3) Motion for Reconsideration by petitioners Association of Pilipinas Shell Dealers,
G.R. No. 168056 (ABAKADA Guro Party List Officer Samson S. Alcantara, et al. vs. The Hon.
Executive Secretary Eduardo R. Ermita); G.R. No. 168207 (Aquilino Q. Pimentel, Jr., et al. vs.
Executive Secretary Eduardo R. Ermita, et al.); G.R. No. 168461 (Association of Pilipinas
Shell Dealers, Inc., et al. vs. Cesar V. Purisima, et al.); G.R. No. 168463 (Francis Joseph G.
Escudero vs. Cesar V. Purisima, et al); 'and G.R. No. 168730 (Bataan Governor Enrique T.
Garcia, Jr. vs. Hon. Eduardo R. Ermita, et al.)
RESOLUTION
For resolution are the following motions for reconsideration of the Court's Decision dated
September 1, 2005 upholding the constitutionality of Republic Act No. 9337 or the VAT
Reform Act[1]:
1) Motion for Reconsideration filed by petitioners in G.R. No. 168463, Escudero, et
al., on the following grounds:
A. THE DELETION OF THE 'NO PASS ON PROVISIONS' FOR THE SALE OF
PETROLEUM PRODUCTS AND POWER GENERATION SERVICES
CONSTITUTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OR EXCESS OF JURISDICTION ON THE PART OF THE BICAMERAL
CONFERENCE COMMITTEE.
B. REPUBLIC ACT NO. 9337 GROSSLY VIOLATES THE CONSTITUTIONAL
IMPERATIVE ON EXCLUSIVE ORIGINATION OF REVENUE BILLS UNDER
'24, ARTICLE VI, 1987 PHILIPPINE CONSTITUTION.
C. REPUBLIC ACT NO. 9337'S STAND-BY AUTHORITY TO THE EXECUTIVE TO
INCREASE THE VAT RATE, ESPECIALLY ON ACCOUNT OF THE EFFECTIVE
RECOMMENDATORY POWER GRANTED TO THE SECRETARY OF FINANCE,
CONSTITUTES UNDUE DELEGATION OF LEGISLATIVE AUTHORITY.
2) Motion for Reconsideration of petitioner in G.R. No. 168730, Bataan Governor
Enrique T. Garcia, Jr., with the argument that burdening the consumers with
significantly higher prices under a VAT regime vis--vis a 3% gross tax renders
the law unconstitutional for being arbitrary, oppressive and inequitable.
and
Inc. in G.R. No. 168461, on the grounds that:
I. This Honorable Court erred in upholding the constitutionality of Section
110(A)(2) and Section 110(B) of the NIRC, as amended by the EVAT Law,
imposing limitations on the amount of input VAT that may be claimed as a credit
against output VAT, as well as Section 114(C) of the NIRC, as amended by the
EVAT Law, requiring the government or any of its instrumentalities to withhold a
5% final withholding VAT on their gross payments on purchases of goods and
services, and finding that the questioned provisions:
A. are not arbitrary, oppressive and consfiscatory as to amount to a
deprivation of property without due process of law in
violation of Article III, Section 1 of the 1987 Philippine
Constitution;
B. do not violate the equal protection clause prescribed under Article
III, Section 1 of the 1987 Philippine Constitution; and
C. apply uniformly to all those belonging to the same class and do not
violate Article VI, Section 28(1) of the 1987 Philippine
Constitution.
II. This Honorable Court erred in upholding the constitutionality of Section
110(B) of the NIRC, as amended by the EVAT Law, imposing a limitation on the
amount of input VAT that may be claimed as a credit against output VAT
notwithstanding the finding that the tax is not progressive as exhorted by Article
VI, Section 28(1) of the 1987 Philippine Constitution.
Respondents filed their Consolidated Comment. Petitioner Garcia filed his Reply.
Petitioners Escudero, et al., insist that the bicameral conference committee should not even
have acted on the no pass-on provisions since there is no disagreement between House Bill
Nos. 3705 and 3555 on the one hand, and Senate Bill No. 1950 on the other, with regard to
the no pass-on provision for the sale of service for power generation because both the
Senate and the House were in agreement that the VAT burden for the sale of such service
shall not be passed on to the end-consumer. As to the no pass-on provision for sale of
petroleum products, petitioners argue that the fact that the presence of such a no pass-on
provision in the House version and the absence thereof in the Senate Bill means there is no
conflict because 'a House provision cannot be in conflict with something that does not exist.
Such argument is flawed. Note that the rules of both houses of Congress provide that a
conference committee shall settle the 'differences' in the respective bills of each house.
Verily, the fact that a no pass-on provision is present in one version but absent in the other,
and one version intends two industries, i.e., power generation companies and petroleum
sellers, to bear the burden of the tax, while the other version intended only the industry of
power generation, transmission and distribution to be saddled with such burden, clearly
shows that there are indeed differences between the bills coming from each house, which
differences should be acted upon by the bicameral conference committee. It is incorrect to
conclude that there is no clash between two opposing forces with regard to the no pass-on
provision for VAT on the sale of petroleum products merely because such provision exists in
the House version while it is absent in the Senate version. It is precisely the absence of such
provision in the Senate bill and the presence thereof in the House bills that causes the
conflict. The absence of the provision in the Senate bill shows the Senate's disagreement to
the intention of the House of Representatives make the sellers of petroleum bear the burden
of the VAT. Thus, there are indeed two opposing forces: on one side, the House of
Representatives which wants petroleum dealers to be saddled with the burden of paying VAT
and on the other, the Senate which does not see it proper to make that particular industry
bear said burden. Clearly, such conflicts and differences between the no pass-on provisions in
the Senate and House bills had to be acted upon by the bicameral conference committee as
mandated by the rules of both houses of Congress.
Moreover, the deletion of the no pass-on provision made the present VAT law more in
consonance with the very nature of VAT which, as stated in the Decision promulgated on
September 1, 2005, is a tax on spending or consumption, thus, the burden thereof is
ultimately borne by the end-consumer.
Escudero, et al., then claim that there had been changes introduced in the Rules of the House
of Representatives regarding the conduct of the House panel in a bicameral conference
committee, since the time of Tolentino vs. Secretary of Finance to act as safeguards against
possible abuse of authority by the House members of the bicameral conference committee.
Even assuming that the rule requiring the House panel to report back to the House if there
are substantial differences in the House and Senate bills had indeed been introduced after
Tolentino, the Court stands by its ruling that the issue of whether or not the House panel in
the bicameral conference committee complied with said internal rule cannot be inquired into
by the Court. To reiterate, 'mere failure to conform to parliamentary usage will not invalidate
the action (taken by a deliberative body) when the requisite number of members have
agreed to a particular measure.
Escudero, et. al., also contend that Republic Act No. 9337 grossly violates the constitutional
imperative on exclusive origination of revenue bills under Section 24 of Article VI of the
Constitution when the Senate introduced amendments not connected with VAT.
The Court is not persuaded.
Article VI, Section 24 of the Constitution provides:
Sec. 24 All appropriation, revenue or tariff bills, bills authorizing increase of the public debt,
bills of local application, and private bills shall originate exclusively in the House of
Representatives, but the Senate may propose or concur with amendments.
Section 24 speaks of origination of certain bills from the House of Representatives which has
been interpreted in the Tolentino case as follows:
To begin with, it is not the law ' but the revenue bill ' which is required by
the Constitution to "originate exclusively" in the House of
Representatives. It is important to emphasize this, because a bill
originating in the House may undergo such extensive changes in the
Senate that the result may be a rewriting of the whole At this point, what
is important to note is that, as a result of the Senate action, a distinct bill
may be produced. To insist that a revenue statute ' and not only the bill
which initiated the legislative process culminating in the enactment of
the law ' must substantially be the same as the House bill would be to
deny the Senate's power not only to "concur with amendments" but also
to " propose amendments." It would be to violate the coequality of
legislative power of the two houses of Congress and in fact make the
House superior to the Senate.
Given, then, the power of the Senate to propose amendments, the
Senate can propose its own version even with respect to bills which are
required by the Constitution to originate in the House.
...
Indeed, what the Constitution simply means is that the initiative for filing
revenue, tariff, or tax bills, bills authorizing an increase of the public debt,
private bills and bills of local application must come from the House of
Representatives on the theory that, elected as they are from the districts,
the members of the House can be expected to be more sensitive to the
local needs and problems. On the other hand, the senators, who are
elected at large, are expected to approach the same problems from the
national perspective. Both views are thereby made to bear on the
enactment of such law.
Clearly, after the House bills as approved on third reading are duly transmitted to the Senate,
the Constitution states that the latter can propose or concur with amendments. The Court
finds that the subject provisions found in the Senate bill are within the purview of such
constitutional provision as declared in the Tolentino case.
The intent of the House of Representatives in initiating House Bill Nos. 3555 and 3705 was to
solve the country's serious financial problems. It was stated in the respective explanatory
notes that there is a need for the government to make significant expenditure savings and a
credible package of revenue measures. These measures include improvement of tax
administration and control and leakages in revenues from income taxes and value added tax.
It is also stated that one opportunity that could be beneficial to the overall status of our
economy is to review existing tax rates, evaluating the relevance given our present
conditions. Thus, with these purposes in mind and to accomplish these purposes for which
the house bills were filed, i.e., to raise revenues for the government, the Senate introduced
amendments on income taxes, which as admitted by Senator Ralph Recto, would yield about
P10.5 billion a year.
Moreover, since the objective of these house bills is to raise revenues, the increase in
corporate income taxes would be a great help and would also soften the impact of VAT
measure on the consumers by distributing the burden across all sectors instead of putting it
entirely on the shoulders of the consumers.
As to the other National Internal Revenue Code (NIRC) provisions found in Senate Bill No.
1950, i.e., percentage taxes, franchise taxes, amusement and excise taxes, these provisions
are needed so as to cushion the effects of VAT on consumers. As we said in our decision,
certain goods and services which were subject to percentage tax and excise tax would no
longer be VAT exempt, thus, the consumer would be burdened more as they would be
paying the VAT in addition to these taxes. Thus, there is a need to amend these sections to
soften the impact of VAT. The Court finds no reason to reverse the earlier ruling that the
Senate introduced amendments that are germane to the subject matter and purposes of the
house bills.
Petitioners Escudero, et al., also reiterate that R.A. No. 9337's stand- by authority to the
Executive to increase the VAT rate, especially on account of the recommendatory power
granted to the Secretary of Finance, constitutes undue delegation of legislative power. They
submit that the recommendatory power given to the Secretary of Finance in regard to the
occurrence of either of two events using the Gross Domestic Product (GDP) as a benchmark
necessarily and inherently required extended analysis and evaluation, as well as policy
making.
There is no merit in this contention. The Court reiterates that in making his recommendation
to the President on the existence of either of the two conditions, the Secretary of Finance is
not acting as the alter ego of the President or even her subordinate. He is acting as the agent
of the legislative department, to determine and declare the event upon which its expressed
will is to take effect. The Secretary of Finance becomes the means or tool by which legislative
policy is determined and implemented, considering that he possesses all the facilities to
gather data and information and has a much broader perspective to properly evaluate them.
His function is to gather and collate statistical data and other pertinent information and
verify if any of the two conditions laid out by Congress is present. Congress granted the
Secretary of Finance the authority to ascertain the existence of a fact, namely, whether by
December 31, 2005, the value-added tax collection as a percentage of GDP of the previous
year exceeds two and four-fifth percent (24/5%) or the national government deficit as a
percentage of GDP of the previous year exceeds one and one-half percent (1%). If either of
these two instances has occurred, the Secretary of Finance, by legislative mandate, must
submit such information to the President. Then the 12% VAT rate must be imposed by the
President effective January 1, 2006. Congress does not abdicate its functions or unduly
delegate power when it describes what job must be done, who must do it, and what is the
scope of his authority; in our complex economy that is frequently the only way in which the
legislative process can go forward. There is no undue delegation of legislative power but only
of the discretion as to the execution of a law. This is constitutionally permissible. Congress
did not delegate the power to tax but the mere implementation of the law. The intent and
will to increase the VAT rate to 12% came from Congress and the task of the President is to
simply execute the legislative policy. That Congress chose to use the GDP as a benchmark to
determine economic growth is not within the province of the Court to inquire into, its task
being to interpret the law.
With regard to petitioner Garcia's arguments, the Court also finds the same to be without
merit. As stated in the assailed Decision, the Court recognizes the burden that the consumers
will be bearing with the passage of R.A. No. 9337. But as was also stated by the Court, it
cannot strike down the law as unconstitutional simply because of its yokes. The legislature
has spoken and the only role that the Court plays in the picture is to determine whether the
law was passed with due regard to the mandates of the Constitution. Inasmuch as the Court
finds that there are no constitutional infirmities with its passage, the validity of the law must
therefore be upheld.
Finally, petitioners Association of Pilipinas Shell Dealers, Inc. reiterated their arguments in
the petition, citing this time, the dissertation of Associate Justice Dante O. Tinga in his
Dissenting Opinion.
The glitch in petitioners' arguments is that it presents figures based on an event that is yet to
happen. Their illustration of the possible effects of the 70% limitation, while seemingly
concrete, still remains theoretical. Theories have no place in this case as the Court must only
deal with an existing case or controversy that is appropriate or ripe for judicial
determination, not one that is conjectural or merely anticipatory.[5] The Court will not
intervene absent an actual and substantial controversy admitting of specific relief through a
decree conclusive in nature, as distinguished from an opinion advising what the law would be
upon a hypothetical state of facts.
The impact of the 70% limitation on the creditable input tax will ultimately depend on how
one manages and operates its business. Market forces, strategy and acumen will dictate their
moves. With or without these VAT provisions, an entrepreneur who does not have the ken to
adapt to economic variables will surely perish in the competition. The arguments posed are
within the realm of business, and the solution lies also in business.
Petitioners also reiterate their argument that the input tax is a property or a property right.
In the same breath, the Court reiterates its finding that it is not a property or a property
right, and a VAT-registered person's entitlement to the creditable input tax is a mere
statutory privilege.
Petitioners also contend that even if the right to credit the input VAT is merely a statutory
privilege, it has already evolved into a vested right that the State cannot remove.
company's financial statements, and are not rooted in laws of nature, as are the laws of
physical science, for these are merely developed and continually modified by local and
international regulatory accounting bodies. To state otherwise and recognize such asset
account as a vested right is to limit the taxing power of the State. Unlimited, plenary,
comprehensive and supreme, this power cannot be unduly restricted by mere creations of
the State.

As the Court stated in its Decision, the right to credit the input tax is a mere creation of law.
Prior to the enactment of multi-stage sales taxation, the sales taxes paid at every level of More importantly, the assailed provisions of R.A. No. 9337 already involve legislative policy
distribution are not recoverable from the taxes payable. With the advent of Executive Order and wisdom. So long as there is a public end for which R.A. No. 9337 was passed, the means
No. 273 imposing a 10% multi-stage tax on all sales, it was only then that the crediting of the through which such end shall be accomplished is for the legislature to choose so long as it is
input tax paid on purchase or importation of goods and services by VAT-registered persons within constitutional bounds. As stated in Carmichael vs. Southern Coal & Coke Co.:
against the output tax was established. This continued with the Expanded VAT Law (R.A. No.
7716), and The Tax Reform Act of 1997 (R.A. No. 8424). The right to credit input tax as
If the question were ours to decide, we could not say that the legislature, in adopting the
against the output tax is clearly a privilege created by law, a privilege that also the law can
present scheme rather than another, had no basis for its choice, or was arbitrary or
limit. It should be stressed that a person has no vested right in statutory privileges.[7]
unreasonable in its action. But, as the state is free to distribute the burden of a tax without
regard to the particular purpose for which it is to be used, there is no warrant in the
The concept of vested right is a consequence of the constitutional guaranty of due process Constitution for setting the tax aside because a court thinks that it could have distributed the
that expresses a present fixed interest which in right reason and natural justice is protected burden more wisely. Those are functions reserved for the legislature.[9]
against arbitrary state action; it includes not only legal or equitable title to the enforcement
of a demand but also exemptions from new obligations created after the right has become
WHEREFORE, the Motions for Reconsideration are hereby DENIED WITH FINALITY. The
vested. Rights are considered vested when the right to enjoyment is a present interest,
temporary restraining order issued by the Court is LIFTED.
absolute, unconditional, and perfect or fixed and irrefutable.[8] As adeptly stated by
Associate Justice Minita V. Chico-Nazario in her Concurring Opinion, which the Court adopts,
petitioners' right to the input VAT credits has not yet vested, thus ' SO ORDERED.

It should be remembered that prior to Rep. Act No. 9337, the petroleum
dealers' input VAT credits were inexistent ' they were unrecognized and
disallowed by law. The petroleum dealers had no such property called
input VAT credits. It is only rational, therefore, that they cannot acquire
vested rights to the use of such input VAT credits when they were never
entitled to such credits in the first place, at least, not until Rep. Act No.
9337.

My view, at this point, when Rep. Act No. 9337 has not yet even been
implemented, is that petroleum dealers' right to use their input VAT as
credit against their output VAT unlimitedly has not vested, being a mere
expectancy of a future benefit and being contingent on the continuance
of Section 110 of the National Internal Revenue Code of 1997, prior to its
amendment by Rep. Act No. 9337.

The elucidation of Associate Justice Artemio V. Panganiban is likewise worthy of note, to wit:

Moreover, there is no vested right in generally accepted accounting principles. These refer
to accounting concepts, measurement techniques, and standards of presentation in a