Abakada Guro v. Exec. Sec

7/31/2019 Abakada Guro v. Exec. Sec.

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EN BANC

ABAKADA GURO PARTY LIST(Formerly AASJAS) OFFICERSSAMSON S. ALCANTARA and EDVINCENT S. ALBANO,

G.R. No. 168056

Petitioners, Present:DAVIDE, JR., C.J.,

PUNO, PANGANIBAN, QUISUMBING,

YNARES-SANTIAGO,

SANDOVAL-GUTIERREZ,

- versus - CARPIO, AUSTRIA-MARTINEZ,

CORONA,CARPIO-MORALES,

CALLEJO, SR.,AZCUNA,

TINGA,CHICO-NAZARIO, and

GARCIA,JJ.THE HONORABLE EXECUTIVESECRETARY EDUARDO ERMITA;

HONORABLE SECRETARY OFTHE DEPARTMENT OF FINANCECESAR PURISIMA; andHONORABLE COMMISSIONEROF INTERNAL REVENUEGUILLERMO PARAYNO, JR.,

Respondents.


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x - - - - - - - - - - - - - - - - - - - - - - - - - x

AQUILINO Q. PIMENTEL, JR.,LUISA P. EJERCITO-ESTRADA,JINGGOY E. ESTRADA, PANFILOM. LACSON, ALFREDO S. LIM,JAMBY A.S. MADRIGAL, ANDSERGIO R. OSMEA III,

G.R. No. 168207

Petitioners,

- versus -

EXECUTIVE SECRETARY

EDUARDO R. ERMITA, CESAR V.PURISIMA, SECRETARY OFFINANCE, GUILLERMO L.PARAYNO, JR., COMMISSIONEROF THE BUREAU OF INTERNALREVENUE,

Respondents.

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ASSOCIATION OF PILIPINASSHELL DEALERS, INC. representedby its President, ROSARIOANTONIO; PETRON DEALERSASSOCIATION represented by itsPresident, RUTH E. BARBIBI;ASSOCIATION OF CALTEXDEALERS OF THE PHILIPPINESrepresented by its President,

MERCEDITAS A. GARCIA;ROSARIO ANTONIO doing businessunder the name and style of ANBNORTH SHELL SERVICESTATION; LOURDES MARTINEZdoing business under the name andstyle of SHELL GATE N.

G.R. No. 168461


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DOMINGO; BETHZAIDA TANdoing business under the name andstyle of ADVANCE SHELLSTATION; REYNALDO P.MONTOYA doing business under thename and style of NEW LAMUANSHELL SERVICE STATION;EFREN SOTTO doing businessunder the name and style of REDFIELD SHELL SERVICESTATION; DONICACORPORATION represented by itsPresident, DESI TOMACRUZ;RUTH E. MARBIBI doing business

under the name and style of R&RPETRON STATION; PETER M.UNGSON doing business under thename and style of CLASSIC STARGASOLINE SERVICE STATION;MARIAN SHEILA A. LEE doingbusiness under the name and style ofNTE GASOLINE & SERVICESTATION; JULIAN CESAR P.POSADAS doing business under thename and style of STARCARGAENTERPRISES; ADORACIONMAEBO doing business under thename and style of CMAMOTORISTS CENTER; SUSAN M.ENTRATA doing business under thename and style of LEONASGASOLINE STATION andSERVICE CENTER; CARMELITA

BALDONADO doing business underthe name and style of FIRSTCHOICE SERVICE CENTER;MERCEDITAS A. GARCIA doingbusiness under the name and style ofLORPED SERVICE CENTER;RHEAMAR A. RAMOS doing


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business under the name and style ofRJRAM PTT GAS STATION;MA. ISABEL VIOLAGO doingbusiness under the name and style ofVIOLAGO-PTT SERVICECENTER; MOTORISTS HEARTCORPORATION represented by itsVice-President for Operations,JOSELITO F. FLORDELIZA;MOTORISTS HARVARDCORPORATION represented by itsVice-President for Operations,JOSELITO F. FLORDELIZA;MOTORISTS HERITAGE

CORPORATION represented by itsVice-President for Operations,JOSELITO F. FLORDELIZA;PHILIPPINE STANDARD OILCORPORATION represented by itsVice-President for Operations,JOSELITO F. FLORDELIZA;ROMEO MANUEL doing businessunder the name and style of ROMMAN GASOLINESTATION; ANTHONY ALBERTCRUZ III doing business under thename and style of TRUE SERVICESTATION,

Petitioners,

- versus -

CESAR V. PURISIMA, in his

capacity as Secretary of theDepartment of Finance andGUILLERMO L. PARAYNO, JR., inhis capacity as Commissioner ofInternal Revenue,

Respondents.


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x - - - - - - - - - - - - - - - - - - - - - - - - - x

FRANCIS JOSEPH G. ESCUDERO,VINCENT CRISOLOGO,EMMANUEL JOEL J.VILLANUEVA, RODOLFO G.PLAZA, DARLENE ANTONINO-CUSTODIO, OSCAR G.MALAPITAN, BENJAMIN C.AGARAO, JR. JUAN EDGARDO M.ANGARA, JUSTIN MARC SB.CHIPECO, FLORENCIO G. NOEL,MUJIV S. HATAMAN, RENATO B.MAGTUBO, JOSEPH A.

SANTIAGO, TEOFISTO DL.GUINGONA III, RUY ELIAS C.LOPEZ, RODOLFO Q. AGBAYANIand TEODORO A. CASIO,

G.R. No. 168463

Petitioners,

- versus -

CESAR V. PURISIMA, in hiscapacity as Secretary of Finance,GUILLERMO L. PARAYNO, JR., inhis capacity as Commissioner ofInternal Revenue, and EDUARDO R.ERMITA, in his capacity as ExecutiveSecretary,

Respondents.

x - - - - - - - - - - - - - - - - - - - - - - - - - x

BATAAN GOVERNOR ENRIQUET. GARCIA, JR.

G.R. No. 168730

Petitioner,


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- versus -

HON. EDUARDO R. ERMITA, in hiscapacity as the Executive Secretary;HON. MARGARITO TEVES, in hiscapacity as Secretary of Finance;HON. JOSE MARIO BUNAG, in hiscapacity as the OIC Commissioner ofthe Bureau of Internal Revenue; andHON. ALEXANDER AREVALO, inhis capacity as the OIC Commissionerof the Bureau of Customs,

Promulgated:

Respondents. September 1, 2005

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R E S O L U T I O N

AUSTRIA-MARTINEZ,J.:


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In view of the Courts Resolution dated July 12, 2005, which required

Former Finance Secretary Cesar V. Purisima to show cause why he should not be

held in contempt of court for conduct which puts the Court and its Members into

dishonor, disrepute and discredit, and degrades the administration of justice,

Purisima filed his Compliance thereto, stating that:

It is not true that I claimed or even insinuated that this Honorable

Court was pressured or influenced by President Gloria Macapagal

Arroyo or Malacaang Palace to issue a Temporary RestrainingOrder (TRO) in the instant cases. What I stated was simply that

President Arroyo had on several occasions discussed with the

economic team the possibility of postponing the implementation ofRepublic Act No. 9337. While I believe that President Arroyo

wanted to postpone the implementation of the said law, I neverclaimed or insinuated that this Honorable Court was influenced orpressured to issue the TRO against its implementation.

I do not deny that I was extremely disappointed when this

Honorable Court issued the TRO, which was a serious setback to

our fiscal consolidation program. And my disappointment grewwhen I felt that the Government specifically the Executive branch,

was not doing enough to have the TRO lifted. At the height of mydisappointment, and after hearing of rumors that Executive officialsmay have been instrumental in procuring the TRO, I did enquire

from the other cabinet officials whether Malacaang had a hand in

the issuance of the order. I felt that it was my right and duty as

Finance Secretary to make such an inquiry, given that before theissuance of the TRO, the President had inquired about the possibility

of deferring the implementation of Republic Act No. 9337. But

surely, my inquiries whether Malacaang did so, did not amount to,as it was not intended to have the effect of, claiming outright or

necessarily insinuating that Malacaang did so, or to hold, in any

manner, this Honorable Court in contempt.[1]
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Purisima cites the July 11, 2005 edition of the Philippine Starand the July

10, 2005 edition of the Philippine Daily Inquirer, which reported that

Purisima did not directly accuse the President of influencing the Court in issuing

the TRO, and that he would neither confirm nor deny the reports that the President

had a hand in its issuance.

The Court finds Purisimas explanation unsatisfactory.

The Court reproduces excerpts from some of the reports contained in the

newspapers with regard to Purisimas statements, to wit:

(1) July 10, 2005, The Philippine Star, Opinion Section (Its the

Economy, Stupid!)

The present political crisis will inevitably boil down to the economy as thereal issue that will ultimately bring down the Arroyo Administration. What we are

hearing from people close to the Palace is that the TRO issued by the Supreme

Court on the EVAT is the real reason why 10 Cabinet members, specially Cesar

Purisima and Johnny Santos, resigned. Cesar Purisima further pointed out that her

decision-making process has adversely affected the economy. The frustrated

economic team felt that GMA had actually influenced the Supreme Court to issue


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the TRO to postpone the bad effects of the EVAT on prices purely for her political

survival. If indeed that is true, then it just confirms that our present political

system has really gone from bad to worse. What I found disgusting is that the

plotters, especially Cesar Purisima, sounded like Judas Iscariot. They could just

have simply resigned without making a spectacle out of it.

(2) July 10, 2005, The Daily Tribune (SC Denies Palace Pressed

Issuance of E-VAT TRO)

Reports had claimed that the former economic team of Mrs. Arroyo decided

to resign over the weekend due in part to the administrations lobbying the SC to

issue a restraining order on the e-VAT, apparently to prevent the public fromfurther seething against the government over the continuous spiraling of the prices

of basic goods and services.

Finance officials led by Purisima previously expressed dismay over the

suspension of the e-VAT as they claimed that the TRO would cost the government

at least P140 million a day in unrealized revenues.

Purisima hinted that Mrs. Arroyo had a hand in the SCs TRO to save herpresidency.

(3) July 11, 2005, Manila Standard Today (Palace Debunks

Purisima Claim on EVAT)

Malacaang yesterday branded as ridiculous the insinuations that

President Gloria Macapagal Arroyo had a hand in the Supreme Courts July 1

order suspending the implementation of the Expanded Value-Added Tax Law.

At the same time, Justice Secretary Raul Gonzalez slammed resigned

Finance Secretary Cesar Purisima and ex-Trade Secretary Juan Santos for claiming

that the President had wanted the implementation of the law delayed so she would

not get too much political flak for the tax measure.


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(4) July 11, 2005, The Philippine Star, Business Section (The Last

Straw that Broke a Cabinet)

For ex-Finance Secretary Cesar Purisima, the implementation of the EVAT

law was a major pillar to strengthen the countrys finances, to get our fiscal house

in order. As far as he and the rest of the economic management team he heads are

concerned, they are operating under the fiscal equivalent of a red alert. They have

scored some early victories, like the increase in revenue collections in recent

months, but they know that they are still far from being in the clear.

That was why Purisima felt truly betrayed when he reportedly got a phone

call from an official telling him yung hinihingi nyo sa Supreme Court binigay

na. He didnt have any pending requests from the Court so he wondered, refusing

to accept the reality of his worst fear: The EVAT had been sacrificed by the

Palace.

(5) July 12, 2005, The Philippine Daily Inquirer (No GMA

Influence on e-VAT freeze-SC)

Bunye made the reaffirmation after Purisima and former Trade Secretary

Juan Santos insinuated that the President might have influenced the Supreme Court

to grant the TRO.

At the time the reports came out, Purisima did not controvert the truth or

falsity of the statements attributed to him. It was only after the Court issued the

show-cause order that Purisima saw it fit to deny having uttered these statements.


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By then, it was already impressed upon the publics mind that the issuance of the

TRO was the product of machinations on the Court by the executive branch.

If it were true that Purisima felt that the media misconstrued his actions, then

he should have immediately rectified it. He should not have waited until the Court

required him to explain before he denied having made such statements. And even

then, his denials were made as a result of the Courts show-cause order and not by

any voluntary act on his part that will show utter regret for having been

misquoted. Purisima should know that these press releases placed the Court into

dishonor, disrespect, and public contempt, diminished public confidence, promoted

distrust in the Court, and assailed the integrity of its Members. The Court already

took a beating before Purisima made any disclaimer. The damage has been done,

so to speak.

WHEREFORE, Cesar V. Purisima is found GUILTY of indirect contemptof court and FINED in the amount of Twenty Thousand Pesos (P20,000.00) to be

paid within ten (10) days from finality of herein Resolution.

SO ORDERED.

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice


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WE CONCUR:

HILARIO G. DAVIDE, JR.

Chief Justice

REYNATO S. PUNO

Associate Justice

ARTEMIO V. PANGANIBAN

Associate Justice


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LEONARDO A. QUISUMBING

Associate Justice

CONSUELO YNARES-SANTIAGO

Associate Justice

ANGELINA SANDOVAL-GUTIERREZ

Associate Justice

ANTONIO T. CARPIO

Associate Justice

RENATO C. CORONA

Associate Justice

CONCHITA CARPIO-MORALES

Associate Justice

ROMEO J. CALLEJO, SR.

Associate Justice

ADOLFO S. AZCUNA

Associate

Justice


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DANTE O. TINGA

Associate Justice

MINITA V. CHICO-

NAZARIO

AssociateJustice

CANCIO C. GARCIA

Associate Justice

C E R T I F I C A T I O N


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Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified

that the conclusions in the above Resolution were reached in consultation before

the case was assigned to the writer of the opinion of the Court.

HILARIO G. DAVIDE, JR.

Chief Justice

[1] Compliance, pp. 2-3.

N BANC

Agenda for October 18, 2005
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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 datedSeptember 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 TOLACK 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 PHILIPPINECONSTITUTION.

C. REPUBLIC ACT NO. 9337S STAND-BY AUTHORITY TO THE EXECUTIVE

TO INCREASE THE VAT RATE, ESPECIALLY ON ACCOUNT OF THEEFFECTIVE 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
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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, imposinglimitations on the amount of input VAT that may be claimed as a credit againstoutput 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% finalwithholding VAT on their gross payments on purchases of goods and services, andfinding 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) ofthe 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.


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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 theburden 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 bythe 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 bearthe 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 andon 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 Senateand House bills had to be acted upon by the bicameral conference committee as mandated by the

rules of both houses of Congress.


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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 inquiredinto 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.
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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 whichis 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 violatethe 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 initiativefor 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.


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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 oneopportunity 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, theincrease 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


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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 (24/5%) 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


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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


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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]
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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 newobligations 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 companysfinancial 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 limitthe taxing power of the State. Unlimited, plenary, comprehensive and supreme, this power cannot

be unduly restricted by mere creations of the State.
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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, themeans 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 inits 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 functionsreserved 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.)


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[1] Also referred to as the EVAT Law.

[2] G.R. Nos. 115455, 115525, 115543, 115544, 115754, 115781, 115852, 115873 and

115931, August 25, 1994, 235 SCRA 630.

[3] Farias vs. The Executive Secretary, G.R. No. 147387, December 10, 2003, 417 SCRA503, 530.

[4] Supra, note no. 2,pp. 661-663.

[5] Velarde vs. Social Justice Society, G.R. No. 159357, April 28, 2004, 428 SCRA 283.

[6] Information Technology Foundation of the Phils. vs. COMELEC, G.R. No. 159139,

June 15, 2005.

[7] Lahom vs. Sibulo, G.R. No. 143989, July 14, 2003, 406 SCRA 135.

[8] Ibid.

[9] 301 U.S. 495.
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