G.R. No.

115455 August 25, 1994

ARTURO M. TOLENTINO, petitioner,

vs.
THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL
REVENUE, respondents.

MENDOZA, J.:

The value-added tax (VAT) is levied on the sale, barter or exchange of goods and properties as well
as on the sale or exchange of services. It is equivalent to 10% of the gross selling price or gross
value in money of goods or properties sold, bartered or exchanged or of the gross receipts from the
sale or exchange of services. Republic Act No. 7716 seeks to widen the tax base of the existing VAT
system and enhance its administration by amending the National Internal Revenue Code.

These are various suits for certiorari and prohibition, challenging the constitutionality of Republic Act
No. 7716 on various grounds summarized in the resolution of July 6, 1994 of this Court, as follows:

I. Procedural Issues:

A. Does Republic Act No. 7716 violate Art. VI, § 24 of the Constitution?

B. Does it violate Art. VI, § 26(2) of the Constitution?

C. What is the extent of the power of the Bicameral Conference Committee?

II. Substantive Issues:

A. Does the law violate the following provisions in the Bill of Rights (Art. III)?

1. §1

2. § 4

3. § 5

4. § 10

B. Does the law violate the following other provisions of the Constitution?

1. Art. VI, § 28(1)

2. Art. VI, § 28(3)

These questions will be dealt in the order they are stated above. As will presently be explained not
all of these questions are judicially cognizable, because not all provisions of the Constitution are self
executing and, therefore, judicially enforceable. The other departments of the government are
equally charged with the enforcement of the Constitution, especially the provisions relating to them.

I. PROCEDURAL ISSUES
 The contention of petitioners is that in enacting Republic Act No. 7716, or the Expanded Value-
Added Tax Law, Congress violated the Constitution because, although H. No. 11197 had originated
in the House of Representatives, it was not passed by the Senate but was simply consolidated with
the Senate version (S. No. 1630) in the Conference Committee to produce the bill which the
President signed into law. The following provisions of the Constitution are cited in support of the
proposition that because Republic Act No. 7716 was passed in this manner, it did not originate in the
House of Representatives and it has not thereby become a law:

Art. VI, § 24: All appropriation, revenue or tariff bills, bills authorizing increase of the
public debt, bills of local application, and private bills shall originate exclusively in the
House of Representatives, but the Senate may propose or concur with amendments.

Id., § 26(2): No bill passed by either House shall become a law unless it has passed
three readings on separate days, and printed copies thereof in its final form have
been distributed to its Members three days before its passage, except when the
President certifies to the necessity of its immediate enactment to meet a public
calamity or emergency. Upon the last reading of a bill, no amendment thereto shall
be allowed, and the vote thereon shall be taken immediately thereafter, and
the yeas and nays entered in the Journal.

It appears that on various dates between July 22, 1992 and August 31, 1993, several bills 1 were
introduced in the House of Representatives seeking to amend certain provisions of the National
Internal Revenue Code relative to the value-added tax or VAT. These bills were referred to the
House Ways and Means Committee which recommended for approval a substitute measure, H. No.
11197, entitled

AN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT) SYSTEM TO WIDEN

ITS TAX BASE AND ENHANCE ITS ADMINISTRATION, AMENDING FOR THESE
PURPOSES SECTIONS 99, 100, 102, 103, 104, 105, 106, 107, 108 AND 110 OF
TITLE IV, 112, 115 AND 116 OF TITLE V, AND 236, 237 AND 238 OF TITLE IX,
AND REPEALING SECTIONS 113 AND 114 OF TITLE V, ALL OF THE NATIONAL
INTERNAL REVENUE CODE, AS AMENDED
HOUSE BILL NO. 11197
The bill (H. No. 11197) was considered on second reading starting November 6, 1993 and, on
November 17, 1993, it was approved by the House of Representatives after third and final reading.

It was sent to the Senate on November 23, 1993 and later referred by that body to its Committee on
Ways and Means.

On February 7, 1994, the Senate Committee submitted its report recommending approval of S. No.
1630, entitled

AN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT) SYSTEM TO WIDEN

ITS TAX BASE AND ENHANCE ITS ADMINISTRATION, AMENDING FOR THESE
PURPOSES SECTIONS 99, 100, 102, 103, 104, 105, 107, 108, AND 110 OF TITLE
IV, 112 OF TITLE V, AND 236, 237, AND 238 OF TITLE IX, AND REPEALING
SECTIONS 113, 114 and 116 OF TITLE V, ALL OF THE NATIONAL INTERNAL
REVENUE CODE, AS AMENDED, AND FOR OTHER PURPOSES

It was stated that the bill was being submitted "in substitution of Senate Bill No. 1129, taking into
consideration P.S. Res. No. 734 and H.B. No. 11197."
 SENATE BILL No. 1630

On February 8, 1994, the Senate began consideration of the bill (S. No. 1630). It finished debates on
the bill and approved it on second reading on March 24, 1994. On the same day, it approved the bill
on third reading by the affirmative votes of 13 of its members, with one abstention.
House Bill + Senate Bill
H. No. 11197 and its Senate version (S. No. 1630) were then referred to a conference committee
which, after meeting four times (April 13, 19, 21 and 25, 1994), recommended that "House Bill No.
11197, in consolidation with Senate Bill No. 1630, be approved in accordance with the attached copy
of the bill as reconciled and approved by the conferees."

The Conference Committee bill, entitled "AN ACT RESTRUCTURING THE VALUE-ADDED TAX
Conference (VAT) SYSTEM, WIDENING ITS TAX BASE AND ENHANCING ITS ADMINISTRATION AND FOR
Committee
Bill THESE PURPOSES AMENDING AND REPEALING THE RELEVANT PROVISIONS OF THE
-which is NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER PURPOSES," was
a thereafter approved by the House of Representatives on April 27, 1994 and by the Senate on May 2,
consolidat
ion of 1994. The enrolled bill was then presented to the President of the Philippines who, on May 5, 1994,
House Bill signed it. It became Republic Act No. 7716. On May 12, 1994, Republic Act No. 7716 was published
and Senate in two newspapers of general circulation and, on May 28, 1994, it took effect, although its
Bill
-became RA implementation was suspended until June 30, 1994 to allow time for the registration of business
No. 7716 entities. It would have been enforced on July 1, 1994 but its enforcement was stopped because the
Court, by the vote of 11 to 4 of its members, granted a temporary restraining order on June 30,
1994.
Contention #1
First. Petitioners' contention is that Republic Act No. 7716 did not "originate exclusively" in the
House of Representatives as required by Art. VI, §24 of the Constitution, because it is in fact the
result of the consolidation of two distinct bills, H. No. 11197 and S. No. 1630. In this connection,
petitioners point out that although Art. VI, SS 24 was adopted from the American Federal
Constitution, 2 it is notable in two respects: the verb "shall originate" is qualified in the Philippine
Constitution by the word "exclusively" and the phrase "as on other bills" in the American version is
omitted. This means, according to them, that to be considered as having originated in the House,
Republic Act No. 7716 must retain the essence of H. No. 11197.
Held:
This argument will not bear analysis. To begin with, it is not the law — but the revenue bill — which
is required by the Constitution to "originate exclusively" in the House of Representatives. It is
important to emphasize this, because a bill originating in the House may undergo such extensive
changes in the Senate that the result may be a rewriting of the whole. The possibility of a third
version by the conference committee will be discussed later. At this point, what is important to note
is that, as a result of the Senate action, a distinct bill may be produced. To insist that a revenue
statute — and not only the bill which initiated the legislative process culminating in the enactment of
the law — must substantially be the same as the House bill would be to deny the Senate's power not
only to "concur with amendments" but also to "propose amendments." It would be to violate the
coequality of legislative power of the two houses of Congress and in fact make the House superior to
the Senate.

The contention that the constitutional design is to limit the Senate's power in respect of revenue bills
Note: in order to compensate for the grant to the Senate of the treaty-ratifying power 3 and thereby
equalize its powers and those of the House overlooks the fact that the powers being compared are
different. We are dealing here with the legislative power which under the Constitution is vested not in
any particular chamber but in the Congress of the Philippines, consisting of "a Senate and a House
of Representatives." 4 The exercise of the treaty-ratifying power is not the exercise of legislative
power. It is the exercise of a check on the executive power. There is, therefore, no justification for
comparing the legislative powers of the House and of the Senate on the basis of the possession of
such nonlegislative power by the Senate. The possession of a similar power by the U.S.
 Senate 5 has never been thought of as giving it more legislative powers than the House of
Representatives.

In the United States, the validity of a provision (§ 37) imposing an ad valorem tax based on the
weight of vessels, which the U.S. Senate had inserted in the Tariff Act of 1909, was upheld against
the claim that the provision was a revenue bill which originated in the Senate in contravention of Art.
I, § 7 of the U.S. Constitution. 6 Nor is the power to amend limited to adding a provision or two in a
revenue bill emanating from the House. The U.S. Senate has gone so far as changing the whole of
bills following the enacting clause and substituting its own versions. In 1883, for example, it struck
out everything after the enacting clause of a tariff bill and wrote in its place its own measure, and the
House subsequently accepted the amendment. The U.S. Senate likewise added 847 amendments to
what later became the Payne-Aldrich Tariff Act of 1909; it dictated the schedules of the Tariff Act of
1921; it rewrote an extensive tax revision bill in the same year and recast most of the tariff bill of
1922. 7 Given, then, the power of the Senate to propose amendments, the Senate can propose its
own version even with respect to bills which are required by the Constitution to originate in the
House.

Note: It is insisted, however, that S. No. 1630 was passed not in substitution of H. No. 11197 but of
another Senate bill (S. No. 1129) earlier filed and that what the Senate did was merely to "take [H.
No. 11197] into consideration" in enacting S. No. 1630. There is really no difference between the
Senate preserving H. No. 11197 up to the enacting clause and then writing its own version following
the enacting clause (which, it would seem, petitioners admit is an amendment by substitution), and,
on the other hand, separately presenting a bill of its own on the same subject matter. In either case
the result are two bills on the same subject.

Indeed, what the Constitution simply means is that the initiative for filing revenue, tariff, or tax bills,
bills authorizing an increase of the public debt, private bills and bills of local application must come
from the House of Representatives on the theory that, elected as they are from the districts, the
members of the House can be expected to be more sensitive to the local needs and problems. On
the other hand, the senators, who are elected at large, are expected to approach the same problems
from the national perspective. Both views are thereby made to bear on the enactment of such laws.

Nor does the Constitution prohibit the filing in the Senate of a substitute bill in anticipation of its
receipt of the bill from the House, so long as action by the Senate as a body is withheld pending
receipt of the House bill. The Court cannot, therefore, understand the alarm expressed over the fact
that on March 1, 1993, eight months before the House passed H. No. 11197, S. No. 1129 had been
filed in the Senate. After all it does not appear that the Senate ever considered it. It was only after
the Senate had received H. No. 11197 on November 23, 1993 that the process of legislation in
respect of it began with the referral to the Senate Committee on Ways and Means of H. No. 11197
and the submission by the Committee on February 7, 1994 of S. No. 1630. For that matter, if the
question were simply the priority in the time of filing of bills, the fact is that it was in the House that a
bill (H. No. 253) to amend the VAT law was first filed on July 22, 1992. Several other bills had been
filed in the House before S. No. 1129 was filed in the Senate, and H. No. 11197 was only a
substitute of those earlier bills.
Contention #2 - Senate Bill did not pass 3 readings on separate days
Second. Enough has been said to show that it was within the power of the Senate to propose S. No.
1630. We now pass to the next argument of petitioners that S. No. 1630 did not pass three readings
on separate days as required by the Constitution 8 because the second and third readings were done
on the same day, March 24, 1994. But this was because on February 24, 1994 9 and again on March
Held: 22, 1994, 10 the President had certified S. No. 1630 as urgent. The presidential certification
dispensed with the requirement not only of printing but also that of reading the bill on separate days.
The phrase "except when the President certifies to the necessity of its immediate enactment, etc." in
 NOTE:
Art. VI, § 26(2) qualifies the two stated conditions before a bill can become a law: (i) the bill has
passed three readings on separate days and (ii) it has been printed in its final form and distributed
three days before it is finally approved.

NOTE: In other words, the "unless" clause must be read in relation to the "except" clause, because the two
are really coordinate clauses of the same sentence. To construe the "except" clause as simply
dispensing with the second requirement in the "unless" clause (i.e., printing and distribution three
days before final approval) would not only violate the rules of grammar. It would also negate the very
premise of the "except" clause: the necessity of securing the immediate enactment of a bill which is
certified in order to meet a public calamity or emergency. For if it is only the printing that is
dispensed with by presidential certification, the time saved would be so negligible as to be of any
use in insuring immediate enactment. It may well be doubted whether doing away with the necessity
of printing and distributing copies of the bill three days before the third reading would insure speedy
enactment of a law in the face of an emergency requiring the calling of a special election for
President and Vice-President. Under the Constitution such a law is required to be made within seven
days of the convening of Congress in emergency session. 11

That upon the certification of a bill by the President the requirement of three readings on separate
days and of printing and distribution can be dispensed with is supported by the weight of legislative
practice. For example, the bill defining the certiorari jurisdiction of this Court which, in consolidation
with the Senate version, became Republic Act No. 5440, was passed on second and third readings
as to
printing
in the House of Representatives on the same day (May 14, 1968) after the bill had been certified by
of the President as urgent. 12
copies
HELD: There is, therefore, no merit in the contention that presidential certification dispenses only with the
requirement for the printing of the bill and its distribution three days before its passage but not with
the requirement of three readings on separate days, also.

HELD: It is nonetheless urged that the certification of the bill in this case was invalid because there was no
emergency, the condition stated in the certification of a "growing budget deficit" not being an unusual
condition in this country.

It is noteworthy that no member of the Senate saw fit to controvert the reality of the factual basis of
the certification. To the contrary, by passing S. No. 1630 on second and third readings on March 24,
1994, the Senate accepted the President's certification. Should such certification be now reviewed
by this Court, especially when no evidence has been shown that, because S. No. 1630 was taken up
on second and third readings on the same day, the members of the Senate were deprived of the
time needed for the study of a vital piece of legislation?

The sufficiency of the factual basis of the suspension of the writ of habeas corpus or declaration of
martial law under Art. VII, § 18, or the existence of a national emergency justifying the delegation of
extraordinary powers to the President under Art. VI, § 23(2), is subject to judicial review because
basic rights of individuals may be at hazard. But the factual basis of presidential certification of bills,
which involves doing away with procedural requirements designed to insure that bills are duly
considered by members of Congress, certainly should elicit a different standard of review.

Petitioners also invite attention to the fact that the President certified S. No. 1630 and not H. No.
11197. That is because S. No. 1630 was what the Senate was considering. When the matter was
before the House, the President likewise certified H. No. 9210 the pending in the House.
Contention #3
Third. Finally it is contended that the bill which became Republic Act No. 7716 is the bill which the
Conference Committee prepared by consolidating H. No. 11197 and S. No. 1630. It is claimed that

Held: Nor is there any reason for requiring that the

Committee's Report in these cases must have undergone three
readings in each of the two houses.
 the Conference Committee report included provisions not found in either the House bill or the Senate
bill and that these provisions were "surreptitiously" inserted by the Conference Committee. Much is
made of the fact that in the last two days of its session on April 21 and 25, 1994 the Committee met
behind closed doors. We are not told, however, whether the provisions were not the result of the
give and take that often mark the proceedings of conference committees.

Nor is there anything unusual or extraordinary about the fact that the Conference Committee met in
executive sessions. Often the only way to reach agreement on conflicting provisions is to meet
behind closed doors, with only the conferees present. Otherwise, no compromise is likely to be
made. The Court is not about to take the suggestion of a cabal or sinister motive attributed to the
conferees on the basis solely of their "secret meetings" on April 21 and 25, 1994, nor read anything
into the incomplete remarks of the members, marked in the transcript of stenographic notes by
ellipses. The incomplete sentences are probably due to the stenographer's own limitations or to the
incoherence that sometimes characterize conversations. William Safire noted some such lapses in
recorded talks even by recent past Presidents of the United States.

In any event, in the United States conference committees had been customarily held in executive
sessions with only the conferees and their staffs in attendance. 13 Only in November 1975 was a new
rule adopted requiring open sessions. Even then a majority of either chamber's conferees may vote
in public to close the meetings. 14

As to the possibility of an entirely new bill emerging out of a Conference Committee, it has been
explained:

Under congressional rules of procedure, conference committees are not expected to

make any material change in the measure at issue, either by deleting provisions to
which both houses have already agreed or by inserting new provisions. But this is a
difficult provision to enforce. Note the problem when one house amends a proposal
originating in either house by striking out everything following the enacting clause
and substituting provisions which make it an entirely new bill. The versions are now
altogether different, permitting a conference committee to draft essentially a new bill.
. . . 15

The result is a third version, which is considered an "amendment in the nature of a substitute," the
only requirement for which being that the third version be germane to the subject of the House and
Senate bills. 16

Held: Indeed, this Court recently held that it is within the power of a conference committee to include in its
report an entirely new provision that is not found either in the House bill or in the Senate bill. 17 If the
committee can propose an amendment consisting of one or two provisions, there is no reason why it
cannot propose several provisions, collectively considered as an "amendment in the nature of a
substitute," so long as such amendment is germane to the subject of the bills before the committee.
After all, its report was not final but needed the approval of both houses of Congress to become valid
as an act of the legislative department. The charge that in this case the Conference Committee
acted as a third legislative chamber is thus without any basis. 18

Note: Nonetheless, it is argued that under the respective Rules of the Senate and the House of
Representatives a conference committee can only act on the differing provisions of a Senate bill and
a House bill, and that contrary to these Rules the Conference Committee inserted provisions not
found in the bills submitted to it. The following provisions are cited in support of this contention:

Rules of the Senate

 Rule XII:

§ 26. In the event that the Senate does not agree with the House of Representatives
on the provision of any bill or joint resolution, the differences shall be settled by a
conference committee of both Houses which shall meet within ten days after their
composition.

The President shall designate the members of the conference committee in

accordance with subparagraph (c), Section 3 of Rule III.

Each Conference Committee Report shall contain a detailed and sufficiently explicit
statement of the changes in or amendments to the subject measure, and shall be
signed by the conferees.

The consideration of such report shall not be in order unless the report has been filed
with the Secretary of the Senate and copies thereof have been distributed to the
Members.

(Emphasis added)

Rules of the House of Representatives

Rule XIV:

§ 85. Conference Committee Reports. — In the event that the House does not agree
with the Senate on the amendments to any bill or joint resolution, the differences may
be settled by conference committees of both Chambers.

The consideration of conference committee reports shall always be in order, except

when the journal is being read, while the roll is being called or the House is dividing
on any question. Each of the pages of such reports shall be signed by the
conferees. Each report shall contain a detailed, sufficiently explicit statement of the
changes in or amendments to the subject measure.

The consideration of such report shall not be in order unless copies thereof are
distributed to the Members: Provided, That in the last fifteen days of each session
period it shall be deemed sufficient that three copies of the report, signed as above
provided, are deposited in the office of the Secretary General.

(Emphasis added)

To be sure, nothing in the Rules limits a conference committee to a consideration of conflicting

provisions. But Rule XLIV, § 112 of the Rules of the Senate is cited to the effect that "If there is no
Rule applicable to a specific case the precedents of the Legislative Department of the Philippines
shall be resorted to, and as a supplement of these, the Rules contained in Jefferson's Manual." The
following is then quoted from the Jefferson's Manual:

The managers of a conference must confine themselves to the differences

committed to them. . . and may not include subjects not within disagreements, even
though germane to a question in issue.
 Note that, according to Rule XLIX, § 112, in case there is no specific rule applicable, resort must be
to the legislative practice. The Jefferson's Manual is resorted to only as supplement. It is common
place in Congress that conference committee reports include new matters which, though germane,
have not been committed to the committee. This practice was admitted by Senator Raul S. Roco,
petitioner in G.R. No. 115543, during the oral argument in these cases. Whatever, then, may be
provided in the Jefferson's Manual must be considered to have been modified by the legislative
practice. If a change is desired in the practice it must be sought in Congress since this question is
not covered by any constitutional provision but is only an internal rule of each house. Thus, Art. VI, §
16(3) of the Constitution provides that "Each House may determine the rules of its proceedings. . . ."

This observation applies to the other contention that the Rules of the two chambers were likewise
disregarded in the preparation of the Conference Committee Report because the Report did not
contain a "detailed and sufficiently explicit statement of changes in, or amendments to, the subject
measure." The Report used brackets and capital letters to indicate the changes. This is a standard
practice in bill-drafting. We cannot say that in using these marks and symbols the Committee
violated the Rules of the Senate and the House. Moreover, this Court is not the proper forum for the
enforcement of these internal Rules. To the contrary, as we have already ruled, "parliamentary rules
are merely procedural and with their observance the courts have no concern." 19 Our concern is with
the procedural requirements of the Constitution for the enactment of laws. As far as these
requirements are concerned, we are satisfied that they have been faithfully observed in these cases.
Held:
Nor is there any reason for requiring that the Committee's Report in these cases must have
3 readings undergone three readings in each of the two houses. If that be the case, there would be no end to
negotiation since each house may seek modifications of the compromise bill. The nature of the bill,
therefore, requires that it be acted upon by each house on a "take it or leave it" basis, with the only
alternative that if it is not approved by both houses, another conference committee must be
appointed. But then again the result would still be a compromise measure that may not be wholly
satisfying to both houses. The conferees are not limited to reconciling the differences in the bill but
may introduce new provisions germane to the subject matter or may report out
an entirely new bill on the subject.
Held:
Art. VI, § 26(2) must, therefore, be construed as referring only to bills introduced for the first time in
either house of Congress, not to the conference committee report. For if the purpose of requiring
three readings is to give members of Congress time to study bills, it cannot be gainsaid that H. No.
11197 was passed in the House after three readings; that in the Senate it was considered on first
reading and then referred to a committee of that body; that although the Senate committee did not
report out the House bill, it submitted a version (S. No. 1630) which it had prepared by "taking into
consideration" the House bill; that for its part the Conference Committee consolidated the two bills
and prepared a compromise version; that the Conference Committee Report was thereafter
approved by the House and the Senate, presumably after appropriate study by their members. We
cannot say that, as a matter of fact, the members of Congress were not fully informed of the
provisions of the bill. The allegation that the Conference Committee usurped the legislative power of
Congress is, in our view, without warrant in fact and in law.
ENROLLED BILL
Fourth. Whatever doubts there may be as to the formal validity of Republic Act No. 7716 must be
resolved in its favor. Our cases 20 manifest firm adherence to the rule that an enrolled copy of a bill is
conclusive not only of its provisions but also of its due enactment. Not even claims that a proposed
constitutional amendment was invalid because the requisite votes for its approval had not been
obtained 21 or that certain provisions of a statute had been "smuggled" in the printing of the bill 22 have
moved or persuaded us to look behind the proceedings of a coequal branch of the government.
There is no reason now to depart from this rule.

No claim is here made that the "enrolled bill" rule is absolute. In fact in one case 23 we "went behind"
an enrolled bill and consulted the Journal to determine whether certain provisions of a statute had
 been approved by the Senate in view of the fact that the President of the Senate himself, who had
signed the enrolled bill, admitted a mistake and withdrew his signature, so that in effect there was no
longer an enrolled bill to consider.

But where allegations that the constitutional procedures for the passage of bills have not been
observed have no more basis than another allegation that the Conference Committee
"surreptitiously" inserted provisions into a bill which it had prepared, we should decline the invitation
to go behind the enrolled copy of the bill. To disregard the "enrolled bill" rule in such cases would be
to disregard the respect due the other two departments of our government.
One Bill, One Subject Rule
Fifth. An additional attack on the formal validity of Republic Act No. 7716 is made by the Philippine
Airlines, Inc., petitioner in G.R. No. 11582, namely, that it violates Art. VI, § 26(1) which provides that
"Every bill passed by Congress shall embrace only one subject which shall be expressed in the title
thereof." It is contended that neither H. No. 11197 nor S. No. 1630 provided for removal of
exemption of PAL transactions from the payment of the VAT and that this was made only in the
Conference Committee bill which became Republic Act No. 7716 without reflecting this fact in its
title.

The title of Republic Act No. 7716 is:

AN ACT RESTRUCTURING THE VALUE- ADDED TAX (VAT) SYSTEM,

WIDENING ITS TAX BASE AND ENHANCING ITS ADMINISTRATION, AND FOR
THESE PURPOSES AMENDING AND REPEALING THE RELEVANT PROVISIONS
OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR
OTHER PURPOSES.

Among the provisions of the NIRC amended is § 103, which originally read:

§ 103. Exempt transactions. — The following shall be exempt from the value-added
tax:

....

(q) Transactions which are exempt under special laws or international agreements to
which the Philippines is a signatory. Among the transactions exempted from the VAT
were those of PAL because it was exempted under its franchise (P.D. No. 1590) from
the payment of all "other taxes . . . now or in the near future," in consideration of the
payment by it either of the corporate income tax or a franchise tax of 2%.

As a result of its amendment by Republic Act No. 7716, § 103 of the NIRC now provides:

§ 103. Exempt transactions. — The following shall be exempt from the value-added
tax:

....

(q) Transactions which are exempt under special laws, except those granted under
Presidential Decree Nos. 66, 529, 972, 1491, 1590. . . .

The effect of the amendment is to remove the exemption granted to PAL, as far as the VAT is
concerned.
 The question is whether this amendment of § 103 of the NIRC is fairly embraced in the title of
Republic Act No. 7716, although no mention is made therein of P.D. No. 1590 as among those
which the statute amends. We think it is, since the title states that the purpose of the statute is to
expand the VAT system, and one way of doing this is to widen its base by withdrawing some of the
exemptions granted before. To insist that P.D. No. 1590 be mentioned in the title of the law, in
addition to § 103 of the NIRC, in which it is specifically referred to, would be to insist that the title of a
bill should be a complete index of its content.
Note:
The constitutional requirement that every bill passed by Congress shall embrace only one subject
which shall be expressed in its title is intended to prevent surprise upon the members of Congress
and to inform the people of pending legislation so that, if they wish to, they can be heard regarding it.
If, in the case at bar, petitioner did not know before that its exemption had been withdrawn, it is not
because of any defect in the title but perhaps for the same reason other statutes, although
published, pass unnoticed until some event somehow calls attention to their existence. Indeed, the
title of Republic Act No. 7716 is not any more general than the title of PAL's own franchise under
P.D. No. 1590, and yet no mention is made of its tax exemption. The title of P.D. No. 1590 is:

AN ACT GRANTING A NEW FRANCHISE TO PHILIPPINE AIRLINES, INC. TO

ESTABLISH, OPERATE, AND MAINTAIN AIR-TRANSPORT SERVICES IN THE
PHILIPPINES AND BETWEEN THE PHILIPPINES AND OTHER COUNTRIES.

The trend in our cases is to construe the constitutional requirement in such a manner that courts do
not unduly interfere with the enactment of necessary legislation and to consider it sufficient if the title
expresses the general subject of the statute and all its provisions are germane to the general subject
thus expressed. 24

It is further contended that amendment of petitioner's franchise may only be made by special law, in
view of § 24 of P.D. No. 1590 which provides:

This franchise, as amended, or any section or provision hereof may only be modified,
amended, or repealed expressly by a special law or decree that shall specifically
modify, amend, or repeal this franchise or any section or provision thereof.

This provision is evidently intended to prevent the amendment of the franchise by mere implication
resulting from the enactment of a later inconsistent statute, in consideration of the fact that a
franchise is a contract which can be altered only by consent of the parties. Thus in Manila Railroad
Co. v.
Rafferty, 25 it was held that an Act of the U.S. Congress, which provided for the payment of tax on
certain goods and articles imported into the Philippines, did not amend the franchise of plaintiff,
which exempted it from all taxes except those mentioned in its franchise. It was held that a special
law cannot be amended by a general law.

In contrast, in the case at bar, Republic Act No. 7716 expressly amends PAL's franchise (P.D. No.
1590) by specifically excepting from the grant of exemptions from the VAT PAL's exemption under
P.D. No. 1590. This is within the power of Congress to do under Art. XII, § 11 of the Constitution,
which provides that the grant of a franchise for the operation of a public utility is subject to
amendment, alteration or repeal by Congress when the common good so requires.

II. SUBSTANTIVE ISSUES

A. Claims of Press Freedom, Freedom of Thought

and Religious Freedom
The Philippine Press Institute (PPI), petitioner in G.R. No. 115544, is a nonprofit organization of
newspaper publishers established for the improvement of journalism in the Philippines. On the other
hand, petitioner in G.R. No. 115781, the Philippine Bible Society (PBS), is a nonprofit organization
engaged in the printing and distribution of bibles and other religious articles. Both petitioners claim
violations of their rights under § § 4 and 5 of the Bill of Rights as a result of the enactment of the
VAT Law.

The PPI questions the law insofar as it has withdrawn the exemption previously granted to the press
under § 103 (f) of the NIRC. Although the exemption was subsequently restored by administrative
regulation with respect to the circulation income of newspapers, the PPI presses its claim because of
the possibility that the exemption may still be removed by mere revocation of the regulation of the
Secretary of Finance. On the other hand, the PBS goes so far as to question the Secretary's power
to grant exemption for two reasons: (1) The Secretary of Finance has no power to grant tax
exemption because this is vested in Congress and requires for its exercise the vote of a majority of
all its members 26 and (2) the Secretary's duty is to execute the law.

§ 103 of the NIRC contains a list of transactions exempted from VAT. Among the transactions
previously granted exemption were:

(f) Printing, publication, importation or sale of books and any newspaper, magazine,
review, or bulletin which appears at regular intervals with fixed prices for subscription
and sale and which is devoted principally to the publication of advertisements.

Republic Act No. 7716 amended § 103 by deleting ¶ (f) with the result that print media became
subject to the VAT with respect to all aspects of their operations. Later, however, based on a
memorandum of the Secretary of Justice, respondent Secretary of Finance issued Revenue
Regulations No. 11-94, dated June 27, 1994, exempting the "circulation income of print media
pursuant to § 4 Article III of the 1987 Philippine Constitution guaranteeing against abridgment of
freedom of the press, among others." The exemption of "circulation income" has left income from
advertisements still subject to the VAT.

It is unnecessary to pass upon the contention that the exemption granted is beyond the authority of
the Secretary of Finance to give, in view of PPI's contention that even with the exemption of the
circulation revenue of print media there is still an unconstitutional abridgment of press freedom
because of the imposition of the VAT on the gross receipts of newspapers from advertisements and
on their acquisition of paper, ink and services for publication. Even on the assumption that no
exemption has effectively been granted to print media transactions, we find no violation of press
freedom in these cases.

To be sure, we are not dealing here with a statute that on its face operates in the area of press
freedom. The PPI's claim is simply that, as applied to newspapers, the law abridges press freedom.
Even with due recognition of its high estate and its importance in a democratic society, however, the
press is not immune from general regulation by the State. It has been held:

The publisher of a newspaper has no immunity from the application of general laws.
He has no special privilege to invade the rights and liberties of others. He must
answer for libel. He may be punished for contempt of court. . . . Like others, he must
pay equitable and nondiscriminatory taxes on his business. . . . 27

The PPI does not dispute this point, either.

What it contends is that by withdrawing the exemption previously granted to print media transactions
involving printing, publication, importation or sale of newspapers, Republic Act No. 7716 has singled
out the press for discriminatory treatment and that within the class of mass media the law
discriminates against print media by giving broadcast media favored treatment. We have carefully
examined this argument, but we are unable to find a differential treatment of the press by the law,
much less any censorial motivation for its enactment. If the press is now required to pay a value-
added tax on its transactions, it is not because it is being singled out, much less targeted, for special
treatment but only because of the removal of the exemption previously granted to it by law. The
withdrawal of exemption is all that is involved in these cases. Other transactions, likewise previously
granted exemption, have been delisted as part of the scheme to expand the base and the scope of
the VAT system. The law would perhaps be open to the charge of discriminatory treatment if the only
privilege withdrawn had been that granted to the press. But that is not the case.

The situation in the case at bar is indeed a far cry from those cited by the PPI in support of its claim
that Republic Act No. 7716 subjects the press to discriminatory taxation. In the cases cited, the
discriminatory purpose was clear either from the background of the law or from its operation. For
example, in Grosjean v. American Press Co., 28 the law imposed a license tax equivalent to 2% of the
gross receipts derived from advertisements only on newspapers which had a circulation of more
than 20,000 copies per week. Because the tax was not based on the volume of advertisement alone
but was measured by the extent of its circulation as well, the law applied only to the thirteen large
newspapers in Louisiana, leaving untaxed four papers with circulation of only slightly less than
20,000 copies a week and 120 weekly newspapers which were in serious competition with the
thirteen newspapers in question. It was well known that the thirteen newspapers had been critical of
Senator Huey Long, and the Long-dominated legislature of Louisiana respondent by taxing what
Long described as the "lying newspapers" by imposing on them "a tax on lying." The effect of the tax
was to curtail both their revenue and their circulation. As the U.S. Supreme Court noted, the tax was
"a deliberate and calculated device in the guise of a tax to limit the circulation of information to which
the public is entitled in virtue of the constitutional guaranties." 29 The case is a classic illustration of
the warning that the power to tax is the power to destroy.

In the other case 30 invoked by the PPI, the press was also found to have been singled out because
everything was exempt from the "use tax" on ink and paper, except the press. Minnesota imposed a
tax on the sales of goods in that state. To protect the sales tax, it enacted a complementary tax on
the privilege of "using, storing or consuming in that state tangible personal property" by eliminating
the residents' incentive to get goods from outside states where the sales tax might be lower.
The Minnesota Star Tribune was exempted from both taxes from 1967 to 1971. In 1971, however,
the state legislature amended the tax scheme by imposing the "use tax" on the cost of paper and ink
used for publication. The law was held to have singled out the press because (1) there was no
reason for imposing the "use tax" since the press was exempt from the sales tax and (2) the "use
tax" was laid on an "intermediate transaction rather than the ultimate retail sale." Minnesota had a
heavy burden of justifying the differential treatment and it failed to do so. In addition, the U.S.
Supreme Court found the law to be discriminatory because the legislature, by again amending the
law so as to exempt the first $100,000 of paper and ink used, further narrowed the coverage of the
tax so that "only a handful of publishers pay any tax at all and even fewer pay any significant amount
of tax." 31 The discriminatory purpose was thus very clear.

More recently, in Arkansas Writers' Project, Inc. v. Ragland, 32 it was held that a law which taxed
general interest magazines but not newspapers and religious, professional, trade and sports journals
was discriminatory because while the tax did not single out the press as a whole, it targeted a small
group within the press. What is more, by differentiating on the basis of contents (i.e., between
general interest and special interests such as religion or sports) the law became "entirely
incompatible with the First Amendment's guarantee of freedom of the press."
These cases come down to this: that unless justified, the differential treatment of the press creates
risks of suppression of expression. In contrast, in the cases at bar, the statute applies to a wide
range of goods and services. The argument that, by imposing the VAT only on print media whose
gross sales exceeds P480,000 but not more than P750,000, the law discriminates 33 is without merit
since it has not been shown that as a result the class subject to tax has been unreasonably
narrowed. The fact is that this limitation does not apply to the press along but to all sales. Nor is
impermissible motive shown by the fact that print media and broadcast media are treated differently.
The press is taxed on its transactions involving printing and publication, which are different from the
transactions of broadcast media. There is thus a reasonable basis for the classification.

The cases canvassed, it must be stressed, eschew any suggestion that "owners of newspapers are
immune from any forms of ordinary taxation." The license tax in the Grosjean case was declared
invalid because it was "one single in kind, with a long history of hostile misuse against the freedom
of the
press." 34 On the other hand, Minneapolis Star acknowledged that "The First Amendment does not
prohibit all regulation of the press [and that] the States and the Federal Government can subject
newspapers to generally applicable economic regulations without creating constitutional problems." 35

What has been said above also disposes of the allegations of the PBS that the removal of the
exemption of printing, publication or importation of books and religious articles, as well as their
printing and publication, likewise violates freedom of thought and of conscience. For as the U.S.
Supreme Court unanimously held in Jimmy Swaggart Ministries v. Board of Equalization, 36 the Free
Exercise of Religion Clause does not prohibit imposing a generally applicable sales and use tax on
the sale of religious materials by a religious organization.

This brings us to the question whether the registration provision of the law, 37 although of general
applicability, nonetheless is invalid when applied to the press because it lays a prior restraint on its
essential freedom. The case of American Bible Society v. City of Manila 38 is cited by both the PBS
and the PPI in support of their contention that the law imposes censorship. There, this Court held
that an ordinance of the City of Manila, which imposed a license fee on those engaged in the
business of general merchandise, could not be applied to the appellant's sale of bibles and other
religious literature. This Court relied on Murdock v. Pennsylvania, 39 in which it was held that, as a
license fee is fixed in amount and unrelated to the receipts of the taxpayer, the license fee, when
applied to a religious sect, was actually being imposed as a condition for the exercise of the sect's
right under the Constitution. For that reason, it was held, the license fee "restrains in advance those
constitutional liberties of press and religion and inevitably tends to suppress their exercise." 40

But, in this case, the fee in § 107, although a fixed amount (P1,000), is not imposed for the exercise
of a privilege but only for the purpose of defraying part of the cost of registration. The registration
requirement is a central feature of the VAT system. It is designed to provide a record of tax credits
because any person who is subject to the payment of the VAT pays an input tax, even as he collects
an output tax on sales made or services rendered. The registration fee is thus a mere administrative
fee, one not imposed on the exercise of a privilege, much less a constitutional right.

For the foregoing reasons, we find the attack on Republic Act No. 7716 on the ground that it offends
the free speech, press and freedom of religion guarantees of the Constitution to be without merit. For
the same reasons, we find the claim of the Philippine Educational Publishers Association (PEPA) in
G.R. No. 115931 that the increase in the price of books and other educational materials as a result
of the VAT would violate the constitutional mandate to the government to give priority to education,
science and technology (Art. II, § 17) to be untenable.
 B. Claims of Regressivity, Denial of Due Process,
Equal Protection, and Impairment
of Contracts

There is basis for passing upon claims that on its face the statute violates the guarantees of freedom
of speech, press and religion. The possible "chilling effect" which it may have on the essential
freedom of the mind and conscience and the need to assure that the channels of communication are
open and operating importunately demand the exercise of this Court's power of review.

There is, however, no justification for passing upon the claims that the law also violates the rule that
taxation must be progressive and that it denies petitioners' right to due process and that equal
protection of the laws. The reason for this different treatment has been cogently stated by an
eminent authority on constitutional law thus: "[W]hen freedom of the mind is imperiled by law, it is
freedom that commands a momentum of respect; when property is imperiled it is the lawmakers'
judgment that commands respect. This dual standard may not precisely reverse the presumption of
constitutionality in civil liberties cases, but obviously it does set up a hierarchy of values within the
due process clause." 41

Indeed, the absence of threat of immediate harm makes the need for judicial intervention less
evident and underscores the essential nature of petitioners' attack on the law on the grounds of
regressivity, denial of due process and equal protection and impairment of contracts as a mere
academic discussion of the merits of the law. For the fact is that there have even been no notices of
assessments issued to petitioners and no determinations at the administrative levels of their claims
so as to illuminate the actual operation of the law and enable us to reach sound judgment regarding
so fundamental questions as those raised in these suits.

Thus, the broad argument against the VAT is that it is regressive and that it violates the requirement
that "The rule of taxation shall be uniform and equitable [and] Congress shall evolve a progressive
system of taxation." 42 Petitioners in G.R. No. 115781 quote from a paper, entitled "VAT Policy
Issues: Structure, Regressivity, Inflation and Exports" by Alan A. Tait of the International Monetary
Fund, that "VAT payment by low-income households will be a higher proportion of their incomes
(and expenditures) than payments by higher-income households. That is, the VAT will be
regressive." Petitioners contend that as a result of the uniform 10% VAT, the tax on consumption
goods of those who are in the higher-income bracket, which before were taxed at a rate higher than
10%, has been reduced, while basic commodities, which before were taxed at rates ranging from 3%
to 5%, are now taxed at a higher rate.

Just as vigorously as it is asserted that the law is regressive, the opposite claim is pressed by
respondents that in fact it distributes the tax burden to as many goods and services as possible
particularly to those which are within the reach of higher-income groups, even as the law exempts
basic goods and services. It is thus equitable. The goods and properties subject to the VAT are
those used or consumed by higher-income groups. These include real properties held primarily for
sale to customers or held for lease in the ordinary course of business, the right or privilege to use
industrial, commercial or scientific equipment, hotels, restaurants and similar places, tourist buses,
and the like. On the other hand, small business establishments, with annual gross sales of less than
P500,000, are exempted. This, according to respondents, removes from the coverage of the law
some 30,000 business establishments. On the other hand, an occasional paper 43 of the Center for
Research and Communication cities a NEDA study that the VAT has minimal impact on inflation and
income distribution and that while additional expenditure for the lowest income class is only P301 or
1.49% a year, that for a family earning P500,000 a year or more is P8,340 or 2.2%.
Lacking empirical data on which to base any conclusion regarding these arguments, any discussion
whether the VAT is regressive in the sense that it will hit the "poor" and middle-income group in
society harder than it will the "rich," as the Cooperative Union of the Philippines (CUP) claims in G.R.
No. 115873, is largely an academic exercise. On the other hand, the CUP's contention that
Congress' withdrawal of exemption of producers cooperatives, marketing cooperatives, and service
cooperatives, while maintaining that granted to electric cooperatives, not only goes against the
constitutional policy to promote cooperatives as instruments of social justice (Art. XII, § 15) but also
denies such cooperatives the equal protection of the law is actually a policy argument. The
legislature is not required to adhere to a policy of "all or none" in choosing the subject of taxation. 44

Nor is the contention of the Chamber of Real Estate and Builders Association (CREBA), petitioner in
G.R. 115754, that the VAT will reduce the mark up of its members by as much as 85% to 90% any
more concrete. It is a mere allegation. On the other hand, the claim of the Philippine Press Institute,
petitioner in G.R. No. 115544, that the VAT will drive some of its members out of circulation because
their profits from advertisements will not be enough to pay for their tax liability, while purporting to be
based on the financial statements of the newspapers in question, still falls short of the establishment
of facts by evidence so necessary for adjudicating the question whether the tax is oppressive and
confiscatory.

Indeed, regressivity is not a negative standard for courts to enforce. What Congress is required by
the Constitution to do is to "evolve a progressive system of taxation." This is a directive to Congress,
just like the directive to it to give priority to the enactment of laws for the enhancement of human
dignity and the reduction of social, economic and political inequalities (Art. XIII, § 1), or for the
promotion of the right to "quality education" (Art. XIV, § 1). These provisions are put in the
Constitution as moral incentives to legislation, not as judicially enforceable rights.

At all events, our 1988 decision in Kapatiran 45 should have laid to rest the questions now raised
against the VAT. There similar arguments made against the original VAT Law (Executive Order No.
273) were held to be hypothetical, with no more basis than newspaper articles which this Court
found to be "hearsay and [without] evidentiary value." As Republic Act No. 7716 merely expands the
base of the VAT system and its coverage as provided in the original VAT Law, further debate on the
desirability and wisdom of the law should have shifted to Congress.

Only slightly less abstract but nonetheless hypothetical is the contention of CREBA that the
imposition of the VAT on the sales and leases of real estate by virtue of contracts entered into prior
to the effectivity of the law would violate the constitutional provision that "No law impairing the
obligation of contracts shall be passed." It is enough to say that the parties to a contract cannot,
through the exercise of prophetic discernment, fetter the exercise of the taxing power of the State.
For not only are existing laws read into contracts in order to fix obligations as between parties, but
the reservation of essential attributes of sovereign power is also read into contracts as a basic
postulate of the legal order. The policy of protecting contracts against impairment presupposes the
maintenance of a government which retains adequate authority to secure the peace and good order
of society. 46

In truth, the Contract Clause has never been thought as a limitation on the exercise of the State's
power of taxation save only where a tax exemption has been granted for a valid
consideration. 47 Such is not the case of PAL in G.R. No. 115852, and we do not understand it to
make this claim. Rather, its position, as discussed above, is that the removal of its tax exemption
cannot be made by a general, but only by a specific, law.

The substantive issues raised in some of the cases are presented in abstract, hypothetical form
because of the lack of a concrete record. We accept that this Court does not only adjudicate private
cases; that public actions by "non-Hohfeldian" 48 or ideological plaintiffs are now cognizable provided
they meet the standing requirement of the Constitution; that under Art. VIII, § 1, ¶ 2 the Court has a
"special function" of vindicating constitutional rights. Nonetheless the feeling cannot be escaped that
we do not have before us in these cases a fully developed factual record that alone can impart to our
adjudication the impact of actuality 49 to insure that decision-making is informed and well grounded.
Needless to say, we do not have power to render advisory opinions or even jurisdiction over
petitions for declaratory judgment. In effect we are being asked to do what the Conference
Committee is precisely accused of having done in these cases — to sit as a third legislative chamber
to review legislation.

We are told, however, that the power of judicial review is not so much power as it is duty imposed on
this Court by the Constitution and that we would be remiss in the performance of that duty if we
decline to look behind the barriers set by the principle of separation of powers. Art. VIII, § 1, ¶ 2 is
cited in support of this view:

Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of the Government.

To view the judicial power of review as a duty is nothing new. Chief Justice Marshall said so in 1803,
to justify the assertion of this power in Marbury v. Madison:

It is emphatically the province and duty of the judicial department to say what the law
is. Those who apply the rule to particular cases must of necessity expound and
interpret that rule. If two laws conflict with each other, the courts must decide on the
operation of each. 50

Justice Laurel echoed this justification in 1936 in Angara v. Electoral Commission:

And when the judiciary mediates to allocate constitutional boundaries, it does not
assert any superiority over the other departments; it does not in reality nullify or
invalidate an act of the legislature, but only asserts the solemn and sacred obligation
assigned to it by the Constitution to determine conflicting claims of authority under
the Constitution and to establish for the parties in an actual controversy the rights
which that instrument secures and guarantees to them. 51

This conception of the judicial power has been affirmed in several

cases 52 of this Court following Angara.

It does not add anything, therefore, to invoke this "duty" to justify this Court's intervention in what is
essentially a case that at best is not ripe for adjudication. That duty must still be performed in the
context of a concrete case or controversy, as Art. VIII, § 5(2) clearly defines our jurisdiction in terms
of "cases," and nothing but "cases." That the other departments of the government may have
committed a grave abuse of discretion is not an independent ground for exercising our power.
Disregard of the essential limits imposed by the case and controversy requirement can in the long
run only result in undermining our authority as a court of law. For, as judges, what we are called
upon to render is judgment according to law, not according to what may appear to be the opinion of
the day.

_______________________________
In the preceeding pages we have endeavored to discuss, within limits, the validity of Republic Act
No. 7716 in its formal and substantive aspects as this has been raised in the various cases before
us. To sum up, we hold:

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

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

(3) That the law does not abridge freedom of speech, expression or the press, nor interfere with the
free exercise of religion, nor deny to any of the parties the right to an education; and

(4) That, in view of the absence of a factual foundation of record, claims that the law is regressive,
oppressive and confiscatory and that it violates vested rights protected under the Contract Clause
are prematurely raised and do not justify the grant of prospective relief by writ of prohibition.

WHEREFORE, the petitions in these cases are DISMISSED.