tax cases (full txt)

7/28/2019 TAX CASES (FULL TXT)

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G.R. No. 115455 August 25, 1994ARTURO M. TOLENTINO, petitioner,vs.THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNALREVENUE, respondents.G.R. No. 115525 August 25, 1994JUAN T. DAVID, petitioner,vs.TEOFISTO T. GUINGONA, JR., as Executive Secretary; ROBERTO DE OCAMPO, asSecretary of Finance; LIWAYWAY VINZONS-CHATO, as Commissioner of InternalRevenue; and their AUTHORIZED AGENTS OR REPRESENTATIVES, respondents.G.R. No. 115543 August 25, 1994RAUL S. ROCO and the INTEGRATED BAR OF THE PHILIPPINES, petitioners,vs.THE SECRETARY OF THE DEPARTMENT OF FINANCE; THE COMMISSIONERS OF THEBUREAU OF INTERNAL REVENUE AND BUREAU OF CUSTOMS, respondents.G.R. No. 115544 August 25, 1994PHILIPPINE PRESS INSTITUTE, INC.; EGP PUBLISHING CO., INC.; PUBLISHINGCORPORATION; PHILIPPINE JOURNALISTS, INC.; JOSE L. PAVIA; and OFELIA L.DIMALANTA, petitioners,vs.HON. LIWAYWAY V. CHATO, in her capacity as Commissioner of Internal Revenue; HON.TEOFISTO T. GUINGONA, JR., in his capacity as Executive Secretary; and HON.ROBERTO B. DE OCAMPO, in his capacity as Secretary of Finance, respondents.G.R. No. 115754 August 25, 1994CHAMBER OF REAL ESTATE AND BUILDERS ASSOCIATIONS, INC., (CREBA), petitioner,vs.THE COMMISSIONER OF INTERNAL REVENUE, respondent.G.R. No. 115781 August 25, 1994KILOSBAYAN, INC., JOVITO R. SALONGA, CIRILO A. RIGOS, ERME CAMBA, EMILIO C.CAPULONG, JR., JOSE T. APOLO, EPHRAIM TENDERO, FERNANDO SANTIAGO, JOSEABCEDE, CHRISTINE TAN, FELIPE L. GOZON, RAFAEL G. FERNANDO, RAOUL V.VICTORINO, JOSE CUNANAN, QUINTIN S. DOROMAL, MOVEMENT OF ATTORNEYS FORBROTHERHOOD, INTEGRITY AND NATIONALISM, INC. ("MABINI"), FREEDOM FROMDEBT COALITION, INC., PHILIPPINE BIBLE SOCIETY, INC., and WIGBERTOTAADA,petitioners,vs.THE EXECUTIVE SECRETARY, THE SECRETARY OF FINANCE, THE COMMISSIONER OFINTERNAL REVENUE and THE COMMISSIONER OF CUSTOMS, respondents.G.R. No. 115852 August 25, 1994PHILIPPINE AIRLINES, INC., petitioner,

vs.THE SECRETARY OF FINANCE, and COMMISSIONER OF INTERNALREVENUE, respondents.G.R. No. 115873 August 25, 1994COOPERATIVE UNION OF THE PHILIPPINES, petitioners,vs.HON. LIWAYWAY V. CHATO, in her capacity as the Commissioner of Internal Revenue,HON. TEOFISTO T. GUINGONA, JR., in his capacity as Executive Secretary, and HON.ROBERTO B. DE OCAMPO, in his capacity as Secretary of Finance, respondents.G.R. No. 115931 August 25, 1994PHILIPPINE EDUCATIONAL PUBLISHERS ASSOCIATION, INC., and ASSOCIATION OFPHILIPPINE BOOK-SELLERS, petitioners,vs.HON. ROBERTO B. DE OCAMPO, as the Secretary of Finance; HON. LIWAYWAY V.CHATO, as the Commissioner of Internal Revenue and HON. GUILLERMO PARAYNO, JR.,

in his capacity as the Commissioner of Customs, respondents.Arturo M. Tolentino for and in his behalf.

Donna Celeste D. Feliciano and Juan T. David for petitioners in G.R. No. 115525.Roco, Bunag, Kapunan, Migallos and Jardeleza for petitioner R.S. Roco.Villaranza and Cruz for petitioners in G.R. No. 115544.Carlos A. Raneses and Manuel M. Serrano for petitioner in G.R. No. 115754.Salonga, Hernandez & Allado for Freedon From Debts Coalition, Inc. & Phil. Bible Society.Estelito P. Mendoza for petitioner in G.R. No. 115852.Panganiban, Benitez, Parlade, Africa & Barinaga Law Offices for petitioners in G.R. No. 115873.R.B. Rodriguez & Associates for petitioners in G.R. No. 115931.Reve A.V. Saguisag for MABINI.

MENDOZA, J.:The value-added tax (VAT) is levied on the sale, barter or exchange of goods and properties aswell as on the sale or exchange of services. It is equivalent to 10% of the gross selling price orgross value in money of goods or properties sold, bartered or exchanged or of the gross receiptsfrom the sale or exchange of services. Republic Act No. 7716 seeks to widen the tax base of theexisting VAT system and enhance its administration by amending the National Internal RevenueCode.These are various suits forcertiorariand prohibition, challenging the constitutionality of Republic

Act No. 7716 on various grounds summarized in the resolution of July 6, 1994 of this Court, asfollows:I. Procedural Issues:

A. Does Republic Act No. 7716 violate Art. VI, 24 of the Constitution?B. Does it violate Art. VI, 26(2) of the Constitution?C. What is the extent of the power of the Bicameral Conference Committee?

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

1. 12. 43. 54. 10

B. Does the law violate the following other provisions of the Constitution?1. Art. VI, 28(1)2. Art. VI, 28(3)

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

I. PROCEDURAL ISSUESThe contention of petitioners is that in enacting Republic Act No. 7716, or the Expanded Value-

Added Tax Law, Congress violated the Constitution because, although H. No. 11197 had

originated in the House of Representatives, it was not passed by the Senate but was simplyconsolidated with the Senate version (S. No. 1630) in the Conference Committee to produce thebill which the President signed into law. The following provisions of the Constitution are cited insupport of the proposition that because Republic Act No. 7716 was passed in this manner, it didnot originate in the House of Representatives and it has not thereby become a law:

Art. VI, 24: All appropriation, revenue or tariff bills, bills authorizingincrease of the public debt, bills of local application, and private bills shalloriginate exclusively in the House of Representatives, but the Senate maypropose or concur with amendments.Id., 26(2): No bill passed by either House shall become a law unless it haspassed three readings on separate days, and printed copies thereof in itsfinal form have been distributed to its Members three days before itspassage, except when the President certifies to the necessity of itsimmediate enactment to meet a public calamity or emergency. Upon the lastreading of a bill, no amendment thereto shall be allowed, and the vote

thereon shall be taken immediately thereafter, andthe yeasand nays entered in the Journal.


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

AN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT) SYSTEM TOWIDEN ITS TAX BASE AND ENHANCE ITS ADMINISTRATION,

AMENDING FOR THESE PURPOSES SECTIONS 99, 100, 102, 103, 104,105, 106, 107, 108 AND 110 OF TITLE IV, 112, 115 AND 116 OF TITLE V,

AND 236, 237 AND 238 OF TITLE IX, AND REPEALING SECTIONS 113AND 114 OF TITLE V, ALL OF THE NATIONAL INTERNAL REVENUECODE, AS AMENDED

The bill (H. No. 11197) was considered on second reading starting November 6, 1993 and, onNovember 17, 1993, it was approved by the House of Representatives after third and finalreading.It was sent to the Senate on November 23, 1993 and later referred by that body to its Committeeon Ways and Means.On February 7, 1994, the Senate Committee submitted its report recommending approval of S.No. 1630, entitled

AN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT) SYSTEM TOWIDEN ITS TAX BASE AND ENHANCE ITS ADMINISTRATION,

AMENDING FOR THESE PURPOSES SECTIONS 99, 100, 102, 103, 104,105, 107, 108, AND 110 OF TITLE IV, 112 OF TITLE V, AND 236, 237,

AND 238 OF TITLE IX, AND REPEALING SECTIONS 113, 114 and 116 OFTITLE V, ALL OF THE NATIONAL INTERNAL REVENUE CODE, AS

AMENDED, AND FOR OTHER PURPOSES

It was stated that the bill was being submitted "in substitution of Senate Bill No. 1129, taking intoconsideration P.S. Res. No. 734 and H.B. No. 11197."On February 8, 1994, the Senate began consideration of the bill (S. No. 1630). It finisheddebates on the bill and approved it on second reading on March 24, 1994. On the same day, itapproved the bill on third reading by the affirmative votes of 13 of its members, with oneabstention.H. No. 11197 and its Senate version (S. No. 1630) were then referred to a conferencecommittee which, after meeting four times (April 13, 19, 21 and 25, 1994), recommended that"House Bill No. 11197, in consolidation with Senate Bill No. 1630, be approved in accordancewith the attached copy of the bill as reconciled and approved by the conferees."The Conference Committee bill, entitled "AN ACT RESTRUCTURING THE VALUE-ADDED TAX(VAT) SYSTEM, WIDENING ITS TAX BASE AND ENHANCING ITS ADMINISTRATION ANDFOR THESE PURPOSES AMENDING AND REPEALING THE RELEVANT PROVISIONS OFTHE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHERPURPOSES," was thereafter approved by the House of Representatives on April 27, 1994 and

by the Senate on May 2, 1994. The enrolled bill was then presented to the President of thePhilippines who, on May 5, 1994, signed it. It became Republic Act No. 7716. On May 12, 1994,Republic Act No. 7716 was published in two newspapers of general circulation and, on May 28,1994, it took effect, although its implementation was suspended until June 30, 1994 to allow timefor the registration of business entities. It would have been enforced on July 1, 1994 but itsenforcement was stopped because the Court, by the vote of 11 to 4 of its members, granted atemporary restraining order on June 30, 1994.First. Petitioners' contention is that Republic Act No. 7716 did not "originate exclusively" in theHouse of Representatives as required by Art. VI, 24 of the Constitution, because it is in fact theresult of the consolidation of two distinct bills, H. No. 11197 and S. No. 1630. In this connection,petitioners point out that although Art. VI, SS 24 was adopted from the American FederalConstitution, 2it is notable in two respects: the verb "shall originate" is qualified in the PhilippineConstitution by the word "exclusively" and the phrase "as on other bills" in the American versionis omitted. This means, according to them, that to be considered as having originated in theHouse, Republic Act No. 7716 must retain the essence of H. No. 11197.

This argument will not bear analysis. To begin with, it is not the law but the revenue bill which is required by the Constitution to "originate exclusively" in the House of Representatives. It

is important to emphasize this, because a bill originating in the House may undergo suchextensive changes in the Senate that the result may be a rewriting of the whole. The possibilityof a third version by the conference committee will be discussed later. At this point, what isimportant to note is that, as a result of the Senate action, a distinct bill may be produced. Toinsist that a revenue statute and not only the bill which initiated the legislative processculminating in the enactment of the law must substantially be the same as the House billwould be to deny the Senate's power not only to "concur with amendments" but also to "proposeamendments." It would be to violate the coequality of legislative power of the two houses ofCongress and in fact make the House superior to the Senate.The contention that the constitutional design is to limit the Senate's power in respect of revenuebills in order to compensate for the grant to the Senate of the treaty-ratifying power3and therebyequalize its powers and those of the House overlooks the fact that the powers being comparedare different. We are dealing here with the legislative power which under the Constitution isvested not in any particular chamber but in the Congress of the Philippines, consisting of "aSenate and a House of Representatives." 4The exercise of the treaty-ratifying power is not theexercise of legislative power. It is the exercise of a check on the executive power. There is,therefore, no justification for comparing the legislative powers of the House and of the Senate onthe basis of the possession of such nonlegislative power by the Senate. The possession of asimilar power by the U.S. Senate 5has never been thought of as giving it more legislativepowers than the House of Representatives.In the United States, the validity of a provision ( 37) imposing an ad valorem tax based on theweight of vessels, which the U.S. Senate had inserted in the Tariff Act of 1909, was upheldagainst the claim that the provision was a revenue bill which originated in the Senate incontravention of Art. I, 7 of the U.S. Constitution. 6Nor is the power to amend limited to addinga provision or two in a revenue bill emanating from the House. The U.S. Senate has gone so faras changing the whole of bills following the enacting clause and substituting its own versions. In

1883, for example, it struck out everything after the enacting clause of a tariff bill and wrote in itsplace its own measure, and the House subsequently accepted the amendment. The U.S. Senatelikewise added 847 amendments to what later became the Payne-Aldrich Tariff Act of 1909; itdictated the schedules of the Tariff Act of 1921; it rewrote an extensive tax revision bill in thesame year and recast most of the tariff bill of 1922. 7Given, then, the power of the Senate topropose amendments, the Senate can propose its own version even with respect to bills whichare required by the Constitution to originate in the House.It is insisted, however, that S. No. 1630 was passed not in substitution of H. No. 11197 but ofanother Senate bill (S. No. 1129) earlier filed and that what the Senate did was merely to "take[H. No. 11197] into consideration" in enacting S. No. 1630. There is really no difference betweenthe Senate preserving H. No. 11197 up to the enacting clause and then writing its own versionfollowing the enacting clause (which, it would seem, petitioners admit is an amendment bysubstitution), and, on the other hand, separately presenting a bill of its own on the same subjectmatter. In either case the result are two bills on the same subject.Indeed, what the Constitution simply means is that the initiative for filing revenue, tariff, or tax

bills, bills authorizing an increase of the public debt, private bills and bills of local applicationmust come from the House of Representatives on the theory that, elected as they are from thedistricts, the members of the House can be expected to be more sensitive to the local needs andproblems. On the other hand, the senators, who are elected at large, are expected to approachthe same problems from the national perspective. Both views are thereby made to bear on theenactment of such laws.Nor does the Constitution prohibit the filing in the Senate of a substitute bill in anticipation of itsreceipt of the bill from the House, so long as action by the Senate as a body is withheld pendingreceipt of the House bill. The Court cannot, therefore, understand the alarm expressed over thefact that on March 1, 1993, eight months before the House passed H. No. 11197, S. No. 1129had been filed in the Senate. After all it does not appear that the Senate ever considered it. Itwas only after the Senate had received H. No. 11197 on November 23, 1993 that the process oflegislation in respect of it began with the referral to the Senate Committee on Ways and Meansof H. No. 11197 and the submission by the Committee on February 7, 1994 of S. No. 1630. Forthat matter, if the question were simply the priority in the time of filing of bills, the fact is that it

was in the House that a bill (H. No. 253) to amend the VAT law was first filed on July 22, 1992.


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Several other bills had been filed in the House before S. No. 1129 was filed in the Senate, andH. No. 11197 was only a substitute of those earlier bills.Second. Enough has been said to show that it was within the power of the Senate to propose S.No. 1630. We now pass to the next argument of petitioners that S. No. 1630 did not pass threereadings on separate days as required by the Constitution 8because the second and thirdreadings were done on the same day, March 24, 1994. But this was because on February 24,1994 9and again on March 22, 1994, 10the President had certified S. No. 1630 as urgent. Thepresidential certification dispensed with the requirement not only of printing but also that ofreading the bill on separate days. The phrase "except when the President certifies to thenecessity of its immediate enactment, etc." in Art. VI, 26(2) qualifies the two stated conditionsbefore a bill can become a law: (i) the bill has passed three readings on separate days and (ii) ithas been printed in its final form and distributed three days before it is finally approved.In other words, the "unless" clause must be read in relation to the "except" clause, because thetwo are really coordinate clauses of the same sentence. To construe the "except" clause assimply dispensing with the second requirement in the "unless" clause ( i.e., printing anddistribution three days before final approval) would not only violate the rules of grammar. Itwould also negate the very premise of the "except" clause: the necessity of securing theimmediate enactment of a bill which is certified in order to meet a public calamity or emergency.For if it is only the printing that is dispensed with by presidential certification, the time savedwould be so negligible as to be of any use in insuring immediate enactment. It may well bedoubted whether doing away with the necessity of printing and distributing copies of the bill threedays before the third reading would insure speedy enactment of a law in the face of anemergency requiring the calling of a special election for President and Vice-President. Under theConstitution such a law is required to be made within seven days of the convening of Congressin emergency session. 11That upon the certification of a bill by the President the requirement of three readings on

separate days and of printing and distribution can be dispensed with is supported by the weightof legislative practice. For example, the bill defining the certiorarijurisdiction of this Court which,in consolidation with the Senate version, became Republic Act No. 5440, was passed on secondand third readings in the House of Representatives on the same day (May 14, 1968) after the billhad been certified by the President as urgent. 12There is, therefore, no merit in the contention that presidential certification dispenses only withthe requirement for the printing of the bill and its distribution three days before its passage butnot with the requirement of three readings on separate days, also.It is nonetheless urged that the certification of the bill in this case was invalid because there wasno emergency, the condition stated in the certification of a "growing budget deficit" not being anunusual condition in this country.It is noteworthy that no member of the Senate saw fit to controvert the reality of the factual basisof the certification. To the contrary, by passing S. No. 1630 on second and third readings onMarch 24, 1994, the Senate accepted the President's certification. Should such certification benow reviewed by this Court, especially when no evidence has been shown that, because S. No.

1630 was taken up on second and third readings on the same day, the members of the Senatewere deprived of the time needed for the study of a vital piece of legislation?The sufficiency of the factual basis of the suspension of the writ of habeas corpus or declarationof martial law under Art. VII, 18, or the existence of a national emergency justifying thedelegation of extraordinary powers to the President under Art. VI, 23(2), is subject to judicialreview because basic rights of individuals may be at hazard. But the factual basis of presidentialcertification of bills, which involves doing away with procedural requirements designed to insurethat bills are duly considered by members of Congress, certainly should elicit a differentstandard of review.Petitioners also invite attention to the fact that the President certified S. No. 1630 and not H. No.11197. That is because S. No. 1630 was what the Senate was considering. When the matterwas before the House, the President likewise certified H. No. 9210 the pending in the House.Third. Finally it is contended that the bill which became Republic Act No. 7716 is the bill whichthe Conference Committee prepared by consolidating H. No. 11197 and S. No. 1630. It isclaimed that the Conference Committee report included provisions not found in either the House

bill or the Senate bill and that these provisions were "surreptitiously" inserted by the ConferenceCommittee. Much is made of the fact that in the last two days of its session on April 21 and 25,

1994 the Committee met behind closed doors. We are not told, however, whether the provisionswere not the result of the give and take that often mark the proceedings of conferencecommittees.Nor is there anything unusual or extraordinary about the fact that the Conference Committee metin executive sessions. Often the only way to reach agreement on conflicting provisions is to meetbehind closed doors, with only the conferees present. Otherwise, no compromise is likely to bemade. The Court is not about to take the suggestion of a cabal or sinister motive attributed to theconferees on the basis solely of their "secret meetings" on April 21 and 25, 1994, nor readanything into the incomplete remarks of the members, marked in the transcript of stenographicnotes by ellipses. The incomplete sentences are probably due to the stenographer's ownlimitations or to the incoherence that sometimes characterize conversations. William Safirenoted some such lapses in recorded talks even by recent past Presidents of the United States.In any event, in the United States conference committees had been customarily held inexecutive sessions with only the conferees and their staffs in attendance. 13Only in November1975 was a new rule adopted requiring open sessions. Even then a majority of either chamber'sconferees may vote in public to c lose the meetings. 14

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

Under congressional rules of procedure, conference committees are notexpected to make any material change in the measure at issue, either bydeleting provisions to which both houses have already agreed or byinserting new provisions. But this is a difficult provision to enforce. Note theproblem when one house amends a proposal originating in either house bystriking out everything following the enacting clause and substitutingprovisions which make it an entirely new bill. The versions are nowaltogether different, permitting a conference committee to draft essentially a

new bill. . . . 15The result is a third version, which is considered an "amendment in the nature of a substitute,"the only requirement for which being that the third version be germane to the subject of theHouse and Senate bills. 16Indeed, this Court recently held that it is within the power of a conference committee to include inits report an entirely new provision that is not found either in the House bill or in the Senatebill. 17If the committee can propose an amendment consisting of one or two provisions, there isno reason why it cannot propose several provisions, collectively considered as an "amendmentin the nature of a substitute," so long as such amendment is germane to the subject of the billsbefore the committee. After all, its report was not final but needed the approval of both houses ofCongress to become valid as an act of the legislative department. The charge that in this casethe Conference Committee acted as a third legislative chamber is thus without any basis. 18Nonetheless, it is argued that under the respective Rules of the Senate and the House ofRepresentatives a conference committee can only act on the differing provisions of a Senate billand a House bill, and that contrary to these Rules the Conference Committee inserted provisions

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

Rules of the SenateRule XII: 26. In the event that the Senate does not agree with the House ofRepresentatives on the provision of any bill or jointresolution, thedifferences shall be settled by a conference committee ofboth Houses which shall meet within ten days after their composition.The President shall designate the members of the conference committee inaccordance with subparagraph (c), Section 3 of Rule III.Each Conference Committee Report shall contain a detailed and sufficientlyexplicit statement of the changes in or amendments to the subjectmeasure, and shall be signed by the conferees.The consideration of such report shall not be in order unless the report hasbeen filed with the Secretary of the Senate and copies thereof have been

distributed to the Members.(Emphasis added)


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which the statute amends. We think it is, since the title states that the purpose of the statute is toexpand the VAT system, and one way of doing this is to widen its base by withdrawing some ofthe exemptions granted before. To insist that P.D. No. 1590 be mentioned in the title of the law,in addition to 103 of the NIRC, in which it is specifically referred to, would be to insist that thetitle of a bill should be a complete index of its content.The constitutional requirement that every bill passed by Congress shall embrace only onesubject which shall be expressed in its title is intended to prevent surprise upon the members ofCongress and to inform the people of pending legislation so that, if they wish to, they can beheard regarding it. If, in the case at bar, petitioner did not know before that its exemption hadbeen withdrawn, it is not because of any defect in the title but perhaps for the same reason otherstatutes, although published, pass unnoticed until some event somehow calls attention to their

existence. Indeed, the title of Republic Act No. 7716 is not any more general than the title ofPAL's own franchise under P.D. No. 1590, and yet no mention is made of its tax exemption. Thetitle of P.D. No. 1590 is:

AN ACT GRANTING A NEW FRANCHISE TO PHILIPPINE AIRLINES, INC.TO ESTABLISH, OPERATE, AND MAINTAIN AIR-TRANSPORTSERVICES IN THE PHILIPPINES AND BETWEEN THE PHILIPPINES

AND OTHER COUNTRIES.The trend in our cases is to construe the constitutional requirement in such a manner that courtsdo not unduly interfere with the enactment of necessary legislation and to consider it sufficient ifthe title expresses the general subject of the statute and all its provisions are germane to thegeneral subject thus expressed. 24It is further contended that amendment of petitioner's franchise may only be made by speciallaw, in view of 24 of P.D. No. 1590 which provides:

This franchise, as amended, or any section or provision hereof may only bemodified, amended, or repealed expressly by a special law or decree that

shall specifically modify, amend, or repeal this franchise or any section orprovision thereof.

This provision is evidently intended to prevent the amendment of the franchise by mereimplication resulting from the enactment of a later inconsistent statute, in consideration of thefact that a franchise is a contract which can be altered only by consent of the parties. Thusin Manila Railroad Co. v.Rafferty, 25it was held that an Act of the U.S. Congress, which provided for the payment of taxon certain goods and articles imported into the Philippines, did not amend the franchise ofplaintiff, which exempted it from all taxes except those mentioned in its franchise. It was heldthat a special law cannot be amended by a general law.In contrast, in the case at bar, Republic Act No. 7716 expressly amends PAL's franchise (P.D.No. 1590) by specifically excepting from the grant of exemptions from the VAT PAL's exemptionunder P.D. No. 1590. This is within the power of Congress to do under Art. XII, 11 of theConstitution, which provides that the grant of a franchise for the operation of a public utility issubject to amendment, alteration or repeal by Congress when the common good so requires.

II. SUBSTANTIVE ISSUESA. Claims of Press Freedom,Freedom of Thought and ReligiousFreedom

The Philippine Press Institute (PPI), petitioner in G.R. No. 115544, is a nonprofit organization ofnewspaper publishers established for the improvement of journalism in the Philippines. On theother hand, petitioner in G.R. No. 115781, the Philippine Bible Society (PBS), is a nonprofitorganization engaged in the printing and distribution of bibles and other religious articles. Bothpetitioners claim violations of their rights under 4 and 5 of the Bill of Rights as a result of theenactment of the VAT Law.The PPI questions the law insofar as it has withdrawn the exemption previously granted to thepress under 103 (f) of the NIRC. Although the exemption was subsequently restored byadministrative regulation with respect to the circulation income of newspapers, the PPI pressesits claim because of the possibility that the exemption may still be removed by mere revocationof the regulation of the Secretary of Finance. On the other hand, the PBS goes so far as to

question the Secretary's power to grant exemption for two reasons: (1) The Secretary of Financehas no power to grant tax exemption because this is vested in Congress and requires for its

exercise the vote of a majority of all its members 26and (2) the Secretary's duty is to execute thelaw. 103 of the NIRC contains a list of transactions exempted from VAT. Among the transactionspreviously granted exemption were:

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

Republic Act No. 7716 amended 103 by deleting (f) with the result that print media becamesubject to the VAT with respect to all aspects of their operations. Later, however, based on amemorandum of the Secretary of Justice, respondent Secretary of Finance issued Revenue

Regulations No. 11-94, dated June 27, 1994, exempting the "circulation income of print mediapursuant to 4 Article III of the 1987 Philippine Constitution guaranteeing against abridgment offreedom of the press, among others." The exemption of "circulation income" has left incomefrom advertisements still subject to the VAT.It is unnecessary to pass upon the contention that the exemption granted is beyond the authorityof the Secretary of Finance to give, in view of PPI's contention that even with the exemption ofthe circulation revenue of print media there is still an unconstitutional abridgment of pressfreedom because of the imposition of the VAT on the gross receipts of newspapers fromadvertisements and on their acquisition of paper, ink and services for publication. Even on theassumption that no exemption has effectively been granted to print media transactions, we findno violation of press freedom in these cases.To be sure, we are not dealing here with a statute that on its face operates in the area of pressfreedom. The PPI's claim is simply that, as appliedto newspapers, the law abridges pressfreedom. Even with due recognition of its high estate and its importance in a democratic society,however, the press is not immune from general regulation by the State. It has been held:

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

The PPI does not dispute this point, either.What it contends is that by withdrawing the exemption previously granted to print mediatransactions involving printing, publication, importation or sale of newspapers, Republic Act No.7716 has singled out the press for discriminatory treatment and that within the class of massmedia the law discriminates against print media by giving broadcast media favored treatment.We have carefully examined this argument, but we are unable to find a differential treatment ofthe press by the law, much less any censorial motivation for its enactment. If the press is nowrequired to pay a value-added tax on its transactions, it is not because it is being singled out,much less targeted, for special treatment but only because of the removal of the exemptionpreviously granted to it by law. The withdrawal of exemption is all that is involved in these cases.

Other transactions, likewise previously granted exemption, have been delisted as part of thescheme to expand the base and the scope of the VAT system. The law would perhaps be opento the charge of discriminatory treatment if the only privilege withdrawn had been that granted tothe press. But that is not the case.The situation in the case at bar is indeed a far cry from those cited by the PPI in support of itsclaim that Republic Act No. 7716 subjects the press to discriminatory taxation. In the casescited, the discriminatory purpose was clear either from the background of the law or from itsoperation. For example, in Grosjean v. American Press Co., 28the law imposed a license taxequivalent to 2% of the gross receipts derived from advertisements only on newspapers whichhad a circulation of more than 20,000 copies per week. Because the tax was not based on thevolume of advertisement alone but was measured by the extent of i ts circulation as well, the lawapplied only to the thirteen large newspapers in Louisiana, leaving untaxed four papers withcirculation of only slightly less than 20,000 copies a week and 120 weekly newspapers whichwere in serious competition with the thirteen newspapers in question. It was well known that thethirteen newspapers had been critical of Senator Huey Long, and the Long-dominated

legislature of Louisiana respondent by taxing what Long described as the "lying newspapers" byimposing on them "a tax on lying." The effect of the tax was to curtail both their revenue and


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their circulation. As the U.S. Supreme Court noted, the tax was "a deliberate and calculateddevice in the guise of a tax to limit the circulation of information to which the public is entitled invirtue of the constitutional guaranties." 29The case is a classic illustration of the warning that thepower to tax is the power to destroy.In the other case 30invoked by the PPI, the press was also found to have been singled outbecause everything was exempt from the "use tax" on ink and paper, except the press.Minnesota imposed a tax on the sales of goods in that state. To protect the sales tax, it enacteda complementary tax on the privilege of "using, storing or consuming in that state tangiblepersonal property" by eliminating the residents' incentive to get goods from outside states wherethe sales tax might be lower. The Minnesota Star Tribune was exempted from both taxes from1967 to 1971. In 1971, however, the state legislature amended the tax scheme by imposing the

"use tax" on the cost of paper and ink used for publication. The law was held to have singled outthe press because (1) there was no reason for imposing the "use tax" since the press wasexempt from the sales tax and (2) the "use tax" was laid on an "intermediate transaction ratherthan the ultimate retail sale." Minnesota had a heavy burden of justifying the differentialtreatment and it failed to do so. In addition, the U.S. Supreme Court found the law to bediscriminatory because the legislature, by again amending the law so as to exempt the first$100,000 of paper and ink used, further narrowed the coverage of the tax so that "only a handfulof publishers pay any tax at all and even fewer pay any significant amount of tax." 31Thediscriminatory purpose was thus very clear.More recently, inArkansas Writers' Project, Inc. v. Ragland, 32it was held that a law which taxedgeneral interest magazines but not newspapers and religious, professional, trade and sports

journals was discriminatory because while the tax did not single out the press as a whole, ittargeted a small group within the press. What is more, by differentiating on the basis of contents(i.e., between general interest and special interests such as religion or sports) the law became"entirely incompatible with the First Amendment's guarantee of freedom of the press."

These cases come down to this: that unless justified, the differential treatment of the presscreates risks of suppression of expression. In contrast, in the cases at bar, the statute applies toa wide range of goods and services. The argument that, by imposing the VAT only on printmedia whose gross sales exceeds P480,000 but not more than P750,000, the lawdiscriminates 33is without merit since it has not been shown that as a result the class subject totax has been unreasonably narrowed. The fact is that this limitation does not apply to the pressalong but to all sales. Nor is impermissible motive shown by the fact that print media andbroadcast media are treated differently. The press is taxed on its transactions involving printingand publication, which are different from the transactions of broadcast media. There is thus areasonable basis for the classification.The cases canvassed, it must be stressed, eschew any suggestion that "owners of newspapersare immune from any forms of ordinary taxation." The license tax in the Grosjean case wasdeclared invalid because it was "one single in kind, with a long history of hostile misuse againstthe freedom of thepress." 34On the other hand, Minneapolis Staracknowledged that "The First Amendment does

not prohibit all regulation of the press [and that] the States and the Federal Government cansubject newspapers to generally applicable economic regulations without creating constitutionalproblems." 35What has been said above also disposes of the allegations of the PBS that the removal of theexemption of printing, publication or importation of books and religious articles, as well as theirprinting and publication, likewise violates freedom of thought and of conscience. For as the U.S.Supreme Court unanimously held in Jimmy Swaggart Ministries v. Board of Equalization, 36theFree Exercise of Religion Clause does not prohibit imposing a generally applicable sales anduse tax on the sale of religious materials by a religious organization.This brings us to the question whether the registration provision of the law, 37although of generalapplicability, nonetheless is invalid when applied to the press because it lays a prior restraint onits essential freedom. The case ofAmerican Bible Society v. City of Manila 38is cited by both thePBS and the PPI in support of their contention that the law imposes censorship. There, thisCourt held that an ordinance of the City of Manila, which imposed a license fee on thoseengaged in the business of general merchandise, could not be applied to the appellant's sale of

bibles and other religious literature. This Court relied on Murdock v. Pennsylvania,39

in which itwas held that, as a license fee is fixed in amount and unrelated to the receipts of the taxpayer,

the license fee, when applied to a religious sect, was actually being imposed as a condition forthe exercise of the sect's right under the Constitution. For that reason, it was held, the licensefee "restrains in advance those constitutional liberties of press and religion and inevitably tendsto suppress their exercise." 40But, in this case, the fee in 107, although a fixed amount (P1,000), is not imposed for theexercise of a privilege but only for the purpose of defraying part of the cost of registration. Theregistration requirement is a central feature of the VAT system. It is designed to provide a recordof tax credits because any person who is subject to the payment of the VAT pays an input tax,even as he collects an output tax on sales made or services rendered. The registration fee isthus a mere administrative fee, one not imposed on the exercise of a privilege, much less aconstitutional right.

For the foregoing reasons, we find the attack on Republic Act No. 7716 on the ground that itoffends the free speech, press and freedom of religion guarantees of the Constitution to bewithout merit. For the same reasons, we find the claim of the Philippine Educational Publishers

Association (PEPA) in G.R. No. 115931 that the increase in the price of books and othereducational materials as a result of the VAT would violate the constitutional mandate to thegovernment to give priority to education, science and technology (Art. II, 17) to be untenable.

B. Claims of Regressivity, Denial ofDue Process, Equal Protection,and Impairmentof Contracts

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

of review.There is, however, no justification for passing upon the claims that the law also violates the rulethat taxation must be progressive and that it denies petitioners' right to due process and thatequal protection of the laws. The reason for this different treatment has been cogently stated byan eminent authority on constitutional law thus: "[W]hen freedom of the mind is imperiled by law,it is freedom that commands a momentum of respect; when property is imperiled it is thelawmakers' judgment that commands respect. This dual standard may not precisely reverse thepresumption of constitutionality in civil liberties cases, but obviously it does set up a hierarchy ofvalues within the due process clause." 41Indeed, the absence of threat of immediate harm makes the need for judicial intervention lessevident and underscores the essential nature of petitioners' attack on the law on the grounds ofregressivity, denial of due process and equal protection and impairment of contracts as a mereacademic discussion of the merits of the law. For the fact is that there have even been nonotices of assessments issued to petitioners and no determinations at the administrative levelsof their claims so as to illuminate the actual operation of the law and enable us to reach sound

judgment regarding so fundamental questions as those raised in these suits.Thus, the broad argument against the VAT is that it is regressive and that it violates therequirement that "The rule of taxation shall be uniform and equitable [and] Congress shall evolvea progressive system of taxation." 42Petitioners in G.R. No. 115781 quote from a paper, entitled"VAT Policy Issues: Structure, Regressivity, Inflation and Exports" by Alan A. Tait of theInternational Monetary Fund, that "VAT payment by low-income households will be a higherproportion of their incomes (and expenditures) than payments by higher-income households.That is, the VAT will be regressive." Petitioners contend that as a result of the uniform 10% VAT,the tax on consumption goods of those who are in the higher-income bracket, which before weretaxed at a rate higher than 10%, has been reduced, while basic commodities, which before weretaxed at rates ranging from 3% to 5%, are now taxed at a higher rate.Just as vigorously as it is asserted that the law is regressive, the opposite claim is pressed byrespondents that in fact it distributes the tax burden to as many goods and services as possibleparticularly to those which are within the reach of higher-income groups, even as the lawexempts basic goods and services. It is thus equitable. The goods and properties subject to the

VAT are those used or consumed by higher-income groups. These include real properties heldprimarily for sale to customers or held for lease in the ordinary course of business, the right or


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privilege to use industrial, commercial or scientific equipment, hotels, restaurants and similarplaces, tourist buses, and the like. On the other hand, small business establishments, withannual gross sales of less than P500,000, are exempted. This, according to respondents,removes from the coverage of the law some 30,000 business establishments. On the otherhand, an occasional paper43of the Center for Research and Communication cities a NEDAstudy that the VAT has minimal impact on inflation and income distribution and that whileadditional expenditure for the lowest income class is only P301 or 1.49% a year, that for a familyearning P500,000 a year or more is P8,340 or 2.2%.Lacking empirical data on which to base any conclusion regarding these arguments, anydiscussion whether the VAT is regressive in the sense that it will hit the "poor" and middle-income group in society harder than it will the "rich," as the Cooperative Union of the Philippines

(CUP) claims in G.R. No. 115873, is largely an academic exercise. On the other hand, theCUP's contention that Congress' withdrawal of exemption of producers cooperatives, marketingcooperatives, and service cooperatives, while maintaining that granted to electric cooperatives,not only goes against the constitutional policy to promote cooperatives as instruments of social

justice (Art. XII, 15) but also denies such cooperatives the equal protection of the law isactually a policy argument. The legislature is not required to adhere to a policy of "all or none" inchoosing the subject of taxation.44Nor is the contention of the Chamber of Real Estate and Builders Association (CREBA),petitioner in G.R. 115754, that the VAT will reduce the mark up of its members by as much as85% to 90% any more concrete. It is a mere allegation. On the other hand, the claim of thePhilippine Press Institute, petitioner in G.R. No. 115544, that the VAT will drive some of itsmembers out of circulation because their profits from advertisements will not be enough to payfor their tax liability, while purporting to be based on the financial statements of the newspapersin question, still falls short of the establishment of facts by evidence so necessary foradjudicating the question whether the tax is oppressive and confiscatory.

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

At all events, our 1988 decision in Kapatiran 45should have laid to rest the questions now raisedagainst the VAT. There similar arguments made against the original VAT Law (Executive OrderNo. 273) were held to be hypothetical, with no more basis than newspaper articles which thisCourt found to be "hearsay and [without] evidentiary value." As Republic Act No. 7716 merelyexpands the base of the VAT system and its coverage as provided in the original VAT Law,further debate on the desirability and wisdom of the law should have shifted to Congress.Only slightly less abstract but nonetheless hypothetical is the contention of CREBA that theimposition of the VAT on the sales and leases of real estate by virtue of contracts entered into

prior to the effectivity of the law would violate the constitutional provision that "No law impairingthe obligation of contracts shall be passed." It is enough to say that the parties to a contractcannot, through the exercise of prophetic discernment, fetter the exercise of the taxing power ofthe State. For not only are existing laws read into contracts in order t o fix obligations as betweenparties, but the reservation of essential attributes of sovereign power is also read into contractsas a basic postulate of the legal order. The policy of protecting contracts against impairmentpresupposes the maintenance of a government which retains adequate authority to secure thepeace and good order of society. 46In truth, the Contract Clause has never been thought as a limitation on the exercise of theState's power of taxation save only where a tax exemption has been granted for a validconsideration. 47Such is not the case of PAL in G.R. No. 115852, and we do not understand it tomake this claim. Rather, its position, as discussed above, is that the removal of its tax exemptioncannot be made by a general, but only by a specific, law.The substantive issues raised in some of the cases are presented in abstract, hypothetical formbecause of the lack of a concrete record. We accept that this Court does not only adjudicate

private cases; that public actions by "non-Hohfeldian"48

or ideological plaintiffs are nowcognizable provided they meet the standing requirement of the Constitution; that under Art. VIII,

1, 2 the Court has a "special function" of vindicating constitutional rights. Nonetheless thefeeling cannot be escaped that we do not have before us in these cases a fully developedfactual record that alone can impart to our adjudication the impact of actuality 49to insure thatdecision-making is informed and well grounded. Needless to say, we do not have power torender advisory opinions or even jurisdiction over petitions for declaratory judgment. In effect weare being asked to do what the Conference Committee is precisely accused of having done inthese cases to sit as a third legislative chamber to review legislation.We are told, however, that the power of judicial review is not so much power as it is dutyimposed on this Court by the Constitution and that we would be remiss in the performance ofthat duty if we decline to look behind the barriers set by the principle of separation of powers.

Art. VIII, 1, 2 is cited in support of this view:

Judicial power includes the duty of the courts of justice to settle actualcontroversies involving rights which are legally demandable andenforceable, and to determine whether or not there has been a grave abuseof discretion amounting to lack or excess of jurisdiction on the part of anybranch or instrumentality of the Government.

To view the judicial power of review as a duty is nothing new. Chief Justice Marshall said so in1803, to justify the assertion of this power in Marbury v. Madison:

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

Justice Laurel echoed this justification in 1936 inAngara v. Electoral Commission:And when the judiciary mediates to allocate constitutional boundaries, itdoes not assert any superiority over the other departments; it does not inreality nullify or invalidate an act of the legislature, but only asserts the

solemn and sacred obligation assigned to it by the Constitution to determineconflicting claims of authority under the Constitution and to establish for theparties in an actual controversy the rights which that instrument secures andguarantees to them. 51

This conception of the judicial power has been affirmed in severalcases 52of this Court followingAngara.It does not add anything, therefore, to invoke this "duty" to justify this Court's intervention in whatis essentially a case that at best is not ripe for adjudication. That duty must still be performed inthe context of a concrete case or controversy, as Art. VIII, 5(2) clearly defines our jurisdictionin terms of "cases," and nothing but "cases." That the other departments of the government mayhave committed a grave abuse of discretion is not an independent ground for exercising ourpower. Disregard of the essential limits imposed by the case and controversy requirement can inthe long run only result in undermining our authority as a court of law. For, as judges, what weare called upon to render is judgment according to law, not according to what may appear to bethe opinion of the day.

_______________________________In the preceeding pages we have endeavored to discuss, within limits, the validity of Republic

Act No. 7716 in its formal and substantive aspects as this has been raised in the various casesbefore us. To sum up, we hold:(1) That the procedural requirements of the Constitution have been complied with by Congressin the enactment of the statute;(2) That judicial inquiry whether the formal requirements for the enactment of statutes beyondthose prescribed by the Constitution have been observed is precluded by the principle ofseparation of powers;(3) That the law does not abridge freedom of speech, expression or the press, nor interfere withthe free exercise of religion, nor deny to any of the parties the right to an education; and(4) That, in view of the absence of a factual foundation of record, claims that the law isregressive, oppressive and confiscatory and that it violates vested rights protected under theContract Clause are prematurely raised and do not justify the grant of prospective relief by writ ofprohibition.

WHEREFORE, the petitions in these cases are DISMISSED.Bidin, Quiason, and Kapunan, JJ., concur.


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April 30, 1957G.R. No. L-9637AMERICAN BIBLE SOCIETY, plaintiff-appellant,vs.CITY OF MANILA, defendant-appellee.City Fiscal Eugenio Angeles and Juan Nabong for appellant.

Assistant City Fiscal Arsenio Naawa for appellee.Felix, J. :Plaintiff-appellant is a foreign, non-stock, non-profit, religious, missionary corporation dulyregistered and doing business in the Philippines through its Philippine agency established inManila in November, 1898, with its principal office at 636 Isaac Peral in said City. The defendant

appellee is a municipal corporation with powers that are to be exercised in conformity with theprovisions of Republic Act No. 409, known as the Revised Charter of the City of Manila.In the course of its ministry, plaintiffs Philippine agency has been distributing and selling biblesand/or gospel portions thereof (except during the Japanese occupation) throughout thePhilippines and translating the same into several Philippine dialects. On May 29 1953, the actingCity Treasurer of the City of Manila informed plaintiff that it was conducting the business ofgeneral merchandise since November, 1945, without providing itself with the necessary Mayors

permit and municipal license, in violation of Ordinance No. 3000, as amended, and OrdinancesNos. 2529, 3028 and 3364, and required plaintiff to secure, within three days, the correspondingpermit and license fees, together with compromise covering the period from the 4th quarter of1945 to the 2nd quarter of 1953, in the total sum of P5,821.45 (Annex A).Plaintiff protested against this requirement, but the City Treasurer demanded that plaintiffdeposit and pay under protest the sum of P5,891.45, if suit was to be taken in court regardingthe same (Annex B). To avoid the closing of its business as well as further fines and penalties inthe premises on October 24, 1953, plaintiff paid to the defendant under protest the said permit

and license fees in the aforementioned amount, giving at the same time notice to the CityTreasurer that suit would be taken in court to question the legality of the ordinances underwhich, the said fees were being collected (Annex C), which was done on the same date by filingthe complaint that gave rise to this action. In its complaint plaintiff prays that judgment berendered declaring the said Municipal Ordinance No. 3000, as amended, and Ordinances Nos.2529, 3028 and 3364 illegal and unconstitutional, and that the defendant be ordered to refund tothe plaintiff the sum of P5,891.45 paid under protest, together with legal interest thereon, and thecosts, plaintiff further praying for such other relief and remedy as the court may deem justequitable.Defendant answered the complaint, maintaining in turn that said ordinances were enacted by theMunicipal Board of the City of Manila by virtue of the power granted to it by section 2444,subsection (m-2) of the Revised Administrative Code, superseded on June 18, 1949, by section18, subsection (1) of Republic Act No. 409, known as the Revised Charter of the City of Manila,and praying that the complaint be dismissed, with costs against plaintiff. This answer was repliedby the plaintiff reiterating the unconstitutionality of the often-repeated ordinances.

Before trial the parties submitted the following stipulation of facts:COME NOW the parties in the above-entitled case, thru their undersigned attorneys andrespectfully submit the following stipulation of facts:1. That the plaintiff sold for the use of the purchasers at its principal office at 636 Isaac Peral,Manila, Bibles, New Testaments, bible portions and bible concordance in English and otherforeign languages imported by it from the United States as well as Bibles, New Testaments andbible portions in the local dialects imported and/or purchased locally; that from the fourth quarterof 1945 to the first quarter of 1953 inclusive the sales made by the plaintiff were as follows:Quarter

Amount of Sales4th quarter 1945 P1,244.211st quarter 1946

2,206.85

2nd quarter 1946 1,950.383rd quarter 1946 2,235.994th quarter 1946 3,256.041st quarter 1947 13,241.07

2nd quarter 1947 15,774.553rd quarter 1947 14,654.134th quarter 1947 12,590.941st quarter 1948 11,143.902nd quarter 1948 14,715.26

3rd quarter 1948 38,333.834th quarter 1948 16,179.901st quarter 1949 23,975.102nd quarter 1949 17,802.083rd quarter 1949 16,640.79

4th quarter 1949 15,961.381st quarter 1950 18,562.462nd quarter 1950 21,816.323rd quarter 1950 25,004.554th quarter 1950 45,287.92

1st quarter 1951


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37,841.212nd quarter 1951 29,103.983rd quarter 1951 20,181.104th quarter 1951 22,968.91

1st quarter 1952 23,002.652nd quarter 1952 17,626.963rd quarter 1952 17,921.014th quarter 1952 24,180.721st quarter 1953 29,516.21

2. That the parties hereby reserve the right to present evidence of other facts not hereinstipulated.WHEREFORE, it is respectfully prayed that this case be set for hearing so that the parties maypresent further evidence on their behalf. (Record on Appeal, pp. 15-16).When the case was set for hearing, plaintiff proved, among other things, that it has been inexistence in the Philippines since 1899, and that its parent society is in New York, United Statesof America; that its, contiguous real properties located at Isaac Peral are exempt from real estatetaxes; and that it was never required to pay any municipal license fee or tax before the war, nordoes the American Bible Society in the United States pay any license fee or sales tax for thesale of bible therein. Plaintiff further tried to establish that it never made any profit from the saleof its bibles, which are disposed of for as low as one third of the cost, and that in order tomaintain its operating cost it obtains substantial remittances from its New York office andvoluntary contributions and gifts from certain churches, both in the United States and in thePhilippines, which are interested in its missionary work. Regarding plaintiffs contention of lack ofprofit in the sale of bibles, defendant retorts that the admissions of plaintiff-appellants lone

witness who testified on cross-examination that bibles bearing the price of 70 cents each fromplaintiff-appellants New York office are sold here by plaintiff-appellant at P1.30 each; thosebearing the price of $4.50 each are sold here at P10 each; those bearing the price of $7 eachare sold here at P15 each; and those bearing the price of $11 each are sold here at P22 each,clearly show that plaintiffs contention that it never makes any profit from the sale of its bible, isevidently untenable.

After hearing the Court rendered judgment, the last part of which is as follows:As may be seen from the repealed section (m-2) of the Revised Administrative Code and therepealing portions (o) of section 18 of Republic Act No. 409, although they seemingly differ in theway the legislative intent is expressed, yet their meaning is practically the same for the purposeof taxing the merchandise mentioned in said legal provisions, and that the taxes to be levied bysaid ordinances is in the nature of percentage graduated taxes (Sec. 3 of Ordinance No. 3000,as amended, and Sec. 1, Group 2, of Ordinance No. 2529, as amended by Ordinance No.3364).IN VIEW OF THE FOREGOING CONSIDERATIONS, this Court is of the opinion and so holds

that this case should be dismissed, as it is hereby dismissed, for lack of merits, with costsagainst the plaintiff.

Not satisfied with this verdict plaintiff took up the matter to the Court of Appeals which certifiedthe case to Us for the reason that the errors assigned to the lower Court involved only questionsof law.

Appellant contends that the lower Court erred:1. In holding that Ordinances Nos. 2529 and 3000, as respectively amended, are notunconstitutional;2. In holding that subsection m-2 of Section 2444 of the Revised Administrative Code underwhich Ordinances Nos. 2592 and 3000 were promulgated, was not repealed by Section 18 ofRepublic Act No. 409;3. In not holding that an ordinance providing for taxes based on gross sales or receipts, in orderto be valid under the new Charter of the City of Manila, must first be approved by the President

of the Philippines; and4. In holding that, as the sales made by the plaintiff-appellant have assumed commercialproportions, it cannot escape from the operation of said municipal ordinances under the cloak ofreligious privilege.The issues. As may be seen from the proceeding statement of the case, the issues involved inthe present controversy may be reduced to the following: (1) whether or not the ordinances ofthe City of Manila, Nos. 3000, as amended, and 2529, 3028 and 3364, are constitutional andvalid; and (2) whether the provisions of said ordinances are applicable or not to the case at bar.Section 1, subsection (7) of Article III of the Constitution of the Republic of the Philippines,provides that:(7) No law shall be made respecting an establishment of religion, or prohibiting the free exercisethereof, and the free exercise and enjoyment of religious profession and worship, withoutdiscrimination or preference, shall forever be allowed. No religion test shall be required for theexercise of civil or political rights.Predicated on this constitutional mandate, plaintiff-appellant contends that Ordinances Nos.

2529 and 3000, as respectively amended, are unconstitutional and illegal in so far as its societyis concerned, because they provide for religious censorship and restrain the free exercise andenjoyment of its religious profession, to wit: the distribution and sale of bibles and other religiousliterature to the people of the Philippines.Before entering into a discussion of the constitutional aspect of the case, We shall first considerthe provisions of the questioned ordinances in relation to their application to the sale of bibles,etc. by appellant. The records, show that by letter of May 29, 1953 (Annex A), the City Treasurerrequired plaintiff to secure a Mayors permit in connection with the societys alleged business ofdistributing and selling bibles, etc. and to pay permit dues in the sum of P35 for the periodcovered in this litigation, plus the sum of P35 for compromise on account of plaintiffs failure tosecure the permit required by Ordinance No. 3000 of the City of Manila, as amended. ThisOrdinance is of general application and not particularly directed against institutions like theplaintiff, and it does not contain any provisions whatever prescribing religious censorship norrestraining the free exercise and enjoyment of any religious profession. Section 1 of OrdinanceNo. 3000 reads as follows:

SEC. 1. PERMITS NECESSARY. It shall be unlawful for any person or entity to conduct orengage in any of the businesses, trades, or occupations enumerated in Section 3 of thisOrdinance or other businesses, trades, or occupations for which a permit is required for theproper supervision and enforcement of existing laws and ordinances governing the sanitation,security, and welfare of the public and the health of the employees engaged in the businessspecified in said section 3 hereof, WITHOUT FIRST HAVING OBTAINED A PERMITTHEREFOR FROM THE MAYOR AND THE NECESSARY LICENSE FROM THE CITYTREASURER.The business, trade or occupation of the plaintiff involved in this case is not particularlymentioned in Section 3 of the Ordinance, and the record does not show that a permit is requiredtherefor under existing laws and ordinances for the proper supervision and enforcement of theirprovisions governing the sanitation, security and welfare of the public and the health of theemployees engaged in the business of the plaintiff. However, sections 3 of Ordinance 3000contains item No. 79, which reads as follows:79. All other businesses, trades or occupations not

mentioned in this Ordinance, except those upon which theCity is not empowered to license or to tax P5.00


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Therefore, the necessity of the permit is made to depend upon the power of the City to license ortax said business, trade or occupation.

As to the license fees that the Treasurer of the City of Manila required the society to pay fromthe 4th quarter of 1945 to the 1st quarter of 1953 in the sum of P5,821.45, including the sum ofP50 as compromise, Ordinance No. 2529, as amended by Ordinances Nos. 2779, 2821 and3028 prescribes the following:SEC. 1. FEES. Subject to the provisions of section 578 of the Revised Ordinances of the Cityof Manila, as amended, there shall be paid to the City Treasurer for engaging in any of thebusinesses or occupations below enumerated, quarterly, license fees based on gross sales orreceipts realized during the preceding quarter in accordance with the rates herein prescribed:PROVIDED, HOWEVER, That a person engaged in any businesses or occupation for the first

time shall pay the initial license fee based on the probable gross sales or receipts for the firstquarter beginning from the date of the opening of the business as indicated herein for thecorresponding business or occupation.x x x x x x x x xGROUP 2. Retail dealers in new (not yet used) merchandise, which dealers are not yet subjectto the payment of any municipal tax, such as (1) retail dealers in general merchandise; (2) retaildealers exclusively engaged in the sale of . . . books, including stationery.x x x x x x x x x

As may be seen, the license fees required to be paid quarterly in Section 1 of said OrdinanceNo. 2529, as amended, are not imposed directly upon any religious institution but upon thoseengaged in any of the business or occupations therein enumerated, such as retail dealers ingeneral merchandise which, it is alleged, cover the business or occupation of selling bibles,books, etc.Chapter 60 of the Revised Administrative Code which includes section 2444, subsection (m-2) ofsaid legal body, as amended by Act No. 3659, approved on December 8, 1929, empowers the

Municipal Board of the City of Manila:(M-2) To tax and fix the license fee on (a) dealers in new automobiles or accessories or both,and (b) retail dealers in new (not yet used) merchandise, which dealers are not yet subject to thepayment of any municipal tax.For the purpose of taxation, these retail dealers shall be classified as (1) retail dealers in generalmerchandise, and (2) retail dealers exclusively engaged in the sale of (a) textiles . . . (e) books,including stationery, paper and office supplies, . . .: PROVIDED, HOWEVER, That the combinedtotal tax of any debtor or manufacturer, or both, enumerated under these subsections (m-1) and(m-2), whether dealing in one or all of the articles mentioned herein, SHALL NOT BE INEXCESS OF FIVE HUNDRED PESOS PER ANNUM.and appellees counsel maintains that City Ordinances Nos. 2529 and 3000, as amended, wereenacted in virtue of the power that said Act No. 3669 conferred upon the City of Manila.

Appellant, however, contends that said ordinances are longer in force and effect as the lawunder which they were promulgated has been expressly repealed by Section 102 of Republic

Act No. 409 passed on June 18, 1949, known as the Revised Manila Charter.

Passing upon this point the lower Court categorically stated that Republic Act No. 409 expresslyrepealed the provisions of Chapter 60 of the Revised Administrative Code but in the opinion ofthe trial Judge, although Section 2444 (m-2) of the former Manila Charter and section 18 (o) ofthe new seemingly differ in the way the legislative intent was expressed, yet their meaning ispractically the same for the purpose of taxing the merchandise mentioned in both legalprovisions and, consequently, Ordinances Nos. 2529 and 3000, as amended, are to beconsidered as still in full force and effect uninterruptedly up to the present.Often the legislature, instead of simply amending the pre-existing statute, will repeal the oldstatute in its entirety and by the same enactment re-enact all or certain portions of thepreexisting law. Of course, the problem created by this sort of legislative action involves mainlythe effect of the repeal upon rights and liabilities which accrued under the original statute. Arethose rights and liabilities destroyed or preserved? The authorities are divided as to the effect ofsimultaneous repeals and re-enactments. Some adhere to the view that the rights and liabilitiesaccrued under the repealed act are destroyed, since the statutes from which they sprang areactually terminated, even though for only a very short period of time. Others, and they seem to

be in the majority, refuse to accept this view of the situation, and consequently maintain that allrights an liabilities which have accrued under the original statute are preserved and may be

enforced, since the re-enactment neutralizes the repeal, therefore, continuing the law in forcewithout interruption. (Crawford-Statutory Construction, Sec. 322).

Appellants counsel states that section 18 (o) of Republic Act No, 409 introduces a new and

wider concept of taxation and is different from the provisions of Section 2444(m-2) that theformer cannot be considered as a substantial re-enactment of the provisions of the latter. Wehave quoted above the provisions of section 2444(m-2) of the Revised Administrative Code andWe shall now copy hereunder the provisions of Section 18, subdivision (o) of Republic Act No.409, which reads as follows:(o) To tax and fix the license fee on dealers in general merchandise, including importers andindentors, except those dealers who may be expressly subject to the payment of some othermunicipal tax under the provisions of this section.

Dealers in general merchandise shall be classified as (a) wholesale dealers and (b) retaildealers. For purposes of the tax on retail dealers, general merchandise shall be classified intofour main classes: namely (1) luxury articles, (2) semi-luxury articles, (3) essential commodities,and (4) miscellaneous articles. A separate license shall be prescribed for each class but wherecommodities of different classes are sold in the same establishment, it shall not be compulsoryfor the owner to secure more than one license if he pays the higher or highest rate of taxprescribed by ordinance. Wholesale dealers shall pay the license tax as such, as may beprovided by ordinance.For purposes of this section, the term General merchandise shall include poultry and livestock,agricultural products, fish and other allied products.The only essential difference that We find between these two provisions that may have anybearing on the case at bar, is that, while subsection (m-2) prescribes that the combined total taxof any dealer or manufacturer, or both, enumerated under subsections (m-1) and (m-2), whetherdealing in one or all of the articles mentioned therein, shall not be in excess of P500 per annum,the corresponding section 18, subsection (o) of Republic Act No. 409, does not contain any

limitation as to the amount of tax or license fee that the retail dealer has to pay per annum.Hence, and in accordance with the weight of the authorities above referred to that maintain thatall rights and liabilities which have accrued under the original statute are preserved and may beenforced, since the reenactment neutralizes the repeal, therefore continuing the law in forcewithout interruption, We hold that the questioned ordinances of the City of Manila are still i nforce and effect.Plaintiff, however, argues that the questioned ordinances, to be valid, must first be approved bythe President of the Philippines as per section 18, subsection (ii) of Republic Act No. 409, whichreads as follows:(ii) To tax, license and regulate any business, trade or occupation being conducted within theCity of Manila, not otherwise enumerated in the preceding subsections, including percentagetaxes based on gross sales or receipts, subject to the approval of the PRESIDENT, exceptamusement taxes.but this requirement of the Presidents approval was not contained in section 2444 of the formerCharter of the City of Manila under which Ordinance No. 2529 was promulgated. Anyway, as

stated by appellees counsel, the business of retail dealers in general merchandise is expresslyenumerated in subsection (o), section 18 of Republic Act No. 409; hence, an ordinanceprescribing a municipal tax on said business does not have to be approved by the President tobe effective, as it is not among those referred to in said subsection (ii). Moreover, the questionedordinances are still in force, having been promulgated by the Municipal Board of the City ofManila under the authority granted to it by law.The question that now remains to be determined is whether said ordinances are inapplicable,invalid or unconstitutional if applied to the alleged business of distribution and sale of bibles tothe people of the Philippines by a religious corporation like the American Bible Society, plaintiffherein.With regard to Ordinance No. 2529, as amended by Ordinances Nos. 2779, 2821 and 3028,appellant contends that it is unconstitutional and illegal because it restrains the free exercise andenjoyment of the religious profession and worship of appellant.

Article III, section 1, clause (7) of the Constitution of the Philippines aforequoted, guarantees thefreedom of religious profession and worship. Religion has been spoken of as a profession of

faith to an active power that binds and elevates man to its Crea tor (Aglipay vs. Ruiz, 64 Phil.201).It has reference to ones views of his relations to His Creator and to the obligations they


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impose of reverence to His being and character, and obedience to His Will (Davis vs. Beason,133 U.S. 342). The constitutional guaranty of the free exercise and enjoyment of religiousprofession and worship carries with it the right to disseminate religious information. Anyrestraints of such right can only be justified like other restraints of freedom of expression on thegrounds that there is a clear and present danger of any substantive evil which the State has theright to prevent. (Taada and Fernando on the Constitution of the Philippines, Vol. 1, 4th ed., p.297). In the case at bar the license fee herein involved is imposed upon appellant for itsdistribution and sale of bibles and other religious literature:In the case of Murdock vs. Pennsylvania, it was held that an ordinance requiring that a licensebe obtained before a person could canvass or solicit orders for goods, paintings, pictures, waresor merchandise cannot be made to apply to members of Jehovahs Witnesses who went about

from door to door distributing literature and soliciting people to purchase certain religious booksand pamphlets, all published by the Wa tch Tower Bible & Tract Society. The price of the bookswas twenty-five cents each, the price of the pamphlets five cents each. It was shown that inmaking the solicitations there was a request for additional contribution of twenty -five centseach for the books and five cents each for the pamphlets. Lesser sum were accepted, however,and books were even donated in case interested persons were without funds.On the above facts the Supreme Court held that it could not be said that petitioners wereengaged in commercial rather than a religious venture. Their activities could not be described asembraced in the occupation of selling books and pamphlets. Then the Court continued:We do not mean to say that religious groups and the press are free from all financial burdens ofgovernment. See Grosjean vs. American Press Co., 297 U.S. 233, 250, 80 L. ed. 660, 668, 56S. Ct. 444. We have here something quite different, for example, from a tax on the income ofone who engages in religious activities or a tax on property used or employed in connection withactivities. It is one thing to impose a tax on the income or property of a preacher. It is quiteanother to exact a tax from him for the privilege of delivering a sermon. The tax imposed by the

City of Jeannette is a flat license tax, payment of which is a condition of the exercise of theseconstitutional privileges. The power to tax the exercise of a privilege is the power to control orsuppress its enjoyment. . . . Those who can tax the exercise of this religious practice can makeits exercise so costly as to deprive it of the resources necessary for its maintenance. Those whocan tax the privilege of engaging in this form of missionary evangelism can close all its doors toall those who do not have a full purse. Spreading religious beliefs in this ancient and honorablemanner would thus be denied the needy. . . .It is contended however that the fact that the license tax can suppress or control this activity isunimportant if it does not do so. But that is to disregard the nature of this tax. It is a license taxa flat tax imposed on the exercise of a privilege granted by the Bill of Rights . . . The power toimpose a license tax on the exercise of these freedom is indeed as potent as the power ofcensorship which this Court has repeatedly struck down. . . . It is not a nominal fee imposed as aregulatory measure to defray the expenses of policing the activities in question. It is in no wayapportioned. It is flat license tax levied and collected as a condition to the pursuit of activitieswhose enjoyment is guaranteed by the constitutional liberties of press and religion and inevitably

tends to suppress their exercise. That is almost uniformly recognized as the inherent vice andevil of this flat license tax.Nor could dissemination of religious information be conditioned upon the approval of an officialor manager even if the town were owned by a corporation as held in the case of Marsh vs. Stateof Alabama (326 U.S. 501), or by the United States itself as held in the case of Tucker vs. Texas(326 U.S. 517). In the former case the Supreme Court expressed the opinion that the right toenjoy freedom of the press and religion occupies a preferred position as against theconstitutional right of property owners.When we balance the constitutional rights of owners of property against those of the people toenjoy freedom of press and religion, as we must here, we remain mindful of the fact that thelatter occupy a preferred position. . . . In our view the circumstance that the property rights to thepremises where the deprivation of property here involved, took place, were held by others thanthe public, is not sufficient to justify the States permitting a corporation to govern a community ofcitizens so as to restrict their fundamental liberties and the enforcement of such restraint by theapplication of a State statute. (Taada and Fernando on the Constitution of the Philippines, Vol.

1, 4th ed., p. 304-306).Section 27 of Commonwealth Act No. 466, otherwise known as the National Internal Revenue

Code, provides:SEC. 27. EXEMPTIONS FROM TAX ON CORPORATIONS. The following organizations shallnot be taxed under this Title in respect to income received by them as such (e) Corporations or associations organized and operated exclusively for religious, charitable, . . .or educational purposes, . . .: Provided, however, That the income of whatever kind andcharacter from any of its properties, real or personal, or from any activity conducted for profit,regardless of the disposition made of such income, shall be liable to the tax imposed under thisCode;

Appellants counsel claims that the Collector of Internal Revenue has exempted the plaintiff fromthis tax and says that such exemption clearly indicates that the act of distributing and sellingbibles, etc. is purely religious and does not fall under the above legal provisions.

It may be true that in the case at bar the price asked for the bibles and other religious pamphletswas in some instances a little bit higher than the actual cost of the same but this cannot meanthat appellant was engaged in the business or occupation of selling said merchandise for profit.For this reason We believe that the provisions of City of Manila Ordinance No. 2529, asamended, cannot be applied to appellant, for in doing so it would impair its free exercise andenjoyment of its religious profession and worship as well as its rights of dissemination ofreligious beliefs.With respect to Ordinance No. 3000, as amended, which requires the ob tention the Mayorspermit before any person can engage in any of the businesses, trades or occupationsenumerated therein, We do not find that it imposes any charge upon the enjoyment of a rightgranted by the Constitution, nor tax the exercise of religious practices. In the case of Colemanvs. City of Griffin, 189 S.E. 427, this point was elucidated as follows:

An ordinance by the City of Griffin, declaring that the practice of distributing either by hand orotherwise, circulars, handbooks, advertising, or literature of any kind, whether said articles arebeing delivered free, or whether same are being sold within the city limits of the City of Griffin,

without first obtaining written permission from the city manager of the City of Griffin, shall bedeemed a nuisance and punishable as an offense against the City of Griffin, does not deprivedefendant of his constitutional right of the free exercise and enjoyment of religious professionand worship, even though it prohibits him from introducing and carrying out a scheme or purposewhich he sees fit to claim as a part of his religious system.It seems clear, therefore, that Ordinance No. 3000 cannot be considered unconstitutional, evenif applied to plaintiff Society. But as Ordinance No. 2529 of the City of Manila, as amended, isnot applicable to plaintiff-appellant and defendant-appellee is powerless to license or tax thebusiness of plaintiff Society involved herein for, as stated before, it would impair plaintiffs right tothe free exercise and enjoyment of its religious profession and worship, as well as its rights ofdissemination of religious beliefs, We find that Ordinance No. 3000, as amended is alsoinapplicable to said business, trade or occupation of the plaintiff.Wherefore, and on the strength of the foregoing considerations, We hereby reverse the decisionappealed from, sentencing defendant return to plaintiff the sum of P5,891.45 unduly collectedfrom it. Without pronouncement as to costs. It is so ordered.

Bengzon, Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion and Endencia, JJ.,concur.


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G.R. No. 131359 May 5, 1999MANILA ELECTRIC COMPANY, petitioner,vs.PROVINCE OF LAGUNA and BENITO R. BALAZO, in his capacity as Provincial Treasurerof Laguna,respondents.

VITUG, J.:On various dates, certain municipalities of the Province of Laguna, including, Bian, Sta. Rosa,San Pedro, Luisiana, Calauan and Cabuyao, by virtue of existing laws then in effect, issuedresolutions through their respective municipal councils granting franchise in favor of petitionerManila Electric Company ("MERALCO") for the supply of electric light, heat and power withintheir concerned areas. On 19 January 1983, MERALCO was likewise granted a franchise by theNational Electrification Administration to operate an electric light and power service in theMunicipality of Calamba, Laguna.On 12 September 1991, Republic Act No. 7160, otherwise known as the "Local GovernmentCode of 1991," was enacted to take effect on 01 January 1992 enjoining local government unitsto create their own sources of revenue and to levy taxes, fees and charges, subject to thelimitations expressed therein, consistent with the basic policy of local autonomy. Pursuant to theprovisions of the Code, respondent province enacted Laguna Provincial Ordinance No. 01-92,effective 01 January 1993, providing, in part, as follows:

Sec. 2.09. Franchise Tax. There is hereby imposed a tax on businessesenjoying a franchise, at a rate of fifty percent (50%) of one percent (1%) ofthe gross annual receipts, which shall include both cash sales and sales onaccount realized during the preceding calendar year within this province,including the territorial limits on any city located in the province.

On the basis of the above ordinance, respondent Provincial Treasurer sent a demand letter toMERALCO for the corresponding tax payment. Petitioner MERALCO paid the tax, which thenamounted to P19,520.628.42, under protest. A formal claim for refund was thereafter sent byMERALCO to the Provincial Treasurer of Laguna claiming that the franchise tax it had paid andcontinued to pay to the National Government pursuant to P.D. 551 already included thefranchise tax imposed by the Provincial Tax Ordinance. MERALCO, contended that theimposition of a franchise tax under Section 2.09 of Laguna Provincial Ordinance No. 01-92,insofar as it concerned MERALCO, contravened the provisions of Section 1 of P.D. 551 whichread:

Any provision of law or local ordinance to the contrary notwithstanding, thefranchise tax payable by all grantees of franchises to generate, distributeand sell electric current for light, heat and power shall be two per cent (2%)of their gross receipts received from the sale of electric current and fromtransactions incident to the generation, distribution and sale of electriccurrent.

Such franchise tax shall be payable to the Commissioner of InternalRevenue or his duly authorized representative on or before the twentiethday of the month following the end of each calendar quarter or month, asmay be provided in the respective franchise or pertinent municipalregulation and shall, any provision of the Local Tax Code or any other law tothe contrary notwithstanding, be in lieu of all taxes and assessments ofwhatever nature imposed by any national or local authority on earnings,receipts, income and privilege of generation, distribution and sale of electriccurrent.

On 28 August 1995, the claim for refund of petitioner was denied in a letter signed by GovernorJose D. Lina relied on a more recent law, i.e. Republic Act No. 7160 or the Local GovernmentCode of 1991, than the old decree invoked by petitioner.On 14 February 1996, petitioner MERALCO filed with the Regional Trial Court of Sta. Cruz,Laguna, a complaint for refund, with a prayer for the issuance of a writ of preliminary injunctionand/or temporary restraining order, against the Province of Laguna and also Benito R. Balazo in

his capacity as the Provincial Treasurer of Laguna. Aside from the amount of P19,520,628.42 for

which petitioner MERALCO had priorly made a formal request for refund, petitioner thereafterlikewise made additional payments under protest on various dates totaling P27,669,566.91.The trial court, in its assailed decision of 30 September 1997, dismissed the complaint andconcluded:

WHEREFORE, IN THE LIGHT OF ALL THE FOREGOINGCONSIDERATIONS, JUDGMENT is hereby rendered in favor of thedefendants and against the plaintiff, by:1. Ordering the dismissal of the Complaint; and2. Declaring Laguna Provincial Tax Ordinance No

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