27. ARTURO M. TOLENTINO, Petitioners, vs.

THE SECRETARY OF FINANCE and

THE COMMISSIONER OF INTERNAL REVENUE, Respondents.
G.R. No. 115455 August 25, 1994
MENDOZA, J.:

FACTS:

The value-added tax (VAT) is levied on the sale, barter or exchange of goods and properties as
well as on the sale or exchange of services. RA 7716 seeks to widen the tax base of the existing
VAT system and enhance its administration by amending the National Internal Revenue Code. It
is equivalent to 10% of the gross selling price or gross value in money of goods or properties
sold, bartered or exchanged or of the gross receipts from the sale or exchange of services. There
are various suits challenging the constitutionality of RA 7716 on various grounds.

The Chamber of Real Estate and Builders Association (CREBA) contends that the imposition of
VAT on sales and leases by virtue of contracts entered into prior to the effectivity of the law
would violate the following:

(1) That RA 7716 originated exclusively in the House of Representatives as required by Art.
VI, Sec. 24 of the Constitution, because it is in fact the result of the consolidation of 2
distinct bills, H. No. 11197 and S. No. 1630.
(2) That S. No. 1630 did not pass 3 readings as required by the Constitution.
(3) That RA 7716 violated sec 26(1), art 6 - one subject, one title rule.
(4) That the imposition of VAT on sales and leases by virtue of contracts entered into prior to
the effectivity of the law would violate the constitutional provision of “non-impairment
of contracts.”

MAIN ISSUE:

(4) Whether R.A. No. 7716 is unconstitutional on ground that it violates the contract clause
under Art. III, sec 10 of the Bill of Rights.

RULING:

(1) YES. Court said that it is not the law which should originate from the House of Rep, but
the revenue bill which was required to originate from the House of Rep. The inititiative
must ocme from the Lower House because they are elected in the district level – meaning
they are expected to be more sensitive to the needs of the locality. Also, a bill originating
from the Lower House may undergo extensive changes while in the Senate. Senate can
introduce a separate and distinct bill other than the one the Lower House proposed. The
Constitution does not prohibit the filing in the Senate of a substitute bill in anticipation of
its receipt of the House bill, so long as action by Senate is withheld pending the receipt of
the House bill.
(2) NO. The Pres. certified that the Senate bill was urgent. Presidential certification
dispensed the requirement not only of printing but also reading the bill in 3 separate
days. In fact, the Senate accepted the Pres. Certification

(3) NO. Court said that the title states that the purpose of the statute is to expand the VAT
system and one way of doing this is to widen its base by withdrawing some of the
exemptions granted before. It is also in the power of Congress to amend, alter, repeal
grant of franchises for operation of public utility when the common good so requires.
One subject rule is intended to prevent surprise upon Congress members and inform
people of pending legislation. In the case of PAL, they did not know of their situation not
because of any defect in title but because they might have not noticed its publication until
some event calls attention to its existence.

(4) NO. The Supreme Court the contention of CREBA, that the imposition of the VAT on
the sales and leases of real estate by virtue of contracts entered into prior to the effectivity
of the law would violate the constitutional provision of non-impairment of contracts, is
only slightly less abstract but nonetheless hypothetical. It is enough to say that the parties
to a contract cannot, through the exercise of prophetic discernment, fetter the exercise of
the taxing power of the State. For not only are existing laws read into contracts in order to
fix obligations as between parties, but the reservation of essential attributes of sovereign
power is also read into contracts as a basic postulate of the legal order. The policy of
protecting contracts against impairment presupposes the maintenance of a government
which retains adequate authority to secure the peace and good order of society. In truth,
the Contract Clause has never been thought as a limitation on the exercise of the State's
power of taxation save only where a tax exemption has been granted for a valid
consideration.

Such is not the case of PAL in G.R. No. 115852, and the Court does not understand it to
make this claim. Rather, its position, as discussed above, is that the removal of its tax
exemption cannot be made by a general, but only by a specific, law.

Further, the Supreme Court held the validity of Republic Act No. 7716 in its formal and
substantive aspects as this has been raised in the various cases before it. To sum up, the
Court holds:

(1) That the procedural requirements of the Constitution have been complied with by
Congress in the enactment of the statute;

(2) That judicial inquiry whether the formal requirements for the enactment of
statutes - beyond those prescribed by the Constitution - have been observed is
precluded by the principle of separation of powers;

(3) That the law does not abridge freedom of speech, expression or the press, nor
interfere with the free exercise of religion, nor deny to any of the parties the right
to an education; and
 (4) That, in view of the absence of a factual foundation of record, claims that the law
is regressive, oppressive and confiscatory and that it violates vested rights
protected under the Contract Clause are prematurely raised and do not justify the
grant of prospective relief by writ of prohibition.

WHEREFORE, the petitions are DISMISSED.

28. ABAKADA GURO PARTY LIST (Formerly AASJAS) OFFICERS SAMSON S.
ALCANTARA and ED VINCENT S. ALBANO, Petitioners, vs. THE HONORABLE
EXECUTIVE SECRETARY EDUARDO ERMITA; HONORABLE SECRETARY OF
THE DEPARTMENT OF FINANCE CESAR PURISIMA; and HONORABLE
COMMISSIONER OF INTERNAL REVENUE GUILLERMO PARAYNO, JR.,
Respondent.
G.R. No. 168056 September 1, 2005
AUSTRIA-MARTINEZ, J.:

FACTS:

In the following case, the constitutionality of R.A. No. 9337 (Revitalized Value Added Tax Law)
is being questioned by petitioner ABAKADA GURO Party List as It was alleged that said law
was not duly enacted. Petitioners ABAKADA GURO Party List challenged the constitutionality
of R.A. No. 9337 particularly Sections 4, 5 and 6, amending Sections 106, 107 and 108,
respectively, of the National Internal Revenue Code (NIRC).

R.A. 9337 originated as House Bill No. 3705. After 3rd reading in the lower house, it was
transmitted to the Senate where it was lodged as Senate Bill No. 1950. In the Senate, several
provisions, which were not found in the H.B. 3705, were inserted during a Bicameral Conference
Committee.

The questioned provisions contain a uniform proviso authorizing the President, upon
recommendation of the Secretary of Finance, to raise the VAT rate to 12%, effective January 1,
2006, after any of the following conditions have been satisfied, to wit:
That the President, upon the recommendation of the Secretary of Finance, shall, effective
January 1, 2006, raise the rate of value-added tax to twelve percent (12%), after any of
the following conditions has been satisfied:
(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of
the previous year exceeds two and four-fifth percent (2 4/5%); or

(ii) (ii) National government deficit as a percentage of GDP of the previous year
exceeds one and one-half percent (1 ½%)..
Upon the insertions by the BCC and the bill being passed into a law, in 2005, ABAKADA
GURO Party List, headed by its officers Attys. Samson Alcantara and Ed Vincent Albano, as
well as co-petitioner Congressman Francis Escudero, questioned the constitutionality of R.A.
No. 9337.
ABAKADA GURO Party List et al. contends the constitutionality of RA 9337 as it constitutes
abandonment by Congress of its exclusive authority to fix the rate of taxes under Article VI,
Section 28(2) of the 1987 Philippine Constitution. They further argue that VAT is a tax levied on
the sale or exchange of goods and services and cannot be included within the purview of tariffs
under the exemption delegation since this refers to customs duties, tolls or tribute payable upon
merchandise to the government and usually imposed on imported/exported goods. They also said
that the President has powers to cause, influence or create the conditions provided by law to
bring about the conditions precedent. Moreover, they allege that no guiding standards are made
by law as to how the Secretary of Finance will make the recommendation. They claim,
nonetheless, that any recommendation of the Secretary of Finance can easily be brushed aside by
the President since the former is a mere alter ego of the latter, such that, ultimately, it is the
President who decides whether to impose the increased tax rate or not.
As for the respondent’s contention, they cite the ruling in the case of Tolentino vs Secretary of
Finance or the Enrolled Bill Doctrine. The said case relied upon by respondent’s state that the
signing of a bill by the Speaker of the House and the Senate President and the certification of the
Secretaries of both Houses of Congress that it was passed are conclusive of its due enactment. As
such, R.A. No. 9337 enjoys the conclusive presumption of constitutionality and that the courts
cannot go behind the enrolled bill.
ABAKADA GURO et al., however insists that the ruling in the Tolentino case should be
abandoned.
ISSUES:
(1) Whether or not R.A. No. 9337 has violated the provisions in Article VI, Section 24, and
Article VI, Section 26 (2) of the Constitution.
(2) Whether or not there was an undue delegation of legislative power in violation of Article
VI Sec 28 Par 1 and 2 of the Constitution.
(3) Whether or not there was a violation of the due process and equal protection under
Article III Sec. 1 of the Constitution.
RULING:
(1) NO. R.A. No. 9337 has not violated the provisions. The revenue bill exclusively
originated in the House of Representatives, the Senate was acting within its constitutional
power to introduce amendments to the House bill when it included provisions in Senate
Bill No. 1950 amending corporate income taxes, percentage, excise and franchise taxes.
Verily, Article VI, Section 24 of the Constitution does not contain any prohibition or
limitation on the extent of the amendments that may be introduced by the Senate to the
House revenue bill.
Basing from the ruling of Tolentino case, it is not the law, but the revenue bill which is
required by the Constitution to “originate exclusively” in the House of Representatives,
but Senate has the power not only to propose amendments, but also to propose its own
version even with respect to bills which are required by the Constitution to originate in
the House. The Constitution simply means is that the initiative for filing revenue, tariff or
tax bills, bills authorizing an increase of the public debt, private bills and bills of local
application must come from the House of Representatives on the theory that, elected as
they are from the districts, the members of the House can be expected to be more
sensitive to the local needs and problems. On the other hand, the senators, who are
elected at large, are expected to approach the same problems from the national
perspective. Both views are thereby made to bear on the enactment of such laws.
(2) NO. There is no undue delegation of legislative power but only of the discretion as to the
execution of a law. This is constitutionally permissible. Congress does not abdicate its
functions or unduly delegate power when it describes what job must be done, who must
 do it, and what is the scope of his authority; in our complex economy that is frequently
the only way in which the legislative process can go forward.
In testing whether a statute constitutes an undue delegation of legislative power or not, it
is usual to inquire whether the statute was complete in all its terms and provisions when it
left the hands of the legislature so that nothing was left to the judgment of any other
appointee or delegate of the legislature.
(3) NO. The equal protection clause under the Constitution means that “no person or class of
persons shall be deprived of the same protection of laws which is enjoyed by other
persons or other classes in the same place and in like circumstances.” The power of the
State to make reasonable and natural classifications for the purposes of taxation has long
been established. Whether it relates to the subject of taxation, the kind of property, the
rates to be levied, or the amounts to be raised, the methods of assessment, valuation and
collection, the State’s power is entitled to presumption of validity. As a rule, the judiciary
will not interfere with such power absent a clear showing of unreasonableness,
discrimination, or arbitrariness.