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Taxation Case no.

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G.R. No. 173176 August 26, Office Building, BIR Road, Diliman, Quezon City,
2008 recommending the criminal prosecution of MS. JUDY ANNE
LUMAGUI SANTOS for substantial underdeclaration of
JUDY ANNE L. SANTOS, petitioner, income, which constitutes as prima facie evidence of
vs. false or fraudulent return under Section 248(B) of the
PEOPLE OF THE PHILIPPINES and BUREAU OF NIRC and punishable under Sections 254 and 255 of the Tax
INTERNAL REVENUE, respondents. Code.
G.R. No. 168056 September 1, 2005
Before this Court is a Petition for Review on Certiorari1 under ABAKADA GURO PARTY LIST (Formerly AASJAS)
Rule 45 of the Revised Rules of Court filed by petitioner Judy OFFICERS SAMSON S. ALCANTARA and ED VINCENT S.
Anne L. Santos (Santos) seeking the reversal and setting ALBANO, Petitioners,
aside of the Resolution,2 dated 19 June 2006, of the Court of vs.
Tax Appeals (CTA) en banc in C.T.A. EB. CRIM. No. 001 which THE HONORABLE EXECUTIVE SECRETARY EDUARDO
denied petitioners Motion for Extension of Time to File ERMITA; HONORABLE SECRETARY OF THE
Petition for Review. Petitioner intended to file the Petition for DEPARTMENT OF FINANCE CESAR PURISIMA; and
Review with the CTA en banc to appeal the Resolutions HONORABLE COMMISSIONER OF INTERNAL REVENUE
dated 23 February 20063 and 11 May 20064 of the CTA First GUILLERMO PARAYNO, JR., Respondent.
Division in C.T.A. Crim. Case No. 0-012 denying, x-------------------------x
respectively, her Motion to Quash the Information filed G.R. No. 168207
against her for violation of Section 255, in relation to AQUILINO Q. PIMENTEL, JR., LUISA P. EJERCITO-ESTRADA,
Sections 254 and 248(B) of the National Internal Revenue JINGGOY E. ESTRADA, PANFILO M. LACSON, ALFREDO S. LIM,
Code (NIRC), as amended; and her Motion for JAMBY A.S. MADRIGAL, AND SERGIO R. OSMEA III,
Reconsideration. Petitioners,
There is no controversy as to the facts that gave rise to the vs.
present Petition. EXECUTIVE SECRETARY EDUARDO R. ERMITA, CESAR
On 19 May 2005, then Bureau of Internal Revenue (BIR) V. PURISIMA, SECRETARY OF FINANCE, GUILLERMO L.
Commissioner Guillermo L. Parayno, Jr. wrote to the PARAYNO, JR., COMMISSIONER OF THE BUREAU OF
Department of Justice (DOJ) Secretary Raul M. Gonzales a INTERNAL REVENUE, Respondent.
letter5 regarding the possible filing of criminal charges x-------------------------x
against petitioner. BIR Commissioner Parayno began his G.R. No. 168461
letter with the following statement: ASSOCIATION OF PILIPINAS SHELL DEALERS, INC.
I have the honor to refer to you for preliminary investigation represented by its President, ROSARIO ANTONIO; PETRON
and filing of an information in court if evidence so warrants, DEALERS ASSOCIATION represented by its President, RUTH
the herein attached Joint Affidavit of RODERICK C. ABAD, E. BARBIBI; ASSOCIATION OF CALTEX DEALERS OF THE
STIMSON P. CUREG, VILMA V. CARONAN, RHODORA L. PHILIPPINES represented by its President, MERCEDITAS A.
DELOS REYES under Group Supervisor TEODORA V. GARCIA; ROSARIO ANTONIO doing business under the name
PURINO, of the National Investigation Division, BIR National and style of "ANB NORTH SHELL SERVICE STATION";

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Taxation Case no. 41

LOURDES MARTINEZ doing business under the name and SERVICE STATION", Petitioners,
style of "SHELL GATE N. DOMINGO"; BETHZAIDA TAN doing vs.
business under the name and style of "ADVANCE SHELL CESAR V. PURISIMA, in his capacity as Secretary of
STATION"; REYNALDO P. MONTOYA doing business under the the Department of Finance and GUILLERMO L.
name and style of "NEW LAMUAN SHELL SERVICE STATION"; PARAYNO, JR., in his capacity as Commissioner of
EFREN SOTTO doing business under the name and style of Internal Revenue, Respondent.
"RED FIELD SHELL SERVICE STATION"; DONICA x-------------------------x
CORPORATION represented by its President, DESI G.R. No. 168463
TOMACRUZ; RUTH E. MARBIBI doing business under the FRANCIS JOSEPH G. ESCUDERO, VINCENT CRISOLOGO,
name and style of "R&R PETRON STATION"; PETER M. EMMANUEL JOEL J. VILLANUEVA, RODOLFO G. PLAZA,
UNGSON doing business under the name and style of DARLENE ANTONINO-CUSTODIO, OSCAR G. MALAPITAN,
"CLASSIC STAR GASOLINE SERVICE STATION"; MARIAN BENJAMIN C. AGARAO, JR. JUAN EDGARDO M. ANGARA,
SHEILA A. LEE doing business under the name and style of JUSTIN MARC SB. CHIPECO, FLORENCIO G. NOEL, MUJIV S.
"NTE GASOLINE & SERVICE STATION"; JULIAN CESAR P. HATAMAN, RENATO B. MAGTUBO, JOSEPH A. SANTIAGO,
POSADAS doing business under the name and style of TEOFISTO DL. GUINGONA III, RUY ELIAS C. LOPEZ, RODOLFO
"STARCARGA ENTERPRISES"; ADORACION MAEBO doing Q. AGBAYANI and TEODORO A. CASIO, Petitioners,
business under the name and style of "CMA MOTORISTS vs.
CENTER"; SUSAN M. ENTRATA doing business under the CESAR V. PURISIMA, in his capacity as Secretary of
name and style of "LEONAS GASOLINE STATION and Finance, GUILLERMO L. PARAYNO, JR., in his capacity
SERVICE CENTER"; CARMELITA BALDONADO doing business as Commissioner of Internal Revenue, and EDUARDO
under the name and style of "FIRST CHOICE SERVICE R. ERMITA, in his capacity as Executive Secretary,
CENTER"; MERCEDITAS A. GARCIA doing business under the Respondent.
name and style of "LORPED SERVICE CENTER"; RHEAMAR A. x-------------------------x
RAMOS doing business under the name and style of "RJRAM G.R. No. 168730
PTT GAS STATION"; MA. ISABEL VIOLAGO doing business BATAAN GOVERNOR ENRIQUE T. GARCIA, JR. Petitioner,
under the name and style of "VIOLAGO-PTT SERVICE vs.
CENTER"; MOTORISTS HEART CORPORATION represented by HON. EDUARDO R. ERMITA, in his capacity as the Executive
its Vice-President for Operations, JOSELITO F. FLORDELIZA; Secretary; HON. MARGARITO TEVES, in his capacity as
MOTORISTS HARVARD CORPORATION represented by its Secretary of Finance; HON. JOSE MARIO BUNAG, in his
Vice-President for Operations, JOSELITO F. FLORDELIZA; capacity as the OIC Commissioner of the Bureau of Internal
MOTORISTS HERITAGE CORPORATION represented by its Revenue; and HON. ALEXANDER AREVALO, in his capacity as
Vice-President for Operations, JOSELITO F. FLORDELIZA; the OIC Commissioner of the Bureau of Customs,
PHILIPPINE STANDARD OIL CORPORATION represented by its Respondent.
Vice-President for Operations, JOSELITO F. FLORDELIZA; DECISION
ROMEO MANUEL doing business under the name and style AUSTRIA-MARTINEZ, J.:
of "ROMMAN GASOLINE STATION"; ANTHONY ALBERT CRUZ The expenses of government, having for their object the
III doing business under the name and style of "TRUE interest of all, should be borne by everyone, and the more

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man enjoys the advantages of society, the more he ought to Meanwhile, the Senate Committee on Ways and Means
hold himself honored in contributing to those expenses. approved Senate Bill No. 19504 on March 7, 2005, "in
-Anne Robert Jacques Turgot (1727-1781) substitution of Senate Bill Nos. 1337, 1838 and 1873, taking
French statesman and economist into consideration House Bill Nos. 3555 and 3705." Senator
Mounting budget deficit, revenue generation, inadequate Ralph G. Recto sponsored Senate Bill No. 1337, while Senate
fiscal allocation for education, increased emoluments for Bill Nos. 1838 and 1873 were both sponsored by Sens.
health workers, and wider coverage for full value-added tax Franklin M. Drilon, Juan M. Flavier and Francis N. Pangilinan.
benefits these are the reasons why Republic Act No. 9337 The President certified the bill on March 11, 2005, and was
(R.A. No. 9337)1 was enacted. Reasons, the wisdom of approved by the Senate on second and third reading on
which, the Court even with its extensive constitutional April 13, 2005.
power of review, cannot probe. The petitioners in these On the same date, April 13, 2005, the Senate agreed to the
cases, however, question not only the wisdom of the law, request of the House of Representatives for a committee
but also perceived constitutional infirmities in its passage. conference on the disagreeing provisions of the proposed
Every law enjoys in its favor the presumption of bills.
constitutionality. Their arguments notwithstanding, Before long, the Conference Committee on the Disagreeing
petitioners failed to justify their call for the invalidity of the Provisions of House Bill No. 3555, House Bill No. 3705, and
law. Hence, R.A. No. 9337 is not unconstitutional. Senate Bill No. 1950, "after having met and discussed in full
LEGISLATIVE HISTORY free and conference," recommended the approval of its
R.A. No. 9337 is a consolidation of three legislative bills report, which the Senate did on May 10, 2005, and with the
namely, House Bill Nos. 3555 and 3705, and Senate Bill No. House of Representatives agreeing thereto the next day,
1950. May 11, 2005.
House Bill No. 35552 was introduced on first reading on On May 23, 2005, the enrolled copy of the consolidated
January 7, 2005. The House Committee on Ways and Means House and Senate version was transmitted to the President,
approved the bill, in substitution of House Bill No. 1468, who signed the same into law on May 24, 2005. Thus, came
which Representative (Rep.) Eric D. Singson introduced on R.A. No. 9337.
August 8, 2004. The President certified the bill on January 7, July 1, 2005 is the effectivity date of R.A. No. 9337. 5 When
2005 for immediate enactment. On January 27, 2005, the said date came, the Court issued a temporary restraining
House of Representatives approved the bill on second and order, effective immediately and continuing until further
third reading. orders, enjoining respondents from enforcing and
House Bill No. 37053 on the other hand, substituted House implementing the law.
Bill No. 3105 introduced by Rep. Salacnib F. Baterina, and Oral arguments were held on July 14, 2005. Significantly,
House Bill No. 3381 introduced by Rep. Jacinto V. Paras. Its during the hearing, the Court speaking through Mr. Justice
"mother bill" is House Bill No. 3555. The House Committee Artemio V. Panganiban, voiced the rationale for its issuance
on Ways and Means approved the bill on February 2, 2005. of the temporary restraining order on July 1, 2005, to wit:
The President also certified it as urgent on February 8, 2005. J. PANGANIBAN : . . . But before I go into the details of your
The House of Representatives approved the bill on second presentation, let me just tell you a little background. You
and third reading on February 28, 2005. know when the law took effect on July 1, 2005, the Court

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Taxation Case no. 41

issued a TRO at about 5 oclock in the afternoon. But before of 3%. When this E-Vat law took effect the Sales Tax was
that, there was a lot of complaints aired on television and on also removed as a mitigating measure. So, therefore, there
radio. Some people in a gas station were complaining that is no justification to increase the fares by 10% at best 7%,
the gas prices went up by 10%. Some people were correct?
complaining that their electric bill will go up by 10%. Other ATTY. BANIQUED : I guess so, Your Honor, yes.
times people riding in domestic air carrier were complaining J. PANGANIBAN : There are other products that the people
that the prices that theyll have to pay would have to go up were complaining on that first day, were being increased
by 10%. While all that was being aired, per your arbitrarily by 10%. And thats one reason among many
presentation and per our own understanding of the law, others this Court had to issue TRO because of the confusion
thats not true. Its not true that the e-vat law necessarily in the implementation. Thats why we added as an issue in
increased prices by 10% uniformly isnt it? this case, even if its tangentially taken up by the pleadings
ATTY. BANIQUED : No, Your Honor. of the parties, the confusion in the implementation of the E-
J. PANGANIBAN : It is not? vat. Our people were subjected to the mercy of that
ATTY. BANIQUED : Its not, because, Your Honor, there is an confusion of an across the board increase of 10%, which you
Executive Order that granted the Petroleum companies yourself now admit and I think even the Government will
some subsidy . . . interrupted admit is incorrect. In some cases, it should be 3% only, in
J. PANGANIBAN : Thats correct . . . some cases it should be 6% depending on these mitigating
ATTY. BANIQUED : . . . and therefore that was meant to measures and the location and situation of each product, of
temper the impact . . . interrupted each service, of each company, isnt it?
J. PANGANIBAN : . . . mitigating measures . . . ATTY. BANIQUED : Yes, Your Honor.
ATTY. BANIQUED : Yes, Your Honor. J. PANGANIBAN : Alright. So thats one reason why we had to
J. PANGANIBAN : As a matter of fact a part of the mitigating issue a TRO pending the clarification of all these and we
measures would be the elimination of the Excise Tax and the wish the government will take time to clarify all these by
import duties. That is why, it is not correct to say that the means of a more detailed implementing rules, in case the
VAT as to petroleum dealers increased prices by 10%. law is upheld by this Court. . . .6
ATTY. BANIQUED : Yes, Your Honor. The Court also directed the parties to file their respective
J. PANGANIBAN : And therefore, there is no justification for Memoranda.
increasing the retail price by 10% to cover the E-Vat tax. If G.R. No. 168056
you consider the excise tax and the import duties, the Net Before R.A. No. 9337 took effect, petitioners ABAKADA
Tax would probably be in the neighborhood of 7%? We are GURO Party List, et al., filed a petition for prohibition on May
not going into exact figures I am just trying to deliver a point 27, 2005. They question the constitutionality of Sections 4, 5
that different industries, different products, different and 6 of R.A. No. 9337, amending Sections 106, 107 and
services are hit differently. So its not correct to say that all 108, respectively, of the National Internal Revenue Code
prices must go up by 10%. (NIRC). Section 4 imposes a 10% VAT on sale of goods and
ATTY. BANIQUED : Youre right, Your Honor. properties, Section 5 imposes a 10% VAT on importation of
J. PANGANIBAN : Now. For instance, Domestic Airline goods, and Section 6 imposes a 10% VAT on sale of services
companies, Mr. Counsel, are at present imposed a Sales Tax and use or lease of properties. These questioned provisions

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Taxation Case no. 41

contain a uniform proviso authorizing the President, upon Petitioners further claim that the inclusion of a stand-by
recommendation of the Secretary of Finance, to raise the authority granted to the President by the Bicameral
VAT rate to 12%, effective January 1, 2006, after any of the Conference Committee is a violation of the "no-amendment
following conditions have been satisfied, to wit: rule" upon last reading of a bill laid down in Article VI,
. . . That the President, upon the recommendation of the Section 26(2) of the Constitution.
Secretary of Finance, shall, effective January 1, 2006, raise G.R. No. 168461
the rate of value-added tax to twelve percent (12%), after Thereafter, a petition for prohibition was filed on June 29,
any of the following conditions has been satisfied: 2005, by the Association of Pilipinas Shell Dealers, Inc., et
(i) Value-added tax collection as a percentage of Gross al., assailing the following provisions of R.A. No. 9337:
Domestic Product (GDP) of the previous year exceeds two 1) Section 8, amending Section 110 (A)(2) of the NIRC,
and four-fifth percent (2 4/5%); or requiring that the input tax on depreciable goods shall be
(ii) National government deficit as a percentage of GDP of amortized over a 60-month period, if the acquisition,
the previous year exceeds one and one-half percent (1 %). excluding the VAT components, exceeds One Million Pesos
Petitioners argue that the law is unconstitutional, as it (P1, 000,000.00);
constitutes abandonment by Congress of its exclusive 2) Section 8, amending Section 110 (B) of the NIRC,
authority to fix the rate of taxes under Article VI, Section imposing a 70% limit on the amount of input tax to be
28(2) of the 1987 Philippine Constitution. credited against the output tax; and
G.R. No. 168207 3) Section 12, amending Section 114 (c) of the NIRC,
On June 9, 2005, Sen. Aquilino Q. Pimentel, Jr., et al., filed a authorizing the Government or any of its political
petition for certiorari likewise assailing the constitutionality subdivisions, instrumentalities or agencies, including
of Sections 4, 5 and 6 of R.A. No. 9337. GOCCs, to deduct a 5% final withholding tax on gross
Aside from questioning the so-called stand-by authority of payments of goods and services, which are subject to 10%
the President to increase the VAT rate to 12%, on the ground VAT under Sections 106 (sale of goods and properties) and
that it amounts to an undue delegation of legislative power, 108 (sale of services and use or lease of properties) of the
petitioners also contend that the increase in the VAT rate to NIRC.
12% contingent on any of the two conditions being satisfied Petitioners contend that these provisions are
violates the due process clause embodied in Article III, unconstitutional for being arbitrary, oppressive, excessive,
Section 1 of the Constitution, as it imposes an unfair and and confiscatory.
additional tax burden on the people, in that: (1) the 12% Petitioners argument is premised on the constitutional right
increase is ambiguous because it does not state if the rate of non-deprivation of life, liberty or property without due
would be returned to the original 10% if the conditions are process of law under Article III, Section 1 of the Constitution.
no longer satisfied; (2) the rate is unfair and unreasonable, According to petitioners, the contested sections impose
as the people are unsure of the applicable VAT rate from limitations on the amount of input tax that may be claimed.
year to year; and (3) the increase in the VAT rate, which is Petitioners also argue that the input tax partakes the nature
supposed to be an incentive to the President to raise the of a property that may not be confiscated, appropriated, or
VAT collection to at least 2 4/5 of the GDP of the previous limited without due process of law. Petitioners further
year, should only be based on fiscal adequacy. contend that like any other property or property right, the

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Taxation Case no. 41

input tax credit may be transferred or disposed of, and that alleging unconstitutionality of the law on the ground that the
by limiting the same, the government gets to tax a profit or limitation on the creditable input tax in effect allows VAT-
value-added even if there is no profit or value-added. registered establishments to retain a portion of the taxes
Petitioners also believe that these provisions violate the they collect, thus violating the principle that tax collection
constitutional guarantee of equal protection of the law and revenue should be solely allocated for public purposes
under Article III, Section 1 of the Constitution, as the and expenditures. Petitioner Garcia further claims that
limitation on the creditable input tax if: (1) the entity has a allowing these establishments to pass on the tax to the
high ratio of input tax; or (2) invests in capital equipment; or consumers is inequitable, in violation of Article VI, Section
(3) has several transactions with the government, is not 28(1) of the Constitution.
based on real and substantial differences to meet a valid RESPONDENTS COMMENT
classification. The Office of the Solicitor General (OSG) filed a Comment in
Lastly, petitioners contend that the 70% limit is anything but behalf of respondents. Preliminarily, respondents contend
progressive, violative of Article VI, Section 28(1) of the that R.A. No. 9337 enjoys the presumption of
Constitution, and that it is the smaller businesses with constitutionality and petitioners failed to cast doubt on its
higher input tax to output tax ratio that will suffer the validity.
consequences thereof for it wipes out whatever meager Relying on the case of Tolentino vs. Secretary of Finance,
margins the petitioners make. 235 SCRA
G.R. No. 168463 630 (1994), respondents argue that the procedural issues
Several members of the House of Representatives led by raised by petitioners, i.e., legality of the bicameral
Rep. Francis Joseph G. Escudero filed this petition for proceedings, exclusive origination of revenue measures and
certiorari on June 30, 2005. They question the the power of the Senate concomitant thereto, have already
constitutionality of R.A. No. 9337 on the following grounds: been settled. With regard to the issue of undue delegation of
1) Sections 4, 5, and 6 of R.A. No. 9337 constitute an undue legislative power to the President, respondents contend that
delegation of legislative power, in violation of Article VI, the law is complete and leaves no discretion to the President
Section 28(2) of the Constitution; but to increase the rate to 12% once any of the two
2) The Bicameral Conference Committee acted without conditions provided therein arise.
jurisdiction in deleting the no pass on provisions present in Respondents also refute petitioners argument that the
Senate Bill No. 1950 and House Bill No. 3705; and increase to 12%, as well as the 70% limitation on the
3) Insertion by the Bicameral Conference Committee of creditable input tax, the 60-month amortization on the
Sections 27, 28, 34, 116, 117, 119, 121, 125, 7 148, 151, purchase or importation of capital goods exceeding
236, 237 and 288, which were present in Senate Bill No. P1,000,000.00, and the 5% final withholding tax by
1950, violates Article VI, Section 24(1) of the Constitution, government agencies, is arbitrary, oppressive, and
which provides that all appropriation, revenue or tariff bills confiscatory, and that it violates the constitutional principle
shall originate exclusively in the House of Representatives on progressive taxation, among others.
G.R. No. 168730 Finally, respondents manifest that R.A. No. 9337 is the
On the eleventh hour, Governor Enrique T. Garcia filed a anchor of the governments fiscal reform agenda. A reform
petition for certiorari and prohibition on July 20, 2005, in the value-added system of taxation is the core revenue

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Taxation Case no. 41

measure that will tilt the balance towards a sustainable are individual and corporate income taxes, transfer taxes,
macroeconomic environment necessary for economic and residence taxes.12
growth. In the Philippines, the value-added system of sales taxation
ISSUES has long been in existence, albeit in a different mode. Prior
The Court defined the issues, as follows: to 1978, the system was a single-stage tax computed under
PROCEDURAL ISSUE the "cost deduction method" and was payable only by the
Whether R.A. No. 9337 violates the following provisions of original sellers. The single-stage system was subsequently
the Constitution: modified, and a mixture of the "cost deduction method" and
a. Article VI, Section 24, and "tax credit method" was used to determine the value-added
b. Article VI, Section 26(2) tax payable.13 Under the "tax credit method," an entity can
SUBSTANTIVE ISSUES credit against or subtract from the VAT charged on its sales
1. Whether Sections 4, 5 and 6 of R.A. No. 9337, amending or outputs the VAT paid on its purchases, inputs and
Sections 106, 107 and 108 of the NIRC, violate the following imports.14
provisions of the Constitution: It was only in 1987, when President Corazon C. Aquino
a. Article VI, Section 28(1), and issued Executive Order No. 273, that the VAT system was
b. Article VI, Section 28(2) rationalized by imposing a multi-stage tax rate of 0% or 10%
2. Whether Section 8 of R.A. No. 9337, amending Sections on all sales using the "tax credit method." 15
110(A)(2) and 110(B) of the NIRC; and Section 12 of R.A. No. E.O. No. 273 was followed by R.A. No. 7716 or the Expanded
9337, amending Section 114(C) of the NIRC, violate the VAT Law,16 R.A. No. 8241 or the Improved VAT Law, 17 R.A. No.
following provisions of the Constitution: 8424 or the Tax Reform Act of 1997, 18 and finally, the
a. Article VI, Section 28(1), and presently beleaguered R.A. No. 9337, also referred to by
b. Article III, Section 1 respondents as the VAT Reform Act.
RULING OF THE COURT The Court will now discuss the issues in logical sequence.
As a prelude, the Court deems it apt to restate the general PROCEDURAL ISSUE
principles and concepts of value-added tax (VAT), as the I.
confusion and inevitably, litigation, breeds from a fallacious Whether R.A. No. 9337 violates the following provisions of
notion of its nature. the Constitution:
The VAT is a tax on spending or consumption. It is levied on a. Article VI, Section 24, and
the sale, barter, exchange or lease of goods or properties b. Article VI, Section 26(2)
and services.8 Being an indirect tax on expenditure, the A. The Bicameral Conference Committee
seller of goods or services may pass on the amount of tax Petitioners Escudero, et al., and Pimentel, et al., allege that
paid to the buyer,9 with the seller acting merely as a tax the Bicameral Conference Committee exceeded its authority
collector.10 The burden of VAT is intended to fall on the by:
immediate buyers and ultimately, the end-consumers. 1) Inserting the stand-by authority in favor of the President
In contrast, a direct tax is a tax for which a taxpayer is in Sections 4, 5, and 6 of R.A. No. 9337;
directly liable on the transaction or business it engages in, 2) Deleting entirely the no pass-on provisions found in both
without transferring the burden to someone else. 11 Examples the House and Senate bills;

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Taxation Case no. 41

3) Inserting the provision imposing a 70% limit on the the Conference Committee Report prior to the voting
amount of input tax to be credited against the output tax; thereon. The House shall vote on the Conference Committee
and Report in the same manner and procedure as it votes on a
4) Including the amendments introduced only by Senate Bill bill on third and final reading.
No. 1950 regarding other kinds of taxes in addition to the Rule XII, Section 35 of the Rules of the Senate states:
value-added tax. Sec. 35. In the event that the Senate does not agree with
Petitioners now beseech the Court to define the powers of the House of Representatives on the provision of any bill or
the Bicameral Conference Committee. joint resolution, the differences shall be settled by a
It should be borne in mind that the power of internal conference committee of both Houses which shall meet
regulation and discipline are intrinsic in any legislative body within ten (10) days after their composition. The President
for, as unerringly elucidated by Justice Story, "[i]f the shall designate the members of the Senate Panel in the
power did not exist, it would be utterly impracticable conference committee with the approval of the Senate.
to transact the business of the nation, either at all, or Each Conference Committee Report shall contain a detailed
at least with decency, deliberation, and order."19 Thus, and sufficiently explicit statement of the changes in, or
Article VI, Section 16 (3) of the Constitution provides that amendments to the subject measure, and shall be signed by
"each House may determine the rules of its proceedings." a majority of the members of each House panel, voting
Pursuant to this inherent constitutional power to promulgate separately.
and implement its own rules of procedure, the respective A comparative presentation of the conflicting House and
rules of each house of Congress provided for the creation of Senate provisions and a reconciled version thereof with the
a Bicameral Conference Committee. explanatory statement of the conference committee shall be
Thus, Rule XIV, Sections 88 and 89 of the Rules of House of attached to the report.
Representatives provides as follows: ...
Sec. 88. Conference Committee. In the event that the The creation of such conference committee was apparently
House does not agree with the Senate on the amendment to in response to a problem, not addressed by any
any bill or joint resolution, the differences may be settled by constitutional provision, where the two houses of Congress
the conference committees of both chambers. find themselves in disagreement over changes or
In resolving the differences with the Senate, the House amendments introduced by the other house in a legislative
panel shall, as much as possible, adhere to and support the bill. Given that one of the most basic powers of the
House Bill. If the differences with the Senate are so legislative branch is to formulate and implement its own
substantial that they materially impair the House Bill, the rules of proceedings and to discipline its members, may the
panel shall report such fact to the House for the latters Court then delve into the details of how Congress complies
appropriate action. with its internal rules or how it conducts its business of
Sec. 89. Conference Committee Reports. . . . Each report passing legislation? Note that in the present petitions, the
shall contain a detailed, sufficiently explicit statement of the issue is not whether provisions of the rules of both houses
changes in or amendments to the subject measure. creating the bicameral conference committee are
... unconstitutional, but whether the bicameral conference
The Chairman of the House panel may be interpellated on committee has strictly complied with the rules of

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both houses, thereby remaining within the House of Congress failed to comply with its own
jurisdiction conferred upon it by Congress. rules, in the absence of showing that there was a
In the recent case of Farias vs. The Executive Secretary,20 violation of a constitutional provision or the rights of
the Court En Banc, unanimously reiterated and private individuals. In Osmea v. Pendatun, it was held:
emphasized its adherence to the "enrolled bill doctrine," "At any rate, courts have declared that the rules adopted by
thus, declining therein petitioners plea for the Court to go deliberative bodies are subject to revocation, modification or
behind the enrolled copy of the bill. Assailed in said case waiver at the pleasure of the body adopting them. And it
was Congresss creation of two sets of bicameral conference has been said that "Parliamentary rules are merely
committees, the lack of records of said committees procedural, and with their observance, the courts
proceedings, the alleged violation of said committees of the have no concern. They may be waived or disregarded
rules of both houses, and the disappearance or deletion of by the legislative body." Consequently, "mere failure
one of the provisions in the compromise bill submitted by to conform to parliamentary usage will not invalidate
the bicameral conference committee. It was argued that the action (taken by a deliberative body) when the
such irregularities in the passage of the law nullified R.A. No. requisite number of members have agreed to a
9006, or the Fair Election Act. particular measure."21 (Emphasis supplied)
Striking down such argument, the Court held thus: The foregoing declaration is exactly in point with the present
Under the "enrolled bill doctrine," the signing of a bill by the cases, where petitioners allege irregularities committed by
Speaker of the House and the Senate President and the the conference committee in introducing changes or
certification of the Secretaries of both Houses of Congress deleting provisions in the House and Senate bills. Akin to the
that it was passed are conclusive of its due enactment. A Farias case,22 the present petitions also raise an issue
review of cases reveals the Courts consistent adherence to regarding the actions taken by the conference committee on
the rule. The Court finds no reason to deviate from the matters regarding Congress compliance with its own
salutary rule in this case where the irregularities internal rules. As stated earlier, one of the most basic and
alleged by the petitioners mostly involved the inherent power of the legislature is the power to formulate
internal rules of Congress, e.g., creation of the 2nd or rules for its proceedings and the discipline of its members.
3rd Bicameral Conference Committee by the House. Congress is the best judge of how it should conduct its own
This Court is not the proper forum for the business expeditiously and in the most orderly manner. It is
enforcement of these internal rules of Congress, also the sole
whether House or Senate. Parliamentary rules are concern of Congress to instill discipline among the members
merely procedural and with their observance the of its conference committee if it believes that said members
courts have no concern. Whatever doubts there may violated any of its rules of proceedings. Even the expanded
be as to the formal validity of Rep. Act No. 9006 must jurisdiction of this Court cannot apply to questions regarding
be resolved in its favor. The Court reiterates its ruling in only the internal operation of Congress, thus, the Court is
Arroyo vs. De Venecia, viz.: wont to deny a review of the internal proceedings of a co-
But the cases, both here and abroad, in varying forms equal branch of government.
of expression, all deny to the courts the power to Moreover, as far back as 1994 or more than ten years ago,
inquire into allegations that, in enacting a law, a in the case of Tolentino vs. Secretary of Finance,23 the Court

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Taxation Case no. 41

already made the pronouncement that "[i]f a change is generation and on the sal
desired in the practice [of the Bicameral Conference products shall be absorbed
Committee] it must be sought in Congress since this companies or sellers, respec
question is not covered by any constitutional not be passed on to consume
provision but is only an internal rule of each house."
24
To date, Congress has not seen it fit to make such changes
adverted to by the Court. It seems, therefore, that Congress
finds the practices of the bicameral conference committee
to be very useful for purposes of prompt and efficient With regard to 70% limit on input tax credit
legislative action. Provides that the input tax credit for No similar provision
Nevertheless, just to put minds at ease that no blatant capital goods on which a VAT has been
irregularities tainted the proceedings of the bicameral paid shall be equally distributed over 5
conference committees, the Court deems it necessary to years or the depreciable life of such
dwell on the issue. The Court observes that there was a capital goods; the input tax credit for
necessity for a conference committee because a comparison goods and services other than capital
of the provisions of House Bill Nos. 3555 and 3705 on one goods shall not exceed 5% of the total
hand, and Senate Bill No. 1950 on the other, reveals that amount of such goods and services; and
there were indeed disagreements. As pointed out in the for persons engaged in retail trading of
petitions, said disagreements were as follows: goods, the allowable input tax credit
House Bill No. 3555 House Bill No.3705shall not exceed 11% of the total
With regard to "Stand-By Authority" in favor of President amount of goods purchased.
Provides for 12% VAT on every sale of Provides for 12% VAT in general
With regardon tosales of
amendments to be made to NIRC provisions regardin
goods or properties (amending Sec. 106 goods or propertiesNo and reduced rates
similar provision for No similar provision
of NIRC); 12% VAT on importation of sale of certain locally manufactured goods
goods (amending Sec. 107 of NIRC); and and petroleum products and raw materials
12% VAT on sale of services and use or to be used in theThe manufacture thereof
disagreements between the provisions in the House bills
lease of properties (amending Sec. 108 (amending Sec. 106 andof NIRC); 12% VAT on with regard to (1) what rate of VAT
the Senate bill were
of NIRC) importation of goods isand reduced rates for
to be imposed; (2) whether only the VAT imposed on
certain imported electricity
products generation,
including transmission and distribution
petroleum products (amending Sec. 107 not
of be passed on to consumers, as
companies should
NIRC); and 12% VAT on sale of in
services and bill, or both the VAT imposed on
proposed the Senate
use or lease of properties and a reduced
electricity generation, transmission and distribution
rate for certain services including
companies and power
the VAT imposed on sale of petroleum
generation (amendingproducts
Sec. 108 should
of NIRC) not be passed on to consumers, as
With regard to the "no pass-on" provision proposed in the House bill; (3) in what manner input tax
No similar provision Provides that the VAT imposed
credits shouldon be
powerlimited; (4) and whether the NIRC

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provisions on corporate income taxes, percentage, franchise language as to the amount of the limitation on input tax
and excise taxes should be amended. credits and the manner of computing the same by providing
There being differences and/or disagreements on the thus:
foregoing provisions of the House and Senate bills, the (A) Creditable Input Tax. . . .
Bicameral Conference Committee was mandated by the ...
rules of both houses of Congress to act on the same by Provided, The input tax on goods purchased or imported in a
settling said differences and/or disagreements. The calendar month for use in trade or business for which
Bicameral Conference Committee acted on the disagreeing deduction for depreciation is allowed under this Code, shall
provisions by making the following changes: be spread evenly over the month of acquisition and the fifty-
1. With regard to the disagreement on the rate of VAT to be nine (59) succeeding months if the aggregate acquisition
imposed, it would appear from the Conference Committee cost for such goods, excluding the VAT component thereof,
Report that the Bicameral Conference Committee tried to exceeds one million Pesos (P1,000,000.00): PROVIDED,
bridge the gap in the difference between the 10% VAT rate however, that if the estimated useful life of the capital good
proposed by the Senate, and the various rates with 12% as is less than five (5) years, as used for depreciation purposes,
the highest VAT rate proposed by the House, by striking a then the input VAT shall be spread over such shorter
compromise whereby the present 10% VAT rate would be period: . . .
retained until certain conditions arise, i.e., the value-added (B) Excess Output or Input Tax. If at the end of any taxable
tax collection as a percentage of gross domestic product quarter the output tax exceeds the input tax, the excess
(GDP) of the previous year exceeds 2 4/5%, or National shall be paid by the VAT-registered person. If the input tax
Government deficit as a percentage of GDP of the previous exceeds the output tax, the excess shall be carried over to
year exceeds 1%, when the President, upon the succeeding quarter or quarters: PROVIDED that the
recommendation of the Secretary of Finance shall raise the input tax inclusive of input VAT carried over from the
rate of VAT to 12% effective January 1, 2006. previous quarter that may be credited in every quarter shall
2. With regard to the disagreement on whether only the VAT not exceed seventy percent (70%) of the output VAT:
imposed on electricity generation, transmission and PROVIDED, HOWEVER, THAT any input tax attributable to
distribution companies should not be passed on to zero-rated sales by a VAT-registered person may at his
consumers or whether both the VAT imposed on electricity option be refunded or credited against other internal
generation, transmission and distribution companies and the revenue taxes, . . .
VAT imposed on sale of petroleum products may be passed 4. With regard to the amendments to other provisions of the
on to consumers, the Bicameral Conference Committee NIRC on corporate income tax, franchise, percentage and
chose to settle such disagreement by altogether deleting excise taxes, the conference committee decided to include
from its Report any no pass-on provision. such amendments and basically adopted the provisions
3. With regard to the disagreement on whether input tax found in Senate Bill No. 1950, with some changes as to the
credits should be limited or not, the Bicameral Conference rate of the tax to be imposed.
Committee decided to adopt the position of the House by Under the provisions of both the Rules of the House of
putting a limitation on the amount of input tax that may be Representatives and Senate Rules, the Bicameral
credited against the output tax, although it crafted its own Conference Committee is mandated to settle the differences

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Taxation Case no. 41

between the disagreeing provisions in the House bill and the simple.26 (Emphasis supplied)
Senate bill. The term "settle" is synonymous to "reconcile" Rep. Teodoro Locsin further made the manifestation that the
and "harmonize."25 To reconcile or harmonize disagreeing no pass-on provision "never really enjoyed the support of
provisions, the Bicameral Conference Committee may then either House."27
(a) adopt the specific provisions of either the House bill or With regard to the amount of input tax to be credited
Senate bill, (b) decide that neither provisions in the House against output tax, the Bicameral Conference Committee
bill or the provisions in the Senate bill would came to a compromise on the percentage rate of the
be carried into the final form of the bill, and/or (c) try to limitation or cap on such input tax credit, but again, the
arrive at a compromise between the disagreeing provisions. change introduced by the Bicameral Conference Committee
In the present case, the changes introduced by the was totally within the intent of both houses to put a cap on
Bicameral Conference Committee on disagreeing provisions input tax that may be
were meant only to reconcile and harmonize the disagreeing credited against the output tax. From the inception of the
provisions for it did not inject any idea or intent that is subject revenue bill in the House of Representatives, one of
wholly foreign to the subject embraced by the original the major objectives was to "plug a glaring loophole in the
provisions. tax policy and administration by creating vital restrictions on
The so-called stand-by authority in favor of the President, the claiming of input VAT tax credits . . ." and "[b]y
whereby the rate of 10% VAT wanted by the Senate is introducing limitations on the claiming of tax credit, we are
retained until such time that certain conditions arise when capping a major leakage that has placed our collection
the 12% VAT wanted by the House shall be imposed, efforts at an apparent disadvantage."28
appears to be a compromise to try to bridge the difference As to the amendments to NIRC provisions on taxes other
in the rate of VAT proposed by the two houses of Congress. than the value-added tax proposed in Senate Bill No. 1950,
Nevertheless, such compromise is still totally within the since said provisions were among those referred to it, the
subject of what rate of VAT should be imposed on taxpayers. conference committee had to act on the same and it
The no pass-on provision was deleted altogether. In the basically adopted the version of the Senate.
transcripts of the proceedings of the Bicameral Conference Thus, all the changes or modifications made by the
Committee held on May 10, 2005, Sen. Ralph Recto, Bicameral Conference Committee were germane to subjects
Chairman of the Senate Panel, explained the reason for of the provisions referred
deleting the no pass-on provision in this wise: to it for reconciliation. Such being the case, the Court does
. . . the thinking was just to keep the VAT law or the VAT bill not see any grave abuse of discretion amounting to lack or
simple. And we were thinking that no sector should be a excess of jurisdiction committed by the Bicameral
beneficiary of legislative grace, neither should any sector be Conference Committee. In the earlier cases of Philippine
discriminated on. The VAT is an indirect tax. It is a pass on- Judges Association vs. Prado29 and Tolentino vs. Secretary of
tax. And lets keep it plain and simple. Lets not confuse the Finance,30 the Court recognized the long-standing legislative
bill and put a no pass-on provision. Two-thirds of the world practice of giving said conference committee ample latitude
have a VAT system and in this two-thirds of the globe, I have for compromising differences between the Senate and the
yet to see a VAT with a no pass-though provision. So, the House. Thus, in the Tolentino case, it was held that:
thinking of the Senate is basically simple, lets keep the VAT . . . it is within the power of a conference committee to

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Taxation Case no. 41

include in its report an entirely new provision that is not Art. VI. 26 (2) must, therefore, be construed as
found either in the House bill or in the Senate bill. If the referring only to bills introduced for the first time in
committee can propose an amendment consisting of one or either house of Congress, not to the conference
two provisions, there is no reason why it cannot propose committee report.32 (Emphasis supplied)
several provisions, collectively considered as an The Court reiterates here that the "no-amendment rule"
"amendment in the nature of a substitute," so long as such refers only to the procedure to be followed by each
amendment is germane to the subject of the bills before the house of Congress with regard to bills initiated in
committee. After all, its report was not final but needed the each of said respective houses, before said bill is
approval of both houses of Congress to become valid as an transmitted to the other house for its concurrence or
act of the legislative department. The charge that in this amendment. Verily, to construe said provision in a way as
case the Conference Committee acted as a third to proscribe any further changes to a bill after one house
legislative chamber is thus without any basis. 31 has voted on it would lead to absurdity as this would mean
(Emphasis supplied) that the other house of Congress would be deprived of its
B. R.A. No. 9337 Does Not Violate Article VI, Section 26(2) of constitutional power to amend or introduce changes to said
the Constitution on the "No-Amendment Rule" bill. Thus, Art. VI, Sec. 26 (2) of the Constitution cannot be
Article VI, Sec. 26 (2) of the Constitution, states: taken to mean that the introduction by the Bicameral
No bill passed by either House shall become a law unless it Conference Committee of amendments and modifications to
has passed three readings on separate days, and printed disagreeing provisions in bills that have been acted upon by
copies thereof in its final form have been distributed to its both houses of Congress is prohibited.
Members three days before its passage, except when the C. R.A. No. 9337 Does Not Violate Article VI, Section 24 of
President certifies to the necessity of its immediate the Constitution on Exclusive Origination of Revenue Bills
enactment to meet a public calamity or emergency. Upon Coming to the issue of the validity of the amendments made
the last reading of a bill, no amendment thereto shall be regarding the NIRC provisions on corporate income taxes
allowed, and the vote thereon shall be taken immediately and percentage, excise taxes. Petitioners refer to the
thereafter, and the yeas and nays entered in the Journal. following provisions, to wit:
Petitioners argument that the practice where a bicameral Section 27 Rates of Income Tax on Domestic Corporation
conference committee is allowed to add or delete provisions 28(A)(1) Tax on Resident Foreign Corporation
in the House bill and the Senate bill after these had passed 28(B)(1) Inter-corporate Dividends
three readings is in effect a circumvention of the "no
amendment rule" (Sec. 26 (2), Art. VI of the 1987 34(B)(1) Inter-corporate Dividends
Constitution), fails to convince the Court to deviate from its 116 Tax on Persons Exempt from VAT
ruling in the Tolentino case that: 117 Percentage Tax on domestic carriers and keepers of Gara
Nor is there any reason for requiring that the Committees 119 Tax on franchises
Report in these cases must have undergone three readings 121 Tax on banks and Non-Bank Financial Intermediaries
in each of the two houses. If that be the case, there would
148 Excise Tax on manufactured oils and other fuels
be no end to negotiation since each house may seek
modification of the compromise bill. . . . 151 Excise Tax on mineral products
236 Registration requirements

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Taxation Case no. 41

Petitioners claim that the amendments to these provisions which is required by the Constitution to "originate
of the NIRC did not at all originate from the House. They exclusively" in the House of Representatives. It is important
aver that House Bill No. 3555 proposed amendments only to emphasize this, because a bill originating in the House
regarding Sections 106, 107, 108, 110 and 114 of the NIRC, may undergo such extensive changes in the Senate that the
while House Bill No. 3705 proposed amendments only to result may be a rewriting of the whole. . . . At this point,
Sections 106, 107,108, 109, 110 and 111 of the NIRC; thus, what is important to note is that, as a result of the Senate
the other sections of the NIRC which the Senate amended action, a distinct bill may be produced. To insist that a
but which amendments were not found in the House bills are revenue statute and not only the bill which initiated
not intended to be amended by the House of the legislative process culminating in the enactment
Representatives. Hence, they argue that since the proposed of the law must substantially be the same as the
amendments did not originate from the House, such House bill would be to deny the Senates power not
amendments are a violation of Article VI, Section 24 of the only to "concur with amendments" but also to
Constitution. "propose amendments." It would be to violate the
The argument does not hold water. coequality of legislative power of the two houses of
Article VI, Section 24 of the Constitution reads: Congress and in fact make the House superior to the
Sec. 24. All appropriation, revenue or tariff bills, bills Senate.
authorizing increase of the public debt, bills of local
application, and private bills shall originate exclusively in Given, then, the power of the Senate to propose
the House of Representatives but the Senate may propose amendments, the Senate can propose its own version
or concur with amendments. even with respect to bills which are required by the
In the present cases, petitioners admit that it was indeed Constitution to originate in the House.
House Bill Nos. 3555 and 3705 that initiated the move for ...
amending provisions of the NIRC dealing mainly with the Indeed, what the Constitution simply means is that the
value-added tax. Upon transmittal of said House bills to the initiative for filing revenue, tariff or tax bills, bills authorizing
Senate, the Senate came out with Senate Bill No. 1950 an increase of the public debt, private bills and bills of local
proposing amendments not only to NIRC provisions on the application must come from the House of Representatives
value-added tax but also amendments to NIRC provisions on on the theory that, elected as they are from the districts,
other kinds of taxes. Is the introduction by the Senate of the members of the House can be expected to be
provisions not dealing directly with the value- added tax, more sensitive to the local needs and problems. On
which is the only kind of tax being amended in the House the other hand, the senators, who are elected at
bills, still within the purview of the constitutional provision large, are expected to approach the same problems
authorizing the Senate to propose or concur with from the national perspective. Both views are
amendments to a revenue bill that originated from the thereby made to bear on the enactment of such
House? laws.33 (Emphasis supplied)
The foregoing question had been squarely answered in the Since there is no question that the revenue bill exclusively
Tolentino case, wherein the Court held, thus: originated in the House of Representatives, the Senate was
. . . To begin with, it is not the law but the revenue bill acting within its

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Taxation Case no. 41

constitutional power to introduce amendments to the House which might seem poignant in the beginning, but in
bill when it included provisions in Senate Bill No. 1950 the long run prove effective and beneficial to the
amending corporate income taxes, percentage, excise and overall status of our economy. One such opportunity
franchise taxes. Verily, Article VI, Section 24 of the is a review of existing tax rates, evaluating the
Constitution does not contain any prohibition or limitation on relevance given our present conditions.34 (Emphasis
the extent of the amendments that may be introduced by supplied)
the Senate to the House revenue bill. Notably therefore, the main purpose of the bills emanating
Furthermore, the amendments introduced by the Senate to from the House of Representatives is to bring in sizeable
the NIRC provisions that had not been touched in the House revenues for the government
bills are still in furtherance of the intent of the House in to supplement our countrys serious financial problems, and
initiating the subject revenue bills. The Explanatory Note of improve tax administration and control of the leakages in
House Bill No. 1468, the very first House bill introduced on revenues from income taxes and value-added taxes. As
the floor, which was later substituted by House Bill No. these house bills were transmitted to the Senate, the latter,
3555, stated: approaching the measures from the point of national
One of the challenges faced by the present administration is perspective, can introduce amendments within the purposes
the urgent and daunting task of solving the countrys of those bills. It can provide for ways that would soften the
serious financial problems. To do this, government impact of the VAT measure on the consumer, i.e., by
expenditures must be strictly monitored and controlled and distributing the burden across all sectors instead of putting
revenues must be significantly increased. This may be it entirely on the shoulders of the consumers. The
easier said than done, but our fiscal authorities are still sponsorship speech of Sen. Ralph Recto on why the
optimistic the government will be operating on a balanced provisions on income tax on corporation were included is
budget by the year 2009. In fact, several measures that will worth quoting:
result to significant expenditure savings have been All in all, the proposal of the Senate Committee on Ways and
identified by the administration. It is supported with a Means will raise P64.3 billion in additional revenues annually
credible package of revenue measures that include even while by mitigating prices of power, services and
measures to improve tax administration and control petroleum products.
the leakages in revenues from income taxes and the However, not all of this will be wrung out of VAT. In fact, only
value-added tax (VAT). (Emphasis supplied) P48.7 billion amount is from the VAT on twelve goods and
Rep. Eric D. Singson, in his sponsorship speech for House Bill services. The rest of the tab P10.5 billion- will be picked by
No. 3555, declared that: corporations.
In the budget message of our President in the year 2005, What we therefore prescribe is a burden sharing between
she reiterated that we all acknowledged that on top of our corporate Philippines and the consumer. Why should the
agenda must be the restoration of the health of our fiscal latter bear all the pain? Why should the fiscal salvation be
system. only on the burden of the consumer?
In order to considerably lower the consolidated public sector The corporate worlds equity is in form of the increase in the
deficit and eventually achieve a balanced budget by the corporate income tax from 32 to 35 percent, but up to 2008
year 2009, we need to seize windows of opportunities only. This will raise P10.5 billion a year. After that, the rate

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Taxation Case no. 41

will slide back, not to its old rate of 32 percent, but two products such as diesel, bunker, fuel and kerosene.
notches lower, to 30 percent. ...
Clearly, we are telling those with the capacity to pay, What do all these exercises point to? These are not
corporations, to bear with this emergency provision that will contortions of giving to the left hand what was taken from
be in effect for 1,200 days, while we put our fiscal house in the right. Rather, these sprang from our concern of
order. This fiscal medicine will have an expiry date. softening the impact of VAT, so that the people can cushion
For their assistance, a reward of tax reduction awaits them. the blow of higher prices they will have to pay as a result of
We intend to keep the length of their sacrifice brief. We VAT.36
would like to assure them that not because there is a light at The other sections amended by the Senate pertained to
the end of the tunnel, this government will keep on making matters of tax administration which are necessary for the
the tunnel long. implementation of the changes in the VAT system.
The responsibility will not rest solely on the weary shoulders To reiterate, the sections introduced by the Senate are
of the small man. Big business will be there to share the germane to the subject matter and purposes of the house
burden.35 bills, which is to supplement our countrys fiscal deficit,
As the Court has said, the Senate can propose amendments among others. Thus, the Senate acted within its power to
and in fact, the amendments made on provisions in the tax propose those amendments.
on income of corporations are germane to the purpose of SUBSTANTIVE ISSUES
the house bills which is to raise revenues for the I.
government. Whether Sections 4, 5 and 6 of R.A. No. 9337, amending
Likewise, the Court finds the sections referring to other Sections 106, 107 and 108 of the NIRC, violate the following
percentage and excise taxes germane to the reforms to the provisions of the Constitution:
VAT system, as these sections would cushion the effects of a. Article VI, Section 28(1), and
VAT on consumers. Considering that certain goods and b. Article VI, Section 28(2)
services which were subject to percentage tax and excise A. No Undue Delegation of Legislative Power
tax would no longer be VAT-exempt, the consumer would be Petitioners ABAKADA GURO Party List, et al., Pimentel, Jr., et
burdened more as they would be paying the VAT in addition al., and Escudero, et al. contend in common that Sections 4,
to these taxes. Thus, there is a need to amend these 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and
sections to soften the impact of VAT. Again, in his 108, respectively, of the NIRC giving the President the
sponsorship speech, Sen. Recto said: stand-by authority to raise the VAT rate from 10% to 12%
However, for power plants that run on oil, we will reduce to when a certain condition is met, constitutes undue
zero the present excise tax on bunker fuel, to lessen the delegation of the legislative power to tax.
effect of a VAT on this product. The assailed provisions read as follows:
For electric utilities like Meralco, we will wipe out the SEC. 4. Sec. 106 of the same Code, as amended, is hereby
franchise tax in exchange for a VAT. further amended to read as follows:
And in the case of petroleum, while we will levy the VAT on SEC. 106. Value-Added Tax on Sale of Goods or Properties.
oil products, so as not to destroy the VAT chain, we will (A) Rate and Base of Tax. There shall be levied, assessed
however bring down the excise tax on socially sensitive and collected on every sale, barter or exchange of goods or

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Taxation Case no. 41

properties, a value-added tax equivalent to ten percent GDP of the previous year exceeds one and one-half
(10%) of the gross selling price or gross value in money of percent (1 %).
the goods or properties sold, bartered or exchanged, such SEC. 6. Section 108 of the same Code, as amended, is
tax to be paid by the seller or transferor: provided, that hereby further amended to read as follows:
the President, upon the recommendation of the SEC. 108. Value-added Tax on Sale of Services and Use or
Secretary of Finance, shall, effective January 1, 2006, Lease of Properties
raise the rate of value-added tax to twelve percent (A) Rate and Base of Tax. There shall be levied, assessed
(12%), after any of the following conditions has been and collected, a value-added tax equivalent to ten percent
satisfied. (10%) of gross receipts derived from the sale or exchange of
(i) value-added tax collection as a percentage of services: provided, that the President, upon the
Gross Domestic Product (GDP) of the previous year recommendation of the Secretary of Finance, shall,
exceeds two and four-fifth percent (2 4/5%) or effective January 1, 2006, raise the rate of value-
(ii) national government deficit as a percentage of added tax to twelve percent (12%), after any of the
GDP of the previous year exceeds one and one-half following conditions has been satisfied.
percent (1 %). (i) value-added tax collection as a percentage of
SEC. 5. Section 107 of the same Code, as amended, is Gross Domestic Product (GDP) of the previous year
hereby further amended to read as follows: exceeds two and four-fifth percent (2 4/5%) or
SEC. 107. Value-Added Tax on Importation of Goods. (ii) national government deficit as a percentage of
(A) In General. There shall be levied, assessed and GDP of the previous year exceeds one and one-half
collected on every importation of goods a value-added tax percent (1 %). (Emphasis supplied)
equivalent to ten percent (10%) based on the total value Petitioners allege that the grant of the stand-by authority to
used by the Bureau of Customs in determining tariff and the President to increase the VAT rate is a virtual abdication
customs duties, plus customs duties, excise taxes, if any, by Congress of its exclusive power to tax because such
and other charges, such tax to be paid by the importer prior delegation is not within the purview of Section 28 (2), Article
to the release of such goods from customs custody: VI of the Constitution, which provides:
Provided, That where the customs duties are determined on The Congress may, by law, authorize the President to fix
the basis of the quantity or volume of the goods, the value- within specified limits, and may impose, tariff rates, import
added tax shall be based on the landed cost plus excise and export quotas, tonnage and wharfage dues, and other
taxes, if any: provided, further, that the President, duties or imposts within the framework of the national
upon the recommendation of the Secretary of development program of the government.
Finance, shall, effective January 1, 2006, raise the They argue that the VAT is a tax levied on the sale, barter or
rate of value-added tax to twelve percent (12%) after exchange of goods and properties as well as on the sale or
any of the following conditions has been satisfied. exchange of services, which cannot be included within the
(i) value-added tax collection as a percentage of purview of tariffs under the exempted delegation as the
Gross Domestic Product (GDP) of the previous year latter refers to customs duties, tolls or tribute payable upon
exceeds two and four-fifth percent (2 4/5%) or merchandise to the government and usually imposed on
(ii) national government deficit as a percentage of goods or merchandise imported or exported.

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Petitioners ABAKADA GURO Party List, et al., further contend principle of non-delegation of powers, as expressed in the
that delegating to the President the legislative power to tax Latin maxim: potestas delegata non delegari potest which
is contrary to republicanism. They insist that accountability, means "what has been delegated, cannot be delegated." 38
responsibility and transparency should dictate the actions of This doctrine is based on the ethical principle that such as
Congress and they should not pass to the President the delegated power constitutes not only a right but a duty to
decision to impose taxes. They also argue that the law also be performed by the delegate through the instrumentality of
effectively nullified the Presidents power of control, which his own judgment and not through the intervening mind of
includes the authority to set aside and nullify the acts of her another.39
subordinates like the Secretary of Finance, by mandating the With respect to the Legislature, Section 1 of Article VI of the
fixing of the tax rate by the President upon the Constitution provides that "the Legislative power shall be
recommendation of the Secretary of Finance. vested in the Congress of the Philippines which shall consist
Petitioners Pimentel, et al. aver that the President has ample of a Senate and a House of Representatives." The powers
powers to cause, influence or create the conditions provided which Congress is prohibited from delegating are those
by the law to bring about either or both the conditions which are strictly, or inherently and exclusively, legislative.
precedent. Purely legislative power, which can never be delegated, has
On the other hand, petitioners Escudero, et al. find bizarre been described as the authority to make a complete law
and revolting the situation that the imposition of the 12% complete as to the time when it shall take effect
rate would be subject to the whim of the Secretary of and as to whom it shall be applicable and to
Finance, an unelected bureaucrat, contrary to the principle determine the expediency of its enactment.40 Thus, the
of no taxation without representation. They submit that the rule is that in order that a court may be justified in holding a
Secretary of Finance is not mandated to give a favorable statute unconstitutional as a delegation of legislative power,
recommendation and he may not even give his it must appear that the power involved is purely legislative
recommendation. Moreover, they allege that no guiding in nature that is, one appertaining exclusively to the
standards are provided in the law on what basis and as to legislative department. It is the nature of the power, and not
how he will make his recommendation. They claim, the liability of its use or the manner of its exercise, which
nonetheless, that any recommendation of the Secretary of determines the validity of its delegation.
Finance can easily be brushed aside by the President since Nonetheless, the general rule barring delegation of
the former is a mere alter ego of the latter, such that, legislative powers is subject to the following recognized
ultimately, it is the President who decides whether to limitations or exceptions:
impose the increased tax rate or not. (1) Delegation of tariff powers to the President under
A brief discourse on the principle of non-delegation of Section 28 (2) of Article VI of the Constitution;
powers is instructive. (2) Delegation of emergency powers to the President under
The principle of separation of powers ordains that each of Section 23 (2) of Article VI of the Constitution;
the three great branches of government has exclusive (3) Delegation to the people at large;
cognizance of and is supreme in matters falling within its (4) Delegation to local governments; and
own constitutionally allocated sphere.37 A logical (5) Delegation to administrative bodies.
corollary to the doctrine of separation of powers is the In every case of permissible delegation, there must be a

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showing that the delegation itself is valid. It is valid only if Wayman vs. Southard, the Supreme Court of the United
the law (a) is complete in itself, setting forth therein the States ruled that the legislature may delegate a power not
policy to be executed, carried out, or implemented by the legislative which it may itself rightfully exercise. The power
delegate;41 and (b) fixes a standard the limits of which are to ascertain facts is such a power which may be
sufficiently determinate and determinable to which the delegated. There is nothing essentially legislative in
delegate must conform in the performance of his functions. 42 ascertaining the existence of facts or conditions as
A sufficient standard is one which defines legislative policy, the basis of the taking into effect of a law. That is a
marks its limits, maps out its boundaries and specifies the mental process common to all branches of the
public agency to apply it. It indicates the circumstances government. Notwithstanding the apparent tendency,
under which the legislative command is to be effected. 43 however, to relax the rule prohibiting delegation of
Both tests are intended to prevent a total transference of legislative authority on account of the complexity arising
legislative authority to the delegate, who is not allowed to from social and economic forces at work in this modern
step into the shoes of the legislature and exercise a power industrial age, the orthodox pronouncement of Judge Cooley
essentially legislative.44 in his work on Constitutional Limitations finds restatement in
In People vs. Vera,45 the Court, through eminent Justice Jose Prof. Willoughby's treatise on the Constitution of the United
P. Laurel, expounded on the concept and extent of States in the following language speaking of declaration
delegation of power in this wise: of legislative power to administrative agencies: The
In testing whether a statute constitutes an undue delegation principle which permits the legislature to provide
of legislative power or not, it is usual to inquire whether the that the administrative agent may determine when
statute was complete in all its terms and provisions when it the circumstances are such as require the application
left the hands of the legislature so that nothing was left to of a law is defended upon the ground that at the time
the judgment of any other appointee or delegate of the this authority is granted, the rule of public policy,
legislature. which is the essence of the legislative act, is
... determined by the legislature. In other words, the
The true distinction, says Judge Ranney, is between legislature, as it is its duty to do, determines that,
the delegation of power to make the law, which under given circumstances, certain executive or
necessarily involves a discretion as to what it shall administrative action is to be taken, and that, under
be, and conferring an authority or discretion as to its other circumstances, different or no action at all is to
execution, to be exercised under and in pursuance of be taken. What is thus left to the administrative
the law. The first cannot be done; to the latter no official is not the legislative determination of what
valid objection can be made. public policy demands, but simply the ascertainment
... of what the facts of the case require to be done
It is contended, however, that a legislative act may be made according to the terms of the law by which he is
to the effect as law after it leaves the hands of the governed. The efficiency of an Act as a declaration of
legislature. It is true that laws may be made effective on legislative will must, of course, come from Congress,
certain contingencies, as by proclamation of the executive but the ascertainment of the contingency upon which
or the adoption by the people of a particular community. In the Act shall take effect may be left to such agencies

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as it may designate. The legislature, then, may facts on which its operation depends.50
provide that a law shall take effect upon the The rationale for this is that the preliminary ascertainment
happening of future specified contingencies leaving of facts as basis for the enactment of legislation is not of
to some other person or body the power to determine itself a legislative function, but is simply ancillary to
when the specified contingency has arisen. (Emphasis legislation. Thus, the duty of correlating information and
supplied).46 making recommendations is the kind of subsidiary activity
In Edu vs. Ericta,47 the Court reiterated: which the legislature may perform through its members, or
What cannot be delegated is the authority under the which it may delegate to others to perform. Intelligent
Constitution to make laws and to alter and repeal them; the legislation on the complicated problems of modern society is
test is the completeness of the statute in all its terms and impossible in the absence of accurate information on the
provisions when it leaves the hands of the legislature. To part of the legislators, and any reasonable method of
determine whether or not there is an undue delegation of securing such information is proper.51 The Constitution as a
legislative power, the inquiry must be directed to the scope continuously operative charter of government does not
and definiteness of the measure enacted. The legislative require that Congress find for itself
does not abdicate its functions when it describes every fact upon which it desires to base legislative action or
what job must be done, who is to do it, and what is that it make for itself detailed determinations which it has
the scope of his authority. For a complex economy, that declared to be prerequisite to application of legislative
may be the only way in which the legislative process can go policy to particular facts and circumstances impossible for
forward. A distinction has rightfully been made Congress itself properly to investigate.52
between delegation of power to make the laws which In the present case, the challenged section of R.A. No. 9337
necessarily involves a discretion as to what it shall is the common proviso in Sections 4, 5 and 6 which reads as
be, which constitutionally may not be done, and follows:
delegation of authority or discretion as to its That the President, upon the recommendation of the
execution to be exercised under and in pursuance of Secretary of Finance, shall, effective January 1, 2006, raise
the law, to which no valid objection can be made. The the rate of value-added tax to twelve percent (12%), after
Constitution is thus not to be regarded as denying the any of the following conditions has been satisfied:
legislature the necessary resources of flexibility and (i) Value-added tax collection as a percentage of Gross
practicability. (Emphasis supplied).48 Domestic Product (GDP) of the previous year exceeds two
Clearly, the legislature may delegate to executive officers or and four-fifth percent (2 4/5%); or
bodies the power to determine certain facts or conditions, or (ii) National government deficit as a percentage of GDP of
the happening of contingencies, on which the operation of a the previous year exceeds one and one-half percent (1 %).
statute is, by its terms, made to depend, but the legislature The case before the Court is not a delegation of legislative
must prescribe sufficient standards, policies or limitations on power. It is simply a delegation of ascertainment of facts
their authority.49 While the power to tax cannot be delegated upon which enforcement and administration of the increase
to executive agencies, details as to the enforcement and rate under the law is contingent. The legislature has made
administration of an exercise of such power may be left to the operation of the 12% rate effective January 1, 2006,
them, including the power to determine the existence of contingent upon a specified fact or condition. It leaves the

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entire operation or non-operation of the 12% rate upon When one speaks of the Secretary of Finance as the alter
factual matters outside of the control of the executive. ego of the President, it simply means that as head of the
No discretion would be exercised by the President. Department of Finance he is the assistant and agent of the
Highlighting the absence of discretion is the fact that the Chief Executive. The multifarious executive and
word shall is used in the common proviso. The use of the administrative functions of the Chief Executive are
word shall connotes a mandatory order. Its use in a statute performed by and through the executive departments, and
denotes an imperative obligation and is inconsistent with the acts of the secretaries of such departments, such as the
the idea of discretion. 53 Where the law is clear and Department of Finance, performed and promulgated in the
unambiguous, it must be taken to mean exactly what it regular course of business, are, unless disapproved or
says, and courts have no choice but to see to it that the reprobated by the Chief Executive, presumptively the acts of
mandate is obeyed.54 the Chief Executive. The Secretary of Finance, as such,
Thus, it is the ministerial duty of the President to occupies a political position and holds office in an advisory
immediately impose the 12% rate upon the existence of any capacity, and, in the language of Thomas Jefferson, "should
of the conditions specified by Congress. This is a duty which be of the President's bosom confidence" and, in the
cannot be evaded by the President. Inasmuch as the law language of Attorney-General Cushing, is "subject to the
specifically uses the word shall, the exercise of discretion by direction of the President."55
the President does not come into play. It is a clear directive In the present case, in making his recommendation to the
to impose the 12% VAT rate when the specified conditions President on the existence of either of the two conditions,
are present. The time of taking into effect of the 12% VAT the Secretary of Finance is not acting as the alter ego of the
rate is based on the happening of a certain specified President or even her subordinate. In such instance, he is
contingency, or upon the ascertainment of certain facts or not subject to the power of control and direction of the
conditions by a person or body other than the legislature President. He is acting as the agent of the legislative
itself. department, to determine and declare the event upon which
The Court finds no merit to the contention of petitioners its expressed will is to take effect. 56 The Secretary of Finance
ABAKADA GURO Party List, et al. that the law effectively becomes the means or tool by which legislative policy is
nullified the Presidents power of control over the Secretary determined and implemented, considering that he
of Finance by mandating the fixing of the tax rate by the possesses all the facilities to gather data and information
President upon the recommendation of the Secretary of and has a much broader perspective to properly evaluate
Finance. The Court cannot also subscribe to the position of them. His function is to gather and collate statistical data
petitioners and other pertinent information and verify if any of the two
Pimentel, et al. that the word shall should be interpreted to conditions laid out by Congress is present. His personality in
mean may in view of the phrase "upon the recommendation such instance is in reality but a projection of that of
of the Secretary of Finance." Neither does the Court find Congress. Thus, being the agent of Congress and not of the
persuasive the submission of petitioners Escudero, et al. President, the President cannot alter or modify or nullify, or
that any recommendation by the Secretary of Finance can set aside the findings of the Secretary of Finance and to
easily be brushed aside by the President since the former is substitute the judgment of the former for that of the latter.
a mere alter ego of the latter. Congress simply granted the Secretary of Finance the

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authority to ascertain the existence of a fact, namely, B. The 12% Increase VAT Rate Does Not Impose an Unfair
whether by December 31, 2005, the value-added tax and Unnecessary Additional Tax Burden
collection as a percentage of Gross Domestic Product (GDP) Petitioners Pimentel, et al. argue that the 12% increase in
of the previous year exceeds two and four-fifth percent the VAT rate imposes an unfair and additional tax burden on
(24/5%) or the national government deficit as a percentage the people. Petitioners also argue that the 12% increase,
of GDP of the previous year exceeds one and one-half dependent on any of the 2 conditions set forth in the
percent (1%). If either of these two instances has contested provisions, is ambiguous because it does not
occurred, the Secretary of Finance, by legislative mandate, state if the VAT rate would be returned to the original 10% if
must submit such information to the President. Then the the rates are no longer satisfied. Petitioners also argue that
12% VAT rate must be imposed by the President effective such rate is unfair and unreasonable, as the people are
January 1, 2006. There is no undue delegation of unsure of the applicable VAT rate from year to year.
legislative power but only of the discretion as to the Under the common provisos of Sections 4, 5 and 6 of R.A.
execution of a law. This is constitutionally No. 9337, if any of the two conditions set forth therein are
permissible.57 Congress does not abdicate its functions or satisfied, the President shall increase the VAT rate to 12%.
unduly delegate power when it describes what job must be The provisions of the law are clear. It does not provide for a
done, who must do it, and what is the scope of his authority; return to the 10% rate nor does it empower the President to
in our complex economy that is frequently the only way in so revert if, after the rate is increased to 12%, the VAT
which the legislative process can go forward. 58 collection goes below the 24/5 of the GDP of the previous
As to the argument of petitioners ABAKADA GURO Party List, year or that the national government deficit as a percentage
et al. that delegating to the President the legislative power of GDP of the previous year does not exceed 1%.
to tax is contrary to the principle of republicanism, the same Therefore, no statutory construction or interpretation is
deserves scant consideration. Congress did not delegate the needed. Neither can conditions or limitations be introduced
power to tax but the mere implementation of the law. The where none is provided for. Rewriting the law is a forbidden
intent and will to increase the VAT rate to 12% came from ground that only Congress may tread upon.60
Congress and the task of the President is to simply execute Thus, in the absence of any provision providing for a return
the legislative policy. That Congress chose to do so in such a to the 10% rate, which in this case the Court finds none,
manner is not within the province of the Court to inquire petitioners argument is, at best, purely speculative. There is
into, its task being to interpret the law.59 no basis for petitioners fear of a fluctuating VAT rate
The insinuation by petitioners Pimentel, et al. that the because the law itself does not provide that the rate should
President has ample powers to cause, influence or create go back to 10% if the conditions provided in Sections 4, 5
the conditions to bring about either or both the conditions and 6 are no longer present. The rule is that where the
precedent does not deserve any merit as this argument is provision of the law is clear and unambiguous, so that there
highly speculative. The Court does not rule on allegations is no occasion for the court's seeking the legislative intent,
which are manifestly conjectural, as these may not exist at the law must be taken as it is, devoid of judicial addition or
all. The Court deals with facts, not fancies; on realities, not subtraction.61
appearances. When the Court acts on appearances instead Petitioners also contend that the increase in the VAT rate,
of realities, justice and law will be short-lived. which was allegedly an incentive to the President to raise

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the VAT collection to at least 2 4/5 of the GDP of the previous possible over and above what it brings into the public
year, should be based on fiscal adequacy. treasury of the state.63
Petitioners obviously overlooked that increase in VAT It simply means that sources of revenues must be adequate
collection is not the only condition. There is another to meet government expenditures and their variations. 64
condition, i.e., the national government deficit as a The dire need for revenue cannot be ignored. Our country is
percentage of GDP of the previous year exceeds one and in a quagmire of financial woe. During the Bicameral
one-half percent (1 %). Conference Committee hearing, then Finance Secretary
Respondents explained the philosophy behind these Purisima bluntly depicted the countrys gloomy state of
alternative conditions: economic affairs, thus:
1. VAT/GDP Ratio > 2.8% First, let me explain the position that the Philippines finds
The condition set for increasing VAT rate to 12% have itself in right now. We are in a position where 90 percent of
economic or fiscal meaning. If VAT/GDP is less than 2.8%, it our revenue is used for debt service. So, for every peso of
means that government has weak or no capability of revenue that we currently raise, 90 goes to debt service.
implementing the VAT or that VAT is not effective in the Thats interest plus amortization of our debt. So clearly, this
function of the tax collection. Therefore, there is no value to is not a sustainable situation. Thats the first fact.
increase it to 12% because such action will also be The second fact is that our debt to GDP level is way out of
ineffectual. line compared to other peer countries that borrow money
2. Natl Govt Deficit/GDP >1.5% from that international financial markets. Our debt to GDP is
The condition set for increasing VAT when deficit/GDP is approximately equal to our GDP. Again, that shows you that
1.5% or less means the fiscal condition of government has this is not a sustainable situation.
reached a relatively sound position or is towards the The third thing that Id like to point out is the environment
direction of a balanced budget position. Therefore, there is that we are presently operating in is not as benign as what it
no need to increase the VAT rate since the fiscal house is in used to be the past five years.
a relatively healthy position. Otherwise stated, if the ratio is What do I mean by that?
more than 1.5%, there is indeed a need to increase the VAT In the past five years, weve been lucky because we were
rate.62 operating in a period of basically global growth and low
That the first condition amounts to an incentive to the interest rates. The past few months, we have seen an
President to increase the VAT collection does not render it inching up, in fact, a rapid increase in the interest rates in
unconstitutional so long as there is a public purpose for the leading economies of the world. And, therefore, our
which the law was passed, which in this case, is mainly to ability to borrow at reasonable prices is going to be
raise revenue. In fact, fiscal adequacy dictated the need for challenged. In fact, ultimately, the question is our ability to
a raise in revenue. access the financial markets.
The principle of fiscal adequacy as a characteristic of a When the President made her speech in July last year, the
sound tax system was originally stated by Adam Smith in his environment was not as bad as it is now, at least based on
Canons of Taxation (1776), as: the forecast of most financial institutions. So, we were
IV. Every tax ought to be so contrived as both to take out assuming that raising 80 billion would put us in a position
and to keep out of the pockets of the people as little as where we can then convince them to improve our ability to

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borrow at lower rates. But conditions have changed on us within the range of judicial cognizance. 66
because the interest rates have gone up. In fact, just within In the same vein, the Court in this case will not dawdle on
this room, we tried to access the market for a billion dollars the purpose of Congress or the executive policy, given that
because for this year alone, the Philippines will have to it is not for the judiciary to "pass upon questions of wisdom,
borrow 4 billion dollars. Of that amount, we have borrowed justice or expediency of legislation."67
1.5 billion. We issued last January a 25-year bond at 9.7 II.
percent cost. We were trying to access last week and the Whether Section 8 of R.A. No. 9337, amending Sections
market was not as favorable and up to now we have not 110(A)(2) and 110(B) of the NIRC; and Section 12 of R.A. No.
accessed and we might pull back because the conditions are 9337, amending Section 114(C) of the NIRC, violate the
not very good. following provisions of the Constitution:
So given this situation, we at the Department of Finance a. Article VI, Section 28(1), and
believe that we really need to front-end our deficit b. Article III, Section 1
reduction. Because it is deficit that is causing the increase of A. Due Process and Equal Protection Clauses
the debt and we are in what we call a debt spiral. The more Petitioners Association of Pilipinas Shell Dealers, Inc., et al.
debt you have, the more deficit you have because interest argue that Section 8 of R.A. No. 9337, amending Sections
and debt service eats and eats more of your revenue. We 110 (A)(2), 110 (B), and Section 12 of R.A. No. 9337,
need to get out of this debt spiral. And the only way, I think, amending Section 114 (C) of the NIRC are arbitrary,
we can get out of this debt spiral is really have a front-end oppressive, excessive and confiscatory. Their argument is
adjustment in our revenue base.65 premised on the constitutional right against deprivation of
The image portrayed is chilling. Congress passed the law life, liberty of property without due process of law, as
hoping for rescue from an inevitable catastrophe. Whether embodied in Article III, Section 1 of the Constitution.
the law is indeed sufficient to answer the states economic Petitioners also contend that these provisions violate the
dilemma is not for the Court to judge. In the Farias case, constitutional guarantee of equal protection of the law.
the Court refused to consider the various arguments raised The doctrine is that where the due process and equal
therein that dwelt on the wisdom of Section 14 of R.A. No. protection clauses are invoked, considering that they are not
9006 (The Fair Election Act), pronouncing that: fixed rules but rather broad standards, there is a need for
. . . policy matters are not the concern of the Court. proof of such persuasive character as would lead to such a
Government policy is within the exclusive dominion of the conclusion. Absent such a showing, the presumption of
political branches of the government. It is not for this Court validity must prevail.68
to look into the wisdom or propriety of legislative Section 8 of R.A. No. 9337, amending Section 110(B) of the
determination. Indeed, whether an enactment is wise or NIRC imposes a limitation on the amount of input tax that
unwise, whether it is based on sound economic theory, may be credited against the output tax. It states, in part:
whether it is the best means to achieve the desired results, "[P]rovided, that the input tax inclusive of the input VAT
whether, in short, the legislative discretion within its carried over from the previous quarter that may be credited
prescribed limits should be exercised in a particular manner in every quarter shall not exceed seventy percent (70%) of
are matters for the judgment of the legislature, and the the output VAT: "
serious conflict of opinions does not suffice to bring them Input Tax is defined under Section 110(A) of the NIRC, as

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amended, as the value-added tax due from or paid by a VAT- tax credit certificate under Section 112(B).
registered person on the importation of goods or local Therefore, petitioners argument must be rejected.
purchase of good and services, including lease or use of On the other hand, it appears that petitioner Garcia failed to
property, in the course of trade or business, from a VAT- comprehend the operation of the 70% limitation on the
registered person, and Output Tax is the value-added tax input tax. According to petitioner, the limitation on the
due on the sale or lease of taxable goods or properties or creditable input tax in effect allows VAT-registered
services by any person registered or required to register establishments to retain a portion of the taxes they collect,
under the law. which violates the principle that tax collection and revenue
Petitioners claim that the contested sections impose should be for public purposes and expenditures
limitations on the amount of input tax that may be claimed. As earlier stated, the input tax is the tax paid by a person,
In effect, a portion of the input tax that has already been passed on to him by the seller, when he buys goods. Output
paid cannot now be credited against the output tax. tax meanwhile is the tax due to the person when he sells
Petitioners argument is not absolute. It assumes that the goods. In computing the VAT payable, three possible
input tax exceeds 70% of the output tax, and therefore, the scenarios may arise:
input tax in excess of 70% remains uncredited. However, to First, if at the end of a taxable quarter the output taxes
the extent that the input tax is less than 70% of the output charged by the seller are equal to the input taxes that he
tax, then 100% of such input tax is still creditable. paid and passed on by the suppliers, then no payment is
More importantly, the excess input tax, if any, is retained in required;
a businesss books of accounts and remains creditable in the Second, when the output taxes exceed the input taxes, the
succeeding quarter/s. This is explicitly allowed by Section person shall be liable for the excess, which has to be paid to
110(B), which provides that "if the input tax exceeds the the Bureau of Internal Revenue (BIR);69 and
output tax, the excess shall be carried over to the Third, if the input taxes exceed the output taxes, the excess
succeeding quarter or quarters." In addition, Section 112(B) shall be carried over to the succeeding quarter or quarters.
allows a VAT-registered person to apply for the issuance of a Should the input taxes result from zero-rated or effectively
tax credit certificate or refund for any unused input taxes, to zero-rated transactions, any excess over the output taxes
the extent that such input taxes have not been applied shall instead be refunded to the taxpayer or credited against
against the output taxes. Such unused input tax may be other internal revenue taxes, at the taxpayers option. 70
used in payment of his other internal revenue taxes. Section 8 of R.A. No. 9337 however, imposed a 70%
The non-application of the unutilized input tax in a given limitation on the input tax. Thus, a person can credit his
quarter is not ad infinitum, as petitioners exaggeratedly input tax only up to the extent of 70% of the output tax. In
contend. Their analysis of the effect of the 70% limitation is laymans term, the value-added taxes that a
incomplete and one-sided. It ends at the net effect that person/taxpayer paid and passed on to him by a seller can
there will be unapplied/unutilized inputs VAT for a given only be credited up to 70% of the value-added taxes that is
quarter. It does not proceed further to the fact that such due to him on a taxable transaction. There is no retention of
unapplied/unutilized input tax may be credited in the any tax collection because the person/taxpayer has already
subsequent periods as allowed by the carry-over provision of previously paid the input tax to a seller, and the seller will
Section 110(B) or that it may later on be refunded through a subsequently remit such input tax to the BIR. The party

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directly liable for the payment of the tax is the seller. 71 What imported in a calendar month for use in trade or business
only needs to be done is for the person/taxpayer to apply or for which deduction for depreciation is allowed under this
credit these input taxes, as evidenced by receipts, against Code, shall be spread evenly over the month of acquisition
his output taxes. and the fifty-nine (59) succeeding months if the aggregate
Petitioners Association of Pilipinas Shell Dealers, Inc., et al. acquisition cost for such goods, excluding the VAT
also argue that the input tax partakes the nature of a component thereof, exceeds One million pesos
property that may not be confiscated, appropriated, or (P1,000,000.00): Provided, however, That if the estimated
limited without due process of law. useful life of the capital goods is less than five (5) years, as
The input tax is not a property or a property right within the used for depreciation purposes, then the input VAT shall be
constitutional purview of the due process clause. A VAT- spread over such a shorter period: Provided, finally, That in
registered persons entitlement to the creditable input tax is the case of purchase of services, lease or use of properties,
a mere statutory privilege. the input tax shall be creditable to the purchaser, lessee or
The distinction between statutory privileges and vested license upon payment of the compensation, rental, royalty
rights must be borne in mind for persons have no vested or fee.
rights in statutory privileges. The state may change or take The foregoing section imposes a 60-month period within
away rights, which were created by the law of the state, which to amortize the creditable input tax on purchase or
although it may not take away property, which was vested importation of capital goods with acquisition cost of P1
by virtue of such rights.72 Million pesos, exclusive of the VAT component. Such spread
Under the previous system of single-stage taxation, taxes out only poses a delay in the crediting of the input tax.
paid at every level of distribution are not recoverable from Petitioners argument is without basis because the taxpayer
the taxes payable, although it becomes part of the cost, is not permanently deprived of his privilege to credit the
which is deductible from the gross revenue. When Pres. input tax.
Aquino issued E.O. No. 273 imposing a 10% multi-stage tax It is worth mentioning that Congress admitted that the
on all sales, it was then that the crediting of the input tax spread-out of the creditable input tax in this case amounts
paid on purchase or importation of goods and services by to a 4-year interest-free loan to the government. 76 In the
VAT-registered persons against the output tax was same breath, Congress also justified its move by saying that
introduced.73 This was adopted by the Expanded VAT Law the provision was designed to raise an annual revenue of
(R.A. No. 7716),74 and The Tax Reform Act of 1997 (R.A. No. 22.6 billion.77 The legislature also dispelled the fear that the
8424).75 The right to credit input tax as against the output provision will fend off foreign investments, saying that
tax is clearly a privilege created by law, a privilege that also foreign investors have other tax incentives provided by law,
the law can remove, or in this case, limit. and citing the case of China, where despite a 17.5% non-
Petitioners also contest as arbitrary, oppressive, excessive creditable VAT, foreign investments were not deterred. 78
and confiscatory, Section 8 of R.A. No. 9337, amending Again, for whatever is the purpose of the 60-month
Section 110(A) of the NIRC, which provides: amortization, this involves executive economic policy and
SEC. 110. Tax Credits. legislative wisdom in which the Court cannot intervene.
(A) Creditable Input Tax. With regard to the 5% creditable withholding tax imposed on
Provided, That the input tax on goods purchased or payments made by the government for taxable transactions,

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Taxation Case no. 41

Section 12 of R.A. No. 9337, which amended Section 114 of word final. In tax usage, final, as opposed to creditable,
the NIRC, reads: means full. Thus, it is provided in Section 114(C): "final
SEC. 114. Return and Payment of Value-added Tax. value-added tax at the rate of five percent (5%)."
(C) Withholding of Value-added Tax. The Government or In Revenue Regulations No. 02-98, implementing R.A. No.
any of its political subdivisions, instrumentalities or 8424 (The Tax Reform Act of 1997), the concept of final
agencies, including government-owned or controlled withholding tax on income was explained, to wit:
corporations (GOCCs) shall, before making payment on SECTION 2.57. Withholding of Tax at Source
account of each purchase of goods and services which are (A) Final Withholding Tax. Under the final withholding tax
subject to the value-added tax imposed in Sections 106 and system the amount of income tax withheld by the
108 of this Code, deduct and withhold a final value-added withholding agent is constituted as full and final payment
tax at the rate of five percent (5%) of the gross payment of the income tax due from the payee on the said income.
thereof: Provided, That the payment for lease or use of The liability for payment of the tax rests primarily on the
properties or property rights to nonresident owners shall be payor as a withholding agent. Thus, in case of his failure to
subject to ten percent (10%) withholding tax at the time of withhold the tax or in case of underwithholding, the
payment. For purposes of this Section, the payor or person deficiency tax shall be collected from the payor/withholding
in control of the payment shall be considered as the agent.
withholding agent. (B) Creditable Withholding Tax. Under the creditable
The value-added tax withheld under this Section shall be withholding tax system, taxes withheld on certain income
remitted within ten (10) days following the end of the month payments are intended to equal or at least approximate the
the withholding was made. tax due of the payee on said income. Taxes withheld on
Section 114(C) merely provides a method of collection, or as income payments covered by the expanded withholding tax
stated by respondents, a more simplified VAT withholding (referred to in Sec. 2.57.2 of these regulations) and
system. The government in this case is constituted as a compensation income (referred to in Sec. 2.78 also of these
withholding agent with respect to their payments for goods regulations) are creditable in nature.
and services. As applied to value-added tax, this means that taxable
Prior to its amendment, Section 114(C) provided for different transactions with the government are subject to a 5% rate,
rates of value-added taxes to be withheld -- 3% on gross which constitutes as full payment of the tax payable on the
payments for purchases of goods; 6% on gross payments for transaction. This represents the net VAT payable of the
services supplied by contractors other than by public works seller. The other 5% effectively accounts for the standard
contractors; 8.5% on gross payments for services supplied input VAT (deemed input VAT), in lieu of the actual input VAT
by public work contractors; or 10% on payment for the lease directly or attributable to the taxable transaction. 79
or use of properties or property rights to nonresident The Court need not explore the rationale behind the
owners. Under the present Section 114(C), these different provision. It is clear that Congress intended to treat
rates, except for the 10% on lease or property rights differently taxable transactions with the government. 80 This
payment to nonresidents, were deleted, and a uniform rate is supported by the fact that under the old provision, the 5%
of 5% is applied. tax withheld by the government remains creditable against
The Court observes, however, that the law the used the the tax liability of the seller or contractor, to wit:

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Taxation Case no. 41

SEC. 114. Return and Payment of Value-added Tax. Regulations 2005 issued by the BIR, provides that should the
(C) Withholding of Creditable Value-added Tax. The actual input tax exceed 5% of gross payments, the excess
Government or any of its political subdivisions, may form part of the cost. Equally, should the actual input
instrumentalities or agencies, including government-owned tax be less than 5%, the difference is treated as income. 81
or controlled corporations (GOCCs) shall, before making Petitioners also argue that by imposing a limitation on the
payment on account of each purchase of goods from sellers creditable input tax, the government gets to tax a profit or
and services rendered by contractors which are subject to value-added even if there is no profit or value-added.
the value-added tax imposed in Sections 106 and 108 of this Petitioners stance is purely hypothetical, argumentative,
Code, deduct and withhold the value-added tax due at the and again, one-sided. The Court will not engage in a legal
rate of three percent (3%) of the gross payment for the joust where premises are what ifs, arguments, theoretical
purchase of goods and six percent (6%) on gross receipts for and facts, uncertain. Any disquisition by the Court on this
services rendered by contractors on every sale or point will only be, as Shakespeare describes life in
installment payment which shall be creditable against Macbeth,82 "full of sound and fury, signifying nothing."
the value-added tax liability of the seller or Whats more, petitioners contention assumes the
contractor: Provided, however, That in the case of proposition that there is no profit or value-added. It need not
government public works contractors, the withholding rate take an astute businessman to know that it is a matter of
shall be eight and one-half percent (8.5%): Provided, further, exception that a business will sell goods or services without
That the payment for lease or use of properties or property profit or value-added. It cannot be overstressed that a
rights to nonresident owners shall be subject to ten percent business is created precisely for profit.
(10%) withholding tax at the time of payment. For this The equal protection clause under the Constitution means
purpose, the payor or person in control of the payment shall that "no person or class of persons shall be deprived of the
be considered as the withholding agent. same protection of laws which is enjoyed by other persons
The valued-added tax withheld under this Section shall be or other classes in the same place and in like
remitted within ten (10) days following the end of the month circumstances."83
the withholding was made. (Emphasis supplied) The power of the State to make reasonable and natural
As amended, the use of the word final and the deletion of classifications for the purposes of taxation has long been
the word creditable exhibits Congresss intention to treat established. Whether it relates to the subject of taxation,
transactions with the government differently. Since it has the kind of property, the rates to be levied, or the amounts
not been shown that the class subject to the 5% final to be raised, the methods of assessment, valuation and
withholding tax has been unreasonably narrowed, there is collection, the States power is entitled to presumption of
no reason to invalidate the provision. Petitioners, as validity. As a rule, the judiciary will not interfere with such
petroleum dealers, are not the only ones subjected to the power absent a clear showing of unreasonableness,
5% final withholding tax. It applies to all those who deal with discrimination, or arbitrariness.84
the government. Petitioners point out that the limitation on the creditable
Moreover, the actual input tax is not totally lost or input tax if the entity has a high ratio of input tax, or invests
uncreditable, as petitioners believe. Revenue Regulations in capital equipment, or has several transactions with the
No. 14-2005 or the Consolidated Value-Added Tax government, is not based on real and substantial differences

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Taxation Case no. 41

to meet a valid classification. everywhere with all people at all times.86


The argument is pedantic, if not outright baseless. The law In this case, the tax law is uniform as it provides a standard
does not make any classification in the subject of taxation, rate of 0% or 10% (or 12%) on all goods and services.
the kind of property, the rates to be levied or the amounts Sections 4, 5 and 6 of R.A. No. 9337, amending Sections
to be raised, the methods of assessment, valuation and 106, 107 and 108, respectively, of the NIRC, provide for a
collection. Petitioners alleged distinctions are based on rate of 10% (or 12%) on sale of goods and properties,
variables that bear different consequences. While the importation of goods, and sale of services and use or lease
implementation of the law may yield varying end results of properties. These same sections also provide for a 0%
depending on ones profit margin and value-added, the rate on certain sales and transaction.
Court cannot go beyond what the legislature has laid down Neither does the law make any distinction as to the type of
and interfere with the affairs of business. industry or trade that will bear the 70% limitation on the
The equal protection clause does not require the universal creditable input tax, 5-year amortization of input tax paid on
application of the laws on all persons or things without purchase of capital goods or the 5% final withholding tax by
distinction. This might in fact sometimes result in unequal the government. It must be stressed that the rule of uniform
protection. What the clause requires is equality among taxation does not deprive Congress of the power to classify
equals as determined according to a valid classification. By subjects of taxation, and only demands uniformity within the
classification is meant the grouping of persons or things particular class.87
similar to each other in certain particulars and different from R.A. No. 9337 is also equitable. The law is equipped with a
all others in these same particulars. 85 threshold margin. The VAT rate of 0% or 10% (or 12%) does
Petitioners brought to the Courts attention the introduction not apply to sales of goods or services with gross annual
of Senate Bill No. 2038 by Sens. S.R. Osmea III and Ma. Ana sales or receipts not exceeding P1,500,000.00.88 Also, basic
Consuelo A.S. Madrigal on June 6, 2005, and House Bill No. marine and agricultural food products in their original state
4493 by Rep. Eric D. Singson. The proposed legislation seeks are still not subject to the tax, 89 thus ensuring that prices at
to amend the 70% limitation by increasing the same to 90%. the grassroots level will remain accessible. As was stated in
This, according to petitioners, supports their stance that the Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas,
70% limitation is arbitrary and confiscatory. On this score, Inc. vs. Tan:90
suffice it to say that these are still proposed legislations. The disputed sales tax is also equitable. It is imposed only
Until Congress amends the law, and absent any unequivocal on sales of goods or services by persons engaged in
basis for its unconstitutionality, the 70% limitation stays. business with an aggregate gross annual sales exceeding
B. Uniformity and Equitability of Taxation P200,000.00. Small corner sari-sari stores are consequently
Article VI, Section 28(1) of the Constitution reads: exempt from its application. Likewise exempt from the tax
The rule of taxation shall be uniform and equitable. The are sales of farm and marine products, so that the costs of
Congress shall evolve a progressive system of taxation. basic food and other necessities, spared as they are from
Uniformity in taxation means that all taxable articles or the incidence of the VAT, are expected to be relatively lower
kinds of property of the same class shall be taxed at the and within the reach of the general public.
same rate. Different articles may be taxed at different It is admitted that R.A. No. 9337 puts a premium on
amounts provided that the rate is uniform on the same class businesses with low profit margins, and unduly favors those

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Taxation Case no. 41

with high profit margins. Congress was not oblivious to this. Adam Smiths Canons of Taxation, and it states:
Thus, to equalize the weighty burden the law entails, the I. The subjects of every state ought to contribute towards
law, under Section 116, imposed a 3% percentage tax on the support of the government, as nearly as possible, in
VAT-exempt persons under Section 109(v), i.e., transactions proportion to their respective abilities; that is, in proportion
with gross annual sales and/or receipts not exceeding P1.5 to the revenue which they respectively enjoy under the
Million. This acts as a equalizer because in effect, bigger protection of the state.
businesses that qualify for VAT coverage and VAT-exempt Taxation is progressive when its rate goes up depending on
taxpayers stand on equal-footing. the resources of the person affected.98
Moreover, Congress provided mitigating measures to The VAT is an antithesis of progressive taxation. By its very
cushion the impact of the imposition of the tax on those nature, it is regressive. The principle of progressive taxation
previously exempt. Excise taxes on petroleum products 91 has no relation with the VAT system inasmuch as the VAT
and natural gas92 were reduced. Percentage tax on domestic paid by the consumer or business for every goods bought or
carriers was removed.93 Power producers are now exempt services enjoyed is the same regardless of income. In
from paying franchise tax.94 other words, the VAT paid eats the same portion of an
Aside from these, Congress also increased the income tax income, whether big or small. The disparity lies in the
rates of corporations, in order to distribute the burden of income earned by a person or profit margin marked by a
taxation. Domestic, foreign, and non-resident corporations business, such that the higher the income or profit margin,
are now subject to a 35% income tax rate, from a previous the smaller the portion of the income or profit that is eaten
32%.95 Intercorporate dividends of non-resident foreign by VAT. A converso, the lower the income or profit margin,
corporations are still subject to 15% final withholding tax but the bigger the part that the VAT eats away. At the end of the
the tax credit allowed on the corporations domicile was day, it is really the lower income group or businesses with
increased to 20%.96 The Philippine Amusement and Gaming low-profit margins that is always hardest hit.
Corporation (PAGCOR) is not exempt from income taxes Nevertheless, the Constitution does not really prohibit the
anymore.97 Even the sale by an artist of his works or imposition of indirect taxes, like the VAT. What it simply
services performed for the production of such works was not provides is that Congress shall "evolve a progressive system
spared. of taxation." The Court stated in the Tolentino case, thus:
All these were designed to ease, as well as spread out, the The Constitution does not really prohibit the imposition of
burden of taxation, which would otherwise rest largely on indirect taxes which, like the VAT, are regressive. What it
the consumers. It cannot therefore be gainsaid that R.A. No. simply provides is that Congress shall evolve a progressive
9337 is equitable. system of taxation. The constitutional provision has been
C. Progressivity of Taxation interpreted to mean simply that direct taxes are . . . to be
Lastly, petitioners contend that the limitation on the preferred [and] as much as possible, indirect taxes should
creditable input tax is anything but regressive. It is the be minimized. (E. FERNANDO, THE CONSTITUTION OF THE
smaller business with higher input tax-output tax ratio that PHILIPPINES 221 (Second ed. 1977)) Indeed, the mandate to
will suffer the consequences. Congress is not to prescribe, but to evolve, a progressive tax
Progressive taxation is built on the principle of the system. Otherwise, sales taxes, which perhaps are the
taxpayers ability to pay. This principle was also lifted from oldest form of indirect taxes, would have been prohibited

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Taxation Case no. 41

with the proclamation of Art. VIII, 17 (1) of the 1973 The words of the Court in Vera vs. Avelino101 holds true then,
Constitution from which the present Art. VI, 28 (1) was as it still holds true now. All things considered, there is no
taken. Sales taxes are also regressive. raison d'tre for the unconstitutionality of R.A. No. 9337.
Resort to indirect taxes should be minimized but not avoided WHEREFORE, Republic Act No. 9337 not being
entirely because it is difficult, if not impossible, to avoid unconstitutional, the petitions in G.R. Nos. 168056, 168207,
them by imposing such taxes according to the taxpayers' 168461, 168463, and 168730, are hereby DISMISSED.
ability to pay. In the case of the VAT, the law minimizes the There being no constitutional impediment to the full
regressive effects of this imposition by providing for zero enforcement and implementation of R.A. No. 9337, the
rating of certain transactions (R.A. No. 7716, 3, amending temporary restraining order issued by the Court on July 1,
102 (b) of the NIRC), while granting exemptions to other 2005 is LIFTED upon finality of herein decision.
transactions. (R.A. No. 7716, 4 amending 103 of the SO ORDERED.After an exchange of affidavits and other
NIRC)99 pleadings by the parties, Prosecution Attorney Olivia Laroza-
CONCLUSION Torrevillas issued a Resolution 9 dated 21 October 2005
It has been said that taxes are the lifeblood of the finding probable cause and recommending the filing of a
government. In this case, it is just an enema, a first-aid criminal information against petitioner for violation of
measure to resuscitate an economy in distress. The Court is Section 255 in relation to Sections 254 and 248(B) of the
neither blind nor is it turning a deaf ear on the plight of the NIRC, as amended. The said Resolution was approved by
masses. But it does not have the panacea for the malady Chief State Prosecutor Jovencito R. Zuno.
that the law seeks to remedy. As in other cases, the Court Pursuant to the 21 October 2005 DOJ Resolution, an
cannot strike down a law as unconstitutional simply because Information10 for violation of Section 255 in relation to
of its yokes. Sections 254 and 248(B) of the NIRC, as amended, was filed
Let us not be overly influenced by the plea that for every with the CTA on 3 November 2005 and docketed as C.T.A.
wrong there is a remedy, and that the judiciary should stand Crim. Case No. 0-012. However, the CTA First Division, after
ready to afford relief. There are undoubtedly many wrongs noting several discrepancies in the Information filed,
the judicature may not correct, for instance, those involving required the State Prosecutor to clarify and explain the
political questions. . . . same, and to submit the original copies of the parties
Let us likewise disabuse our minds from the notion that the affidavits, memoranda, and all other evidence on record. 11
judiciary is the repository of remedies for all political or Consequently, Prosecution Attorney Torrevillas, on behalf of
social ills; We should not forget that the Constitution has respondent People, submitted on 1 December 2005 a
judiciously allocated the powers of government to three Compliance with Ex Parte Motion to Admit Attached
distinct and separate compartments; and that judicial Information.12 Prosecution Attorney Torrevillas moved that
interpretation has tended to the preservation of the the documents submitted be admitted as part of the record
independence of the three, and a zealous regard of the of the case and the first Information be substituted by the
prerogatives of each, knowing full well that one is not the attached second Information. The second Information 13
guardian of the others and that, for official wrong-doing, addressed the discrepancies noted by the CTA in the first
each may be brought to account, either by impeachment, Information, by now reading thus:
trial or by the ballot box.100 The undersigned Prosecution Attorney of the Department of

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Taxation Case no. 41

Justice hereby accuses JUDY ANNE SANTOS y Lumagui of In a Resolution18 dated 23 February 2006, the CTA First
the offense of violation of Section 255, of Republic Act No. Division denied petitioners Motion to Quash and accordingly
8424, otherwise known as the "Tax Reform Act of 1997," as scheduled her arraignment on 2 March 2006 at 9:00 a.m.
amended, committed as follows: Petitioner filed a Motion for Reconsideration and/or
"That on or about the 15th day of April, 2003, at Quezon City, Reinvestigation,19 which was again denied by the CTA First
Philippines, and within the jurisdiction of this Honorable Division in a Resolution20 dated 11 May 2006.
Court, the above-named accused did then and there, Petitioner received a copy of the 11 May 2006 Resolution of
willfully, unlawfully, and feloniously file a false and the CTA First Division on 17 May 2006. On 1 June 2006,
fraudulent income tax return for taxable year 2002 by petitioner filed with the CTA en banc a Motion for Extension
indicating therein a gross income of P8,033,332.70 when in of Time to File Petition for Review, docketed as C.T.A. EB.
truth and in fact her correct income for taxable year 2002 is CRIM. No. 001. She filed her Petition for Review with the CTA
P16,396,234.70 or a gross underdeclaration/difference of en banc on 16 June 2006. However, in its Resolution 21 dated
P8,362,902 resulting to an income tax deficiency of 19 June 2006, the CTA en banc denied petitioners Motion
P1,395,116.24 excluding interest and penalties thereon of for Extension of Time to File Petition for Review, ratiocinating
P1,319,500.94 or a total income tax deficiency of that:
P2,714,617.18 to the damage and prejudice of the In the case before Us, the petitioner is asking for an
government of the same amount.["] extension of time to file her Petition for Review to appeal the
In a Resolution14 dated 8 December 2005, the CTA First denial of her motion to quash in C.T.A. Crim. Case No. 0-012.
Division granted the Peoples Ex Parte Motion and admitted As stated above, a resolution denying a motion to quash is
the second Information. not a proper subject of an appeal to the Court En Banc
The CTA First Division then issued on 9 December 2005 a under Section 11 of R.A. No. 9282 because a ruling denying
warrant for the arrest of petitioner.15 The tax court lifted and a motion to quash is only an interlocutory order, as such, it
recalled the warrant of arrest on 21 December 2005 after cannot be made the subject of an appeal pursuant to said
petitioner voluntarily appeared and submitted herself to its law and the Rules of Court. Section 1 of Rule 41 of the Rules
jurisdiction and filed the required bail bond in the amount of of Court provides that "no appeal may be taken from an
P20,000.00.16 interlocutory order" and Section 1 (i) of Rule 50 provides for
On 10 January 2006, petitioner filed with the CTA First the dismissal of an appeal on the ground that "the order or
Division a Motion to Quash17 the Information filed in C.T.A. judgment appealed from is not appealable". Time and again,
Crim. Case No. 0-012 on the following grounds: the Supreme Court had ruled that the remedy of the
1. The facts alleged in the INFORMATION do not constitute accused in case of denial of a motion to quash is for the
an offense; accused to enter a plea, go to trial and after an adverse
2. The officer who filed the information had no authority to decision is rendered, to appeal therefrom in the manner
do so; authorized by law.
3. The Honorable Court of Tax Appeals has no jurisdiction Since a denial of a Motion to Quash is not appealable,
over the subject matter of the case; and granting petitioners Motion for Extension of Time to File
4. The information is void ab initio, being violative of due Petition for Review will only be an exercise in futility
process, and the equal protection of the laws. considering that the dismissal of the Petition for Review that

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Taxation Case no. 41

will be filed by way of appeal is mandated both by law and courts of general jurisdiction.
jurisprudence.22 Petitioner is invoking a very narrow and literal reading of
Ultimately, the CTA en banc decreed: Section 18 of Republic Act No. 1125, as amended.
WHEREFORE, premises considered, petitioners Motion for Indeed, the filing of a petition for review with the CTA en
Extension of Time to File Petition for Review filed on June 1, banc from a decision, resolution, or order of a CTA Division is
2006 is hereby DENIED for lack of merit.23 a remedy newly made available in proceedings before the
Now comes petitioner before this Court raising the sole issue CTA, necessarily adopted to conform to and address the
of: changes in the CTA.
WHETHER A RESOLUTION OF A CTA DIVISION DENYING A There was no need for such rule under Republic Act No.
MOTION TO QUASH IS A PROPER SUBJECT OF AN APPEAL TO 1125, prior to its amendment, since the CTA then was
THE CTA EN BANC UNDER SECTION 11 OF REPUBLIC ACT NO. composed only of one Presiding Judge and two Associate
9282, AMENDING SECTION 18 OF REPUBLIC ACT NO. 1125. 24 Judges.27 Any two Judges constituted a quorum and the
Section 18 of Republic Act No. 1125, 25 as amended by concurrence of two Judges was necessary to promulgate any
Republic Act No. 9282,26 provides: decision thereof.28
SEC. 18. Appeal to the Court of Tax Appeals En Banc. No The amendments introduced by Republic Act No. 9282 to
civil proceedings involving matters arising under the Republic Act No. 1125 elevated the rank of the CTA to a
National Internal Revenue Code, the Tariff and Customs collegiate court, with the same rank as the Court of Appeals,
Code or the Local Government Code shall be maintained, and increased the number of its members to one Presiding
except as herein provided, until and unless an appeal has Justice and five Associate Justices. 29 The CTA is now allowed
been previously filed with the CTA and disposed of in to sit en banc or in two Divisions with each Division
accordance with the provisions of this Act. consisting of three Justices. Four Justices shall constitute a
A party adversely affected by a resolution of a Division of quorum for sessions en banc, and the affirmative votes of
the CTA on a motion for reconsideration or new trial, may four members of the Court en banc are necessary for the
file a petition for review with the CTA en banc. rendition of a decision or resolution; while two Justices shall
Petitioners primary argument is that a resolution of a CTA constitute a quorum for sessions of a Division and the
Division denying a motion to quash is a proper subject of an affirmative votes of two members of the Division shall be
appeal to the CTA en banc under Section 18 of Republic Act necessary for the rendition of a decision or resolution. 30
No. 1125, as amended, because the law does not say that In A.M. No. 05-11-07-CTA, the Revised CTA Rules, this Court
only a resolution that constitutes a final disposition of a case delineated the jurisdiction of the CTA en banc31 and in
may be appealed to the CTA en banc. If the interpretation of Divisions.32 Section 2, Rule 4 of the Revised CTA Rules
the law by the CTA en banc prevails, a procedural void is recognizes the exclusive appellate jurisdiction of the CTA en
created leaving the parties, such as petitioner, without any banc to review by appeal the following decisions,
remedy involving erroneous resolutions of a CTA Division. resolutions, or orders of the CTA Division:
The Court finds no merit in the petitioners assertion. SEC. 2. Cases within the jurisdiction of the Court en banc.
The petition for review under Section 18 of Republic The Court en banc shall exercise exclusive appellate
Act No. 1125, as amended, may be new to the CTA, jurisdiction to review by appeal the following:
but it is actually a mode of appeal long available in (a) Decisions or resolutions on motions for reconsideration

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Taxation Case no. 41

or new trial of the Court in Divisions in the exercise of its pursuant to the applicable provisions of Rules 42, 43,
exclusive appellate jurisdiction over: 44 and 46 of the Rules of Court, except as otherwise
(1) Cases arising from administrative agencies Bureau of provided for in these Rules.
Internal Revenue, Bureau of Customs, Department of RULE 8PROCEDURE IN CIVIL CASES
Finance, Department of Trade and Industry, Department of xxxx
Agriculture; SEC. 4. Where to appeal; mode of appeal.
(2) Local tax cases decided by the Regional Trial Courts in xxxx
the exercise of their original jurisdiction; and (b) An appeal from a decision or resolution of the Court in
(3) Tax collection cases decided by the Regional Trial Courts Division on a motion for reconsideration or new trial shall be
in the exercise of their original jurisdiction involving final taken to the Court by petition for review as provided in
and executory assessments for taxes, fees, charges and Rule 43 of the Rules of Court. The Court en banc shall
penalties, where the principal amount of taxes and penalties act on the appeal.
claimed is less than one million pesos; xxxx
xxxx RULE 9PROCEDURE IN CRIMINAL CASES
(f) Decisions, resolutions or orders on motions for SEC. 1. Review of cases in the Court. The review of
reconsideration or new trial of the Court in Division in the criminal cases in the Court en banc or in Division shall be
exercise of its exclusive original jurisdiction over cases governed by the applicable provisions of Rule 124 of the
involving criminal offenses arising from violations of the Rules of Court.
National Internal Revenue Code or the Tariff and Customs xxxx
Code and other laws administered by the Bureau of Internal SEC. 9. Appeal; period to appeal.
Revenue or Bureau of Customs. xxxx
(g) Decisions, resolutions or order on motions for (b) An appeal to the Court en banc in criminal cases decided
reconsideration or new trial of the Court in Division in the by the Court in Division shall be taken by filing a petition for
exercise of its exclusive appellate jurisdiction over criminal review as provided in Rule 43 of the Rules of Court
offenses mentioned in the preceding subparagraph; x x x. within fifteen days from receipt of a copy of the decision or
Although the filing of a petition for review with the CTA en resolution appealed from. The Court may, for good cause,
banc from a decision, resolution, or order of the CTA extend the time for filing of the petition for review for an
Division, was newly made available to the CTA, such mode additional period not exceeding fifteen days. (Emphasis
of appeal has long been available in Philippine courts of ours.)
general jurisdiction. Hence, the Revised CTA Rules no longer Given the foregoing, the petition for review to be filed with
elaborated on it but merely referred to existing rules of the CTA en banc as the mode for appealing a decision,
procedure on petitions for review and appeals, to wit: resolution, or order of the CTA Division, under Section 18 of
RULE 7PROCEDURE IN THE COURT OF TAX APPEALS Republic Act No. 1125, as amended, is not a totally new
SEC. 1. Applicability of the Rules of the Court of Appeals. remedy, unique to the CTA, with a special application or use
The procedure in the Court en banc or in Divisions in original therein. To the contrary, the CTA merely adopts the
and in appealed cases shall be the same as those in procedure for petitions for review and appeals long
petitions for review and appeals before the Court of Appeals established and practiced in other Philippine courts.

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Taxation Case no. 41

Accordingly, doctrines, principles, rules, and precedents laid rights, or some right or rights of the parties, either on the
down in jurisprudence by this Court as regards petitions for entire controversy or on some definite and separate branch
review and appeals in courts of general jurisdiction should thereof, and which concludes them until it is reversed or set
likewise bind the CTA, and it cannot depart therefrom. aside." The central point to consider is, therefore, the effects
General rule: The denial of a motion to quash is an of the order on the rights of the parties. A court order, on
interlocutory order which is not the proper subject of the other hand, is merely interlocutory in character if it is
an appeal or a petition for certiorari. provisional and leaves substantial proceeding to be had in
According to Section 1, Rule 41 of the Revised Rules of connection with its subject. The word "interlocutory" refers
Court, governing appeals from the Regional Trial Courts to "something intervening between the commencement and
(RTCs) to the Court of Appeals, an appeal may be taken only the end of a suit which decides some point or matter but is
from a judgment or final order that completely disposes of not a final decision of the whole controversy." 34
the case or of a matter therein when declared by the Rules In other words, after a final order or judgment, the court
to be appealable. Said provision, thus, explicitly states that should have nothing more to do in respect of the relative
no appeal may be taken from an interlocutory order. 33 rights of the parties to the case. Conversely, "an order that
The Court distinguishes final judgments and orders from does not finally dispose of the case and does not end the
interlocutory orders in this wise: Court's task of adjudicating the parties' contentions in
Section 2, Rule 41 of the Revised Rules of Court provides determining their rights and liabilities as regards each other,
that "(o)nly final judgments or orders shall be subject to but obviously indicates that other things remain to be done
appeal." Interlocutory or incidental judgments or orders do by the Court, is interlocutory."35
not stay the progress of an action nor are they subject of The rationale for barring the appeal of an interlocutory order
appeal "until final judgment or order is rendered for one was extensively discussed in Matute v. Court of Appeals,36
party or the other." The test to determine whether an order thus:
or judgment is interlocutory or final is this: "Does it leave It is settled that an "interlocutory order or decree made in
something to be done in the trial court with respect to the the progress of a case is always under the control of the
merits of the case? If it does, it is interlocutory; if it does court until the final decision of the suit, and may be
not, it is final". A court order is final in character if it puts an modified or rescinded upon sufficient grounds shown at any
end to the particular matter resolved or settles definitely the time before final judgment . . ." Of similar import is the
matter therein disposed of, such that no further questions ruling of this Court declaring that "it is rudimentary that
can come before the court except the execution of the order. such (interlocutory) orders are subject to change in the
The term "final" judgment or order signifies a judgment or discretion of the court." Moreover, one of the inherent
an order which disposes of the cause as to all the parties, powers of the court is "To amend and control its process and
reserving no further questions or directions for future orders so as to make them conformable to law and justice.
determination. The order or judgment may validly refer to In the language of Chief Justice Moran, paraphrasing the
the entire controversy or to some definite and separate ruling in Veluz vs. Justice of the Peace of Sariaya, "since
branch thereof. "In the absence of a statutory definition, a judges are human, susceptible to mistakes, and are bound
final judgment, order or decree has been held to be x x x to administer justice in accordance with law, they are given
one that finally disposes of, adjudicates, or determines the the inherent power of amending their orders or judgments

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so as to make them conformable to law and justice, and an appeal from the judgment after trial.39
they can do so before they lose their jurisdiction of the case, The Court cannot agree in petitioners contention that there
that is before the time to appeal has expired and no appeal would exist a procedural void following the denial of her
has been perfected." And in the abovecited Veluz case, this Motion to Quash by the CTA First Division in its Resolutions
Court held that "If the trial court should discover or be dated 23 February 2006 and 11 May 2006, leaving her
convinced that it had committed an error in its judgment, or helpless. The remedy of an accused from the denial of his or
had done an injustice, before the same has become final, it her motion to quash has already been clearly laid down as
may, upon its own motion or upon a motion of the parties, follows:
correct such error in order to do justice between the An order denying a Motion to Acquit (like an order denying a
parties. . . . It would seem to be the very height of absurdity motion to quash) is interlocutory and not a final order. It is,
to prohibit a trial judge from correcting an error, mistake, or therefore, not appealable. Neither can it be the subject of a
injustice which is called to his attention before he has lost petition for certiorari. Such order of denial may only be
control of his judgment." Corollarily, it has also been held reviewed, in the ordinary course of law, by an appeal from
"that a judge of first instance is not legally prevented from the judgment, after trial. As stated in Collins vs. Wolfe, and
revoking the interlocutory order of another judge in the very reiterated in Mill vs. Yatco, the accused, after the denial of
litigation subsequently assigned to him for judicial action." his motion to quash, should have proceeded with the trial of
Another recognized reason of the law in permitting appeal the case in the court below, and if final judgment is
only from a final order or judgment, and not from an rendered against him, he could then appeal, and, upon such
interlocutory or incidental one, is to avoid multiplicity of appeal, present the questions which he sought to be
appeals in a single action, which must necessarily suspend decided by the appellate court in a petition for certiorari.
the hearing and decision on the merits of the case during In Acharon vs. Purisima, the procedure was well defined,
the pendency of the appeal. If such appeal were allowed, thus:
the trial on the merits of the case would necessarily be "Moreover, when the motion to quash filed by Acharon to
delayed for a considerable length of time, and compel the nullify the criminal cases filed against him was denied by
adverse party to incur unnecessary expenses, for one of the the Municipal Court of General Santos his remedy was not to
parties may interpose as many appeals as incidental file a petition for certiorari but to go to trial without
questions may be raised by him, and interlocutory orders prejudice on his part to reiterate the special defenses he
rendered or issued by the lower court.37 had invoked in his motion and, if, after trial on the merits, an
There is no dispute that a court order denying a motion to adverse decision is rendered, to appeal therefrom in the
quash is interlocutory. The denial of the motion to quash manner authorized by law. This is the procedure that he
means that the criminal information remains pending with should have followed as authorized by law and precedents.
the court, which must proceed with the trial to determine Instead, he took the usual step of filing a writ of certiorari
whether the accused is guilty of the crime charged therein. before the Court of First Instance which in our opinion is
Equally settled is the rule that an order denying a motion to unwarranted it being contrary to the usual course of law." 40
quash, being interlocutory, is not immediately appealable, 38 Hence, the CTA en banc herein did not err in denying
nor can it be the subject of a petition for certiorari. Such petitioners Motion for Extension of Time to File Petition for
order may only be reviewed in the ordinary course of law by Review, when such Petition for Review is the wrong remedy

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to assail an interlocutory order denying her Motion to Quash. may still seek recourse, under exceptional and meritorious
While the general rule proscribes the appeal of an circumstances, via a special civil action for certiorari with
interlocutory order, there are also recognized exceptions to this Court, refuting petitioners assertion of a procedural
the same. The general rule is not absolute. Where special void.
circumstances clearly demonstrate the inadequacy of an The CTA First Division did not commit grave abuse of
appeal, then the special civil action of certiorari or discretion in denying petitioners Motion to Quash.
prohibition may exceptionally be allowed. 41 This Court Assuming that the CTA en banc, as an exception to the
recognizes that under certain situations, recourse to general rule, allowed and treated petitioners Petition for
extraordinary legal remedies, such as a petition for Review in C.T.A. EB. CRIM. No. 001 as a special civil action
certiorari, is considered proper to question the denial of a for certiorari, 47 it would still be dismissible for lack of merit.
motion to quash (or any other interlocutory order) in the An act of a court or tribunal may only be considered as
interest of a "more enlightened and substantial justice"; 42 or committed in grave abuse of discretion when the same was
to promote public welfare and public policy; 43 or when the performed in a capricious or whimsical exercise of judgment,
cases "have attracted nationwide attention, making it which is equivalent to lack of jurisdiction. The abuse of
essential to proceed with dispatch in the consideration discretion must be so patent and gross as to amount to an
thereof";44 or when the order was rendered with grave abuse evasion of positive duty or to a virtual refusal to perform a
of discretion.45 Certiorari is an appropriate remedy to assail duty enjoined by law or to act at all in contemplation of law,
an interlocutory order (1) when the tribunal issued such as where the power is exercised in an arbitrary and despotic
order without or in excess of jurisdiction or with grave abuse manner by reason of passion or personal hostility. In this
of discretion; and (2) when the assailed interlocutory order connection, it is only upon showing that the court acted
is patently erroneous, and the remedy of appeal would not without or in excess of jurisdiction or with grave abuse of
afford adequate and expeditious relief.46 discretion that an interlocutory order such as that involved
Recourse to a petition for certiorari to assail an interlocutory in this case may be impugned. Be that as it may, it must be
order is now expressly recognized in the ultimate paragraph emphasized that this practice is applied only under certain
of Section 1, Rule 41 of the Revised Rules of Court on the exceptional circumstances to prevent unnecessary delay in
subject of appeal, which states: the administration of justice and so as not to unduly burden
In all the above instances where the judgment or final order the courts.48
is not appealable, the aggrieved party may file an Certiorari is not available to correct errors of procedure or
appropriate special civil action under Rule 65. mistakes in the judges findings and conclusions of law and
As to whether the CTA en banc, under its expanded fact. It is only in the presence of extraordinary
jurisdiction in Republic Act No. 9282, has been granted circumstances evincing a patent disregard of justice and fair
jurisdiction over special civil actions for certiorari is not play where resort to a petition for certiorari is proper. A
raised as an issue in the Petition at bar, thus, precluding the party must not be allowed to delay litigation by the sheer
Court from making a definitive pronouncement thereon. expediency of filing a petition for certiorari under Rule 65 of
However, even if such an issue is answered in the negative, the Revised Rules of Court based on scant allegations of
it would not substantially affect the ruling of this Court grave abuse.49
herein, for a party whose motion to quash had been denied A writ of certiorari is not intended to correct every

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controversial interlocutory ruling: it is resorted to only to preliminary investigation. Section 220 of the NIRC, as
correct a grave abuse of discretion or a whimsical exercise amended, simply requires that the BIR Commissioner
of judgment equivalent to lack of jurisdiction. Its function is approve the institution of civil or criminal action against a
limited to keeping an inferior court within its jurisdiction and tax law violator, but it does not describe in what form such
to relieve persons from arbitrary acts acts which courts or approval must be given. In this case, BIR Commissioner
judges have no power or authority in law to perform. It is not Paraynos letter of 19 May 2005 already states his express
designed to correct erroneous findings and conclusions approval of the filing of an information against petitioner
made by the courts.50 and his signature need not appear on the Resolution of the
The Petition for Review which petitioner intended to file State Prosecutor or the Information itself.
before the CTA en banc relied on two grounds: (1) the lack of Still on the purported lack of authority of Prosecution
authority of Prosecuting Attorney Torrevillas to file the Attorney Torrevillas to file the Information, petitioner asserts
Information; and (2) the filing of the said Information in that it is the City Prosecutor under the Quezon City Charter,
violation of petitioners constitutional rights to due process who has the authority to investigate and prosecute offenses
and equal protection of the laws. allegedly committed within the jurisdiction of Quezon City,
Anent the first ground, petitioner argues that the such as petitioners case.
Information was filed without the approval of the BIR The Court is not persuaded. Under Republic Act No. 537, the
Commissioner in violation of Section 220 of NIRC, as Revised Charter of Quezon City, the City Prosecutor shall
amended, which provides: have the following duties relating to the investigation and
SEC. 220. Form and Mode of Proceeding in Actions Arising prosecution of criminal offenses:
under this Code. - Civil and criminal actions and proceedings SEC. 28. The City Attorney - His assistants - His duties.
instituted in behalf of the Government under the authority of xxxx
this Code or other law enforced by the Bureau of Internal (g) He shall also have charge of the prosecution of all
Revenue shall be brought in the name of the Government of crimes, misdemeanors, and violations of city ordinances, in
the Philippines and shall be conducted by legal officers of the Court of First Instance and the municipal courts of the
the Bureau of Internal Revenue but no civil or criminal action city, and shall discharge all the duties in respect to the
for the recovery of taxes or the enforcement of any fine, criminal prosecutions enjoined by law upon provincial
penalty or forfeiture under this Code shall be filed in court fiscals.
without the approval of the Commissioner. (h) He shall cause to be investigated all charges of crimes,
Petitioners argument must fail in light of BIR Commissioner misdemeanors, and violations of ordinances and have the
Paraynos letter dated 19 May 2005 to DOJ Secretary necessary information or complaints prepared or made
Gonzales referring "for preliminary investigation and filing against the persons accused. He or any of his assistants
of an information in court if evidence so warrants," the may conduct such investigations by taking oral evidence of
findings of the BIR officers recommending the criminal reputable witnesses, and for this purpose may issue
prosecution of petitioner. In said letter, BIR Commissioner subpoena, summon witnesses to appear and testify under
Parayno already gave his prior approval to the filing of an oath before him, and the attendance or evidence of an
information in court should the DOJ, based on the evidence absent or recalcitrant witness may be enforced by
submitted, find probable cause against petitioner during the application to the municipal court or the Court of First

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Instance. No witness summoned to testify under this section [T]he power or authority of the Chief State Prosecutor
shall be under obligation to give any testimony which tend Jovencito Zuo, Jr. and his deputies in the Department of
to incriminate himself. Justice to prosecute cases is national in scope; and the
Evident from the foregoing is that the City Prosecutor has Special Prosecutors authority to sign and file informations in
the power to investigate crimes, misdemeanors, and court proceeds from the exercise of said persons authority
violations of ordinances committed within the territorial to conduct preliminary investigations.55
jurisdiction of the city, and which can be prosecuted before Moreover, there is nothing in the Revised Quezon City
the trial courts of the said city. The charge against Charter which would suggest that the power of the City
petitioner, however, is already within the exclusive original Prosecutor to investigate and prosecute crimes,
jurisdiction of the CTA,51 as the Information states that her misdemeanors, and violations of ordinances committed
gross underdeclaration resulted in an income tax deficiency within the territorial jurisdiction of the city is to the exclusion
of P1,395,116.24, excluding interest and penalties. The City of the State Prosecutors. In fact, the Office of the State
Prosecutor does not have the authority to appear before the Prosecutor exercises control and supervision over City
CTA, which is now of the same rank as the Court of Appeals. Prosecutors under Executive Order No. 292, otherwise
In contrast, the DOJ is the principal law agency of the known as the Administrative Code of 1987.
Philippine government which shall be both its legal counsel As regards petitioners second ground in her intended
and prosecution arm.52 It has the power to investigate the Petition for Review with the CTA en banc, she asserts that
commission of crimes, prosecute offenders and administer she has been denied due process and equal protection of
the probation and correction system.53 Under the DOJ is the the laws when similar charges for violation of the NIRC, as
Office of the State Prosecutor whose functions are described amended, against Regina Encarnacion A. Velasquez
as follows: (Velasquez) were dismissed by the DOJ in its Resolution
Sec. 8. Office of the Chief State Prosecutor. - The Office of dated 10 August 2005 in I.S. No. 2005-330 for the reason
the Chief State Prosecutor shall have the following functions: that Velasquezs tax liability was not yet fully determined
(1) Assist the Secretary in the performance of powers and when the charges were filed.
functions of the Department relative to its role as the The Court is unconvinced.
prosecution arm of the government; First, a motion to quash should be based on a defect in the
(2) Implement the provisions of laws, executive orders and information which is evident on its face. 56 The same cannot
rules, and carry out the policies, plans, programs and be said herein. The Information against petitioner appears
projects of the Department relative to the investigation and valid on its face; and that it was filed in violation of her
prosecution of criminal cases; constitutional rights to due process and equal protection of
(3) Assist the Secretary in exercising supervision and control the laws is not evident on the face thereof. As pointed out
over the National Prosecution Service as constituted under by the CTA First Division in its 11 May 2006 Resolution, the
P.D. No. 1275 and/or otherwise hereinafter provided; and more appropriate recourse petitioner should have taken,
(4) Perform such other functions as may be provided by law given the dismissal of similar charges against Velasquez,
or assigned by the Secretary.54 was to appeal the Resolution dated 21 October 2005 of the
As explained by CTA First Division in its Resolution dated 11 Office of the State Prosecutor recommending the filing of an
May 2006: information against her with the DOJ Secretary. 57

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Second, petitioner cannot claim denial of due process when The prosecution of one guilty person while others equally
she was given the opportunity to file her affidavits and other guilty are not prosecuted, however, is not, by itself, a denial
pleadings and submit evidence before the DOJ during the of the equal protection of the laws. Where the official action
preliminary investigation of her case and before the purports to be in conformity to the statutory classification,
Information was filed against her. Due process is merely an an erroneous or mistaken performance of the statutory duty,
opportunity to be heard. In addition, preliminary although a violation of the statute, is not without more a
investigation conducted by the DOJ is merely inquisitorial. It denial of the equal protection of the laws. The unlawful
is not a trial of the case on the merits. Its sole purpose is to administration by officers of a statute fair on its face,
determine whether a crime has been committed and resulting in its unequal application to those who are entitled
whether the respondent therein is probably guilty of the to be treated alike, is not a denial of equal protection unless
crime. It is not the occasion for the full and exhaustive there is shown to be present in it an element of intentional
display of the parties evidence. Hence, if the investigating or purposeful discrimination. This may appear on the face of
prosecutor is already satisfied that he can reasonably the action taken with respect to a particular class or person,
determine the existence of probable cause based on the or it may only be shown by extrinsic evidence showing a
parties evidence thus presented, he may terminate the discriminatory design over another not to be inferred from
proceedings and resolve the case.58 the action itself. But a discriminatory purpose is not
Third, petitioner cannot likewise aver that she has been presumed, there must be a showing of "clear and
denied equal protection of the laws. intentional discrimination." Appellant has failed to show
The equal protection clause exists to prevent undue favor or that, in charging appellant in court, that there was a "clear
privilege. It is intended to eliminate discrimination and and intentional discrimination" on the part of the
oppression based on inequality. Recognizing the existence of prosecuting officials.
real differences among men, the equal protection clause The discretion of who to prosecute depends on the
does not demand absolute equality. It merely requires that prosecutions sound assessment whether the evidence
all persons shall be treated alike, under like circumstances before it can justify a reasonable belief that a person has
and conditions, both as to the privileges conferred and committed an offense. The presumption is that the
liabilities enforced.59 prosecuting officers regularly performed their duties,
Petitioner was not able to duly establish to the satisfaction and this presumption can be overcome only by proof
of this Court that she and Velasquez were indeed similarly to the contrary, not by mere speculation. Indeed,
situated, i.e., that they committed identical acts for which appellant has not presented any evidence to overcome this
they were charged with the violation of the same provisions presumption. The mere allegation that appellant, a
of the NIRC; and that they presented similar arguments and Cebuana, was charged with the commission of a crime,
evidence in their defense - yet, they were treated differently. while a Zamboanguea, the guilty party in appellants eyes,
Furthermore, that the Prosecution Attorney dismissed what was not, is insufficient to support a conclusion that the
were supposedly similar charges against Velasquez did not prosecution officers denied appellant equal protection of the
compel Prosecution Attorney Torrevillas to rule the same laws.
way on the charges against petitioner. In People v. Dela There is also common sense practicality in sustaining
Piedra,60 this Court explained that: appellants prosecution.

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While all persons accused of crime are to be treated Motion for Extension of Time to File Petition for Review.
on a basis of equality before the law, it does not Petitioner cannot file a Petition for Review with the CTA en
follow that they are to be protected in the banc to appeal the Resolution of the CTA First Division
commission of crime. It would be unconscionable, for denying her Motion to Quash. The Resolution is interlocutory
instance, to excuse a defendant guilty of murder because and, thus, unappealable. Even if her Petition for Review is to
others have murdered with impunity. The remedy for be treated as a petition for certiorari, it is dismissible for
unequal enforcement of the law in such instances lack of merit.
does not lie in the exoneration of the guilty at the WHEREFORE, premises considered, the instant Petition for
expense of society x x x. Protection of the law will be Review is hereby DENIED. Costs against petitioner.
extended to all persons equally in the pursuit of their lawful SO ORDERED.
occupations, but no person has the right to demand
protection of the law in the commission of a crime.
Likewise, [i]f the failure of prosecutors to enforce the
criminal laws as to some persons should be converted into a
defense for others charged with crime, the result would be
that the trial of the district attorney for nonfeasance would
become an issue in the trial of many persons charged with
heinous crimes and the enforcement of law would suffer a
complete breakdown. (Emphasis ours.)
In the case at bar, no evidence of a clear and intentional
discrimination against petitioner was shown, whether by
Prosecution Attorney Torrevillas in recommending the filing
of Information against petitioner or by the CTA First Division
in denying petitioners Motion to Quash. The only basis for
petitioners claim of denial of equal protection of the laws
was the dismissal of the charges against Velasquez while
those against her were not.
And lastly, the Resolutions of the CTA First Division dated 23
February 2006 and 11 May 2006 directly addressed the
arguments raised by petitioner in her Motion to Quash and
Motion for Reconsideration, respectively, and explained the
reasons for the denial of both Motions. There is nothing to
sustain a finding that these Resolutions were rendered
capriciously, whimsically, or arbitrarily, as to constitute
grave abuse of discretion amounting to lack or excess of
jurisdiction.
In sum, the CTA en banc did not err in denying petitioners

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