EN BANC

ABAKADA GURO PARTY LIST (Formerly AASJAS) OFFICERS SAMSON S. ALCANTARA and ED VINCENT S. ALBANO, Petitioners,

G.R. No. 168056

Present: DAVIDE, JR., C.J., PUNO, PANGANIBAN, QUISUMBING, YNARES-SANTIAGO, SANDOVAL-GUTIERREZ, CARPIO, AUSTRIA-MARTINEZ, CORONA, CARPIO-MORALES, CALLEJO, SR., AZCUNA, TINGA, CHICO-NAZARIO, and GARCIA, JJ.

- versus -

THE HONORABLE EXECUTIVE SECRETARY EDUARDO ERMITA; HONORABLE SECRETARY OF THE DEPARTMENT OF FINANCE CESAR PURISIMA; and HONORABLE COMMISSIONER OF INTERNAL REVENUE GUILLERMO PARAYNO, JR., Respondents.

x------------------------- x AQUILINO Q. PIMENTEL, JR., LUISA P. EJERCITO-ESTRADA, JINGGOY E. ESTRADA, PANFILO M. LACSON, ALFREDO S. LIM, JAMBY A.S. MADRIGAL, AND SERGIO R. OSMEA III, Petitioners, - versus EXECUTIVE SECRETARY EDUARDO R. ERMITA, CESAR V. PURISIMA, SECRETARY OF FINANCE, GUILLERMO L. PARAYNO, JR., COMMISSIONER OF THE BUREAU OF INTERNAL REVENUE, Respondents. x------------------------- x ASSOCIATION OF PILIPINAS SHELL DEALERS, INC. represented by its President, ROSARIO ANTONIO; PETRON DEALERS ASSOCIATION represented by its President, RUTH E. BARBIBI; ASSOCIATION OF CALTEX DEALERS OF THE PHILIPPINES represented by its President, MERCEDITAS A. GARCIA; ROSARIO ANTONIO doing business under the name and style of ANB NORTH SHELL SERVICE STATION; LOURDES MARTINEZ doing business under the name and style of SHELL GATE N. G.R. No. 168461 G.R. No. 168207

DOMINGO; BETHZAIDA TAN doing business under the name and style of ADVANCE SHELL STATION; REYNALDO P. MONTOYA doing business under the name and style of NEW LAMUAN SHELL SERVICE STATION; EFREN SOTTO doing business under the name and style of RED FIELD SHELL SERVICE STATION; DONICA CORPORATION represented by its President, DESI TOMACRUZ; RUTH E. MARBIBI doing business under the name and style of R&R PETRON STATION; PETER M. UNGSON doing business under the name and style of CLASSIC STAR GASOLINE SERVICE STATION; MARIAN SHEILA A. LEE doing business under the name and style of NTE GASOLINE & SERVICE STATION; JULIAN CESAR P. POSADAS doing business under the name and style of STARCARGA ENTERPRISES; ADORACION MAEBO doing business under the name and style of CMA MOTORISTS CENTER; SUSAN M. ENTRATA doing business under the name and style of LEONAS GASOLINE STATION and SERVICE CENTER; CARMELITA BALDONADO doing business under the name and style of FIRST CHOICE SERVICE CENTER; MERCEDITAS A. GARCIA doing business under the name and style of LORPED SERVICE CENTER; RHEAMAR A. RAMOS doing

business under the name and style of RJRAM PTT GAS STATION; MA. ISABEL VIOLAGO doing business under the name and style of VIOLAGO-PTT SERVICE CENTER; MOTORISTS HEART CORPORATION represented by its Vice-President for Operations, JOSELITO F. FLORDELIZA; MOTORISTS HARVARD CORPORATION represented by its Vice-President for Operations, JOSELITO F. FLORDELIZA; MOTORISTS HERITAGE CORPORATION represented by its Vice-President for Operations, JOSELITO F. FLORDELIZA; PHILIPPINE STANDARD OIL CORPORATION represented by its Vice-President for Operations, JOSELITO F. FLORDELIZA; ROMEO MANUEL doing business under the name and style of ROMMAN GASOLINE STATION; ANTHONY ALBERT CRUZ III doing business under the name and style of TRUE SERVICE STATION, Petitioners, - versus CESAR V. PURISIMA, in his capacity as Secretary of the Department of Finance and GUILLERMO L. PARAYNO, JR., in his capacity as Commissioner of Internal Revenue, Respondents.

x------------------------- x FRANCIS JOSEPH G. ESCUDERO, VINCENT CRISOLOGO, EMMANUEL JOEL J. VILLANUEVA, RODOLFO G. PLAZA, DARLENE ANTONINOCUSTODIO, OSCAR G. MALAPITAN, BENJAMIN C. AGARAO, JR. JUAN EDGARDO M. ANGARA, JUSTIN MARC SB. CHIPECO, FLORENCIO G. NOEL, MUJIV S. HATAMAN, RENATO B. MAGTUBO, JOSEPH A. SANTIAGO, TEOFISTO DL. GUINGONA III, RUY ELIAS C. LOPEZ, RODOLFO Q. AGBAYANI and TEODORO A. CASIO, Petitioners, - versus CESAR V. PURISIMA, in his capacity as Secretary of Finance, GUILLERMO L. PARAYNO, JR., in his capacity as Commissioner of Internal Revenue, and EDUARDO R. ERMITA, in his capacity as Executive Secretary, Respondents. x------------------------- x BATAAN GOVERNOR ENRIQUE T. GARCIA, JR. Petitioner, G.R. No. 168730 G.R. No. 168463

- versus HON. EDUARDO R. ERMITA, in his capacity as the Executive Secretary; HON. MARGARITO TEVES, in his capacity as Secretary of Finance; HON. JOSE MARIO BUNAG, in his capacity as the OIC Commissioner of the Bureau of Internal Revenue; and HON. ALEXANDER AREVALO, in his capacity as the OIC Commissioner of the Bureau of Customs,

Respondents.

Promulgated: September 1, 2005

x----------------------------------------------------------- x

RESOLUTION

AUSTRIA-MARTINEZ, J.:

In view of the Courts Resolution dated July 12, 2005, which required Former Finance Secretary Cesar V. Purisima to show cause why he should not be held in contempt of court for conduct which puts the Court and its Members into dishonor, disrepute and discredit, and degrades the administration of justice, Purisima filed his Compliance thereto, stating that:

It is not true that I claimed or even insinuated that this Honorable Court was pressured or influenced by President Gloria Macapagal Arroyo or Malacaang Palace to issue a Temporary Restraining Order (TRO) in the instant cases. What I stated was simply that President Arroyo had on several occasions discussed with the economic team the possibility of postponing the implementation of Republic Act No. 9337. While I believe that President Arroyo wanted to postpone the implementation of the said law, I never claimed or insinuated that this Honorable Court was influenced or pressured to issue the TRO against its implementation. I do not deny that I was extremely disappointed when this Honorable Court issued the TRO, which was a serious setback to our fiscal consolidation program. And my disappointment grew when I felt that the Government specifically the Executive branch, was not doing enough to have the TRO lifted. At the height of my disappointment, and after hearing of rumors that Executive officials may have been instrumental in procuring the TRO, I did enquire from the other cabinet officials whether Malacaang had a hand in the issuance of the order. I felt that it was my right and duty as Finance Secretary to make such an inquiry, given that before the issuance of the TRO, the President had inquired about the possibility of deferring the implementation of Republic Act No. 9337. But surely, my inquiries whether Malacaang did so, did not amount to, as it was not intended to have the effect of, claiming outright or necessarily insinuating that Malacaang did so, or to hold, in any manner, this Honorable Court in contempt.[1]

Purisima cites the July 11, 2005 edition of the Philippine Star and the July 10, 2005 edition of the Philippine Daily Inquirer, which reported that Purisima did not directly accuse the President of influencing the Court in issuing the TRO, and that he would neither confirm nor deny the reports that the President had a hand in its issuance.

The Court finds Purisimas explanation unsatisfactory.

The Court reproduces excerpts from some of the reports contained in the newspapers with regard to Purisimas statements, to wit:

(1)

July 10, 2005, The Philippine Star, Opinion Section (Its the Economy, Stupid!)

The present political crisis will inevitably boil down to the economy as the real issue that will ultimately bring down the Arroyo Administration. What we are hearing from people close to the Palace is that the TRO issued by the Supreme Court on the EVAT is the real reason why 10 Cabinet members, specially Cesar Purisima and Johnny Santos, resigned. Cesar Purisima further pointed out that her decision-making process has adversely affected the economy. The frustrated economic team felt that GMA had actually influenced the Supreme Court to issue

the TRO to postpone the bad effects of the EVAT on prices purely for her political survival. If indeed that is true, then it just confirms that our present political system has really gone from bad to worse. What I found disgusting is that the plotters, especially Cesar Purisima, sounded like Judas Iscariot. They could just have simply resigned without making a spectacle out of it.

(2)

July 10, 2005, The Daily Tribune (SC Denies Palace Pressed Issuance of E-VAT TRO)

Reports had claimed that the former economic team of Mrs. Arroyo decided to resign over the weekend due in part to the administrations lobbying the SC to issue a restraining order on the e-VAT, apparently to prevent the public from further seething against the government over the continuous spiraling of the prices of basic goods and services. Finance officials led by Purisima previously expressed dismay over the suspension of the e-VAT as they claimed that the TRO would cost the government at least P140 million a day in unrealized revenues. Purisima hinted that Mrs. Arroyo had a hand in the SCs TRO to save her presidency. (3) July 11, 2005, Manila Standard Today (Palace Debunks Purisima Claim on EVAT)

Malacaang yesterday branded as ridiculous the insinuations that President Gloria Macapagal Arroyo had a hand in the Supreme Courts July 1 order suspending the implementation of the Expanded Value-Added Tax Law.

At the same time, Justice Secretary Raul Gonzalez slammed resigned Finance Secretary Cesar Purisima and ex-Trade Secretary Juan Santos for claiming that the President had wanted the implementation of the law delayed so she would not get too much political flak for the tax measure.

(4)

July 11, 2005, The Philippine Star, Business Section (The Last Straw that Broke a Cabinet)

For ex-Finance Secretary Cesar Purisima, the implementation of the EVAT law was a major pillar to strengthen the countrys finances, to get our fiscal house in order. As far as he and the rest of the economic management team he heads are concerned, they are operating under the fiscal equivalent of a red alert. They have scored some early victories, like the increase in revenue collections in recent months, but they know that they are still far from being in the clear.

That was why Purisima felt truly betrayed when he reportedly got a phone call from an official telling him yung hinihingi nyo sa Supreme Court binigay na. He didnt have any pending requests from the Court so he wondered, refusing to accept the reality of his worst fear: The EVAT had been sacrificed by the Palace.

(5)

July 12, 2005, The Philippine Daily Inquirer (No GMA Influence on e-VAT freeze-SC)

Bunye made the reaffirmation after Purisima and former Trade Secretary Juan Santos insinuated that the President might have influenced the Supreme Court to grant the TRO.

At the time the reports came out, Purisima did not controvert the truth or falsity of the statements attributed to him. It was only after the Court issued the show-cause order that Purisima saw it fit to deny having uttered these statements.

By then, it was already impressed upon the publics mind that the issuance of the TRO was the product of machinations on the Court by the executive branch.

If it were true that Purisima felt that the media misconstrued his actions, then he should have immediately rectified it. He should not have waited until the Court required him to explain before he denied having made such statements. And even then, his denials were made as a result of the Courts show-cause order and not by any voluntary act on his part that will show utter regret for having been misquoted. Purisima should know that these press releases placed the Court into dishonor, disrespect, and public contempt, diminished public confidence, promoted distrust in the Court, and assailed the integrity of its Members. The Court already took a beating before Purisima made any disclaimer. The damage has been done, so to speak.

WHEREFORE, Cesar V. Purisima is found GUILTY of indirect contempt of court and FINED in the amount of Twenty Thousand Pesos (P20,000.00) to be paid within ten (10) days from finality of herein Resolution.

SO ORDERED.

MA. ALICIA AUSTRIA-MARTINEZ Associate Justice

WE CONCUR:

HILARIO G. DAVIDE, JR. Chief Justice

REYNATO S. PUNO Associate Justice

ARTEMIO V. PANGANIBAN Associate Justice

LEONARDO A. QUISUMBING Associate Justice

CONSUELO YNARES-SANTIAGO Associate Justice

ANGELINA SANDOVAL-GUTIERREZ Associate Justice

ANTONIO T. CARPIO Associate Justice

RENATO C. CORONA Associate Justice

CONCHITA CARPIO-MORALES Associate Justice

ROMEO J. CALLEJO, SR. Associate Justice Justice

ADOLFO S. AZCUNA Associate

DANTE O. TINGA Associate Justice NAZARIO

MINITA

V.

CHICOAssociate

Justice

CANCIO C. GARCIA Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Resolution were reached in consultation before the case was assigned to the writer of the opinion of the Court.

HILARIO G. DAVIDE, JR. Chief Justice

[1]

Compliance, pp. 2-3.

N BANC Agenda for October 18, 2005

Item No. 45

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 Courts 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. 9337S 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 3) Motion for Reconsideration by petitioners Association of Pilipinas Shell Dealers, 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; do not violate the equal protection clause prescribed under Article III, Section 1 of the 1987 Philippine Constitution; and apply uniformly to all those belonging to the same class and do not violate Article VI, Section 28(1) of the 1987 Philippine Constitution.

B. C.

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 Senates 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[2] 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.[3]

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 laws.[4]

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 countrys 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. 9337s 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 Garcias 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.[6]

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 persons 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.

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 distribution are not recoverable from the taxes payable. With the advent of Executive Order No. 273 imposing a 10% multi-stage tax on all sales, it was only then that the crediting of the input tax paid on purchase or importation of goods and services by VAT-registered persons 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 against the output tax is clearly a privilege created by law, a privilege that also the law can limit. It should be stressed that a person has no vested right in statutory privileges.[7]

The concept of vested right is a consequence of the constitutional guaranty of due process that expresses a present fixed interest which in right reason and natural justice is protected 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 vested. Rights are considered vested when the right to enjoyment is a present interest, 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

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 companys 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.

More importantly, the assailed provisions of R.A. No. 9337 already involve legislative policy and wisdom. So long as there is a public end for which R.A. No. 9337 was passed, the means through which such end shall be accomplished is for the legislature to choose so long as it is within constitutional bounds. As stated in Carmichael vs. Southern Coal & Coke Co.:

If the question were ours to decide, we could not say that the legislature, in adopting the present scheme rather than another, had no basis for its choice, or was arbitrary or 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 Constitution for setting the tax aside because a court thinks that it could have distributed the burden more wisely. Those are functions reserved for the legislature.[9]

WHEREFORE, the Motions for Reconsideration are hereby DENIED WITH FINALITY. The temporary restraining order issued by the Court is LIFTED.

SO ORDERED.

(The Justices who filed their respective concurring and dissenting opinions maintain their respective positions. Justice Dante O. Tinga filed a dissenting opinion to the present Resolution; while Justice Consuelo Ynares- Santiago joins him in his dissenting opinion.)

[1] [2]

Also referred to as the EVAT Law. G.R. Nos. 115455, 115525, 115543, 115544, 115754, 115781, 115852, 115873 and 115931, August 25, 1994, 235 SCRA 630.

[3] Farias vs. The Executive Secretary, G.R. No. 147387, December 10, 2003, 417 SCRA 503, 530. [4] [5] [6] [7] [8] [9] Supra, note no. 2, pp. 661-663. Velarde vs. Social Justice Society, G.R. No. 159357, April 28, 2004, 428 SCRA 283. Information Technology Foundation of the Phils. vs. COMELEC, G.R. No. 159139, June 15, 2005. Lahom vs. Sibulo, G.R. No. 143989, July 14, 2003, 406 SCRA 135. Ibid. 301 U.S. 495.