Tax 1 Cases - Purpose of Taxation: Revenueraising

8/12/2019 Tax 1 Cases - Purpose of Taxation: Revenueraising

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G.R. No. L-28896 February 17, 1988

COMMISSIONER OF INTERNAL

REVENE, petitioner,vs.ALGE, INC., a!" T#E CORT OF TA$

A%%EALS, respondents.CR&, J.:

Taxes are the lifeblood of the government and so should

be collected without unnecessary hindrance On theother hand, such collection should be made inaccordance with law as any arbitrariness will negate thevery reason for government itself. It is thereforenecessary to reconcile the apparently conflictinginterests of the authorities and the taxpayers so that thereal purpose of taxation, which is the promotion of thecommon good, may be achieved.The main issue in this case is whether or not theCollector of Internal Revenue correctly disallowed theP!,"""."" deduction claimed by private respondent#lgue as legitimate business expenses in its income tax

returns. The corollary issue is whether or not the appealof the private respondent from the decision of theCollector of Internal Revenue was made on time and inaccordance with law.$e deal first with the procedural %uestion.The record shows that on &anuary '(, ')*!, the privaterespondent, a domestic corporation engaged inengineering, construction and other allied activities,received a letter from the petitioner assessing it in thetotal amount of P+,'+.+! as delin%uency income taxesfor the years ')!+ and ')!).1On &anuary '+, ')*!,#lgue flied a letter of protest or re%uest forreconsideration, which letter was stamp received on thesame day in the office of the petitioner. 2On -arch ',')*!, a warrant of distraint and levy was presented tothe private respondent, through its counsel, #tty. #lberto/uevara, &r., who refused to receive it on the ground ofthe pending protest. '# search of the protest in thedoc0ets of the case proved fruitless. #tty. /uevaraproduced his file copy and gave a photostat to 1IR agentRamon Reyes, who deferred service of the warrant. (On#pril , ')*!, #tty. /uevara was finally informed that the1IR was not ta0ing any action on the protest and it was

only then that he accepted the warrant of distraint andlevy earlier sought to be served.)2ixteen days later, on#pril , ')*!, #lgue filed a petition for review of thedecision of the Commissioner of Internal Revenue withthe Court of Tax #ppeals.6

The above chronology shows that the petition was filedseasonably. #ccording to Rep. #ct 3o. ''!, the appealmay be made within thirty days after receipt of thedecision or ruling challenged.7It is true that as a rule thewarrant of distraint and levy is 4proof of the finality of theassessment4 8and renders hopeless a re%uest for

reconsideration,4 9being 4tantamount to an outrightdenial thereof and ma0es the said re%uest deemedre5ected.41*1ut there is a special circumstance in thecase at bar that prevents application of this accepteddoctrine.The proven fact is that four days after the privaterespondent received the petitioner6s notice ofassessment, it filed its letter of protest. This was

apparently not ta0en into account before the warrant ofdistraint and levy was issued7 indeed, such protest couldnot be located in the office of the petitioner. It was onlyafter #tty. /uevara gave the 1IR a copy of the protestthat it was, if at all, considered by the tax authorities.8uring the intervening period, the warrant waspremature and could therefore not be served.#s the Court of Tax #ppeals correctly noted,4 11theprotest filed by private respondent was notproformaand was based on strong legal considerations. Itthus 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 definitelyinformed of the implied re5ection of the said protest andthe warrant was finally served on it. :ence, when theappeal was filed on #pril , ')*!, only " days of thereglementary period had been consumed.3ow for the substantive %uestion.The petitioner contends that the claimed deduction ofP!,"""."" was properly disallowed because it was notan ordinary reasonable or necessary business expense.The Court of Tax #ppeals had seen it differently.#greeing with #lgue, it held that the said amount hadbeen legitimately paid by the private respondent foractual services rendered. The payment was in the formof promotional fees. These were collected by the Payeesfor their wor0 in the creation of the ;egetable OilInvestment Corporation of the Philippines and itssubse%uent purchase of the properties of the Philippine2ugar


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persons to invest in it.1(>ltimately, after its incorporationlargely through the promotion of the said persons, thisnew corporation purchased the P2


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fees was necessary and reasonable in the light of theefforts exerted by the payees in inducing investors andprominent businessmen to venture in an experimentalenterprise and involve themselves in a new businessre%uiring millions of pesos. This was no mean feat andshould be, as it was, sufficiently recompensed.It is said that taxes are what we pay for civili9ationsociety. $ithout taxes, the government would be

paraly9ed for lac0 of the motive power to activate andoperate it. :ence, despite the natural reluctance tosurrender part of one6s hard earned income to the taxingauthorities, every person who is able to must contributehis share in the running of the government. Thegovernment for its part, is expected to respond in theform of tangible and intangible benefits intended toimprove the lives of the people and enhance their moraland material values. This symbiotic relationship is therationale of taxation and should dispel the erroneousnotion that it is an arbitrary method of exaction by thosein the seat of power.

1ut even as we concede the inevitability andindispensability of taxation, it is a re%uirement in alldemocratic regimes that it be exercised reasonably andin accordance with the prescribed procedure. If it is not,then the taxpayer has a right to complain and the courtswill then come to his succor. =or all the awesome powerof the tax collector, he may still be stopped in his trac0sif the taxpayer can demonstrate, as it has here, that thelaw has not been observed.$e hold that the appeal of the private respondent fromthe decision of the petitioner was filed on time with therespondent court in accordance with Rep. #ct 3o. ''!.#nd we also find that the claimed deduction by theprivate respondent was permitted under the InternalRevenue Code and should therefore not have beendisallowed by the petitioner.#CCOR8I3/EF, the appealed decision of the Court ofTax #ppeals is #==IR-nderscoringsuppliedDPursuant to the EOI, =ertiphil paid P'" for every bag offertili9er it sold in the domestic mar0et to the =ertili9erand Pesticide #uthority =P#D. =P# then remitted theamount collected to the =ar


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the EOI because the burden imposed by the levy fell onthe ultimate consumer, not the seller.

RTC 0o0/o!

On 3ovember ", '))', the RTC rendered 5udgment infavor of =ertiphil, disposing as follows@$:


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Indisputably, the present case was primarily instituted forcollection and damages. :owever, a perusal of thecomplaint also reveals that the instant action is foundedon the claim that the levy imposed was an unlawful andunconstitutional special assessment. Conse%uently, there%uisite that the constitutionality of the law in %uestionbe the very lis mota of the case is present, ma0ing itproper 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 isstill unconstitutional because it did not promote publicwelfare. The C# explained@In declaring EOI '(*! unconstitutional, the trial courtheld that the levy imposed under the said law was aninvalid exercise of the 2tateGs power of taxationinasmuch as it violated the inherent and constitutionalprescription that taxes be levied only for public purposes.It reasoned out that the amount collected under the levywas remitted to the depository ban0 of PPI, which the

latter used to advance its private interest.On the other hand, appellant submits that the sub5ectstatuteGs passage was a valid exercise of police power.In addition, it disputes the court a %uoGs findings arguingthat the collections under EOI '(*! was for the benefit ofPlanters =oundation, Incorporated P=ID, a foundationcreated by law to hold in trust for millions of farmers, thestoc0 ownership of PPI.Of the three fundamental powers of the 2tate, theexercise of police power has been characteri9ed as themost essential, insistent and the least limitable ofpowers, extending as it does to all the great publicneeds. It may be exercised as long as the activity or theproperty sought to be regulated has some relevance topublic welfare Constitutional Eaw, by Isagani #. Cru9, p.+, '))! nderta0ing EO>D issued bythen Prime -inister Cesar ;irata on #pril '+, ')+! andaffirmed by the 2ecretary of &ustice in an Opinion datedOctober ', ')+, to wit@4. >pon the effective date of this Eetter of >nderta0ing,the Republic shall cause =P# to include in its fertili9erpricing formula a capital recovery component, theproceeds of which will be used initially for the purpose offunding the unpaid portion of the outstanding capitalstoc0 of Planters presently held in trust by Planters=oundation, Inc. Planters =oundationD, which unpaidcapital is estimated at approximately P"* millionsub5ect to validation by Planters and Planters=oundationD such unpaid portion of the outstandingcapital stoc0 of Planters being hereafter referred to asthe K>npaid CapitalGD, and subse%uently for such capitalincreases as may be re%uired for the continuing viabilityof Planters.

The capital recovery component shall be in the minimumamount of P'" per bag, which will be added to the priceof all domestic sales of fertili9er in the Philippines by anyimporter andLor fertili9er mother company. In thisconnection, the Republic hereby ac0nowledges that theadvances by Planters to Planters =oundation which wereapplied to the payment of the Planters shares now heldin trust by Planters =oundation, have been assigned to,among others, the Creditors. #ccordingly, the Republic,through =P#, hereby agrees to deposit the proceeds ofthe capital recovery component in the special trust

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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 becharged and collected until payment in full of aD the>npaid Capital andLor bD any shortfall in the payment ofthe 2ubsidy Receivables, cD any carrying cost accruing

from the date hereof on the amounts which may beoutstanding from time to time of the >npaid CapitalandLor the 2ubsidy Receivables and dD the capitalincreases contemplated in paragraph hereof. =or thepurpose of the foregoing clause cD, the Kcarrying costGshall be at such rate as will represent the full andreasonable cost to Planters of servicing its debts, ta0inginto account both its peso and foreign currencyAdenominated obligations.4 Records, pp. (A(D#ppellantGs proposition is open to %uestion, to say theleast. The EO> issued by then Prime -inister ;iratata0en together with the &ustice 2ecretaryGs Opinion does

not preponderantly demonstrate that the collectionsmade were held in trust in favor of millions of farmers.>nfortunately for appellant, in the absence of sufficientevidence to establish its claims, this Court is constrainedto rely on what is explicitly provided in EOI '(*! M thatone of the primary aims in imposing the levy is tosupport the successful rehabilitation and continuedviability of PPI.'+

PPI moved for reconsideration but its motion wasdenied.')It then filed the present petition with this Court.

I00ue0

Petitioner PPI raises four issues for Our consideration,vi9.@

IT:< CO32TIT>TIO3#EITF O= EOI '(*! C#33OT 1nited 2tatescase bluntly put it@ 4To lay with one hand, the power ofthe government on the property of the citi9en, and withthe other to bestow it upon favored individuals to aidprivate enterprises and build up private fortunes, is

nonetheless a robbery because it is done under theforms of law and is called taxation.4(

The term 4public purpose4 is not defined. It is an elasticconcept that can be hammered to fit modern standards.&urisprudence states that 4public purpose4 should begiven a broad interpretation. It does not only pertain tothose purposes which are traditionally viewed asessentially government functions, such as building roads

and delivery of basic services, but also includes thosepurposes designed to promote social 5ustice. Thus,public money may now be used for the relocation ofillegal settlers, lowAcost housing and urban or agrarianreform.$hile the categories of what may constitute a publicpurpose are continually expanding in light of theexpansion of government functions, the inherentre%uirement that taxes can only be exacted for a publicpurpose still stands. Public purpose is the heart of a taxlaw. $hen a tax law is only a mas0 to exact funds fromthe public when its true intent is to give undue benefit

and advantage to a private enterprise, that law will notsatisfy the re%uirement of 4public purpose.4The purpose of a law is evident from its text or inferablefrom other secondary sources. :ere, $e agree with theRTC and that C# that the levy imposed under EOI 3o.'(*! was not for a public purpose.=irst, the EOI expressly provided that the levy beimposed to benefit PPI, a private company. The purposeis explicit from Clause of the law, thus@. The #dministrator of the =ertili9er Pesticide #uthorityto include in its fertili9er pricing formula a capitalcontribution component of not less than P '" per bag.This capital contribution shall be collected until ade%uatecapital is raised to ma0e PPI viable. 2uch capitalcontribution shall be applied by =P# to all domesticsales of fertili9ers in the Philippines.(+>nderscoringsuppliedDIt is a basic rule of statutory construction that the text ofa statute should be given a literal meaning. In this case,the text of the EOI is plain that the levy was imposed inorder to raise capital for PPI. The framers of the EOI didnot even hide the insidious purpose of the law. Theywere cavalier enough to name PPI as the ultimate

beneficiary of the taxes levied under the EOI. $e find itutterly repulsive that a tax law would expressly name aprivate company as the ultimate beneficiary of the taxesto be levied from the public. This is a clear case of cronycapitalism.2econd, the EOI provides that the imposition of the P'"levy was conditional and dependent upon PPI becomingfinancially 4viable.4 This suggests that the levy wasactually imposed to benefit PPI. The EOI notably doesnot fix a maximum amount when PPI is deemedfinancially 4viable.4 $orse, the liability of =ertiphil and

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other domestic sellers of fertili9er to pay the levy is madeindefinite. They are re%uired to continuously pay the levyuntil ade%uate capital is raised for PPI.Third, the RTC and the C# held that the levies paidunder the EOI were directly remitted and deposited by=P# to =ar nderstanding!"dated-ay '+, ')+! signed by then Prime -inister Cesar;irata reveals that PPI was in deep financial problembecause of its huge corporate debts. There werepending petitions for rehabilitation against PPI before the2ecurities and nderta0ing,the Republic shall cause =P# to include in its fertili9erpricing formula a capital recovery component, theproceeds of which will be used initially for the purpose offunding the unpaid portion of the outstanding capital

stoc0 of Planters presently held in trust by Planters=oundation, Inc. 4Planters =oundation4D, which unpaidcapital is estimated at approximately P"* millionsub5ect to validation by Planters and Planters=oundationD such unpaid portion of the outstandingcapital stoc0 of Planters being hereafter referred to asthe 4>npaid Capital4D, and subse%uently for such capitalincreases as may be re%uired for the continuing viabilityof Planters.

x x x xThe capital recovery component shall continue to becharged and collected until payment in full of aD the

>npaid Capital andLor bD any shortfall in the payment ofthe 2ubsidy Receivables, cD any carrying cost accruingfrom the date hereof on the amounts which may beoutstanding from time to time of the >npaid CapitalandLor the 2ubsidy Receivables, and dD the capitalincreases contemplated in paragraph hereof. =or thepurpose of the foregoing clause cD, the 4carrying cost4shall be at such rate as will represent the full andreasonable cost to Planters of servicing its debts, ta0inginto account both its peso and foreign currencyAdenominated obligations.R

1EIC O= T:< P:IEIPPI3


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from those of particular class, re%uires its exercise7 andD the means employed are reasonably necessary forthe accomplishment of the purpose and not undulyoppressive upon individuals.!

=or the same reasons as discussed, EOI 3o. '*)! isinvalid because it did not promote public interest. Thelaw was enacted to give undue advantage to a privatecorporation. $e %uote with approval the C# ratiocination

on this point, thus@It is upon applying this established tests that $e sustainthe trial courtGs holding EOI '(*!unconstitutional.#a$philTo be sure, ensuring thecontinued supply and distribution of fertili9er in thecountry is an underta0ing imbued with public interest.:owever, the method by which EOI '(*! sought toachieve this is by no means a measure that will promotethe public welfare. The governmentGs commitment tosupport the successful rehabilitation and continuedviability of PPI, a private corporation, is an unmista0ableattempt to mas0 the sub5ect statuteGs impartiality. There

is no way to treat the selfAinterest of a favored entity, li0ePPI, as identical with the general interest of the countryGsfarmers or even the =ilipino people in general. $ell tostress, substantive due process exacts fairness ande%ual protection disallows distinction where none isneeded. $hen a statuteGs public purpose is spoiled byprivate interest, the use of police power becomes atravesty which must be struc0 down for being anarbitrary exercise of government power. To rule in favorof appellant would contravene the general principle thatrevenues derived from taxes cannot be used for purelyprivate purposes or for the exclusive benefit of privateindividuals. >nderscoring suppliedDThe general rule is that an unconstitutional law is void7the doctrine of operative fact is inapplicable.PPI also argues that =ertiphil cannot see0 a refund evenif EOI 3o. '(*! is declared unconstitutional. It ban0s onthe doctrine of operative fact, which provides that anunconstitutional law has an effect before being declaredunconstitutional. PPI wants to retain the levies paidunder EOI 3o. '(*! even if it is subse%uently declared tobe unconstitutional.$e cannot agree. It is settled that no %uestion, issue or

argument will be entertained on appeal, unless it hasbeen raised in the court a %uo.!PPI did not raise theapplicability of the doctrine of operative fact with theRTC and the C#. It cannot belatedly raise the issue with>s in order to extricate itself from the dire effects of anunconstitutional law.#t any rate, $e find the doctrine inapplicable. Thegeneral rule is that an unconstitutional law is void. Itproduces no rights, imposes no duties and affords noprotection. It has no legal effect. It is, in legalcontemplation, inoperative as if it has not been

passed.!(1eing void, =ertiphil is not re%uired to pay thelevy. #ll levies paid should be refunded in accordancewith the general civil code principle against un5ustenrichment. The general rule is supported by #rticle ofthe Civil Code, which provides@#RT. . Eaws are repealed only by subse%uent ones,and their violation or nonAobservance shall not beexcused by disuse or custom or practice to the contrary.

$hen the courts declare a law to be inconsistent withthe Constitution, the former shall be void and the lattershall govern.The doctrine of operative fact, as an exception to thegeneral rule, only applies as a matter of e%uity and fairplay.!!It nullifies the effects of an unconstitutional law byrecogni9ing that the existence of a statute prior to adetermination of unconstitutionality is an operative factand may have conse%uences which cannot always beignored. The past cannot always be erased by a new5udicial declaration.!*

The doctrine is applicable when a declaration of

unconstitutionality will impose an undue burden on thosewho have relied on the invalid law. Thus, it was appliedto a criminal case when a declaration ofunconstitutionality would put the accused in double5eopardy!or would put in limbo the acts done by amunicipality in reliance upon a law creating it.!+

:ere, $e do not find anything ini%uitous in ordering PPIto refund the amounts paid by =ertiphil under EOI 3o.'(*!. It unduly benefited from the levy. It was provenduring the trial that the levies paid were remitted anddeposited to its ban0 account. uite the reverse, it wouldbe ine%uitable and un5ust not to order a refund. To do sowould un5ustly enrich PPI at the expense of =ertiphil.#rticle of the Civil Code explicitly provides that 4everyperson who, through an act of performance by anothercomes into possession of something at the expense ofthe latter without 5ust or legal ground shall return thesame to him.4 $e cannot allow PPI to profit from anunconstitutional law. &ustice and e%uity dictate that PPImust refund the amounts paid by =ertiphil.$:


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MENO&A, J.:

The valueAadded tax ;#TD is levied on the sale, barteror exchange of goods and properties as well as on thesale or exchange of services. It is e%uivalent to '"? ofthe gross selling price or gross value in money of goodsor properties sold, bartered or exchanged or of the grossreceipts 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 byamending the 3ational Internal Revenue Code.These are various suits for certiorariand 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 Constitution1. 8oes it violate #rt. ;I, Q *D of theConstitutionC. $hat is the extent of the power of the

1icameral Conference CommitteeII. 2ubstantive Issues@

#. 8oes the law violate the followingprovisions in the 1ill of Rights #rt. IIID

'. Q'. Q (. Q !(. Q '"

1. 8oes the law violate the followingother provisions of the Constitution

'. #rt. ;I, Q +'D. #rt. ;I, Q +D

These %uestions will be dealt in the order they are statedabove. #s will presently be explained not all of these%uestions are 5udicially cogni9able, because not allprovisions of the Constitution are self executing and,therefore, 5udicially enforceable. The other departmentsof the government are e%ually charged with theenforcement of the Constitution, especially theprovisions relating to them.

I. PROCR#E I22>


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#3 #CT RCT>RI3/ T:.2.2enate )has never been thought of as giving it morelegislative powers than the :ouse of Representatives.In the >nited 2tates, the validity of a provision Q Dimposing an ad valorem tax based on the weight ofvessels, which the >.2. 2enate had inserted in the Tariff#ct of ')"), was upheld against the claim that theprovision was a revenue bill which originated in the2enate in contravention of #rt. I, Q of the >.2.Constitution. 63or is the power to amend limited to

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adding a provision or two in a revenue bill emanatingfrom the :ouse. The >.2. 2enate has gone so far aschanging the whole of bills following the enacting clauseand substituting its own versions. In '++, for example, itstruc0 out everything after the enacting clause of a tariffbill 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 dictatedthe schedules of the Tariff #ct of ')'7 it rewrote anextensive tax revision bill in the same year and recastmost of the tariff bill of '). 7/iven, then, the power ofthe 2enate to propose amendments, the 2enate canpropose its own version even with respect to bills whichare re%uired by the Constitution to originate in the:ouse.It is insisted, however, that 2. 3o. '*" was passed notin substitution of :. 3o. ''') but of another 2enate bill2. 3o. '')D earlier filed and that what the 2enate didwas merely to 4ta0e H:. 3o. ''') into consideration4 in

enacting 2. 3o. '*". There is really no differencebetween the 2enate preserving :. 3o. ''') up to theenacting clause and then writing its own versionfollowing the enacting clause which, it would seem,petitioners admit is an amendment by substitutionD, and,on the other hand, separately presenting a bill of its ownon the same sub5ect matter. In either case the result aretwo bills on the same sub5ect.Indeed, what the Constitution simply means is that theinitiative for filing revenue, tariff, or tax bills, billsauthori9ing an increase of the public debt, private billsand bills of local application must come from the :ouseof Representatives on the theory that, elected as theyare from the districts, the members of the :ouse can beexpected to be more sensitive to the local needs andproblems. On the other hand, the senators, who areelected at large, are expected to approach the sameproblems from the national perspective. 1oth views arethereby made to bear on the enactment of such laws.3or does the Constitution prohibit the filing in the 2enateof a substitute bill in anticipation of its receipt of the billfrom the :ouse, so long as action by the 2enate as abody is withheld pending receipt of the :ouse bill. The

Court cannot, therefore, understand the alarm expressedover the fact that on -arch ', ')), eight months beforethe :ouse passed :. 3o. '''), 2. 3o. '') had beenfiled in the 2enate. #fter all it does not appear that the2enate ever considered it. It was only after the 2enatehad received :. 3o. ''') on 3ovember , ')) thatthe process of legislation in respect of it began with thereferral 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 :. 3o.!D to amend the ;#T law was first filed on &uly ,')). 2everal other bills had been filed in the :ousebefore 2. 3o. '') was filed in the 2enate, and :. 3o.''') was only a substitute of those earlier bills.-econd. nder the Constitution such a law isre%uired to be made within seven days of the conveningof Congress in emergency session. 11

That upon the certification of a bill by the President there%uirement of three readings on separate days and ofprinting and distribution can be dispensed with issupported by the weight of legislative practice. =orexample, the bill defining the certiorari5urisdiction of thisCourt which, in consolidation with the 2enate version,became Republic #ct 3o. !((", was passed on secondand third readings in the :ouse of Representatives onthe same day -ay '(, ')*+D after the bill had beencertified by the President as urgent. 12

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There is, therefore, no merit in the contention thatpresidential certification dispenses only with there%uirement for the printing of the bill and its distributionthree days before its passage but not with there%uirement of three readings on separate days, also.It is nonetheless urged that the certification of the bill inthis 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 thiscountry.It is noteworthy that no member of the 2enate saw fit tocontrovert the reality of the factual basis of thecertification. To the contrary, by passing 2. 3o. '*" onsecond and third readings on -arch (, '))(, the2enate accepted the President6s certification. 2houldsuch certification be now reviewed by this Court,especially when no evidence has been shown that,because 2. 3o. '*" was ta0en up on second and thirdreadings on the same day, the members of the 2enatewere deprived of the time needed for the study of a vital

piece of legislationThe sufficiency of the factual basis of the suspension ofthe writ of haeas corpusor declaration of martial lawunder #rt. ;II, Q '+, or the existence of a nationalemergency 5ustifying the delegation of extraordinarypowers to the President under #rt. ;I, Q D, is sub5ectto 5udicial review because basic rights of individuals maybe at ha9ard. 1ut the factual basis of presidentialcertification of bills, which involves doing away withprocedural re%uirements designed to insure that bills areduly considered by members of Congress, certainlyshould elicit a different standard of review.Petitioners also invite attention to the fact that thePresident certified 2. 3o. '*" and not :. 3o. ''').That is because 2. 3o. '*" was what the 2enate wasconsidering. $hen the matter was before the :ouse, thePresident li0ewise certified :. 3o. )'" the pending inthe :ouse.Third. =inally it is contended that the bill which becameRepublic #ct 3o. '* is the bill which the ConferenceCommittee prepared by consolidating :. 3o. ''') and2. 3o. '*". It is claimed that the ConferenceCommittee report included provisions not found in either

the :ouse bill or the 2enate bill and that theseprovisions were 4surreptitiously4 inserted by theConference Committee. -uch is made of the fact that inthe last two days of its session on #pril ' and !, '))(the Committee met behind closed doors. $e are nottold, however, whether the provisions were not the resultof the give and ta0e that often mar0 the proceedings ofconference committees.3or is there anything unusual or extraordinary about thefact that the Conference Committee met in executivesessions. Often the only way to reach agreement on

conflicting provisions is to meet behind closed doors,with only the conferees present. Otherwise, nocompromise is li0ely to be made. The Court is not aboutto ta0e the suggestion of a cabal or sinister motiveattributed to the conferees on the basis solely of their4secret meetings4 on #pril ' and !, '))(, nor readanything into the incomplete remar0s of the members,mar0ed in the transcript of stenographic notes by

ellipses. The incomplete sentences are probably due tothe stenographer6s own limitations or to the incoherencethat sometimes characteri9e conversations. $illiam2afire noted some such lapses in recorded tal0s even byrecent past Presidents of the >nited 2tates.In any event, in the >nited 2tates conferencecommittees had been customarily held in executivesessions with only the conferees and their staffs inattendance. 1'Only in 3ovember ')! was a new ruleadopted re%uiring open sessions. nder congressional rules of procedure,conference committees are notexpected to ma0e any material changein the measure at issue, either bydeleting provisions to which both houseshave already agreed or by inserting newprovisions. 1ut this is a difficult provisionto enforce. 3ote the problem when onehouse amends a proposal originating ineither house by stri0ing out everythingfollowing the enacting clause andsubstituting provisions which ma0e it anentirely new bill. The versions are nowaltogether different, permitting aconference committee to draftessentially a new bill. . . . 1)

The result is a third version, which is considered an4amendment in the nature of a substitute,4 the onlyre%uirement for which being that the third version begermane 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 anentirely new provision that is not found either in the:ouse bill or in the 2enate bill. 17If the committee canpropose an amendment consisting of one or twoprovisions, there is no reason why it cannot proposeseveral provisions, collectively considered as an4amendment in the nature of a substitute,4 so long assuch amendment is germane to the sub5ect of the billsbefore the committee. #fter all, its report was not finalbut needed the approval of both houses of Congress tobecome valid as an act of the legislative department.

15


16/37

The charge that in this case the Conference Committeeacted as a third legislative chamber is thus without anybasis. 18

3onetheless, it is argued that under the respective Rulesof the 2enate and the :ouse of Representatives aconference committee can only act on the differingprovisions of a 2enate bill and a :ouse bill, and thatcontrary to these Rules the Conference Committee

inserted provisions not found in the bills submitted to it.The following provisions are cited in support of thiscontention@

/ules of the -enate

Rule II@Q *. In the event that the 2enate doesnot agree with the :ouse ofRepresentatives on the provision of anybill or 5oint resolution, thedifferencesshall e settled y a conference

committee of oth 0ouses which shallmeet within ten days after their

composition.The President shall designate themembers of the conference committeein accordance with subparagraph cD,2ection of Rule III.1ach Conference Committee /eport

shall contain a detailed and sufficiently

e2plicit statement of the changes in or

amendments to the su3ect

measure, and shall be signed by theconferees.The consideration of such report shallnot be in order unless the report hasbeen filed with the 2ecretary of the2enate and copies thereof have beendistributed to the -embers.


17/37

-oreover, this Court is not the proper forum for theenforcement of these internal Rules. To the contrary, aswe have already ruled, 4parliamentary rules are merelyprocedural and with their observance the courts have noconcern.4 19Our concern is with the proceduralre%uirements of the Constitution for the enactment oflaws. #s far as these re%uirements are concerned, weare satisfied that they have been faithfully observed in

these cases.3or is there any reason for re%uiring that theCommittee6s Report in these cases must haveundergone three readings in each of the two houses. Ifthat be the case, there would be no end to negotiationsince each house may see0 modifications of thecompromise bill. The nature of the bill, therefore,re%uires that it be acted upon by each house on a 4ta0eit or leave it4 basis, with the only alternative that if it isnot approved by both houses, another conferencecommittee must be appointed. 1ut then again the resultwould still be a compromise measure that may not be

wholly satisfying to both houses.#rt. ;I, Q *D must, therefore, be construed as referringonly to bills introduced for the first time in either house ofCongress, not to the conference committee report. =or ifthe purpose of re%uiring three readings is to givemembers of Congress time to study bills, it cannot begainsaid that :. 3o. ''') was passed in the :ouseafter three readings7 that in the 2enate it was consideredon first reading and then referred to a committee of thatbody7 that although the 2enate committee did not reportout the :ouse bill, it submitted a version 2. 3o. '*"Dwhich it had prepared by 4ta0ing into consideration4 the:ouse bill7 that for its part the Conference Committeeconsolidated the two bills and prepared a compromiseversion7 that the Conference Committee Report wasthereafter 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 ofCongress were not fully informed of the provisions of thebill. The allegation that the Conference Committeeusurped the legislative power of Congress is, in ourview, 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 itsfavor. Our cases 2*manifest firm adherence to the rulethat an enrolled copy of a bill is conclusive not only of itsprovisions but also of its due enactment. 3ot evenclaims that a proposed constitutional amendment wasinvalid because the re%uisite votes for its approval hadnot been obtained 21or that certain provisions of astatute had been 4smuggled4 in the printing of thebill 22have moved or persuaded us to loo0 behind theproceedings 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 isabsolute. In fact in one case 2'we 4went behind4 anenrolled bill and consulted the &ournal to determinewhether certain provisions of a statute had beenapproved by the 2enate in view of the fact that thePresident of the 2enate himself, who had signed theenrolled bill, admitted a mista0e and withdrew hissignature, so that in effect there was no longer an

enrolled bill to consider.1ut where allegations that the constitutional proceduresfor the passage of bills have not been observed have nomore basis than another allegation that the ConferenceCommittee 4surreptitiously4 inserted provisions into a billwhich it had prepared, we should decline the invitation togo behind the enrolled copy of the bill. To disregard the4enrolled bill4 rule in such cases would be to disregardthe respect due the other two departments of ourgovernment.ifth. #n additional attac0 on the formal validity ofRepublic #ct 3o. '* is made by the Philippine #irlines

Inc., petitioner in /.R. 3o. ''!+, namely, that it violates#rt. ;I, Q *'D which provides that 4


18/37

the near future,4 in consideration of thepayment by it either of the corporateincome 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 Thefollowing shall be exempt from thevalueAadded tax@

. . . .%D Transactions which are exemptunder special laws, except thosegranted under Presidential 8ecree 3os.**, !), ), '()', '!)". . . .

The effect of the amendment is to remove the exemptiongranted to P#E, as far as the ;#T is concerned.The %uestion is whether this amendment of Q '" of the3IRC 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. $ethin0 it is, since the title states that the purpose of the

statute is to expand the ;#T system, and one way ofdoing this is to widen its base by withdrawing some ofthe 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 acomplete index of its content.The constitutional re%uirement that every bill passed byCongress shall embrace only one sub5ect which shall beexpressed in its title is intended to prevent surprise uponthe members of Congress and to inform the people ofpending legislation so that, if they wish to, they can beheard regarding it. If, in the case at bar, petitioner did not0now before that its exemption had been withdrawn, it isnot because of any defect in the title but perhaps for thesame reason other statutes, although published, passunnoticed until some event somehow calls attention totheir existence. Indeed, the title of Republic #ct 3o. '*is not any more general than the title of P#E6s ownfranchise under P.8. 3o. '!)", and yet no mention ismade of its tax exemption. The title of P.8. 3o. '!)" is@

#3 #CT /R#3TI3/ # 3


19/37

hand, the P12 goes so far as to %uestion the 2ecretary6spower to grant exemption for two reasons@ 'D The2ecretary of =inance has no power to grant taxexemption because this is vested in Congress andre%uires for its exercise the vote of a ma5ority of all itsmembers 26and D the 2ecretary6s duty is to execute thelaw.Q '" of the 3IRC contains a list of transactions

exempted from ;#T. #mong the transactions previouslygranted exemption were@fD Printing, publication, importation orsale of boo0s and any newspaper,maga9ine, review, or bulletin whichappears at regular intervals with fixedprices for subscription and sale andwhich is devoted principally to thepublication of advertisements.

Republic #ct 3o. '* amended Q '" by deleting S fDwith 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 issuedRevenue Regulations 3o. ''A)(, dated &une , '))(,exempting the 4circulation income of print mediapursuant to Q ( #rticle III of the ')+ PhilippineConstitution guaranteeing against abridgment offreedom of the press, among others.4 The exemption of4circulation income4 has left income from advertisementsstill sub5ect to the ;#T.It is unnecessary to pass upon the contention that theexemption granted is beyond the authority of the2ecretary of =inance to give, in view of PPI6s contentionthat even with the exemption of the circulation revenueof print media there is still an unconstitutionalabridgment of press freedom because of the impositionof the ;#T on the gross receipts of newspapers fromadvertisements and on their ac%uisition of paper, in0 andservices for publication.


20/37

guaranties.4 29The case is a classic illustration of thewarning that the power to tax is the power to destroy.In the other case '*invo0ed by the PPI, the press wasalso found to have been singled out because everythingwas exempt from the 4use tax4 on in0 and paper, exceptthe press. -innesota imposed a tax on the sales ofgoods in that state. To protect the sales tax, it enacted acomplementary tax on the privilege of 4using, storing or

consuming in that state tangible personal property4 byeliminating the residents6 incentive to get goods fromoutside states where the sales tax might be lower.The 4innesota -tar Triune was exempted from bothtaxes from ')* to ')'. In ')', however, the statelegislature amended the tax scheme by imposing the4use tax4 on the cost of paper and in0 used forpublication. The law was held to have singled out thepress because 'D there was no reason for imposing the4use tax4 since the press was exempt from the sales taxand D the 4use tax4 was laid on an 4intermediatetransaction rather than the ultimate retail sale.4

-innesota had a heavy burden of 5ustifying thedifferential treatment and it failed to do so. In addition,the >.2. 2upreme Court found the law to bediscriminatory because the legislature, by againamending the law so as to exempt the first '"",""" ofpaper and in0 used, further narrowed the coverage ofthe tax so that 4only a handful of publishers pay any taxat all and even fewer pay any significant amount oftax.4 '1The discriminatory purpose was thus very clear.-ore recently, in!rkansas 6riters7 5ro3ect, Inc. v./agland, '2it was held that a law which taxed generalinterest maga9ines but not newspapers and religious,professional, trade and sports 5ournals wasdiscriminatory because while the tax did not single outthe press as a whole, it targeted a small group within thepress. $hat is more, by differentiating on the basis ofcontents i.e., between general interest and specialinterests such as religion or sportsD the law became4entirely incompatible with the =irst #mendment6sguarantee of freedom of the press.4These cases come down to this@ that unless 5ustified, thedifferential treatment of the press creates ris0s ofsuppression of expression. In contrast, in the cases at

bar, the statute applies to a wide range of goods andservices. The argument that, by imposing the ;#T onlyon print media whose gross sales exceeds P(+",""" butnot more than P!",""", the law discriminates ''iswithout merit since it has not been shown that as a resultthe class sub5ect to tax has been unreasonablynarrowed. The fact is that this limitation does not applyto the press along but to all sales. 3or is impermissiblemotive shown by the fact that print media and broadcastmedia are treated differently. The press is taxed on itstransactions involving printing and publication, which are

different from the transactions of broadcast media. Thereis thus a reasonable basis for the classification.The cases canvassed, it must be stressed, eschew anysuggestion that 4owners of newspapers are immunefrom any forms of ordinary taxation.4 The license tax inthe Gros3ean case was declared invalid because it was4one single in 0ind, with a long history of hostile misuseagainst the freedom of the

press.4

'(

On the other hand, 4inneapolis-tar ac0nowledged that 4The =irst #mendment does notprohibit all regulation of the press Hand that the 2tatesand the =ederal /overnment can sub5ect newspapers togenerally applicable economic regulations withoutcreating constitutional problems.4 ')

$hat has been said above also disposes of theallegations of the P12 that the removal of the exemptionof printing, publication or importation of boo0s andreligious articles, as well as their printing and publicationli0ewise violates freedom of thought and of conscience.=or as the >.2. 2upreme Court unanimously held

in Jimmy -$aggart 4inistries v. 8oard of1"uali9ation, '6the =ree


21/37

administrative fee, one not imposed on the exercise of aprivilege, much less a constitutional right.=or the foregoing reasons, we find the attac0 onRepublic #ct 3o. '* on the ground that it offends thefree speech, press and freedom of religion guarantees ofthe Constitution to be without merit. =or the samereasons, we find the claim of the Philippine


22/37

3or is the contention of the Chamber of Real


23/37

#nd when the 5udiciary mediates toallocate constitutional boundaries, itdoes not assert any superiority over theother departments7 it does not in realitynullify or invalidate an act of thelegislature, but only asserts the solemnand sacred obligation assigned to it bythe Constitution to determine conflicting

claims of authority under theConstitution and to establish for theparties in an actual controversy therights which that instrument secures andguarantees to them. )1

This conception of the 5udicial power has been affirmedin severalcases )2of this Court following!ngara.It does not add anything, therefore, to invo0e this 4duty4to 5ustify this Court6s intervention in what is essentially acase that at best is not ripe for ad5udication. That dutymust still be performed in the context of a concrete case

or controversy, as #rt. ;III, Q !D clearly defines our5urisdiction in terms of 4cases,4 and nothing but 4cases.4That the other departments of the government may havecommitted a grave abuse of discretion is not anindependent ground for exercising our power. 8isregardof the essential limits imposed by the case andcontroversy re%uirement can in the long run only result inundermining our authority as a court of law. =or, as5udges, what we are called upon to render is 5udgmentaccording to law, not according to what may appear tobe the opinion of the day.

UUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUIn the preceeding pages we have endeavored todiscuss, within limits, the validity of Republic #ct 3o.'* in its formal and substantive aspects as this hasbeen raised in the various cases before us. To sum up,we hold@'D That the procedural re%uirements of the Constitutionhave been complied with by Congress in the enactmentof the statute7D That 5udicial in%uiry whether the formal re%uirementsfor the enactment of statutes B beyond those prescribedby the Constitution B have been observed is precluded

by the principle of separation of powers7D That the law does not abridge freedom of speech,expression or the press, nor interfere with the freeexercise of religion, nor deny to any of the parties theright to an education7 and(D That, in view of the absence of a factual foundation ofrecord, claims that the law is regressive, oppressive andconfiscatory and that it violates vested rights protectedunder the Contract Clause are prematurely raised anddo not 5ustify the grant of prospective relief by writ ofprohibition.

$: T I O 3

MENO&A, J.:

These are motions see0ing reconsideration of ourdecision dismissing the petitions filed in these cases forthe declaration of unconstitutionality of R.#. 3o. '*,otherwise 0nown as the


24/37

The enactment of 2. 3o. '*" is not the only instance inwhich the 2enate proposed an amendment to a :ouserevenue 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. *) #3 #CT TO #-2

I3;


25/37

:ouse 1ill 3o. +), -ay ', '))2enate 1ill 3o. '", 3ovember '+,')). R.#. 3O. '#3 #CT I-PO2I3/ # T# O3 T:RCO32TIT>TIO3 *!A** ')!"DD. The proposedamendment was submitted to the people and ratified bythem in the elections held on &une '+, ')(".This is the history of #rt. ;I, Q'+ D of the ')!Constitution, from which #rt. ;I, Q( of the presentConstitution was derived. It explains why the word4exclusively4 was added to the #merican text from whichthe framers of the Philippine Constitution borrowed andwhy the phrase 4as on other 1ills4 was not copied.Considering the defeat of the proposal, the power of the2enate to propose amendments must be understood tobe full, plenary and complete 4as on other 1ills.4 Thus,because revenue bills are re%uired to originateexclusively in the :ouse of Representatives, the 2enatecannot enact revenue measures of its own without suchbills. #fter a revenue bill is passed and sent over to it bythe :ouse, however, the 2enate certainly can pass itsown version on the same sub5ect matter. This followsfrom 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 thefollowing commentaries@

The power of the 2enate to propose orconcur with amendments is apparentlywithout restriction. It would seem that byvirtue of this power, the 2enate canpractically reAwrite a bill re%uired tocome from the :ouse and leave only atrace of the original bill. =or example, ageneral revenue bill passed by the lowerhouse of the >nited 2tates Congress

contained provisions for the impositionof an inheritance tax . This was changedby the 2enate into a corporation tax.The amending authority of the 2enatewas declared by the >nited 2tates2upreme Court to be sufficiently broadto enable it to ma0e the alteration. H=lintv. 2tone Tracy Company, " >.2. '",

!! E. ed. +).E. T#V#8# #38 =. C#RRJ, P:IEIPPI3< POEITIC#E E#$'((A'(! '))DD.

In sum, while #rt. ;I, Q( provides that all appropriation,revenue or tariff bills, bills authori9ing increase of thepublic debt, bills of local application, and private billsmust 4originate exclusively in the :ouse ofRepresentatives,4 it also adds, 4ut the -enate may

propose or concur $ith amendments.4 In the exercise of

this power, the 2enate may propose an entirely new billas a substitute measure. #s petitioner Tolentino states ina high school text, a committee to which a bill is referredmay do any of the following@

'D to endorse the bill without changes7D to ma0e changes in the bill omittingor adding sections or altering itslanguage7 D to ma0e and endorse anentirely new bill as a substitute, in whichcase it will be 0nown as a committee illor (D to ma0e no report at all.

26


27/37

#. TOER#3. Therefore, I raise this%uestion of order as to procedure@ If a0ouse 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 su3ect of a

conference, and can a la$ e enacted

from these t$o ills I understand thatthe 2enate bill in this particular instancedoes not refer to investments ingovernment securities, whereas the billin the :ouse, which was introduced bythe 2pea0er, covers two sub5ectmatters@ not only investigation ofdeposits in ban0s but also investigationof investments in government securities.3ow, since the two bills differ in theirsub5ect matter, I believe that no law canbe enacted.

Ruling on the point of order raised, the chair 2pea0er&ose 1. Eaurel, &r.D said@

T:< 2P


28/37

for immediate enactment because it was the one whichat that time was being considered by the :ouse. This billwas later substituted, together with other bills, by :. 3o.''').#s to what Presidential certification can accomplish, wehave already explained in the main decision that thephrase 4except when the President certifies to thenecessity of its immediate enactment, etc.4 in #rt. ;I,

Q* D %ualifies not only the re%uirement that 4printedcopies Hof a bill in its final form Hmust be distributed tothe members three days before its passage4 but also there%uirement that before a bill can become a law it musthave passed 4three readings on separate days.4 There isnot only textual support for such construction buthistorical basis as well.#rt. ;I, Q' D of the ')! Constitution originallyprovided@

D 3o bill shall be passed by either:ouse unless it shall have been printedand copies thereof in its final form

furnished its -embers at least threecalendar days prior to its passage,except when the President shall havecertified to the necessity of itsimmediate enactment. >pon the lastreading of a bill, no amendment thereofshall be allowed and the %uestion uponits passage shall be ta0en immediatelythereafter, andthe yeasand naysentered on the&ournal.

$hen the ') Constitution was adopted, it wasprovided in #rt. ;III, Q') D@

D 3o bill shall become a law unless ithas passed three readings on separatedays, and printed copies thereof in itsfinal form have been distributed to the-embers three days before its passage,except when the Prime -inister certifiesto the necessity of its immediateenactment to meet a public calamity oremergency. >pon the last reading of abill, no amendment thereto shall be

allowed, and the vote thereon shall beta0en immediately thereafter, andtheyeas and nays entered in the&ournal.

This provision of the ') document, with slightmodification, was adopted in #rt. ;I, Q* D of thepresent Constitution, thus@

D 3o bill passed by either :ouse shallbecome a law unless it has passedthree readings on separate days, andprinted copies thereof in its final form

have been distributed to its -embersthree days before its passage, exceptwhen the President certifies to thenecessity of its immediate enactment tomeet a public calamity or emergency.>pon the last reading of a bill, noamendment thereto shall be allowed,and the vote thereon shall be ta0en

immediately thereafter, andtheyeasand naysentered in the&ournal.

The exception is based on the prudential considerationthat if in all cases three readings on separate days arere%uired and a bill has to be printed in final form before itcan be passed, the need for a law may be renderedacademic by the occurrence of the very emergency orpublic calamity which it is meant to address.Petitioners further contend that a 4growing budgetdeficit4 is not an emergency, especially in a country li0ethe Philippines where budget deficit is a chronic

condition.


29/37

Q'"."(, p. + ')DD. These purposes weresubstantially achieved in the case of R.#. 3o. '*.I;. 5o$er of Conference Committee. It is contendedprincipally by Nilosbayan, Inc. and the -ovement of#ttorneys for 1rotherhood, Integrity and 3ationalism, Inc.-#1I3IDD that in violation of the constitutional policy offull public disclosure and the people6s right to 0now #rt.II, Q+ and #rt. III, QD the Conference Committee met

for two days in executive session with only the confereespresent.#s pointed out in our main decision, even in the >nited2tates it was customary to hold such sessions with onlythe conferees and their staffs in attendance and it wasonly in ')! when a new rule was adopted re%uiringopen sessions. >nli0e its #merican counterpart, thePhilippine Congress has not adopted a rule prescribingopen hearings for conference committees.It is nevertheless claimed that in the >nited 2tates,before the adoption of the rule in ')!, at least staffmembers were present. These were staff members of

the 2enators and Congressmen, however, who may bepresumed to be their confidential men, notstenographers as in this case who on the last two daysof the conference were excluded. There is no showingthat the conferees themselves did not ta0e notes of theirproceedings so as to give petitioner Nilosbayan basis forclaiming that even in secret diplomatic negotiationsinvolving state interests, conferees 0eep notes of theirmeetings. #bove all, the public6s right to 0now was fullyserved because the Conference Committee in this casesubmitted a report showing the changes made on thediffering versions of the :ouse and the 2enate.Petitioners cite the rules of both houses which providethat conference committee reports must contain 4adetailed, sufficiently explicit statement of the changes inor other amendments.4 These changes are shown in thebill attached to the Conference Committee Report. Themembers of both houses could thus ascertain whatchanges had been made in the original bills without theneed of a statement detailing the changes.The same %uestion now presented was raised when thebill which became R.#. 3o. '("" Eand Reform #ct of')!!D was reported by the Conference Committee.

Congressman 1eng9on raised a point of order. :e said@-R. 1


30/37

limited to resolving differences between the 2enate andthe :ouse. It may propose an entirely new provision.$hat is important is that its report is subse%uentlyapproved by the respective houses of Congress. ThisCourt ruled that it would not entertain allegations that,because new provisions had been added by theconference committee, there was thereby a violation ofthe constitutional in5unction that 4upon the last reading of

a bill, no amendment thereto shall be allowed.4#pplying these principles, weshall declineto loo0 into the petitioners6charges that an amendment $as madeupon the last reading of the illthateventually became R.#. 3o. !( andthat copiesthereof in its final form $erenot distriutedamong the members ofeach :ouse. 1oth the enrolled bill andthe legislative 5ournals certify that themeasure was duly enacted i.e., inaccordance with #rticle ;I, 2ec. * D

of the Constitution. $e are bound bysuch official assurances from acoordinate department of thegovernment, to which we owe, at thevery least, a becoming courtesy.Id. at '". emphasis addedDD

It is interesting to note the following description ofconference committees in the Philippines in a '))study@

Conference committees may be of twotypes@ free or instructed. Thesecommittees may be given instructionsby their parent bodies or they may beleft without instructions. 3ormally theconference committees are withoutinstructions, and this is why they areoften critically referred to as 4the littlelegislatures.4 Once bills have been sentto them, the conferees have almostunlimited authority to change theclauses of the bills and in factsometimes introduce new measures thatwere not in the original legislation. 3o

minutes are 0ept, and members6activities on conference committees aredifficult to determine. One congressman0nown for his idealism put it this way@ 4I0illed a bill on export incentives for myinterest group Hcopra in the conferencecommittee but I could not have done soanywhere else.4 The conferencecommittee submits a report to bothhouses, and usually it is accepted. If thereport is not accepted, then the

committee is discharged and newmembers are appointed.R. &ac0son, Committees in thePhilippine Congress, in CO--ITT. P#Emaintains that R.#. 3o. '* violates #rt. ;I, Q* 'D ofthe Constitution which provides that 4


31/37

The amendment of Q'" is expressed in the title of R.#.3o. '* which reads@

#3 #CT RCT>RI3/ T:


32/37

the Constitution. The reason is simple@ by grantingexemptions, the 2tate does not forever waive theexercise of its sovereign prerogative.Indeed, in withdrawing the exemption, the law merelysub5ects the press to the same tax burden to which otherbusinesses have long ago been sub5ect. It is thusdifferent from the tax involved in the cases invo0ed bythe PPI. The license tax in Gros3ean v.!merican 5ress

Co., ) >.2. , +" E. .2. !!, !E. .2. '"!, + E.


33/37

=irst #mendment along with the waresand merchandise of huc0sters andpeddlers and treats them all ali0e. 2uche%uality in treatment does not save theordinance. =reedom of press, freedomof speech, freedom of religion are inpreferred position.

The Court was spea0ing in that case of a license ta2,

which, unli0e an ordinary tax, is mainly for regulation. Itsimposition on the press is unconstitutional because itlays a prior restraint on the exercise of its right. :ence,although its application to others, such those sellinggoods, is valid, its application to the press or to religiousgroups, such as the &ehovah6s $itnesses, in connectionwith the latter6s sale of religious boo0s and pamphlets, isunconstitutional. #s the >.2. 2upreme Court put it, 4it isone thing to impose a tax on income or property of apreacher. It is %uite another thing to exact a tax on himfor delivering a sermon.4# similar ruling was made by this Court in!merican

8ile -ociety v. City of 4anila, '"' Phil. +* ')!Dwhich invalidated a city ordinance re%uiring a businesslicense fee on those engaged in the sale of generalmerchandise. It was held that the tax could not beimposed on the sale of bibles by the #merican 1ible2ociety without restraining the free exercise of its right topropagate.The ;#T is, however, different. It is not a license tax. It isnot a tax on the exercise of a privilege, much less aconstitutional right. It is imposed on the sale, barter,lease or exchange of goods or properties or the sale orexchange of services and the lease of properties purelyfor revenue purposes. To sub5ect the press to itspayment is not to burden the exercise of its right anymore than to ma0e the press pay income tax or sub5ect itto general regulation is not to violate its freedom underthe Constitution.#dditionally, the Philippine 1ible 2ociety, Inc. claims thatalthough it sells bibles, the proceeds derived from thesales are used to subsidi9e the cost of printing copieswhich are given free to those who cannot afford to payso 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 ofreligious freedom is so incidental as to ma0e it difficult todifferentiate it from any other economic imposition thatmight ma0e the right to disseminate religious doctrinescostly. Otherwise, to follow the petitioner6s argument, toincrease the tax on the sale of vestments would be to layan impermissible burden on the right of the preacher toma0e a sermon.On the other hand the registration fee of P',""".""imposed by Q'" of the 3IRC, as amended by Q ofR.#. 3o. '*, although fixed in amount, is really 5ust to

pay for the expenses of registration and enforcement ofprovisions such as those relating to accounting in Q'"+of the 3IRC. That the P12 distributes free bibles andtherefore is not liable to pay the ;#T does not excuse itfrom the payment of this fee because it also sells somecopies. #t any rate whether the P12 is liable for the ;#Tmust be decided in concrete cases, in the event it isassessed this tax by the Commissioner of Internal

Revenue.;II.!lleged violations of the due process, e"ualprotection and contract clauses and the rule on ta2ation.CR


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property for sociali9ed and lowAcost housing is exemptedfrom the tax, but CR


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Thus, the following transactions involving basic andessential goods and services are exempted from the;#T@

aD /oods for consumption or use whichare in their original state agricultural,marine and forest products, cottonseeds in their original state, fertili9ers,seeds, seedlings, fingerlings, fish, prawn

livestoc0 and poultry feedsD and goodsor services to enhance agriculturemilling of palay, corn sugar cane andraw sugar, livestoc0, poultry feeds,fertili9er, ingredients used for themanufacture of feedsD.bD /oods used for personalconsumption or use household andpersonal effects of citi9ens returning tothe PhilippinesD and or professional use,li0e professional instruments andimplements, by persons coming to the

Philippines to settle here.cD /oods sub5ect to excise tax such aspetroleum products or to be used formanufacture of petroleum productssub5ect to excise tax and servicessub5ect to percentage tax.dD nder #rt . ;III, Q! our5urisdiction is defined in terms of 4cases4 and all that #rt.;III, Q', S can plausibly mean is that in the exercise ofthat3urisdiction we have the3udicial po$er to determine

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%uestions of grave abuse of discretion by any branch orinstrumentality of the government.Put in another way, what is granted in #rt. ;III, Q', S is45udicial power,4 which is 4the power of a court to hearand decide cases pending between parties who have theright to sue and be sued in the courts of law and e%uity4Eamb v. Phipps, Phil. (!*, !!) ')'DD, asdistinguished from legislative and executive power. This

power cannot be directly appropriated until it isapportioned among several courts either by theConstitution, as in the case of #rt. ;III, Q!, or by statute,as in the case of the &udiciary #ct of ')(+ R.#. 3o. )*Dand the &udiciary Reorgani9ation #ct of ')+" 1.P. 1lg.')D. The power thus apportioned constitutes the court6s45urisdiction,4 defined as 4the power conferred by lawupon a court or 5udge to ta0e cogni9ance of a case, tothe exclusion of all others.4 >nited 2tates v. #rceo, *Phil. ) ')"*DD $ithout an actual case coming within its5urisdiction, this Court cannot in%uire into any allegationof grave abuse of discretion by the other departments of

the government.;III.!lleged violation of policy to$ards cooperatives. Onthe other hand, the Cooperative >nion of the PhilippinesC>PD, after briefly surveying the course of legislation,argues that it was to adopt a definite policy of grantingtax exemption to cooperatives that the presentConstitution embodies provisions on cooperatives. Tosub5ect cooperatives to the ;#T would therefore be toinfringe a constitutional policy. Petitioner claims that in'), P.8. 3o. '! was promulgated exemptingcooperatives from the payment of income taxes andsales taxes but in ')+(, because of the crisis whichmenaced the national economy, this exemption waswithdrawn by P.8. 3o. ')!!7 that in ')+*, P.8. 3o. ""+again granted cooperatives exemption from income andsales taxes until 8ecember ', '))', but, in the sameyear,


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institutions, churches and parsonages, by reason of #rt.;I, Q+ D, and nonAstoc0, nonAprofit educationalinstitutions by reason of #rt. I;, Q( D.C>P6s further ground for see0ing the invalidation of R.#.3o. '* is that it denies cooperatives the e%ualprotection of the law because electric cooperatives areexempted from the ;#T. The classification betweenelectric and other cooperatives farmers cooperatives,

producers cooperatives, mar0eting cooperatives, etc.Dapparently rests on a congressional determination thatthere is greater need to provide cheaper electric powerto as many people as possible, especially those living inthe rural areas, than there is to provide them with othernecessities in life. $e cannot say that such classificationis unreasonable.$e have carefully read the various arguments raisedagainst the constitutional validity of R.#. 3o. '*. $ehave in fact ta0en the extraordinary step of en5oining itsenforcement pending resolution of these cases. $ehave now come to the conclusion that the law suffers

from none of the infirmities attributed to it by petitionersand that its enactment by the other branches of thegovernment does not constitute a grave abuse ofdiscretion. #ny %uestion as to its necessity, desirabilityor expediency must be addressed to Congress as thebody which is electorally responsible, remembering that,as &ustice :olmes has said, 4legislators are the ultimateguardians of the liberties and welfare of the people in%uite as great a degree as are the courts.4 -issouri,Nansas W Texas Ry. Co. v. -ay, ')( >.2. *, ", (+E.

Documents

Tax 1 Cases - Purpose of Taxation: Revenueraising