Abakada v.

Ermita (Fixes a standard; Duty to keep Journals and Records)

G.R. No. 168056 | September 1, 2005
Ponente: Austria-Martinez
Petitioner: ABAKADA GURO PARTY LIST (Formerly AASJAS)
Respondent: EXECUTIVE SECRETARY EDUARDO ERMITA

Emergency: MAIN 1 (Fixes a standard) - This involves constitutionality of RA 9337 VAT reform act.
ABAKADA et al challenge the provision in RA 9337 which states that when 1) VAT collection as a
percentage of GDP of the previous year exceeds 2 4/5% and 2) when national govt deficit as a % of GDP of
the previous year exceeds 1 %, the President, upon recommendation of the Secretary of Finance, shall
raise the VAT rate to 12% (from 10%), effective January 1, 2006. It is challenged for being undue delegation
of legislative power. SC - In every case of permissible delegation, there must be a showing that the
delegation itself is valid. It is valid only if the law (a) is complete in itself, setting forth therein the policy to be
executed, carried out, or implemented by the delegate; and (b) fixes a standard the limits of which are
sufficiently determinate and determinable to which the delegate must conform in the performance of his
functions. A sufficient standard is one which defines legislative policy, marks its limits, maps out its
boundaries and specifies the public agency to apply it. It indicates the circumstances under which the
legislative command is to be effected. In the case at hand, what was delegated was not the determination of
what the law is, but the ascertainment of facts on which the enforcement of the law (12%) will be based.
MAIN 2 (Duty to keep Journals and Records ) on deciding w/n the bicameral committee and its processes
were constitutional, SC stated that what is followed is the "enrolled bill doctrine," that is, the signing of a bill
by the Speaker of the House and the Senate President and the certification of the Secretaries of both
Houses of Congress that it was passed are conclusive of its due enactment. Justice Puno dissents and
states The argument that the enrolled bill is a "record" and therefore unimpeachable is likewise misleading,
for the correction of records is a matter of established judicial procedure. Thus, as far back as the 1940s,
Prof. Sutherland confirmed that "x x x the tendency seems to be toward the abandonment of the conclusive
presumption rule and the adoption of the third rule leaving only a prima facie presumption of validity which
may be attacked by any authoritative source of information, such as, legislative journals, debates,
committee reports or papers. (I think the Puno dissent is important cuz it is the only time the word journal
comes out in the entire case)
Facts:
1. Four consolidated cases (omitted titles of each case; I also omitted section nos since so many and
just left it to substance of provs. Also I didnt change flow of the case).
2. R.A. No. 9337 (VAT Reform Act ) is a consolidation of three legislative bills namely, House Bill Nos.
3555 and 3705, and Senate Bill No. 1950.
3. April 13, 2005, the Senate agreed to the request of the House of Representatives for a committee
conference on the disagreeing provisions of the proposed bills.
4. On May 23, 2005, the enrolled copy of the consolidated House and Senate version was transmitted
to the President, who signed the same into law on May 24, 2005. Thus, came R.A. No. 9337.
5. July 1, 2005 is the effectivity date of R.A. No. 9337. When said date came, the Court issued TRO
(due to confusion in the increase of prices on air carriers, gas, and electric bill by 10%).
6. (MAIN 1) G.R. No. 168056 - ABAKADA GURO Party List, et al., filed a petition for prohibition. They
question the constitutionality of Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107
and 108, of the NIRC. Section 4 imposes a 10% VAT on sale of goods and properties, Section 5 on
importation of goods, and Section 6 on sale of services and use or lease of properties.
a. These questioned provisions contain a uniform proviso authorizing the President, upon
recommendation of the Secretary of Finance, SHALL raise the VAT rate to 12%, effective
January 1, 2006, after any of the following conditions have been satisfied, to wit:
i. Value-added tax collection as a % of GDP of the previous year exceeds 2 4/5%
(hereinafter VAT/GDP Ratio > 2 4/5%) -> IT MEANS VAT IS EFFECTIVE
ii. Natl govt deficit as a % of GDP of the previous year exceeds 1 % (hereinafter
Natl Govt Deficit/GDP >1.5%) -> IT MEANS DEFICIT IS INCREASING
b. ABAKADA argue that the law is unconstitutional, as it constitutes abandonment by
Congress of its exclusive authority to fix the rate of taxes under Article VI, Section 28(2) of
the 1987 Philippine Constitution.
7. G.R. No. 168207 - Sen. Aquilino Q. Pimentel, Jr., et al., filed a petition for certiorari likewise
assailing the constitutionality of Sections 4, 5 and 6 of R.A. No. 9337. Pimentel et al further claim
that changes made by the Bicameral Conference Committee are violations of the "no-amendment
rule" upon last reading of a bill laid down in Article VI, Section 26(2) of the Constitution.
8. G.R. No. 168461 - petition for prohibition was filed on June 29, 2005, by the Association of Pilipinas
Shell Dealers, Inc., et al., assailing the following provisions of R.A. No. 9337:
a. Requiring that the input tax on depreciable goods shall be amortized over a 60-month
period, if the acquisition, excluding the VAT components, exceeds P1Million.
b. Imposing a 70% limit on the amount of input tax to be credited against the output tax; and
c. Authorizing the Government to deduct a 5% final withholding tax on gross payments of
goods and services, which are subject to 10% VAT
d. Shell contend that they violates right of non-deprivation of life, liberty or property without
due process of law. Shell also argue that the input tax partakes the nature of a property.
9. G.R. No. 168463 - Several members of the House of Rep led by Rep. Francis Joseph G. Escudero
filed this petition for certiorari on June 30, 2005. They question the following: undue delegation of
legislative power (same as ABAKADA); The Bicameral Conference Committee violates Article VI,
Section 24(1) of the Constitution, which provides that all appropriation, revenue or tariff bills shall
originate exclusively in the House of Representatives
10. G.R. No. 168730 - Governor Enrique T. Garcia filed a petition for certiorari. Law is uncosti bec.
limitation on the creditable input tax in effect allows VAT-registered establishments to retain a
portion of the taxes they collect. (SC said this was a ridiculous argument. Omitted this case)
Issue 1 (MAIN 2, rest is in dissent): Whether Bicameral Conference Committee violates the Consti? NO
Note: BIcam was needed to fix disagreements on 1. rate of VAT; 2. industries to be hit by VAT; 3. limitation
of input tax credit; 4. amendments of NIRC provs. Bicam conclusion: 1. 10% until existence of conditions 2.
Deleted no pass-on provision (VAT naturally will be passed on to consumer) 3. Input tax credit must be
limited 4. Amendments were adopted
1. It should be borne in mind that the power of internal regulation and discipline are intrinsic in any
legislative body. Both House of Rep and Senate have regulations on the formation of the Bicam.
2. The creation of such conference committee was apparently in response to a problem, not
addressed by any constitutional provision, where the two houses of Congress find themselves in
disagreement over changes or amendments introduced by the other house in a legislative bill.
3. Farias vs. The Executive Secretary, the Court En Banc, unanimously reiterated and emphasized
its adherence to the "enrolled bill doctrine.
a. Under the "enrolled bill doctrine," the signing of a bill by the Speaker of the House and the
Senate President and the certification of the Secretaries of both Houses of Congress that
it was passed are conclusive of its due enactment. This Court is not the proper forum for
the enforcement of these internal rules of Congress, whether House or Senate.
Parliamentary rules are merely procedural and with their observance the courts have no
concern. This is premised on the separation of powers and respect for legislative
department.
b. Arroyo vs. De Venecia, viz xxx all deny to the courts the power to inquire into allegations
that, in enacting a law, a House of Congress failed to comply with its own rules, in the
absence of showing that there was a violation of a constitutional provision or the rights of
private individuals.
4. Osmea v. Pendatun,- "mere failure to conform to parliamentary usage will not invalidate the action
(taken by a deliberative body) when the requisite number of members have agreed to a particular
measure."
Issue 2: w/n R.A. No. 9337 Violates Article VI, Section 26(2) of the Consti on "No-Amendment Rule" NO
Art. VI. 26 (2) must, therefore, be construed as referring only to bills introduced for the first time in either
house of Congress, not to the conference committee report. To construe said provision in a way as to
proscribe any further changes to a bill after one house has voted on it would lead to absurdity as this would
mean that the other house of Congress would be deprived of its constitutional power to amend.

Issue 3: w/n R.A. No. 9337 Violate Article VI, Section 24 of the Consti on Exclusive Origination of Revenue
Bills NO, it is admitted that it was indeed House Bill Nos. 3555 and 3705 that initiated the move for
amending provisions of the NIRC dealing mainly with the value-added tax.
To begin with, it is not the law but the revenue bill which is required by the Constitution to "originate
exclusively" in the House of Representatives.
Issue 3 (MAIN 1): w/n there was Undue Delegation of Legislative Power NO (refer to FACT NUM. 6)
1. Section 28 (2), Article VI of the Constitution provides: The Congress may, by law, authorize the
President to fix within specified limits, and may impose, tariff rates, import and export quotas,
tonnage and wharfage dues, and other duties or imposts within the framework of the national
development program of the government.
2. ABAKADA argue that the VAT is a tax levied on the sale, barter or exchange of goods and
properties as well as on the sale or exchange of services, which cannot be included within the
purview of tariffs, etc. and more importantly, legislative power cannot be delegated.
3. SC: Purely legislative power, which can never be delegated, has been described as the authority to
make a complete law complete as to the time when it shall take effect and as to whom it shall be
applicable and to determine the expediency of its enactment.
4. But there are recognized exceptions: Delegation of tariff powers to the President; Delegation of
emergency powers to the President; Delegation to the people at large; Delegation to local
governments; and Delegation to administrative bodies.
5. In every case of permissible delegation, there must be a showing that the delegation itself is valid.
It is valid only if the law (a) is complete in itself, setting forth therein the policy to be executed,
carried out, or implemented by the delegate; and (b) fixes a standard the limits of which are
sufficiently determinate and determinable to which the delegate must conform in the
performance of his functions. A sufficient standard is one which defines legislative policy, marks its
limits, maps out its boundaries and specifies the public agency to apply it. It indicates the
circumstances under which the legislative command is to be effected. Both tests are intended to
prevent a total transference of legislative authority to the delegate, who is not allowed to step into
the shoes of the legislature and exercise a power essentially legislative.
6. People vs. Vera - The true distinction is between the delegation of power to make the law, which
necessarily involves a discretion as to what it shall be, and conferring an authority or discretion as
to its execution, to be exercised under and in pursuance of the law. The first cannot be done; to the
latter no valid objection can be made.
7. The power to ascertain facts is such a power which may be delegated. There is nothing essentially
legislative in ascertaining the existence of facts or conditions as the basis of the taking into effect of
a law. That is a mental process common to all branches of the government.
8. What is thus left to the administrative official is not the legislative determination of what public
policy demands, but simply the ascertainment of what the facts of the case require to be done
according to the terms of the law by which he is governed. The efficiency of an Act as a declaration
of legislative will must, of course, come from Congress, but the ascertainment of the contingency
upon which the Act shall take effect may be left to such agencies as it may designate. The
legislature, then, may provide that a law shall take effect upon the happening of future specified
contingencies leaving to some other person or body the power to determine when the specified
contingency has arisen. For a complex economy, that may be the only way in which the legislative
process can go forward.
9. The case at hand is not a delegation of legislative power. It is simply a delegation of ascertainment
of facts upon which enforcement and administration of the increase rate under the law is
contingent. It leaves the entire operation or non-operation of the 12% rate upon factual matters
outside of the control of the executive, that is 1. VAT/GDP Ratio > 2.8% and 2. Natl Govt
Deficit/GDP >1.5%
10. Furthermore, the recommendation from the secretary of finance is not subject to the presidents
discretion. The secretary acts as an agent of the congress in ascertaining whether 1. VAT/GDP
Ratio > 2.8% and 2. Natl Govt Deficit/GDP >1.5%. Also, the provision uses the word shall,
highlighting its mandatory nature.
(MAIN 2) Dissenting opinion of Justice Puno regarding Duty to keep Journals and Records
Finally, respondents seek sanctuary in the conclusiveness of an enrolled bill to bar any judicial inquiry on
whether Congress observed our constitutional procedure in the passage of R.A. No. 7716. The enrolled bill
theory is a historical relic that should not continuously rule us. The enrolled bill theory originated in England
where there is no written constitution and where Parliament is supreme. It must be pointed out that starting
from the decade of the 40s, even American courts have veered away from the rigidity and unrealism of the
conclusiveness of an enrolled bill.
Prof. Sutherland observed:
Where the failure of constitutional compliance in the enactment of statutes is not discoverable from
the face of the act itself but may be demonstrated by recourse to the legislative journals, debates,
committee reports or papers of the governor, courts have used several conflicting theories with
which to dispose of the issue. They have held: (1) that the enrolled bill is conclusive and like the
sheriffs return cannot be attacked; (2) that the enrolled bill is prima facie correct and only in case
the legislative journal shows affirmative contradiction of the constitutional requirement will the bill
be held invalid; (3) that although the enrolled bill is prima facie correct, evidence from the journals,
or other extrinsic sources is admissible to strike the bill down; (4) that the legislative journal is
conclusive and the enrolled bills is valid only if it accords with the recital in the journal and the
constitutional procedure. Various jurisdictions have adopted these alternative approaches in view of
strong dissent and dissatisfaction against the philosophical underpinnings of the conclusiveness of
an enrolled bill.
The rule of conclusiveness (of enrolled bill) was similar to the common law rule of the inviolability of
the sheriffs return. Indeed, they had the same origin, that is, the sheriff was an officer of the king
and likewise the parliamentary act was a regal act and no official might dispute the kings word.
Transposed to our democratic system of government, courts held that as the legislature was an
official branch of government the court must indulge every presumption that the legislative act was
valid. When these arguments failed, as they frequently did, the doctrine of convenience was
advanced, that is, that it was not only an undue burden upon the legislature to preserve its records
to meet the attack of persons not affected by the procedure of enactment, but also that it
unnecessarily complicated litigation and confused the trial of substantive issues.
The argument that the enrolled bill is a "record" and therefore unimpeachable is likewise
misleading, for the correction of records is a matter of established judicial procedure. Apparently,
the justification is either the historical one that the kings word could not be questioned or the
separation of powers principle that one branch of the government must treat as valid the acts of
another.
Persuasive as these arguments are, the tendency today is to avoid reaching results by artificial
presumptions and thus it would seem desirable to insist that the enrolled bill stand or fall on the
basis of the relevant evidence which may be submitted for or against it. (Emphasis ours)
Thus, as far back as the 1940s, Prof. Sutherland confirmed that "x x x the tendency seems to be
toward the abandonment of the conclusive presumption rule and the adoption of the third rule
leaving only a prima facie presumption of validity which may be attacked by any authoritative
source of information.
CONSTI EXTRA
EPC not violated since Tax Reform Act applies to all taxpayers and all properties
Re. progressive tax system Resort to indirect taxes should be minimized but not avoided entirely because
it is difficult, if not impossible, to avoid them by imposing such taxes according to the taxpayers' ability to pay
R.A. No. 9337 is also equitable. The law is equipped with a threshold margin.
TAX EXTRA
Re. 70% limit on the amount of input tax - Taxpayer is not deprived of creditable input tax bec it may be
carried on in subsequent years. The input tax is not a property or a property right within the constitutional
purview of the due process clause. A VAT-registered persons entitlement to the creditable input tax is a
mere statutory privilege.
Re. 5% creditable withholding tax imposed on payments made by the government just a method of tax
collection.
Section 114(C) merely provides a method of collection, or as stated by respondents, a more simplified VAT
withholding system. The government in this case is constituted as a withholding agent with respect to their
payments for goods and services.