CASE DIGEST : Tolentino v. Secretary of Finance; David v. Guingona; Roco and IBP v. Secretary of Finance; Philippine Press Institute, Inc. v. Chato G.R. Nos. 115455, 115525, 115543 & 115544, October 30, 1995 Supreme Court En Banc

 

FACTS

These consolidated cases involved motions for reconsideration of the Supreme Court's earlier decision upholding the constitutionality of Republic Act No. 7716, otherwise known as the Expanded Value-Added Tax (E-VAT) Law. The petitioners questioned R.A. No. 7716 on several constitutional grounds, including the manner of its enactment, the alleged violation of the constitutional requirement that revenue bills originate exclusively in the House of Representatives, and alleged violations of due process, equal protection, freedom of the press, and the constitutional policies on taxation and cooperatives.

One of the principal challenges concerned Article VI, Section 24 of the 1987 Constitution, which provides that all appropriation, revenue, or tariff bills must originate exclusively in the House of Representatives, although the Senate may propose or concur with amendments. The petitioners argued that the Senate went beyond its constitutional authority when it introduced its own version of the E-VAT measure. They also questioned the legislative procedure followed in passing the law, including the alleged amendments made during the final stages of congressional action.

The petitioners further attacked the substantive provisions of R.A. No. 7716. Philippine Airlines (PAL) questioned the withdrawal of its VAT exemption, arguing that the amendment of its franchise exemption was not sufficiently expressed in the title of the law. Philippine Press Institute (PPI) argued that imposing VAT on the press violated freedom of the press and equal protection. Other petitioners argued that the law impaired contractual obligations, violated the constitutional requirements of uniformity and equity in taxation, and improperly subjected cooperatives to VAT.

The Supreme Court had previously dismissed the petitions and upheld R.A. No. 7716. The petitioners filed motions for reconsideration, resulting in the October 30, 1995 Resolution. The Court reconsidered the arguments raised but ultimately maintained its conclusion that R.A. No. 7716 did not suffer from the constitutional infirmities alleged by the petitioners.

ISSUE

The first issue was whether R.A. No. 7716 was unconstitutional because it did not originate exclusively in the House of Representatives, as allegedly required by Article VI, Section 24 of the 1987 Constitution. The Court had to determine the extent of the Senate's constitutional authority to propose or concur with amendments to revenue bills that originate in the House.

The second issue was whether the substantive provisions of R.A. No. 7716 violated the Constitution, particularly the requirements concerning the title of bills under Article VI, Section 26(1), freedom of the press, due process, equal protection, non-impairment of contracts, uniformity and equity in taxation, and the constitutional policy concerning cooperatives. The Court also considered whether the withdrawal of particular VAT exemptions and the expansion of the VAT base were constitutionally permissible.

HELD

The Supreme Court DENIED the motions for reconsideration with finality and maintained its previous ruling upholding the constitutionality of R.A. No. 7716. On the issue of legislative origin, the Court held that although revenue bills must originate exclusively in the House, the Senate has broad authority under Article VI, Section 24 of the Constitution to propose or concur with amendments. The Court held that the Senate may introduce an entirely new bill as a substitute measure, provided that the measure remains an amendment to the House bill in the constitutional sense.

The Court explained that the word "exclusively" in Article VI, Section 24 qualifies the requirement that the revenue bill must originate in the House; it does not restrict the Senate's authority to propose amendments. The Court noted that the Senate's power to amend may be extensive and may even result in the substitution of the entire text of the House bill. The Court therefore rejected the argument that the Senate was constitutionally required merely to make minor or limited amendments to the House version.

The Court also rejected the challenge based on Article VI, Section 26(1), which requires every bill to embrace only one subject expressed in its title. With respect to PAL, the Court held that the title of R.A. No. 7716 sufficiently expressed its subject because the law expressly sought to restructure the VAT system, widen its tax base, and amend the relevant provisions of the National Internal Revenue Code. It was therefore unnecessary for the title to specifically identify every special law or franchise whose VAT exemption would be affected. The Court likewise held that the conference committee could introduce provisions germane to the subject of the bill, provided that its report was approved by both Houses.

The Court rejected the argument that imposing VAT upon the press violated freedom of the press. It distinguished VAT from a license or privilege tax. VAT is imposed upon the sale, barter, lease, or exchange of goods or properties and the sale or exchange of services for revenue purposes; it is not a tax imposed upon the exercise of the constitutional right to publish. The Court therefore held that subjecting the press to VAT did not, by itself, burden freedom of the press. The Court also found no unconstitutional discrimination in the exemptions retained by R.A. No. 7716 because the exempt transactions had reasonable classifications and included basic goods and services, agricultural products, educational and medical services, certain exports, and other transactions specifically identified by law.

The Court likewise rejected the claim that R.A. No. 7716 impaired the obligation of contracts. It reiterated that the government's power of taxation is an essential attribute of sovereignty and that the possibility of the lawful exercise of that power is read into contracts. The imposition of a new or increased tax does not constitute impairment of a contract merely because it increases the financial burden upon a party. The Court further rejected the challenges based on uniformity and equity of taxation and the constitutional policy favoring cooperatives, finding no constitutional infirmity in the classifications made by Congress.

Accordingly, the Court concluded that R.A. No. 7716 suffered from none of the constitutional infirmities alleged by the petitioners and that its enactment did not constitute grave abuse of discretion by Congress or the Executive. The Court DENIED the motions for reconsideration with finality and lifted the temporary restraining order previously issued against the enforcement of the law. The separate opinions and dissents remained as stated in the Resolution.