enate ) has never been thought of as giving it more legislative powers than the :ouse of Representatives. In the >nited 2tates, the validity of a provision CQ , D imposing an ad valorem tax based on the weight of vessels, which the >.2. 2enate had inserted in the Tariff #ct of ')"), was upheld against the claim that the provision was a revenue bill which originated in the 2enate in contravention of #rt. I, Q of the >.2. Constitution. 6 3or is the power to amend limited to

13

adding a provision or two in a revenue bill emanating from the :ouse. The >.2. 2enate has gone so far as changing the whole of bills following the enacting clause and substituting its own versions. In '++,, for example, it struc0 out everything after the enacting clause of a tariff bill and wrote in its place its own measure, and the :ouse subse%uently accepted the amendment. The >.2. 2enate li0ewise added +( amendments to what later became the PayneA#ldrich Tariff #ct of ')")7 it dictated the schedules of the Tariff #ct of ').'7 it rewrote an extensive tax revision bill in the same year and recast most of the tariff bill of ')... 7 /iven, then, the power of the 2enate to propose amendments, the 2enate can propose its own version even with respect to bills which are re%uired by the Constitution to originate in the :ouse. It is insisted, however, that 2. 3o. '*," was passed not in substitution of :. 3o. ''') but of another 2enate bill C2. 3o. ''.)D earlier filed and that what the 2enate did was merely to 4ta0e H:. 3o. ''') I into consideration4 in enacting 2. 3o. '*,". There is really no difference between the 2enate preserving :. 3o. ''') up to the enacting clause and then writing its own version following the enacting clause Cwhich, it would seem, petitioners admit is an amendment by substitutionD, and, on the other hand, separately presenting a bill of its own on the same sub5ect matter. In either case the result are two bills on the same sub5ect. Indeed, what the Constitution simply means is that the initiative for filing revenue, tariff, or tax bills, bills authori9ing an increase of the public debt, private bills and bills of local application must come from the :ouse of Representatives on the theory that, elected as they are from the districts, the members of the :ouse 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. 1oth views are thereby made to bear on the enactment of such laws. 3or does the Constitution prohibit the filing in the 2enate of a substitute bill in anticipation of its receipt of the bill from the :ouse, so long as action by the 2enate as a body is withheld pending receipt of the :ouse bill. The Court cannot, therefore, understand the alarm expressed over the fact that on -arch ', ')),, eight months before the :ouse passed :. 3o. ''') , 2. 3o. ''.) had been filed in the 2enate. #fter all it does not appear that the 2enate ever considered it. It was only after the 2enate had received :. 3o. ''') on 3ovember .,, ')), that the process of legislation in respect of it began with the referral to the 2enate Committee on $ays and -eans of :. 3o. ''') and the submission by the Committee on =ebruary , '))( of 2. 3o. '*,". =or that matter, if the %uestion were simply the priority in the time of filing of

bills, the fact is that it was in the :ouse that a bill C:. 3o. .!,D to amend the ;#T law was first filed on &uly .., ')).. 2everal other bills had been filed in the :ouse before 2. 3o. ''.) was filed in the 2enate, and :. 3o. ''') was only a substitute of those earlier bills. -econd. <nough has been said to show that it was within the power of the 2enate to propose 2. 3o. '*,". $e now pass to the next argument of petitioners that 2. 3o. '*," did not pass three readings on separate days as re%uired by the Constitution 8 because the second and third readings were done on the same day, -arch .(, '))(. 1ut this was because on =ebruary .(, '))( 9 and again on -arch .., '))(, 1* the President had certified 2. 3o. '*," as urgent. The presidential certification dispensed with the re%uirement not only of printing but also that of reading the bill on separate days. The phrase 4except when the President certifies to the necessity of its immediate enactment, etc.4 in #rt. ;I, Q .*C.D %ualifies the two stated conditions before a bill can become a law@ CiD the bill has passed three readings on separate days and CiiD it has been printed in its final form and distributed three days before it is finally approved. In other words, the 4unless4 clause must be read in relation to the 4except4 clause, because the two are really coordinate clauses of the same sentence. To construe the 4except4 clause as simply dispensing with the second re%uirement in the 4unless4 clause Ci.e., printing and distribution three days before final approvalD would not only violate the rules of grammar. It would also negate the very premise of the 4except4 clause@ the necessity of securing the immediate enactment of a bill which is certified in order to meet a public calamity or emergency. =or 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 re%uiring the calling of a special election for President and ;iceAPresident. >nder the Constitution such a law is re%uired 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 re%uirement of three readings on separate days and of printing and distribution can be dispensed with is supported by the weight of legislative practice. =or example, the bill defining the certiorari 5urisdiction of this Court which, in consolidation with the 2enate version, became Republic #ct 3o. !((", was passed on second and third readings in the :ouse of Representatives on the same day C-ay '(, ')*+D after the bill had been certified by the President as urgent. 12

14

There is, therefore, no merit in the contention that presidential certification dispenses only with the re%uirement for the printing of the bill and its distribution three days before its passage but not with the re%uirement 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 4growing budget deficit4 not being an unusual condition in this country. It is noteworthy that no member of the 2enate saw fit to controvert the reality of the factual basis of the certification. To the contrary, by passing 2. 3o. '*," on second and third readings on -arch .(, '))(, the 2enate accepted the President6s certification. 2hould such certification be now reviewed by this Court, especially when no evidence has been shown that, because 2. 3o. '*," was ta0en up on second and third readings on the same day, the members of the 2enate were deprived of the time needed for the study of a vital piece of legislationR The sufficiency of the factual basis of the suspension of the writ of ha.eas corpus or declaration of martial law under #rt. ;II, Q '+, or the existence of a national emergency 5ustifying the delegation of extraordinary powers to the President under #rt. ;I, Q .,C.D, is sub5ect to 5udicial review because basic rights of individuals may be at ha9ard. 1ut the factual basis of presidential certification of bills, which involves doing away with procedural re%uirements 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 2. 3o. '*," and not :. 3o. ''') . That is because 2. 3o. '*," was what the 2enate was considering. $hen the matter was before the :ouse, the President li0ewise certified :. 3o. ).'" the pending in the :ouse. Third. =inally it is contended that the bill which became Republic #ct 3o. '* is the bill which the Conference Committee prepared by consolidating :. 3o. ''') and 2. 3o. '*,". It is claimed that the Conference Committee report included provisions not found in either the :ouse bill or the 2enate bill and that these provisions were 4surreptitiously4 inserted by the Conference Committee. -uch is made of the fact that in the last two days of its session on #pril .' and .!, '))( the Committee met behind closed doors. $e are not told, however, whether the provisions were not the result of the give and ta0e that often mar0 the proceedings of conference committees. 3or 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 li0ely to be made. The Court is not about to ta0e the suggestion of a cabal or sinister motive attributed to the conferees on the basis solely of their 4secret meetings4 on #pril .' and .!, '))(, nor read anything into the incomplete remar0s of the members, mar0ed in the transcript of stenographic notes by ellipses. The incomplete sentences are probably due to the stenographer6s own limitations or to the incoherence that sometimes characteri9e conversations. $illiam 2afire noted some such lapses in recorded tal0s even by recent past Presidents of the >nited 2tates. In any event, in the >nited 2tates conference committees had been customarily held in executive sessions with only the conferees and their staffs in attendance. 1' Only in 3ovember ') ! was a new rule adopted re%uiring open sessions. <ven then a ma5ority of either chamber6s conferees may vote in public to close the meetings. 1( #s to the possibility of an entirely new bill emerging out of a Conference Committee, it has been explained@ >nder congressional rules of procedure, conference committees are not expected to ma0e any material change in the measure at issue, either by deleting provisions to which both houses have already agreed or by inserting new provisions. 1ut this is a difficult provision to enforce. 3ote the problem when one house amends a proposal originating in either house by stri0ing out everything following the enacting clause and substituting provisions which ma0e it an entirely new bill. The versions are now altogether different, permitting a conference committee to draft essentially a new bill. . . . 1) The result is a third version, which is considered an 4amendment in the nature of a substitute,4 the only re%uirement for which being that the third version be germane to the sub5ect of the :ouse and 2enate 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 :ouse bill or in the 2enate 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 4amendment in the nature of a substitute,4 so long as such amendment is germane to the sub5ect of the bills before the committee. #fter 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.

15

The charge that in this case the Conference Committee acted as a third legislative chamber is thus without any basis. 18 3onetheless, it is argued that under the respective Rules of the 2enate and the :ouse of Representatives a conference committee can only act on the differing provisions of a 2enate bill and a :ouse 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@ /ules of the -enate Rule OII@ Q .*. In the event that the 2enate does not agree with the :ouse of Representatives on the provision of any bill or 5oint resolution, the differences shall .e settled .y a conference committee of .oth 0ouses which shall meet within ten days after their composition. The President shall designate the members of the conference committee in accordance with subparagraph CcD, 2ection , of Rule III. 1ach Conference Committee /eport shall contain a detailed and sufficiently e2plicit statement of the changes in or amendments to the su.3ect 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 2ecretary of the 2enate and copies thereof have been distributed to the -embers. C<mphasis addedD /ules of the 0ouse of /epresentatives Rule OI;@ Q +!. Conference Committee /eports. B In the event that the :ouse does not agree with the 2enate on the amendments to any bill or 5oint resolution, the differences may .e settled .y conference committees of .oth Cham.ers. The consideration of conference committee reports shall always be in order, except when the 5ournal is being read, while the roll is being called or the :ouse is dividing on any %uestion. <ach of the pages of such reports shall be signed by the conferees. 1ach report shall contain a detailed, sufficiently

e2plicit statement of the changes in or amendments to the su.3ect measure. The consideration of such report shall not be in order unless copies thereof are distributed to the -embers@ 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 2ecretary /eneral. C<mphasis addedD To be sure, nothing in the Rules limits a conference committee to a consideration of conflicting provisions. 1ut Rule OEI;, Q ''. of the Rules of the 2enate is cited to the effect that 4If there is no Rule applicable to a specific case the precedents of the Eegislative 8epartment of the Philippines shall be resorted to, and as a supplement of these, the Rules contained in &efferson6s -anual.4 The following is then %uoted from the &efferson6s -anual@ The managers of a conference must confine themselves to the differences committed to them. . . and may not include sub5ects not within disagreements, even though germane to a %uestion in issue. 3ote that, according to Rule OEIO, Q ''., in case there is no specific rule applicable, resort must be to the legislative practice. The &efferson6s -anual 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 2enator Raul 2. Roco, petitioner in /.R. 3o. ''!!(,, during the oral argument in these cases. $hatever, then, may be provided in the &efferson6s -anual 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 %uestion is not covered by any constitutional provision but is only an internal rule of each house. Thus, #rt. ;I, Q '*C,D of the Constitution provides that 4<ach :ouse may determine the rules of its proceedings. . . .4 This observation applies to the other contention that the Rules of the two chambers were li0ewise disregarded in the preparation of the Conference Committee Report because the Report did not contain a 4detailed and sufficiently explicit statement of changes in, or amendments to, the sub5ect measure.4 The Report used brac0ets and capital letters to indicate the changes. This is a standard practice in billAdrafting. $e cannot say that in using these mar0s and symbols the Committee violated the Rules of the 2enate and the :ouse.

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-oreover, this Court is not the proper forum for the enforcement of these internal Rules. To the contrary, as we have already ruled, 4parliamentary rules are merely procedural and with their observance the courts have no concern.4 19 Our concern is with the procedural re%uirements of the Constitution for the enactment of laws. #s far as these re%uirements are concerned, we are satisfied that they have been faithfully observed in these cases. 3or is there any reason for re%uiring that the Committee6s 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 see0 modifications of the compromise bill. The nature of the bill, therefore, re%uires that it be acted upon by each house on a 4ta0e it or leave it4 basis, with the only alternative that if it is not approved by both houses, another conference committee must be appointed. 1ut then again the result would still be a compromise measure that may not be wholly satisfying to both houses. #rt. ;I, Q .*C.D 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. =or if the purpose of re%uiring three readings is to give members of Congress time to study bills, it cannot be gainsaid that :. 3o. ''') was passed in the :ouse after three readings7 that in the 2enate it was considered on first reading and then referred to a committee of that body7 that although the 2enate committee did not report out the :ouse bill, it submitted a version C2. 3o. '*,"D which it had prepared by 4ta0ing into consideration4 the :ouse bill7 that for its part the Conference Committee consolidated the two bills and prepared a compromise version7 that the Conference Committee Report was thereafter approved by the :ouse and the 2enate, presumably after appropriate study by their members. $e 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. ,ourth. $hatever doubts there may be as to the formal validity of Republic #ct 3o. '* must be resolved in its favor. Our cases 2* 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. 3ot even claims that a proposed constitutional amendment was invalid because the re%uisite votes for its approval had not been obtained 21 or that certain provisions of a statute had been 4smuggled4 in the printing of the bill 22 have moved or persuaded us to loo0 behind the proceedings of a coe%ual branch of the government. There is no reason now to depart from this rule.

3o claim is here made that the 4enrolled bill4 rule is absolute. In fact in one case 2' we 4went behind4 an enrolled bill and consulted the &ournal to determine whether certain provisions of a statute had been approved by the 2enate in view of the fact that the President of the 2enate himself, who had signed the enrolled bill, admitted a mista0e and withdrew his signature, so that in effect there was no longer an enrolled bill to consider. 1ut 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 4surreptitiously4 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 4enrolled bill4 rule in such cases would be to disregard the respect due the other two departments of our government. ,ifth. #n additional attac0 on the formal validity of Republic #ct 3o. '* is made by the Philippine #irlines, Inc., petitioner in /.R. 3o. ''!+., namely, that it violates #rt. ;I, Q .*C'D which provides that 4<very bill passed by Congress shall embrace only one sub5ect which shall be expressed in the title thereof.4 It is contended that neither :. 3o. ''') nor 2. 3o. '*," provided for removal of exemption of P#E transactions from the payment of the ;#T and that this was made only in the Conference Committee bill which became Republic #ct 3o. '* without reflecting this fact in its title. The title of Republic #ct 3o. '* is@ #3 #CT R<2TR>CT>RI3/ T:< ;#E><A #88<8 T#O C;#TD 2F2T<-, $I8<3I3/ IT2 T#O 1#2< #38 <3:#3CI3/ IT2 #8-I3I2TR#TIO3, #38 =OR T:<2< P>RPO2<2 #-<38I3/ #38 R<P<#EI3/ T:< R<E<;#3T PRO;I2IO32 O= T:< 3#TIO3#E I3T<R3#E R<;<3>< CO8<, #2 #-<38<8, #38 =OR OT:<R P>RPO2<2. #mong the provisions of the 3IRC amended is Q '",, which originally read@ Q '",. 12empt transactions. B The following shall be exempt from the valueAadded tax@ .... C%D Transactions which are exempt under special laws or international agreements to which the Philippines is a signatory. #mong the transactions exempted from the ;#T were those of P#E because it was exempted under its franchise CP.8. 3o. '!)"D from the payment of all 4other taxes . . . now or in

17

the near future,4 in consideration of the payment by it either of the corporate income tax or a franchise tax of .?. #s a result of its amendment by Republic #ct 3o. '*, Q '", of the 3IRC now provides@ Q '",. 12empt transactions. B The following shall be exempt from the valueAadded tax@ .... C%D Transactions which are exempt under special laws, except those granted under Presidential 8ecree 3os. **, !.), ) ., '()', '!)". . . . The effect of the amendment is to remove the exemption granted to P#E, as far as the ;#T is concerned. The %uestion is whether this amendment of Q '", of the 3IRC is fairly embraced in the title of Republic #ct 3o. '*, although no mention is made therein of P.8. 3o. '!)" as among those which the statute amends. $e thin0 it is, since the title states that the purpose of the statute is to expand the ;#T system, and one way of doing this is to widen its base by withdrawing some of the exemptions granted before. To insist that P.8. 3o. '!)" be mentioned in the title of the law, in addition to Q '", of the 3IRC, in which it is specifically referred to, would be to insist that the title of a bill should be a complete index of its content. The constitutional re%uirement that every bill passed by Congress shall embrace only one sub5ect which shall be expressed in its title is intended to prevent surprise upon the members of Congress and to inform the people of pending legislation so that, if they wish to, they can be heard regarding it. If, in the case at bar, petitioner did not 0now before that its exemption had been withdrawn, it is not because of any defect in the title but perhaps for the same reason other statutes, although published, pass unnoticed until some event somehow calls attention to their existence. Indeed, the title of Republic #ct 3o. '* is not any more general than the title of P#E6s own franchise under P.8. 3o. '!)", and yet no mention is made of its tax exemption. The title of P.8. 3o. '!)" is@ #3 #CT /R#3TI3/ # 3<$ =R#3C:I2< TO P:IEIPPI3< #IREI3<2, I3C. TO <2T#1EI2:, OP<R#T<, #38 -#I3T#I3 #IRA TR#32PORT 2<R;IC<2 I3 T:< P:IEIPPI3<2 #38 1<T$<<3 T:< P:IEIPPI3<2 #38 OT:<R CO>3TRI<2. The trend in our cases is to construe the constitutional re%uirement 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

sub5ect of the statute and all its provisions are germane to the general sub5ect thus expressed. 2( It is further contended that amendment of petitioner6s franchise may only be made by special law, in view of Q .( of P.8. 3o. '!)" 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 4anila /ailroad Co. v. /afferty, 2) it was held that an #ct of the >.2. 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 #ct 3o. '* expressly amends P#E6s franchise CP.8. 3o. '!)"D by specifically excepting from the grant of exemptions from the ;#T P#E6s exemption under P.8. 3o. '!)". This is within the power of Congress to do under #rt. OII, Q '' of the Constitution, which provides that the grant of a franchise for the operation of a public utility is sub5ect to amendment, alteration or repeal by Congress when the common good so re%uires. II. 2>12T#3TI;< I22><2 #. Claims of 5ress ,reedom, ,reedom of Thought and /eligious ,reedom The Philippine Press Institute CPPID, petitioner in /.R. 3o. ''!!((, is a nonprofit organi9ation of newspaper publishers established for the improvement of 5ournalism in the Philippines. On the other hand, petitioner in /.R. 3o. ''! +', the Philippine 1ible 2ociety CP12D, is a nonprofit organi9ation engaged in the printing and distribution of bibles and other religious articles. 1oth petitioners claim violations of their rights under Q Q ( and ! of the 1ill of Rights as a result of the enactment of the ;#T Eaw. The PPI %uestions the law insofar as it has withdrawn the exemption previously granted to the press under Q '", CfD of the 3IRC. #lthough the exemption was subse%uently 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 2ecretary of =inance. On the other

18

hand, the P12 goes so far as to %uestion the 2ecretary6s power to grant exemption for two reasons@ C'D The 2ecretary of =inance has no power to grant tax exemption because this is vested in Congress and re%uires for its exercise the vote of a ma5ority of all its members 26 and C.D the 2ecretary6s duty is to execute the law. Q '", of the 3IRC contains a list of transactions exempted from ;#T. #mong the transactions previously granted exemption were@ CfD Printing, publication, importation or sale of boo0s and any newspaper, maga9ine, 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 #ct 3o. '* amended Q '", by deleting S CfD with the result that print media became sub5ect to the ;#T with respect to all aspects of their operations. Eater, however, based on a memorandum of the 2ecretary of &ustice, respondent 2ecretary of =inance issued Revenue Regulations 3o. ''A)(, dated &une . , '))(, exempting the 4circulation income of print media pursuant to Q ( #rticle III of the ')+ Philippine Constitution guaranteeing against abridgment of freedom of the press, among others.4 The exemption of 4circulation income4 has left income from advertisements still sub5ect to the ;#T. It is unnecessary to pass upon the contention that the exemption granted is beyond the authority of the 2ecretary of =inance to give, in view of PPI6s 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 ;#T on the gross receipts of newspapers from advertisements and on their ac%uisition of paper, in0 and services for publication. <ven 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 PPI6s claim is simply that, as applied to newspapers, the law abridges press freedom. <ven 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 2tate. It has been held@ The publisher of a newspaper has no immunity from the application of general laws. :e has no special privilege to invade the rights and liberties of others. :e must answer for libel. :e may be punished for contempt of court. . . . Ei0e

others, he must pay e%uitable and nondiscriminatory taxes on his business. . . . 27 The PPI does not dispute this point, either. $hat it contends is that by withdrawing the exemption previously granted to print media transactions involving printing, publication, importation or sale of newspapers, Republic #ct 3o. '* 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. $e 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 re%uired to pay a valueAadded 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, li0ewise previously granted exemption, have been delisted as part of the scheme to expand the base and the scope of the ;#T 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. 1ut 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 #ct 3o. '* sub5ects the press to discriminatory taxation. In the cases cited, the discriminatory purpose was clear either from the bac0ground of the law or from its operation. =or example, in Gros3ean v. !merican 5ress Co., 28the law imposed a license tax e%uivalent to .? of the gross receipts derived from advertisements only on newspapers which had a circulation of more than .",""" copies per wee0. 1ecause 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 Eouisiana, leaving untaxed four papers with circulation of only slightly less than .",""" copies a wee0 and '." wee0ly newspapers which were in serious competition with the thirteen newspapers in %uestion. It was well 0nown that the thirteen newspapers had been critical of 2enator :uey Eong, and the EongAdominated legislature of Eouisiana respondent by taxing what Eong described as the 4lying newspapers4 by imposing on them 4a tax on lying.4 The effect of the tax was to curtail both their revenue and their circulation. #s the >.2. 2upreme Court noted, the tax was 4a 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

19

guaranties.4 29 The case is a classic illustration of the warning that the power to tax is the power to destroy. In the other case '* invo0ed by the PPI, the press was also found to have been singled out because everything was exempt from the 4use tax4 on in0 and paper, except the press. -innesota 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 4using, storing or consuming in that state tangible personal property4 by eliminating the residents6 incentive to get goods from outside states where the sales tax might be lower. The 4innesota -tar Tri.une was exempted from both taxes from ')* to ') '. In ') ', however, the state legislature amended the tax scheme by imposing the 4use tax4 on the cost of paper and in0 used for publication. The law was held to have singled out the press because C'D there was no reason for imposing the 4use tax4 since the press was exempt from the sales tax and C.D the 4use tax4 was laid on an 4intermediate transaction rather than the ultimate retail sale.4 -innesota had a heavy burden of 5ustifying the differential treatment and it failed to do so. In addition, the >.2. 2upreme Court found the law to be discriminatory because the legislature, by again amending the law so as to exempt the first T'"",""" of paper and in0 used, further narrowed the coverage of the tax so that 4only a handful of publishers pay any tax at all and even fewer pay any significant amount of tax.4 '1 The discriminatory purpose was thus very clear. -ore recently, in !rkansas 6riters7 5ro3ect, Inc. v. /agland, '2 it was held that a law which taxed general interest maga9ines but not newspapers and religious, professional, trade and sports 5ournals was discriminatory because while the tax did not single out the press as a whole, it targeted a small group within the press. $hat is more, by differentiating on the basis of contents Ci.e., between general interest and special interests such as religion or sportsD the law became 4entirely incompatible with the =irst #mendment6s guarantee of freedom of the press.4 These cases come down to this@ that unless 5ustified, the differential treatment of the press creates ris0s 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 ;#T only on print media whose gross sales exceeds P(+",""" but not more than P !",""", the law discriminates '' is without merit since it has not been shown that as a result the class sub5ect to tax has been unreasonably narrowed. The fact is that this limitation does not apply to the press along but to all sales. 3or 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 4owners of newspapers are immune from any forms of ordinary taxation.4 The license tax in the Gros3ean case was declared invalid because it was 4one single in 0ind, with a long history of hostile misuse against the freedom of the press.4 '( On the other hand, 4inneapolis -tar ac0nowledged that 4The =irst #mendment does not prohibit all regulation of the press Hand thatI the 2tates and the =ederal /overnment can sub5ect newspapers to generally applicable economic regulations without creating constitutional problems.4 ') $hat has been said above also disposes of the allegations of the P12 that the removal of the exemption of printing, publication or importation of boo0s and religious articles, as well as their printing and publication, li0ewise violates freedom of thought and of conscience. =or as the >.2. 2upreme Court unanimously held in Jimmy -$aggart 4inistries v. 8oard of 1"uali9ation, '6 the =ree <xercise of Religion Clause does not prohibit imposing a generally applicable sales and use tax on the sale of religious materials by a religious organi9ation. This brings us to the %uestion whether the registration provision of the law, '7 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 !merican 8i.le -ociety v. City of 4anila '8 is cited by both the P12 and the PPI in support of their contention that the law imposes censorship. There, this Court held that an ordinance of the City of -anila, which imposed a license fee on those engaged in the business of general merchandise, could not be applied to the appellant6s sale of bibles and other religious literature. This Court relied on 4urdock v. 5ennsylvania, '9 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 sect6s right under the Constitution. =or that reason, it was held, the license fee 4restrains in advance those constitutional liberties of press and religion and inevitably tends to suppress their exercise.4 (* 1ut, in this case, the fee in Q '" , although a fixed amount CP',"""D, is not imposed for the exercise of a privilege but only for the purpose of defraying part of the cost of registration. The registration re%uirement is a central feature of the ;#T system. It is designed to provide a record of tax credits because any person who is sub5ect to the payment of the ;#T pays an input tax, even as he collects an output tax on sales made or services rendered. The registration fee is thus a mere

20

administrative fee, one not imposed on the exercise of a privilege, much less a constitutional right. =or the foregoing reasons, we find the attac0 on Republic #ct 3o. '* on the ground that it offends the free speech, press and freedom of religion guarantees of the Constitution to be without merit. =or the same reasons, we find the claim of the Philippine <ducational Publishers #ssociation CP<P#D in /.R. 3o. ''!),' that the increase in the price of boo0s and other educational materials as a result of the ;#T would violate the constitutional mandate to the government to give priority to education, science and technology C#rt. II, Q ' D to be untenable. 1. Claims of /egressivity, Denial of Due 5rocess, 1"ual 5rotection, 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 4chilling effect4 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 Court6s power of review. There is, however, no 5ustification for passing upon the claims that the law also violates the rule that taxation must be progressive and that it denies petitioners6 right to due process and that e%ual protection of the laws. The reason for this different treatment has been cogently stated by an eminent authority on constitutional law thus@ 4H$Ihen freedom of the mind is imperiled by law, it is freedom that commands a momentum of respect7 when property is imperiled it is the lawma0ers6 5udgment 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.4 (1 Indeed, the absence of threat of immediate harm ma0es the need for 5udicial intervention less evident and underscores the essential nature of petitioners6 attac0 on the law on the grounds of regressivity, denial of due process and e%ual protection and impairment of contracts as a mere academic discussion of the merits of the law. =or 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 5udgment regarding so fundamental %uestions as those raised in these suits. Thus, the broad argument against the ;#T is that it is regressive and that it violates the re%uirement that 4The rule of taxation shall be uniform and e%uitable HandI Congress shall evolve a progressive system of

taxation.4 (2Petitioners in /.R. 3o. ''! +' %uote from a paper, entitled 4;#T Policy Issues@ 2tructure, Regressivity, Inflation and <xports4 by #lan #. Tait of the International -onetary =und, that 4;#T payment by lowA income households will be a higher proportion of their incomes Cand expendituresD than payments by higherA income households. That is, the ;#T will be regressive.4 Petitioners contend that as a result of the uniform '"? ;#T, the tax on consumption goods of those who are in the higherAincome brac0et, which before were taxed at a rate higher than '"?, has been reduced, while basic commodities, which before were taxed at rates ranging from ,? to !?, are now taxed at a higher rate. &ust 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 higherAincome groups, even as the law exempts basic goods and services. It is thus e%uitable. The goods and properties sub5ect to the ;#T are those used or consumed by higherAincome 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 e%uipment, hotels, restaurants and similar places, tourist buses, and the li0e. On the other hand, small business establishments, with annual gross sales of less than P!"",""", are exempted. This, according to respondents, removes from the coverage of the law some ,",""" business establishments. On the other hand, an occasional paper (' of the Center for Research and Communication cities a 3<8# study that the ;#T has minimal impact on inflation and income distribution and that while additional expenditure for the lowest income class is only P,"' or '.()? a year, that for a family earning P!"",""" a year or more is P+,,(" or ...?. Eac0ing empirical data on which to base any conclusion regarding these arguments, any discussion whether the ;#T is regressive in the sense that it will hit the 4poor4 and middleAincome group in society harder than it will the 4rich,4 as the Cooperative >nion of the Philippines CC>PD claims in /.R. 3o. ''!+ ,, is largely an academic exercise. On the other hand, the C>P6s contention that Congress6 withdrawal of exemption of producers cooperatives, mar0eting 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 5ustice C#rt. OII, Q '!D but also denies such cooperatives the e%ual protection of the law is actually a policy argument. The legislature is not re%uired to adhere to a policy of 4all or none4 in choosing the sub5ect of taxation.((

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3or is the contention of the Chamber of Real <state and 1uilders #ssociation CCR<1#D, petitioner in /.R. ''! !(, that the ;#T will reduce the mar0 up of its members by as much as +!? to )"? any more concrete. It is a mere allegation. On the other hand, the claim of the Philippine Press Institute, petitioner in /.R. 3o. ''!!((, that the ;#T 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 %uestion, still falls short of the establishment of facts by evidence so necessary for ad5udicating the %uestion whether the tax is oppressive and confiscatory. Indeed, regressivity is not a negative standard for courts to enforce. $hat Congress is re%uired by the Constitution to do is to 4evolve a progressive system of taxation.4 This is a directive to Congress, 5ust li0e 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 ine%ualities C#rt. OIII, Q 'D, or for the promotion of the right to 4%uality education4 C#rt. OI;, Q 'D. These provisions are put in the Constitution as moral incentives to legislation, not as 5udicially enforceable rights. #t all events, our ')++ decision in :apatiran () should have laid to rest the %uestions now raised against the ;#T. There similar arguments made against the original ;#T Eaw C<xecutive Order 3o. . ,D were held to be hypothetical, with no more basis than newspaper articles which this Court found to be 4hearsay and HwithoutI evidentiary value.4 #s Republic #ct 3o. '* merely expands the base of the ;#T system and its coverage as provided in the original ;#T Eaw, 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 CR<1# that the imposition of the ;#T 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 43o law impairing the obligation of contracts shall be passed.4 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 2tate. =or 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 ade%uate authority to secure the peace and good order of society. (6

In truth, the Contract Clause has never been thought as a limitation on the exercise of the 2tate6s power of taxation save only where a tax exemption has been granted for a valid consideration. (7 2uch is not the case of P#E in /.R. 3o. ''!+!., and we do not understand it to ma0e 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 lac0 of a concrete record. $e accept that this Court does not only ad5udicate private cases7 that public actions by 4nonA:ohfeldian4 (8 or ideological plaintiffs are now cogni9able provided they meet the standing re%uirement of the Constitution7 that under #rt. ;III, Q ', S . the Court has a 4special function4 of vindicating constitutional rights. 3onetheless 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 ad5udication the impact of actuality (9 to insure that decisionAma0ing is informed and well grounded. 3eedless to say, we do not have power to render advisory opinions or even 5urisdiction over petitions for declaratory 5udgment. In effect we are being as0ed to do what the Conference Committee is precisely accused of having done in these cases B to sit as a third legislative chamber to review legislation. $e are told, however, that the power of 5udicial 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 loo0 behind the barriers set by the principle of separation of powers. #rt. ;III, Q ', S . is cited in support of this view@ &udicial power includes the duty of the courts of 5ustice 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 lac0 or excess of 5urisdiction on the part of any branch or instrumentality of the /overnment. To view the 5udicial power of review as a duty is nothing new. Chief &ustice -arshall said so in '+",, to 5ustify the assertion of this power in 4ar.ury v. 4adison; It is emphatically the province and duty of the 5udicial 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. )* &ustice Eaurel echoed this 5ustification in '),* in !ngara v. 1lectoral Commission;

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#nd when the 5udiciary mediates to allocate constitutional boundaries, it does not assert any superiority over the other departments7 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. )1 This conception of the 5udicial power has been affirmed in several cases )2 of this Court following !ngara. It does not add anything, therefore, to invo0e this 4duty4 to 5ustify this Court6s intervention in what is essentially a case that at best is not ripe for ad5udication. That duty must still be performed in the context of a concrete case or controversy, as #rt. ;III, Q !C.D clearly defines our 5urisdiction in terms of 4cases,4 and nothing but 4cases.4 That the other departments of the government may have committed a grave abuse of discretion is not an independent ground for exercising our power. 8isregard of the essential limits imposed by the case and controversy re%uirement can in the long run only result in undermining our authority as a court of law. =or, as 5udges, what we are called upon to render is 5udgment according to law, not according to what may appear to be the opinion of the day. UUUUUUUUUUUUUUUUUUUUUUUUUUUUUUU In the preceeding pages we have endeavored to discuss, within limits, the validity of Republic #ct 3o. '* in its formal and substantive aspects as this has been raised in the various cases before us. To sum up, we hold@ C'D That the procedural re%uirements of the Constitution have been complied with by Congress in the enactment of the statute7 C.D That 5udicial in%uiry whether the formal re%uirements for the enactment of statutes B beyond those prescribed by the Constitution B have been observed is precluded by the principle of separation of powers7 C,D 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 education7 and C(D 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 5ustify the grant of prospective relief by writ of prohibition.

$:<R<=OR<, the petitions in these cases are 8I2-I22<8. 8idin, <uiason, and :apunan, JJ., concur. G.R. No. 11)()) O+/ober '*, 199) ART RO M. TOLENTINO, petitioner, vs. T#E SECRETAR. OF FINANCE a!" T#E COMMISSIONER OF INTERNAL REVEN E, respondents. G.R. No. 11))2) O+/ober '*, 199) R<2OE>TIO3 MEN-O&A, J.: These are motions see0ing reconsideration of our decision dismissing the petitions filed in these cases for the declaration of unconstitutionality of R.#. 3o. '*, otherwise 0nown as the <xpanded ;alueA#dded Tax Eaw. The motions, of which there are '" in all, have been filed by the several petitioners in these cases, with the exception of the Philippine <ducational Publishers #ssociation, Inc. and the #ssociation of Philippine 1oo0sellers, petitioners in /.R. 3o. ''!),'. The 2olicitor /eneral, representing the respondents, filed a consolidated comment, to which the Philippine #irlines, Inc., petitioner in /.R. 3o. ''!+!., and the Philippine Press Institute, Inc., petitioner in /.R. 3o. ''!!((, and &uan T. 8avid, petitioner in /.R. 3o. ''!!.!, each filed a reply. In turn the 2olicitor /eneral filed on &une ', '))! a re5oinder to the PPI6s reply. On &une . , '))! the matter was submitted for resolution. I. 5o$er of the -enate to propose amendments to revenue .ills. 2ome of the petitioners CTolentino, Nilosbayan, Inc., Philippine #irlines CP#ED, Roco, and Chamber of Real <state and 1uilders #ssociation CCR<1#DD reiterate previous claims made by them that R.#. 3o. '* did not 4originate exclusively4 in the :ouse of Representatives as re%uired by #rt. ;I, Q.( of the Constitution. #lthough they admit that :. 3o. ''') was filed in the :ouse of Representatives where it passed three readings and that afterward it was sent to the 2enate where after first reading it was referred to the 2enate $ays and -eans Committee, they complain that the 2enate did not pass it on second and third readings. Instead what the 2enate did was to pass its own version C2. 3o. '*,"D which it approved on -ay .(, '))(. Petitioner Tolentino adds that what the 2enate committee should have done was to amend :. 3o. ''') by stri0ing out the text of the bill and substituting it with the text of 2. 3o. '*,". That way, it is said, 4the bill remains a :ouse bill and the 2enate version 5ust becomes the text Conly the te2tD of the :ouse bill.4 The contention has no merit.

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The enactment of 2. 3o. '*," is not the only instance in which the 2enate proposed an amendment to a :ouse revenue bill by enacting its own version of a revenue bill. On at least two occasions during the 1ighth Congress, the 2enate passed its own version of revenue bills, which, in consolidation with :ouse bills earlier passed, became the enrolled bills. These were@ R.#. 3o. ,*) C#3 #CT TO #-<38 T:< O-3I1>2 I3;<2T-<3T2 CO8< O= ')+ 1F <OT<38I3/ =RO- =I;< C!D F<#R2 TO T<3 F<#R2 T:< P<RIO8 =OR T#O #38 8>TF <O<-PTIO3 #38 T#O CR<8IT O3 C#PIT#E <P>IP-<3TD which was approved by the President on #pril '", ')).. This #ct is actually a consolidation of :. 3o. ,(.!(, which was approved by the :ouse on &anuary .), '))., and 2. 3o. ').", which was approved by the 2enate on =ebruary ,, ')).. R.#. 3o. !() C#3 #CT /R#3TI3/ T#O <O<-PTIO32 TO $:O<;<R 2:#EE /I;< R<$#R8 TO #3F =IEIPI3O #T:E<T< $I33I3/ # -<8#E I3 OEF-PIC /#-<2D which was approved by the President on -ay .., ')).. This #ct is a consolidation of :. 3o. ...,., which was approved by the :ouse of Representatives on #ugust ., ')+), and 2. 3o. +" , which was approved by the 2enate on October .', '))'. On the other hand, the Ninth Congress passed revenue laws which were also the result of the consolidation of :ouse and 2enate bills. These are the following, with indications of the dates on which the laws were approved by the President and dates the separate bills of the two chambers of Congress were respectively passed@ '. R.#. 3O. *(. #3 #CT I3CR<#2I3/ T:< P<3#ETI<2 =OR T#O <;#2IO3, #-<38I3/ =OR T:I2 P>RPO2< T:< P<RTI3<3T 2<CTIO32 O= T:< 3#TIO3#E I3T<R3#E R<;<3>< CO8< C8ecember .+, ')).D. :ouse 1ill 3o. .'*!, October !, ')). 2enate 1ill 3o. ,., 8ecember , ')). .. R.#. 3O. *(, #3 #CT TO <-PO$<R T:< CO--I22IO3<R O= I3T<R3#E R<;<3>< TO R<P>IR< T:< P#F-<3T O= T:< ;#E><A#88<8 T#O <;<RF -O3T: #38 TO #EEO$ EOC#E /O;<R3-<3T >3IT2 TO 2:#R< I3 ;#T R<;<3><, #-<38I3/ =OR T:I2 P>RPO2< C<RT#I3 2<CTIO32 O= T:< 3#TIO3#E I3T<R3#E R<;<3>< CO8< C8ecember .+, ')).D :ouse 1ill 3o. '!",, 2eptember ,, ')). 2enate 1ill 3o. )*+, 8ecember , ')).

,. R.#. 3O. *(* #3 #CT #>T:ORIJI3/ T:< CO--I22IO3<R O= I3T<R3#E R<;<3>< TO PR<2CRI1< T:< PE#C< =OR P#F-<3T O= I3T<R3#E R<;<3>< T#O<2 1F E#R/< T#OP#F<R2, #-<38I3/ =OR T:I2 P>RPO2< C<RT#I3 PRO;I2IO32 O= T:< 3#TIO3#E I3T<R3#E R<;<3>< CO8<, #2 #-<38<8 C=ebruary .(, ')),D :ouse 1ill 3o. '( ", October .", ')). 2enate 1ill 3o. ,!, 3ovember '), ')). (. R.#. 3O. *() #3 #CT R<P>IRI3/ T:< /O;<R3-<3T OR #3F O= IT2 POEITIC#E 2>18I;I2IO32, I32TR>-<3T#EITI<2 OR #/<3CI<2 I3CE>8I3/ /O;<R3-<3TAO$3<8 OR CO3TROEE<8 CORPOR#TIO32 C/OCC2D TO 8<8>CT #38 $IT::OE8 T:< ;#E><A#88<8 T#O 8>< #T T:< R#T< O= T:R<< P<RC<3T C,?D O3 /RO22 P#F-<3T =OR T:< P>RC:#2< O= /OO82 #38 2IO P<RC<3T C*?D O3 /RO22 R<C<IPT2 =OR 2<R;IC<2 R<38<R<8 1F CO3TR#CTOR2 C#pril *, ')),D :ouse 1ill 3o. !.*", &anuary .*, ')), 2enate 1ill 3o. ''(', -arch ,", ')), !. R.#. 3O. *!* #3 #CT R<P>IRI3/ /O;<R3-<3TA O$3<8 OR CO3TROEE<8 CORPOR#TIO32 TO 8<CE#R< 8I;I8<382 >38<R C<RT#I3 CO38ITIO32 TO T:< 3#TIO3#E /O;<R3-<3T, #38 =OR OT:<R P>RPO2<2 C3ovember ), ')),D :ouse 1ill 3o. ''".(, 3ovember ,, ')), 2enate 1ill 3o. ''*+, 3ovember ,, ')), *. R.#. 3O. **" #3 #CT R#TIO3#EIJI3/ =>RT:<R T:< 2TR>CT>R< #38 #8-I3I2TR#TIO3 O= T:< 8OC>-<3T#RF 2T#-P T#O, #-<38I3/ =OR T:< P>RPO2< C<RT#I3 PRO;I2IO32 O= T:< 3#TIO3#E I3T<R3#E R<;<3>< CO8<, #2 #-<38<8, #EEOC#TI3/ =>382 =OR 2P<CI=IC PRO/R#-2, #38 =OR OT:<R P>RPO2<2 C8ecember .,, ')),D

24

:ouse 1ill 3o. +), -ay ,', ')), 2enate 1ill 3o. ',,", 3ovember '+, ')), . R.#. 3O. ' #3 #CT I-PO2I3/ # T#O O3 T:< 2#E<, 1#RT<R OR <OC:#3/< O= 2:#R<2 O= 2TOCN EI2T<8 #38 TR#8<8 T:RO>/: T:< EOC#E 2TOCN <OC:#3/< OR T:RO>/: I3ITI#E P>1EIC O==<RI3/, #-<38I3/ =OR T:< P>RPO2< T:< 3#TIO3#E I3T<R3#E R<;<3>< CO8<, #2 #-<38<8, 1F I32<RTI3/ # 3<$ 2<CTIO3 #38 R<P<#EI3/ C<RT#I3 2>12<CTIO32 T:<R<O= C-ay !, '))(D :ouse 1ill 3o. )'+ , 3ovember ,, ')), 2enate 1ill 3o. ''. , -arch .,, '))( Thus, the enactment of 2. 3o. '*," is not the only instance in which the 2enate, in the exercise of its power to propose amendments to bills re%uired to originate in the :ouse, passed its own version of a :ouse revenue measure. It is noteworthy that, in the particular case of 2. 3o. '*,", petitioners Tolentino and Roco, as members of the 2enate, voted to approve it on second and third readings. On the other hand, amendment by substitution, in the manner urged by petitioner Tolentino, concerns a mere matter of form. Petitioner has not shown what substantial difference it would ma0e if, as the 2enate actually did in this case, a separate bill li0e 2. 3o. '*," is instead enacted as a substitute measure, 4taking into Consideration . . . 0.8. ###=>.4 Indeed, so far as pertinent, the Rules of the 2enate only provide@ R>E< OOIO #-<38-<3T2 xxx xxx xxx Q*+. 3ot more than one amendment to the original amendment shall be considered. No amendment .y su.stitution shall .e entertained unless the te2t thereof is su.mitted in $riting. #ny of said amendments may be withdrawn before a vote is ta0en thereon. Q*). 3o amendment which see0s the inclusion of a legislative provision foreign to the sub5ect matter of a bill CriderD shall be entertained. xxx xxx xxx Q "A#. # bill or resolution shall not be amended by substituting it with another

which covers a sub5ect distinct from that proposed in the original bill or resolution. Cemphasis addedD. 3or is there merit in petitioners6 contention that, with regard to revenue bills, the Philippine 2enate possesses less power than the >.2. 2enate because of textual differences between constitutional provisions giving them the power to propose or concur with amendments. #rt. I, Q , cl. ' of the >.2. Constitution reads@ #ll 1ills for raising Revenue shall originate in the :ouse of Representatives7 but the 2enate may propose or concur with amendments as on other 1ills. #rt. ;I, Q.( of our Constitution reads@ #ll appropriation, revenue or tariff bills, bills authori9ing increase of the public debt, bills of local application, and private bills shall originate exclusively in the :ouse of Representatives, but the 2enate may propose or concur with amendments. The addition of the word 4exclusively4 in the Philippine Constitution and the decision to drop the phrase 4as on other 1ills4 in the #merican version, according to petitioners, shows the intention of the framers of our Constitution to restrict the 2enate6s power to propose amendments to revenue bills. Petitioner Tolentino contends that the word 4exclusively4 was inserted to modify 4originate4 and 4the words 6as in any other bills6 CsicD were eliminated so as to show that these bills were not to be li0e other bills but must be treated as a special 0ind.4 The history of this provision does not support this contention. The supposed indicia of constitutional intent are nothing but the relics of an unsuccessful attempt to limit the power of the 2enate. It will be recalled that the '),! Constitution originally provided for a unicameral 3ational #ssembly. $hen it was decided in '),) to change to a bicameral legislature, it became necessary to provide for the procedure for lawma0ing by the 2enate and the :ouse of Representatives. The wor0 of proposing amendments to the Constitution was done by the 3ational #ssembly, acting as a constituent assembly, some of whose members, 5ealous of preserving the #ssembly6s lawma0ing powers, sought to curtail the powers of the proposed 2enate. #ccordingly they proposed the following provision@ #ll bills appropriating public funds, revenue or tariff bills, bills of local application, and private bills shall originate exclusively in the #ssembly, but the 2enate may propose or concur with amendments. In case of

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disapproval by the 2enate of any such bills, the #ssembly may repass the same by a twoAthirds 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 2enate should fail to finally act on any such bills, the #ssembly may, after thirty days from the opening of the next regular session of the same legislative term, reapprove the same with a vote of twoAthirds of all the members of the #ssembly. #nd upon such reapproval, the bill shall be deemed enacted and may be submitted to the President for corresponding action. The special committee on the revision of laws of the 2econd 3ational #ssembly vetoed the proposal. It deleted everything after the first sentence. #s rewritten, the proposal was approved by the 3ational #ssembly and embodied in Resolution 3o. ,+, as amended by Resolution 3o. ,. C&. #R></O, N3O$ FO>R CO32TIT>TIO3 *!A** C')!"DD. The proposed amendment was submitted to the people and ratified by them in the elections held on &une '+, ')(". This is the history of #rt. ;I, Q'+ C.D of the '),! Constitution, from which #rt. ;I, Q.( of the present Constitution was derived. It explains why the word 4exclusively4 was added to the #merican text from which the framers of the Philippine Constitution borrowed and why the phrase 4as on other 1ills4 was not copied. Considering the defeat of the proposal, the power of the 2enate to propose amendments must be understood to be full, plenary and complete 4as on other 1ills.4 Thus, because revenue bills are re%uired to originate exclusively in the :ouse of Representatives, the 2enate cannot enact revenue measures of its own without such bills. #fter a revenue bill is passed and sent over to it by the :ouse, however, the 2enate certainly can pass its own version on the same sub5ect matter. This follows from the coe%uality of the two chambers of Congress. That this is also the understanding of boo0 authors of the scope of the 2enate6s power to concur is clear from the following commentaries@ The power of the 2enate to propose or concur with amendments is apparently without restriction. It would seem that by virtue of this power, the 2enate can practically reAwrite a bill re%uired to come from the :ouse and leave only a trace of the original bill. =or example, a general revenue bill passed by the lower house of the >nited 2tates Congress

contained provisions for the imposition of an inheritance tax . This was changed by the 2enate into a corporation tax. The amending authority of the 2enate was declared by the >nited 2tates 2upreme Court to be sufficiently broad to enable it to ma0e the alteration. H=lint v. 2tone Tracy Company, .." >.2. '" , !! E. ed. ,+)I. CE. T#V#8# #38 =. C#RR<O3, POEITIC#E E#$ O= T:< P:IEIPPI3<2 .( C')*'DD The aboveAmentioned bills are supposed to be initiated by the :ouse of Representatives because it is more numerous in membership and therefore also more representative of the people. -oreover, its members are presumed to be more familiar with the needs of the country in regard to the enactment of the legislation involved. The 2enate is, however, allowed much leeway in the exercise of its power to propose or concur with amendments to the bills initiated by the :ouse of Representatives. Thus, in one case, a bill introduced in the >.2. :ouse of Representatives was changed by the 2enate to ma0e a proposed inheritance tax a corporation tax. It is also accepted practice for the 2enate to introduce what is 0nown as an amendment by substitution, which may entirely replace the bill initiated in the :ouse of Representatives. CI. CR>J, P:IEIPPI3< POEITIC#E E#$ '((A'(! C')),DD. In sum, while #rt. ;I, Q.( provides that all appropriation, revenue or tariff bills, bills authori9ing increase of the public debt, bills of local application, and private bills must 4originate exclusively in the :ouse of Representatives,4 it also adds, 4.ut the -enate may propose or concur $ith amendments.4 In the exercise of this power, the 2enate may propose an entirely new bill as a substitute measure. #s petitioner Tolentino states in a high school text, a committee to which a bill is referred may do any of the following@ C'D to endorse the bill without changes7 C.D to ma0e changes in the bill omitting or adding sections or altering its language7 C,D to ma0e and endorse an entirely new bill as a substitute, in which case it will be 0nown as a committee .ill7 or C(D to ma0e no report at all.

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C#. TOE<3TI3O, T:< /O;<R3-<3T O= T:< P:IEIPPI3<2 .!+ C')!"DD To except from this procedure the amendment of bills which are re%uired to originate in the :ouse by prescribing that the number of the :ouse bill and its other parts up to the enacting clause must be preserved although the text of the 2enate amendment may be incorporated in place of the original body of the bill is to insist on a mere technicality. #t any rate there is no rule prescribing this form. 2. 3o. '*,", as a substitute measure, is therefore as much an amendment of :. 3o. ''') as any which the 2enate could have made. II. -. No. #)?@ a mere amendment of 0. No. ###=>. Petitioners6 basic error is that they assume that 2. 3o. '*," is an independent and distinct .ill. :ence their repeated references to its certification that it was passed by the 2enate 4in su.stitution of -.8. No. ##'=, taking into consideration P.2. Res. 3o. ,( and 0.8. No. ###=>,4 implying that there is something substantially different between the reference to 2. 3o. ''.) and the reference to :. 3o. ''') . =rom this premise, they conclude that R.#. 3o. '* originated both in the :ouse and in the 2enate and that it is the product of two 4halfAba0ed bills because neither :. 3o. ''') nor 2. 3o. '*," was passed by both houses of Congress.4 In point of fact, in several instances the provisions of 2. 3o. '*,", clearly appear to be mere amendments of the corresponding provisions of :. 3o. ''') . The very tabular comparison of the provisions of :. 3o. ''') and 2. 3o. '*," attached as 2upplement # to the basic petition of petitioner Tolentino, while showing differences between the two bills, at the same time indicates that the provisions of the 2enate bill were precisely intended to be amendments to the :ouse bill. $ithout :. 3o. ''') , the 2enate could not have enacted 2. 3o. '*,". 1ecause the 2enate bill was a mere amendment of the :ouse bill, :. 3o. ''') in its original form did not have to pass the 2enate on second and three readings. It was enough that after it was passed on first reading it was referred to the 2enate Committee on $ays and -eans. 3either was it re%uired that 2. 3o. '*," be passed by the :ouse of Representatives before the two bills could be referred to the Conference Committee. There is legislative precedent for what was done in the case of :. 3o. ''') and 2. 3o. '*,". $hen the :ouse bill and 2enate bill, which became R.#. 3o. '("! C#ct prohibiting the disclosure of ban0 depositsD, were referred to a conference committee, the %uestion was raised whether the two bills could be the sub5ect of such conference, considering that the bill from one house had not been passed by the other and vice versa. #s Congressman 8uran put the %uestion@

-R. 8>R#3. Therefore, I raise this %uestion of order as to procedure@ If a 0ouse .ill is passed .y the 0ouse .ut not passed .y the -enate, and a -enate .ill of a similar nature is passed in the -enate .ut never passed in the 0ouse, can the t$o .ills .e the su.3ect of a conference, and can a la$ .e enacted from these t$o .illsR I understand that the 2enate bill in this particular instance does not refer to investments in government securities, whereas the bill in the :ouse, which was introduced by the 2pea0er, covers two sub5ect matters@ not only investigation of deposits in ban0s but also investigation of investments in government securities. 3ow, since the two bills differ in their sub5ect matter, I believe that no law can be enacted. Ruling on the point of order raised, the chair C2pea0er &ose 1. Eaurel, &r.D said@ T:< 2P<#N<R. The report of the conference committee is in order. It is precisely in cases li0e this where a conference should be had. If the :ouse bill had been approved by the 2enate, there would have been no need of a conference7 but precisely because the 2enate passed another .ill on the same su.3ect matter, the conference committee had to be created, and we are now considering the report of that committee. C. CO3/. R<C. 3O. ',, &uly . , ')!!, pp. ,+('A(. Cemphasis addedDD III. The 5resident7s certification. The fallacy in thin0ing that :. 3o. ''') and 2. 3o. '*," are distinct and unrelated measures also accounts for the petitioners6 CNilosbayan6s and P#E6sD contention that because the President separately certified to the need for the immediate enactment of these measures, his certification was ineffectual and void. The certification had to be made of the version of the same revenue bill which at the momentwas being considered. Otherwise, to follow petitioners6 theory, it would be necessary for the President to certify as many bills as are presented in a house of Congress even though the bills are merely versions of the bill he has already certified. It is enough that he certifies the bill which, at the time he ma0es the certification, is under consideration. 2ince on -arch .., '))( the 2enate was considering 2. 3o. '*,", it was that bill which had to be certified. =or that matter on &une ', ')), the President had earlier certified :. 3o. ).'"

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for immediate enactment because it was the one which at that time was being considered by the :ouse. This bill was later substituted, together with other bills, by :. 3o. ''') . #s to what Presidential certification can accomplish, we have already explained in the main decision that the phrase 4except when the President certifies to the necessity of its immediate enactment, etc.4 in #rt. ;I, Q.* C.D %ualifies not only the re%uirement that 4printed copies Hof a billI in its final form Hmust beI distributed to the members three days before its passage4 but also the re%uirement that before a bill can become a law it must have passed 4three readings on separate days.4 There is not only textual support for such construction but historical basis as well. #rt. ;I, Q.' C.D of the '),! Constitution originally provided@ C.D 3o bill shall be passed by either :ouse unless it shall have been printed and copies thereof in its final form furnished its -embers at least three calendar days prior to its passage, except when the President shall have certified to the necessity of its immediate enactment. >pon the last reading of a bill, no amendment thereof shall be allowed and the %uestion upon its passage shall be ta0en immediately thereafter, and the yeas and nays entered on the &ournal. $hen the ') , Constitution was adopted, it was provided in #rt. ;III, Q') C.D@ C.D 3o 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 -embers three days before its passage, except when the Prime -inister certifies to the necessity of its immediate enactment to meet a public calamity or emergency. >pon the last reading of a bill, no amendment thereto shall be allowed, and the vote thereon shall be ta0en immediately thereafter, and the yeas and nays entered in the &ournal. This provision of the ') , document, with slight modification, was adopted in #rt. ;I, Q.* C.D of the present Constitution, thus@ C.D 3o bill passed by either :ouse 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 -embers three days before its passage, except when the President certifies to the necessity of its immediate enactment to meet a public calamity or emergency. >pon the last reading of a bill, no amendment thereto shall be allowed, and the vote thereon shall be ta0en immediately thereafter, and the yeasand nays entered in the &ournal. The exception is based on the prudential consideration that if in all cases three readings on separate days are re%uired and a bill has to be printed in final form before it can be passed, the need for a law may be rendered academic by the occurrence of the very emergency or public calamity which it is meant to address. Petitioners further contend that a 4growing budget deficit4 is not an emergency, especially in a country li0e the Philippines where budget deficit is a chronic condition. <ven if this were the case, an enormous budget deficit does not ma0e the need for R.#. 3o. '* any less urgent or the situation calling for its enactment any less an emergency. #pparently, the members of the 2enate Cincluding some of the petitioners in these casesD believed that there was an urgent need for consideration of 2. 3o. '*,", because they responded to the call of the President by voting on the bill on second and third readings on the same day. $hile the 5udicial department is not bound by the 2enate6s acceptance of the President6s certification, the respect due coe%ual departments of the government in matters committed to them by the Constitution and the absence of a clear showing of grave abuse of discretion caution a stay of the 5udicial hand. #t any rate, we are satisfied that 2. 3o. '*," received thorough consideration in the 2enate where it was discussed for six days. Only its distribution in advance in its final printed form was actually dispensed with by holding the voting on second and third readings on the same day C-arch .(, '))(D. Otherwise, sufficient time between the submission of the bill on =ebruary +, '))( on second reading and its approval on -arch .(, '))( elapsed before it was finally voted on by the 2enate on third reading. The purpose for which three readings on separate days is re%uired is said to be twoAfold@ C'D to inform the members of Congress of what they must vote on and C.D to give them notice that a measure is progressing through the enacting process, thus enabling them and others interested in the measure to prepare their positions with reference to it. C' &. /. 2>T:<RE#38, 2T#T>T<2 #38 2T#T>TORF CO32TR>CTIO3

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Q'"."(, p. .+. C') .DD. These purposes were substantially achieved in the case of R.#. 3o. '*. I;. 5o$er of Conference Committee . It is contended Cprincipally by Nilosbayan, Inc. and the -ovement of #ttorneys for 1rotherhood, Integrity and 3ationalism, Inc. C-#1I3IDD that in violation of the constitutional policy of full public disclosure and the people6s right to 0now C#rt. II, Q.+ and #rt. III, Q D the Conference Committee met for two days in executive session with only the conferees present. #s pointed out in our main decision, even in the >nited 2tates it was customary to hold such sessions with only the conferees and their staffs in attendance and it was only in ') ! when a new rule was adopted re%uiring open sessions. >nli0e its #merican counterpart, the Philippine Congress has not adopted a rule prescribing open hearings for conference committees. It is nevertheless claimed that in the >nited 2tates, before the adoption of the rule in ') !, at least staff members were present. These were staff members of the 2enators and Congressmen, however, who may be presumed to be their confidential men, not stenographers as in this case who on the last two days of the conference were excluded. There is no showing that the conferees themselves did not ta0e notes of their proceedings so as to give petitioner Nilosbayan basis for claiming that even in secret diplomatic negotiations involving state interests, conferees 0eep notes of their meetings. #bove all, the public6s right to 0now was fully served because the Conference Committee in this case submitted a report showing the changes made on the differing versions of the :ouse and the 2enate. Petitioners cite the rules of both houses which provide that conference committee reports must contain 4a detailed, sufficiently explicit statement of the changes in or other amendments.4 These changes are shown in the bill attached to the Conference Committee Report. The members of both houses could thus ascertain what changes had been made in the original bills without the need of a statement detailing the changes. The same %uestion now presented was raised when the bill which became R.#. 3o. '("" CEand Reform #ct of ')!!D was reported by the Conference Committee. Congressman 1eng9on raised a point of order. :e said@ -R. 1<3/JO3. -y point of order is that it is out of order to consider the report of the conference committee regarding 0ouse 8ill No. 'AA> by reason of the provision of 2ection '', #rticle OII, of the Rules of this :ouse which provides specifically that the conference report must be accompanied by a detailed statement of the effects of the amendment on the bill of the :ouse.

This conference committee report is not accompanied by that detailed statement, -r. 2pea0er. Therefore it is out of order to consider it. Petitioner Tolentino, then the -a5ority =loor Eeader, answered@ -R. TOE<3TI3O. -r. 2pea0er, I should 5ust li0e to say a few words in connection with the point of order raised by the gentleman from Pangasinan. There is no %uestion about the provision of the Rule cited by the gentleman from Pangasinan, but this provision applies to those cases $here only portions of the .ill have .een amended. In this case .efore us an entire .ill is presented7 therefore, it can .e easily seen from the reading of the .ill $hat the provisions are. 1esides, this procedure has .een an esta.lished practice. #fter some interruption, he continued@ -R. TOE<3TI3O. #s I was saying, -r. 2pea0er, we have to loo0 into the reason for the provisions of the Rules, and the reason for the re%uirement in the provision cited by the gentleman from Pangasinan is when there are only certain words or phrases inserted in or deleted from the provisions of the bill included in the conference report, and we cannot understand what those words and phrases mean and their relation to the bill. In that case, it is necessary to make a detailed statement on ho$ those $ords and phrases $ill affect the .ill as a $hole7 .ut $hen the entire .ill itself is copied ver.atim in the conference report, that is not necessary. 2o when the reason for the Rule does not exist, the Rule does not exist. C. CO3/. R<C. 3O. ., p. ("!*. Cemphasis addedDD Congressman Tolentino was sustained by the chair. The record shows that when the ruling was appealed, it was upheld by viva voce and when a division of the :ouse was called, it was sustained by a vote of (+ to !. C Id., p. ("!+D 3or is there any doubt about the power of a conference committee to insert new provisions as long as these are germane to the sub5ect of the conference. #s this Court held in 5hilippine Judges !ssociation v. 5rado, .. 2CR# ", C')),D, in an opinion written by then &ustice Cru9, the 5urisdiction of the conference committee is not

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limited to resolving differences between the 2enate and the :ouse. It may propose an entirely new provision. $hat is important is that its report is subse%uently approved by the respective houses of Congress. This Court ruled that it would not entertain allegations that, because new provisions had been added by the conference committee, there was thereby a violation of the constitutional in5unction that 4upon the last reading of a bill, no amendment thereto shall be allowed.4 #pplying these principles, we shall decline to loo0 into the petitioners6 charges that an amendment $as made upon the last reading of the .ill that eventually became R.#. 3o. ,!( and that copiesthereof in its final form $ere not distri.uted among the members of each :ouse. 1oth the enrolled bill and the legislative 5ournals certify that the measure was duly enacted i.e., in accordance with #rticle ;I, 2ec. .* C.D of the Constitution. $e are bound by such official assurances from a coordinate department of the government, to which we owe, at the very least, a becoming courtesy. CId. at '". Cemphasis addedDD It is interesting to note the following description of conference committees in the Philippines in a ') ) study@ Conference committees may be of two types@ free or instructed. These committees may be given instructions by their parent bodies or they may be left without instructions. 3ormally the conference committees are without instructions, and this is why they are often critically referred to as 4the little legislatures.4 Once bills have been sent to them, the conferees have almost unlimited authority to change the clauses of the bills and in fact sometimes introduce new measures that were not in the original legislation. 3o minutes are 0ept, and members6 activities on conference committees are difficult to determine. One congressman 0nown for his idealism put it this way@ 4I 0illed a bill on export incentives for my interest group HcopraI in the conference committee but I could not have done so anywhere else.4 The conference committee submits a report to both houses, and usually it is accepted. If the report is not accepted, then the

committee is discharged and new members are appointed. CR. &ac0son, Committees in the Philippine Congress, in CO--ITT<<2 #38 E</I2E#T>R<2@ # CO-P#R#TI;< #3#EF2I2 '*, C&. 8. E<<2 #38 -. 2:#$, eds.DD. In citing this study, we pass no 5udgment on the methods of conference committees. $e cite it only to say that conference committees here are no different from their counterparts in the >nited 2tates whose vast powers we noted in 5hilippine Judges !ssociation v. 5rado, supra. #t all events, under #rt. ;I, Q'*C,D each house has the power 4to determine the rules of its proceedings,4 including those of its committees. #ny meaningful change in the method and procedures of Congress or its committees must therefore be sought in that body itself. ;. The titles of -. No. #)?@ and 0. No. ###=>. P#E maintains that R.#. 3o. '* violates #rt. ;I, Q.* C'D of the Constitution which provides that 4<very bill passed by Congress shall embrace only one sub5ect which shall be expressed in the title thereof.4 P#E contends that the amendment of its franchise by the withdrawal of its exemption from the ;#T is not expressed in the title of the law. Pursuant to Q', of P.8. 3o. '!)", P#E pays a franchise tax of .? on its gross revenue 4in lieu of all other taxes, duties, royalties, registration, license and other fees and charges of any 0ind, 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.4 P#E was exempted from the payment of the ;#T along with other entities by Q'", of the 3ational Internal Revenue Code, which provides as follows@ Q'",. 12empt transactions. B The following shall be exempt from the valueAadded tax@ xxx xxx xxx C%D Transactions which are exempt under special laws or international agreements to which the Philippines is a signatory. R.#. 3o. '* see0s to withdraw certain exemptions, including that granted to P#E, by amending Q'",, as follows@ Q'",. 12empt transactions. B The following shall be exempt from the valueAadded tax@ xxx xxx xxx C%D Transactions which are exempt under special laws, except those granted under Presidential 8ecree 3os. **, !.), ) ., '()', '!)". . . .

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The amendment of Q'", is expressed in the title of R.#. 3o. '* which reads@ #3 #CT R<2TR>CT>RI3/ T:< ;#E><A#88<8 T#O C;#TD 2F2T<-, $I8<3I3/ IT2 T#O 1#2< #38 <3:#3CI3/ IT2 #8-I3I2TR#TIO3, #38 =OR T:<2< P>RPO2<2 #-<38I3/ #38 R<P<#EI3/ T:< R<E<;#3T PRO;I2IO32 O= T:< 3#TIO3#E I3T<R3#E R<;<3>< CO8<, #2 #-<38<8, #38 =OR OT:<R P>RPO2<2. 1y stating that R.#. 3o. '* see0s to 4HR<2TR>CT>R<I T:< ;#E><A#88<8 T#O C;#TD 2F2T<- H1FI $I8<3I3/ IT2 T#O 1#2< #38 <3:#3CI3/ IT2 #8-I3I2TR#TIO3, #38 =OR T:<2< P>RPO2<2 #-<38I3/ #38 R<P<#EI3/ T:< R<E<;#3T PRO;I2IO32 O= T:< 3#TIO3#E I3T<R3#E R<;<3>< CO8<, #2 #-<38<8 #38 =OR OT:<R P>RPO2<2,4 Congress thereby clearly expresses its intention to amend any provision of the 3IRC which stands in the way of accomplishing the purpose of the law. P#E asserts that the amendment of its franchise must be reflected in the title of the law by specific reference to P.8. 3o. '!)". It is unnecessary to do this in order to comply with the constitutional re%uirement, since it is already stated in the title that the law see0s to amend the pertinent provisions of the 3IRC, among which is Q'",C%D, in order to widen the base of the ;#T. #ctually, it is the bill which becomes a law that is re%uired to express in its title the sub5ect of legislation. The titles of :. 3o. ''') and 2. 3o. '*," in fact specifically referred to Q'", of the 3IRC as among the provisions sought to be amended. $e are satisfied that sufficient notice had been given of the pendency of these bills in Congress before they were enacted into what is now R.#. 3o. '*. In 5hilippine Judges !ssociation v. 5rado, supra, a similar argument as that now made by P#E was re5ected. R.#. 3o. ,!( is entitled #3 #CT CR<#TI3/ T:< P:IEIPPI3< PO2T#E CORPOR#TIO3, 8<=I3I3/ IT2 PO$<R2, =>3CTIO32 #38 R<2PO32I1IEITI<2, PRO;I8I3/ =OR R</>E#TIO3 O= T:< I38>2TRF #38 =OR OT:<R P>RPO2<2 CO33<CT<8 T:<R<$IT:. It contained a provision repealing all fran0ing privileges. It was contended that the withdrawal of fran0ing privileges was not expressed in the title of the law. In holding that there was sufficient description of the sub5ect of the law in its title, including the repeal of fran0ing privileges, this Court held@ To re%uire every end and means necessary for the accomplishment of the

general ob5ectives of the statute to be expressed in its title would not only be unreasonable but would actually render legislation impossible. HCooley, Constitutional Eimitations, +th <d., p. .) I #s has been correctly explained@ The details of a legislative act need not be specifically stated in its title, but matter germane to the sub5ect as expressed in the title, and adopted to the accomplishment of the ob5ect in view, may properly be included in the act. Thus, it is proper to create in the same act the machinery by which the act is to be enforced, to prescribe the penalties for its infraction, and to remove obstacles in the way of its execution. If such matters are properly connected with the sub5ect as expressed in the title, it is unnecessary that they should also have special mention in the title. C2outhern Pac. Co. v. 1artine, ' " =ed. .!D C.. 2CR# at " A "+D ;I. Claims of press freedom and religious li.erty. $e have held that, as a general proposition, the press is not exempt from the taxing power of the 2tate and that what the constitutional guarantee of free press prohibits are laws which single out the press or target a group belonging to the press for special treatment or which in any way discriminate against the press on the basis of the content of the publication, and R.#. 3o. '* is none of these. 3ow it is contended by the PPI that by removing the exemption of the press from the ;#T while maintaining those granted to others, the law discriminates against the press. #t any rate, it is averred, 4even nondiscriminatory taxation of constitutionally guaranteed freedom is unconstitutional.4 $ith respect to the first contention, it would suffice to say that since the law granted the press a privilege, the law could ta0e bac0 the privilege anytime without offense to

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the Constitution. The reason is simple@ by granting exemptions, the 2tate does not forever waive the exercise of its sovereign prerogative. Indeed, in withdrawing the exemption, the law merely sub5ects the press to the same tax burden to which other businesses have long ago been sub5ect. It is thus different from the tax involved in the cases invo0ed by the PPI. The license tax in Gros3ean v. !merican 5ress Co., .) >.2. .,,, +" E. <d. **" C'),*D was found to be discriminatory because it was laid on the gross advertising receipts only of newspapers whose wee0ly circulation was over .",""", with the result that the tax applied only to ', out of '.( publishers in Eouisiana. These large papers were critical of 2enator :uey Eong who controlled the state legislature which enacted the license tax. The censorial motivation for the law was thus evident. On the other hand, in 4inneapolis -tar B Tri.une Co. v. 4innesota Comm7r of /evenue, (*" >.2. ! !, ! E. <d. .d .)! C')+,D, the tax was found to be discriminatory because although it could have been made liable for the sales tax or, in lieu thereof, for the use tax on the privilege of using, storing or consuming tangible goods, the press was not. Instead, the press was exempted from both taxes. It was, however, later made to pay a special use tax on the cost of paper and in0 which made these items 4the only items sub5ect to the use tax that were component of goods to be sold at retail.4 The >.2. 2upreme Court held that the differential treatment of the press 4suggests that the goal of regulation is not related to suppression of expression, and such goal is presumptively unconstitutional.4 It would therefore appear that even a law that favors the press is constitutionally suspect. C2ee the dissent of Rehn%uist, &. in that caseD 3or is it true that only two exemptions previously granted by <.O. 3o. . , are withdrawn 4absolutely and un%ualifiedly4 by R.#. 3o. '*. Other exemptions from the ;#T, such as those previously granted to P#E, petroleum concessionaires, enterprises registered with the <xport Processing Jone #uthority, and many more are li0ewise totally withdrawn, in addition to exemptions which are partially withdrawn, in an effort to broaden the base of the tax. The PPI says that the discriminatory treatment of the press is highlighted by the fact that transactions, which are profit oriented, continue to en5oy exemption under R.#. 3o. '*. #n enumeration of some of these transactions will suffice to show that by and large this is not so and that the exemptions are granted for a purpose. #s the 2olicitor /eneral says, such exemptions are granted, in some cases, to encourage agricultural production and, in other cases, for the personal benefit

of the endAuser rather than for profit. The exempt transactions are@ CaD /oods for consumption or use which are in their original state Cagricultural, marine and forest products, cotton seeds in their original state, fertili9ers, seeds, seedlings, fingerlings, fish, prawn livestoc0 and poultry feedsD and goods or services to enhance agriculture Cmilling of palay, corn, sugar cane and raw sugar, livestoc0, poultry feeds, fertili9er, ingredients used for the manufacture of feedsD. CbD /oods used for personal consumption or use Chousehold and personal effects of citi9ens returning to the PhilippinesD or for professional use, li0e professional instruments and implements, by persons coming to the Philippines to settle here. CcD /oods sub5ect to excise tax such as petroleum products or to be used for manufacture of petroleum products sub5ect to excise tax and services sub5ect to percentage tax. CdD <ducational services, medical, dental, hospital and veterinary services, and services rendered under employerA employee relationship. CeD $or0s of art and similar creations sold by the artist himself. CfD Transactions exempted under special laws, or international agreements. CgD <xportAsales by persons not ;#TA registered. ChD /oods or services with gross annual sale or receipt not exceeding 5A@@,@@@.@@. CRespondents6 Consolidated Comment on the -otions for Reconsideration, pp. !+A*"D The PPI asserts that it does not really matter that the law does not discriminate against the press because 4even nondiscriminatory taxation on constitutionally guaranteed freedom is unconstitutional.4 PPI cites in support of this assertion the following statement in 4urdock v. 5ennsylvania, ,') >.2. '"!, + E. <d. '.). C')(,D@ The fact that the ordinance is 4nondiscriminatory4 is immaterial. The protection afforded by the =irst #mendment is not so restricted. # license tax certainly does not ac%uire constitutional validity because it classifies the privileges protected by the

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=irst #mendment along with the wares and merchandise of huc0sters and peddlers and treats them all ali0e. 2uch e%uality in treatment does not save the ordinance. =reedom of press, freedom of speech, freedom of religion are in preferred position. The Court was spea0ing in that case of a license ta2, which, unli0e an ordinary tax, is mainly for regulation. Its imposition on the press is unconstitutional because it lays a prior restraint on the exercise of its right. :ence, although its application to others, such those selling goods, is valid, its application to the press or to religious groups, such as the &ehovah6s $itnesses, in connection with the latter6s sale of religious boo0s and pamphlets, is unconstitutional. #s the >.2. 2upreme Court put it, 4it is one thing to impose a tax on income or property of a preacher. It is %uite another thing to exact a tax on him for delivering a sermon.4 # similar ruling was made by this Court in !merican 8i.le -ociety v. City of 4anila, '"' Phil. ,+* C')! D which invalidated a city ordinance re%uiring a business license fee on those engaged in the sale of general merchandise. It was held that the tax could not be imposed on the sale of bibles by the #merican 1ible 2ociety without restraining the free exercise of its right to propagate. The ;#T is, however, different. It is not a license tax. It is not a tax on the exercise of a privilege, much less a constitutional right. It is imposed on the sale, barter, lease or exchange of goods or properties or the sale or exchange of services and the lease of properties purely for revenue purposes. To sub5ect the press to its payment is not to burden the exercise of its right any more than to ma0e the press pay income tax or sub5ect it to general regulation is not to violate its freedom under the Constitution. #dditionally, the Philippine 1ible 2ociety, Inc. claims that although it sells bibles, the proceeds derived from the sales are used to subsidi9e the cost of printing copies which are given free to those who cannot afford to pay so that to tax the sales would be to increase the price, while reducing the volume of sale. /ranting that to be the case, the resulting burden on the exercise of religious freedom is so incidental as to ma0e it difficult to differentiate it from any other economic imposition that might ma0e the right to disseminate religious doctrines costly. Otherwise, to follow the petitioner6s argument, to increase the tax on the sale of vestments would be to lay an impermissible burden on the right of the preacher to ma0e a sermon. On the other hand the registration fee of P',"""."" imposed by Q'" of the 3IRC, as amended by Q of R.#. 3o. '*, although fixed in amount, is really 5ust to

pay for the expenses of registration and enforcement of provisions such as those relating to accounting in Q'"+ of the 3IRC. That the P12 distributes free bibles and therefore is not liable to pay the ;#T does not excuse it from the payment of this fee because it also sells some copies. #t any rate whether the P12 is liable for the ;#T must be decided in concrete cases, in the event it is assessed this tax by the Commissioner of Internal Revenue. ;II. !lleged violations of the due process, e"ual protection and contract clauses and the rule on ta2ation . CR<1# asserts that R.#. 3o. '* C'D impairs the obligations of contracts, C.D classifies transactions as covered or exempt without reasonable basis and C,D violates the rule that taxes should be uniform and e%uitable and that Congress shall 4evolve a progressive system of taxation.4 $ith respect to the first contention, it is claimed that the application of the tax to existing contracts of the sale of real property by installment or on deferred payment basis would result in substantial increases in the monthly amorti9ations to be paid because of the '"? ;#T. The additional amount, it is pointed out, is something that the buyer did not anticipate at the time he entered into the contract. The short answer to this is the one given by this Court in an early case@ 4#uthorities from numerous sources are cited by the plaintiffs, but none of them show that a lawful tax on a new sub5ect, or an increased tax on an old one, interferes with a contract or impairs its obligation, within the meaning of the Constitution. <ven though such taxation may affect particular contracts, as it may increase the debt of one person and lessen the security of another, or may impose additional burdens upon one class and release the burdens of another, still the tax must be paid unless prohibited by the Constitution, nor can it be said that it impairs the obligation of any existing contract in its true legal sense.4 CEa Insular v. -achuca /oATauco and 3ubla CoA2iong, ,) Phil. !* , ! ( C')')DD. Indeed not only existing laws but also 4the reservation of the essential attri.utes of sovereignty, is . . . read into contracts as a postulate of the legal order.4 CPhilippineA#merican Eife Ins. Co. v. #uditor /eneral, .. 2CR# ',!, '( C')*+DD Contracts must be understood as having been made in reference to the possible exercise of the rightful authority of the government and no obligation of contract can extend to the defeat of that authority. C3orman v. 1altimore and Ohio R.R., ) E. <d. ++! C'),!DD. It is next pointed out that while Q( of R.#. 3o. '* exempts such transactions as the sale of agricultural products, food items, petroleum, and medical and veterinary services, it grants no exemption on the sale of real property which is e%ually essential. The sale of real

33

property for sociali9ed and lowAcost housing is exempted from the tax, but CR<1# claims that real estate transactions of 4the less poor,4 i.e., the middle class, who are e%ually homeless, should li0ewise be exempted. The sale of food items, petroleum, medical and veterinary services, etc., which are essential goods and services was already exempt under Q'",, pars. CbD CdD C'D of the 3IRC before the enactment of R.#. 3o. '*. Petitioner is in error in claiming that R.#. 3o. '* granted exemption to these transactions, while sub5ecting those of petitioner to the payment of the ;#T. -oreover, there is a difference between the 4homeless poor4 and the 4homeless less poor4 in the example given by petitioner, because the second group or middle class can afford to rent houses in the meantime that they cannot yet buy their own homes. The two social classes are thus differently situated in life. 4It is inherent in the power to tax that the 2tate be free to select the sub5ects of taxation, and it has been repeatedly held that 6ine%ualities which result from a singling out of one particular class for taxation, or exemption infringe no constitutional limitation.64 CEut9 v. #raneta, )+ Phil. '(+, '!, C')!!D. !ccord, City of 1aguio v. 8e Eeon, ',( Phil. )'. C')*+D7 2ison, &r. v. #ncheta, '," 2CR# *!(, **, C')+(D7 Napatiran ng mga 3agliling0od sa Pamahalaan ng Pilipinas, Inc. v. Tan, '*, 2CR# , ' C')++DD. =inally, it is contended, for the reasons already noted, that R.#. 3o. '* also violates #rt. ;I, Q.+C'D which provides that 4The rule of taxation shall be uniform and e%uitable. The Congress shall evolve a progressive system of taxation.4 <%uality and uniformity of taxation means that all taxable articles or 0inds of property of the same class be taxed at the same rate. The taxing power has the authority to ma0e reasonable and natural classifications for purposes of taxation. To satisfy this re%uirement it is enough that the statute or ordinance applies e%ually to all persons, forms and corporations placed in similar situation. CCity of 1aguio v. 8e Eeon, supra7 2ison, &r. v. #ncheta, supraD Indeed, the ;#T was already provided in <.O. 3o. . , long before R.#. 3o. '* was enacted. R.#. 3o. '* merely expands the base of the tax. The validity of the original ;#T Eaw was %uestioned in :apatiran ng Naglilingkod sa 5amahalaan ng 5ilipinas, Inc. v. Tan, '*, 2CR# ,+, C')++D on grounds similar to those made in these cases, namely, that the law was 4oppressive, discriminatory, un5ust and regressive in violation of #rt. ;I, Q.+C'D of the Constitution.4 C#t ,+.D Re5ecting the challenge to the law, this Court held@ #s the Court sees it, <O . , satisfies all the re%uirements of a valid tax. It is uniform. . . .

The sales tax adopted in <O . , is applied similarly on all goods and services sold to the public, which are not exempt, at the constant rate of "? or '"?. The disputed sales tax is also e%uitable. It is imposed only on sales of goods or services by persons engaged in business with an aggregate gross annual sales exceeding P."","""."". 2mall corner sariAsari stores are conse%uently exempt from its application. Ei0ewise exempt from the tax are sales of farm and marine products, so that the costs of basic food and other necessities, spared as they are from the incidence of the ;#T, are expected to be relatively lower and within the reach of the general public. C#t ,+.A,+,D The CR<1# claims that the ;#T is regressive. # similar claim is made by the Cooperative >nion of the Philippines, Inc. CC>PD, while petitioner &uan T. 8avid argues that the law contravenes the mandate of Congress to provide for a progressive system of taxation because the law imposes a flat rate of '"? and thus places the tax burden on all taxpayers without regard to their ability to pay. The Constitution does not really prohibit the imposition of indirect taxes which, li0e the ;#T, are regressive. $hat it simply provides is that Congress shall 4evolve a progressive system of taxation.4 The constitutional provision has been interpreted to mean simply that 4direct taxes are . . . to be preferred HandI as much as possible, indirect taxes should be minimi9ed.4 C<. =<R3#38O, T:< CO32TIT>TIO3 O= T:< P:IEIPPI3<2 ..' C2econd ed. C') DD. Indeed, the mandate to Congress is not to prescri.e, but to evolve, a progressive tax system. Otherwise, sales taxes, which perhaps are the oldest form of indirect taxes, would have been prohibited with the proclamation of #rt. ;III, Q' C'D of the ') , Constitution from which the present #rt. ;I, Q.+C'D was ta0en. 2ales taxes are also regressive. Resort to indirect taxes should be minimi9ed but not avoided entirely because it is difficult, if not impossible, to avoid them by imposing such taxes according to the taxpayers6 ability to pay. In the case of the ;#T, the law minimi9es the regressive effects of this imposition by providing for 9ero rating of certain transactions CR.#. 3o. '*, Q,, amending Q'". CbD of the 3IRCD, while granting e2emptions to other transactions. CR.#. 3o. '*, Q(, amending Q'", of the 3IRCD.

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Thus, the following transactions involving basic and essential goods and services are exempted from the ;#T@ CaD /oods for consumption or use which are in their original state Cagricultural, marine and forest products, cotton seeds in their original state, fertili9ers, seeds, seedlings, fingerlings, fish, prawn livestoc0 and poultry feedsD and goods or services to enhance agriculture Cmilling of palay, corn sugar cane and raw sugar, livestoc0, poultry feeds, fertili9er, ingredients used for the manufacture of feedsD. CbD /oods used for personal consumption or use Chousehold and personal effects of citi9ens returning to the PhilippinesD and or professional use, li0e professional instruments and implements, by persons coming to the Philippines to settle here. CcD /oods sub5ect to excise tax such as petroleum products or to be used for manufacture of petroleum products sub5ect to excise tax and services sub5ect to percentage tax. CdD <ducational services, medical, dental, hospital and veterinary services, and services rendered under employerA employee relationship. CeD $or0s of art and similar creations sold by the artist himself. CfD Transactions exempted under special laws, or international agreements. CgD <xportAsales by persons not ;#TA registered. ChD /oods or services with gross annual sale or receipt not exceeding 5A@@,@@@.@@. CRespondents6 Consolidated Comment on the -otions for Reconsideration, pp. !+A*"D On the other hand, the transactions which are sub5ect to the ;#T are those which involve goods and services which are used or availed of mainly by higher income groups. These include real properties held primarily for sale to customers or for lease in the ordinary course of trade or business, the right or privilege to use patent, copyright, and other similar property or right, the right or privilege to use industrial, commercial or scientific e%uipment, motion picture films, tapes and discs, radio, television, satellite transmission and cable television time, hotels, restaurants and similar places, securities, lending investments, taxicabs, utility cars for rent, tourist

buses, and other common carriers, services of franchise grantees of telephone and telegraph. The problem with CR<1#6s petition is that it presents broad claims of constitutional violations by tendering issues not at retail but at wholesale and in the abstract. There is no fully developed record which can impart to ad5udication the impact of actuality. There is no factual foundation to show in the concrete the application of the law to actual contracts and exemplify its effect on property rights. =or the fact is that petitioner6s members have not even been assessed the ;#T. Petitioner6s case is not made concrete by a series of hypothetical %uestions as0ed which are no different from those dealt with in advisory opinions. The difficulty confronting petitioner is thus apparent. :e alleges arbitrariness. # mere allegation, as here, does not suffice. There must be a factual foundation of such unconstitutional taint. Considering that petitioner here would condemn such a provision as void on its face, he has not made out a case. This is merely to adhere to the authoritative doctrine that where the due process and e%ual protection clauses are invo0ed, considering that they are not fixed rules but rather broad standards, there is a need for proof of such persuasive character as would lead to such a conclusion. #bsent such a showing, the presumption of validity must prevail. C2ison, &r. v. #ncheta, '," 2CR# at **'D #d5udication of these broad claims must await the development of a concrete case. It may be that postponement of ad5udication would result in a multiplicity of suits. This need not be the case, however. <nforcement of the law may give rise to such a case. # test case, provided it is an actual case and not an abstract or hypothetical one, may thus be presented. 3or is hardship to taxpayers alone an ade%uate 5ustification for ad5udicating abstract issues. Otherwise, ad5udication would be no different from the giving of advisory opinion that does not really settle legal issues. $e are told that it is our duty under #rt. ;III, Q', S. to decide whenever a claim is made that 4there has been a grave abuse of discretion amounting to lac0 or excess of 5urisdiction on the part of any branch or instrumentality of the government.4 This duty can only arise if an actual case or controversy is before us. >nder #rt . ;III, Q! our 5urisdiction is defined in terms of 4cases4 and all that #rt. ;III, Q', S. can plausibly mean is that in the exercise of that 3urisdiction we have the 3udicial po$er to determine

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%uestions of grave abuse of discretion by any branch or instrumentality of the government. Put in another way, what is granted in #rt. ;III, Q', S. is 45udicial power,4 which is 4the power of a court to hear and decide cases pending between parties who have the right to sue and be sued in the courts of law and e%uity4 CEamb v. Phipps, .. Phil. (!*, !!) C')'.DD, as distinguished from legislative and executive power. This power cannot be directly appropriated until it is apportioned among several courts either by the Constitution, as in the case of #rt. ;III, Q!, or by statute, as in the case of the &udiciary #ct of ')(+ CR.#. 3o. .)*D and the &udiciary Reorgani9ation #ct of ')+" C1.P. 1lg. '.)D. The power thus apportioned constitutes the court6s 45urisdiction,4 defined as 4the power conferred by law upon a court or 5udge to ta0e cogni9ance of a case, to the exclusion of all others.4 C>nited 2tates v. #rceo, * Phil. .) C')"*DD $ithout an actual case coming within its 5urisdiction, this Court cannot in%uire into any allegation of grave abuse of discretion by the other departments of the government. ;III. !lleged violation of policy to$ards cooperatives. On the other hand, the Cooperative >nion of the Philippines CC>PD, after briefly surveying the course of legislation, argues that it was to adopt a definite policy of granting tax exemption to cooperatives that the present Constitution embodies provisions on cooperatives. To sub5ect cooperatives to the ;#T would therefore be to infringe a constitutional policy. Petitioner claims that in ') ,, P.8. 3o. ' ! was promulgated exempting cooperatives from the payment of income taxes and sales taxes but in ')+(, because of the crisis which menaced the national economy, this exemption was withdrawn by P.8. 3o. ')!!7 that in ')+*, P.8. 3o. .""+ again granted cooperatives exemption from income and sales taxes until 8ecember ,', '))', but, in the same year, <.O. 3o. ), revo0ed the exemption7 and that finally in ')+ the framers of the Constitution 4repudiated the previous actions of the government adverse to the interests of the cooperatives, that is, the repeated revocation of the ta2 e2emption to cooperatives and instead upheld the policy of strengthening the cooperatives .y $ay of the grant of ta2 e2emptions,4 by providing the following in #rt. OII@ Q'. The goals of the national economy are a more e%uitable distribution of opportunities, income, and wealth7 a sustained increase in the amount of goods and services produced by the nation for the benefit of the people7 and an expanding productivity as the 0ey to raising the %uality of life for all, especially the underprivileged.

The 2tate shall promote industriali9ation and full employment based on sound agricultural development and agrarian reform, through industries that ma0e full and efficient use of human and natural resources, and which are competitive in both domestic and foreign mar0ets. :owever, the 2tate shall protect =ilipino enterprises against unfair foreign competition and trade practices. In the pursuit of these goals, all sectors of the economy and all regions of the country shall be given optimum opportunity to develop. Private enterprises, including corporations, cooperatives, and similar collective organi9ations, shall be encouraged to broaden the base of their ownership. Q'!. The Congress shall create an agency to promote the viability and growth of cooperatives as instruments for social 5ustice and economic development. Petitioner6s contention has no merit. In the first place, it is not true that P.8. 3o. ')!! singled out cooperatives by withdrawing their exemption from income and sales taxes under P.8. 3o. ' !, Q!. $hat P.8. 3o. ')!!, Q' did was to withdraw the e2emptions and preferential treatments theretofore granted to private .usiness enterprises in general, in view of the economic crisis which then beset the nation. It is true that after P.8. 3o. .""+, Q. had restored the tax exemptions of cooperatives in ')+*, the exemption was again repealed by <.O. 3o. ),, Q', but then again cooperatives were not the only ones whose exemptions were withdrawn. The $ithdra$al of ta2 incentives applied to all, including government and private entities. In the second place, the Constitution does not really re%uire that cooperatives be granted tax exemptions in order to promote their growth and viability. :ence, there is no basis for petitioner6s assertion that the government6s policy toward cooperatives had been one of vacillation, as far as the grant of tax privileges was concerned, and that it was to put an end to this indecision that the constitutional provisions cited were adopted. Perhaps as a matter of policy cooperatives should be granted tax exemptions, but that is left to the discretion of Congress. If Congress does not grant exemption and there is no discrimination to cooperatives, no violation of any constitutional policy can be charged. Indeed, petitioner6s theory amounts to saying that under the Constitution cooperatives are e2empt from ta2ation . 2uch theory is contrary to the Constitution under which only the following are exempt from taxation@ charitable

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institutions, churches and parsonages, by reason of #rt. ;I, Q.+ C,D, and nonAstoc0, nonAprofit educational institutions by reason of #rt. OI;, Q( C,D. C>P6s further ground for see0ing the invalidation of R.#. 3o. '* is that it denies cooperatives the e%ual protection of the law because electric cooperatives are exempted from the ;#T. The classification between electric and other cooperatives Cfarmers cooperatives, producers cooperatives, mar0eting cooperatives, etc.D apparently rests on a congressional determination that there is greater need to provide cheaper electric power to as many people as possible, especially those living in the rural areas, than there is to provide them with other necessities in life. $e cannot say that such classification is unreasonable. $e have carefully read the various arguments raised against the constitutional validity of R.#. 3o. '*. $e have in fact ta0en the extraordinary step of en5oining its enforcement pending resolution of these cases. $e have now come to the conclusion that the law suffers from none of the infirmities attributed to it by petitioners and that its enactment by the other branches of the government does not constitute a grave abuse of discretion. #ny %uestion as to its necessity, desirability or expediency must be addressed to Congress as the body which is electorally responsible, remembering that, as &ustice :olmes has said, 4legislators are the ultimate guardians of the liberties and welfare of the people in %uite as great a degree as are the courts.4 C-issouri, Nansas W Texas Ry. Co. v. -ay, ')( >.2. .* , . ", (+ E. <d. ) ', ) , C')"(DD. It is not right, as petitioner in /.R. 3o. ''!!(, does in arguing that we should enforce the public accountability of legislators, that those who too0 part in passing the law in %uestion by voting for it in Congress should later thrust to the courts the burden of reviewing measures in the flush of enactment. This Court does not sit as a third branch of the legislature, much less exercise a veto power over legislation. $:<R<=OR<, the motions for reconsideration are denied with finality and the temporary restraining order previously issued is hereby lifted. 2O OR8<R<8.

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