Tolentino v.

Secretary of Finance

Summary Cases:

● Arturo M. Tolentino vs. Secretary of Finance, et al.

Subjects:

Revenue Bills to “originate exclusively” in the House of Representatives, Procedure for Passage of Bill
into Law; Presidential certification, Bicameral Conference Committee, Enrolled Bill Doctrine, “One Bill,
One Subject” rule, Congressional Franchise subject to amendment, Freedom of Speech and of the
Press (VAT on Print Publications), Progressive System of Taxation, Non-impairment of Contracts

Facts:

Tolentino and other petitioners questioned the constitutionality of RA 7716 otherwise known as the EVAT
Law. RA 7716 sought to widen the tax base of the existing VAT system and enhance its administration
by amending the National Internal Revenue Code.

The original draft of RA 7716 (House Bill No. 11197) originated in the House of Representatives where it
passed three readings and afterward was sent to the Senate which came up with its own version
(Senate Bill No. 1630). The house bill and senate bill were then referred to a Conference Committee
which consolidated the two bill versions to produce the “enrolled bill” which the President signed into law.

Tolentino avers that (1) RA 7716 did not "originate exclusively" in the House of Representatives as
required by Art. VI, Section 24 of the Constitution because it is the result of the consolidation of two
distinct bills; (2) Senate bill did not pass three readings on separate days as required by the Art. VI,
Section 26 of the Constitution because the second and third readings were done on the same day; and
(3) the Conference Committee version included provisions not found in either the House bill or the
Senate bill

Held:

Revenue Bills to “originate exclusively” in the House of Representatives

1. The contention that the constitutional design is to limit the Senate's power in respect of revenue bills in
order to compensate for the grant to the Senate of the treaty-ratifying power and thereby equalize the
powers of both houses overlooks the fact that the powers being compared are different. We are dealing
here with the legislative power, which under the Constitution is vested not in any particular chamber but
in the Congress of the Philippines, consisting of a 'Senate and a House of Representatives.' The
exercise of the treaty-ratifying power is not the exercise of legislative power. It is the exercise of a check
on the executive power.

2. It is not the law - but the revenue bill - which is required by the Constitution to "originate
exclusively" in the House of Representatives. A bill originating in the House may undergo such
extensive changes in the Senate that the result may be a rewriting of the whole. As a result of the
Senate action, a distinct bill may be produced.

3. To insist that a revenue statute must substantially be the same as the House bill would be to deny the
Senate's power not only to "concur with amendments" but also to " propose amendments." It would
violate the coequality of legislative power of the two houses of Congress and in fact make the House
superior to the Senate.
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4. What the Constitution simply means is that the initiative for filing appropriation, revenue or tariff bills,
bills authorizing increase of the public debt, bills of local application, and private bills must come from the
House of Representatives on the theory that, elected as they are from the districts, the members of the
House can be expected to be more sensitive to the local needs and problems. On the other hand, the
senators, who are elected at large, are expected to approach the same problems from the national
perspective. Both views are thereby made to bear on the enactment of such laws.

5. In fact, the Constitution does not prohibit the filing in the Senate of a substitute bill in anticipation of its
receipt of the bill from the House, so long as action by the Senate as a body is withheld pending receipt
of the House bill.

Procedure for Passage of Bill into Law; Presidential certification

6. The second and third reading of the Senate bill were done on the same day because the President
had certified S. No. 1630 as urgent. The presidential certification dispensed with the requirement
not only of printing but also that of reading the bill on separate days.

7. The phrase ‘except when the President certifies to the necessity of its immediate enactment, etc.’ in
Art. VI, Sec 26(2) qualified the two stated conditions before a bill can become a law: (i) the bill has
passed three readings on separate days and (ii) it has been printed in its final form and distributed three
days before it is finally approved.

Bicameral Conference Committee

8. It is within the power of a conference committee to include in its report an entirely new provision that is
not found either in the House bill or in the Senate bill. If the committee can propose an amendment
consisting of one or two provisions, there is no 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 to the subject of the bills before the committee. After all, its report was not final but needed
the approval of both houses of Congress to become valid as an act of the legislative department. The
charge that in this case the Conference Committee acted as a third legislative chamber is thus without
any basis.

9. As to the contention that the Rules of the two chambers were disregarded in the preparation of the
Conference Committee Report because the Report did not contain a 'detailed statement of changes in,
or amendments to, the subject measure', this Court is not the proper forum for the enforcement of these
internal rules. Parliamentary rules are merely procedural and with their observance the courts have no
concern. So long as the procedural requirements under the Constitution have been observed, the court
will not step in to interfere.

10. Nor is there any reason for requiring that the Committee's Report must have undergone three
readings in each of the two houses. The nature of the bill requires that it be acted upon by each house
on a 'take it or leave it' basis, with the only alternative that if it is not approved by both houses, another
conference committee must be appointed. Art. VI, Sec 26(2) must be construed as referring only to bills
introduced for the first time in either house of Congress, not to the conference committee report.

Enrolled Bill Doctrine

11. An enrolled copy of a bill is conclusive not only of its provisions but also of its due enactment.

12. On the mere allegation that the Conference Committee ‘surreptitiously’ inserted provisions into a bill
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which it had prepared, the court should decline to go behind the enrolled copy of the bill. To disregard
the "enrolled bill" rule in such case would be to disregard the respect due to a co-equal branch of our
government.

“One Bill, One Subject” rule

13. Art. IV, Sec 26(1) provides that "Every bill passed by Congress shall embrace only one subject which
shall be expressed in the title thereof."

14. The amendment of Sec. 103 of the NIRC (which removed the VAT exemption of PAL) is fairly
embraced in the title of RA 7716. The title states that the purpose of the statute is to expand the VAT
system, and one way of doing this is to widen its base by withdrawing some of the exemptions granted
before.

15. It is sufficient if the title expresses the general subject of the statute and all its provisions are
germane to the general subject thus expressed

Congressional Franchise subject to amendment

16. Sec 103 (Vat Exemptions) of the NIRC was amended by RA 7716. The effect of the amendment is to
remove the exemption granted to PAL, as far as the VAT is concerned.

17. This is within the power of Congress to do under Art. XII, Sec 11 of the Constitution, which provides
that the grant of a franchise for the operation of a public utility is subject to amendment, alteration or
repeal by Congress when the common good so requires.

Freedom of Speech and of the Press (VAT on Print Publications)

18. Republic Act No. 7716 amended Sec 103 by deleting par. (f) with the result that print media became
subject to the VAT with respect to all aspects of their operations.

19. If the press is now required to pay a value-added tax on its transactions, it is not because it is being
singled out, much less targeted, for special treatment but only because of the removal of the exemption
previously granted to it by law. Other transactions, likewise previously granted exemption, have been
delisted as part of the scheme to expand the base and the scope of the VAT system. The law would
perhaps be open to the charge of discriminatory treatment if the only privilege withdrawn had been that
granted to the press. But that is not the case.

20. The press is not exempt from the taxing power of the State. By granting exemptions, the State does
not forever waive the exercise of its sovereign prerogative.

21. Likewise, the removal of the exemption of printing, publication or importation of books and religious
articles, as well as their printing and publication, does not violate freedom of thought and of conscience.
For as the U.S. Supreme Court unanimously held in Jimmy Swaggart Ministries v. Board of Equalization,
the Free Exercise of Religion Clause does not prohibit imposing a generally applicable sales and use tax
on the sale of religious material by a religious organization.

22. The registration fee is not equivalent to a prior restraint. The registration requirement is a central
feature of the VAT system. The fee is not imposed for the exercise of a privilege but only for the purpose
of defraying part of the cost of registration. The registration fee is thus a mere administrative fee.

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Progressive System of Taxation

23. Congress shall “evolve a progressive system of taxation” has been interpreted to mean that “direct
taxes are to be preferred and as much as possible and indirect taxes should be minimized.”

24. What Congress is required by the Constitution to do is to "evolve a progressive system of taxation."
These provisions are put in the Constitution as moral incentives to legislation, not as judicially
enforceable rights.

Non-impairment of Contracts

25. As to the contention that the imposition of the VAT on the sales and leases of real estate by virtue of
contracts entered into prior to the effectivity of the law would violate the constitutional provision that "No
law impairing the obligation of contracts shall be passed," it is enough to say that the parties to a contract
cannot fetter the exercise of the taxing power of the State. For not only are existing laws read into
contracts in order to fix obligations as between parties, but the reservation of essential attributes of
sovereign power is also read into contracts as a basic postulate of the legal order.

26. The Contract Clause has never been thought as a limitation on the exercise of the State's power of
taxation save only where a tax exemption has been granted for a valid consideration.

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