Taxation Case 4

7/28/2019 Taxation Case 4

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G.R. No. L-9637 April 30, 1957

AMERICAN 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, missionarycorporation duly registered and doing business in the Philippines through itsPhilippine agency established in Manila in November, 1898, with its principal officeat 636 Isaac Peral in said City. The defendant appellee is a municipal corporation with

powers that are to be exercised in conformity with the provisions of Republic Act No.409, known as the Revised Charter of the City of Manila.

In the course of its ministry, plaintiff's Philippine agency has been distributing andselling bibles and/or gospel portions thereof (except during the Japanese occupation)throughout the Philippines and translating the same into several Philippine dialects.On May 29 1953, the acting City Treasurer of the City of Manila informed plaintiffthat it was conducting the business of general merchandise since November, 1945,without providing itself with the necessary Mayor's permit and municipal license, inviolation of Ordinance No. 3000, as amended, and Ordinances Nos. 2529, 3028 and

3364, and required plaintiff to secure, within three days, the corresponding permit andlicense 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 thatplaintiff deposit and pay under protest the sum of P5,891.45, if suit was to be taken incourt regarding the same (Annex B). To avoid the closing of its business as well asfurther fines and penalties in the premises on October 24, 1953, plaintiff paid to thedefendant under protest the said permit and license fees in the aforementionedamount, giving at the same time notice to the City Treasurer that suit would be taken

in court to question the legality of the ordinances under which, the said fees werebeing collected (Annex C), which was done on the same date by filing the complaintthat gave rise to this action. In its complaint plaintiff prays that judgment be rendereddeclaring the said Municipal Ordinance No. 3000, as amended, and Ordinances Nos.2529, 3028 and 3364 illegal and unconstitutional, and that the defendant be ordered torefund to the plaintiff the sum of P5,891.45 paid under protest, together with legal


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interest thereon, and the costs, plaintiff further praying for such other relief andremedy as the court may deem just equitable.

Defendant answered the complaint, maintaining in turn that said ordinances wereenacted by the Municipal 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 section 18, subsection (1) of Republic Act No. 409,known as the Revised Charter of the City of Manila, and praying that the complaint bedismissed, with costs against plaintiff. This answer was replied by the plaintiffreiterating 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 undersignedattorneys and respectfully submit the following stipulation of facts:

1. That the plaintiff sold for the use of the purchasers at its principal office at636 Isaac Peral, Manila, Bibles, New Testaments, bible portions and bibleconcordance in English and other foreign languages imported by it from theUnited States as well as Bibles, New Testaments and bible portions in the localdialects imported and/or purchased locally; that from the fourth quarter of 1945to the first quarter of 1953 inclusive the sales made by the plaintiff were asfollows:

Quarter Amount of

Sales

4th quarter1945

P1,244.21

1st quarter 1946 2,206.85

2nd quarter1946

1,950.38

3rd quarter1946

2,235.99

4th quarter1946

3,256.04

1st quarter 1947 13,241.07

2nd quarter1947

15,774.55


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3rd quarter1947

14,654.13

4th quarter1947

12,590.94

1st quarter 1948 11,143.90

2nd quarter1948

14,715.26

3rd quarter1948

38,333.83

4th quarter1948

16,179.90

1st quarter 1949 23,975.10

2nd quarter1949

17,802.08

3rd quarter1949

16,640.79

4th quarter1949

15,961.38

1st quarter 1950 18,562.46

2nd quarter1950

21,816.32

3rd quarter1950

25,004.55

4th quarter1950

45,287.92

1st quarter 1951 37,841.21

2nd quarter1951

29,103.98

3rd quarter1951

20,181.10

4th quarter1951

22,968.91

1st quarter 1952 23,002.65

2nd quarter 17,626.96


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1952

3rd quarter1952

17,921.01

4th quarter

1952

24,180.72

1st quarter 1953 29,516.21

2. That the parties hereby reserve the right to present evidence of other facts notherein stipulated.

WHEREFORE, it is respectfully prayed that this case be set for hearing so thatthe parties may present 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 hasbeen in existence in the Philippines since 1899, and that its parent society is in NewYork, United States of America; that its, contiguous real properties located at IsaacPeral are exempt from real estate taxes; and that it was never required to pay anymunicipal license fee or tax before the war, nor does the American Bible Society inthe United States pay any license fee or sales tax for the sale of bible therein. Plaintifffurther tried to establish that it never made any profit from the sale of its bibles, whichare disposed of for as low as one third of the cost, and that in order to maintain itsoperating cost it obtains substantial remittances from its New York office and

voluntary contributions and gifts from certain churches, both in the United States andin the Philippines, which are interested in its missionary work. Regarding plaintiff'scontention of lack of profit in the sale of bibles, defendant retorts that the admissionsof plaintiff-appellant's lone witness who testified on cross-examination that bibles

bearing the price of 70 cents each from plaintiff-appellant's New York office are soldhere by plaintiff-appellant at P1.30 each; those bearing the price of $4.50 each aresold here at P10 each; those bearing the price of $7 each are sold here at P15 each;and those bearing the price of $11 each are sold here at P22 each, clearly show that

plaintiff's 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 AdministrativeCode and the repealing portions (o) of section 18 of Republic Act No. 409,although they seemingly differ in the way the legislative intent is expressed, yettheir meaning is practically the same for the purpose of taxing the merchandise


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mentioned in said legal provisions, and that the taxes to be levied by saidordinances 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, asamended by Ordinance No. 3364).

IN VIEW OF THE FOREGOING CONSIDERATIONS, this Court is of theopinion and so holds that this case should be dismissed, as it is herebydismissed, for lack of merits, with costs against the plaintiff.

Not satisfied with this verdict plaintiff took up the matter to the Court of Appealswhich certified the case to Us for the reason that the errors assigned to the lower Courtinvolved only questions of law.

Appellant contends that the lower Court erred:

1. In holding that Ordinances Nos. 2529 and 3000, as respectively amended, arenot unconstitutional;

2. In holding that subsection m-2 of Section 2444 of the RevisedAdministrative Code under which Ordinances Nos. 2592 and 3000 were

promulgated, was not repealed by Section 18 of Republic Act No. 409;

3. In not holding that an ordinance providing for taxes based on gross sales orreceipts, in order to be valid under the new Charter of the City of Manila, mustfirst be approved by the President of the Philippines; and

4. In holding that, as the sales made by the plaintiff-appellant have assumedcommercial proportions, it cannot escape from the operation of said municipalordinances under the cloak of religious privilege.

The issues. As may be seen from the proceeding statement of the case, the issuesinvolved in the present controversy may be reduced to the following: (1) whether ornot the ordinances of the City of Manila, Nos. 3000, as amended, and 2529, 3028 and3364, are constitutional and valid; and (2) whether the provisions of said ordinancesare applicable or not to the case at bar.

Section 1, subsection (7) of Article III of the Constitution of the Republic of thePhilippines, provides that:

(7) No law shall be made respecting an establishment of religion, or prohibitingthe free exercise thereof, and the free exercise and enjoyment of religious

profession and worship, without discrimination or preference, shall forever be


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allowed. No religion test shall be required for the exercise of civil or politicalrights.

Predicated on this constitutional mandate, plaintiff-appellant contends that OrdinancesNos. 2529 and 3000, as respectively amended, are unconstitutional and illegal in so

far as its society is concerned, because they provide for religious censorship andrestrain the free exercise and enjoyment of its religious profession, to wit: thedistribution and sale of bibles and other religious literature to the people of thePhilippines.

Before entering into a discussion of the constitutional aspect of the case, We shall firstconsider the provisions of the questioned ordinances in relation to their application tothe sale of bibles, etc. by appellant. The records, show that by letter of May 29, 1953(Annex A), the City Treasurer required plaintiff to secure a Mayor's permit inconnection with the society's alleged business of distributing and selling bibles, etc.

and to pay permit dues in the sum of P35 for the period covered in this litigation, plusthe sum of P35 for compromise on account of plaintiff's failure to secure the permitrequired by Ordinance No. 3000 of the City of Manila, as amended. This Ordinance isof general application and not particularly directed against institutions like the

plaintiff, and it does not contain any provisions whatever prescribing religiouscensorship nor restraining the free exercise and enjoyment of any religious profession.Section 1 of Ordinance No. 3000 reads as follows:

SEC. 1. PERMITS NECESSARY. It shall be unlawful for any person orentity to conduct or engage in any of the businesses, trades, oroccupations enumerated in Section 3 of this Ordinance or other businesses,trades, or occupations for which a permit is required for the proper

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 business specified in said section 3 hereof, WITHOUT FIRSTHAVING OBTAINED A PERMIT THEREFOR FROM THE MAYOR ANDTHE NECESSARY LICENSE FROM THE CITY TREASURER.

The business, trade or occupation of the plaintiff involved in this case is notparticularly mentioned in Section 3 of the Ordinance, and the record does not showthat a permit is required therefor under existing laws and ordinances for the propersupervision and enforcement of their provisions governing the sanitation, security andwelfare of the public and the health of the employees engaged in the business of the

plaintiff. However, sections 3 of Ordinance 3000 contains item No. 79, which reads asfollows:


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79. All other businesses, trades or occupations notmentioned in this Ordinance, except those upon which theCity is not empowered to license or to tax P5.00

Therefore, the necessity of the permit is made to depend upon the power of the City to

license or tax said business, trade or occupation.

As to the license fees that the Treasurer of the City of Manila required the society topay from the 4th quarter of 1945 to the 1st quarter of 1953 in the sum of P5,821.45,including the sum of P50 as compromise, Ordinance No. 2529, as amended byOrdinances Nos. 2779, 2821 and 3028 prescribes the following:

SEC. 1. FEES. Subject to the provisions of section 578 of the RevisedOrdinances of the City of Manila, as amended, there shall be paid to the CityTreasurer for engaging in any of the businesses or occupations below

enumerated, quarterly, license fees based on gross sales or receipts realizedduring the preceding quarter in accordance with the rates herein prescribed:PROVIDED, HOWEVER, That a person engaged in any businesses oroccupation for the first time shall pay the initial license fee based on the

probable gross sales or receipts for the first quarter beginning from the date ofthe opening of the business as indicated herein for the corresponding businessor occupation.

x x x x x x x x x

GROUP 2. Retail dealers in new (not yet used) merchandise, which dealersare not yet subject to the payment of any municipal tax, such as (1) retaildealers in general merchandise; (2) retail dealers exclusively engaged in thesale 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 saidOrdinance No. 2529, as amended, are not imposed directly upon any religiousinstitution but upon those engaged in any of the business or occupations therein

enumerated, such as retail "dealers in general merchandise" which, it is alleged, coverthe business or occupation of selling bibles, books, etc.

Chapter 60 of the Revised Administrative Code which includes section 2444,subsection (m-2) of said legal body, as amended by Act No. 3659, approved on

December 8, 1929, empowers the Municipal Board of the City of Manila:


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(M-2) To tax and fix the license fee on (a) dealers in new automobiles oraccessories or both, and (b) retail dealers in new (not yet used) merchandise,which dealers are not yet subject to the payment of any municipal tax.

For the purpose of taxation, these retail dealers shall be classified as (1) retail

dealers in general merchandise, and (2) retail dealers exclusively engaged in thesale of (a) textiles . . . (e) books, including stationery, paper and office supplies,. . .: PROVIDED, HOWEVER, That the combined total tax of any debtor ormanufacturer, 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

IN EXCESS OF FIVE HUNDRED PESOS PER ANNUM.

and appellee's counsel maintains that City Ordinances Nos. 2529 and 3000, asamended, were enacted in virtue of the power that said Act No. 3669 conferred uponthe City of Manila. Appellant, however, contends that said ordinances are longer in

force and effect as the law under which they were promulgated has been expresslyrepealed by Section 102 of Republic Act No. 409 passed onJune 18, 1949, known asthe Revised Manila Charter.

Passing upon this point the lower Court categorically stated that Republic Act No. 409expressly repealed the provisions of Chapter 60 of the Revised Administrative Code

but in the opinion of the trial Judge, although Section 2444 (m-2) of the formerManila Charter and section 18 (o) of the new seemingly differ in the way thelegislative intent was expressed, yet their meaning is practically the same for the

purpose of taxing the merchandise mentioned in both legal provisions and,consequently, Ordinances Nos. 2529 and 3000, as amended, are to be considered asstill in full force and effect uninterruptedly up to the present.

Often the legislature, instead of simply amending the pre-existing statute, willrepeal the old statute in its entirety and by the same enactment re-enact all orcertain portions of the preexisting law. Of course, the problem created by thissort of legislative action involves mainly the effect of the repeal upon rightsand liabilities which accrued under the original statute. Are those rights andliabilities destroyed or preserved? The authorities are divided as to the effect ofsimultaneous repeals and re-enactments. Some adhere to the view that therights and liabilities accrued under the repealed act are destroyed, since thestatutes from which they sprang are actually terminated, even though for only avery short period of time. Others, and they seem to be in the majority, refuse toaccept this view of the situation, and consequently maintain that all rights an

liabilities which have accrued under the original statute are preserved and

may be enforced, since the re-enactment neutralizes the repeal, therefore,


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continuing the law in force without interruption. (Crawford-StatutoryConstruction, Sec. 322).

Appellant's counsel states that section 18 (o) of Republic Act No, 409 introduces anew and wider concept of taxation and is different from the provisions of Section

2444(m-2) that the former cannot be considered as a substantial re-enactment of theprovisions of the latter. We have quoted above the provisions of section 2444(m-2) ofthe Revised Administrative Code and We shall now copy hereunder the provisions ofSection 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, includingimporters and indentors, except those dealers who may be expressly subject tothe payment of some other municipal tax under the provisions of this section.

Dealers in general merchandise shall be classified as (a) wholesale dealers and

(b) retail dealers. For purposes of the tax on retail dealers, general merchandiseshall be classified into four main classes: namely (1) luxury articles, (2) semi-luxury articles, (3) essential commodities, and (4) miscellaneous articles. Aseparate license shall be prescribed for each class but where commodities ofdifferent 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 highestrate of tax prescribed by ordinance. Wholesale dealers shall pay the license taxas such, as may be provided 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 mayhave any bearing on the case at bar, is that, while subsection (m-2) prescribes that thecombined total tax of any dealer or manufacturer, or both, enumerated undersubsections (m-1) and (m-2), whether dealing in one or all of the articles mentionedtherein,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 theamount of tax or license fee that the retail dealer has to pay per annum. Hence, and inaccordance with the weight of the authorities above referred to that maintain that "allrights and liabilities which have accrued under the original statute are preserved andmay be enforced, since the reenactment neutralizes the repeal, therefore continuingthe law in force without interruption", We hold that the questioned ordinances of theCity of Manila are still in force and effect.


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Plaintiff, however, argues that the questioned ordinances, to be valid, must first beapproved by the President of the Philippines as per section 18, subsection (ii) ofRepublic Act No. 409, which reads as follows:

(ii) To tax, license and regulate any business, trade or occupation being

conducted within the City of Manila, not otherwise enumerated in thepreceding subsections, including percentage taxes based on gross sales or

receipts, subject to the approval of the PRESIDENT, except amusement taxes .

but this requirement of the President's approval was not contained in section 2444 ofthe former Charter of the City of Manila under which Ordinance No. 2529 was

promulgated. Anyway, as stated by appellee's counsel, the business of "retail dealersin general merchandise" is expressly enumerated in subsection (o), section 18 ofRepublic Act No. 409; hence, an ordinance prescribing a municipal tax on said

business does not have to be approved by the President to be effective, as it is not

among those referred to in said subsection (ii). Moreover, the questioned ordinancesare 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 areinapplicable, invalid or unconstitutional if applied to the alleged business ofdistribution and sale of bibles to the people of the Philippines by a religiouscorporation like the American Bible Society, plaintiff herein.

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 thefree exercise and enjoyment of the religious profession and worship of appellant.

Article III, section 1, clause (7) of the Constitution of the Philippines aforequoted,guarantees the freedom of religious profession and worship. "Religion has beenspoken of as a profession of faith to an active power that binds and elevates man to itsCreator" (Aglipay vs. Ruiz, 64 Phil., 201).It has reference to one's views of hisrelations to His Creator and to the obligations they impose of reverence to His beingand character, and obedience to His Will (Davis vs. Beason, 133 U.S., 342). Theconstitutional guaranty of the free exercise and enjoyment of religious profession andworship carries with it the right to disseminate religious information. Any restraints ofsuch 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 Statehas the right 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 imposedupon appellant for its distribution and sale of bibles and other religious literature:


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In the case ofMurdock vs. Pennsylvania, it was held that an ordinancerequiring that a license be obtained before a person could canvass or solicitorders for goods, paintings, pictures, wares or merchandise cannot be made toapply to members of Jehovah's Witnesses who went about from door to doordistributing literature and soliciting people to "purchase" certain religious

books and pamphlets, all published by the Watch Tower Bible & Tract Society.The "price" of the books was twenty-five cents each, the "price" of the

pamphlets five cents each. It was shown that in making the solicitations therewas a request for additional "contribution" of twenty-five cents each 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 withoutfunds.

On the above facts the Supreme Court held that it could not be said thatpetitioners were engaged in commercial rather than a religious venture. Theiractivities could not be described as embraced in the occupation of selling booksand pamphlets. Then the Court continued:

"We do not mean to say that religious groups and the press are free from allfinancial burdens of government. SeeGrosjean vs. American Press Co., 297U.S., 233, 250, 80 L. ed. 660, 668, 56 S. Ct. 444. We have here something quitedifferent, for example, from a tax on the income of one who engages inreligious 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 quite another to exact a tax from him for the privilege ofdelivering a sermon. The tax imposed by the City of Jeannette is a flat licensetax, payment of which is a condition of the exercise of these constitutional

privileges. The power to tax the exercise of a privilege is the power to controlor suppress its enjoyment. . . . Those who can tax the exercise of this religious

practice can make its exercise so costly as to deprive it of the resourcesnecessary for its maintenance. Those who can tax the privilege of engaging inthis form of missionary evangelism can close all its doors to all those who donot 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 controlthis activity is unimportant if it does not do so. But that is to disregard thenature of this tax. It is a license tax a flat tax imposed on the exercise of a

privilege granted by the Bill of Rights . . . The power to impose a license tax onthe exercise of these freedom is indeed as potent as the power of censorshipwhich this Court has repeatedly struck down. . . . It is not a nominal fee


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imposed as a regulatory measure to defray the expenses of policing theactivities in question. It is in no way apportioned. It is flat license tax leviedand collected as a condition to the pursuit of activities whose enjoyment isguaranteed by the constitutional liberties of press and religion and inevitablytends to suppress their exercise. That is almost uniformly recognized as theinherent vice and evil of this flat license tax."

Nor could dissemination of religious information be conditioned upon theapproval of an official or manager even if the town were owned by acorporation as held in the case ofMarsh vs. State of 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 rightto enjoy freedom of the press and religion occupies a preferred position asagainst the constitutional right of property owners.

"When we balance the constitutional rights of owners of property against thoseof the people to enjoy freedom of press and religion, as we must here, weremain mindful of the fact that the latter occupy a preferred position. . . . In ourview the circumstance that the property rights to the premises where thedeprivation of property here involved, took place, were held by others than the

public, is not sufficient to justify the State's permitting a corporation to governa community of citizens so as to restrict their fundamental liberties and theenforcement of such restraint by the application of a State statute." (Taada andFernando 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 InternalRevenue Code, provides:

SEC. 27. EXEMPTIONS FROM TAX ON CORPORATIONS. Thefollowing organizations shall not be taxed under this Title in respect to incomereceived by them as such

(e) Corporations or associations organized and operated exclusivelyforreligious, charitable, . . . or educational purposes, . . .: Provided, however,That the income of whatever kind and character from any of its properties, realor personal, or from any activity conducted for profit, regardless of thedisposition made of such income, shall be liable to the tax imposed under thisCode;

Appellant's counsel claims that the Collector of Internal Revenue has exempted theplaintiff from this tax and says that such exemption clearly indicates that the act of


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distributing and selling bibles, etc. is purely religious and does not fall under theabove legal provisions.

It may be true that in the case at bar the price asked for the bibles and other religiouspamphlets was in some instances a little bit higher than the actual cost of the same but

this cannot mean that appellant was engaged in the business or occupation of sellingsaid "merchandise" for profit. For this reason We believe that the provisions of City ofManila Ordinance No. 2529, as amended, cannot be applied to appellant, for in doingso it would impair its free exercise and enjoyment of its religious profession andworship as well as its rights of dissemination of religious beliefs.

With respect to Ordinance No. 3000, as amended, which requires the obtention theMayor's permit before any person can engage in any of the businesses, trades oroccupations enumerated therein, We do not find that it imposes any charge upon theenjoyment of a right granted by the Constitution, nor tax the exercise of religious

practices. In the case ofColeman vs. City of Griffin, 189 S.E. 427, this point waselucidated as follows:

An ordinance by the City of Griffin, declaring that the practice of distributingeither by hand or otherwise, circulars, handbooks, advertising, or literature ofany kind, whether said articles are being delivered free, or whether same are

being sold within the city limits of the City of Griffin, without first obtainingwritten permission from the city manager of the City of Griffin, shall bedeemed a nuisance and punishable as an offense against the City ofGriffin, does not deprive defendant of his constitutional right of the freeexercise and enjoyment of religious profession and worship, even though it

prohibits him from introducing and carrying out a scheme or purpose which he

sees fit to claim as a part of his religious system.

It seems clear, therefore, that Ordinance No. 3000 cannot be consideredunconstitutional, even if applied to plaintiff Society. But as Ordinance No. 2529 of theCity of Manila, as amended, is not applicable to plaintiff-appellant and defendant-appellee is powerless to license or tax the business of plaintiff Society involved hereinfor, as stated before, it would impair plaintiff's right to the free exercise andenjoyment of its religious profession and worship, as well as its rights ofdissemination of religious beliefs, We find that Ordinance No. 3000, as amended isalso inapplicable to said business, trade or occupation of the plaintiff.

Wherefore, and on the strength of the foregoing considerations, We hereby reverse thedecision appealed from, sentencing defendant return to plaintiff the sum of P5,891.45unduly collected from it. Without pronouncement as to costs. It is so ordered.


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Facts: New Yorks Education

Law requires local public schoolauthorities to lend textbooks free

of charge to all students in grade

7 to 12, including those in

private schools. The Board ofEducation contended that said

statute was invalid and violative

of the State and Federal

Constitutions. An order barringthe Commissioner of Education

(Allen) from removing appellants

members from office for failure

to comply with the requirementand an order preventing the use

of state funds for the purchase of


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textbooks to be lent to parochial

schools were sought for. The trial

court held the statute

unconstitutional. The Appellate

Division reversed the decision

and dismissed the complaint

since the appellant have no

standing. The New York Court of

Appeals, ruled that the

appellants have standing but the

law is not unconstitutional.

Issue: Whether or Not the

said ordinances are constitutional

and valid (contention: it restrains

the free exercise and enjoyment


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of the religious profession and

worship of appellant).

Held: Section 1, subsection

(7) of Article III of the

Constitution, provides that:

(7) No law shall be made

respecting an establishment of

religion, or prohibiting the freeexercise thereof, and the free

exercise and enjoyment of

religious profession and worship,

without discrimination orpreference, shall forever be

allowed. No religion test shall be


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required for the exercise of civil

or political rights.

The provision aforequoted is a

constitutional guaranty of the

free exercise and enjoyment of

religious profession and worship,which carries with it the right to

disseminate religious

information.

It may be true that in the case at

bar the price asked for the bibles

and other religious pamphlets

was in some instances a little bithigher than the actual cost of the

same but this cannot mean that


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appellant was engaged in the

business or occupation of selling

said "merchandise" for profit. For

this reason. The Court believe

that the provisions of City of

Manila Ordinance No. 2529, as

amended, cannot be applied to

appellant, for in doing so it would

impair its free exercise and

enjoyment of its religious

profession and worship as well as

its rights of dissemination of

religious beliefs.

With respect to Ordinance No.3000, as amended, the Court do

not find that it imposes any


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charge upon the enjoyment of a

right granted by the Constitution,

nor tax the exercise of religious

practices.

It seems clear, therefore, that

Ordinance No. 3000 cannot beconsidered unconstitutional,

however inapplicable to said

business, trade or occupation of

the plaintiff. As to Ordinance No.2529 of the City of Manila, as

amended, is also not applicable,

so defendant is powerless to

license or tax the business ofplaintiff Society.


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WHEREFORE, defendant shall

return to plaintiff the sum of

P5,891.45 unduly collected from

it.

G.R. No. 115455 August 25, 1994

ARTURO M. TOLENTINO, petitioner,vs.THE SECRETARY OF FINANCE and THECOMMISSIONER OF INTERNALREVENUE, respondents.

G.R. No. 115525 August 25, 1994JUAN T. DAVID, petitioner,vs.TEOFISTO T. GUINGONA, JR., asExecutive Secretary; ROBERTO DE

OCAMPO, as Secretary of Finance;LIWAYWAY VINZONS-CHATO, asCommissioner of Internal Revenue; and


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their AUTHORIZED AGENTS ORREPRESENTATIVES, respondents.

G.R. No. 115543 August 25, 1994RAUL S. ROCO and the INTEGRATEDBAR OF THE PHILIPPINES, petitioners,vs.THE SECRETARY OF THE

DEPARTMENT OF FINANCE; THECOMMISSIONERS OF THE BUREAU OFINTERNAL REVENUE AND BUREAU OFCUSTOMS, respondents.

G.R. No. 115544 August 25, 1994

PHILIPPINE PRESS INSTITUTE, INC.;EGP PUBLISHING CO., INC.;PUBLISHING CORPORATION;PHILIPPINE JOURNALISTS, INC.; JOSEL. PAVIA; and OFELIA L.

DIMALANTA, petitioners,vs.HON. LIWAYWAY V. CHATO, in hercapacity as Commissioner of Internal


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Revenue; HON. TEOFISTO T.GUINGONA, JR., in his capacity as

Executive Secretary; and HON.ROBERTO B. DE OCAMPO, in hiscapacity as Secretary ofFinance, respondents.

G.R. No. 115754 August 25, 1994

CHAMBER OF REAL ESTATE ANDBUILDERS ASSOCIATIONS, INC.,(CREBA), petitioner,vs.THE COMMISSIONER OF INTERNAL

REVENUE, respondent.G.R. No. 115781 August 25, 1994

KILOSBAYAN, INC., JOVITO R.SALONGA, CIRILO A. RIGOS, ERMECAMBA, EMILIO C. CAPULONG, JR.,

JOSE T. APOLO, EPHRAIM TENDERO,FERNANDO SANTIAGO, JOSE ABCEDE,CHRISTINE TAN, FELIPE L. GOZON,RAFAEL G. FERNANDO, RAOUL V.


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VICTORINO, JOSE CUNANAN, QUINTINS. DOROMAL, MOVEMENT OF

ATTORNEYS FOR BROTHERHOOD,INTEGRITY AND NATIONALISM, INC.("MABINI"), FREEDOM FROM DEBTCOALITION, INC., PHILIPPINE BIBLESOCIETY, INC., and WIGBERTOTAADA,petitioners,

vs.THE EXECUTIVE SECRETARY, THESECRETARY OF FINANCE, THECOMMISSIONER OF INTERNALREVENUE and THE COMMISSIONER OFCUSTOMS, respondents.

G.R. No. 115852 August 25, 1994

PHILIPPINE AIRLINES, INC., petitioner,vs.THE SECRETARY OF FINANCE, and

COMMISSIONER OF INTERNALREVENUE, respondents.

G.R. No. 115873 August 25, 1994


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COOPERATIVE UNION OF THEPHILIPPINES, petitioners,

vs.HON. LIWAYWAY V. CHATO, in hercapacity as the Commissioner ofInternal Revenue, HON. TEOFISTO T.GUINGONA, JR., in his capacity asExecutive Secretary, and HON.

ROBERTO B. DE OCAMPO, in hiscapacity as Secretary ofFinance, respondents.

G.R. No. 115931 August 25, 1994

PHILIPPINE EDUCATIONALPUBLISHERS ASSOCIATION, INC., andASSOCIATION OF PHILIPPINE BOOK-SELLERS, petitioners,vs.HON. ROBERTO B. DE OCAMPO, as the

Secretary of Finance; HON. LIWAYWAYV. CHATO, as the Commissioner ofInternal Revenue and HON. GUILLERMO


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PARAYNO, JR., in his capacity as theCommissioner 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. Serranofor petitioner in G.R. No. 115754.

Salonga, Hernandez & Allado for FreedonFrom Debts Coalition, Inc. & Phil. BibleSociety.

Estelito P. Mendoza for petitioner in G.R.

No. 115852.Panganiban, Benitez, Parlade, Africa &Barinaga Law Offices for petitioners in G.R.No. 115873.


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R.B. Rodriguez & Associates for petitionersin 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 andproperties as well as on the sale orexchange of services. It is equivalent to10% of the gross selling price or grossvalue in money of goods or properties sold,

bartered or exchanged or of the grossreceipts from the sale or exchange ofservices. Republic Act No. 7716 seeks towiden the tax base of the existing VATsystem and enhance its administration byamending the National Internal Revenue

Code.

These are various suits forcertiorariandprohibition, challenging the constitutionality


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of Republic Act No. 7716 on variousgrounds summarized in the resolution of

July 6, 1994 of this Court, as follows:I. Procedural Issues:

A. Does Republic Act No. 7716violate Art. VI, 24 of theConstitution?

B. Does it violate Art. VI, 26(2) ofthe Constitution?

C. What is the extent of the power ofthe Bicameral Conference

Committee?II. Substantive Issues:

A. Does the law violate the followingprovisions in the Bill of Rights (Art.III)?

1. 1

2. 4


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3. 5

4. 10

B. Does the law violate the followingother provisions of the Constitution?

1. Art. VI, 28(1)

2. Art. VI, 28(3)

These questions will be dealt in the orderthey are stated above. As will presently beexplained not all of these questions arejudicially cognizable, because not allprovisions of the Constitution are self

executing and, therefore, judiciallyenforceable. The other departments of thegovernment are equally charged with theenforcement of the Constitution, especiallythe provisions relating to them.

I. PROCEDURAL ISSUES

The contention of petitioners is that inenacting Republic Act No. 7716, or the


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Expanded Value-Added Tax Law, Congressviolated the Constitution because, although

H. No. 11197 had originated in the Houseof Representatives, it was not passed bythe Senate but was simply consolidatedwith the Senate version (S. No. 1630) in theConference Committee to produce the billwhich the President signed into law. The

following provisions of the Constitution arecited in support of the proposition thatbecause Republic Act No. 7716 waspassed in this manner, it did not originate inthe House of Representatives and it has notthereby become a law:

Art. VI, 24: All appropriation,revenue or tariff bills, bills authorizingincrease of the public debt, bills oflocal application, and private billsshall originate exclusively in theHouse of Representatives, but theSenate may propose or concur withamendments.


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Id., 26(2): No bill passed by eitherHouse shall become a law unless it

has passed three readings onseparate days, and printed copiesthereof in its final form have beendistributed to its Members three daysbefore its passage, except when thePresident certifies to the necessity of

its immediate enactment to meet apublic calamity or emergency. Uponthe last reading of a bill, noamendment thereto shall be allowed,and the vote thereon shall be takenimmediately thereafter, andthe yeasand nays entered in theJournal.

It appears that on various dates betweenJuly 22, 1992 and August 31, 1993, severalbills 1were introduced in the House ofRepresentatives seeking to amend certainprovisions of the National Internal RevenueCode relative to the value-added tax or


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VAT. These bills were referred to the HouseWays and Means Committee which

recommended for approval a substitutemeasure, H. No. 11197, entitled

AN ACT RESTRUCTURING THEVALUE-ADDED TAX (VAT)SYSTEM TO WIDEN ITS TAX BASE

AND ENHANCE ITSADMINISTRATION, AMENDINGFOR THESE PURPOSESSECTIONS 99, 100, 102, 103, 104,105, 106, 107, 108 AND 110 OFTITLE IV, 112, 115 AND 116 OF

TITLE V, AND 236, 237 AND 238OF TITLE IX, AND REPEALINGSECTIONS 113 AND 114 OF TITLEV, ALL OF THE NATIONALINTERNAL REVENUE CODE, ASAMENDED

The bill (H. No. 11197) was considered onsecond reading starting November 6, 1993and, on November 17, 1993, it was


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approved by the House of Representativesafter third and final reading.

It was sent to the Senate on November 23,1993 and later referred by that body to itsCommittee on Ways and Means.

On February 7, 1994, the SenateCommittee submitted its report

recommending approval of S. No. 1630,entitled

AN ACT RESTRUCTURING THEVALUE-ADDED TAX (VAT)SYSTEM TO WIDEN ITS TAX BASE

AND ENHANCE ITSADMINISTRATION, AMENDINGFOR THESE PURPOSESSECTIONS 99, 100, 102, 103, 104,105, 107, 108, AND 110 OF TITLEIV, 112 OF TITLE V, AND 236, 237,AND 238 OF TITLE IX, ANDREPEALING SECTIONS 113, 114and 116 OF TITLE V, ALL OF THE


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NATIONAL INTERNAL REVENUECODE, AS AMENDED, AND FOR

OTHER PURPOSESIt was stated that the bill was beingsubmitted "in substitution of Senate Bill No.1129, taking into consideration P.S. Res.No. 734 and H.B. No. 11197."

On February 8, 1994, the Senate beganconsideration of the bill (S. No. 1630). Itfinished debates on the bill and approved iton second reading on March 24, 1994. Onthe same day, it approved the bill on third

reading by the affirmative votes of 13 of itsmembers, with one abstention.

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 accordance with the


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attached copy of the bill as reconciled andapproved by the conferees."

The Conference Committee bill, entitled"AN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT) SYSTEM, WIDENINGITS TAX BASE AND ENHANCING ITSADMINISTRATION AND FOR THESE

PURPOSES AMENDING ANDREPEALING THE RELEVANTPROVISIONS OF THE NATIONALINTERNAL REVENUE CODE, ASAMENDED, 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 thePresident of the Philippines 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 ofgeneral circulation and, on May 28, 1994, ittook effect, although its implementation was


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suspended until June 30, 1994 to allow timefor the registration of business entities. It

would have been enforced on July 1, 1994but its enforcement was stopped becausethe Court, by the vote of 11 to 4 of itsmembers, granted a temporary restrainingorder on June 30, 1994.

First. Petitioners' contention is that RepublicAct No. 7716 did not "originate exclusively"in the House of Representatives asrequired by Art. VI, 24 of the Constitution,because it is in fact the result of theconsolidation 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 AmericanFederal Constitution, 2it is notable in tworespects: the verb "shall originate" isqualified in the Philippine Constitution bythe word "exclusively" and the phrase "ason other bills" in the American version isomitted. This means, according to them,


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that to be considered as having originatedin the House, Republic Act No. 7716 must

retain the essence of H. No. 11197.This argument will not bear analysis. Tobegin with, it is not the law but therevenue bill which is required by theConstitution to "originate exclusively" in the

House of Representatives. It is important toemphasize this, because a bill originating inthe House may undergo such extensivechanges in the Senate that the result maybe a rewriting of the whole. The possibilityof a third version by the conference

committee will be discussed later. At thispoint, what is important to note is that, as aresult of the Senate action, a distinct billmay be produced. To insist that a revenuestatute and not only the bill whichinitiated the legislative process culminatingin the enactment of the law mustsubstantially be the same as the House billwould be to deny the Senate's power not


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only to "concur with amendments" but alsoto "propose amendments." It would be to

violate the coequality of legislative power ofthe two houses of Congress and in factmake the House superior to the Senate.

The contention that the constitutionaldesign is to limit the Senate's power in

respect of revenue bills in order tocompensate for the grant to the Senate ofthe treaty-ratifying power3and therebyequalize its powers and those of the Houseoverlooks the fact that the powers beingcompared are different. We are dealing

here with the legislative power which underthe Constitution is vested not in anyparticular chamber but in the Congress ofthe Philippines, consisting of "a Senate anda House of Representatives." 4The exerciseof the treaty-ratifying power is not theexercise of legislative power. It is theexercise of a check on the executive power.There is, therefore, no justification for


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comparing the legislative powers of theHouse and of the Senate on the basis of

the possession of such nonlegislativepower by the Senate. The possession of asimilar power by the U.S. Senate 5hasnever been thought of as giving it morelegislative powers than the House ofRepresentatives.

In the United States, the validity of aprovision ( 37) imposing an ad valorem taxbased on the weight of vessels, which theU.S. Senate had inserted in the Tariff Act of1909, was upheld against the claim that the

provision was a revenue bill whichoriginated in the Senate in contravention ofArt. I, 7 of the U.S. Constitution. 6Nor isthe power to amend limited to adding aprovision or two in a revenue bill emanatingfrom the House. The U.S. Senate has goneso far as changing the whole of billsfollowing the enacting clause andsubstituting its own versions. In 1883, for


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example, it struck out everything after theenacting clause of a tariff bill and wrote in

its place its own measure, and the Housesubsequently accepted the amendment.The U.S. Senate likewise added 847amendments to what later became thePayne-Aldrich Tariff Act of 1909; it dictatedthe schedules of the Tariff Act of 1921; it

rewrote an extensive tax revision bill in thesame year and recast most of the tariff billof 1922. 7Given, then, the power of theSenate to propose amendments, theSenate can propose its own version evenwith respect to bills which are required bythe Constitution to originate in the House.

It is insisted, however, that S. No. 1630 waspassed not in substitution of H. No. 11197but of another Senate bill (S. No. 1129)earlier filed and that what the Senate didwas merely to "take [H. No. 11197] intoconsideration" in enacting S. No. 1630.There is really no difference between the


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Senate preserving H. No. 11197 up to theenacting clause and then writing its own

version following the enacting clause(which, it would seem, petitioners admit isan amendment by substitution), and, on theother hand, separately presenting a bill ofits own on the same subject matter. Ineither case the result are two bills on the

same subject.

Indeed, what the Constitution simply meansis that the initiative for filing revenue, tariff,or tax bills, bills authorizing an increase ofthe public debt, private bills and bills of local

application must come from the House ofRepresentatives on the theory that, electedas they are from the districts, the membersof the House can be expected to be moresensitive to the local needs and problems.On the other hand, the senators, who areelected at large, are expected to approachthe same problems from the national


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perspective. Both views are thereby madeto bear on the enactment of such laws.

Nor does the Constitution prohibit the filingin the Senate of a substitute bill inanticipation of its receipt of the bill from theHouse, so long as action by the Senate asa body is withheld pending receipt of the

House bill. The Court cannot, therefore,understand the alarm expressed over thefact that on March 1, 1993, eight monthsbefore the House passed H. No. 11197, S.No. 1129 had been filed in the Senate. Afterall it does not appear that the Senate ever

considered it. It was only after the Senatehad received H. No. 11197 on November23, 1993 that the process of legislation inrespect of it began with the referral to theSenate Committee on Ways and Means ofH. No. 11197 and the submission by theCommittee on February 7, 1994 of S. No.1630. For that matter, if the question weresimply the priority in the time of filing of


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bills, the fact is that it was in the House thata bill (H. No. 253) to amend the VAT law

was first filed on July 22, 1992. Severalother bills had been filed in the Housebefore S. No. 1129 was filed in the Senate,and H. No. 11197 was only a substitute ofthose earlier bills.

Second. Enough has been said to showthat it was within the power of the Senate topropose S. No. 1630. We now pass to thenext argument of petitioners that S. No.1630 did not pass three readings onseparate days as required by the

Constitution 8because the second and thirdreadings were done on the same day,March 24, 1994. But this was because onFebruary 24, 1994 9and again on March 22,1994, 10the President had certified S. No.1630 as urgent. The presidentialcertification dispensed with the requirementnot only of printing but also that of readingthe bill on separate days. The phrase


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"except when the President certifies to thenecessity of its immediate enactment, etc."

in Art. VI, 26(2) qualifies the two statedconditions before a bill can become a law:(i) the bill has passed three readings onseparate days and (ii) it has been printed inits final form and distributed three daysbefore it is finally approved.

In other words, the "unless" clause must beread in relation to the "except" clause,because the two are really coordinateclauses of the same sentence. To construethe "except" clause as simply dispensing

with the second requirement in the "unless"clause (i.e., printing and distribution threedays before final approval) would not onlyviolate the rules of grammar. It would alsonegate the very premise of the "except"clause: the necessity of securing theimmediate enactment of a bill which iscertified in order to meet a public calamityor emergency. For if it is only the printing


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that is dispensed with by presidentialcertification, the time saved would be so

negligible as to be of any use in insuringimmediate enactment. It may well bedoubted whether doing away with thenecessity of printing and distributing copiesof the bill three days before the thirdreading would insure speedy enactment of

a law in the face of an emergency requiringthe calling of a special election forPresident and Vice-President. Under theConstitution such a law is required to bemade within seven days of the convening ofCongress in emergency session. 11

That upon the certification of a bill by thePresident the requirement of three readingson separate days and of printing anddistribution can be dispensed with issupported by the weight of legislativepractice. For example, the bill definingthe certiorarijurisdiction of this Court which,in consolidation with the Senate version,


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became Republic Act No. 5440, waspassed on second and third readings in the

House of Representatives on the same day(May 14, 1968) after the bill had beencertified by the President as urgent. 12

There is, therefore, no merit in thecontention that presidential certification

dispenses only with the requirement for theprinting of the bill and its distribution threedays before its passage but not with therequirement of three readings on separatedays, also.

It is nonetheless urged that the certificationof the bill in this case was invalid becausethere was no emergency, the conditionstated in the certification of a "growingbudget deficit" not being an unusualcondition in this country.

It is noteworthy that no member of theSenate saw fit to controvert the reality ofthe factual basis of the certification. To the


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contrary, by passing S. No. 1630 on secondand third readings on March 24, 1994, the

Senate accepted the President'scertification. Should such certification benow reviewed by this Court, especiallywhen no evidence has been shown that,because S. No. 1630 was taken up onsecond and third readings on the same day,

the members of the Senate were deprivedof the time needed for the study of a vitalpiece of legislation?

The sufficiency of the factual basis of thesuspension of the writ ofhabeas corpus or

declaration of martial law under Art. VII, 18, or the existence of a nationalemergency justifying the delegation ofextraordinary powers to the President underArt. VI, 23(2), is subject to judicial reviewbecause basic rights of individuals may beat hazard. But the factual basis ofpresidential certification of bills, whichinvolves doing away with procedural


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requirements designed to insure that billsare duly considered by members of

Congress, certainly should elicit a differentstandard of review.

Petitioners also invite attention to the factthat the President certified S. No. 1630 andnot H. No. 11197. That is because S. No.

1630 was what the Senate wasconsidering. When the matter was beforethe House, the President likewise certifiedH. No. 9210 the pending in the House.

Third. Finally it is contended that the bill

which became Republic Act No. 7716 is thebill which the Conference Committeeprepared by consolidating H. No. 11197and S. No. 1630. It is claimed that theConference Committee report includedprovisions not found in either the House bill

or the Senate bill and that these provisionswere "surreptitiously" inserted by theConference Committee. Much is made ofthe fact that in the last two days of its


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session on April 21 and 25, 1994 theCommittee met behind closed doors. We

are not told, however, whether theprovisions were not the result of the giveand take that often mark the proceedings ofconference committees.

Nor is there anything unusual or

extraordinary about the fact that theConference Committee met in executivesessions. Often the only way to reachagreement on conflicting provisions is tomeet behind closed doors, with only theconferees present. Otherwise, no

compromise is likely to be made. The Courtis not about to take the suggestion of acabal or sinister motive attributed to theconferees on the basis solely of their"secret meetings" on April 21 and 25, 1994,nor read anything into the incompleteremarks of the members, marked in thetranscript of stenographic notes by ellipses.The incomplete sentences are probably due


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to the stenographer's own limitations or tothe incoherence that sometimes

characterize conversations. William Safirenoted some such lapses in recorded talkseven by recent past Presidents of theUnited States.

In any event, in the United States

conference committees had beencustomarily held in executive sessions withonly the conferees and their staffs inattendance. 13Only in November 1975 wasa new rule adopted requiring opensessions. Even then a majority of either

chamber's conferees may vote in public toclose the meetings. 14

As to the possibility of an entirely new billemerging out of a Conference Committee, ithas been explained:

Under congressional rules of procedure, conference committees are not expected tomake any material change in the measure at issue, either by deleting provisions to whichboth houses have already agreed or by inserting new provisions. But this is a difficultprovision to enforce. Note the problem when one house amends a proposal originating ineither house by striking out everything following the enacting clause and substitutingprovisions which make it an entirely new bill. The versions are now altogether different,

permitting a conference committee to draft essentially a new bill. . . .15


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The result is a third version, which isconsidered an "amendment in the nature of

a substitute," the only requirement for whichbeing that the third version be germane tothe subject of the House and Senate bills. 16

Indeed, this Court recently held that it iswithin the power of a conference committee

to include in its report an entirely newprovision that is not found either in theHouse bill or in the Senate bill. 17If thecommittee can propose an amendmentconsisting of one or two provisions, there isno reason why it cannot propose several

provisions, collectively considered as an"amendment in the nature of a substitute,"so long as such amendment is germane tothe subject of the bills before thecommittee. After all, its report was not finalbut needed the approval of both houses ofCongress to become valid as an act of thelegislative department. The charge that inthis case the Conference Committee acted


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as a third legislative chamber is thuswithout any basis. 18

Nonetheless, it is argued that under therespective Rules of the Senate and theHouse of Representatives a conferencecommittee can only act on the differingprovisions of a Senate bill and a House bill,

and that contrary to these Rules theConference Committee inserted provisionsnot found in the bills submitted to it. Thefollowing provisions are cited in support ofthis contention:

Rules of the SenateRule XII:

26. In the event that the Senatedoes not agree with the House ofRepresentatives on the provision of

any bill or jointresolution, thedifferences shall besettled by a conference committee of


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both Houses which shall meet withinten days after their composition.

The President shall designate themembers of the conferencecommittee in accordance withsubparagraph (c), Section 3 of RuleIII.

Each Conference Committee Reportshall contain a detailed andsufficiently explicit statement of thechanges in or amendments to thesubject measure, and shall be

signed by the conferees.The consideration of such reportshall not be in order unless thereport has been filed with theSecretary of the Senate and copiesthereof have been distributed to theMembers.

(Emphasis added)


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Rules of the House ofRepresentatives

Rule XIV:

85. Conference CommitteeReports. In the event that theHouse does not agree with theSenate on the amendments to any

bill or joint resolution, the differencesmay be settled by conferencecommittees of both Chambers.

The consideration of conferencecommittee reports shall always be in

order, except when the journal isbeing read, while the roll is beingcalled or the House is dividing onany question. Each of the pages ofsuch reports shall be signed by theconferees. Eachreport shall containa detailed, sufficiently explicitstatement of the changes in or


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amendments to the subjectmeasure.

The consideration of such reportshall not be in order unless copiesthereof are distributed to theMembers: Provided, That in the lastfifteen days of each session period it

shall be deemed sufficient that threecopies of the report, signed as aboveprovided, are deposited in the officeof the Secretary General.

(Emphasis added)

To be sure, nothing in the Rules limits aconference committee to a consideration ofconflicting provisions. But Rule XLIV, 112of the Rules of the Senate is cited to theeffect that "If there is no Rule applicable toa specific case the precedents of theLegislative Department of the Philippinesshall be resorted to, and as a supplement ofthese, the Rules contained in Jefferson's


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Manual." The following is then quoted fromthe Jefferson's Manual:

The managers of a conference mustconfine themselves to thedifferences committed to them. . .and may not include subjects notwithin disagreements, even though

germane to a question in issue.Note that, according to Rule XLIX, 112, incase there is no specific rule applicable,resort must be to the legislative practice.The Jefferson's Manual is resorted to only

as supplement. It is common place inCongress that conference committeereports include new matters which, thoughgermane, have not been committed to thecommittee. This practice was admitted bySenator Raul S. Roco, petitioner in G.R.

No. 115543, during the oral argument inthese cases. Whatever, then, may beprovided in the Jefferson's Manual must beconsidered to have been modified by the


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legislative practice. If a change is desired inthe practice it must be sought in Congress

since this question is not covered by anyconstitutional provision but is only aninternal rule of each house. Thus, Art. VI, 16(3) of the Constitution provides that"Each House may determine the rules of itsproceedings. . . ."

This observation applies to the othercontention that the Rules of the twochambers were likewise disregarded in thepreparation of the Conference CommitteeReport because the Report did not contain

a "detailed and sufficiently explicitstatement of changes in, or amendmentsto, the subject measure." The Report usedbrackets and capital letters to indicate thechanges. This is a standard practice in bill-drafting. We cannot say that in using thesemarks and symbols the Committee violatedthe Rules of the Senate and the House.Moreover, this Court is not the proper forum


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But then again the result would still be acompromise measure that may not be

wholly satisfying to both houses.Art. VI, 26(2) must, therefore, beconstrued as referring only to billsintroduced for the first time in either houseof Congress, not to the conference

committee report. For if the purpose ofrequiring three readings is to give membersof Congress time to study bills, it cannot begainsaid that H. No. 11197 was passed inthe House after three readings; that in theSenate it was considered on first reading

and then referred to a committee of thatbody; that although the Senate committeedid not report out the House bill, itsubmitted a version (S. No. 1630) which ithad prepared by "taking into consideration"the House bill; that for its part theConference Committee consolidated thetwo bills and prepared a compromiseversion; that the Conference Committee


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Report was thereafter approved by theHouse and the Senate, presumably after

appropriate study by their members. Wecannot say that, as a matter of fact, themembers of Congress were not fullyinformed of the provisions of the bill. Theallegation that the Conference Committeeusurped the legislative power of Congress

is, in our view, without warrant in fact and inlaw.

Fourth. Whatever doubts there may be asto the formal validity of Republic Act No.7716 must be resolved in its favor. Our

cases 20manifest firm adherence to the rulethat an enrolled copy of a bill is conclusivenot only of its provisions but also of its dueenactment. Not even claims that aproposed constitutional amendment wasinvalid because the requisite votes for itsapproval had not been obtained 21or thatcertain provisions of a statute had been"smuggled" in the printing of the bill 22have


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moved or persuaded us to look behind theproceedings of a coequal branch of the

government. There is no reason now todepart from this rule.

No claim is here made that the "enrolledbill" rule is absolute. In fact in one case 23we"went behind" an enrolled bill and consulted

the Journal to determine whether certainprovisions of a statute had been approvedby the Senate in view of the fact that thePresident of the Senate himself, who hadsigned the enrolled bill, admitted a mistakeand withdrew his signature, so that in effect

there was no longer an enrolled bill toconsider.

But where allegations that the constitutionalprocedures for the passage of bills have notbeen observed have no more basis than

another allegation that the ConferenceCommittee "surreptitiously" insertedprovisions into a bill which it had prepared,we should decline the invitation to go


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behind the enrolled copy of the bill. Todisregard the "enrolled bill" rule in such

cases would be to disregard the respectdue the other two departments of ourgovernment.

Fifth. An additional attack on the formalvalidity of Republic Act No. 7716 is made

by the Philippine Airlines, Inc., petitioner inG.R. No. 11582, namely, that it violates Art.VI, 26(1) which provides that "Every billpassed by Congress shall embrace onlyone subject which shall be expressed in thetitle thereof." It is contended that neither H.

No. 11197 nor S. No. 1630 provided forremoval of exemption of PAL transactionsfrom the payment of the VAT and that thiswas made only in the ConferenceCommittee bill which became Republic ActNo. 7716 without reflecting this fact in itstitle.

The title of Republic Act No. 7716 is:


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AN ACT RESTRUCTURING THEVALUE- ADDED TAX (VAT)

SYSTEM, WIDENING ITS TAXBASE AND ENHANCING ITSADMINISTRATION, AND FORTHESE PURPOSES AMENDINGAND REPEALING THE RELEVANTPROVISIONS OF THE NATIONAL

INTERNAL REVENUE CODE, ASAMENDED, AND FOR OTHERPURPOSES.

Among the provisions of the NIRCamended is 103, which originally read:

103. Exempt transactions. Thefollowing shall be exempt from thevalue-added tax:

. . . .

(q) Transactions which are exemptunder special laws or internationalagreements to which the Philippinesis a signatory. Among the


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transactions exempted from the VATwere those of PAL because it was

exempted under its franchise (P.D.No. 1590) from the payment of all"other taxes . . . now or in the nearfuture," in consideration of thepayment by it either of the corporateincome tax or a franchise tax of 2%.

As a result of its amendment by RepublicAct No. 7716, 103 of the NIRC nowprovides:

103. Exempt transactions. The

following shall be exempt from thevalue-added tax:

. . . .

(q) Transactions which are exemptunder special laws, except those

granted under Presidential DecreeNos. 66, 529, 972, 1491, 1590. . . .


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The effect of the amendment is to removethe exemption granted to PAL, as far as the

VAT is concerned.The question is whether this amendment of 103 of the NIRC is fairly embraced in thetitle of Republic Act No. 7716, although nomention is made therein of P.D. No. 1590

as among those which the statute amends.We think it is, since the title states that thepurpose of the statute is to expand the VATsystem, and one way of doing this is towiden its base by withdrawing some of theexemptions granted before. To insist that

P.D. No. 1590 be mentioned in the title ofthe law, in addition to 103 of the NIRC, inwhich it is specifically referred to, would beto insist that the title of a bill should be acomplete index of its content.

The constitutional requirement that everybill passed by Congress shall embrace onlyone subject which shall be expressed in itstitle is intended to prevent surprise upon the


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members of Congress and to inform thepeople of pending legislation so that, if they

wish to, they can be heard regarding it. If, inthe case at bar, petitioner did not knowbefore that its exemption had beenwithdrawn, it is not because of any defect inthe title but perhaps for the same reasonother statutes, although published, pass

unnoticed until some event somehow callsattention to their existence. Indeed, the titleof Republic Act No. 7716 is not any moregeneral than the title of PAL's own franchiseunder P.D. No. 1590, and yet no mention ismade of its tax exemption. The title of P.D.No. 1590 is:

AN ACT GRANTING A NEWFRANCHISE TO PHILIPPINEAIRLINES, INC. TO ESTABLISH,OPERATE, AND MAINTAIN AIR-TRANSPORT SERVICES IN THEPHILIPPINES AND BETWEEN THE


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PHILIPPINES AND OTHERCOUNTRIES.

The trend in our cases is to construe theconstitutional requirement in such a mannerthat courts do not unduly interfere with theenactment of necessary legislation and toconsider it sufficient if the title expresses

the general subject of the statute and all itsprovisions are germane to the generalsubject thus expressed. 24

It is further contended that amendment ofpetitioner's franchise may only be made by

special law, in view of 24 of P.D. No.1590 which provides:

This franchise, as amended, or anysection or provision hereof may onlybe modified, amended, or repealedexpressly by a special law or decreethat shall specifically modify, amend,or repeal this franchise or anysection or provision thereof.


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This provision is evidently intended toprevent the amendment of the franchise by

mere implication resulting from theenactment of a later inconsistent statute, inconsideration of the fact that a franchise isa contract which can be altered only byconsent of the parties. Thus in ManilaRailroad Co. v.

Rafferty, 25it was held that an Act of theU.S. Congress, which provided for thepayment of tax on certain goods andarticles imported into the Philippines, didnot amend the franchise of plaintiff, whichexempted it from all taxes except thosementioned in its franchise. It was held that aspecial law cannot be amended by ageneral law.

In contrast, in the case at bar, Republic ActNo. 7716 expressly amends PAL'sfranchise (P.D. No. 1590) by specificallyexcepting from the grant of exemptionsfrom the VAT PAL's exemption under P.D.


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No. 1590. This is within the power ofCongress to do under Art. XII, 11 of the

Constitution, which provides that the grantof a franchise for the operation of a publicutility is subject to amendment, alteration orrepeal by Congress when the commongood so requires.

II. SUBSTANTIVE ISSUESA. Claims of Press

Freedom, Freedom ofThought and Religious

Freedom

The Philippine Press Institute (PPI),petitioner in G.R. No. 115544, is a nonprofitorganization of newspaper publishersestablished for the improvement ofjournalism in the Philippines. On the otherhand, petitioner in G.R. No. 115781, thePhilippine Bible Society (PBS), is anonprofit organization engaged in theprinting and distribution of bibles and other


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religious articles. Both petitioners claimviolations 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 haswithdrawn the exemption previouslygranted to the press under 103 (f) of the

NIRC. Although the exemption wassubsequently restored by administrativeregulation with respect to the circulationincome of newspapers, the PPI presses itsclaim because of the possibility that theexemption may still be removed by mere

revocation of the regulation of the Secretaryof Finance. On the other hand, the PBSgoes so far as to question the Secretary'spower to grant exemption for two reasons:(1) The Secretary of Finance has no powerto grant tax exemption because this isvested in Congress and requires for itsexercise the vote of a majority of all its


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members 26and (2) the Secretary's duty is toexecute the law.

103 of the NIRC contains a list oftransactions exempted from VAT. Amongthe transactions previously grantedexemption were:

(f) Printing, publication, importation

or sale of books and any newspaper,magazine, review, or bulletin whichappears at regular intervals withfixed prices for subscription and saleand which is devoted principally to

the publication of advertisements.Republic Act No. 7716 amended 103 bydeleting (f) with the result that print mediabecame subject to the VAT with respect toall aspects of their operations. Later,however, based on a memorandum of theSecretary of Justice, respondent Secretaryof Finance issued Revenue RegulationsNo. 11-94, dated June 27, 1994, exempting


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the "circulation income of print mediapursuant to 4 Article III of the 1987

Philippine Constitution guaranteeingagainst abridgment of freedom of the press,among others." The exemption of"circulation income" has left income fromadvertisements still subject to the VAT.

It is unnecessary to pass upon thecontention that the exemption granted isbeyond the authority of the Secretary ofFinance to give, in view of PPI's contentionthat even with the exemption of thecirculation revenue of print media there is

still an unconstitutional abridgment of pressfreedom because of the imposition of theVAT on the gross receipts of newspapersfrom advertisements and on theiracquisition of paper, ink and services forpublication. Even on the assumption that noexemption has effectively been granted toprint media transactions, we find noviolation of press freedom in these cases.


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To be sure, we are not dealing here with astatute that on its face operates in the area

of press freedom. The PPI's claim is simplythat, as appliedto newspapers, the lawabridges press freedom. Even with duerecognition of its high estate and itsimportance in a democratic society,however, the press is not immune from

general regulation by the State. It has beenheld:

The publisher of a newspaper has no immunity from the application of general laws. Hehas no special privilege to invade the rights and liberties of others. He must answer forlibel. He may be punished for contempt of court. . . . Like others, he must pay equitable

and nondiscriminatory taxes on his business. . . .27

The PPI does not dispute this point, either.What it contends is that by withdrawing theexemption previously granted to print mediatransactions involving printing, publication,importation or sale of newspapers, Republic

Act No. 7716 has singled out the press fordiscriminatory treatment and that within theclass of mass media the law discriminatesagainst print media by giving broadcast


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media favored treatment. We have carefullyexamined this argument, but we are unable

to find a differential treatment of the pressby the law, much less any censorialmotivation for its enactment. If the press isnow required to pay a value-added tax onits transactions, it is not because it is beingsingled out, much less targeted, for special

treatment but only because of the removalof the exemption previously granted to it bylaw. The withdrawal of exemption is all thatis involved in these cases. Othertransactions, likewise previously grantedexemption, have been delisted as part ofthe scheme to expand the base and thescope of the VAT system. The law wouldperhaps be open to the charge ofdiscriminatory treatment if the only privilegewithdrawn had been that granted to the

press. But that is not the case.

The situation in the case at bar is indeed afar cry from those cited by the PPI in


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support of its claim that Republic Act No.7716 subjects the press to discriminatory

taxation. In the cases cited, thediscriminatory purpose was clear eitherfrom the background of the law or from itsoperation. For example, in Grosjean v.American Press Co., 28the law imposed alicense tax equivalent to 2% of the gross

receipts derived from advertisements onlyon newspapers which had a circulation ofmore than 20,000 copies per week.Because the tax was not based on thevolume of advertisement alone but wasmeasured by the extent of its circulation aswell, the law applied only to the thirteenlarge newspapers in Louisiana, leavinguntaxed four papers with circulation of onlyslightly less than 20,000 copies a week and120 weekly newspapers which were in

serious competition with the thirteennewspapers in question. It was well knownthat the thirteen newspapers had beencritical of Senator Huey Long, and the


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Long-dominated legislature of Louisianarespondent by taxing what Long described

as the "lying newspapers" by imposing onthem "a tax on lying." The effect of the taxwas to curtail both their revenue and theircirculation. As the U.S. Supreme Courtnoted, the tax was "a deliberate andcalculated device in the guise of a tax to

limit the circulation of information to whichthe public is entitled in virtue of theconstitutional guaranties." 29The case is aclassic illustration of the warning that thepower to tax is the power to destroy.

In the other case 30invoked by the PPI, thepress was also found to have been singledout because everything was exempt fromthe "use tax" on ink and paper, except thepress. Minnesota imposed a tax on thesales of goods in that state. To protect thesales tax, it enacted a complementary taxon the privilege of "using, storing orconsuming in that state tangible personal


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property" by eliminating the residents'incentive to get goods from outside states

where the sales tax might be lower.The Minnesota Star Tribune was exemptedfrom both taxes from 1967 to 1971. In 1971,however, the state legislature amended thetax scheme by imposing the "use tax" onthe cost of paper and ink used for

publication. The law was held to havesingled out the press because (1) there wasno reason for imposing the "use tax" sincethe press was exempt from the sales taxand (2) the "use tax" was laid on an"intermediate transaction rather than theultimate retail sale." Minnesota had a heavyburden of justifying the differential treatmentand 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 exemptthe first $100,000 of paper and ink used,further narrowed the coverage of the tax sothat "only a handful of publishers pay any


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tax at all and even fewer pay any significantamount of tax." 31The discriminatory

purpose was thus very clear.More recently, inArkansas Writers' Project,Inc. v. Ragland, 32it was held that a lawwhich taxed general interest magazines butnot newspapers and religious, professional,

trade and sports journals wasdiscriminatory because while the tax did notsingle out the press as a whole, it targeteda small group within the press. What ismore, by differentiating on the basis ofcontents (i.e., between general interest and

special interests such as religion or sports)the law became "entirely incompatible withthe First Amendment's guarantee offreedom of the press."

These cases come down to this: that unless

justified, the differential treatment of thepress creates risks of suppression ofexpression. In contrast, in the cases at bar,the statute applies to a wide range of goods


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and services. The argument that, byimposing the VAT only on print media

whose gross sales exceeds P480,000 butnot more than P750,000, the lawdiscriminates 33is without merit since it hasnot been shown that as a result the classsubject to tax has been unreasonablynarrowed. The fact is that this limitation

does not apply to the press along but to allsales. Nor is impermissible motive shownby the fact that print media and broadcastmedia are treated differently. The press istaxed on its transactions involving printingand publication, which are different from thetransactions of broadcast media. There isthus a reasonable basis for theclassification.

The cases canvassed, it must be stressed,eschew any suggestion that "owners ofnewspapers are immune from any forms ofordinary taxation." The license tax inthe Grosjean case was declared invalid


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because it was "one single in kind, with along history of hostile misuse against the

freedom of thepress." 34On the other hand, MinneapolisStaracknowledged that "The FirstAmendment does not prohibit all regulationof the press [and that] the States and theFederal Government can subject

newspapers to generally applicableeconomic regulations without creatingconstitutional problems." 35

What has been said above also disposes ofthe allegations of the PBS that the removal

of the exemption of printing, publication orimportation of books and religious articles,as well as their printing and publication,likewise violates freedom of thought and ofconscience. For as the U.S. Supreme Courtunanimously held in Jimmy SwaggartMinistries v. Board of Equalization, 36theFree Exercise of Religion Clause does notprohibit imposing a generally applicable


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sales and use tax on the sale of religiousmaterials by a religious organization.

This brings us to the question whether theregistration provision of the law, 37althoughof general applicability, nonetheless isinvalid when applied to the press because itlays a prior restraint on its essential

freedom. The case ofAmerican BibleSociety v. City of Manila 38is cited by boththe PBS and the PPI in support of theircontention that the law imposes censorship.There, this Court held that an ordinance ofthe City of Manila, which imposed a license

fee on those engaged in the business ofgeneral merchandise, could not be appliedto the appellant's sale of bibles and otherreligious literature. This Court reliedon Murdock v. Pennsylvania, 39in which itwas held that, as a license fee is fixed inamount and unrelated to the receipts of thetaxpayer, the license fee, when applied to areligious sect, was actually being imposed


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as a condition for the exercise of the sect'sright under the Constitution. For that

reason, it was held, the license fee"restrains in advance those constitutionalliberties of press and religion and inevitablytends to suppress their exercise." 40

But, in this case, the fee in 107, although

a fixed amount (P1,000), is not imposed forthe exercise of a privilege but only for thepurpose of defraying part of the cost ofregistration. The registration requirement isa central feature of the VAT system. It isdesigned to provide a record of tax credits

because any person who is subject to thepayment of the VAT pays an input tax, evenas he collects an output tax on sales madeor services rendered. The registration fee isthus a mere administrative fee, one notimposed on the exercise of a privilege,much less a constitutional right.

For the foregoing reasons, we find theattack on Republic Act No. 7716 on the


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ground that it offends the free speech,press and freedom of religion guarantees of

the Constitution to be without merit. For thesame reasons, we find the claim of thePhilippine Educational PublishersAssociation (PEPA) in G.R. No. 115931that the increase in the price of books andother educational materials as a result of

the VAT would violate the constitutionalmandate to the government to give priorityto education, science and technology (Art.II, 17) to be untenable.

B. Claims ofRegressivity, Denial ofDue Process, Equal

Protection, andImpairment

of Contracts

There is basis for passing upon claims thaton its face the statute violates the


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guarantees of freedom of speech, pressand religion. The possible "chilling effect"

which it may have on the essential freedomof the mind and conscience and the need toassure that the channels of communicationare open and operating importunatelydemand the exercise of this Court's powerof review.

Ther

Taxation Case 4

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