Abakada Guro vs Ermita

Abakada Guro v. Ermita

G.R. No. 168056, July 5, 2005

J. Puno En Banc

Facts:

Motions for Reconsideration filed by petitioners, ABAKADA Guro party List Officer and et al.,
insist that the bicameral conference committee should not even have acted on the no pass-on
provisions since there is no disagreement between House Bill Nos. 3705 and 3555 on the one
hand, and Senate Bill No. 1950 on the other, with regard to the no pass-on provision for the sale
of service for power generation because both the Senate and the House were in agreement that
the VAT burden for the sale of such service shall not be passed on to the end-consumer. As to
the no pass-on provision for sale of petroleum products, petitioners argue that the fact that the
presence of such a no pass-on provision in the House version and the absence thereof in the
Senate Bill means there is no conflict because a House provision cannot be in conflict with
something that does not exist.

Escudero, et. al., also contend that Republic Act No. 9337 grossly violates the constitutional
imperative on exclusive origination of revenue bills under Section 24 of Article VI of the
Constitution when the Senate introduced amendments not connected with VAT.

Petitioners Escudero, et al., also reiterate that R.A. No. 9337s stand- by authority to the
Executive to increase the VAT rate, especially on account of the recommendatory power granted
to the Secretary of Finance, constitutes undue delegation of legislative power. They submit that
the recommendatory power given to the Secretary of Finance in regard to the occurrence of
either of two events using the Gross Domestic Product (GDP) as a benchmark necessarily and
inherently required extended analysis and evaluation, as well as policy making.

Petitioners also reiterate their argument that the input tax is a property or a property right.
Petitioners also contend that even if the right to credit the input VAT is merely a statutory
privilege, it has already evolved into a vested right that the State cannot remove.

Issue:

Whether or not the R.A. No. 9337 or the Vat Reform Act is constitutional?

Held:

The Court is not persuaded. Article VI, Section 24 of the Constitution provides that All
appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local
application, and private bills shall originate exclusively in the House of Representatives, but the
Senate may propose or concur with amendments.

The Court reiterates that in making his recommendation to the President on the existence of
either of the two conditions, the Secretary of Finance is not acting as the alter ego of the
President or even her subordinate. He is acting as the agent of the legislative department, to
determine and declare the event upon which its expressed will is to take effect. The Secretary of
Finance becomes the means or tool by which legislative policy is determined and implemented,
considering that he possesses all the facilities to gather data and information and has a much
broader perspective to properly evaluate them. His function is to gather and collate statistical
data and other pertinent information and verify if any of the two conditions laid out by Congress
is present.

In the same breath, the Court reiterates its finding that it is not a property or a property right, and
a VAT-registered persons entitlement to the creditable input tax is a mere statutory privilege. As
the Court stated in its Decision, the right to credit the input tax is a mere creation of law. More
importantly, the assailed provisions of R.A. No. 9337 already involve legislative policy and
wisdom. So long as there is a public end for which R.A. No. 9337 was passed, the means through
which such end shall be accomplished is for the legislature to choose so long as it is within
constitutional bounds.

The Motions for Reconsideration are hereby DENIED WITH FINALITY. The temporary
restraining order issued by the Court is LIFTED.

G.R. No. 168056 ' ABAKADA GURO PARTY LIST, ET AL. VS. EXECUTIVE SECRETARY
EDUARDO ERMITA, ET AL.

G.R. No. 168207 ' AQUILINO PIMENTEL, JR., ET AL. VS. EXECUTIVE SECRETARY
EDUARDO ERMITA, ET AL.

G.R. No. 168461 ' ASSOCIATION OF PILIPINAS SHELL DEALERS, INC., ET AL. VS. CESAR
V. PURISIMA, ET AL.

G.R. No. 168463 ' FRANCIS JOSEPH G. ESCUDERO, ET AL. VS. CESAR V. PURISIMA, ET AL.
Promulgated:


September 1, 2005
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

CONCURRING AND
DISSENTING OPINION

PUNO, J .:
The main opinion of Madam Justice Martinez exhaustively discusses the numerous constitutional and
legal issues raised by the petitioners. Be that as it may, I wish to raise the following points, viz:
First. Petitioners assail sections 4 to 6 of Republic Act No. 9337 as violative of the principle of non-
delegation of legislative power. These sections authorize the President, upon recommendation of the
Secretary of Finance, to raise the value-added tax (VAT) rate to 12% effective January 1, 2006, upon
satisfaction of the following conditions: viz:
(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the
previous year exceeds two and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of GDP of the previous year exceeds one
and one-half percent (1 '%).

The power of judicial review under Article VIII, section 5(2) of the 1987 Constitution is limited to the
review of 'actual cases and controversies.[1] As rightly stressed by retired Justice Vicente V.
Mendoza, this requirement gives the judiciary 'the opportunity, denied to the legislature, of seeing the
actual operation of the statute as it is applied to actual facts and thus enables it to reach sounder judgment
and 'enhances public acceptance of its role in our system of government.[2] It also assures that the
judiciary does not intrude on areas committed to the other branches of government and is confined to its
role as defined by the Constitution.[3] Apposite thereto is the doctrine of ripeness whose basic rationale
is to prevent the courts, through premature adjudication, from entangling themselves in abstract
disagreements.[4] Central to the doctrine is the determination of 'whether the case involves uncertain
or contingent future events that may not occur as anticipated, or indeed may not occur at all.[5] The
ripeness requirement must be satisfied for each challenged legal provision and parts of a statute so that
those which are 'not immediately involved are not thereby thrown open for a judicial determination of
constitutionality.[6]
It is manifest that the constitutional challenge to sections 4 to 6 of R.A. No. 9337 cannot hurdle the
requirement of ripeness. These sections give the President the power to raise the VAT rate to 12% on
January 1, 2006 upon satisfaction of certain fact-based conditions. We are not endowed with the
infallible gift of prophesy to know whether these conditions are certain to happen. The power to adjust the
tax rate given to the President is futuristic and may or may not be exercised. The Court is therefore
beseeched to render a conjectural judgment based on hypothetical facts. Such a supplication has to be
rejected.
Second. With due respect, I submit that the most important constitutional issue posed by the petitions at
bar relates to the parameters of power of a Bicameral Conference Committee. Most of the issues in
the petitions at bar arose because the Bicameral Conference Committee concerned exercised powers that
went beyond reconciling the differences between Senate Bill No. 1950 and House Bill Nos. 3705 and
3555. In Tolentino v. Secretary of Finance,[7] I ventured the view that a Bicameral Conference
Committee has limited powers and cannot be allowed to act as if it were a 'third house of Congress. I
further warned that unless its roving powers are reigned in, a Bicameral Conference Committee can
wreck the lawmaking process which is a cornerstone of the democratic, republican regime established in
our Constitution. The passage of time fortifies my faith that there ought to be no legal u-turn on this
preeminent principle. I wish, therefore, to reiterate my reasons for this unbending view, viz:[8]
Section 209, Rule XII of the Rules of the Senate provides:
In the event that the Senate does not agree with the House of
Representatives on the provision of any bill or joint resolution, the
differences shall be settled by a conference committee of both Houses
which shall meet within ten days after their composition.
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. (Emphasis
supplied)
The counterpart rule of the House of Representatives is cast in near identical
language. Section 85 of the Rules of the House of Representatives pertinently provides:
In the event that the House does not agree with the Senate on the
amendments to any bill or joint resolution, the differences may be settled
by a conference committee of both chambers.
x x x. Each report shall contain a detailed, sufficiently explicit
statement of the changes in or amendments to the subject measure.
(Emphasis supplied)
The Jefferson's Manual has been adopted as a supplement to our parliamentary rules and
practice. Section 456 of Jefferson's Manual similarly confines the powers of a
conference committee, viz:
The managers of a conference must confine themselves to the
differences committed to them ' and may not include subjects not
within the disagreements, even though germane to a question in issue.
This rule of antiquity has been honed and honored in practice by the Congress of the
United States. Thus, it is chronicled by Floyd Biddick, Parliamentarian Emeritus of the
United States Senate, viz:
Committees of conference are appointed for the sole purpose of
compromising and adjusting the differing and conflicting opinions of the
two Houses and the committees of conference alone can grant
compromises and modify propositions of either Houses within the limits
of the disagreement. Conferees are limited to the consideration of
differences between the two Houses.
Congress shall not insert in their report matters not committed to
them by either House, nor shall they strike from the bill matters agreed to
by both Houses. No matter on which there is nothing in either the Senate
or House passed versions of a bill may be included in the conference
report and actions to the contrary would subject the report to a point of
order. (Emphasis ours)
In fine, there is neither a sound nor a syllable in the Rules of the Senate and the House
of Representatives to support the thesis of the respondents that a bicameral conference
committee is clothed with an ex post veto power.
But the thesis that a Bicameral Conference Committee can wield ex post veto
power does not only contravene the rules of both the Senate and the House. It wages war
against our settled ideals of representative democracy. For the inevitable, catastrophic
effect of the thesis is to install a Bicameral Conference Committee as the Third Chamber
of our Congress, similarly vested with the power to make laws but with the dissimilarity
that its laws are not the subject of a free and full discussion of both Houses of Congress.
With such a vagrant power, a Bicameral Conference Committee acting as a Third
Chamber will be a constitutional monstrosity.
It needs no omniscience to perceive that our Constitution did not provide for a
Congress composed of three chambers. On the contrary, section 1, Article VI of the
Constitution provides in clear and certain language: 'The legislative power shall be
vested in the Congress of the Philippines which shall consist of a Senate and a House of
Representatives Note that in vesting legislative power exclusively to the Senate and the
House, the Constitution used the word 'shall. Its command for a Congress of two houses
is mandatory. It is not mandatory sometimes.
In vesting legislative power to the Senate, the Constitution means the Senate
composed of twenty-four Senators xxx elected at large by the qualified voters of the
Philippines Similarly, when the Constitution vested the legislative power to the House, it
means the House composed of not more than two hundred and fifty members xxx who
shall be elected from legislative districts xxx and those who xxx shall be elected through
a party-list system of registered national, regional, and sectoral parties or organizations.
The Constitution thus, did not vest on a Bicameral Conference Committee with an ad
hoc membership the power to legislate for it exclusively vested legislative power to the
Senate and the House as co-equal bodies. To be sure, the Constitution does not mention
the Bicameral Conference Committees of Congress. No constitutional status is accorded
to them. They are not even statutory creations. They owe their existence from the
internal rules of the two Houses of Congress. Yet, respondents peddle the disconcerting
idea that they should be recognized as a Third Chamber of Congress and with ex post
veto power at that.
The thesis that a Bicameral Conference Committee can exercise law making
power with ex post veto power is freighted with mischief. Law making is a power that
can be used for good or for ill, hence, our Constitution carefully laid out a plan and a
procedure for its exercise. Firstly, it vouchsafed that the power to make laws should be
exercised by no other body except the Senate and the House. It ought to be indubitable
that what is contemplated is the Senate acting as a full Senate and the House acting as a
full House. It is only when the Senate and the House act as whole bodies that they truly
represent the people. And it is only when they represent the people that they can
legitimately pass laws. Laws that are not enacted by the people's rightful representatives
subvert the people's sovereignty. Bicameral Conference Committees, with their ad hoc
character and limited membership, cannot pass laws for they do not represent the people.
The Constitution does not allow the tyranny of the majority. Yet, the respondents will
impose the worst kind of tyranny ' the tyranny of the minority over the majority.
Secondly, the Constitution delineated in deft strokes the steps to be followed in making
laws. The overriding purpose of these procedural rules is to assure that only bills that
successfully survive the searching scrutiny of the proper committees of Congress and
the full and unfettered deliberations of both Houses can become laws. For this reason, a
bill has to undergo three (3) mandatory separate readings in each House. In the case at
bench, the additions and deletions made by the Bicameral Conference Committee did
not enjoy the enlightened studies of appropriate committees. It is meet to note that the
complexities of modern day legislations have made our committee system a significant
part of the legislative process. Thomas Reed called the committee system as 'the eye, the
ear, the hand, and very often the brain of the house. President Woodrow Wilson of the
United States once referred to the government of the United States as 'a government by
the Chairmen of the Standing Committees of Congress Neither did these additions and
deletions of the Bicameral Conference Committee pass through the coils of collective
deliberation of the members of the two Houses acting separately. Due to this
shortcircuiting of the constitutional procedure of making laws, confusion shrouds the
enactment of R.A. No. 7716. Who inserted the additions and deletions remains a
mystery. Why they were inserted is a riddle. To use a Churchillian phrase, lawmaking
should not be a riddle wrapped in an enigma. It cannot be, for Article II, section 28 of
the Constitution mandates the State to adopt and implement a 'policy of full public
disclosure of all its transactions involving public interest. The Constitution could not
have contemplated a Congress of invisible and unaccountable John and Mary Does. A
law whose rationale is a riddle and whose authorship is obscure cannot bind the people.
All these notwithstanding, respondents resort to the legal cosmetology that
these additions and deletions should govern the people as laws because the Bicameral
Conference Committee Report was anyway submitted to and approved by the Senate
and the House of Representatives. The submission may have some merit with respect to
provisions agreed upon by the Committee in the process of reconciling conflicts
between S.B. No. 1630 and H.B. No. 11197. In these instances, the conflicting
provisions had been previously screened by the proper committees, deliberated upon by
both Houses and approved by them. It is, however, a different matter with respect to
additions and deletions which were entirely new and which were made not to reconcile
inconsistencies between S.B. No. 1630 and H.B. No. 11197. The members of the
Bicameral Conference Committee did not have any authority to add new provisions or
delete provisions already approved by both Houses as it was not necessary to discharge
their limited task of reconciling differences in bills. At that late stage of law making, the
Conference Committee cannot add/delete provisions which can become laws without
undergoing the study and deliberation of both chambers given to bills on 1
st
, 2
nd
, and 3
rd

readings. Even the Senate and the House cannot enact a law which will not undergo
these mandatory three (3) readings required by the Constitution. If the Senate and the
House cannot enact such a law, neither can the lesser Bicameral Conference Committee.
Moreover, the so-called choice given to the members of both Houses to either
approve or disapprove the said additions and deletions is more of an optical illusion.
These additions and deletions are not submitted separately for approval. They are tucked
to the entire bill. The vote is on the bill as a package, i.e., together with the insertions
and deletions. And the vote is either 'aye or 'nay, without any further debate and
deliberation. Quite often, legislators vote 'yes' because they approve of the bill as a
whole although they may object to its amendments by the Conference Committee. This
lack of real choice is well observed by Robert Luce:
Their power lies chiefly in the fact that reports of conference
committees must be accepted without amendment or else rejected in toto.
The impulse is to get done with the matter and so the motion to accept
has undue advantage, for some members are sure to prefer swallowing
unpalatable provisions rather than prolong controversy. This is the more
likely if the report comes in the rush of business toward the end of a
session, when to seek further conference might result in the loss of the
measure altogether. At any time in the session there is some risk of such a
result following the rejection of a conference report, for it may not be
possible to secure a second conference, or delay may give opposition to
the main proposal chance to develop more strength.
In a similar vein, Prof. Jack Davies commented that conference reports are returned to
assembly and Senate on a take-it or leave-it-basis, and the bodies are generally placed in
the position that to leave-it is a practical impossibility. Thus, he concludes that
'conference committee action is the most undemocratic procedure in the legislative
process.
The respondents also contend that the additions and deletions made by the
Bicameral Conference Committee were in accord with legislative customs and usages.
The argument does not persuade for it misappreciates the value of customs and usages in
the hierarchy of sources of legislative rules of procedure. To be sure, every legislative
assembly has the inherent right to promulgate its own internal rules. In our jurisdiction,
Article VI, section 16(3) of the Constitution provides that 'Each House may determine
the rules of its proceedings x x x. But it is hornbook law that the sources of Rules of
Procedure are many and hierarchical in character. Mason laid them down as follows:
x x x
1. Rules of Procedure are derived from several sources. The
principal sources are as follows:
a. Constitutional rules.
b. Statutory rules or charter provisions.
c. Adopted rules.
d. Judicial decisions.
e. Adopted parliamentary authority.
f. Parliamentary law.
g. Customs and usages.

2. The rules from the different sources take precedence in the
order listed above except that judicial decisions, since they are
interpretations of rules from one of the other sources, take the same
precedence as the source interpreted. Thus, for example, an
interpretation of a constitutional provision takes precedence over a
statute.

3. Whenever there is conflict between rules from these sources
the rule from the source listed earlier prevails over the rule from the
source listed later. Thus, where the Constitution requires three readings
of bills, this provision controls over any provision of statute, adopted
rules, adopted manual, or of parliamentary law, and a rule of
parliamentary law controls over a local usage but must give way to any
rule from a higher source of authority. (Emphasis ours)

As discussed above, the unauthorized additions and deletions made by the Bicameral
Conference Committee violated the procedure fixed by the Constitution in the making of
laws. It is reasonless for respondents therefore to justify these insertions as sanctioned
by customs and usages.

Finally, respondents seek sanctuary in the conclusiveness of an enrolled bill to bar any
judicial inquiry on whether Congress observed our constitutional procedure in the
passage of R.A. No. 7716. The enrolled bill theory is a historical relic that should not
continuously rule us from the fossilized past. It should be immediately emphasized that
the enrolled bill theory originated in England where there is no written constitution and
where Parliament is supreme. In this jurisdiction, we have a written constitution and the
legislature is a body of limited powers. Likewise, it must be pointed out that starting
from the decade of the 40s, even American courts have veered away from the rigidity
and unrealism of the conclusiveness of an enrolled bill. Prof. Sutherland observed:

x x x

Where the failure of constitutional compliance in the enactment
of statutes is not discoverable from the face of the act itself but may be
demonstrated by recourse to the legislative journals, debates, committee
reports or papers of the governor, courts have used several conflicting
theories with which to dispose of the issue. They have held: (1) that the
enrolled bill is conclusive and like the sheriff's return cannot be attacked;
(2) that the enrolled bill is prima facie correct and only in case the
legislative journal shows affirmative contradiction of the constitutional
requirement will the bill be held invalid; (3) that although the enrolled
bill is prima facie correct, evidence from the journals, or other extrinsic
sources is admissible to strike the bill down; (4) that the legislative
journal is conclusive and the enrolled bills is valid only if it accords with
the recital in the journal and the constitutional procedure.

Various jurisdictions have adopted these alternative approaches in view of strong dissent
and dissatisfaction against the philosophical underpinnings of the conclusiveness of an
enrolled bill. Prof. Sutherland further observed:

x x x. Numerous reasons have been given for this rule.
Traditionally, an enrolled bill was 'a record and as such was not subject to
attack at common law. Likewise, the rule of conclusiveness was similar
to the common law rule of the inviolability of the sheriff's return. Indeed,
they had the same origin, that is, the sheriff was an officer of the king and
likewise the parliamentary act was a regal act and no official might
dispute the king's word. Transposed to our democratic system of
government, courts held that as the legislature was an official branch of
government the court must indulge every presumption that the legislative
act was valid. The doctrine of separation of powers was advanced as a
strong reason why the court should treat the acts of a co-ordinate branch
of government with the same respect as it treats the action of its own
officers; indeed, it was thought that it was entitled to even greater respect,
else the court might be in the position of reviewing the work of a
supposedly equal branch of government. When these arguments failed, as
they frequently did, the doctrine of convenience was advanced, that is,
that it was not only an undue burden upon the legislature to preserve its
records to meet the attack of persons not affected by the procedure of
enactment, but also that it unnecessarily complicated litigation and
confused the trial of substantive issues.

Although many of these arguments are persuasive and are indeed
the basis for the rule in many states today, they are not invulnerable to
attack. The rule most relied on ' the sheriff's return or sworn official rule '
did not in civil litigation deprive the injured party of an action, for always
he could sue the sheriff upon his official bond. Likewise, although
collateral attack was not permitted, direct attack permitted raising the
issue of fraud, and at a later date attack in equity was also available; and
that the evidence of the sheriff was not of unusual weight was
demonstrated by the fact that in an action against the sheriff no
presumption of its authenticity prevailed.

The argument that the enrolled bill is a record and therefore
unimpeachable is likewise misleading, for the correction of records is a
matter of established judicial procedure. Apparently, the justification is
either the historical one that the king's word could not be questioned or
the separation of powers principle that one branch of the government
must treat as valid the acts of another.

Persuasive as these arguments are, the tendency today is to
avoid reaching results by artificial presumptions and thus it would seem
desirable to insist that the enrolled bill stand or fall on the basis of the
relevant evidence which may be submitted for or against it. (Emphasis
ours)

Thus, as far back as the 1940s, Prof. Sutherland confirmed that 'x x x the tendency
seems to be toward the abandonment of the conclusive presumption rule and the
adoption of the third rule leaving only a prima facie presumption of validity which may
be attacked by any authoritative source of information.

Third. I respectfully submit that it is only by strictly following the contours of powers of a Bicameral
Conference Committee, as delineated by the rules of the House and the Senate, that we can prevent
said Committee from acting as a 'third chamber of Congress. Under the clear rules of both the Senate
and House, its power can go no further than settling differences in their bills or joint resolutions.
Sections 88 and 89, Rule XIV of the Rules of the House of Representatives provide as follows:
Sec. 88. Conference Committee. ' In the event that the House does not agree with the
Senate on the amendment to any bill or joint resolution, the differences may be settled
by the conference committees of both chambers.
In resolving the differences with the Senate, the House panel shall, as much as possible,
adhere to and support the House Bill. If the differences with the Senate are so
substantial that they materially impair the House Bill, the panel shall report such fact to
the House for the latter's appropriate action.
Sec. 89. Conference Committee Reports. - . . . Each report shall contain a detailed,
sufficiently explicit statement of the changes in or amendments to the subject measure.
. . .
The Chairman of the House panel may be interpellated on the Conference Committee
Report prior to the voting thereon. The House shall vote on the Conference Committee
Report in the same manner and procedure as it votes a bill on third and final reading.

Section 35, Rule XII of the Rules of the Senate states:
Sec. 35. 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 (10) days after their
composition. The President shall designate the members of the Senate Panel in the
conference committee with the approval of the Senate.
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 a majority of the members of each House panel, voting separately.

The House rule brightlines the following: (1) the power of the Conference Committee is limited . . . it is
only to settle differences with the Senate; (2) if the differences are substantial, the Committee must
report to the House for the latter's appropriate action; and (3) the Committee report has to be voted upon
in the same manner and procedure as a bill on third and final reading. Similarly, the Senate rule
underscores in crimson that (1) the power of the Committee is limited - - - to settle differences with the
House; (2) it can make changes or amendments only in the discharge of this limited power to settle
differences with the House; and (3) the changes or amendments are merely recommendatory for they
still have to be approved by the Senate.
Under both rules, it is obvious that a Bicameral Conference Committee is a mere agent of the House or
the Senate with limited powers. The House contingent in the Committee cannot, on its own, settle
differences which are substantial in character. If it is confronted with substantial differences, it has to
go back to the chamber that created it 'for the latter's appropriate action. In other words, it must take
the proper instructions from the chambers that created it. It cannot exercise its unbridled discretion.
Where there is no difference between the bills, it cannot make any change. Where the difference is
substantial, it has to return to the chamber of its origin and ask for appropriate instructions. It ought to be
indubitable that it cannot create a new law, i.e., that which has never been discussed in either chamber
of Congress. Its parameters of power are not porous, for they are hedged by the clear limitation that its
only power is to settle differences in bills and joint resolutions of the two chambers of Congress. '
Fourth. Prescinding from these premises, I respectfully submit that the following acts of the Bicameral
Conference Committee constitute grave abuse of discretion amounting to lack or excess of jurisdiction
and should be struck down as unconstitutional nullities, viz:
a. Its deletion of the pro poor 'no pass on provision which is common
in both Senate Bill No. 1950 and House Bill No. 3705.
Sec. 1 of House Bill No. 3705[9] provides:
Section 106 of the National Internal Revenue Code of 1997, as amended, is hereby
further amended to read as follows:
SEC. 106. Value-added Tax on Sale of Goods or Properties. '
x x x
Provided, further, that notwithstanding the provision of the second paragraph of Section
105 of this Code, the Value-added Tax herein levied on the sale of petroleum products
under Subparagraph (1) hereof shall be paid and absorbed by the sellers of petroleum
products who shall be prohibited from passing on the cost of such tax payments,
either directly or indirectly[,] to any consumer in whatever form or manner, it being
the express intent of this act that the Value-added Tax shall be borne and absorbed
exclusively by the sellers of petroleum products x x x.

Sec. 3 of the same House bill provides:
Section 108 of the National Internal Revenue Code of 1997, as amended, is hereby
further amended to read as follows:
Sec. 108. Value-added Tax on Sale of Goods or Properties. '
Provided, further, that notwithstanding the provision of the second paragraph of Section
105 of this Code, the Value-added Tax imposed under this paragraph shall be paid and
absorbed by the subject generation companies who shall be prohibited from passing
on the cost of such tax payments, either directly or indirectly[,] to any consumer in
whatever form or manner, it being the express intent of this act that the Value-added
Tax shall be borne and absorbed exclusively [by] the power-generating companies.

In contrast and comparison, Sec. 5 of Senate Bill No. 1950 provides:
Value-added Tax on sale of Services and Use or Lease of Properties. '
x x x Provided, that the VAT on sales of electricity by generation companies, and
services of transmission companies and distribution companies, as well as those of
franchise grantees of electrical utilities shall not apply to residential end-users: Provided,
that the Value-added Tax herein levied shall be absorbed and paid by the generation,
transmission and distribution companies concerned. The said companies shall not pass
on such tax payments to NAPOCOR or ultimately to the consumers, including but
not limited to residential end users, either as costs or in any other form whatsoever,
directly or indirectly. x x x.

Even the faintest eye contact with the above provisions will reveal that: (a) both the House bill and the
Senate bill prohibited the passing on to consumers of the VAT on sales of electricity and (b) the House
bill prohibited the passing on to consumers of the VAT on sales of petroleum products while the Senate
bill is silent on the prohibition.
In the guise of reconciling disagreeing provisions of the House and the Senate bills on the matter, the
Bicameral Conference Committee deleted the 'no pass on provision on both the sales of electricity
and petroleum products. This action by the Committee is not warranted by the rules of either the Senate
or the House. As aforediscussed, the only power of a Bicameral Conference Committee is to reconcile
disagreeing provisions in the bills or joint resolutions of the two houses of Congress. The House and the
Senate bills both prohibited the passing on to consumers of the VAT on sales of electricity. 'The
Bicameral Conference Committee cannot override this unequivocal decision of the Senate and the
House. Nor is it clear that there is a conflict between the House and Senate versions on the 'no pass on
provisions' of the VAT on sales of petroleum products. The House version contained a 'no pass on
provision but the Senate had none. Elementary logic will tell us that while there may be a difference
in the two versions, it does not necessarily mean that there is a disagreement or conflict between the
Senate and the House. The silence of the Senate on the issue cannot be interpreted as an outright
opposition to the House decision prohibiting the passing on of the VAT to the consumers on sales of
petroleum products. Silence can even be conformity, albeit implicit in nature. But granting for the nonce
that there is conflict between the two versions, the conflict cannot escape the characterization as a
substantial difference. The seismic consequence of the deletion of the 'no pass on provision of the VAT
on sales of petroleum products on the ability of our consumers, especially on the roofless and the
shirtless of our society, to survive the onslaught of spiraling prices ought to be beyond quibble. The rules
require that the Bicameral Conference Committee should not, on its own, act on this substantial conflict.
It has to seek guidance from the chamber that created it. It must receive proper instructions from its
principal, for it is the law of nature that no spring can rise higher than its source. The records of both the
Senate and the House do not reveal that this step was taken by the members of the Bicameral Conference
Committee. They bypassed their principal and ran riot with the exercise of powers that the rules never
bestowed on them.
b. Even more constitutionally obnoxious are the added restrictions on local government's use of
incremental revenue from the VAT in Section 21 of R.A. No. 9337 which were not present in the
Senate or House Bills. Section 21 of R.A. No. 9337 provides:
Fifty percent of the local government unit's share from VAT shall be allocated and used
exclusively for the following purposes:
1. Fifteen percent (15%) for public elementary and secondary
education to finance the construction of buildings, purchases of
school furniture and in-service teacher trainings;
2. Ten percent (10%) for health insurance premiums of enrolled
indigents as a counterpart contribution of the local government
to sustain the universal coverage of the national health insurance
program;
3. Fifteen percent (15%) for environmental conservation to fully
implement a comprehensive national reforestation program; and
4. Ten percent (10%) for agricultural modernization to finance
the construction of farm-to-market roads and irrigation facilities.
Such allocations shall be segregated as separate trust funds by the national treasury and
shall be over and above the annual appropriation for similar purposes.

These amendments did not harmonize conflicting provisions between the constituent bills of R.A. No.
9337 but are entirely new and extraneous concepts which fall beyond the median thereof. They
transgress the limits of the Bicameral Conference Committee's authority and must be struck down.
I cannot therefore subscribe to the thesis of the majority that 'the changes introduced by the Bicameral
Conference Committee on disagreeing provisions were meant only to reconcile and harmonize the
disagreeing provisions for it did not inject any idea or intent that is wholly foreign to the subject
embraced by the original provisions.
Fifth. The majority further defends the constitutionality of the above provisions by holding that 'all the
changes or modifications were germane to subjects of the provisions referred to it for reconciliation.
With due respect, it is high time to re-examine the test of germaneness proffered in Tolentino.
The test of germaneness is overly broad and is the fountainhead of mischief for it allows the Bicameral
Conference Committee to change provisions in the bills of the House and the Senate when they are not
even in disagreement. Worse still, it enables the Committee to introduce amendments which are entirely
new and have not previously passed through the coils of scrutiny of the members of both houses. The
Constitution did not establish a Bicameral Conference Committee that can act as a 'third house of
Congress with super veto power over bills passed by the Senate and the House. We cannot concede that
super veto power without wrecking the delicate architecture of legislative power so carefully laid down
in our Constitution. The clear intent of our fundamental law is to install a lawmaking structure composed
only of two houses whose members would thoroughly debate proposed legislations in representation of
the will of their respective constituents. The institution of this lawmaking structure is unmistakable from
the following provisions: (1) requiring that legislative power shall be vested in a bicameral
legislature;[10] (2) providing for quorum requirements;[11] (3) requiring that appropriation, revenue
or tariff bills, bills authorizing increase of public debt, bills of local application, and private bills originate
exclusively in the House of Representatives;[12] (4) requiring
that bills embrace one subject expressed in the title thereof;[13] and (5) mandating that bills undergo
three readings on separate days in each House prior to passage into law and prohibiting amendments on
the last reading thereof.[14] A Bicameral Conference Committee with untrammeled powers will destroy
this lawmaking structure. At the very least, it will diminish the free and open debate of proposed
legislations and facilitate the smuggling of what purports to be laws.
On this point, Mr. Robert Luce's disconcerting observations are apropos:
Their power lies chiefly in the fact that reports of conference committees must be
accepted without amendment or else rejected in toto. The impulse is to get done with
the matters and so the motion to accept has undue advantage, for some members
are sure to prefer swallowing unpalatable provisions rather than prolong
controversy. This is more likely if the report comes in the rush of business toward the
end of the session, when to seek further conference might result in the loss of the measure
altogether. At any time in the session there is some risk of such a result following the
rejection of a conference report, for it may not be possible to secure a second conference,
or delay may give opposition to the main proposal chance to develop more strength.
xxx xxx xxx
Entangled in a network of rule and custom, the Representative who resents and would
resist this theft of his rights, finds himself helpless. Rarely can be vote, rarely can he
voice his mind, in the matter of any fraction of the bill. Usually he cannot even record
himself as protesting against some one feature while accepting the measure as whole.
Worst of all, he cannot by argument or suggested change, try to improve what the other
branch has done.
This means more than the subversion of individual rights. It means to a degree the
abandonment of whatever advantage the bicameral system may have. By so much it
in effect transfers the lawmaking power to small group of members who work out in
private a decision that almost always prevails. What is worse, these men are not
chosen in a way to ensure the wisest choice. It has become the practice to name as
conferees the ranking members of the committee, so that the accident of seniority
determines. Exceptions are made, but in general it is not a question of who are most
competent to serve. Chance governs, sometimes giving way to favor, rarely to merit.
xxx xxx xxx
Speaking broadly, the system of legislating by conference committee is unscientific and
therefore defective. Usually it forfeits the benefit of scrutiny and judgment by all the
wisdom available. Uncontrolled, it is inferior to that process by which every
amendment is secured independent discussion and vote. . . .[15]

It cannot be overemphasized that in a republican form of government, laws can only be enacted by all the
duly elected representatives of the people. It cuts against conventional wisdom in democracy to lodge
this power in the hands of a few or in the claws of a committee. It is for these reasons that the
argument that we should overlook the excesses of the Bicameral Conference Committee because its report
is anyway approved by both houses' is a futile attempt to square the circle for an unconstitutional act is
void and cannot be redeemed by any subsequent ratification.
Neither can we shut our eyes to the unconstitutional acts of the Bicameral Conference Committee by
holding that the Court cannot interpose its checking powers over mere violations of the internal rules of
Congress. In Arroyo, et al. v. de Venecia, et al.,[16] we ruled that when the violations affect private
rights or impair the Constitution, the Court has all the power, nay, the duty to strike them down.
In conclusion, I wish to stress that this is not the first time nor will it be last that arguments will be
foisted for the Court to merely wink at assaults
on the Constitution on the ground of some national interest, sometimes clear and at other times inchoate.
To be sure, it cannot be gainsaid that the country is in the vortex of a financial crisis. The broadsheets
scream the disconcerting news that our debt payments for the year 2006 will exceed Pph1 billion daily for
interest alone. Experts underscore some factors that will further drive up the debt service expenses such as
the devaluation of the peso, credit downgrades and a spike in interest rates.[17] But no doomsday
scenario will ever justify the thrashing of the Constitution. The Constitution is meant to be our rule both
in good times as in bad times. 'It is the Court's uncompromising obligation to defend the Constitution at
all times lest it be condemned as an irrelevant relic.
WHEREFORE, I concur with the majority but dissent on the following points:
a) I vote to withhold judgment on the constitutionality of the 'standby authority in Sections 4 to 6 of
Republic Act No. 9337 as this issue is not ripe for adjudication.;
b) I vote to declare unconstitutional the deletion by the Bicameral Conference Committee of the pro poor
'no pass on provision on electricity to residential consumers as it contravened the unequivocal intent of
both Houses of Congress; and
c) I vote to declare Section 21 of Republic Act No. 9337 as unconstitutional as it contains extraneous
provisions not found in its constituent bills.


REYNATO S. PUNO
Associate Justice
EN BANC
Agenda for October 18, 2005
Item No. 45

G.R. No. 168056 (ABAKADA Guro Party List Officer Samson S. Alcantara, et al. vs. The
Hon. Executive Secretary Eduardo R. Ermita); G.R. No. 168207 (Aquilino Q. Pimentel, Jr., et
al. vs. Executive Secretary Eduardo R. Ermita, et al.); G.R. No. 168461 (Association of Pilipinas
Shell Dealers, Inc., et al. vs. Cesar V. Purisima, et al.); G.R. No. 168463 (Francis Joseph G.
Escudero vs. Cesar V. Purisima, et al); and G.R. No. 168730 (Bataan Governor Enrique T.
Garcia, Jr. vs. Hon. Eduardo R. Ermita, et al.)

RESOLUTION

For resolution are the following motions for reconsideration of the Courts Decision dated
September 1, 2005 upholding the constitutionality of Republic Act No. 9337 or the VAT Reform
Act[1]:

1) Motion for Reconsideration filed by petitioners in G.R. No. 168463, Escudero, et al.,
on the following grounds:

A. THE DELETION OF THE NO PASS ON PROVISIONS FOR THE
SALE OF PETROLEUM PRODUCTS AND POWER GENERATION
SERVICES CONSTITUTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION ON THE PART
OF THE BICAMERAL CONFERENCE COMMITTEE.

B. REPUBLIC ACT NO. 9337 GROSSLY VIOLATES THE
CONSTITUTIONAL IMPERATIVE ON EXCLUSIVE ORIGINATION OF
REVENUE BILLS UNDER 24, ARTICLE VI, 1987 PHILIPPINE
CONSTITUTION.

C. REPUBLIC ACT NO. 9337S STAND-BY AUTHORITY TO THE EXECUTIVE
TO INCREASE THE VAT RATE, ESPECIALLY ON ACCOUNT OF THE
EFFECTIVE RECOMMENDATORY POWER GRANTED TO THE SECRETARY
OF FINANCE, CONSTITUTES UNDUE DELEGATION OF LEGISLATIVE
AUTHORITY.

2) Motion for Reconsideration of petitioner in G.R. No. 168730, Bataan
Governor Enrique T. Garcia, Jr., with the argument that burdening the
consumers with significantly higher prices under a VAT regime vis--
vis a 3% gross tax renders the law unconstitutional for being arbitrary,
oppressive and inequitable.

and

3) Motion for Reconsideration by petitioners Association of Pilipinas
Shell Dealers, Inc. in G.R. No. 168461, on the grounds that:

I. This Honorable Court erred in upholding the constitutionality of Section 110(A)(2)
and Section 110(B) of the NIRC, as amended by the EVAT Law, imposing limitations
on the amount of input VAT that may be claimed as a credit against output VAT, as
well as Section 114(C) of the NIRC, as amended by the EVAT Law, requiring the
government or any of its instrumentalities to withhold a 5% final withholding VAT on
their gross payments on purchases of goods and services, and finding that the
questioned provisions:

A. are not arbitrary, oppressive and consfiscatory as to amount to a
deprivation of property without due process of law in violation of
Article III, Section 1 of the 1987 Philippine Constitution;
B. do not violate the equal protection clause prescribed under Article III,
Section 1 of the 1987 Philippine Constitution; and
C. apply uniformly to all those belonging to the same class and do not
violate Article VI, Section 28(1) of the 1987 Philippine Constitution.

II. This Honorable Court erred in upholding the constitutionality of Section 110(B) of
the NIRC, as amended by the EVAT Law, imposing a limitation on the amount of
input VAT that may be claimed as a credit against output VAT notwithstanding the
finding that the tax is not progressive as exhorted by Article VI, Section 28(1) of the
1987 Philippine Constitution.

Respondents filed their Consolidated Comment. Petitioner Garcia filed his Reply.

Petitioners Escudero, et al., insist that the bicameral conference committee should not even
have acted on the no pass-on provisions since there is no disagreement between House Bill Nos.
3705 and 3555 on the one hand, and Senate Bill No. 1950 on the other, with regard to the no
pass-on provision for the sale of service for power generation because both the Senate and the
House were in agreement that the VAT burden for the sale of such service shall not be passed on
to the end-consumer. As to the no pass-on provision for sale of petroleum products, petitioners
argue that the fact that the presence of such a no pass-on provision in the House version and the
absence thereof in the Senate Bill means there is no conflict because a House provision cannot
be in conflict with something that does not exist.

Such argument is flawed. Note that the rules of both houses of Congress provide that a
conference committee shall settle the differences in the respective bills of each house. Verily,
the fact that a no pass-on provision is present in one version but absent in the other, and one
version intends two industries, i.e., power generation companies and petroleum sellers, to bear
the burden of the tax, while the other version intended only the industry of power generation,
transmission and distribution to be saddled with such burden, clearly shows that there are indeed
differences between the bills coming from each house, which differences should be acted upon
by the bicameral conference committee. It is incorrect to conclude that there is no clash between
two opposing forces with regard to the no pass-on provision for VAT on the sale of petroleum
products merely because such provision exists in the House version while it is absent in the
Senate version. It is precisely the absence of such provision in the Senate bill and the presence
thereof in the House bills that causes the conflict. The absence of the provision in the Senate bill
shows the Senates disagreement to the intention of the House of Representatives make the
sellers of petroleum bear the burden of the VAT. Thus, there are indeed two opposing
forces: on one side, the House of Representatives which wants petroleum dealers to be saddled
with the burden of paying VAT and on the other, the Senate which does not see it proper to make
that particular industry bear said burden. Clearly, such conflicts and differences between the no
pass-on provisions in the Senate and House bills had to be acted upon by the bicameral
conference committee as mandated by the rules of both houses of Congress.

Moreover, the deletion of the no pass-on provision made the present VAT law more in
consonance with the very nature of VAT which, as stated in the Decision promulgated on
September 1, 2005, is a tax on spending or consumption, thus, the burden thereof is ultimately
borne by the end-consumer.

Escudero, et al., then claim that there had been changes introduced in the Rules of the
House of Representatives regarding the conduct of the House panel in a bicameral conference
committee, since the time of Tolentino vs. Secretary of Finance[2] to act as safeguards against
possible abuse of authority by the House members of the bicameral conference committee. Even
assuming that the rule requiring the House panel to report back to the House if there are
substantial differences in the House and Senate bills had indeed been introduced after Tolentino,
the Court stands by its ruling that the issue of whether or not the House panel in the bicameral
conference committee complied with said internal rule cannot be inquired into by the Court. To
reiterate, mere failure to conform to parliamentary usage will not invalidate the action (taken by
a deliberative body) when the requisite number of members have agreed to a particular
measure.[3]

Escudero, et. al., also contend that Republic Act No. 9337 grossly violates the
constitutional imperative on exclusive origination of revenue bills under Section 24 of Article VI
of the Constitution when the Senate introduced amendments not connected with VAT.

The Court is not persuaded.

Article VI, Section 24 of the Constitution provides:

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

Section 24 speaks of origination of certain bills from the House of Representatives which
has been interpreted in the Tolentino case as follows:

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 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.

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.
. . .
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.[4]

Clearly, after the House bills as approved on third reading are duly transmitted to the Senate, the
Constitution states that the latter can propose or concur with amendments. The Court finds that
the subject provisions found in the Senate bill are within the purview of such constitutional
provision as declared in the Tolentino case.

The intent of the House of Representatives in initiating House Bill Nos. 3555 and 3705
was to solve the countrys serious financial problems. It was stated in the respective explanatory
notes that there is a need for the government to make significant expenditure savings and a
credible package of revenue measures. These measures include improvement of tax
administration and control and leakages in revenues from income taxes and value added tax. It is
also stated that one opportunity that could be beneficial to the overall status of our economy is to
review existing tax rates, evaluating the relevance given our present conditions. Thus, with these
purposes in mind and to accomplish these purposes for which the house bills were filed, i.e., to
raise revenues for the government, the Senate introduced amendments on income taxes, which as
admitted by Senator Ralph Recto, would yield about P10.5 billion a year.

Moreover, since the objective of these house bills is to raise revenues, the increase in
corporate income taxes would be a great help and would also soften the impact of VAT measure
on the consumers by distributing the burden across all sectors instead of putting it entirely on the
shoulders of the consumers.

As to the other National Internal Revenue Code (NIRC) provisions found in Senate Bill
No. 1950, i.e., percentage taxes, franchise taxes, amusement and excise taxes, these provisions
are needed so as to cushion the effects of VAT on consumers. As we said in our decision, certain
goods and services which were subject to percentage tax and excise tax would no longer be VAT
exempt, thus, the consumer would be burdened more as they would be paying the VAT in
addition to these taxes. Thus, there is a need to amend these sections to soften the impact of
VAT. The Court finds no reason to reverse the earlier ruling that the Senate introduced
amendments that are germane to the subject matter and purposes of the house bills.

Petitioners Escudero, et al., also reiterate that R.A. No. 9337s stand- by authority to the
Executive to increase the VAT rate, especially on account of the recommendatory power granted
to the Secretary of Finance, constitutes undue delegation of legislative power. They submit that
the recommendatory power given to the Secretary of Finance in regard to the occurrence of
either of two events using the Gross Domestic Product (GDP) as a benchmark necessarily and
inherently required extended analysis and evaluation, as well as policy making.

There is no merit in this contention. The Court reiterates that in making his
recommendation to the President on the existence of either of the two conditions, the Secretary
of Finance is not acting as the alter ego of the President or even her subordinate. He is acting as
the agent of the legislative department, to determine and declare the event upon which its
expressed will is to take effect. The Secretary of Finance becomes the means or tool by which
legislative policy is determined and implemented, considering that he possesses all the facilities
to gather data and information and has a much broader perspective to properly evaluate
them. His function is to gather and collate statistical data and other pertinent information and
verify if any of the two conditions laid out by Congress is present. Congress granted the
Secretary of Finance the authority to ascertain the existence of a fact, namely, whether by
December 31, 2005, the value-added tax collection as a percentage of GDP of the previous year
exceeds two and four-fifth percent (2
4
/
5
%) or the national government deficit as a percentage of
GDP of the previous year exceeds one and one-half percent (1%). If either of these two
instances has occurred, the Secretary of Finance, by legislative mandate, must submit such
information to the President. Then the 12% VAT rate must be imposed by the President effective
January 1, 2006. Congress does not abdicate its functions or unduly delegate power when it
describes what job must be done, who must do it, and what is the scope of his authority; in our
complex economy that is frequently the only way in which the legislative process can go
forward. There is no undue delegation of legislative power but only of the discretion as to the
execution of a law. This is constitutionally permissible. Congress did not delegate the power to
tax but the mere implementation of the law. The intent and will to increase the VAT rate to 12%
came from Congress and the task of the President is to simply execute the legislative
policy. That Congress chose to use the GDP as a benchmark to determine economic growth is
not within the province of the Court to inquire into, its task being to interpret the law.

With regard to petitioner Garcias arguments, the Court also finds the same to be without
merit. As stated in the assailed Decision, the Court recognizes the burden that the consumers
will be bearing with the passage of R.A. No. 9337. But as was also stated by the Court, it cannot
strike down the law as unconstitutional simply because of its yokes. The legislature has spoken
and the only role that the Court plays in the picture is to determine whether the law was passed
with due regard to the mandates of the Constitution. Inasmuch as the Court finds that there are
no constitutional infirmities with its passage, the validity of the law must therefore be upheld.

Finally, petitioners Association of Pilipinas Shell Dealers, Inc. reiterated their arguments
in the petition, citing this time, the dissertation of Associate Justice Dante O. Tinga in his
Dissenting Opinion.

The glitch in petitioners arguments is that it presents figures based on an event that is yet
to happen. Their illustration of the possible effects of the 70% limitation, while seemingly
concrete, still remains theoretical. Theories have no place in this case as the Court must only
deal with an existing case or controversy that is appropriate or ripe for judicial
determination, not one that is conjectural or merely anticipatory.[5] The Court will not
intervene absent an actual and substantial controversy admitting of specific relief through a decree
conclusive in nature, as distinguished from an opinion advising what the law would be upon a
hypothetical state of facts.[6]

The impact of the 70% limitation on the creditable input tax will ultimately depend on
how one manages and operates its business. Market forces, strategy and acumen will dictate
their moves. With or without these VAT provisions, an entrepreneur who does not have the ken
to adapt to economic variables will surely perish in the competition. The arguments posed are
within the realm of business, and the solution lies also in business.

Petitioners also reiterate their argument that the input tax is a property or a property
right. In the same breath, the Court reiterates its finding that it is not a property or a property
right, and a VAT-registered persons entitlement to the creditable input tax is a mere statutory
privilege.

Petitioners also contend that even if the right to credit the input VAT is merely a statutory
privilege, it has already evolved into a vested right that the State cannot remove.

As the Court stated in its Decision, the right to credit the input tax is a mere creation of
law. Prior to the enactment of multi-stage sales taxation, the sales taxes paid at every level of
distribution are not recoverable from the taxes payable. With the advent of Executive Order No.
273 imposing a 10% multi-stage tax on all sales, it was only then that the crediting of the input
tax paid on purchase or importation of goods and services by VAT-registered persons against the
output tax was established. This continued with the Expanded VAT Law (R.A. No. 7716), and
The Tax Reform Act of 1997 (R.A. No. 8424). The right to credit input tax as against the output
tax is clearly a privilege created by law, a privilege that also the law can limit. It should be
stressed that a person has no vested right in statutory privileges.[7]

The concept of vested right is a consequence of the constitutional guaranty of due
process that expresses a present fixed interest which in right reason and natural justice is
protected against arbitrary state action; it includes not only legal or equitable title to the
enforcement of a demand but also exemptions from new obligations created after the right has
become vested. Rights are considered vested when the right to enjoyment is a present interest,
absolute, unconditional, and perfect or fixed and irrefutable.[8] As adeptly stated by Associate
Justice Minita V. Chico-Nazario in her Concurring Opinion, which the Court adopts, petitioners
right to the input VAT credits has not yet vested, thus

It should be remembered that prior to Rep. Act No. 9337, the petroleum
dealers input VAT credits were inexistent they were unrecognized and
disallowed by law. The petroleum dealers had no such property called input VAT
credits. It is only rational, therefore, that they cannot acquire vested rights to the
use of such input VAT credits when they were never entitled to such credits in the
first place, at least, not until Rep. Act No. 9337.

My view, at this point, when Rep. Act No. 9337 has not yet even been
implemented, is that petroleum dealers right to use their input VAT as credit
against their output VAT unlimitedly has not vested, being a mere expectancy of a
future benefit and being contingent on the continuance of Section 110 of the
National Internal Revenue Code of 1997, prior to its amendment by Rep. Act No.
9337.

The elucidation of Associate Justice Artemio V. Panganiban is likewise worthy of note,
to wit:

Moreover, there is no vested right in generally accepted accounting principles. These
refer to accounting concepts, measurement techniques, and standards of presentation in a
companys financial statements, and are not rooted in laws of nature, as are the laws of physical
science, for these are merely developed and continually modified by local and international
regulatory accounting bodies. To state otherwise and recognize such asset account as a vested
right is to limit the taxing power of the State. Unlimited, plenary, comprehensive and supreme,
this power cannot be unduly restricted by mere creations of the State.

More importantly, the assailed provisions of R.A. No. 9337 already involve legislative
policy and wisdom. So long as there is a public end for which R.A. No. 9337 was passed, the
means through which such end shall be accomplished is for the legislature to choose so long as it
is within constitutional bounds. As stated in Carmichael vs. Southern Coal & Coke Co.:

If the question were ours to decide, we could not say that the legislature, in adopting the
present scheme rather than another, had no basis for its choice, or was arbitrary or unreasonable
in its action. But, as the state is free to distribute the burden of a tax without regard to the
particular purpose for which it is to be used, there is no warrant in the Constitution for setting the
tax aside because a court thinks that it could have distributed the burden more wisely. Those are
functions reserved for the legislature.[9]

WHEREFORE, the Motions for Reconsideration are hereby DENIED WITH
FINALITY. The temporary restraining order issued by the Court is LIFTED.


SO ORDERED.

(The Justices who filed their respective concurring and dissenting opinions maintain their
respective positions. Justice Dante O. Tinga filed a dissenting opinion to the present Resolution;
while Justice Consuelo Ynares- Santiago joins him in his dissenting opinion.)