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Republic of the Philippines

SUPREME COURT
Manila
EN BANC
Agenda for October 18, 2005
Item o! "5

G.R. No. 168056 (ABAKADA Guro Party Lit O!!i"#r Sa$o% S. A&"a%tara' #t a&. (.
T)# *o%. E+#"uti(# S#"r#tary E,uar,o R. Er$ita-. G.R. No. 168/00 (A1ui&i%o 2.
Pi$#%t#&' 3r.' #t a&. (. E+#"uti(# S#"r#tary E,uar,o R. Er$ita' #t a&.-. G.R. No.
168461 (Ao"iatio% o! Pi&i5i%a S)#&& D#a&#r' 6%".' #t a&. (. C#ar 7. Purii$a' #t
a&.-. G.R. No. 168468 (9ra%"i 3o#5) G. E"u,#ro (. C#ar 7. Purii$a' #t a&-. :a%,
G.R. No. 168080 (Bataa% Go(#r%or E%ri1u# T. Gar"ia' 3r. (. *o%. E,uar,o R.
Er$ita' #t a&.-

RESOLUT6ON

#or resolution are the follo$ing motions for reconsideration of the %ourt&s 'ecision dated
(eptember 1, 2005 upholding the constitutionalit) of Republic Act o! *++, or the -A.
Reform Act/101

12 Motion for Reconsideration filed b) petitioners in 3!R! o! 148"4+, 5scudero, et al!,
on the follo$ing grounds1

A! .65 '575.IO O# .65 &O PA(( O PRO-I(IO(& #OR .65 (A75 O#
P5.RO758M PRO'8%.( A' PO95R 355RA.IO (5R-I%5( %O(.I.8.5'
3RA-5 A:8(5 O# 'I(%R5.IO AMO8.I3 .O 7A%; OR 5<%5(( O#
=8RI('I%.IO O .65 PAR. O# .65 :I%AM5RA7 %O#5R5%5 %OMMI..55!

:! R5P8:7I% A%. O! *++, 3RO((7> -IO7A.5( .65 %O(.I.8.IOA7
IMP5RA.I-5 O 5<%78(I-5 ORI3IA.IO O# R5-585 :I77( 8'5R &2",
AR.I%75 -I, 1*8, P6I7IPPI5 %O(.I.8.IO!

%! R5P8:7I% A%. O! *++,&( (.A'?:> A8.6ORI.> .O .65 5<5%8.I-5 .O
I%R5A(5 .65 -A. RA.5, 5(P5%IA77> O A%%O8. O# .65 5##5%.I-5
R5%OMM5'A.OR> PO95R 3RA.5' .O .65 (5%R5.AR> O# #IA%5,
%O(.I.8.5( 8'85 '5753A.IO O# 753I(7A.I-5 A8.6ORI.>!

22 Motion for Reconsideration of petitioner in 3!R! o! 148,+0, :ataan 3o@ernor
5nriAue .! 3arcia, =r!, $ith the argument that burdening the consumers $ith
significantl) higher prices under a -A. regime @is??@is a +B gross taC renders the
la$ unconstitutional for being arbitrar), oppressi@e and ineAuitable!

and

+2 Motion for Reconsideration b) petitioners Association of Pilipinas (hell 'ealers, Inc!
in 3!R! o! 148"41, on the grounds that1

I! .his 6onorable %ourt erred in upholding the constitutionalit) of (ection
110DA2D22 and (ection 110D:2 of the IR%, as amended b) the 5-A. 7a$,
imposing limitations on the amount of input -A. that ma) be claimed as a
credit against output -A., as $ell as (ection 11"D%2 of the IR%, as amended
b) the 5-A. 7a$, reAuiring the go@ernment or an) of its instrumentalities to
$ithhold a 5B final $ithholding -A. on their gross pa)ments on purchases of
goods and ser@ices, and finding that the Auestioned pro@isions1

A! are not arbitrar), oppressi@e and consfiscator) as to amount to a
depri@ation of propert) $ithout due process of la$ in @iolation of Article
III, (ection 1 of the 1*8, Philippine %onstitutionE
:! do not @iolate the eAual protection clause prescribed under Article III,
(ection 1 of the 1*8, Philippine %onstitutionE and
%! appl) uniforml) to all those belonging to the same class and do not @iolate
Article -I, (ection 28D12 of the 1*8, Philippine %onstitution!

II! .his 6onorable %ourt erred in upholding the constitutionalit) of (ection
110D:2 of the IR%, as amended b) the 5-A. 7a$, imposing a limitation on
the amount of input -A. that ma) be claimed as a credit against output -A.
not$ithstanding the finding that the taC is not progressi@e as eChorted b)
Article -I, (ection 28D12 of the 1*8, Philippine %onstitution!

Respondents filed their %onsolidated %omment! Petitioner 3arcia filed his Repl)!

Petitioners 5scudero, et al., insist that the bicameral conference committee should not e@en
ha@e acted on the no pass-on pro@isions since there is no disagreement bet$een 6ouse :ill
os! +,05 and +555 on the one hand, and (enate :ill o! 1*50 on the other, $ith regard to
the no pass-on pro@ision for the sale of ser@ice for po$er generation because both the
(enate and the 6ouse $ere in agreement that the -A. burden for the sale of such ser@ice
shall not be passed on to the end?consumer! As to the no pass-on pro@ision for sale of
petroleum products, petitioners argue that the fact that the presence of such a no pass-
on pro@ision in the 6ouse @ersion and the absence thereof in the (enate :ill means there is
no conflict because &a 6ouse pro@ision cannot be in conflict $ith something that does not
eCist!

(uch argument is fla$ed! ote that the rules of both houses of %ongress pro@ide that a
conference committee shall settle the &differences& in the respecti@e bills of each house!
-eril), the fact that a no pass-on pro@ision is present in one @ersion but absent in the other,
and one @ersion intends t$o industries, i.e!, po$er generation companies and petroleum
sellers, to bear the burden of the taC, $hile the other @ersion intended onl) the industr) of
po$er generation, transmission and distribution to be saddled $ith such burden, clearl)
sho$s that there are indeed differences bet$een the bills coming from each house, $hich
differences should be acted upon b) the bicameral conference committee! It is incorrect to
conclude that there is no clash bet$een t$o opposing forces $ith regard to the no pass-
on pro@ision for -A. on the sale of petroleum products merel) because such pro@ision eCists
in the 6ouse @ersion $hile it is absent in the (enate @ersion! It is precisel) the absence of
such pro@ision in the (enate bill and the presence thereof in the 6ouse bills that causes the
conflict! .he absence of the pro@ision in the (enate bill sho$s the (enate&s disagreement to
the intention of the 6ouse of Representati@es maFe the sellers of petroleum bear the burden
of the -A.! .hus, there are indeed t$o opposing forces1 on one side, the 6ouse of
Representati@es $hich $ants petroleum dealers to be saddled $ith the burden of pa)ing -A.
and on the other, the (enate $hich does not see it proper to maFe that particular industr)
bear said burden! %learl), such conflicts and differences bet$een the no pass-on pro@isions
in the (enate and 6ouse bills had to be acted upon b) the bicameral conference committee
as mandated b) the rules of both houses of %ongress!

Moreo@er, the deletion of the no pass-on pro@ision made the present -A. la$ more in
consonance $ith the @er) nature of -A. $hich, as stated in the 'ecision promulgated on
(eptember 1, 2005, is a taC on spending or consumption, thus, the burden thereof is
ultimatel) borne b) the end?consumer!

5scudero, et al., then claim that there had been changes introduced in the Rules of the
6ouse of Representati@es regarding the conduct of the 6ouse panel in a bicameral
conference committee, since the time of Tolentino vs. Secretary of Finance/20 to act as
safeguards against possible abuse of authorit) b) the 6ouse members of the bicameral
conference committee! 5@en assuming that the rule reAuiring the 6ouse panel to report bacF
to the 6ouse if there are substantial differences in the 6ouse and (enate bills had indeed
been introduced after Tolentino, the %ourt stands b) its ruling that the issue of $hether or
not the 6ouse panel in the bicameral conference committee complied $ith said internal rule
cannot be inAuired into b) the %ourt! .o reiterate, &mere failure to conform to parliamentar)
usage $ill not in@alidate the action DtaFen b) a deliberati@e bod)2 $hen the reAuisite number
of members ha@e agreed to a particular measure!/+0

5scudero, et. al., also contend that Republic Act o! *++, grossl) @iolates the constitutional
imperati@e on eCclusi@e origination of re@enue bills under (ection 2" of Article -I of the
%onstitution $hen the (enate introduced amendments not connected $ith -A.!

.he %ourt is not persuaded!

Article -I, (ection 2" of the %onstitution pro@ides1

(ec! 2" All appropriation, re@enue or tariff bills, bills authoriGing increase
of the public debt, bills of local application, and pri@ate bills shall
originate eCclusi@el) in the 6ouse of Representati@es, but the (enate ma)
propose or concur $ith amendments!
(ection 2" speaFs of origination of certain bills from the 6ouse of Representati@es $hich has
been interpreted in theTolentino case as follo$s1

.o begin $ith, it is not the la$ & but the re@enue bill & $hich is reAuired b) the
%onstitution to Horiginate eCclusi@el)H in the 6ouse of Representati@es! It is
important to emphasiGe this, because a bill originating in the 6ouse ma)
undergo such eCtensi@e changes in the (enate that the result ma) be a
re$riting of the $hole At this point, $hat is important to note is that, as a result
of the (enate action, a distinct bill ma) be produced! .o insist that a re@enue
statute & and not onl) the bill $hich initiated the legislati@e process culminating
in the enactment of the la$ & must substantiall) be the same as the 6ouse bill
$ould be to den) the (enate&s po$er not onl) to Hconcur $ith amendmentsH but
also to H propose amendments!H It $ould be to @iolate the coeAualit) of
legislati@e po$er of the t$o houses of %ongress and in fact maFe the 6ouse
superior to the (enate!

3i@en, then, the po$er of the (enate to propose amendments, the (enate can
propose its o$n @ersion e@en $ith respect to bills $hich are reAuired b) the
%onstitution to originate in the 6ouse!
! ! !
Indeed, $hat the %onstitution simpl) means is that the initiati@e for filing
re@enue, tariff, or taC bills, bills authoriGing an increase of the public debt,
pri@ate bills and bills of local application must come from the 6ouse of
Representati@es on the theor) that, elected as the) are from the districts, the
members of the 6ouse can be eCpected to be more sensiti@e to the local needs
and problems! On the other hand, the senators, $ho are elected at large, are
eCpected to approach the same problems from the national perspecti@e! :oth
@ie$s are thereb) made to bear on the enactment of such la$s./"0

%learl), after the 6ouse bills as appro@ed on third reading are dul) transmitted to the
(enate, the %onstitution states that the latter can propose or concur $ith amendments! .he
%ourt finds that the subIect pro@isions found in the (enate bill are $ithin the pur@ie$ of such
constitutional pro@ision as declared in the Tolentino case!

.he intent of the 6ouse of Representati@es in initiating 6ouse :ill os! +555 and +,05 $as to
sol@e the countr)&s serious financial problems! It $as stated in the respecti@e eCplanator)
notes that there is a need for the go@ernment to maFe significant eCpenditure sa@ings and a
credible pacFage of re@enue measures! .hese measures include impro@ement of taC
administration and control and leaFages in re@enues from income taCes and @alue added taC!
It is also stated that one opportunit) that could be beneficial to the o@erall status of our
econom) is to re@ie$ eCisting taC rates, e@aluating the rele@ance gi@en our present
conditions! .hus, $ith these purposes in mind and to accomplish these purposes for $hich
the house bills $ere filed, i.e!, to raise re@enues for the go@ernment, the (enate introduced
amendments on income taCes, $hich as admitted b) (enator Ralph Recto, $ould )ield
about P10!5 billion a )ear!

Moreo@er, since the obIecti@e of these house bills is to raise re@enues, the increase in
corporate income taCes $ould be a great help and $ould also soften the impact of -A.
measure on the consumers b) distributing the burden across all sectors instead of putting it
entirel) on the shoulders of the consumers!

As to the other ational Internal Re@enue %ode DIR%2 pro@isions found in (enate :ill o!
1*50, i.e!, percentage taCes, franchise taCes, amusement and eCcise taCes, these pro@isions
are needed so as to cushion the effects of -A. on consumers! As $e said in our decision,
certain goods and ser@ices $hich $ere subIect to percentage taC and eCcise taC $ould no
longer be -A. eCempt, thus, the consumer $ould be burdened more as the) $ould be pa)ing
the -A. in addition to these taCes! .hus, there is a need to amend these sections to soften
the impact of -A.! .he %ourt finds no reason to re@erse the earlier ruling that the (enate
introduced amendments that are germane to the subIect matter and purposes of the house
bills!

Petitioners 5scudero, et al., also reiterate that R!A! o! *++,&s stand? b) authorit) to the
5Cecuti@e to increase the -A. rate, especiall) on account of the recommendator) po$er
granted to the (ecretar) of #inance, constitutes undue delegation of legislati@e po$er! .he)
submit that the recommendator) po$er gi@en to the (ecretar) of #inance in regard to the
occurrence of either of t$o e@ents using the 3ross 'omestic Product D3'P2 as a benchmarF
necessaril) and inherentl) reAuired eCtended anal)sis and e@aluation, as $ell as polic)
maFing!

.here is no merit in this contention! .he %ourt reiterates that in maFing his recommendation
to the President on the eCistence of either of the t$o conditions, the (ecretar) of #inance is
not acting as the alter ego of the President or e@en her subordinate! 6e is acting as the
agent of the legislati@e department, to determine and declare the e@ent upon $hich its
eCpressed $ill is to taFe effect! .he (ecretar) of #inance becomes the means or tool b)
$hich legislati@e polic) is determined and implemented, considering that he possesses all the
facilities to gather data and information and has a much broader perspecti@e to properl)
e@aluate them! 6is function is to gather and collate statistical data and other pertinent
information and @erif) if an) of the t$o conditions laid out b) %ongress is present!
Co%;r# ;ra%t#, t)# S#"r#tary o! 9i%a%"# t)# aut)ority to
a"#rtai% t)# #+it#%"# o! a !a"t' %a$#&y' <)#t)#r =y D#"#$=#r
81' /005' t)# (a&u#>a,,#, ta+ "o&&#"tio% a a 5#r"#%ta;# o! GDP
o! t)# 5r#(iou y#ar #+"##, t<o a%, !our>!i!t) 5#r"#%t (/
4
?
5
@-
or t)# %atio%a& ;o(#r%$#%t ,#!i"it a a 5#r"#%ta;# o! GDP o! t)#
5r#(iou y#ar #+"##, o%# a%, o%#>)a&! 5#r"#%t (1@-. 6! #it)#r
o! t)## t<o i%ta%"# )a o""urr#,' t)# S#"r#tary o! 9i%a%"#' =y
&#;i&ati(# $a%,at#' $ut u=$it u") i%!or$atio% to t)#
Pr#i,#%t. T)#% t)# 1/@ 7AT rat# $ut =# i$5o#, =y t)#
Pr#i,#%t #!!#"ti(# 3a%uary 1' /006. %ongress does not abdicate its functions
or undul) delegate po$er $hen it describes $hat Iob must be done, $ho must do it, and
$hat is the scope of his authorit)E in our compleC econom) that is freAuentl) the onl) $a) in
$hich the legislati@e process can go for$ard! .here is no undue delegation of legislati@e
po$er but onl) of the discretion as to the eCecution of a la$! .his is constitutionall)
permissible! Co%;r# ,i, %ot ,#&#;at# t)# 5o<#r to ta+ =ut t)# $#r#
i$5&#$#%tatio% o! t)# &a<. T)# i%t#%t a%, <i&& to i%"r#a#
t)# 7AT rat# to 1/@ "a$# !ro$ Co%;r# a%, t)# taA o! t)#
Pr#i,#%t i to i$5&y #+#"ut# t)# &#;i&ati(# 5o&i"y. .hat %ongress
chose to use the 3'P as a benchmarF to determine economic gro$th is not $ithin the
pro@ince of the %ourt to inAuire into, its tasF being to interpret the la$!

9ith regard to petitioner 3arcia&s arguments, the %ourt also finds the same to be $ithout
merit! As stated in the assailed 'ecision, the %ourt recogniGes the burden that the
consumers $ill be bearing $ith the passage of R!A! o! *++,! :ut as $as also stated b) the
%ourt, it cannot striFe do$n the la$ as unconstitutional simpl) because of its )oFes! .he
legislature has spoFen and the onl) role that the %ourt pla)s in the picture is to determine
$hether the la$ $as passed $ith due regard to the mandates of the %onstitution! Inasmuch
as the %ourt finds that there are no constitutional infirmities $ith its passage, the @alidit) of
the la$ must therefore be upheld!

#inall), petitioners Association of Pilipinas (hell 'ealers, Inc! reiterated their arguments in
the petition, citing this time, the dissertation of Associate =ustice 'ante O! .inga in his
'issenting Opinion!

.he glitch in petitioners& arguments is that it presents figures based on an e@ent that is )et
to happen! .heir illustration of the possible effects of the ,0B limitation, $hile seemingl)
concrete, still remains theoretical! .heories ha@e no place in this case as t)# Court $ut
o%&y ,#a& <it) a% #+iti%; "a# or "o%tro(#ry t)at i a55ro5riat# or ri5# !or
Bu,i"ia& ,#t#r$i%atio%' %ot o%# t)at i "o%B#"tura& or $#r#&y a%ti"i5atory!/50 .he
%ourt $ill not inter@ene absent an actual and substantial contro@ers) admitting of specific
relief through a decree conclusi@e in nature, as distinguished from an opinion ad@ising $hat
the la$ $ould be upon a h)pothetical state of facts!/40

.he impact of the ,0B limitation on the creditable input taC $ill ultimatel) depend on ho$
one manages and operates its business! MarFet forces, strateg) and acumen $ill dictate
their mo@es! 9ith or $ithout these -A. pro@isions, an entrepreneur $ho does not ha@e the
Fen to adapt to economic @ariables $ill surel) perish in the competition! .he arguments
posed are $ithin the realm of business, and the solution lies also in business!

Petitioners also reiterate their argument that the input taC is a propert) or a propert) right!
In the same breath, the %ourt reiterates its finding that it is not a propert) or a propert)
right, and a -A.?registered person&s entitlement to the creditable input taC is a mere
statutor) pri@ilege!

Petitioners also contend that e@en if the right to credit the input -A. is merel) a statutor)
pri@ilege, it has alread) e@ol@ed into a @ested right that the (tate cannot remo@e!

As the %ourt stated in its 'ecision, the right to credit the input taC is a mere creation of la$!
Prior to the enactment of multi?stage sales taCation, the sales taCes paid at e@er) le@el of
distribution are not reco@erable from the taCes pa)able! 9ith the ad@ent of 5Cecuti@e Order
o! 2,+ imposing a 10B multi?stage taC on all sales, it $as onl) then that the crediting of
the input taC paid on purchase or importation of goods and ser@ices b) -A.?registered
persons against the output taC $as established! .his continued $ith the 5Cpanded -A. 7a$
DR!A! o! ,,142, and .he .aC Reform Act of 1**, DR!A! o! 8"2"2! .he right to credit input
taC as against the output taC is clearl) a pri@ilege created b) la$, a pri@ilege that also the
la$ can limit! It should be stressed that a person has no @ested right in statutor) pri@ileges!
/,0

.he concept of @ested right is a conseAuence of the constitutional guarant) of due process
that eCpresses a present fiCed interest $hich in right reason and natural Iustice is protected
against arbitrar) state actionE it includes not onl) legal or eAuitable title to the enforcement
of a demand but also eCemptions from ne$ obligations created after the right has become
@ested! Rights are considered @ested $hen the right to enIo)ment is a present interest,
absolute, unconditional, and perfect or fiCed and irrefutable!/80 As adeptl) stated b)
Associate =ustice Minita -! %hico?aGario in her %oncurring Opinion, $hich the %ourt adopts,
petitioners& right to the input -A. credits has not )et @ested, thus &

It should be remembered that prior to Rep! Act o! *++,, the petroleum
dealers& input -A. credits $ere ineCistent & the) $ere unrecogniGed and
disallo$ed b) la$! .he petroleum dealers had no such propert) called input
-A. credits! It is onl) rational, therefore, that the) cannot acAuire @ested rights
to the use of such input -A. credits $hen the) $ere ne@er entitled to such
credits in the first place, at least, not until Rep! Act o! *++,!

M) @ie$, at this point, $hen Rep! Act o! *++, has not )et e@en been
implemented, is that petroleum dealers& right to use their input -A. as credit
against their output -A. unlimitedl) has not @ested, being a mere eCpectanc) of
a future benefit and being contingent on the continuance of (ection 110 of the
ational Internal Re@enue %ode of 1**,, prior to its amendment b) Rep! Act
o! *++,!

.he elucidation of Associate =ustice Artemio -! Panganiban is liFe$ise $orth) of note, to $it1

Moreo@er, there is no @ested right in generall) accepted accounting principles!
.hese refer to accounting concepts, measurement techniAues, and standards of
presentation in a compan)&s financial statements, and are not rooted in la$s of
nature, as are the la$s of ph)sical science, for these are merel) de@eloped and
continuall) modified b) local and international regulator) accounting bodies! .o
state other$ise and recogniGe such asset account as a @ested right is to limit
the taCing po$er of the (tate! 8nlimited, plenar), comprehensi@e and
supreme, this po$er cannot be undul) restricted b) mere creations of the
(tate!

More importantl), the assailed pro@isions of R!A! o! *++, alread) in@ol@e legislati@e polic)
and $isdom! (o long as there is a public end for $hich R!A! o! *++, $as passed, the means
through $hich such end shall be accomplished is for the legislature to choose so long as it is
$ithin constitutional bounds! As stated in Carmichael vs. Southern Coal & Coke Co.1

If the Auestion $ere ours to decide, $e could not sa) that the legislature, in
adopting the present scheme rather than another, had no basis for its choice, or
$as arbitrar) or unreasonable in its action! :ut, as the state is free to distribute
the burden of a taC $ithout regard to the particular purpose for $hich it is to be
used, there is no $arrant in the %onstitution for setting the taC aside because a
court thinFs that it could ha@e distributed the burden more $isel)! .hose are
functions reser@ed for the legislature!/*0

965R5#OR5, the Motions for Reconsideration are hereb) DEN6ED C6T* 96NAL6TD! .he
temporar) restraining order issued b) the %ourt is L69TED!


(O OR'5R5'!
D.he =ustices $ho filed their respecti@e concurring and dissenting opinions maintain their
respecti@e positions! =ustice 'ante O! .inga filed a dissenting opinion to the present
ResolutionE $hile =ustice %onsuelo >nares? (antiago Ioins him in his dissenting opinion!2

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