Feb 27 Tax - Full

EN BANC
G.R. No. 163583 August 20, 2008
BRITISH AMERICAN TOBACCO, petitioner,

vs.
JOSE ISIDRO N. CAMACHO, in his capacity as Secretary of the Department of Finance and GUILLERMO L.
PARAYNO, JR., in his capacity as Commissioner of the Bureau of Internal Revenue, respondents.
Philip Morris Philippines Manufacturing, Inc., fortune tobacco, corp., MIGHTY CORPORATION, and JT
InTERNATIONAL, S.A., respondents-in-intervention.
DECISION
YNARES-SANTIAGO, J.:
This petition for review assails the validity of: (1) Section 145 of the National Internal Revenue Code (NIRC), as
recodified by Republic Act (RA) 8424; (2) RA 9334, which further amended Section 145 of the NIRC on January 1,
2005; (3) Revenue Regulations Nos. 1-97, 9-2003, and 22-2003; and (4) Revenue Memorandum Order No. 6-2003.
Petitioner argues that the said provisions are violative of the equal protection and uniformity clauses of the Constitution.
RA 8240, entitled "An Act Amending Sections 138, 139, 140, and 142 of the NIRC, as Amended and For Other
Purposes," took effect on January 1, 1997. In the same year, Congress passed RA 8424 or The Tax Reform Act of
1997, re-codifying the NIRC. Section 142 was renumbered as Section 145 of the NIRC.
Paragraph (c) of Section 145 provides for four tiers of tax rates based on the net retail price per pack of cigarettes. To
determine the applicable tax rates of existing cigarette brands, a survey of the net retail prices per pack of cigarettes
was conducted as of October 1, 1996, the results of which were embodied in Annex "D" of the NIRC as the duly
registered, existing or active brands of cigarettes.
Paragraph (c) of Section 145, 1 states –
SEC. 145. Cigars and cigarettes. –
xxxx
(c) Cigarettes packed by machine. – There shall be levied, assessed and collected on cigarettes packed by
machine a tax at the rates prescribed below:
(1) If the net retail price (excluding the excise tax and the value-added tax) is above Ten pesos
(P10.00) per pack, the tax shall be Thirteen pesos and forty-four centavos (P13.44) per pack;
(2) If the net retail price (excluding the excise tax and the value-added tax) exceeds Six pesos and fifty
centavos (P6.50) but does not exceed Ten pesos (10.00) per pack, the tax shall be Eight pesos and
ninety-six centavos (P8.96) per pack;
(3) If the net retail price (excluding the excise tax and the value-added tax) is Five pesos (P5.00) but
does not exceed Six pesos and fifty centavos (P6.50) per pack, the tax shall be Five pesos and sixty
centavos (P5.60) per pack;
(4) If the net retail price (excluding the excise tax and the value-added tax) is below Five pesos (P5.00)
per pack, the tax shall be One peso and twelve centavos (P1.12) per pack.
Variants of existing brands of cigarettes which are introduced in the domestic market after the effectivity of this
Act shall be taxed under the highest classification of any variant of that brand.
xxxx
1
New brands shall be classified according to their current net retail price.
For the above purpose, net retail price shall mean the price at which the cigarette is sold on retail in 20 major
supermarkets in Metro Manila (for brands of cigarettes marketed nationally), excluding the amount intended to
cover the applicable excise tax and the value-added tax. For brands which are marketed only outside Metro
Manila, the net retail price shall mean the price at which the cigarette is sold in five major supermarkets in the
region excluding the amount intended to cover the applicable excise tax and the value-added tax.
The classification of each brand of cigarettes based on its average net retail price as of October 1, 1996,
as set forth in Annex "D" of this Act, shall remain in force until revised by Congress. (Emphasis
supplied)
As such, new brands of cigarettes shall be taxed according to their current net retail price while existing or "old"
brands shall be taxed based on their net retail price as of October 1, 1996.
To implement RA 8240, the Bureau of Internal Revenue (BIR) issued Revenue Regulations No. 1-97,2 which classified
the existing brands of cigarettes as those duly registered or active brands prior to January 1, 1997. New brands, or
those registered after January 1, 1997, shall be initially assessed at their suggested retail price until such time that the
appropriate survey to determine their current net retail price is conducted. Pertinent portion of the regulations reads –
SECTION 2. Definition of Terms.
xxxx
3. Duly registered or existing brand of cigarettes – shall include duly registered, existing or active brands of
cigarettes, prior to January 1, 1997.
xxxx
6. New Brands – shall mean brands duly registered after January 1, 1997 and shall include duly registered,
inactive brands of cigarette not sold in commercial quantity before January 1, 1997.
Section 4. Classification and Manner of Taxation of Existing Brands, New Brands and Variant of Existing
Brands.
xxxx
B. New Brand
New brands shall be classified according to their current net retail price. In the meantime that the current net
retail price has not yet been established, the suggested net retail price shall be used to determine the specific
tax classification. Thereafter, a survey shall be conducted in 20 major supermarkets or retail outlets in Metro
Manila (for brands of cigarette marketed nationally) or in five (5) major supermarkets or retail outlets in the
region (for brands which are marketed only outside Metro Manila) at which the cigarette is sold on retail in
reams/cartons, three (3) months after the initial removal of the new brand to determine the actual net retail price
excluding the excise tax and value added tax which shall then be the basis in determining the specific tax
classification. In case the current net retail price is higher than the suggested net retail price, the former shall
prevail. Any difference in specific tax due shall be assessed and collected inclusive of increments as provided
for by the National Internal Revenue Code, as amended.
In June 2001, petitioner British American Tobacco introduced into the market Lucky Strike Filter, Lucky Strike Lights
and Lucky Strike Menthol Lights cigarettes, with a suggested retail price of P9.90 per pack.3 Pursuant to Sec. 145 (c)
quoted above, the Lucky Strike brands were initially assessed the excise tax at P8.96 per pack.
On February 17, 2003, Revenue Regulations No. 9-2003,4 amended Revenue Regulations No. 1-97 by providing,
among others, a periodic review every two years or earlier of the current net retail price of new brands and variants
thereof for the purpose of establishing and updating their tax classification, thus:
2
For the purpose of establishing or updating the tax classification of new brands and variant(s) thereof, their
current net retail price shall be reviewed periodically through the conduct of survey or any other appropriate
activity, as mentioned above, every two (2) years unless earlier ordered by the Commissioner. However,
notwithstanding any increase in the current net retail price, the tax classification of such new brands shall
remain in force until the same is altered or changed through the issuance of an appropriate Revenue
Regulations.
Pursuant thereto, Revenue Memorandum Order No. 6-20035 was issued on March 11, 2003, prescribing the
guidelines and procedures in establishing current net retail prices of new brands of cigarettes and alcohol products.
Subsequently, Revenue Regulations No. 22-20036 was issued on August 8, 2003 to implement the revised tax
classification of certain new brands introduced in the market after January 1, 1997, based on the survey of their current
net retail price. The survey revealed that Lucky Strike Filter, Lucky Strike Lights, and Lucky Strike Menthol Lights, are
sold at the current net retail price of P22.54, P22.61 and P21.23, per pack, respectively.7 Respondent Commissioner of
the Bureau of Internal Revenue thus recommended the applicable tax rate of P13.44 per pack inasmuch as Lucky
Strike’s average net retail price is above P10.00 per pack.
Thus, on September 1, 2003, petitioner filed before the Regional Trial Court (RTC) of Makati, Branch 61, a petition for
injunction with prayer for the issuance of a temporary restraining order (TRO) and/or writ of preliminary injunction,
docketed as Civil Case No. 03-1032. Said petition sought to enjoin the implementation of Section 145 of the NIRC,
Revenue Regulations Nos. 1-97, 9-2003, 22-2003 and Revenue Memorandum Order No. 6-2003 on the ground that
they discriminate against new brands of cigarettes, in violation of the equal protection and uniformity provisions of the
Constitution.
Respondent Commissioner of Internal Revenue filed an Opposition8 to the application for the issuance of a TRO. On
September 4, 2003, the trial court denied the application for TRO, holding that the courts have no authority to restrain
the collection of taxes.9 Meanwhile, respondent Secretary of Finance filed a Motion to Dismiss, 10 contending that the
petition is premature for lack of an actual controversy or urgent necessity to justify judicial intervention.
In an Order dated March 4, 2004, the trial court denied the motion to dismiss and issued a writ of preliminary injunction
to enjoin the implementation of Revenue Regulations Nos. 1-97, 9-2003, 22-2003 and Revenue Memorandum Order
No. 6-2003.11 Respondents filed a Motion for Reconsideration12 and Supplemental Motion for Reconsideration.13 At the
hearing on the said motions, petitioner and respondent Commissioner of Internal Revenue stipulated that the only issue
in this case is the constitutionality of the assailed law, order, and regulations. 14
On May 12, 2004, the trial court rendered a decision 15 upholding the constitutionality of Section 145 of the NIRC,
Revenue Regulations Nos. 1-97, 9-2003, 22-2003 and Revenue Memorandum Order No. 6-2003. The trial court also
lifted the writ of preliminary injunction. The dispositive portion of the decision reads:
WHEREFORE, premises considered, the instant Petition is hereby DISMISSED for lack of merit. The Writ of
Preliminary Injunction previously issued is hereby lifted and dissolved.
SO ORDERED.16
Petitioner brought the instant petition for review directly with this Court on a pure question of law.
While the petition was pending, RA 9334 (An Act Increasing The Excise Tax Rates Imposed on Alcohol And Tobacco
Products, Amending For The Purpose Sections 131, 141, 143, 144, 145 and 288 of the NIRC of 1997, As Amended),
took effect on January 1, 2005. The statute, among others,–
(1) increased the excise tax rates provided in paragraph (c) of Section 145;
(2) mandated that new brands of cigarettes shall initially be classified according to their suggested net retail price, until
such time that their correct tax bracket is finally determined under a specified period and, after which, their classification
shall remain in force until revised by Congress;
3
(3) retained Annex "D" as tax base of those surveyed as of October 1, 1996 including the classification of brands for the
same products which, although not set forth in said Annex "D," were registered on or before January 1, 1997 and were
being commercially produced and marketed on or after October 1, 1996, and which continue to be commercially
produced and marketed after the effectivity of this Act. Said classification shall remain in force until revised by
Congress; and
(4) provided a legislative freeze on brands of cigarettes introduced between the period January 2, 199717 to December
31, 2003, such that said cigarettes shall remain in the classification under which the BIR has determined them to belong
as of December 31, 2003, until revised by Congress.
Pertinent portions, of RA 9334, provides:
SEC. 145. Cigars and Cigarettes. –
xxxx
(C) Cigarettes Packed by Machine. – There shall be levied, assessed and collected on cigarettes packed by
(1) If the net retail price (excluding the excise tax and the value-added tax) is below Five pesos (P5.00) per
pack, the tax shall be:
Effective on January 1, 2005, Two pesos (P2.00) per pack;
Effective on January 1, 2007, Two pesos and twenty-three centavos (P2.23) per pack;
Effective on January 1, 2009, Two pesos and forty-seven centavos (P2.47) per pack; and
Effective on January 1, 2011, Two pesos and seventy-two centavos (P2.72) per pack.
(2) If the net retail price (excluding the excise tax and the value-added tax) is Five pesos (P5.00) but does not
exceed Six pesos and fifty centavos (P6.50) per pack, the tax shall be:
Effective on January 1, 2005, Six pesos and thirty-five centavos (P6.35) per pack;
Effective on January 1, 2007, Six pesos and seventy-four centavos (P6.74) per pack;
Effective on January 1, 2009, Seven pesos and fourteen centavos (P7.14) per pack; and
Effective on January 1, 2011, Seven pesos and fifty-six centavos (P7.56) per pack.
centavos (P6.50) but does not exceed Ten pesos (P10.00) per pack, the tax shall be:
Effective on January 1, 2005, Ten pesos and thirty-five centavos (10.35) per pack;
Effective on January 1, 2007, Ten pesos and eighty-eight centavos (P10.88) per pack;
Effective on January 1, 2009, Eleven pesos and forty-three centavos (P11.43) per pack; and
Effective on January 1, 2011, Twelve pesos (P12.00) per pack.
(4) If the net retail price (excluding the excise tax and the value-added tax) is above Ten pesos (P10.00) per
Effective on January 1, 2005, Twenty-five pesos (P25.00) per pack;

4
Effective on January 1, 2007, Twenty-six pesos and six centavos (P26.06) per pack;
Effective on January 1, 2009, Twenty-seven pesos and sixteen centavos (P27.16) per pack; and
Effective on January 1, 2011, Twenty-eight pesos and thirty centavos (P28.30) per pack.
xxxx
New brands, as defined in the immediately following paragraph, shall initially be classified according to their
suggested net retail price.
New brands shall mean a brand registered after the date of effectivity of R.A. No. 8240.
Suggested net retail price shall mean the net retail price at which new brands, as defined above, of locally
manufactured or imported cigarettes are intended by the manufacturer or importer to be sold on retail in major
supermarkets or retail outlets in Metro Manila for those marketed nationwide, and in other regions, for those
with regional markets. At the end of three (3) months from the product launch, the Bureau of Internal Revenue
shall validate the suggested net retail price of the new brand against the net retail price as defined herein and
determine the correct tax bracket under which a particular new brand of cigarette, as defined above, shall be
classified. After the end of eighteen (18) months from such validation, the Bureau of Internal Revenue shall
revalidate the initially validated net retail price against the net retail price as of the time of revalidation in order
to finally determine the correct tax bracket under which a particular new brand of cigarettes shall be
classified; Provided however, That brands of cigarettes introduced in the domestic market between
January 1, 1997 [should be January 2, 1997] and December 31, 2003 shall remain in the classification
under which the Bureau of Internal Revenue has determined them to belong as of December 31, 2003.
Such classification of new brands and brands introduced between January 1, 1997 and December 31,
2003 shall not be revised except by an act of Congress.
Net retail price, as determined by the Bureau of Internal Revenue through a price survey to be conducted by
the Bureau of Internal Revenue itself, or the National Statistics Office when deputized for the purpose by the
Bureau of Internal Revenue, shall mean the price at which the cigarette is sold in retail in at least twenty (20)
major supermarkets in Metro Manila (for brands of cigarettes marketed nationally), excluding the amount
intended to cover the applicable excise tax and the value-added tax. For brands which are marketed only
outside Metro Manila, the "net retail price" shall mean the price at which the cigarette is sold in at least five (5)
major supermarkets in the region excluding the amount intended to cover the applicable excise tax and value-
added tax.
The classification of each brand of cigarettes based on its average net retail price as of October 1, 1996,
as set forth in Annex "D", including the classification of brands for the same products which, although
not set forth in said Annex "D", were registered and were being commercially produced and marketed
on or after October 1, 1996, and which continue to be commercially produced and marketed after the
effectivity of this Act, shall remain in force until revised by Congress. (Emphasis added)
Under RA 9334, the excise tax due on petitioner’s products was increased to P25.00 per pack. In the implementation
thereof, respondent Commissioner assessed petitioner’s importation of 911,000 packs of Lucky Strike cigarettes at the
increased tax rate of P25.00 per pack, rendering it liable for taxes in the total sum of P22,775,000.00. 18
Hence, petitioner filed a Motion to Admit Attached Supplement19 and a Supplement20 to the petition for review, assailing
the constitutionality of RA 9334 insofar as it retained Annex "D" and praying for a downward classification of Lucky
Strike products at the bracket taxable at P8.96 per pack. Petitioner contended that the continued use of Annex "D" as
the tax base of existing brands of cigarettes gives undue protection to said brands which are still taxed based on their
price as of October 1996 notwithstanding that they are now sold at the same or even at a higher price than new brands
like Lucky Strike. Thus, old brands of cigarettes such as Marlboro and Philip Morris which, like Lucky Strike, are sold at
or more than P22.00 per pack, are taxed at the rate of P10.88 per pack, while Lucky Strike products are taxed at
P26.06 per pack.
In its Comment to the supplemental petition, respondents, through the Office of the Solicitor General (OSG), argued
that the passage of RA 9334, specifically the provision imposing a legislative freeze on the classification of cigarettes
5
introduced into the market between January 2, 1997 and December 31, 2003, rendered the instant petition academic.
The OSG claims that the provision in Section 145, as amended by RA 9334, prohibiting the reclassification of cigarettes
introduced during said period, "cured’ the perceived defect of Section 145 considering that, like the cigarettes under
Annex "D," petitioner’s brands and other brands introduced between January 2, 1997 and December 31, 2003, shall
remain in the classification under which the BIR has placed them and only Congress has the power to reclassify them.
On March 20, 2006, Philip Morris Philippines Manufacturing Incorporated filed a Motion for Leave to Intervene with
attached Comment-in-Intervention.21 This was followed by the Motions for Leave to Intervene of Fortune Tobacco
Corporation,22 Mighty Corporation, 23 and JT International, S.A., with their respective Comments-in-Intervention. The
Intervenors claim that they are parties-in-interest who stand to be affected by the ruling of the Court on the
constitutionality of Section 145 of the NIRC and its Annex "D" because they are manufacturers of cigarette brands
which are included in the said Annex. Hence, their intervention is proper since the protection of their interest cannot be
addressed in a separate proceeding.
According to the Intervenors, no inequality exists because cigarettes classified by the BIR based on their net retail price
as of December 31, 2003 now enjoy the same status quo provision that prevents the BIR from reclassifying cigarettes
included in Annex "D." It added that the Court has no power to pass upon the wisdom of the legislature in retaining
Annex "D" in RA 9334; and that the nullification of said Annex would bring about tremendous loss of revenue to the
government, chaos in the collection of taxes, illicit trade of cigarettes, and cause decline in cigarette demand to the
detriment of the farmers who depend on the tobacco industry.
Intervenor Fortune Tobacco further contends that petitioner is estopped from questioning the constitutionality of Section
145 and its implementing rules and regulations because it entered into the cigarette industry fully aware of the existing
tax system and its consequences. Petitioner imported cigarettes into the country knowing that its suggested retail price,
which will be the initial basis of its tax classification, will be confirmed and validated through a survey by the BIR to
determine the correct tax that would be levied on its cigarettes.
Moreover, Fortune Tobacco claims that the challenge to the validity of the BIR issuances should have been brought by
petitioner before the Court of Tax Appeals (CTA) and not the RTC because it is the CTA which has exclusive appellate
jurisdiction over decisions of the BIR in tax disputes.
On August 7, 2006, the OSG manifested that it interposes no objection to the motions for intervention. 24 Therefore,
considering the substantial interest of the intervenors, and in the higher interest of justice, the Court admits their
intervention.
Before going into the substantive issues of this case, we must first address the matter of jurisdiction, in light of Fortune
Tobacco’s contention that petitioner should have brought its petition before the Court of Tax Appeals rather than the
regional trial court.
The jurisdiction of the Court of Tax Appeals is defined in Republic Act No. 1125, as amended by Republic Act No. 9282.
Section 7 thereof states, in pertinent part:
Sec. 7. Jurisdiction. — The CTA shall exercise:
a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the
National Internal Revenue or other laws administered by the Bureau of Internal Revenue;
2. Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties in relations thereto, or other matters arising under the
National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the
National Internal Revenue Code provides a specific period of action, in which case the inaction shall be
deemed a denial; xxx.25
While the above statute confers on the CTA jurisdiction to resolve tax disputes in general, this does not include cases
where the constitutionality of a law or rule is challenged. Where what is assailed is the validity or constitutionality of a
6
law, or a rule or regulation issued by the administrative agency in the performance of its quasi-legislative function, the
regular courts have jurisdiction to pass upon the same. The determination of whether a specific rule or set of rules
issued by an administrative agency contravenes the law or the constitution is within the jurisdiction of the regular courts.
Indeed, the Constitution vests the power of judicial review or the power to declare a law, treaty, international or
executive agreement, presidential decree, order, instruction, ordinance, or regulation in the courts, including the
regional trial courts. This is within the scope of judicial power, which includes the authority of the courts to determine in
an appropriate action the validity of the acts of the political departments. Judicial power includes the duty of the courts
of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any
branch or instrumentality of the Government.26
In Drilon v. Lim,27 it was held:
We stress at the outset that the lower court had jurisdiction to consider the constitutionality of Section 187, this
authority being embraced in the general definition of the judicial power to determine what are the valid and
binding laws by the criterion of their conformity to the fundamental law. Specifically, B.P. 129 vests in the
regional trial courts jurisdiction over all civil cases in which the subject of the litigation is incapable of pecuniary
estimation, even as the accused in a criminal action has the right to question in his defense the constitutionality
of a law he is charged with violating and of the proceedings taken against him, particularly as they contravene
the Bill of Rights. Moreover, Article X, Section 5(2), of the Constitution vests in the Supreme Court appellate
jurisdiction over final judgments and orders of lower courts in all cases in which the constitutionality or validity of
any treaty, international or executive agreement, law, presidential decree, proclamation, order, instruction,
ordinance, or regulation is in question.
The petition for injunction filed by petitioner before the RTC is a direct attack on the constitutionality of Section 145(C) of
the NIRC, as amended, and the validity of its implementing rules and regulations. In fact, the RTC limited the resolution
of the subject case to the issue of the constitutionality of the assailed provisions. The determination of whether the
assailed law and its implementing rules and regulations contravene the Constitution is within the jurisdiction of regular
courts. The Constitution vests the power of judicial review or the power to declare a law, treaty, international or
executive agreement, presidential decree, order, instruction, ordinance, or regulation in the courts, including the
regional trial courts.28 Petitioner, therefore, properly filed the subject case before the RTC.
We come now to the issue of whether petitioner is estopped from assailing the authority of the Commissioner of Internal
Revenue. Fortune Tobacco raises this objection by pointing out that when petitioner requested the Commissioner for a
ruling that its Lucky Strike Soft Pack cigarettes was a "new brand" rather than a variant of an existing brand, and thus
subject to a lower specific tax rate, petitioner executed an undertaking to comply with the procedures under existing
regulations for the assessment of deficiency internal revenue taxes.
Fortune Tobacco argues that petitioner, after invoking the authority of the Commissioner of Internal Revenue, cannot
later on turn around when the ruling is adverse to it.
Estoppel, an equitable principle rooted in natural justice, prevents persons from going back on their own acts and
representations, to the prejudice of others who have relied on them. 29 The principle is codified in Article 1431 of the Civil
Code, which provides:
Through estoppel, an admission or representation is rendered conclusive upon the person making it and cannot be
denied or disproved as against the person relying thereon.
Estoppel can also be found in Rule 131, Section 2 (a) of the Rules of Court, viz:
Sec. 2. Conclusive presumptions. — The following are instances of conclusive presumptions:
(a) Whenever a party has by his own declaration, act or omission, intentionally and deliberately led another to
believe a particular thing true, and to act upon such belief, he cannot, in any litigation arising out of such
declaration, act or omission be permitted to falsify it.
The elements of estoppel are: first, the actor who usually must have knowledge, notice or suspicion of the true facts,
communicates something to another in a misleading way, either by words, conduct or silence; second, the other in fact
7
relies, and relies reasonably or justifiably, upon that communication; third, the other would be harmed materially if the
actor is later permitted to assert any claim inconsistent with his earlier conduct; and fourth, the actor knows, expects or
foresees that the other would act upon the information given or that a reasonable person in the actor's position would
expect or foresee such action.30
In the early case of Kalalo v. Luz,31 the elements of estoppel, as related to the party to be estopped, are: (1) conduct
amounting to false representation or concealment of material facts; or at least calculated to convey the impression that
the facts are other than, and inconsistent with, those which the party subsequently attempts to assert; (2) intent, or at
least expectation that this conduct shall be acted upon by, or at least influence, the other party; and (3) knowledge,
actual or constructive, of the real facts.
We find that petitioner was not guilty of estoppel. When it made the undertaking to comply with all issuances of the BIR,
which at that time it considered as valid, petitioner did not commit any false misrepresentation or misleading act.
Indeed, petitioner cannot be faulted for initially undertaking to comply with, and subjecting itself to the operation of
Section 145(C), and only later on filing the subject case praying for the declaration of its unconstitutionality when the
circumstances change and the law results in what it perceives to be unlawful discrimination. The mere fact that a law
has been relied upon in the past and all that time has not been attacked as unconstitutional is not a ground for
considering petitioner estopped from assailing its validity. For courts will pass upon a constitutional question only when
presented before it in bona fide cases for determination, and the fact that the question has not been raised before is not
a valid reason for refusing to allow it to be raised later.32
Now to the substantive issues.
To place this case in its proper context, we deem it necessary to first discuss how the assailed law operates in order to
identify, with precision, the specific provisions which, according to petitioner, have created a grossly discriminatory
classification scheme between old and new brands. The pertinent portions of RA 8240, as amended by RA 9334, are
reproduced below for ready reference:
SEC. 145. Cigars and Cigarettes. –
xxxx
(C) Cigarettes Packed by Machine. – There shall be levied, assessed and collected on cigarettes packed by
Effective on January 1, 2005, Two pesos (P2.00) per pack;
Effective on January 1, 2007, Two pesos and twenty-three centavos (P2.23) per pack;
Effective on January 1, 2009, Two pesos and forty-seven centavos (P2.47) per pack; and
Effective on January 1, 2011, Two pesos and seventy-two centavos (P2.72) per pack.
(2) If the net retail price (excluding the excise tax and the value-added tax) is Five pesos (P5.00) but does not
exceed Six pesos and fifty centavos (P6.50) per pack, the tax shall be:
Effective on January 1, 2005, Six pesos and thirty-five centavos (P6.35) per pack;
Effective on January 1, 2007, Six pesos and seventy-four centavos (P6.74) per pack;
Effective on January 1, 2009, Seven pesos and fourteen centavos (P7.14) per pack; and
Effective on January 1, 2011, Seven pesos and fifty-six centavos (P7.56) per pack.
8
centavos (P6.50) but does not exceed Ten pesos (P10.00) per pack, the tax shall be:
Effective on January 1, 2005, Ten pesos and thirty-five centavos (10.35) per pack;
Effective on January 1, 2007, Ten pesos and eighty-eight centavos (P10.88) per pack;
Effective on January 1, 2009, Eleven pesos and forty-three centavos (P11.43) per pack; and
Effective on January 1, 2011, Twelve pesos (P12.00) per pack.
Effective on January 1, 2005, Twenty-five pesos (P25.00) per pack;
Effective on January 1, 2007, Twenty-six pesos and six centavos (P26.06) per pack;
Effective on January 1, 2009, Twenty-seven pesos and sixteen centavos (P27.16) per pack; and
Effective on January 1, 2011, Twenty-eight pesos and thirty centavos (P28.30) per pack.
xxxx
New brands shall mean a brand registered after the date of effectivity of R.A. No. 8240.
manufactured or imported cigarettes are intended by the manufacturer or importer to be sold on retail in major
with regional markets. At the end of three (3) months from the product launch, the Bureau of Internal Revenue
shall validate the suggested net retail price of the new brand against the net retail price as defined herein and
determine the correct tax bracket under which a particular new brand of cigarette, as defined above, shall be
classified. After the end of eighteen (18) months from such validation, the Bureau of Internal Revenue shall
revalidate the initially validated net retail price against the net retail price as of the time of revalidation in order
to finally determine the correct tax bracket under which a particular new brand of cigarettes shall be classified;
Provided however, That brands of cigarettes introduced in the domestic market between January 1, 1997
[should be January 2, 1997] and December 31, 2003 shall remain in the classification under which the Bureau
of Internal Revenue has determined them to belong as of December 31, 2003. Such classification of new
brands and brands introduced between January 1, 1997 and December 31, 2003 shall not be revised except by
an act of Congress.
Net retail price, as determined by the Bureau of Internal Revenue through a price survey to be conducted by
the Bureau of Internal Revenue itself, or the National Statistics Office when deputized for the purpose by the
Bureau of Internal Revenue, shall mean the price at which the cigarette is sold in retail in at least twenty (20)
outside Metro Manila, the "net retail price" shall mean the price at which the cigarette is sold in at least five (5)
major supermarkets in the region excluding the amount intended to cover the applicable excise tax and value-
added tax.
The classification of each brand of cigarettes based on its average net retail price as of October 1, 1996, as set
forth in Annex "D", including the classification of brands for the same products which, although not set forth in
said Annex "D", were registered and were being commercially produced and marketed on or after October 1,
9
1996, and which continue to be commercially produced and marketed after the effectivity of this Act, shall
remain in force until revised by Congress.
As can be seen, the law creates a four-tiered system which we may refer to as the low-priced,33 medium-priced,34 high-
priced,35 and premium-priced36 tax brackets. When a brand is introduced in the market, the current net retail price is
determined through the aforequoted specified procedure. The current net retail price is then used to classify under
which tax bracket the brand belongs in order to finally determine the corresponding excise tax rate on a per pack basis.
The assailed feature of this law pertains to the mechanism where, after a brand is classified based on its current net
retail price, the classification is frozen and only Congress can thereafter reclassify the same. From a practical point of
view, Annex "D" is merely a by-product of the whole mechanism and philosophy of the assailed law. That is, the brands
under Annex "D" were also classified based on their current net retail price, the only difference being that they were the
first ones so classified since they were the only brands surveyed as of October 1, 1996, or prior to the effectivity of RA
8240 on January 1, 1997.37
Due to this legislative classification scheme, it is possible that over time the net retail price of a previously classified
brand, whether it be a brand under Annex "D" or a new brand classified after the effectivity of RA 8240 on January 1,
1997, would increase (due to inflation, increase of production costs, manufacturer’s decision to increase its prices,
etc.) to a point that its net retail price pierces the tax bracket to which it was previously classified.38 Consequently, even
if its present day net retail price would make it fall under a higher tax bracket, the previously classified brand would
continue to be subject to the excise tax rate under the lower tax bracket by virtue of the legislative classification freeze.
Petitioner claims that this is what happened in 2004 to the Marlboro and Philip Morris brands, which were permanently
classified under Annex "D." As of October 1, 1996, Marlboro had net retail prices ranging from P6.78 to P6.84 while
Philip Morris had net retail prices ranging from P7.39 to P7.48. Thus, pursuant to RA 8240, 39 Marlboro and Philip Morris
were classified under the high-priced tax bracket and subjected to an excise tax rate of P8.96 per pack. Petitioner then
presented evidence showing that after the lapse of about seven years or sometime in 2004, Marlboro’s and Philip
Morris’ net retail prices per pack both increased to about P15.59. 40 This meant that they would fall under the premium-
priced tax bracket, with a higher excise tax rate of P13.44 per pack, 41 had they been classified based on their 2004 net
retail prices. However, due to the legislative classification freeze, they continued to be classified under the high-priced
tax bracket with a lower excise tax rate. Petitioner thereafter deplores the fact that its Lucky Strike Filter, Lucky Strike
Lights, and Lucky Strike Menthol Lights cigarettes, introduced in the market sometime in 2001 and validated by a BIR
survey in 2003, were found to have net retail prices of P11.53, P11.59 and P10.34, 42 respectively, which are lower than
those of Marlboro and Philip Morris. However, since petitioner’s cigarettes were newly introduced brands in the market,
they were taxed based on their current net retail prices and, thus, fall under the premium-priced tax bracket with a
higher excise tax rate of P13.44 per pack. This unequal tax treatment between Marlboro and Philip Morris, on the one
hand, and Lucky Strike, on the other, is the crux of petitioner’s contention that the legislative classification freeze
violates the equal protection and uniformity of taxation clauses of the Constitution.
It is apparent that, contrary to its assertions, petitioner is not only questioning the undue favoritism accorded to brands
under Annex "D," but the entire mechanism and philosophy of the law which freezes the tax classification of a cigarette
brand based on its current net retail price. Stated differently, the alleged discrimination arising from the legislative
classification freeze between the brands under Annex "D" and petitioner’s newly introduced brands arose only
because the former were classified based on their "current" net retail price as of October 1, 1996 and petitioner’s newly
introduced brands were classified based on their "current" net retail price as of 2003. Without this corresponding
freezing of the classification of petitioner’s newly introduced brands based on their current net retail price, it would be
impossible to establish that a disparate tax treatment occurred between the Annex "D" brands and petitioner’s newly
introduced brands.
This clarification is significant because, under these circumstances, a declaration of unconstitutionality would
necessarily entail nullifying the whole mechanism of the law and not just Annex "D." Consequently, if the assailed law is
declared unconstitutional on equal protection grounds, the entire method by which a brand of cigarette is classified
would have to be invalidated. As a result, no method to classify brands under Annex "D" as well as new brands would
be left behind and the whole Section 145 of the NIRC, as amended, would become inoperative. 43
To simplify the succeeding discussions, we shall refer to the whole mechanism and philosophy of the assailed law
which freezes the tax classification of a cigarette brand based on its current net retail price and which, thus, produced
different classes of brands based on the time of their introduction in the market (starting with the brands in Annex "D"
since they were the first brands so classified as of October 1, 1996) as the classification freeze provision.44
10
As thus formulated, the central issue is whether or not the classification freeze provision violates the equal protection
and uniformity of taxation clauses of the Constitution.
In Sison, Jr. v. Ancheta,45 this Court, through Chief Justice Fernando, explained the applicable standard in deciding
equal protection and uniformity of taxation challenges:
Now for equal protection. The applicable standard to avoid the charge that there is a denial of this constitutional
mandate whether the assailed act is in the exercise of the police power or the power of eminent domain is to
demonstrate "that the governmental act assailed, far from being inspired by the attainment of the common weal
was prompted by the spirit of hostility, or at the very least, discrimination that finds no support in reason. It
suffices then that the laws operate equally and uniformly on all persons under similar circumstances or that all
persons must be treated in the same manner, the conditions not being different, both in the privileges conferred
and the liabilities imposed. Favoritism and undue preference cannot be allowed. For the principle is that equal
protection and security shall be given to every person under circumstances, which if not identical are
analogous. If law be looks upon in terms of burden or charges, those that fall within a class should be treated in
the same fashion, whatever restrictions cast on some in the group equally binding on the rest." That same
formulation applies as well to taxation measures. The equal protection clause is, of course, inspired by the
noble concept of approximating the ideal of the laws's benefits being available to all and the affairs of men
being governed by that serene and impartial uniformity, which is of the very essence of the idea of law. There
is, however, wisdom, as well as realism, in these words of Justice Frankfurter: "The equality at which the 'equal
protection' clause aims is not a disembodied equality. The Fourteenth Amendment enjoins 'the equal protection
of the laws,' and laws are not abstract propositions. They do not relate to abstract units A, B and C, but are
expressions of policy arising out of specific difficulties, addressed to the attainment of specific ends by the use
of specific remedies. The Constitution does not require things which are different in fact or opinion to be treated
in law as though they were the same." Hence the constant reiteration of the view that classification if
rational in character is allowable. As a matter of fact, in a leading case of Lutz v. Araneta, this Court, through
Justice J.B.L. Reyes, went so far as to hold "at any rate, it is inherent in the power to tax that a state be free to
select the subjects of taxation, and it has been repeatedly held that 'inequalities which result from a singling out
of one particular class for taxation, or exemption infringe no constitutional limitation.'"
Petitioner likewise invoked the kindred concept of uniformity. According to the Constitution: "The rule of taxation
shall be uniform and equitable." This requirement is met according to Justice Laurel in Philippine Trust
Company v. Yatco, decided in 1940, when the tax "operates with the same force and effect in every place
where the subject may be found." He likewise added: "The rule of uniformity does not call for perfect uniformity
or perfect equality, because this is hardly attainable." The problem of classification did not present itself in that
case. It did not arise until nine years later, when the Supreme Court held: "Equality and uniformity in taxation
means that all taxable articles or kinds of property of the same class shall be taxed at the same rate. The
taxing power has the authority to make reasonable and natural classifications for purposes of taxation,
. . . As clarified by Justice Tuason, where "the differentiation" complained of "conforms to the practical dictates
of justice and equity" it "is not discriminatory within the meaning of this clause and is therefore uniform." There
is quite a similarity then to the standard of equal protection for all that is required is that the tax "applies equally
to all persons, firms and corporations placed in similar situation."46 (Emphasis supplied)
In consonance thereto, we have held that "in our jurisdiction, the standard and analysis of equal protection challenges
in the main have followed the ‘rational basis’ test, coupled with a deferential attitude to legislative classifications and a
reluctance to invalidate a law unless there is a showing of a clear and unequivocal breach of the Constitution." 47 Within
the present context of tax legislation on sin products which neither contains a suspect classification nor impinges on a
fundamental right, the rational-basis test thus finds application. Under this test, a legislative classification, to survive an
equal protection challenge, must be shown to rationally further a legitimate state interest. 48 The classifications must be
reasonable and rest upon some ground of difference having a fair and substantial relation to the object of the
legislation.49 Since every law has in its favor the presumption of constitutionality, the burden of proof is on the one
attacking the constitutionality of the law to prove beyond reasonable doubt that the legislative classification is without
rational basis.50 The presumption of constitutionality can be overcome only by the most explicit demonstration that a
classification is a hostile and oppressive discrimination against particular persons and classes, and that there is no
conceivable basis which might support it.51
A legislative classification that is reasonable does not offend the constitutional guaranty of the equal protection of the
laws. The classification is considered valid and reasonable provided that: (1) it rests on substantial distinctions; (2) it is
11
germane to the purpose of the law; (3) it applies, all things being equal, to both present and future conditions; and (4) it
applies equally to all those belonging to the same class.52
The first, third and fourth requisites are satisfied. The classification freeze provision was inserted in the law for reasons
of practicality and expediency. That is, since a new brand was not yet in existence at the time of the passage of RA
8240, then Congress needed a uniform mechanism to fix the tax bracket of a new brand. The current net retail price,
similar to what was used to classify the brands under Annex "D" as of October 1, 1996, was thus the logical and
practical choice. Further, with the amendments introduced by RA 9334, the freezing of the tax classifications now
expressly applies not just to Annex "D" brands but to newer brands introduced after the effectivity of RA 8240 on
January 1, 1997 and any new brand that will be introduced in the future. 53 (However, as will be discussed later, the
intent to apply the freezing mechanism to newer brands was already in place even prior to the amendments introduced
by RA 9334 to RA 8240.) This does not explain, however, why the classification is "frozen" after its determination based
on current net retail price and how this is germane to the purpose of the assailed law. An examination of the legislative
history of RA 8240 provides interesting answers to this question.
RA 8240 was the first of three parts in the Comprehensive Tax Reform Package then being pushed by the Ramos
Administration. It was enacted with the following objectives stated in the Sponsorship Speech of Senator Juan Ponce
Enrile (Senator Enrile), viz:
First, to evolve a tax structure which will promote fair competition among the players in the industries
concerned and generate buoyant and stable revenue for the government.
Second, to ensure that the tax burden is equitably distributed not only amongst the industries affected but
equally amongst the various levels of our society that are involved in various markets that are going to be
affected by the excise tax on distilled spirits, fermented liquor, cigars and cigarettes.
In the case of firms engaged in the industries producing the products that we are about to tax, this means
relating the tax burden to their market share, not only in terms of quantity, Mr. President, but in terms of value.
In case of consumers, this will mean evolving a multi-tiered rate structure so that low-priced products are
subject to lower tax rates and higher-priced products are subject to higher tax rates.
Third, to simplify the tax administration and compliance with the tax laws that are about to unfold in order to
minimize losses arising from inefficiencies and tax avoidance scheme, if not outright tax evasion.54
In the initial stages of the crafting of the assailed law, the Department of Finance (DOF) recommended to Congress a
shift from the then existing ad valorem taxation system to a specific taxation system with respect to sin products,
including cigarettes. The DOF noted that the ad valorem taxation system was a source of massive tax leakages
because the taxpayer was able to evade paying the correct amount of taxes through the undervaluation of the price of
cigarettes using various marketing arms and dummy corporations. In order to address this problem, the DOF proposed
a specific taxation system where the cigarettes would be taxed based on volume or on a per pack basis which was
believed to be less susceptible to price manipulation. The reason was that the BIR would only need to monitor the sales
volume of cigarettes, from which it could easily compute the corresponding tax liability of cigarette manufacturers. Thus,
the DOF suggested the use of a three-tiered system which operates in substantially the same manner as the four-tiered
system under RA 8240 as earlier discussed. The proposal of the DOF was embodied in House Bill (H.B.) No. 6060, the
pertinent portions of which states—
SEC. 142. Cigars and cigarettes.—
(c) Cigarettes packed by machine.— There shall be levied, assessed and collected on cigarettes packed by
(1) If the manufacturer’s or importer’s wholesale price (net of excise tax and value-added tax) per pack exceeds
four pesos and twenty centavos (P4.20), the tax shall be seven pesos and fifty centavos (P7.50);
(2) If the manufacturer’s or importer’s wholesale price (net of excise tax and value-added tax) per pack exceeds
three pesos and ninety centavos (P3.90) but does not exceed four pesos and twenty centavos (P4.20), the tax
12
shall be five pesos and fifty centavos (P5.50): provided, that after two (2) years from the effectivity of this Act,
cigarettes otherwise subject to tax under this subparagraph shall be taxed under subparagraph (1) above.
(3) If the manufacturer’s or importer’s wholesale price (net of excise tax and value-added tax) per pack does not
exceeds three pesos and ninety centavos (P3.90), the tax rate shall be one peso (P1.00).
Variants of existing brands and new brands of cigarettes packed by machine to be introduced in the domestic
market after the effectivity of this Act, shall be taxed under paragraph (c)(1) hereof.
The rates of specific tax on cigars and cigarettes under paragraphs (a), (b), and (c) hereof, including the
price levels for purposes of classifying cigarettes packed by machine, shall be revised upward two (2)
years after the effectivity of this Act and every two years thereafter by the Commissioner of Internal
Revenue, subject to the approval of the Secretary of Finance, taking into account the movement of the
consumer price index for cigars and cigarettes as established by the National Statistics
Office: provided, that the increase in taxes and/or price levels shall be equal to the present change in
such consumer price index for the two-year period: provided, further, that the President, upon the
recommendation of the Secretary of Finance, may suspend or defer the adjustment in price levels and
tax rates when the interest of the national economy and general welfare so require, such as the need to
obviate unemployment, and economic and social dislocation: provided, finally, that the revised price
levels and tax rates authorized herein shall in all cases be rounded off to the nearest centavo and shall
be in force and effect on the date of publication thereof in a newspaper of general circulation. x x
x (Emphasis supplied)
What is of particular interest with respect to the proposal of the DOF is that it contained a provision for the periodic
adjustment of the excise tax rates and tax brackets, and a corresponding periodic resurvey and reclassification of
cigarette brands based on the increase in the consumer price index as determined by the Commissioner of Internal
Revenue subject to certain guidelines. The evident intent was to prevent inflation from eroding the value of the excise
taxes that would be collected from cigarettes over time by adjusting the tax rate and tax brackets based on the increase
in the consumer price index. Further, under this proposal, old brands as well as new brands introduced thereafter would
be subjected to a resurvey and reclassification based on their respective values at the end of every two years in order
to align them with the adjustment of the excise tax rate and tax brackets due to the movement in the consumer price
index.55
Of course, we now know that the DOF proposal, insofar as the periodic adjustment of tax rates and tax brackets, and
the periodic resurvey and reclassification of cigarette brands are concerned, did not gain approval from Congress. The
House and Senate pushed through with their own versions of the excise tax system on beers and cigarettes both
denominated as H.B. No. 7198. For convenience, we shall refer to the bill deliberated upon by the House as the House
Version and that of the Senate as the Senate Version.
The House’s Committee on Ways and Means, then chaired by Congressman Exequiel B. Javier (Congressman Javier),
roundly rejected the DOF proposal. Instead, in its Committee Report submitted to the plenary, it proposed a different
excise tax system which used a specific tax as a basic tax with an ad valorem comparator. Further, it deleted the
proposal to have a periodic adjustment of tax rates and the tax brackets as well as periodic resurvey and
reclassification of cigarette brands, to wit:
The rigidity of the specific tax system calls for the need for frequent congressional intervention to adjust the tax
rates to inflation and to keep pace with the expanding needs of government for more revenues. The DOF
admits this flaw inherent in the tax system it proposed. Hence, to obviate the need for remedial legislation, the
DOF is asking Congress to grant to the Commissioner the power to revise, one, the specific tax rates: and two,
the price levels of beer and cigarettes. What the DOF is asking, Mr. Speaker, is for Congress to delegate to the
Commissioner of Internal Revenue the power to fix the tax rates and classify the subjects of taxation based on
their price levels for purposes of fixing the tax rates. While we sympathize with the predicament of the DOF, it is
not for Congress to abdicate such power. The power sought to be delegated to be exercised by the
Commissioner of Internal Revenue is a legislative power vested by the Constitution in Congress pursuant to
Section 1, Article VI of the Constitution. Where the power is vested, there it must remain— in Congress, a body
of representatives elected by the people. Congress may not delegate such power, much less abdicate it.
xxxx
13
Moreover, the grant of such power, if at all constitutionally permissible, to the Commissioner of Internal
Revenue is fraught with ethical implications. The debates on how much revenue will be raised, how much
money will be taken from the pockets of taxpayers, will inexorably shift from the democratic Halls of Congress
to the secret and non-transparent corridors of unelected agencies of government, the Department of Finance
and the Bureau of Internal Revenue, which are not accountable to our people. We cannot countenance the shift
for ethical reasons, lest we be accused of betraying the trust reposed on this Chamber by the people. x x x
A final point on this proposal, Mr. Speaker, is the exercise of the taxing power of the Commissioner of Internal
Revenue which will be triggered by inflation rates based on the consumer price index. Simply stated, Mr.
Speaker, the specific tax rates will be fixed by the Commissioner depending on the price levels of beers and
cigarettes as determined by the consumers’ price index. This is a novel idea, if not necessarily weird in the field
of taxation. What if the brewer or the cigarette manufacturer sells at a price below the consumers’ price index?
Will it be taxed on the basis of the consumer’s price index which is over and above its wholesale or retail price
as the case may be? This is a weird form of exaction where the tax is based not on what the brewer or
manufacturer actually realized but on an imaginary wholesale or retail price. This amounts to a taxation based
on presumptive price levels and renders the specific tax a presumptive tax. We hope, the DOF and the BIR will
also honor a presumptive tax payment.
Moreover, specific tax rates based on price levels tied to consumer’s price index as proposed by the DOF
engenders anti-trust concerns. The proposal if enacted into law will serve as a barrier to the entry of new
players in the beer and cigarette industries which are presently dominated by shared monopolies. A new player
in these industries will be denied business flexibility to fix its price levels to promote its product and penetrate
the market as the price levels are dictated by the consumer price index. The proposed tax regime, Mr. Speaker,
will merely enhance the stranglehold of the oligopolies in the beer and cigarette industries, thus, reversing the
government’s policy of dismantling monopolies and combinations in restraint of trade.56
For its part, the Senate’s Committee on Ways and Means, then chaired by Senator Juan Ponce Enrile (Senator Enrile),
developed its own version of the excise tax system on cigarettes. The Senate Version consisted of a four-tiered system
and, interestingly enough, contained a periodic excise tax rate and tax bracket adjustment as well as a periodic
resurvey and reclassification of brands provision ("periodic adjustment and reclassification provision," for brevity) to be
conducted by the DOF in coordination with the BIR and the National Statistics Office based on the increase in the
consumer price index— similar to the one proposed by the DOF, viz:
SEC. 4 Section 142 of the National Internal Revenue Code, as amended, is hereby further amended to read as
follows:
"SEC. 142. Cigars and cigarettes. –
xxxx
(c) Cigarettes packed by machine. – There shall be levied, assessed and collected on cigarettes packed by
pack, the tax shall be Twelve pesos (P12.00) per pack;
centavos (P6.50) per pack, the tax shall be Eight pesos (P8.00) per pack;
(3) If the net retail price (excluding the excise tax and the value-added tax) is Five pesos (P5.00) up to Six
pesos and fifty centavos (P6.50) per pack, the tax shall be Five pesos (P5.00) per pack;
pack, the tax shall be One peso (P1.00) per pack.
Variants of existing brands of cigarettes which are introduced in the domestic market after the effectivity of this
Act shall be taxed under the highest classification of any variant of that brand.
14
xxx
The rates of specific tax on cigars and cigarettes under subparagraph (a), (b) and (c) hereof, including
the net retail prices for purposes of classification, shall be adjusted on the sixth of January three years
after the effectivity of this Act and every three years thereafter. The adjustment shall be in accordance
with the inflation rate measured by the average increase in the consumer price index over the three-
year period. The adjusted tax rates and net price levels shall be in force on the eighth of January.
Within the period hereinabove mentioned, the Secretary of Finance shall direct the conduct of a survey
of retail prices of each brand of cigarettes in coordination with the Bureau of Internal Revenue and the
National Statistics Office.
For purposes of this Section, net retail price shall mean the price at which the cigarette is sold on retail in 20
outside Metro Manila, the net retail price shall mean the price at which the cigarette is sold in five major
supermarkets in the region excluding the amount intended to cover the applicable excise tax and the value-
added tax.
The classification of each brand of cigarettes in the initial year of implementation of this Act shall be
based on its average net retail price as of October 1, 1996. The said classification by brand shall remain
in force until January 7, 2000.
New brands shall be classified according to their current net retail price.57 (Emphasis supplied)
During the period of interpellations, the late Senator Raul S. Roco (Senator Roco) expressed doubts as to the legality
and wisdom of putting a periodic adjustment and reclassification provision:
Senator Enrile: This will be the first time that a tax burden will be allowed to be automatically adjusted upwards
based on a system of indexing tied up with the Consumers Price Index (CPI). Although I must add that we have
adopted a similar system in adjusting the personal tax exemption from income tax of our individual taxpayers.
Senator Roco: They are not exactly the same, Mr. President. But even then, we do note that this the first time
we are trying to put an automatic adjustment. My concern is, why do we propose now this automatic
adjustment? What is the reason that impels the committee? Maybe we can be enlightened and maybe we shall
embrace it forthwith. But what is the reason?
Senator Enrile: Mr. President, we will recall that in the House of Representatives, it has adopted a tax proposal
on these products based on a specific tax as a basic tax with an ad valorem comparator. The Committee on
Ways and Means of the Senate has not seen it fit to adopt this system, but it recognized the possibility that
there may be an occasion where the price movement in the country might unwarrantedly move upwards, in
which case, if we peg the government to a specific tax rate of P6.30, P9.30 and P12.30 for beer, since we are
talking of beer, 58 the government might lose in the process.
In order to consider the interest of the government in this, Mr. President, and in order to obviate the possibility
that some of these products categorized under the different tiers with different specific tax rates from moving
upwards and piercing their own tiers and thereby expose themselves to an incremental tax of higher magnitude,
it was felt that we should adopt a system where, in spite of any escalation in the price of these products in the
future, the tax rates could be adjusted upwards so that none of these products would leave their own tier. That
was the basic principle under which we crafted this portion of the tax proposal.
Senator Roco: Mr. President, we certainly share the judgment of the distinguished gentleman as regards the
comparator provision in the House of Representatives and we appreciate the reasons given. But we are under
the impression that the House also, aside from the comparator, has an adjustment clause that is fixed. It has
fixed rates for the adjustment. So that one of the basic differences between the Senate proposed version now
and the House version is that, the House of Representatives has manifested its will and judgment as regards
the tax to which we will adjust, whereas the Senate version relegates fundamentally that judgment to the
Department of Finance.
15
Senator Enrile: That is correct, Mr. President, because we felt that in imposing a fixed adjustment, we might be
fixing an amount that is either too high or too low. We cannot foresee the economic trends in this country over a
period of two years, three years, let alone ten years. So we felt that a mechanism ought to be adopted in order
to serve the interest of the government, the interest of the producers, and the interest of the consuming public.
Senator Roco: This is where, Mr. President, my policy difficulties start. Under the Constitution— I think it is
Article VI, Section 24, and it was the distinguished chairman of the Committee on Ways and Means who made
this Chamber very conscious of this provision— revenue measures and tariff measures shall originate
exclusively from the House of Representatives.
The reason for this, Mr. President, is, there is a long history why the House of Representatives must originate
judgments on tax. The House members represent specific districts. They represent specific constituencies, and
the whole history of parliamentarism, the whole history of Congress as an institution is founded on the
proposition that the direct representatives of the people must speak about taxes.
Mr. President, while the Senate can concur and can introduce amendments, the proposed change here is
radical. This is the policy difficulty that I wish to clarify with the gentleman because the judgment call now on the
amount of tax to be imposed is not coming from Congress. It is shifted to the Department of Finance. True, the
Secretary of Finance may have been the best finance officer two years ago and now the best finance officer in
Asia, but that does not make him qualified to replace the judgment call of the House of Representatives. That is
my first difficulty.
Senator Enrile: Mr. President, precisely the law, in effect, authorizes this rate beforehand. The computation of
the rate is the only thing that was left to the Department of Finance as a tax implementor of Congress. This is
not unusual because we have already, as I said, adopted a system similar to this. If we adjust the personal
exemption of an individual taxpayer, we are in effect adjusting the applicable tax rate to him.
Senator Roco: But the point I was trying to demonstrate, Mr. President, is that we depart precisely from the
mandate of the Constitution that judgment on revenue must emanate from Congress. Here, it is shifted to the
Department of Finance for no visible or patent reason insofar as I could understand. The only difference is, who
will make the judgment? Should it be Congress?
Senator Enrile: Mr. President, forgive me for answering sooner than I should. My understanding of the
Constitution is that all revenue measures must emanate from the House. That is all the Constitution says.
Now, it does not say that the judgment call must belong to the House. The judgment call can belong both to the
House and to the Senate. We can change whatever proposal the House did. Precisely, we are now crafting a
measure, and we are saying that this is the rate subject to an adjustment which we also provide. We are not
giving any unusual power to the Secretary of Finance because we tell him, "This is the formula that you must
adopt in arriving at the adjustment so that you do not have to come back to us."59
Apart from his doubts as to the legality of the delegation of taxing power to the DOF and BIR, Senator Roco also voiced
out his concern about the possible abuse and corruption that will arise from the periodic adjustment and reclassification
provision. Continuing—
Senator Roco: Mr. President, if that is the argument, that the distinguished gentleman has a different legal
interpretation, we will then now examine the choice. Because his legal interpretation is different from mine, then
the issues becomes: Is it more advantageous that this judgment be exercised by the House? Should we
not concur or modify in terms of the exercise by the House of its power or are we better off giving this
judgment call to the Department of Finance?
Let me now submit, Mr. President, that in so doing, it is more advantageous to fix the rate so that even
if we modify the rates identified by Congress, it is better and less susceptible to abuse.
For instance, Mr. President, would the gentlemen wish to demonstrate to us how this will be done? On page 8,
lines 5 to 9, there is a provision here as to when the Secretary of Finance shall direct the conduct of survey of
retail prices of each brand of fermented liquor in coordination with the Bureau of Internal Revenue and the
National Statistics Office.
16
These offices are not exactly noted, Mr. President, for having been sanctified by the Holy Spirit in their noble
intentions. x x x60 (Emphasis supplied)
Pressing this point, Senator Roco continued his query:
Senator Roco: x x x [On page 8, lines 5 to 9] it says that during the two-year period, the Secretary of Finance
shall direct the conduct of the survey. How? When? Which retail prices and what brand shall he consider?
When he coordinates with the Bureau of Internal Revenue, what is the Bureau of Internal Revenue supposed to
be doing? What is the National Statistics Office supposed to be doing, and under what guides and standards?
May the gentleman wish to demonstrate how this will be done? My point, Mr. President, is, by giving the
Secretary of Finance, the BIR and the National Statistics Office discretion over a two-year period will
invite corruption and arbitrariness, which is more dangerous than letting the House of Representatives
and this Chamber set the adjustment rate. Why not set the adjustment rate? Why should Congress not
exercise that judgment now? x x x
Senator Enrile: x x x
Senator Roco: x x x We respectfully submit that the Chairman consider choosing the judgment of this Chamber
and the House of Representatives over a delegated judgment of the Department of Finance.
Again, it is not to say that I do not trust the Department of Finance. It has won awards, and I also trust the
undersecretary. But that is beside the point. Tomorrow, they may not be there. 61 (Emphasis supplied)
This point was further dissected by the two senators. There was a genuine difference of opinion as to which system—
one with a fixed excise tax rate and classification or the other with a periodic adjustment of excise tax rate and
reclassification— was less susceptible to abuse, as the following exchanges show:
Senator Enrile: Mr. President, considering the sensitivity of these products from the viewpoint of exerted
pressures because of the understandable impact of this measure on the pockets of the major players producing
these products, the committee felt that perhaps to lessen such pressures, it is best that we now establish a
norm where the tax will be adjusted without incurring too much political controversy as has happened in the
case of this proposal.
Senator Roco: But that is exactly the same reason we say we must rely upon Congress because Congress, if it
is subjected to pressure, at least balances off because of political factors.
When the Secretary of Finance is now subjected to pressure, are we saying that the Secretary of Finance and
the Department of Finance is better-suited to withstand the pressure? Or are we saying "Let the Finance
Secretary decide whom to yield"?
I am saying that the temptation and the pressure on the Secretary of Finance is more dangerous and more
corruption-friendly than ascertaining for ourselves now a fixed rate of increase for a fixed period.
Senator Enrile: Mr. President, perhaps the gentleman may not agree with this representation, but in my humble
opinion, this formulation is less susceptible to pressure because there is a definite point of reference which is
the consumer price index, and that consumer price index is not going to be used only for this purpose. The CPI
is used for a national purpose, and there is less possibility of tinkering with it. 62
Further, Senator Roco, like Congressman Javier, expressed the view that the periodic adjustment and reclassification
provision would create an anti-competitive atmosphere. Again, Senators Roco and Enrile had genuine divergence of
opinions on this matter, to wit:
Senator Roco: x x x On the marketing level, an adjustment clause may, in fact, be disadvantageous to both
companies, whether it is the Lucio Tan companies or the San Miguel companies. If we have to adjust our
marketing position every two years based on the adjustment clause, the established company may survive, but
the new ones will have tremendous difficulty. Therefore, this provision tends to indicate an anticompetitive bias.
17
It is good for San Miguel and the Lucio Tan companies, but the new companies— assuming there may be new
companies and we want to encourage them because of the old point of liberalization— will be at a
disadvantage under this situation. If this observation will find receptivity in the policy consideration of the
distinguished Gentleman, maybe we can also further, later on, seek amendments to this automatic adjustment
clause in some manner.
Senator Enrile: Mr. President, I cannot foresee any anti-competitiveness of this provision with respect to a new
entrant, because a new entrant will not just come in without studying the market. He is a lousy businessman if
he will just come in without studying the market. If he comes in, he will determine at what retail price level he
will market his product, and he will be coming under any of the tiers depending upon his net retail price.
Therefore, I do not see how this particular provision will affect a new entrant.
Senator Roco: Be that as it may, Mr. President, we obviously will not resort to debate until this evening, and we
will have to look for other ways of resolving the policy options.
Let me just close that particular area of my interpellation, by summarizing the points we were hoping could be
clarified.
1. That the automatic adjustment clause is at best questionable in law.
2. It is corruption-friendly in the sense that it shifts the discretion from the House of Representatives
and this Chamber to the Secretary of Finance, no matter how saintly he may be.
3. There is,— although the judgment call of the gentleman disagrees— to our view, an anticompetitive
situation that is geared at…63
After these lengthy exchanges, it appears that the views of Senator Enrile were sustained by the Senate Body because
the Senate Version was passed on Third Reading without substantially altering the periodic adjustment and
reclassification provision.
It was actually at the Bicameral Conference Committee level where the Senate Version underwent major changes. The
Senate Panel prevailed upon the House Panel to abandon the basic excise tax rate and ad valorem comparator as the
means to determine the applicable excise tax rate. Thus, the Senate’s four-tiered system was retained with minor
adjustments as to the excise tax rate per tier. However, the House Panel prevailed upon the Senate Panel to delete the
power of the DOF and BIR to periodically adjust the excise tax rate and tax brackets, and periodically resurvey and
reclassify the cigarette brands based on the increase in the consumer price index.
In lieu thereof, the classification of existing brands based on their average net retail price as of October 1, 1996 was
"frozen" and a fixed across-the-board 12% increase in the excise tax rate of each tier after three years from the
effectivity of the Act was put in place. There is a dearth of discussion in the deliberations as to the applicability of the
freezing mechanism to new brands after their classification is determined based on their current net retail price. But a
plain reading of the text of RA 8240, even before its amendment by RA 9334, as well as the previously discussed
deliberations would readily lead to the conclusion that the intent of Congress was to likewise apply the freezing
mechanism to new brands. Precisely, Congress rejected the proposal to allow the DOF and BIR to periodically adjust
the excise tax rate and tax brackets as well as to periodically resurvey and reclassify cigarettes brands which would
have encompassed old and new brands alike. Thus, it would be absurd for us to conclude that Congress intended to
allow the periodic reclassification of new brands by the BIR after their classification is determined based on their current
net retail price. We shall return to this point when we tackle the second issue.
In explaining the changes made at the Bicameral Conference Committee level, Senator Enrile, in his report to the
Senate plenary, noted that the fixing of the excise tax rates was done to avoid confusion. 64 Congressman Javier, for his
part, reported to the House plenary the reasons for fixing the excise tax rate and freezing the classification, thus:
Finally, this twin feature, Mr. Speaker, fixed specific tax rates and frozen classification, rejects the Senate
version which seeks to abdicate the power of Congress to tax by pegging the rates as well as the classification
of sin products to consumer price index which practically vests in the Secretary of Finance the power to fix
the rates and to classify the products for tax purposes.65 (Emphasis supplied)
18
Congressman Javier later added that the frozen classification was intended to give stability to the industry as the BIR
would be prevented from tinkering with the classification since it would remain unchanged despite the increase in the
net retail prices of the previously classified brands.66 This would also assure the industry players that there would be no
new impositions as long as the law is unchanged.67
From the foregoing, it is quite evident that the classification freeze provision could hardly be considered arbitrary, or
motivated by a hostile or oppressive attitude to unduly favor older brands over newer brands. Congress was
unequivocal in its unwillingness to delegate the power to periodically adjust the excise tax rate and tax brackets as well
as to periodically resurvey and reclassify the cigarette brands based on the increase in the consumer price index to the
DOF and the BIR. Congress doubted the constitutionality of such delegation of power, and likewise, considered the
ethical implications thereof. Curiously, the classification freeze provision was put in place of the periodic adjustment and
reclassification provision because of the belief that the latter would foster an anti-competitive atmosphere in the market.
Yet, as it is, this same criticism is being foisted by petitioner upon the classification freeze provision.
To our mind, the classification freeze provision was in the main the result of Congress’s earnest efforts to improve the
efficiency and effectivity of the tax administration over sin products while trying to balance the same with other state
interests. In particular, the questioned provision addressed Congress’s administrative concerns regarding delegating
too much authority to the DOF and BIR as this will open the tax system to potential areas for abuse and corruption.
Congress may have reasonably conceived that a tax system which would give the least amount of discretion to the tax
implementers would address the problems of tax avoidance and tax evasion.
To elaborate a little, Congress could have reasonably foreseen that, under the DOF proposal and the Senate Version,
the periodic reclassification of brands would tempt the cigarette manufacturers to manipulate their price levels or bribe
the tax implementers in order to allow their brands to be classified at a lower tax bracket even if their net retail prices
have already migrated to a higher tax bracket after the adjustment of the tax brackets to the increase in the consumer
price index. Presumably, this could be done when a resurvey and reclassification is forthcoming. As briefly touched
upon in the Congressional deliberations, the difference of the excise tax rate between the medium-priced and the high-
priced tax brackets under RA 8240, prior to its amendment, was P3.36. For a moderately popular brand which sells
around 100 million packs per year, this easily translates to P336,000,000.68 The incentive for tax avoidance, if not
outright tax evasion, would clearly be present. Then again, the tax implementers may use the power to periodically
adjust the tax rate and reclassify the brands as a tool to unduly oppress the taxpayer in order for the government to
achieve its revenue targets for a given year.
Thus, Congress sought to, among others, simplify the whole tax system for sin products to remove these potential
areas of abuse and corruption from both the side of the taxpayer and the government. Without doubt, the classification
freeze provision was an integral part of this overall plan. This is in line with one of the avowed objectives of the assailed
law "to simplify the tax administration and compliance with the tax laws that are about to unfold in order to minimize
losses arising from inefficiencies and tax avoidance scheme, if not outright tax evasion." 69 RA 9334 did not alter
this classification freeze provision of RA 8240. On the contrary, Congress affirmed this freezing mechanism by clarifying
the wording of the law. We can thus reasonably conclude, as the deliberations on RA 9334 readily show, that the
administrative concerns in tax administration, which moved Congress to enact the classification freeze provision in RA
8240, were merely continued by RA 9334. Indeed, administrative concerns may provide a legitimate, rational basis for
legislative classification.70 In the case at bar, these administrative concerns in the measurement and collection of excise
taxes on sin products are readily apparent as afore-discussed.
Aside from the major concern regarding the elimination of potential areas for abuse and corruption from the tax
administration of sin products, the legislative deliberations also show that the classification freeze provision was
intended to generate buoyant and stable revenues for government. With the frozen tax classifications, the revenue
inflow would remain stable and the government would be able to predict with a greater degree of certainty the amount
of taxes that a cigarette manufacturer would pay given the trend in its sales volume over time. The reason for this is that
the previously classified cigarette brands would be prevented from moving either upward or downward their tax
brackets despite the changes in their net retail prices in the future and, as a result, the amount of taxes due from them
would remain predictable. The classification freeze provision would, thus, aid in the revenue planning of the
government.71
All in all, the classification freeze provision addressed Congress’s administrative concerns in the simplification of tax
administration of sin products, elimination of potential areas for abuse and corruption in tax collection, buoyant and
stable revenue generation, and ease of projection of revenues. Consequently, there can be no denial of the equal
protection of the laws since the rational-basis test is amply satisfied.
19
Going now to the contention of petitioner that the classification freeze provision unduly favors older brands over newer
brands, we must first contextualize the basis of this claim. As previously discussed, the evidence presented by the
petitioner merely showed that in 2004, Marlboro and Philip Morris, on the one hand, and Lucky Strike, on the other,
would have been taxed at the same rate had the classification freeze provision been not in place. But due to the
operation of the classification freeze provision, Lucky Strike was taxed higher. From here, petitioner generalizes that
this differential tax treatment arising from the classification freeze provision adversely impacts the fairness of the playing
field in the industry, particularly, between older and newer brands. Thus, it is virtually impossible for new brands to enter
the market.
Petitioner did not, however, clearly demonstrate the exact extent of such impact. It has not been shown that the net
retail prices of other older brands previously classified under this classification system have already pierced their tax
brackets, and, if so, how this has affected the overall competition in the market. Further, it does not necessarily follow
that newer brands cannot compete against older brands because price is not the only factor in the market as there are
other factors like consumer preference, brand loyalty, etc. In other words, even if the newer brands are priced higher
due to the differential tax treatment, it does not mean that they cannot compete in the market especially since cigarettes
contain addictive ingredients so that a consumer may be willing to pay a higher price for a particular brand solely due to
its unique formulation. It may also be noted that in 2003, the BIR surveyed 29 new brands 72 that were introduced in the
market after the effectivity of RA 8240 on January 1, 1997, thus negating the sweeping generalization of petitioner that
the classification freeze provision has become an insurmountable barrier to the entry of new brands. Verily, where there
is a claim of breach of the due process and equal protection clauses, considering that they are not fixed rules but rather
broad standards, there is a need for proof of such persuasive character as would lead to such a conclusion. Absent
such a showing, the presumption of validity must prevail.73
Be that as it may, petitioner’s evidence does suggest that, at least in 2004, Philip Morris and Marlboro, older brands,
would have been taxed at the same rate as Lucky Strike, a newer brand, due to certain conditions (i.e., the increase of
the older brands’ net retail prices beyond the tax bracket to which they were previously classified after the lapse of
some time) were it not for the classification freeze provision. It may be conceded that this has adversely affected, to a
certain extent, the ability of petitioner to competitively price its newer brands vis-à-vis the subject older brands. Thus, to
a limited extent, the assailed law seems to derogate one of its avowed objectives, i.e. promoting fair competition among
the players in the industry. Yet, will this occurrence, by itself, render the assailed law unconstitutional on equal
protection grounds?
We answer in the negative.
Whether Congress acted improvidently in derogating, to a limited extent, the state’s interest in promoting fair
competition among the players in the industry, while pursuing other state interests regarding the simplification of tax
administration of sin products, elimination of potential areas for abuse and corruption in tax collection, buoyant and
stable revenue generation, and ease of projection of revenues through the classification freeze provision, and whether
the questioned provision is the best means to achieve these state interests, necessarily go into the wisdom of the
assailed law which we cannot inquire into, much less overrule. The classification freeze provision has not been shown
to be precipitated by a veiled attempt, or hostile attitude on the part of Congress to unduly favor older brands over
newer brands. On the contrary, we must reasonably assume, owing to the respect due a co-equal branch of
government and as revealed by the Congressional deliberations, that the enactment of the questioned provision was
impelled by an earnest desire to improve the efficiency and effectivity of the tax administration of sin products. For as
long as the legislative classification is rationally related to furthering some legitimate state interest, as here, the rational-
basis test is satisfied and the constitutional challenge is perfunctorily defeated.
We do not sit in judgment as a supra-legislature to decide, after a law is passed by Congress, which state interest is
superior over another, or which method is better suited to achieve one, some or all of the state’s interests, or what these
interests should be in the first place. This policy-determining power, by constitutional fiat, belongs to Congress as it is its
function to determine and balance these interests or choose which ones to pursue. Time and again we have ruled that
the judiciary does not settle policy issues. The Court can only declare what the law is and not what the law should be.
Under our system of government, policy issues are within the domain of the political branches of government and of the
people themselves as the repository of all state power.74 Thus, the legislative classification under the classification
freeze provision, after having been shown to be rationally related to achieve certain legitimate state interests and done
in good faith, must, perforce, end our inquiry.
Concededly, the finding that the assailed law seems to derogate, to a limited extent, one of its avowed objectives (i.e.
promoting fair competition among the players in the industry) would suggest that, by Congress’s own standards, the
20
current excise tax system on sin products is imperfect. But, certainly, we cannot declare a statute unconstitutional
merely because it can be improved or that it does not tend to achieve all of its stated objectives. 75 This is especially true
for tax legislation which simultaneously addresses and impacts multiple state interests. 76 Absent a clear showing of
breach of constitutional limitations, Congress, owing to its vast experience and expertise in the field of taxation, must be
given sufficient leeway to formulate and experiment with different tax systems to address the complex issues and
problems related to tax administration. Whatever imperfections that may occur, the same should be addressed to the
democratic process to refine and evolve a taxation system which ideally will achieve most, if not all, of the state’s
objectives.
In fine, petitioner may have valid reasons to disagree with the policy decision of Congress and the method by which the
latter sought to achieve the same. But its remedy is with Congress and not this Court. As succinctly articulated in Vance
v. Bradley:77
The Constitution presumes that, absent some reason to infer antipathy, even improvident decisions will
eventually be rectified by the democratic process, and that judicial intervention is generally unwarranted no
matter how unwisely we may think a political branch has acted. Thus, we will not overturn such a statute unless
the varying treatment of different groups or persons is so unrelated to the achievement of any combination of
legitimate purposes that we can only conclude that the legislature's actions were irrational. 78
We now tackle the second issue.
Petitioner asserts that Revenue Regulations No. 1-97, as amended by Revenue Regulations No. 9-2003, Revenue
Regulations No. 22-2003 and Revenue Memorandum Order No. 6-2003, are invalid insofar as they empower the BIR to
reclassify or update the classification of new brands of cigarettes based on their current net retail prices every two years
or earlier. It claims that RA 8240, even prior to its amendment by RA 9334, did not authorize the BIR to conduct said
periodic resurvey and reclassification.
The questioned provisions are found in the following sections of the assailed issuances:
(1) Section 4(B)(e)(c), 2nd paragraph of Revenue Regulations No. 1-97, as amended by Section 2 of Revenue
Regulations 9-2003, viz:
For the purpose of establishing or updating the tax classification of new brands and variant(s) thereof, their
current net retail price shall be reviewed periodically through the conduct of survey or any other appropriate
activity, as mentioned above, every two (2) years unless earlier ordered by the Commissioner. However,
notwithstanding any increase in the current net retail price, the tax classification of such new brands shall
remain in force until the same is altered or changed through the issuance of an appropriate Revenue
Regulations.
(2) Sections II(1)(b), II(4)(b), II(6), II(7), III (Large Tax Payers Assistance Division II) II(b) of Revenue Memorandum
Order No. 6-2003, insofar as pertinent to cigarettes packed by machine, viz:
II. POLICIES AND GUIDELINES
1. The conduct of survey covered by this Order, for purposes of determining the current retail prices of new
brands of cigarettes and alcohol products introduced in the market on or after January 1, 1997, shall be
undertaken in the following instances:
xxxx
b. For reclassification of new brands of said excisable products that were introduced in the market after January
1, 1997.
xxxx
4. The determination of the current retail prices of new brands of the aforesaid excisable products shall be
initiated as follows:
21
xxxx
b. After the lapse of the prescribed two-year period or as the Commissioner may otherwise direct, the
appropriate tax reclassification of these brands based on the current net retail prices thereof shall be
determined by a survey to be conducted upon a written directive by the Commissioner.
For this purpose, a memorandum order to the Assistant Commissioner, Large Taxpayers Service, Heads,
Excise Tax Areas, and Regional Directors of all Revenue Regions, except Revenue Region Nos. 4, 5, 6, 7, 8
and 9, shall be issued by the Commissioner for the submission of the list of major supermarkets/retail outlets
where the above excisable products are being sold, as well as the list of selected revenue officers who shall be
designated to conduct the said activity(ies).
xxxx
6. The results of the survey conducted in Revenue Region Nos. 4 to 9 shall be submitted directly to the Chief,
LT Assistance Division II (LTAD II), National Office for consolidation. On the other hand, the results of the
survey conducted in Revenue Regions other than Revenue Region Nos. 4 to 9, shall be submitted to the Office
of the Regional Director for regional consolidation. The consolidated regional survey, together with the
accomplished survey forms shall be transmitted to the Chief, LTAD II for national consolidation within three (3)
days from date of actual receipt from the survey teams. The LTAD II shall be responsible for the evaluation and
analysis of the submitted survey forms and the preparation of the recommendation for the updating/revision of
the tax classification of each brand of cigarettes and alcohol products. The said recommendation, duly validated
by the ACIR, LTS, shall be submitted to the Commissioner for final review within ten (10) days from the date of
actual receipt of complete reports from all the surveying Offices.
7. Upon final review by the Commissioner of the revised tax classification of the different new brands of
cigarettes and alcohol products, the appropriate revenue regulations shall be prepared and submitted for
approval by the Secretary of Finance.
xxxx
III. PROCEDURES
xxxx
Large Taxpayers Assistance Division II
xxxx
1. Perform the following preparatory procedures on the identification of brands to be surveyed,

supermarkets/retail outlets where the survey shall be conducted, and the personnel selected to conduct the
survey.
xxxx
b. On the tax reclassification of new brands
i. Submit a master list of registered brands covered by the survey pursuant to the provisions of Item II.2 of this
Order containing the complete description of each brand, existing net retail price and the corresponding tax rate
thereof.
ii. Submit to the ACIR, LTS, a list of major supermarkets/retail outlets within the territorial jurisdiction of the
concerned revenue regions where the survey will be conducted to be used as basis in the issuance of Mission
Orders. Ensure that the minimum number of establishments to be surveyed, as prescribed under existing
revenue laws and regulations, is complied with. In addition, the names and designations of revenue officers
selected to conduct the survey shall be clearly indicated opposite the names of the establishments to be
surveyed.
22
There is merit to the contention.
In order to implement RA 8240 following its effectivity on January 1, 1997, the BIR issued Revenue Regulations No. 1-
97, dated December 13, 1996, which mandates a one-time classification only.79 Upon their launch, new brands shall be
initially taxed based on their suggested net retail price. Thereafter, a survey shall be conducted within three (3) months
to determine their current net retail prices and, thus, fix their official tax classifications. However, the BIR made a
turnaround by issuing Revenue Regulations No. 9-2003, dated February 17, 2003, which partly amended Revenue
Regulations No. 1-97, by authorizing the BIR to periodically reclassify new brands (i.e., every two years or earlier)
based on their current net retail prices. Thereafter, the BIR issued Revenue Memorandum Order No. 6-2003, dated
March 11, 2003, prescribing the guidelines on the implementation of Revenue Regulations No. 9-2003. This was patent
error on the part of the BIR for being contrary to the plain text and legislative intent of RA 8240.
It is clear that the afore-quoted portions of Revenue Regulations No. 1-97, as amended by Section 2 of Revenue
Regulations 9-2003, and Revenue Memorandum Order No. 6-2003 unjustifiably emasculate the operation of Section
145 of the NIRC because they authorize the Commissioner of Internal Revenue to update the tax classification of new
brands every two years or earlier subject only to its issuance of the appropriate Revenue Regulations, when nowhere in
Section 145 is such authority granted to the Bureau. Unless expressly granted to the BIR, the power to reclassify
cigarette brands remains a prerogative of the legislature which cannot be usurped by the former.
More importantly, as previously discussed, the clear legislative intent was for new brands to benefit from the same
freezing mechanism accorded to Annex "D" brands. To reiterate, in enacting RA 8240, Congress categorically rejected
the DOF proposal and Senate Version which would have empowered the DOF and BIR to periodically adjust the excise
tax rate and tax brackets, and to periodically resurvey and reclassify cigarette brands. (This resurvey and
reclassification would have naturally encompassed both old and new brands.) It would thus, be absurd for us to
conclude that Congress intended to allow the periodic reclassification of new brands by the BIR after their classification
is determined based on their current net retail price while limiting the freezing of the classification to Annex "D" brands.
Incidentally, Senator Ralph G. Recto expressed the following views during the deliberations on RA 9334, which later
amended RA 8240:
Senator Recto: Because, like I said, when Congress agreed to adopt a specific tax system [under R.A. 8240],
when Congress did not index the brackets, and Congress did not index the rates but only provided for a one
rate increase in the year 2000, we shifted from ad valorem which was based on value to a system of specific
which is based on volume. Congress then, in effect, determined the classification based on the prices at that
particular period of time and classified these products accordingly.
Of course, Congress then decided on what will happen to the new brands or variants of existing brands. To
favor government, a variant would be classified as the highest rate of tax for that particular brand. In case of a
new brand, Mr. President, then the BIR should classify them. But I do not think it was the intention of Congress
then to give the BIR the authority to reclassify them every so often. I do not think it was the intention of
Congress to allow the BIR to classify a new brand every two years, for example, because it will be arbitrary for
the BIR to do so. x x x80 (Emphasis supplied)
For these reasons, the amendments introduced by RA 9334 to RA 8240, insofar as the freezing mechanism is
concerned, must be seen merely as underscoring the legislative intent already in place then, i.e. new brands as being
covered by the freezing mechanism after their classification based on their current net retail prices.
Unfortunately for petitioner, this result will not cause a downward reclassification of Lucky Strike. It will be recalled that
petitioner introduced Lucky Strike in June 2001. However, as admitted by petitioner itself, the BIR did not conduct the
required market survey within three months from product launch. As a result, Lucky Strike was never classified based
on its actual current net retail price. Petitioner failed to timely seek redress to compel the BIR to conduct the requisite
market survey in order to fix the tax classification of Lucky Strike. In the meantime, Lucky Strike was taxed based on
its suggested net retail price of P9.90 per pack, which is within the high-priced tax bracket. It was only after the lapse of
two years or in 2003 that the BIR conducted a market survey which was the first time that Lucky Strike’s actual current
net retail price was surveyed and found to be from P10.34 to P11.53 per pack, which is within the premium-priced tax
bracket. The case of petitioner falls under a situation where there was no reclassification based on its current net retail
price which would have been invalid as previously explained. Thus, we cannot grant petitioner’s prayer for a downward
reclassification of Lucky Strike because it was never reclassified by the BIR based on its actual current net retail price.
23
It should be noted though that on August 8, 2003, the BIR issued Revenue Regulations No. 22-2003 which
implemented the revised tax classifications of new brands based on their current net retail prices through the market
survey conducted pursuant to Revenue Regulations No. 9-2003. Annex "A" of Revenue Regulations No. 22-2003 lists
the result of the market survey and the corresponding recommended tax classification of the new brands therein aside
from Lucky Strike. However, whether these other brands were illegally reclassified based on their actual current net
retail prices by the BIR must be determined on a case-to-case basis because it is possible that these brands were
classified based on their actual current net retail price for the first time in the year 2003 just like Lucky Strike. Thus, we
shall not make any pronouncement as to the validity of the tax classifications of the other brands listed therein.
Finally, it must be noted that RA 9334 introduced changes in the manner by which the current net retail price of a new
brand is determined and how its classification is permanently fixed, to wit:
New brands shall mean a brand registered after the date of effectivity of R.A. No. 8240 [on January 1, 1997].
manufactured or imported cigarettes are intended by the manufacture or importer to be sold on retail in major
with regional markets. At the end of three (3) months from the product launch, the Bureau of Internal
Revenue shall validate the suggested net retail price of the new brand against the net retail price as
defined herein and determine the correct tax bracket under which a particular new brand of cigarette,
as defined above, shall be classified. After the end of eighteen (18) months from such validation, the
Bureau of Internal Revenue shall revalidate the initially validated net retail price against the net retail
price as of the time of revalidation in order to finally determine the correct tax bracket under which a
particular new brand of cigarettes shall be classified; Provided however, That brands of cigarettes
introduced in the domestic market between January 1, 1997 and December 31, 2003 shall remain in the
classification under which the Bureau of Internal Revenue has determined them to belong as of December 31,
2003. Such classification of new brands and brands introduced between January 1, 1997 and December
31, 2003 shall not be revised except by an act of Congress. (Emphasis supplied)
Thus, Revenue Regulations No. 9-2003 and Revenue Memorandum Order No. 6-2003 should be deemed modified by
the above provisions from the date of effectivity of RA 9334 on January 1, 2005.
In sum, Section 4(B)(e)(c), 2nd paragraph of Revenue Regulations No. 1-97, as amended by Section 2 of Revenue
Regulations 9-2003, and Sections II(1)(b), II(4)(b), II(6), II(7), III (Large Tax Payers Assistance Division II) II(b) of
Revenue Memorandum Order No. 6-2003, as pertinent to cigarettes packed by machine, are invalid insofar as they
grant the BIR the power to reclassify or update the classification of new brands every two years or earlier. Further,
these provisions are deemed modified upon the effectivity of RA 9334 on January 1, 2005 insofar as the manner of
determining the permanent classification of new brands is concerned.
We now tackle the last issue.
Petitioner contends that RA 8240, as amended by RA 9334, and its implementing rules and regulations violate the
General Agreement on Tariffs and Trade (GATT) of 1947, as amended, specifically, Paragraph 2, Article III, Part II:
2. The products of the territory of any contracting party imported into the territory of any other contracting party
shall not be subject, directly or indirectly, to internal taxes or other internal charges of any kind in excess of
those applied, directly or indirectly, to like domestic products. Moreover, no contracting party shall otherwise
apply internal taxes or other internal charges to imported or domestic products in a manner contrary to the
principles set forth in paragraph 1.
It claims that it is the duty of this Court to correct, in favor of the GATT, whatever inconsistency exists between the
assailed law and the GATT in order to prevent triggering the international dispute settlement mechanism under the
GATT-WTO Agreement.
We disagree.
24
The classification freeze provision uniformly applies to all newly introduced brands in the market, whether imported or
locally manufactured. It does not purport to single out imported cigarettes in order to unduly favor locally produced
ones. Further, petitioner’s evidence was anchored on the alleged unequal tax treatment between old and new brands
which involves a different frame of reference vis-à-vis local and imported products. Petitioner has, therefore, failed to
clearly prove its case, both factually and legally, within the parameters of the GATT.
At any rate, even assuming arguendo that petitioner was able to prove that the classification freeze provision violates
the GATT, the outcome would still be the same. The GATT is a treaty duly ratified by the Philippine Senate and under
Article VII, Section 2181 of the Constitution, it merely acquired the status of a statute.82 Applying the basic principles of
statutory construction in case of irreconcilable conflict between statutes, RA 8240, as amended by RA 9334, would
prevail over the GATT either as a later enactment by Congress or as a special law dealing with the taxation of sin
products. Thus, in Abbas v. Commission on Elections,83 we had occasion to explain:
Petitioners premise their arguments on the assumption that the Tripoli Agreement is part of the law of the land,
being a binding international agreement. The Solicitor General asserts that the Tripoli Agreement is neither a
binding treaty, not having been entered into by the Republic of the Philippines with a sovereign state and
ratified according to the provisions of the 1973 or 1987 Constitutions, nor a binding international agreement.
We find it neither necessary nor determinative of the case to rule on the nature of the Tripoli Agreement and its
binding effect on the Philippine Government whether under public international or internal Philippine law. In the
first place, it is now the Constitution itself that provides for the creation of an autonomous region in Muslim
Mindanao. The standard for any inquiry into the validity of R.A. No. 6734 would therefore be what is so provided
in the Constitution. Thus, any conflict between the provisions of R.A. No. 6734 and the provisions of the Tripoli
Agreement will not have the effect of enjoining the implementation of the Organic Act. Assuming for the sake of
argument that the Tripoli Agreement is a binding treaty or international agreement, it would then constitute part
of the law of the land. But as internal law it would not be superior to R.A. No. 6734, an enactment of the
Congress of the Philippines, rather it would be in the same class as the latter [SALONGA, PUBLIC
INTERNATIONAL LAW 320 (4th ed., 1974), citing Head Money Cases, 112 U.S. 580 (1884) and Foster v.
Nelson, 2 Pet. 253 (1829)]. Thus, if at all, R.A. No. 6734 would be amendatory of the Tripoli Agreement, being a
subsequent law. Only a determination by this Court that R.A. No. 6734 contravenes the Constitution would
result in the granting of the reliefs sought. (Emphasis supplied)
WHEREFORE, the petition is PARTIALLY GRANTED and the decision of the Regional Trial Court of Makati, Branch
61, in Civil Case No. 03-1032, is AFFIRMED with MODIFICATION. As modified, this Court declares that:
(1) Section 145 of the NIRC, as amended by Republic Act No. 9334, is CONSTITUTIONAL; and that
(2) Section 4(B)(e)(c), 2nd paragraph of Revenue Regulations No. 1-97, as amended by Section 2 of Revenue
Regulations 9-2003, and Sections II(1)(b), II(4)(b), II(6), II(7), III (Large Tax Payers Assistance Division II) II(b) of
Revenue Memorandum Order No. 6-2003, insofar as pertinent to cigarettes packed by machine, are INVALID insofar
as they grant the BIR the power to reclassify or update the classification of new brands every two years or earlier.
SO ORDERED.
G.R. No. 115455 October 30, 1995
ARTURO M. TOLENTINO, petitioner,

vs.
THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, respondents.
25
RESOLUTION
MENDOZA, J.:
These are motions seeking reconsideration of our decision dismissing the petitions filed in these cases for the
declaration of unconstitutionality of R.A. No. 7716, otherwise known as the Expanded Value-Added Tax Law. The
motions, of which there are 10 in all, have been filed by the several petitioners in these cases, with the exception
of the Philippine Educational Publishers Association, Inc. and the Association of Philippine Booksellers,
petitioners in G.R. No. 115931.
The Solicitor General, representing the respondents, filed a consolidated comment, to which the Philippine
Airlines, Inc., petitioner in G.R. No. 115852, and the Philippine Press Institute, Inc., petitioner in G.R. No. 115544,
and Juan T. David, petitioner in G.R. No. 115525, each filed a reply. In turn the Solicitor General filed on June 1,
1995 a rejoinder to the PPI's reply.
On June 27, 1995 the matter was submitted for resolution.
I. Power of the Senate to propose amendments to revenue bills. Some of the petitioners (Tolentino, Kilosbayan,
Inc., Philippine Airlines (PAL), Roco, and Chamber of Real Estate and Builders Association (CREBA)) reiterate
previous claims made by them that R.A. No. 7716 did not "originate exclusively" in the House of Representatives
as required by Art. VI, §24 of the Constitution. Although they admit that H. No. 11197 was filed in the House of
Representatives where it passed three readings and that afterward it was sent to the Senate where after first
reading it was referred to the Senate Ways and Means Committee, they complain that the Senate did not pass it
on second and third readings. Instead what the Senate did was to pass its own version (S. No. 1630) which it
approved on May 24, 1994. Petitioner Tolentino adds that what the Senate committee should have done was to
amend H. No. 11197 by striking out the text of the bill and substituting it with the text of S. No. 1630. That way, it
is said, "the bill remains a House bill and the Senate version just becomes the text (only the text) of the House
bill."
The contention has no merit.
The enactment of S. No. 1630 is not the only instance in which the Senate proposed an amendment to a House
revenue bill by enacting its own version of a revenue bill. On at least two occasions during the Eighth Congress,
the Senate passed its own version of revenue bills, which, in consolidation with House bills earlier passed,
became the enrolled bills. These were:
R.A. No. 7369 (AN ACT TO AMEND THE OMNIBUS INVESTMENTS CODE OF 1987 BY EXTENDING FROM
FIVE (5) YEARS TO TEN YEARS THE PERIOD FOR TAX AND DUTY EXEMPTION AND TAX CREDIT ON
CAPITAL EQUIPMENT) which was approved by the President on April 10, 1992. This Act is actually a
consolidation of H. No. 34254, which was approved by the House on January 29, 1992, and S. No. 1920, which
was approved by the Senate on February 3, 1992.
R.A. No. 7549 (AN ACT GRANTING TAX EXEMPTIONS TO WHOEVER SHALL GIVE REWARD TO ANY
FILIPINO ATHLETE WINNING A MEDAL IN OLYMPIC GAMES) which was approved by the President on May
22, 1992. This Act is a consolidation of H. No. 22232, which was approved by the House of Representatives on
August 2, 1989, and S. No. 807, which was approved by the Senate on October 21, 1991.
On the other hand, the Ninth Congress passed revenue laws which were also the result of the consolidation of
House and Senate bills. These are the following, with indications of the dates on which the laws were approved by
the President and dates the separate bills of the two chambers of Congress were respectively passed:
1. R.A. NO. 7642
26
AN ACT INCREASING THE PENALTIES FOR TAX EVASION, AMENDING FOR THIS
PURPOSE THE PERTINENT SECTIONS OF THE NATIONAL INTERNAL REVENUE CODE
(December 28, 1992).
House Bill No. 2165, October 5, 1992
Senate Bill No. 32, December 7, 1992
2. R.A. NO. 7643
AN ACT TO EMPOWER THE COMMISSIONER OF INTERNAL REVENUE TO REQUIRE THE

PAYMENT OF THE VALUE-ADDED TAX EVERY MONTH AND TO ALLOW LOCAL
GOVERNMENT UNITS TO SHARE IN VAT REVENUE, AMENDING FOR THIS PURPOSE
CERTAIN SECTIONS OF THE NATIONAL INTERNAL REVENUE CODE (December 28, 1992)
House Bill No. 1503, September 3, 1992
Senate Bill No. 968, December 7, 1992
3. R.A. NO. 7646
AN ACT AUTHORIZING THE COMMISSIONER OF INTERNAL REVENUE TO PRESCRIBE THE

PLACE FOR PAYMENT OF INTERNAL REVENUE TAXES BY LARGE TAXPAYERS,
AMENDING FOR THIS PURPOSE CERTAIN PROVISIONS OF THE NATIONAL INTERNAL
REVENUE CODE, AS AMENDED (February 24, 1993)
House Bill No. 1470, October 20, 1992
Senate Bill No. 35, November 19, 1992
4. R.A. NO. 7649
AN ACT REQUIRING THE GOVERNMENT OR ANY OF ITS POLITICAL SUBDIVISIONS,

INSTRUMENTALITIES OR AGENCIES INCLUDING GOVERNMENT-OWNED OR
CONTROLLED CORPORATIONS (GOCCS) TO DEDUCT AND WITHHOLD THE VALUE-
ADDED TAX DUE AT THE RATE OF THREE PERCENT (3%) ON GROSS PAYMENT FOR THE
PURCHASE OF GOODS AND SIX PERCENT (6%) ON GROSS RECEIPTS FOR SERVICES
RENDERED BY CONTRACTORS (April 6, 1993)
House Bill No. 5260, January 26, 1993
Senate Bill No. 1141, March 30, 1993
5. R.A. NO. 7656
AN ACT REQUIRING GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS TO

DECLARE DIVIDENDS UNDER CERTAIN CONDITIONS TO THE NATIONAL GOVERNMENT,
AND FOR OTHER PURPOSES (November 9, 1993)
House Bill No. 11024, November 3, 1993
6. R.A. NO. 7660
27
AN ACT RATIONALIZING FURTHER THE STRUCTURE AND ADMINISTRATION OF THE
DOCUMENTARY STAMP TAX, AMENDING FOR THE PURPOSE CERTAIN PROVISIONS OF
THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, ALLOCATING FUNDS FOR
SPECIFIC PROGRAMS, AND FOR OTHER PURPOSES (December 23, 1993)
House Bill No. 7789, May 31, 1993
7. R.A. NO. 7717
AN ACT IMPOSING A TAX ON THE SALE, BARTER OR EXCHANGE OF SHARES OF STOCK

LISTED AND TRADED THROUGH THE LOCAL STOCK EXCHANGE OR THROUGH INITIAL
PUBLIC OFFERING, AMENDING FOR THE PURPOSE THE NATIONAL INTERNAL REVENUE
CODE, AS AMENDED, BY INSERTING A NEW SECTION AND REPEALING CERTAIN
SUBSECTIONS THEREOF (May 5, 1994)
House Bill No. 9187, November 3, 1993
Senate Bill No. 1127, March 23, 1994
Thus, the enactment of S. No. 1630 is not the only instance in which the Senate, in the exercise of its power to
propose amendments to bills required to originate in the House, passed its own version of a House revenue
measure. It is noteworthy that, in the particular case of S. No. 1630, petitioners Tolentino and Roco, as members
of the Senate, voted to approve it on second and third readings.
On the other hand, amendment by substitution, in the manner urged by petitioner Tolentino, concerns a mere
matter of form. Petitioner has not shown what substantial difference it would make if, as the Senate actually did in
this case, a separate bill like S. No. 1630 is instead enacted as a substitute measure, "taking into Consideration . .
. H.B. 11197."
Indeed, so far as pertinent, the Rules of the Senate only provide:
RULE XXIX
AMENDMENTS
xxx xxx xxx
§68. Not more than one amendment to the original amendment shall be considered.
No amendment by substitution shall be entertained unless the text thereof is submitted in writing.
Any of said amendments may be withdrawn before a vote is taken thereon.
§69. No amendment which seeks the inclusion of a legislative provision foreign to the subject
matter of a bill (rider) shall be entertained.
xxx xxx xxx
§70-A. A bill or resolution shall not be amended by substituting it with another which covers a
subject distinct from that proposed in the original bill or resolution. (emphasis added).
28
Nor is there merit in petitioners' contention that, with regard to revenue bills, the Philippine Senate possesses less
power than the U.S. Senate because of textual differences between constitutional provisions giving them the
power to propose or concur with amendments.
Art. I, §7, cl. 1 of the U.S. Constitution reads:
All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may
propose or concur with amendments as on other Bills.
Art. VI, §24 of our Constitution reads:
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.
The addition of the word "exclusively" in the Philippine Constitution and the decision to drop the phrase "as on
other Bills" in the American version, according to petitioners, shows the intention of the framers of our Constitution
to restrict the Senate's power to propose amendments to revenue bills. Petitioner Tolentino contends that the
word "exclusively" was inserted to modify "originate" and "the words 'as in any other bills' (sic) were eliminated so
as to show that these bills were not to be like other bills but must be treated as a special kind."
The history of this provision does not support this contention. The supposed indicia of constitutional intent are
nothing but the relics of an unsuccessful attempt to limit the power of the Senate. It will be recalled that the 1935
Constitution originally provided for a unicameral National Assembly. When it was decided in 1939 to change to a
bicameral legislature, it became necessary to provide for the procedure for lawmaking by the Senate and the
House of Representatives. The work of proposing amendments to the Constitution was done by the National
Assembly, acting as a constituent assembly, some of whose members, jealous of preserving the Assembly's
lawmaking powers, sought to curtail the powers of the proposed Senate. Accordingly they proposed the following
provision:
All bills appropriating public funds, revenue or tariff bills, bills of local application, and private bills
shall originate exclusively in the Assembly, but the Senate may propose or concur with
amendments. In case of disapproval by the Senate of any such bills, the Assembly may repass the
same by a two-thirds vote of all its members, and thereupon, the bill so repassed shall be deemed
enacted and may be submitted to the President for corresponding action. In the event that the
Senate should fail to finally act on any such bills, the Assembly may, after thirty days from the
opening of the next regular session of the same legislative term, reapprove the same with a vote
of two-thirds of all the members of the Assembly. And upon such reapproval, the bill shall be
deemed enacted and may be submitted to the President for corresponding action.
The special committee on the revision of laws of the Second National Assembly vetoed the proposal. It deleted
everything after the first sentence. As rewritten, the proposal was approved by the National Assembly and
embodied in Resolution No. 38, as amended by Resolution No. 73. (J. ARUEGO, KNOW YOUR CONSTITUTION
65-66 (1950)). The proposed amendment was submitted to the people and ratified by them in the elections held
on June 18, 1940.
This is the history of Art. VI, §18 (2) of the 1935 Constitution, from which Art. VI, §24 of the present Constitution
was derived. It explains why the word "exclusively" was added to the American text from which the framers of the
Philippine Constitution borrowed and why the phrase "as on other Bills" was not copied. Considering the defeat of
the proposal, the power of the Senate to propose amendments must be understood to be full, plenary and
complete "as on other Bills." Thus, because revenue bills are required to originate exclusively in the House of
Representatives, the Senate cannot enact revenue measures of its own without such bills. After a revenue bill is
passed and sent over to it by the House, however, the Senate certainly can pass its own version on the same
subject matter. This follows from the coequality of the two chambers of Congress.
29
That this is also the understanding of book authors of the scope of the Senate's power to concur is clear from the
following commentaries:
The power of the Senate to propose or concur with amendments is apparently without restriction.
It would seem that by virtue of this power, the Senate can practically re-write a bill required to
come from the House and leave only a trace of the original bill. For example, a general revenue
bill passed by the lower house of the United States Congress contained provisions for the
imposition of an inheritance tax . This was changed by the Senate into a corporation tax. The
amending authority of the Senate was declared by the United States Supreme Court to be
sufficiently broad to enable it to make the alteration. [Flint v. Stone Tracy Company, 220 U.S. 107,
55 L. ed. 389].
(L. TAÑADA AND F. CARREON, POLITICAL LAW OF THE PHILIPPINES 247 (1961))
The above-mentioned bills are supposed to be initiated by the House of Representatives because
it is more numerous in membership and therefore also more representative of the people.
Moreover, its members are presumed to be more familiar with the needs of the country in regard
to the enactment of the legislation involved.
The Senate is, however, allowed much leeway in the exercise of its power to propose or concur
with amendments to the bills initiated by the House of Representatives. Thus, in one case, a bill
introduced in the U.S. House of Representatives was changed by the Senate to make a proposed
inheritance tax a corporation tax. It is also accepted practice for the Senate to introduce what is
known as an amendment by substitution, which may entirely replace the bill initiated in the House
of Representatives.
(I. CRUZ, PHILIPPINE POLITICAL LAW 144-145 (1993)).
In sum, while Art. VI, §24 provides that all appropriation, revenue or tariff bills, bills authorizing increase of the
public debt, bills of local application, and private bills must "originate exclusively in the House of Representatives,"
it also adds, "but the Senate may propose or concur with amendments." In the exercise of this power, the Senate
may propose an entirely new bill as a substitute measure. As petitioner Tolentino states in a high school text, a
committee to which a bill is referred may do any of the following:
(1) to endorse the bill without changes; (2) to make changes in the bill omitting or adding sections
or altering its language; (3) to make and endorse an entirely new bill as a substitute, in which case
it will be known as a committee bill; or (4) to make no report at all.
(A. TOLENTINO, THE GOVERNMENT OF THE PHILIPPINES 258 (1950))
To except from this procedure the amendment of bills which are required to originate in the House by prescribing
that the number of the House bill and its other parts up to the enacting clause must be preserved although the text
of the Senate amendment may be incorporated in place of the original body of the bill is to insist on a mere
technicality. At any rate there is no rule prescribing this form. S. No. 1630, as a substitute measure, is therefore as
much an amendment of H. No. 11197 as any which the Senate could have made.
II. S. No. 1630 a mere amendment of H. No. 11197. Petitioners' basic error is that they assume that S. No. 1630
is an independent and distinct bill. Hence their repeated references to its certification that it was passed by the
Senate "in substitution of S.B. No. 1129, taking into consideration P.S. Res. No. 734 and H.B. No. 11197,"
implying that there is something substantially different between the reference to S. No. 1129 and the reference to
H. No. 11197. From this premise, they conclude that R.A. No. 7716 originated both in the House and in the
Senate and that it is the product of two "half-baked bills because neither H. No. 11197 nor S. No. 1630 was
passed by both houses of Congress."
In point of fact, in several instances the provisions of S. No. 1630, clearly appear to be mere amendments of the
corresponding provisions of H. No. 11197. The very tabular comparison of the provisions of H. No. 11197 and S.
30
No. 1630 attached as Supplement A to the basic petition of petitioner Tolentino, while showing differences
between the two bills, at the same time indicates that the provisions of the Senate bill were precisely intended to
be amendments to the House bill.
Without H. No. 11197, the Senate could not have enacted S. No. 1630. Because the Senate bill was a mere
amendment of the House bill, H. No. 11197 in its original form did not have to pass the Senate on second and
three readings. It was enough that after it was passed on first reading it was referred to the Senate Committee on
Ways and Means. Neither was it required that S. No. 1630 be passed by the House of Representatives before the
two bills could be referred to the Conference Committee.
There is legislative precedent for what was done in the case of H. No. 11197 and S. No. 1630. When the House
bill and Senate bill, which became R.A. No. 1405 (Act prohibiting the disclosure of bank deposits), were referred
to a conference committee, the question was raised whether the two bills could be the subject of such conference,
considering that the bill from one house had not been passed by the other and vice versa. As Congressman
Duran put the question:
MR. DURAN. Therefore, I raise this question of order as to procedure: If a House bill is passed by
the House but not passed by the Senate, and a Senate bill of a similar nature is passed in the
Senate but never passed in the House, can the two bills be the subject of a conference, and can a
law be enacted from these two bills? I understand that the Senate bill in this particular instance
does not refer to investments in government securities, whereas the bill in the House, which was
introduced by the Speaker, covers two subject matters: not only investigation of deposits in banks
but also investigation of investments in government securities. Now, since the two bills differ in
their subject matter, I believe that no law can be enacted.
Ruling on the point of order raised, the chair (Speaker Jose B. Laurel, Jr.) said:
THE SPEAKER. The report of the conference committee is in order. It is precisely in cases like
this where a conference should be had. If the House bill had been approved by the Senate, there
would have been no need of a conference; but precisely because the Senate passed another bill
on the same subject matter, the conference committee had to be created, and we are now
considering the report of that committee.
(2 CONG. REC. NO. 13, July 27, 1955, pp. 3841-42 (emphasis added))
III. The President's certification. The fallacy in thinking that H. No. 11197 and S. No. 1630 are distinct and
unrelated measures also accounts for the petitioners' (Kilosbayan's and PAL's) contention that because the
President separately certified to the need for the immediate enactment of these measures, his certification was
ineffectual and void. The certification had to be made of the version of the same revenue bill which at the
moment was being considered. Otherwise, to follow petitioners' theory, it would be necessary for the President to
certify as many bills as are presented in a house of Congress even though the bills are merely versions of the bill
he has already certified. It is enough that he certifies the bill which, at the time he makes the certification, is under
consideration. Since on March 22, 1994 the Senate was considering S. No. 1630, it was that bill which had to be
certified. For that matter on June 1, 1993 the President had earlier certified H. No. 9210 for immediate enactment
because it was the one which at that time was being considered by the House. This bill was later substituted,
together with other bills, by H. No. 11197.
As to what Presidential certification can accomplish, we have already explained in the main decision that the
phrase "except when the President certifies to the necessity of its immediate enactment, etc." in Art. VI, §26 (2)
qualifies not only the requirement that "printed copies [of a bill] in its final form [must be] distributed to the
members three days before its passage" but also the requirement that before a bill can become a law it must have
passed "three readings on separate days." There is not only textual support for such construction but historical
basis as well.
Art. VI, §21 (2) of the 1935 Constitution originally provided:
31
(2) No bill shall be passed by either House unless it shall have been printed and copies thereof in
its final form furnished its Members at least three calendar days prior to its passage, except when
the President shall have certified to the necessity of its immediate enactment. Upon the last
reading of a bill, no amendment thereof shall be allowed and the question upon its passage shall
be taken immediately thereafter, and the yeas and nays entered on the Journal.
When the 1973 Constitution was adopted, it was provided in Art. VIII, §19 (2):
(2) No bill shall become a law unless it has passed three readings on separate days, and printed
copies thereof in its final form have been distributed to the Members three days before its
passage, except when the Prime Minister certifies to the necessity of its immediate enactment to
meet a public calamity or emergency. Upon the last reading of a bill, no amendment thereto shall
be allowed, and the vote thereon shall be taken immediately thereafter, and
the yeas and nays entered in the Journal.
This provision of the 1973 document, with slight modification, was adopted in Art. VI, §26 (2) of the present
Constitution, thus:
(2) No bill passed by either House shall become a law unless it has passed three readings on
separate days, and printed copies thereof in its final form have been distributed to its Members
three days before its passage, except when the President certifies to the necessity of its
immediate enactment to meet a public calamity or emergency. Upon the last reading of a bill, no
amendment thereto shall be allowed, and the vote thereon shall be taken immediately thereafter,
and the yeas and nays entered in the Journal.
The exception is based on the prudential consideration that if in all cases three readings on separate days are
required and a bill has to be printed in final form before it can be passed, the need for a law may be rendered
academic by the occurrence of the very emergency or public calamity which it is meant to address.
Petitioners further contend that a "growing budget deficit" is not an emergency, especially in a country like the
Philippines where budget deficit is a chronic condition. Even if this were the case, an enormous budget deficit
does not make the need for R.A. No. 7716 any less urgent or the situation calling for its enactment any less an
emergency.
Apparently, the members of the Senate (including some of the petitioners in these cases) believed that there was
an urgent need for consideration of S. No. 1630, because they responded to the call of the President by voting on
the bill on second and third readings on the same day. While the judicial department is not bound by the Senate's
acceptance of the President's certification, the respect due coequal departments of the government in matters
committed to them by the Constitution and the absence of a clear showing of grave abuse of discretion caution a
stay of the judicial hand.
At any rate, we are satisfied that S. No. 1630 received thorough consideration in the Senate where it was
discussed for six days. Only its distribution in advance in its final printed form was actually dispensed with by
holding the voting on second and third readings on the same day (March 24, 1994). Otherwise, sufficient time
between the submission of the bill on February 8, 1994 on second reading and its approval on March 24, 1994
elapsed before it was finally voted on by the Senate on third reading.
The purpose for which three readings on separate days is required is said to be two-fold: (1) to inform the
members of Congress of what they must vote on and (2) to give them notice that a measure is progressing
through the enacting process, thus enabling them and others interested in the measure to prepare their positions
with reference to it. (1 J. G. SUTHERLAND, STATUTES AND STATUTORY CONSTRUCTION §10.04, p. 282
(1972)). These purposes were substantially achieved in the case of R.A. No. 7716.
IV. Power of Conference Committee. It is contended (principally by Kilosbayan, Inc. and the Movement of
Attorneys for Brotherhood, Integrity and Nationalism, Inc. (MABINI)) that in violation of the constitutional policy of
32
full public disclosure and the people's right to know (Art. II, §28 and Art. III, §7) the Conference Committee met for
two days in executive session with only the conferees present.
As pointed out in our main decision, even in the United States it was customary to hold such sessions with only
the conferees and their staffs in attendance and it was only in 1975 when a new rule was adopted requiring open
sessions. Unlike its American counterpart, the Philippine Congress has not adopted a rule prescribing open
hearings for conference committees.
It is nevertheless claimed that in the United States, before the adoption of the rule in 1975, at least staff members
were present. These were staff members of the Senators and Congressmen, however, who may be presumed to
be their confidential men, not stenographers as in this case who on the last two days of the conference were
excluded. There is no showing that the conferees themselves did not take notes of their proceedings so as to give
petitioner Kilosbayan basis for claiming that even in secret diplomatic negotiations involving state interests,
conferees keep notes of their meetings. Above all, the public's right to know was fully served because the
Conference Committee in this case submitted a report showing the changes made on the differing versions of the
House and the Senate.
Petitioners cite the rules of both houses which provide that conference committee reports must contain "a
detailed, sufficiently explicit statement of the changes in or other amendments." These changes are shown in the
bill attached to the Conference Committee Report. The members of both houses could thus ascertain what
changes had been made in the original bills without the need of a statement detailing the changes.
The same question now presented was raised when the bill which became R.A. No. 1400 (Land Reform Act of
1955) was reported by the Conference Committee. Congressman Bengzon raised a point of order. He said:
MR. BENGZON. My point of order is that it is out of order to consider the report of the conference
committee regarding House Bill No. 2557 by reason of the provision of Section 11, Article XII, of
the Rules of this House which provides specifically that the conference report must be
accompanied by a detailed statement of the effects of the amendment on the bill of the House.
This conference committee report is not accompanied by that detailed statement, Mr. Speaker.
Therefore it is out of order to consider it.
Petitioner Tolentino, then the Majority Floor Leader, answered:
MR. TOLENTINO. Mr. Speaker, I should just like to say a few words in connection with the point of
order raised by the gentleman from Pangasinan.
There is no question about the provision of the Rule cited by the gentleman from Pangasinan,
but this provision applies to those cases where only portions of the bill have been amended. In this
case before us an entire bill is presented; therefore, it can be easily seen from the reading of the
bill what the provisions are. Besides, this procedure has been an established practice.
After some interruption, he continued:
MR. TOLENTINO. As I was saying, Mr. Speaker, we have to look into the reason for the
provisions of the Rules, and the reason for the requirement in the provision cited by the gentleman
from Pangasinan is when there are only certain words or phrases inserted in or deleted from the
provisions of the bill included in the conference report, and we cannot understand what those
words and phrases mean and their relation to the bill. In that case, it is necessary to make a
detailed statement on how those words and phrases will affect the bill as a whole; but when the
entire bill itself is copied verbatim in the conference report, that is not necessary. So when the
reason for the Rule does not exist, the Rule does not exist.
(2 CONG. REC. NO. 2, p. 4056. (emphasis added))
33
Congressman Tolentino was sustained by the chair. The record shows that when the ruling was appealed, it was
upheld by viva voce and when a division of the House was called, it was sustained by a vote of 48 to 5. (Id.,
p. 4058)
Nor is there any doubt about the power of a conference committee to insert new provisions as long as these are
germane to the subject of the conference. As this Court held in Philippine Judges Association v. Prado, 227
SCRA 703 (1993), in an opinion written by then Justice Cruz, the jurisdiction of the conference committee is not
limited to resolving differences between the Senate and the House. It may propose an entirely new provision.
What is important is that its report is subsequently approved by the respective houses of Congress. This Court
ruled that it would not entertain allegations that, because new provisions had been added by the conference
committee, there was thereby a violation of the constitutional injunction that "upon the last reading of a bill, no
amendment thereto shall be allowed."
Applying these principles, we shall decline to look into the petitioners' charges that an amendment
was made upon the last reading of the bill that eventually became R.A. No. 7354 and
that copies thereof in its final form were not distributed among the members of each House. Both
the enrolled bill and the legislative journals certify that the measure was duly enacted i.e., in
accordance with Article VI, Sec. 26 (2) of the Constitution. We are bound by such official
assurances from a coordinate department of the government, to which we owe, at the very least, a
becoming courtesy.
(Id. at 710. (emphasis added))
It is interesting to note the following description of conference committees in the Philippines in a 1979 study:
Conference committees may be of two types: free or instructed. These committees may be given
instructions by their parent bodies or they may be left without instructions. Normally the
conference committees are without instructions, and this is why they are often critically referred to
as "the little legislatures." Once bills have been sent to them, the conferees have almost unlimited
authority to change the clauses of the bills and in fact sometimes introduce new measures that
were not in the original legislation. No minutes are kept, and members' activities on conference
committees are difficult to determine. One congressman known for his idealism put it this way: "I
killed a bill on export incentives for my interest group [copra] in the conference committee but I
could not have done so anywhere else." The conference committee submits a report to both
houses, and usually it is accepted. If the report is not accepted, then the committee is discharged
and new members are appointed.
(R. Jackson, Committees in the Philippine Congress, in COMMITTEES AND LEGISLATURES: A

COMPARATIVE ANALYSIS 163 (J. D. LEES AND M. SHAW, eds.)).
In citing this study, we pass no judgment on the methods of conference committees. We cite it only to say that
conference committees here are no different from their counterparts in the United States whose vast powers we
noted in Philippine Judges Association v. Prado, supra. At all events, under Art. VI, §16(3) each house has the
power "to determine the rules of its proceedings," including those of its committees. Any meaningful change in the
method and procedures of Congress or its committees must therefore be sought in that body itself.
V. The titles of S. No. 1630 and H. No. 11197. PAL maintains that R.A. No. 7716 violates Art. VI, §26 (1) of the
Constitution which provides that "Every bill passed by Congress shall embrace only one subject which shall be
expressed in the title thereof." PAL contends that the amendment of its franchise by the withdrawal of its
exemption from the VAT is not expressed in the title of the law.
Pursuant to §13 of P.D. No. 1590, PAL pays a franchise tax of 2% on its gross revenue "in lieu of all other taxes,
duties, royalties, registration, license and other fees and charges of any kind, nature, or description, imposed,
levied, established, assessed or collected by any municipal, city, provincial or national authority or government
agency, now or in the future."
34
PAL was exempted from the payment of the VAT along with other entities by §103 of the National Internal
Revenue Code, which provides as follows:
§103. Exempt transactions. — The following shall be exempt from the value-added tax:
xxx xxx xxx
(q) Transactions which are exempt under special laws or international agreements to which the
Philippines is a signatory.
R.A. No. 7716 seeks to withdraw certain exemptions, including that granted to PAL, by amending §103, as
follows:
§103. Exempt transactions. — The following shall be exempt from the value-added tax:
xxx xxx xxx
(q) Transactions which are exempt under special laws, except those granted under Presidential
Decree Nos. 66, 529, 972, 1491, 1590. . . .
The amendment of §103 is expressed in the title of R.A. No. 7716 which reads:
AN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT) SYSTEM, WIDENING ITS TAX
BASE AND ENHANCING ITS ADMINISTRATION, AND FOR THESE PURPOSES AMENDING
AND REPEALING THE RELEVANT PROVISIONS OF THE NATIONAL INTERNAL REVENUE
CODE, AS AMENDED, AND FOR OTHER PURPOSES.
By stating that R.A. No. 7716 seeks to "[RESTRUCTURE] THE VALUE-ADDED TAX (VAT) SYSTEM [BY]
WIDENING ITS TAX BASE AND ENHANCING ITS ADMINISTRATION, AND FOR THESE PURPOSES
AMENDING AND REPEALING THE RELEVANT PROVISIONS OF THE NATIONAL INTERNAL REVENUE
CODE, AS AMENDED AND FOR OTHER PURPOSES," Congress thereby clearly expresses its intention to
amend any provision of the NIRC which stands in the way of accomplishing the purpose of the law.
PAL asserts that the amendment of its franchise must be reflected in the title of the law by specific reference to
P.D. No. 1590. It is unnecessary to do this in order to comply with the constitutional requirement, since it is
already stated in the title that the law seeks to amend the pertinent provisions of the NIRC, among which is
§103(q), in order to widen the base of the VAT. Actually, it is the bill which becomes a law that is required to
express in its title the subject of legislation. The titles of H. No. 11197 and S. No. 1630 in fact specifically referred
to §103 of the NIRC as among the provisions sought to be amended. We are satisfied that sufficient notice had
been given of the pendency of these bills in Congress before they were enacted into what is now R.A.
No. 7716.
In Philippine Judges Association v. Prado, supra, a similar argument as that now made by PAL was rejected. R.A.
No. 7354 is entitled AN ACT CREATING THE PHILIPPINE POSTAL CORPORATION, DEFINING ITS POWERS,
FUNCTIONS AND RESPONSIBILITIES, PROVIDING FOR REGULATION OF THE INDUSTRY AND FOR
OTHER PURPOSES CONNECTED THEREWITH. It contained a provision repealing all franking privileges. It was
contended that the withdrawal of franking privileges was not expressed in the title of the law. In holding that there
was sufficient description of the subject of the law in its title, including the repeal of franking privileges, this Court
held:
To require every end and means necessary for the accomplishment of the general objectives of
the statute to be expressed in its title would not only be unreasonable but would actually render
legislation impossible. [Cooley, Constitutional Limitations, 8th Ed., p. 297] As has been correctly
explained:
35
The details of a legislative act need not be specifically stated in its title, but matter
germane to the subject as expressed in the title, and adopted to the
accomplishment of the object in view, may properly be included in the act. Thus, it
is proper to create in the same act the machinery by which the act is to be
enforced, to prescribe the penalties for its infraction, and to remove obstacles in
the way of its execution. If such matters are properly connected with the subject as
expressed in the title, it is unnecessary that they should also have special mention
in the title. (Southern Pac. Co. v. Bartine, 170 Fed. 725)
(227 SCRA at 707-708)
VI. Claims of press freedom and religious liberty. We have held that, as a general proposition, the press is not
exempt from the taxing power of the State and that what the constitutional guarantee of free press prohibits are
laws which single out the press or target a group belonging to the press for special treatment or which in any way
discriminate against the press on the basis of the content of the publication, and R.A. No. 7716 is none of these.
Now it is contended by the PPI that by removing the exemption of the press from the VAT while maintaining those
granted to others, the law discriminates against the press. At any rate, it is averred, "even nondiscriminatory
taxation of constitutionally guaranteed freedom is unconstitutional."
With respect to the first contention, it would suffice to say that since the law granted the press a privilege, the law
could take back the privilege anytime without offense to the Constitution. The reason is simple: by granting
exemptions, the State does not forever waive the exercise of its sovereign prerogative.
Indeed, in withdrawing the exemption, the law merely subjects the press to the same tax burden to which other
businesses have long ago been subject. It is thus different from the tax involved in the cases invoked by the PPI.
The license tax in Grosjean v. American Press Co., 297 U.S. 233, 80 L. Ed. 660 (1936) was found to be
discriminatory because it was laid on the gross advertising receipts only of newspapers whose weekly circulation
was over 20,000, with the result that the tax applied only to 13 out of 124 publishers in Louisiana. These large
papers were critical of Senator Huey Long who controlled the state legislature which enacted the license tax. The
censorial motivation for the law was thus evident.
On the other hand, in Minneapolis Star & Tribune Co. v. Minnesota Comm'r of Revenue, 460 U.S. 575, 75 L. Ed.
2d 295 (1983), the tax was found to be discriminatory because although it could have been made liable for the
sales tax or, in lieu thereof, for the use tax on the privilege of using, storing or consuming tangible goods, the
press was not. Instead, the press was exempted from both taxes. It was, however, later made to pay
a special use tax on the cost of paper and ink which made these items "the only items subject to the use tax that
were component of goods to be sold at retail." The U.S. Supreme Court held that the differential treatment of the
press "suggests that the goal of regulation is not related to suppression of expression, and such goal is
presumptively unconstitutional." It would therefore appear that even a law that favors the press is constitutionally
suspect. (See the dissent of Rehnquist, J. in that case)
Nor is it true that only two exemptions previously granted by E.O. No. 273 are withdrawn "absolutely and
unqualifiedly" by R.A. No. 7716. Other exemptions from the VAT, such as those previously granted to PAL,
petroleum concessionaires, enterprises registered with the Export Processing Zone Authority, and many more are
likewise totally withdrawn, in addition to exemptions which are partially withdrawn, in an effort to broaden the base
of the tax.
The PPI says that the discriminatory treatment of the press is highlighted by the fact that transactions, which are
profit oriented, continue to enjoy exemption under R.A. No. 7716. An enumeration of some of these transactions
will suffice to show that by and large this is not so and that the exemptions are granted for a purpose. As the
Solicitor General says, such exemptions are granted, in some cases, to encourage agricultural production and, in
other cases, for the personal benefit of the end-user rather than for profit. The exempt transactions are:
(a) Goods for consumption or use which are in their original state (agricultural, marine and forest
products, cotton seeds in their original state, fertilizers, seeds, seedlings, fingerlings, fish, prawn
36
livestock and poultry feeds) and goods or services to enhance agriculture (milling of palay, corn,
sugar cane and raw sugar, livestock, poultry feeds, fertilizer, ingredients used for the manufacture
of feeds).
(b) Goods used for personal consumption or use (household and personal effects of citizens
returning to the Philippines) or for professional use, like professional instruments and implements,
by persons coming to the Philippines to settle here.
(c) Goods subject to excise tax such as petroleum products or to be used for manufacture of
petroleum products subject to excise tax and services subject to percentage tax.
(d) Educational services, medical, dental, hospital and veterinary services, and services rendered
under employer-employee relationship.
(e) Works of art and similar creations sold by the artist himself.
(f) Transactions exempted under special laws, or international agreements.
(g) Export-sales by persons not VAT-registered.
(h) Goods or services with gross annual sale or receipt not exceeding P500,000.00.
(Respondents' Consolidated Comment on the Motions for Reconsideration, pp. 58-60)
The PPI asserts that it does not really matter that the law does not discriminate against the press because "even
nondiscriminatory taxation on constitutionally guaranteed freedom is unconstitutional." PPI cites in support of this
assertion the following statement in Murdock v. Pennsylvania, 319 U.S. 105, 87 L. Ed. 1292 (1943):
The fact that the ordinance is "nondiscriminatory" is immaterial. The protection afforded by the
First Amendment is not so restricted. A license tax certainly does not acquire constitutional validity
because it classifies the privileges protected by the First Amendment along with the wares and
merchandise of hucksters and peddlers and treats them all alike. Such equality in treatment does
not save the ordinance. Freedom of press, freedom of speech, freedom of religion are in preferred
position.
The Court was speaking in that case of a license tax, which, unlike an ordinary tax, is mainly for regulation. Its
imposition on the press is unconstitutional because it lays a prior restraint on the exercise of its right. Hence,
although its application to others, such those selling goods, is valid, its application to the press or to religious
groups, such as the Jehovah's Witnesses, in connection with the latter's sale of religious books and pamphlets, is
unconstitutional. As the U.S. Supreme Court put it, "it is one thing to impose a tax on income or property of a
preacher. It is quite another thing to exact a tax on him for delivering a sermon."
A similar ruling was made by this Court in American Bible Society v. City of Manila, 101 Phil. 386 (1957) which
invalidated a city ordinance requiring a business license fee on those engaged in the sale of general
merchandise. It was held that the tax could not be imposed on the sale of bibles by the American Bible Society
without restraining the free exercise of its right to propagate.
The VAT is, however, different. It is not a license tax. It is not a tax on the exercise of a privilege, much less a
constitutional right. It is imposed on the sale, barter, lease or exchange of goods or properties or the sale or
exchange of services and the lease of properties purely for revenue purposes. To subject the press to its payment
is not to burden the exercise of its right any more than to make the press pay income tax or subject it to general
regulation is not to violate its freedom under the Constitution.
Additionally, the Philippine Bible Society, Inc. claims that although it sells bibles, the proceeds derived from the
sales are used to subsidize the cost of printing copies which are given free to those who cannot afford to pay so
37
that to tax the sales would be to increase the price, while reducing the volume of sale. Granting that to be the
case, the resulting burden on the exercise of religious freedom is so incidental as to make it difficult to differentiate
it from any other economic imposition that might make the right to disseminate religious doctrines costly.
Otherwise, to follow the petitioner's argument, to increase the tax on the sale of vestments would be to lay an
impermissible burden on the right of the preacher to make a sermon.
On the other hand the registration fee of P1,000.00 imposed by §107 of the NIRC, as amended by §7 of R.A. No.
7716, although fixed in amount, is really just to pay for the expenses of registration and enforcement of provisions
such as those relating to accounting in §108 of the NIRC. That the PBS distributes free bibles and therefore is not
liable to pay the VAT does not excuse it from the payment of this fee because it also sells some copies. At any
rate whether the PBS is liable for the VAT must be decided in concrete cases, in the event it is assessed this tax
by the Commissioner of Internal Revenue.
VII. Alleged violations of the due process, equal protection and contract clauses and the rule on taxation. CREBA
asserts that R.A. No. 7716 (1) impairs the obligations of contracts, (2) classifies transactions as covered or
exempt without reasonable basis and (3) violates the rule that taxes should be uniform and equitable and that
Congress shall "evolve a progressive system of taxation."
With respect to the first contention, it is claimed that the application of the tax to existing contracts of the sale of
real property by installment or on deferred payment basis would result in substantial increases in the monthly
amortizations to be paid because of the 10% VAT. The additional amount, it is pointed out, is something that the
buyer did not anticipate at the time he entered into the contract.
The short answer to this is the one given by this Court in an early case: "Authorities from numerous sources are
cited by the plaintiffs, but none of them show that a lawful tax on a new subject, or an increased tax on an old one,
interferes with a contract or impairs its obligation, within the meaning of the Constitution. Even though such
taxation may affect particular contracts, as it may increase the debt of one person and lessen the security of
another, or may impose additional burdens upon one class and release the burdens of another, still the tax must
be paid unless prohibited by the Constitution, nor can it be said that it impairs the obligation of any existing
contract in its true legal sense." (La Insular v. Machuca Go-Tauco and Nubla Co-Siong, 39 Phil. 567, 574 (1919)).
Indeed not only existing laws but also "the reservation of the essential attributes of sovereignty, is . . . read into
contracts as a postulate of the legal order." (Philippine-American Life Ins. Co. v. Auditor General, 22 SCRA 135,
147 (1968)) Contracts must be understood as having been made in reference to the possible exercise of the
rightful authority of the government and no obligation of contract can extend to the defeat of that authority.
(Norman v. Baltimore and Ohio R.R., 79 L. Ed. 885 (1935)).
It is next pointed out that while §4 of R.A. No. 7716 exempts such transactions as the sale of agricultural products,
food items, petroleum, and medical and veterinary services, it grants no exemption on the sale of real property
which is equally essential. The sale of real property for socialized and low-cost housing is exempted from the tax,
but CREBA claims that real estate transactions of "the less poor," i.e., the middle class, who are equally
homeless, should likewise be exempted.
The sale of food items, petroleum, medical and veterinary services, etc., which are essential goods and services
was already exempt under §103, pars. (b) (d) (1) of the NIRC before the enactment of R.A. No. 7716. Petitioner is
in error in claiming that R.A. No. 7716 granted exemption to these transactions, while subjecting those of
petitioner to the payment of the VAT. Moreover, there is a difference between the "homeless poor" and the
"homeless less poor" in the example given by petitioner, because the second group or middle class can afford to
rent houses in the meantime that they cannot yet buy their own homes. The two social classes are thus differently
situated in life. "It is inherent in the power to tax that the State be free to select the subjects of taxation, and it has
been repeatedly held that 'inequalities which result from a singling out of one particular class for taxation, or
exemption infringe no constitutional limitation.'" (Lutz v. Araneta, 98 Phil. 148, 153 (1955). Accord, City of Baguio
v. De Leon, 134 Phil. 912 (1968); Sison, Jr. v. Ancheta, 130 SCRA 654, 663 (1984); Kapatiran ng mga
Naglilingkod sa Pamahalaan ng Pilipinas, Inc. v. Tan, 163 SCRA 371 (1988)).
38
Finally, it is contended, for the reasons already noted, that R.A. No. 7716 also violates Art. VI, §28(1) which
provides that "The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive
system of taxation."
Equality and uniformity of taxation means that all taxable articles or kinds of property of the same class be taxed
at the same rate. The taxing power has the authority to make reasonable and natural classifications for purposes
of taxation. To satisfy this requirement it is enough that the statute or ordinance applies equally to all persons,
forms and corporations placed in similar situation. (City of Baguio v. De Leon, supra; Sison, Jr. v. Ancheta, supra)
Indeed, the VAT was already provided in E.O. No. 273 long before R.A. No. 7716 was enacted. R.A. No. 7716
merely expands the base of the tax. The validity of the original VAT Law was questioned in Kapatiran ng
Naglilingkod sa Pamahalaan ng Pilipinas, Inc. v. Tan, 163 SCRA 383 (1988) on grounds similar to those made in
these cases, namely, that the law was "oppressive, discriminatory, unjust and regressive in violation of Art. VI,
§28(1) of the Constitution." (At 382) Rejecting the challenge to the law, this Court held:
As the Court sees it, EO 273 satisfies all the requirements of a valid tax. It is uniform. . . .
The sales tax adopted in EO 273 is applied similarly on all goods and services sold to the public,
which are not exempt, at the constant rate of 0% or 10%.
The disputed sales tax is also equitable. It is imposed only on sales of goods or services by
persons engaged in business with an aggregate gross annual sales exceeding P200,000.00.
Small corner sari-sari stores are consequently exempt from its application. Likewise exempt from
the tax are sales of farm and marine products, so that the costs of basic food and other
necessities, spared as they are from the incidence of the VAT, are expected to be relatively lower
and within the reach of the general public.
(At 382-383)
The CREBA claims that the VAT is regressive. A similar claim is made by the Cooperative Union of the
Philippines, Inc. (CUP), while petitioner Juan T. David argues that the law contravenes the mandate of Congress
to provide for a progressive system of taxation because the law imposes a flat rate of 10% and thus places the tax
burden on all taxpayers without regard to their ability to pay.
The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT, are regressive. What
it simply provides is that Congress shall "evolve a progressive system of taxation." The constitutional provision
has been interpreted to mean simply that "direct taxes are . . . to be preferred [and] as much as possible, indirect
taxes should be minimized." (E. FERNANDO, THE CONSTITUTION OF THE PHILIPPINES 221 (Second ed.
(1977)). Indeed, the mandate to Congress is not to prescribe, but to evolve, a progressive tax system. Otherwise,
sales taxes, which perhaps are the oldest form of indirect taxes, would have been prohibited with the proclamation
of Art. VIII, §17(1) of the 1973 Constitution from which the present Art. VI, §28(1) was taken. Sales taxes are also
regressive.
Resort to indirect taxes should be minimized but not avoided entirely because it is difficult, if not impossible, to
avoid them by imposing such taxes according to the taxpayers' ability to pay. In the case of the VAT, the law
minimizes the regressive effects of this imposition by providing for zero rating of certain transactions (R.A. No.
7716, §3, amending §102 (b) of the NIRC), while granting exemptions to other transactions. (R.A. No. 7716, §4,
amending §103 of the NIRC).
Thus, the following transactions involving basic and essential goods and services are exempted from the VAT:
(a) Goods for consumption or use which are in their original state (agricultural, marine and forest
products, cotton seeds in their original state, fertilizers, seeds, seedlings, fingerlings, fish, prawn
livestock and poultry feeds) and goods or services to enhance agriculture (milling of palay, corn
sugar cane and raw sugar, livestock, poultry feeds, fertilizer, ingredients used for the manufacture
of feeds).
39
(b) Goods used for personal consumption or use (household and personal effects of citizens
returning to the Philippines) and or professional use, like professional instruments and
implements, by persons coming to the Philippines to settle here.
(c) Goods subject to excise tax such as petroleum products or to be used for manufacture of
petroleum products subject to excise tax and services subject to percentage tax.
(d) Educational services, medical, dental, hospital and veterinary services, and services rendered
under employer-employee relationship.
(e) Works of art and similar creations sold by the artist himself.
(f) Transactions exempted under special laws, or international agreements.
(g) Export-sales by persons not VAT-registered.
(h) Goods or services with gross annual sale or receipt not exceeding P500,000.00.
(Respondents' Consolidated Comment on the Motions for Reconsideration, pp. 58-60)
On the other hand, the transactions which are subject to the VAT are those which involve goods and services
which are used or availed of mainly by higher income groups. These include real properties held primarily for sale
to customers or for lease in the ordinary course of trade or business, the right or privilege to use patent, copyright,
and other similar property or right, the right or privilege to use industrial, commercial or scientific equipment,
motion picture films, tapes and discs, radio, television, satellite transmission and cable television time, hotels,
restaurants and similar places, securities, lending investments, taxicabs, utility cars for rent, tourist buses, and
other common carriers, services of franchise grantees of telephone and telegraph.
The problem with CREBA's petition is that it presents broad claims of constitutional violations by tendering issues
not at retail but at wholesale and in the abstract. There is no fully developed record which can impart to
adjudication the impact of actuality. There is no factual foundation to show in the concrete the application of the
law to actual contracts and exemplify its effect on property rights. For the fact is that petitioner's members have
not even been assessed the VAT. Petitioner's case is not made concrete by a series of hypothetical questions
asked which are no different from those dealt with in advisory opinions.
The difficulty confronting petitioner is thus apparent. He alleges arbitrariness. A mere allegation,
as here, does not suffice. There must be a factual foundation of such unconstitutional taint.
Considering that petitioner here would condemn such a provision as void on its face, he has not
made out a case. This is merely to adhere to the authoritative doctrine that where the due process
and equal protection clauses are invoked, considering that they are not fixed rules but rather broad
standards, there is a need for proof of such persuasive character as would lead to such a
conclusion. Absent such a showing, the presumption of validity must prevail.
(Sison, Jr. v. Ancheta, 130 SCRA at 661)
Adjudication of these broad claims must await the development of a concrete case. It may be that postponement
of adjudication would result in a multiplicity of suits. This need not be the case, however. Enforcement of the law
may give rise to such a case. A test case, provided it is an actual case and not an abstract or hypothetical one,
may thus be presented.
Nor is hardship to taxpayers alone an adequate justification for adjudicating abstract issues. Otherwise,
adjudication would be no different from the giving of advisory opinion that does not really settle legal issues.
We are told that it is our duty under Art. VIII, §1, ¶2 to decide whenever a claim is made that "there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of
40
the government." This duty can only arise if an actual case or controversy is before us. Under Art . VIII, §5 our
jurisdiction is defined in terms of "cases" and all that Art. VIII, §1, ¶2 can plausibly mean is that in the exercise of
that jurisdiction we have the judicial power to determine questions of grave abuse of discretion by any branch or
instrumentality of the government.
Put in another way, what is granted in Art. VIII, §1, ¶2 is "judicial power," which is "the power of a court to hear
and decide cases pending between parties who have the right to sue and be sued in the courts of law and equity"
(Lamb v. Phipps, 22 Phil. 456, 559 (1912)), as distinguished from legislative and executive power. This power
cannot be directly appropriated until it is apportioned among several courts either by the Constitution, as in the
case of Art. VIII, §5, or by statute, as in the case of the Judiciary Act of 1948 (R.A. No. 296) and the Judiciary
Reorganization Act of 1980 (B.P. Blg. 129). The power thus apportioned constitutes the court's "jurisdiction,"
defined as "the power conferred by law upon a court or judge to take cognizance of a case, to the exclusion of all
others." (United States v. Arceo, 6 Phil. 29 (1906)) Without an actual case coming within its jurisdiction, this Court
cannot inquire into any allegation of grave abuse of discretion by the other departments of the government.
VIII. Alleged violation of policy towards cooperatives. On the other hand, the Cooperative Union of the Philippines
(CUP), after briefly surveying the course of legislation, argues that it was to adopt a definite policy of granting tax
exemption to cooperatives that the present Constitution embodies provisions on cooperatives. To subject
cooperatives to the VAT would therefore be to infringe a constitutional policy. Petitioner claims that in 1973, P.D.
No. 175 was promulgated exempting cooperatives from the payment of income taxes and sales taxes but in 1984,
because of the crisis which menaced the national economy, this exemption was withdrawn by P.D. No. 1955; that
in 1986, P.D. No. 2008 again granted cooperatives exemption from income and sales taxes until December 31,
1991, but, in the same year, E.O. No. 93 revoked the exemption; and that finally in 1987 the framers of the
Constitution "repudiated the previous actions of the government adverse to the interests of the cooperatives, that
is, the repeated revocation of the tax exemption to cooperatives and instead upheld the policy of strengthening
the cooperatives by way of the grant of tax exemptions," by providing the following in Art. XII:
§1. The goals of the national economy are a more equitable distribution of opportunities, income,
and wealth; a sustained increase in the amount of goods and services produced by the nation for
the benefit of the people; and an expanding productivity as the key to raising the quality of life for
all, especially the underprivileged.
The State shall promote industrialization and full employment based on sound agricultural
development and agrarian reform, through industries that make full and efficient use of human and
natural resources, and which are competitive in both domestic and foreign markets. However, the
State shall protect Filipino enterprises against unfair foreign competition and trade practices.
In the pursuit of these goals, all sectors of the economy and all regions of the country shall be
given optimum opportunity to develop. Private enterprises, including corporations, cooperatives,
and similar collective organizations, shall be encouraged to broaden the base of their ownership.
§15. The Congress shall create an agency to promote the viability and growth of cooperatives as
instruments for social justice and economic development.
Petitioner's contention has no merit. In the first place, it is not true that P.D. No. 1955 singled out cooperatives by
withdrawing their exemption from income and sales taxes under P.D. No. 175, §5. What P.D. No. 1955, §1 did
was to withdraw the exemptions and preferential treatments theretofore granted to private business enterprises in
general, in view of the economic crisis which then beset the nation. It is true that after P.D. No. 2008, §2 had
restored the tax exemptions of cooperatives in 1986, the exemption was again repealed by E.O. No. 93, §1, but
then again cooperatives were not the only ones whose exemptions were withdrawn. The withdrawal of tax
incentives applied to all, including government and private entities. In the second place, the Constitution does not
really require that cooperatives be granted tax exemptions in order to promote their growth and viability. Hence,
there is no basis for petitioner's assertion that the government's policy toward cooperatives had been one of
vacillation, as far as the grant of tax privileges was concerned, and that it was to put an end to this indecision that
the constitutional provisions cited were adopted. Perhaps as a matter of policy cooperatives should be granted tax
41
exemptions, but that is left to the discretion of Congress. If Congress does not grant exemption and there is no
discrimination to cooperatives, no violation of any constitutional policy can be charged.
Indeed, petitioner's theory amounts to saying that under the Constitution cooperatives are exempt from taxation.
Such theory is contrary to the Constitution under which only the following are exempt from taxation: charitable
institutions, churches and parsonages, by reason of Art. VI, §28 (3), and non-stock, non-profit educational
institutions by reason of Art. XIV, §4 (3).
CUP's further ground for seeking the invalidation of R.A. No. 7716 is that it denies cooperatives the equal
protection of the law because electric cooperatives are exempted from the VAT. The classification between
electric and other cooperatives (farmers cooperatives, producers cooperatives, marketing cooperatives, etc.)
apparently rests on a congressional determination that there is greater need to provide cheaper electric power to
as many people as possible, especially those living in the rural areas, than there is to provide them with other
necessities in life. We cannot say that such classification is unreasonable.
We have carefully read the various arguments raised against the constitutional validity of R.A. No. 7716. We have
in fact taken the extraordinary step of enjoining its enforcement pending resolution of these cases. We have now
come to the conclusion that the law suffers from none of the infirmities attributed to it by petitioners and that its
enactment by the other branches of the government does not constitute a grave abuse of discretion. Any question
as to its necessity, desirability or expediency must be addressed to Congress as the body which is electorally
responsible, remembering that, as Justice Holmes has said, "legislators are the ultimate guardians of the liberties
and welfare of the people in quite as great a degree as are the courts." (Missouri, Kansas & Texas Ry. Co. v.
May, 194 U.S. 267, 270, 48 L. Ed. 971, 973 (1904)). It is not right, as petitioner in G.R. No. 115543 does in
arguing that we should enforce the public accountability of legislators, that those who took part in passing the law
in question by voting for it in Congress should later thrust to the courts the burden of reviewing measures in the
flush of enactment. This Court does not sit as a third branch of the legislature, much less exercise a veto power
over legislation.
WHEREFORE, the motions for reconsideration are denied with finality and the temporary restraining order
previously issued is hereby lifted.
SECOND DIVISION
G.R. No. 196596, November 09, 2016
COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. DE LA SALLE UNIVERSITY,

INC., Respondent.
The Factual Antecedents
Sometime in 2004, the Bureau of Internal Revenue (BIR) issued to DLSU Letter of Authority (LOA)
No. 2794 authorizing its revenue officers to examine the latter's books of accounts and other
accounting records for all internal revenue taxes for the period Fiscal Year Ending 2003 and
Unverified Prior Years.5
On May 19, 2004, BIR issued a Preliminary Assessment Notice to DLSU.6
Subsequently on August 18, 2004, the BIR through a Formal Letter of Demand assessed DLSU the
following deficiency taxes: (1) income tax on rental earnings from restaurants/canteens and
bookstores operating within the campus; (2) value-added tax (VAT) on business income; and
(3) documentary stamp tax (DST) on loans and lease contracts. The BIR demanded the payment
42
of P17,303,001.12, inclusive of surcharge, interest and penalty for taxable years 2001, 2002
and 2003.7
DLSU protested the assessment. The Commissioner failed to act on the protest; thus, DLSU filed on
August 3, 2005 a petition for review with the CTA Division.8
DLSU, a non-stock, non-profit educational institution, principally anchored its petition on Article
XIV, Section 4 (3) of the Constitution, which reads:
chanRoble svirtual Lawlib ra ry
(3) All revenues and assets of non-stock, non-profit educational institutions used actually, directly, and
exclusively for educational purposes shall be exempt from taxes and duties. xxx.
On January 5, 2010, the CTA Division partially granted DLSU's petition for review. The dispositive
portion of the decision reads:
WHEREFORE, the Petition for Review is PARTIALLY GRANTED. The DST assessment on the loan
transactions of [DLSU] in the amount of P1,1681,774.00 is hereby CANCELLED. However, [DLSU]
is ORDERED TO PAY deficiency income tax, VAT and DST on its lease contracts, plus 25% surcharge
for the fiscal years 2001, 2002 and 2003 in the total amount of P18,421,363.53...xxx.
In addition, [DLSU] is hereby held liable to pay 20% delinquency interest on the total amount due
computed from September 30, 2004 until full payment thereof pursuant to Section 249(C)(3) of the
[National Internal Revenue Code]. Further, the compromise penalties imposed by [the
Commissioner] were excluded, there. being no compromise agreement between the parties.
SO ORDERED.9 ChanRoblesVi rtua lawlib rary
Both the Commissioner and DLSU moved for the reconsideration of the January 5, 2010
decision.10 On April 6, 2010, the CTA Division denied the Commissioner's motion for
reconsideration while it held in abeyance the resolution on DLSU's motion for reconsideration.11
On May 13, 2010, the Commissioner appealed to the CTA En Banc (CTA En Banc Case No. 622)
arguing that DLSU's use of its revenues and assets for non-educational or commercial purposes
removed these items from the exemption coverage under the Constitution.12
On May 18, 2010, DLSU formally offered to the CTA Division supplemental pieces of documentary
evidence to prove that its rental income was used actually, directly and exclusively for educational
purposes.13The Commissioner did not promptly object to the formal offer of supplemental evidence
despite notice.14
On July 29, 2010, the CTA Division, in view of the supplemental evidence submitted, reduced the
amount of DLSU's tax deficiencies. The dispositive portion of the amended decision reads:
WHEREFORE, [DLSU]'s Motion for Partial Reconsideration is hereby PARTIALLY GRANTED.

[DLSU] is hereby ORDERED TO PAY for deficiency income tax, VAT and DST plus 25% surcharge
for the fiscal years 2001, 2002 and 2003 in the total adjusted amount of P5,506,456.71...xxx.
In addition, [DLSU] is hereby held liable to pay 20% per annum deficiency interest on the...basic
deficiency taxes...until full payment thereof pursuant to Section 249(B) of the [National Internal
Revenue Code]...xxx.
Further, [DLSU] is hereby held liable to pay 20% per annum delinquency interest on the deficiency
taxes, surcharge and deficiency interest which have accrued...from September 30, 2004 until fully
paid.15 ChanRoblesVirt ualawli bra ry
43
Consequently, the Commissioner supplemented its petition with the CTA En Banc and argued that
the CTA Division erred in admitting DLSU's additional evidence.16
Dissatisfied with the partial reduction of its tax liabilities, DLSU filed a separate petition for review
with the CTA En Banc (CTA En Banc Case No. 671) on the following grounds: (1) the entire
assessment should have been cancelled because it was based on an invalid LOA; (2) assuming the
LOA was valid, the CTA Division should still have cancelled the entire assessment because DLSU
submitted evidence similar to those submitted by Ateneo De Manila University (Ateneo) in
a separate case where the CTA cancelled Ateneo's tax assessment;17 and (3) the CTA Division
erred in finding that a portion of DLSU's rental income was not proved to have been used actually,
directly and exclusively for educational purposes.18 chanroblesv irt uallawl ibra ry
The CTA En Banc Rulings
CTA En Banc Case No. 622
The CTA En Banc dismissed the Commissioner's petition for review and sustained the findings of
the CTA Division.19
Tax on rental income
Relying on the findings of the court-commissioned Independent Certified Public Accountant

(Independent CPA), the CTA En Banc found that DLSU was able to prove that a portion of the
assessed rental income was used actually, directly and exclusively for educational purposes; hence,
exempt from tax.20 The CTA En Banc was satisfied with DLSU's supporting evidence confirming that
part of its rental income had indeed been used to pay the loan it obtained to build the university's
Physical Education - Sports Complex.21
Parenthetically, DLSU's unsubstantiated claim for exemption, i.e., the part of its income that was
not shown by supporting documents to have been actually, directly and exclusively used for
educational purposes, must be subjected to income tax and VAT.22
DST on loan and mortgage transactions
Contrary to the Commissioner's contention, DLSU proved its remittance of the DST due on its loan
and mortgage documents.23 The CTA En Banc found that DLSU's DST payments had been remitted
to the BIR, evidenced by the stamp on the documents made by a DST imprinting machine, which is
allowed under Section 200 (D) of the National Internal Revenue Code (Tax Code)24 and Section 2
of Revenue Regulations (RR) No. 15-2001.25 cralawred
Admissibility of DLSU's supplemental evidence
The CTA En Banc held that the supplemental pieces of documentary evidence were admissible even
if DLSU formally offered them only when it moved for reconsideration of the CTA Division's original
decision. Notably, the law creating the CTA provides that proceedings before it shall not be
governed strictly by the technical rules of evidence.26
The Commissioner moved but failed to obtain a reconsideration of the CTA En Banc's December 10,
2010 decision.27 Thus, she came to this court for relief through a petition for review
on certiorari (G.R. No. 196596).
CTA En Banc Case No. 671

44
The CTA En Banc partially granted DLSU's petition for review and further reduced its tax liabilities
to P2,554,825.47 inclusive of surcharge.28
On the validity of the Letter of Authority
The issue of the LOA's validity was raised during trial;29 hence, the issue was deemed properly
submitted for decision and reviewable on appeal.
Citing jurisprudence, the CTA En Banc held that a LOA should cover only one taxable period and
that the practice of issuing a LOA covering audit of unverified prior years is prohibited.30 The
prohibition is consistent with Revenue Memorandum Order (RMO) No. 43-90, which provides that if
the audit includes more than one taxable period, the other periods or years shall be specifically
indicated in the LOA.31
In the present case, the LOA issued to DLSU is for Fiscal Year Ending 2003 and Unverified Prior
Years. Hence, the assessments for deficiency income tax, VAT and DST for taxable years 2001 and
2002 are void, but the assessment for taxable year 2003 is valid.32
On the applicability of the Ateneo case
The CTA En Banc held that the Ateneo case is not a valid precedent because it involved different
parties, factual settings, bases of assessments, sets of evidence, and defenses.33
On the CTA Division's appreciation of the evidence
The CTA En Banc affirmed the CTA Division's appreciation of DLSU's evidence. It held that while
DLSU successfully proved that a portion of its rental income was transmitted and used to pay the
loan obtained to fund the construction of the Sports Complex, the rental income from other sources
were not shown to have been actually, directly and exclusively used for educational purposes.34
Not pleased with the CTA En Banc's ruling, both DLSU (G.R. No. 198841) and the Commissioner
(G.R. No. 198941) came to this Court for relief.chanrob lesvi rtua llawli bra ry
The Consolidated Petitions
G.R. No. 196596
The Commissioner submits the following arguments:
First, DLSU's rental income is taxable regardless of how such income is derived, used or disposed
of.35 DLSU's operations of canteens and bookstores within its campus even though exclusively
serving the university community do not negate income tax liability.36
The Commissioner contends that Article XIV, Section 4 (3) of the Constitution must be harmonized
with Section 30 (H) of the Tax Code, which states among others, that the income of whatever kind
and character of [a non-stock and non-profit educational institution] from any of [its] properties,
real or personal, or from any of (its] activities conducted for profit regardless of the disposition
made of such income, shall be subject to tax imposed by this Code.37
The Commissioner argues that the CTA En Banc misread and misapplied the case
of Commissioner of Internal Revenue v. YMCA38 to support its conclusion that revenues
45
however generated are covered by the constitutional exemption, provided that, the revenues will
be used for educational purposes or will be held in reserve for such purposes.39
On the contrary, the Commissioner posits that a tax-exempt organization like DLSU is exempt only
from property tax but not from income tax on the rentals earned from property.40 Thus, DLSU's
income from the leases of its real properties is not exempt from taxation even if the income would
be used for educational purposes.41
Second, the Commissioner insists that DLSU did not prove the fact of DST payment42 and that it is
not qualified to use the On-Line Electronic DST Imprinting Machine, which is available only to
certain classes of taxpayers under RR No. 9-2000.43
Finally, the Commissioner objects to the admission of DLSU's supplemental offer of evidence. The
belated submission of supplemental evidence reopened the case for trial, and worse, DLSU offered
the supplemental evidence only after it received the unfavorable CTA Division's original
decision.44 In any case, DLSU's submission of supplemental documentary evidence was
unnecessary since its rental income was taxable regardless of its disposition.45
G.R. No. 198841
DLSU argues as that:
First, RMO No. 43-90 prohibits the practice of issuing a LOA with any indication of unverified prior
years. A LOA issued contrary to RMO No. 43-90 is void, thus, an assessment issued based on such
defective LOA must also be void.46
DLSU points out that the LOA issued to it covered the Fiscal Year Ending 2003 and Unverified Prior
Years. On the basis of this defective LOA, the Commissioner assessed DLSU for deficiency income
tax, VAT and DST for taxable years 2001, 2002 and 2003.47 DLSU objects to the CTA En Banc's
conclusion that the LOA is valid for taxable year 2003. According to DLSU, when RMO No. 43-90
provides that:
The practice of issuing [LOAs] covering audit of 'unverified prior years' is hereby prohibited.
ChanRobles Virtualawl ibra ry
it refers to the LOA which has the format "Base Year + Unverified Prior Years." Since the LOA
issued to DLSU follows this format, then any assessment arising from it must be entirely voided.48
Second, DLSU invokes the principle of uniformity in taxation, which mandates that for similarly
situated parties, the same set of evidence should be appreciated and weighed in the same
manner.49 The CTA En Banc erred when it did not similarly appreciate DLSU's evidence as it did to
the pieces of evidence submitted by Ateneo, also a non-stock, non-profit educational institution.50
G.R. No. 198941
The issues and arguments raised by the Commissioner in G.R. No. 198941 petition are exactly the
same as those she raised in her: (1) petition docketed as G.R. No. 196596 and (2) comment on
DLSU's petition docketed as G.R. No. 198841.51 chanroblesvi rtua llawlib ra ry
Counter-arguments
DLSU's Comment on G.R. No. 196596
First, DLSU questions the defective verification attached to the petition.52
46
Second, DLSU stresses that Article XIV, Section 4 (3) of the Constitution is clear that all assets and
revenues of non-stock, non-profit educational institutions used actually, directly and exclusively for
educational purposes are exempt from taxes and duties.53
On this point, DLSU explains that: (1) the tax exemption of nonstock, non-profit educational
institutions is novel to the 1987 Constitution and that Section 30 (H) of the 1997 Tax
Code cannot amend the 1987 Constitution;54 (2) Section 30 of the 1997 Tax Code is almost an
exact replica of Section 26 of the 1977 Tax Code - with the addition of non-stock, non-profit
educational institutions to the list of tax-exempt entities; and (3) that the 1977 Tax Code was
promulgated when the 1973 Constitution was still in place.
DLSU elaborates that the tax exemption granted to a private educational institution under the 1973
Constitution was only for real property tax. Back then, the special tax treatment on income of
private educational institutions only emanates from statute, i.e., the 1977 Tax Code. Only under
the 1987 Constitution that exemption from tax of all the assets and revenues of non-stock, non-
profit educational institutions used actually, directly and exclusively for educational purposes, was
expressly and categorically enshrined.55
DLSU thus invokes the doctrine of constitutional supremacy, which renders any subsequent law
that is contrary to the Constitution void and without any force and effect.56 Section 30 (H) of the
1997 Tax Code insofar as it subjects to tax the income of whatever kind and character of a non-
stock and non-profit educational institution from any of its properties, real or personal, or from any
of its activities conducted for profit regardless of the disposition made of such income, should be
declared without force and effect in view of the constitutionally granted tax exemption on "all
revenues and assets of non-stock, non-profit educational institutions used actually, directly, and
exclusively for educational purposes."57
DLSU further submits that it complies with the requirements enunciated in the YMCA case, that for
an exemption to be granted under Article XIV, Section 4 (3) of the Constitution, the taxpayer must
prove that: (1) it falls under the classification non-stock, non-profit educational institution; and (2)
the income it seeks to be exempted from taxation is used actually, directly and exclusively for
educational purposes.58 Unlike YMCA, which is not an educational institution, DLSU is undisputedly
a non-stock, non-profit educational institution. It had also submitted evidence to prove that it
actually, directly and exclusively used its income for educational purposes.59
DLSU also cites the deliberations of the 1986 Constitutional Commission where they recognized
that the tax exemption was granted "to incentivize private educational institutions to share with the
State the responsibility of educating the youth."60
Third, DLSU highlights that both the CTA En Banc and Division found that the bank that handled
DLSU's loan and mortgage transactions had remitted to the BIR the DST through an imprinting
machine, a method allowed under RR No. 15-2001.61 In any case, DLSU argues that it cannot be
held liable for DST owmg to the exemption granted under the Constitution.62
Finally, DLSU underscores that the Commissioner, despite notice, did not oppose the formal offer of
supplemental evidence. Because of the Commissioner's failure to timely object, she became bound
by the results of the submission of such supplemental evidence.63
The CIR's Comment on G.R. No. 198841
The Commissioner submits that DLSU is estopped from questioning the LOA's validity because it
failed to raise this issue in both the administrative and judicial proceedings.64 That it was asked on
47
crossexamination during the trial does not make it an issue that the CTA could resolve.65 The
Commissioner also maintains that DLSU's rental income is not tax-exempt because an educational
institution is only exempt from property tax but not from tax on the income earned from the
property.66
DLSU's Comment on G.R. No. 198941
DLSU puts forward the same counter-arguments discussed above.67
In addition, DLSU prays that the Court award attorney's fees in its favor because it was constrained
to unnecessarily retain the services of counsel in this separate petition.68
chanroblesv irt uallawl ibra ry
Issues
Although the parties raised a number of issues, the Court shall decide only the pivotal issues, which
we summarize as follows:
I. Whether DLSU's income and revenues proved to have been used actually, directly and
exclusively for educational purposes are exempt from duties and taxes; chanroble slaw
II. Whether the entire assessment should be voided because of the defective LOA; chanrobles law
III. Whether the CTA correctly admitted DLSU's supplemental pieces of evidence; and
IV. Whether the CTA's appreciation of the sufficiency ofDLSU's evidence may be disturbed by the
Court.
Our Ruling
As we explain in full below, we rule that:
I. The income, revenues and assets of non-stock, non-profit educational institutions proved to
have been used actually, directly and exclusively for educational purposes are exempt from
duties and taxes.
II. The LOA issued to DLSU is not entirely void. The assessment for taxable year 2003 is valid.
III. The CTA correctly admitted DLSU's formal offer of supplemental evidence; and
IV. The CTA's appreciation of evidence is conclusive unless the CTA is shown to have manifestly
overlooked certain relevant facts not disputed by the parties and which, if properly considered,
would justify a different conclusion.
The parties failed to convince the Court that the CTA overlooked or failed to consider relevant
facts. We thus sustain the CTA En Banc's findings that:
a. DLSU proved that a portion of its rental income was used actually, directly and
exclusively for educational purposes; and
b. DLSU proved the payment of the DST through its bank's on-line imprinting machine.
48
I. The revenues and assets of non-stock, non-profit educational institutions proved to
have been used actually, directly, and exclusively for educational purposes are exempt
from duties and taxes.
DLSU rests it case on Article XIV, Section 4 (3) of the 1987 Constitution, which reads:
(3) All revenues and assets of non-stock, non-profit educational institutions used actually, directly,
and exclusively for educational purposes shall be exempt from taxes and duties. Upon the
dissolution or cessation of the corporate existence of such institutions, their assets shall be disposed
of in the manner provided by law. Proprietary educational institutions, including those
cooperatively owned, may likewise be entitled to such exemptions subject to the limitations
provided by law including restrictions on dividends and provisions for reinvestment [underscoring
and emphasis supplied]
Before fully discussing the merits of the case, we observe that:
First, the constitutional provision refers to two kinds of educational institutions: (1) non-stock, non-
profit educational institutions and (2) proprietary educational institutions.69
Second, DLSU falls under the first category. Even the Commissioner admits the status of DLSU as a
non-stock, non-profit educational institution.70
Third, while DLSU's claim for tax exemption arises from and is based on the Constitution, the
Constitution, in the same provision, also imposes certain conditions to avail of the exemption. We
discuss below the import of the constitutional text vis-a-vis the Commissioner's counter-
arguments.
Fourth, there is a marked distinction between the treatment of nonstock, non-profit educational
institutions and proprietary educational institutions. The tax exemption granted to non-stock, non-
profit educational institutions is conditioned only on the actual, direct and exclusive use of their
revenues and assets for educational purposes. While tax exemptions may also be granted to
proprietary educational institutions, these exemptions may be subject to limitations imposed by
Congress.
As we explain below, the marked distinction between a non-stock, non-profit and a proprietary
educational institution is crucial in determining the nature and extent of the tax exemption granted
to non-stock, non-profit educational institutions.
The Commissioner opposes DLSU's claim for tax exemption on the basis of Section 30 (H) of the
Tax Code. The relevant text reads:
The following organizations shall not be taxed under this Title [Tax on Income] in respect to
income received by them as such:
xxxx
(H) A non-stock and non-profit educational institution
xxxx
Notwithstanding the provisions in the preceding paragraphs, the income of whatever kind and
character of the foregoing organizations from any of their properties, real or personal, or from any
of their activities conducted for profit regardless of the disposition made of such
income shall be subject to tax imposed under this Code. [underscoring and emphasis
supplied] ChanRoblesVi rt ualawlib ra ry
49
The Commissioner posits that the 1997 Tax Code qualified the tax exemption granted to non-stock,
non-profit educational institutions such that the revenues and income they derived from their
assets, or from any of their activities conducted for profit, are taxable even if these revenues and
income are used for educational purposes.
Did the 1997 Tax Code qualifY the tax exemption constitutionally-granted to non-stock, non-profit
educational institutions?
While the present petition appears to be a case of first impression,71 the Court in the YMCA case
had in fact already analyzed and explained the meaning of Article XIV, Section 4 (3) of the
Constitution. The Court in that case made doctrinal pronouncements that are relevant to the
present case.
The issue in YMCA was whether the income derived from rentals of real property owned by the
YMCA, established as a "welfare, educational and charitable non-profit corporation," was subject to
income tax under the Tax Code and the Constitution.72
The Court denied YMCA's claim for exemption on the ground that as a charitable institution falling
under Article VI, Section 28 (3) of the Constitution,73 the YMCA is not tax-exempt per se; "what
is exempted is not the institution itself...those exempted from real estate taxes are lands, buildings
and improvements actually, directly and exclusively used for religious, charitable or educational
purposes."74
The Court held that the exemption claimed by the YMCA is expressly disallowed by the last
paragraph of then Section 27 (now Section 30) of the Tax Code, which mandates that the income
of exempt organizations from any of their properties, real or personal, are subject to the same tax
imposed by the Tax Code, regardless of how that income is used. The Court ruled that the last
paragraph of Section 27 unequivocally subjects to tax the rent income of the YMCA from its
property.75
In short, the YMCA is exempt only from property tax but not from income tax.
As a last ditch effort to avoid paying the taxes on its rental income, the YMCA invoked the tax
privilege granted under Article XIV, Section 4 (3) of the Constitution.
The Court denied YMCA's claim that it falls under Article XIV, Section 4 (3) of the Constitution
holding that the term educational institution, when used in laws granting tax exemptions, refers to
the school system (synonymous with formal education); it includes a college or an educational
establishment; it refers to the hierarchically structured and chronologically graded learnings
organized and provided by the formal school system.76
The Court then significantly laid down the requisites for availing the tax exemption under Article
XIV, Section 4 (3), namely: (1) the taxpayer falls under the classification non-stock, non-profit
educational institution; and (2) the income it seeks to be exempted from taxation is used
actually, directly and exclusively for educational purposes.77
We now adopt YMCA as precedent and hold that:
1. The last paragraph of Section 30 of the Tax Code is without force and effect with respect to
non-stock, non-profit educational institutions, provided, that the non-stock, non-profit
50
educational institutions prove that its assets and revenues are used actually, directly and
exclusively for educational purposes.
2. The tax-exemption constitutionally-granted to non-stock, non profit educational institutions,

is not subject to limitations imposed by law.
The tax exemption granted by the Constitution to non-stock, non-profit educational

institutions is conditioned only on the actual, direct and exclusive use of their assets,
revenues and income78for educational purposes.
We find that unlike Article VI, Section 28 (3) of the Constitution (pertaining to charitable
institutions, churches, parsonages or convents, mosques, and non-profit cemeteries), which
exempts from tax only the assets, i.e., "all lands, buildings, and improvements, actually,
directly, and exclusively used for religious, charitable, or educational purposes...," Article XIV,
Section 4 (3) categorically states that "[a]ll revenues and assets... used actually, directly, and
exclusively for educational purposes shall be exempt from taxes and duties."
The addition and express use of the word revenues in Article XIV, Section 4 (3) of the Constitution
is not without significance.
We find that the text demonstrates the policy of the 1987 Constitution, discernible from the records
of the 1986 Constitutional Commission79 to provide broader tax privilege to non-stock, non-profit
educational institutions as recognition of their role in assisting the State provide a public good. The
tax exemption was seen as beneficial to students who may otherwise be charged unreasonable
tuition fees if not for the tax exemption extended to all revenues and assets of non-stock, non-
profit educational institutions.80
Further, a plain reading of the Constitution would show that Article XIV, Section 4 (3) does not
require that the revenues and income must have also been sourced from educational activities or
activities related to the purposes of an educational institution. The phrase all revenues is
unqualified by any reference to the source of revenues. Thus, so long as the revenues and income
are used actually, directly and exclusively for educational purposes, then said revenues and income
shall be exempt from taxes and duties.81
We find it helpful to discuss at this point the taxation of revenues versus the taxation of assets.
Revenues consist of the amounts earned by a person or entity from the conduct of business
operations.82 It may refer to the sale of goods, rendition of services, or the return of an
investment. Revenue is a component of the tax base in income tax,83 VAT,84 and local business tax
(LBT).85
Assets, on the other hand, are the tangible and intangible properties owned by a person or
entity.86 It may refer to real estate, cash deposit in a bank, investment in the stocks of a
corporation, inventory of goods, or any property from which the person or entity may derive
income or use to generate the same. In Philippine taxation, the fair market value of real property is
a component of the tax base in real property tax (RPT).87 Also, the landed cost of imported goods
is a component of the tax base in VAT on importation88 and tariff duties.89
Thus, when a non-stock, non-profit educational institution proves that it uses its revenues actually,
directly, and exclusively for educational purposes, it shall be exempted from income tax, VAT, and
LBT. On the other hand, when it also shows that it uses its assets in the form of real property for
educational purposes, it shall be exempted from RPT.
51
To be clear, proving the actual use of the taxable item will result in an exemption, but the specific
tax from which the entity shall be exempted from shall depend on whether the item is an item of
revenue or asset.
To illustrate, if a university leases a portion of its school building to a bookstore or cafeteria, the
leased portion is not actually, directly and exclusively used for educational purposes, even if the
bookstore or canteen caters only to university students, faculty and staff.
The leased portion of the building may be subject to real property tax, as held in Abra Valley
College, Inc. v. Aquino.90 We ruled in that case that the test of exemption from taxation is the use
of the property for purposes mentioned in the Constitution. We also held that the exemption
extends to facilities which are incidental to and reasonably necessary for the accomplishment of the
main purposes.
In concrete terms, the lease of a portion of a school building for commercial purposes, removes
such asset from the property tax exemption granted under the Constitution.91 There is no
exemption because the asset is not used actually, directly and exclusively for educational purposes.
The commercial use of the property is also not incidental to and reasonably necessary for the
accomplishment of the main purpose of a university, which is to educate its students.
However, if the university actually, directly and exclusively uses for educational
purposes the revenues earned from the lease of its school building, such revenues shall be exempt
from taxes and duties. The tax exemption no longer hinges on the use of the asset from which the
revenues were earned, but on the actual, direct and exclusive use of the revenues for educational
purposes.
Parenthetically, income and revenues of non-stock, non-profit educational institution not used
actually, directly and exclusively for educational purposes are not exempt from duties and taxes.
To avail of the exemption, the taxpayer must factually prove that it used actually, directly and
exclusively for educational purposes the revenues or income sought to be exempted.
The crucial point of inquiry then is on the use of the assets or on the use of the revenues.
These are two things that must be viewed and treated separately. But so long as the assets or
revenues are used actually, directly and exclusively for educational purposes, they are exempt
from duties and taxes.
The tax exemption granted by the Constitution to non-stock, non-profit educational

institutions, unlike the exemption that may be availed of by proprietary educational
institutions, is not subject to limitations imposed by law.
That the Constitution treats non-stock, non-profit educational institutions differently from
proprietary educational institutions cannot be doubted. As discussed, the privilege granted to the
former is conditioned only on the actual, direct and exclusive use of their revenues and assets for
educational purposes. In clear contrast, the tax privilege granted to the latter may be subject to
limitations imposed by law.
We spell out below the difference in treatment if only to highlight the privileged status of non-
stock, non-profit educational institutions compared with their proprietary counterparts.
While a non-stock, non-profit educational institution is classified as a tax-exempt entity under

Section 30 (Exemptions from Tax on Corporations) of the Tax Code, a proprietary educational
institution is covered by Section 27 (Rates of Income Tax on Domestic Corporations).
To be specific, Section 30 provides that exempt organizations like non-stock, non-profit educational
52
institutions shall not be taxed on income received by them as such.
Section 27 (B), on the other hand, states that [p]roprietary educational institutions...which are
nonprofit shall pay a tax of ten percent (10%) on their taxable income...Provided, that if the gross
income from unrelated trade, business or other activity exceeds fifty percent (50%) of the total
gross income derived by such educational institutions...[the regular corporate income tax of 30%]
shall be imposed on the entire taxable income...92
By the Tax Code's clear terms, a proprietary educational institution is entitled only to the reduced
rate of 10% corporate income tax. The reduced rate is applicable only if: (1) the proprietary
educational institution is non profit and (2) its gross income from unrelated trade, business or
activity does not exceed 50% of its total gross income.
Consistent with Article XIV, Section 4 (3) of the Constitution, these limitations do not apply to non-
stock, non-profit educational institutions.
Thus, we declare the last paragraph of Section 30 of the Tax Code without force and effect for
being contrary to the Constitution insofar as it subjects to tax the income and revenues of non-
stock, non-profit educational institutions used actually, directly and exclusively for educational
purpose. We make this declaration in the exercise of and consistent with our duty93 to uphold the
primacy of the Constitution.94
Finally, we stress that our holding here pertains only to non-stock, non-profit educational
institutions and does not cover the other exempt organizations under Section 30 of the Tax Code.
For all these reasons, we hold that the income and revenues of DLSU proven to have been used
actually, directly and exclusively for educational purposes are exempt from duties and taxes.
II. The LOA issued to DLSU is not entirely void. The assessment for taxable year 2003 is
valid.
DLSU objects to the CTA En Banc's conclusion that the LOA is valid for taxable year 2003 and
insists that the entire LOA should be voided for being contrary to RMO No. 43-90, which provides
that if tax audit includes more than one taxable period, the other periods or years shall be
specifically indicated in the LOA.
A LOA is the authority given to the appropriate revenue officer to examine the books of account
and other accounting records of the taxpayer in order to determine the taxpayer's correct internal
revenue liabilities95 and for the purpose of collecting the correct amount oftax,96 in accordance with
Section 5 of the Tax Code, which gives the CIR the power to obtain information, to
summon/examine, and take testimony of persons. The LOA commences the audit process97 and
informs the taxpayer that it is under audit for possible deficiency tax assessment.
Given the purposes of a LOA, is there basis to completely nullify the LOA issued to DLSU, and
consequently, disregard the BIR and the CTA's findings of tax deficiency for taxable year 2003?
The relevant provision is Section C of RMO No. 43-90, the pertinent portion of which reads:
3. A Letter of Authority [LOA] should cover a taxable period not exceeding one taxable
year. The practice of issuing [LOAs] covering audit of unverified prior years is hereby
53
prohibited. If the audit of a taxpayer shall include more than one taxable period, the
other periods or years shall be specifically indicated in the [LOA].98
What this provision clearly prohibits is the practice of issuing LOAs covering audit of unverified prior
years. RMO 43-90 does not say that a LOA which contains unverified prior years is void. It merely
prescribes that if the audit includes more than one taxable period, the other periods or years must
be specified. The provision read as a whole requires that if a taxpayer is audited for more than one
taxable year, the BIR must specify each taxable year or taxable period on separate LOAs.
Read in this light, the requirement to specify the taxable period covered by the LOA is simply to
inform the taxpayer of the extent of the audit and the scope of the revenue officer's authority.
Without this rule, a revenue officer can unduly burden the taxpayer by demanding random
accounting records from random unverified years, which may include documents from as far back
as ten years in cases of fraud audit.99
In the present case, the LOA issued to DLSU is for Fiscal Year Ending 2003 and Unverified Prior
Years. The LOA does not strictly comply with RMO 43-90 because it includes unverified prior years.
This does not mean, however, that the entire LOA is void.
As the CTA correctly held, the assessment for taxable year 2003 is valid because this taxable
period is specified in the LOA. DLSU was fully apprised that it was being audited for taxable year
2003. Corollarily, the assessments for taxable years 2001 and 2002 are void for having
been unspecified on separate LOAs as required under RMO No. 43-90.
Lastly, the Commissioner's claim that DLSU failed to raise the issue of the LOA's validity at the CTA
Division, and thus, should not have been entertained on appeal, is not accurate.
On the contrary, the CTA En Banc found that the issue of the LOA's validity came up during the
trial.100 DLSU then raised the issue in its memorandum and motion for partial reconsideration with
the CTA Division. DLSU raised it again on appeal to the CTA En Banc. Thus, the CTA En Banc could,
as it did, pass upon the validity of the LOA.101 Besides, the Commissioner had the opportunity to
argue for the validity of the LOA at the CTA En Banc but she chose not to file her comment and
memorandum despite notice.102
III. The CTA correctly admitted the supplemental evidence formally offered by DLSU.
The Commissioner objects to the CTA Division's admission of DLSU's supplemental pieces of
documentary evidence.
To recall, DLSU formally offered its supplemental evidence upon filing its motion for reconsideration
with the CTA Division.103 The CTA Division admitted the supplemental evidence, which proved that
a portion of DLSU's rental income was used actually, directly and exclusively for educational
purposes. Consequently, the CTA Division reduced DLSU's tax liabilities.
We uphold the CTA Division's admission of the supplemental evidence on distinct but mutually
reinforcing grounds, to wit: (1) the Commissioner failed to timely object to the formal offer of
supplemental evidence; and (2) the CTA is not governed strictly by the technical rules of evidence.
First, the failure to object to the offered evidence renders it admissible, and the court cannot, on its
own, disregard such evidence.104
The Court has held that if a party desires the court to reject the evidence offered, it must so state
in the form of a timely objection and it cannot raise the objection to the evidence for the first time
54
on appeal.105
Because of a party's failure to timely object, the evidence offered becomes part of the evidence in
the case. As a consequence, all the parties are considered bound by any outcome arising from the
offer of evidence properly presented.106
As disclosed by DLSU, the Commissioner did not oppose the supplemental formal offer of evidence
despite notice.107 The Commissioner objected to the admission of the supplemental evidence only
when the case was on appeal to the CTA En Banc. By the time the Commissioner raised her
objection, it was too late; the formal offer, admission and evaluation of the supplemental
evidence were all fait accompli.
We clarify that while the Commissioner's failure to promptly object had no bearing on the
materiality or sufficiency of the supplemental evidence admitted, she was bound by the outcome of
the CTA Division's assessment of the evidence.108
Second, the CTA is not governed strictly by the technical rules of evidence. The CTA Division's
admission of the formal offer of supplemental evidence, without prompt objection from the
Commissioner, was thus justified.
Notably, this Court had in the past admitted and considered evidence attached to the taxpayers'
motion for reconsideration.
In the case of BPI-Family Savings Bank v. Court of Appeals,109 the tax refund claimant attached to
its motion for reconsideration with the CTA its Final Adjustment Return. The Commissioner, as in
the present case, did not oppose the taxpayer's motion for reconsideration and the admission of
the Final Adjustment Return.110 We thus admitted and gave weight to the Final Adjustment
Return although it was only submitted upon motion for reconsideration.
We held that while it is true that strict procedural rules generally frown upon the submission of
documents after the trial, the law creating the CTA specifically provides that proceedings before it
shall not be governed strictly by the technical rules of evidence111 and that the paramount
consideration remains the ascertainment of truth. We ruled that procedural rules should not bar
courts from considering undisputed facts to arrive at a just determination of a controversy.112
We applied the same reasoning in the subsequent cases of Filinvest Development Corporation v.
Commissioner of Internal Revenue113 and Commissioner of Internal Revenue v. PERF Realty
Corporation,114 where the taxpayers also submitted the supplemental supporting document only
upon filing their motions for reconsideration.
Although the cited cases involved claims for tax refunds, we also dispense with the strict
application of the technical rules of evidence in the present tax assessment case. If anything, the
liberal application of the rules assumes greater force and significance in the case of a taxpayer who
claims a constitutionally granted tax exemption. While the taxpayers in the cited cases
claimed refund of excess tax payments based on the Tax Code,115 DLSU is claiming tax
exemption based on the Constitution. If liberality is afforded to taxpayers who paid more than they
should have under a statute, then with more reason that we should allow a taxpayer to prove its
exemption from tax based on the Constitution.
Hence, we sustain the CTA's admission of DLSU's supplemental offer of evidence not only because
the Commissioner failed to promptly object, but more so because the strict application of the
technical tules of evidence may defeat the intent of the Constitution.
55
IV. The CTA's appreciation of evidence is generally binding on the Court unless
compelling reasons justify otherwise.
It is doctrinal that the Court will not lightly set aside the conclusions reached by the CTA which, by
the very nature of its function of being dedicated exclusively to the resolution of tax problems, has
developed an expertise on the subject, unless there has been an abuse or improvident exercise of
authority.116 We thus accord the findings of fact by the CTA with the highest respect. These
findings of facts can only be disturbed on appeal if they are not supported by substantial evidence
or there is a showing of gross error or abuse on the part of the CTA. In the absence of any clear
and convincing proof to the contrary, this Court must presume that the CTA rendered a decision
which is valid in every respect.117
We sustain the factual findings of the CTA.
The parties failed to raise credible basis for us to disturb the CTA's findings that DLSU had used
actually, directly and exclusively for educational purposes a portion of its assessed income and that
it had remitted the DST payments though an online imprinting machine.
a. DLSU used actually, directly, and exclusively for educational purposes a portion of its assessed
income.
To see how the CTA arrived at its factual findings, we review the process undertaken, from which it
deduced that DLSU successfully proved that it used actually, directly and exclusively for
educational purposes a portion of its rental income.
The CTA reduced DLSU's deficiency income tax and VAT liabilities in view of the submission of the
supplemental evidence, which consisted of statement of receipts, statement of disbursement and
fund balance and statement of fund changes.118
These documents showed that DLSU borrowed P93.86 Million,119 which was used to build the
university's Sports Complex. Based on these pieces of evidence, the CTA found that DLSU's rental
income from its concessionaires were indeed transmitted and used for the payment of this loan.
The CTA held that the degree of preponderance of evidence was sufficiently met to prove actual,
direct and exclusive use for educational purposes.
The CTA also found that DLSU's rental income from other concessionaires, which were allegedly
deposited to a fund (CF-CPA Account),120 intended for the university's capital projects, was not
proved to have been used actually, directly and exclusively for educational purposes. The
CTA observed that "[DLSU]...failed to fully account for and substantiate all the disbursements from
the [fund]." Thus, the CTA "cannot ascertain whether rental income from the [other]
concessionaires was indeed used for educational purposes."121
To stress, the CTA's factual findings were based on and supported by the report of the Independent
CPA who reviewed, audited and examined the voluminous documents submitted by DLSU.
Under the CTA Revised Rules, an Independent CPA's functions include: (a) examination and
verification of receipts, invoices, vouchers and other long accounts; (b) reproduction of, and
comparison of such reproduction with, and certification that the same are faithful copies of original
documents, and pre-marking of documentary exhibits consisting of voluminous documents; (c)
preparation of schedules or summaries containing a chronological listing of the numbers, dates and
amounts covered by receipts or invoices or other relevant documents and the amount(s) of taxes
paid; (d) making findings as to compliance with substantiation requirements under
56
pertinent tax laws, regulations and jurisprudence; (e) submission of a formal report with
certification of authenticity and veracity of findings and conclusions in the performance of the
audit; (f) testifying on such formal report; and (g) performing such other functions as the CTA may
direct.122
Based on the Independent CPA's report and on its own appreciation of the evidence, the CTA held
that only the portion of the rental income pertaining to the substantiated disbursements (i.e.,
proved by receipts, vouchers, etc.) from the CF-CPA Account was considered as used actually,
directly and exclusively for educational purposes. Consequently, the unaccounted and
unsubstantiated disbursements must be subjected to income tax and VAT.123
The CTA then further reduced DLSU's tax liabilities by cancelling the assessments for taxable years
2001 and 2002 due to the defective LOA.124
The Court finds that the above fact-finding process undertaken by the CTA shows that it based its
ruling on the evidence on record, which we reiterate, were examined and verified by the
Independent CPA. Thus, we see no persuasive reason to deviate from these factual findings.
However, while we generally respect the factual findings of the CTA, it does not mean that we are
bound by its conclusions. In the present case, we do not agree with the method used by the CTA to
arrive at DLSU's unsubstantiated rental income (i.e., income not proved to have been actually,
directly and exclusively used for educational purposes).
To recall, the CTA found that DLSU earned a rental income of P10,610,379.00 in taxable year
2003.125 DLSU earned this income from leasing a portion of its premises to: 1) MTO-Sports
Complex, 2) La Casita, 3) Alarey, Inc., 4) Zaide Food Corp., 5) Capri International, and 6) MTO
Bookstore.126
To prove that its rental income was used for educational purposes, DLSU identified the transactions
where the rental income was expended, viz.: 1) P4,007,724.00127 used to pay the loan obtained
by DLSU to build the Sports Complex; and 2) P6,602,655.00 transferred to the CF-CPA
Account.128
DLSU also submitted documents to the Independent CPA to prove that the P6,602,655.00
transferred to the CF-CPA Account was used actually, directly and exclusively for educational
purposes. According to the Independent CPA' findings, DLSU was able to substantiate
disbursements from the CF-CPA Account amounting to P6,259,078.30.
Contradicting the findings of the Independent CPA, the CTA concluded that out of
the P10,610,379.00 rental income, P4,841,066.65 was unsubstantiated, and thus, subject to
income tax and VAT.129
The CTA then concluded that the ratio of substantiated disbursements to the total disbursements
from the CF-CPA Account for taxable year 2003 is only 26.68%.130 The CTA held as follows:
However, as regards petitioner's rental income from Alarey, Inc., Zaide Food Corp., Capri
International and MTO Bookstore, which were transmitted to the CF-CPA Account, petitioner again
failed to fully account for and substantiate all the disbursements from the CF-CPA Account; thus
failing to prove that the rental income derived therein were actually, directly and exclusively used
for educational purposes. Likewise, the findings of the Court-Commissioned Independent CPA show
that the disbursements from the CF-CPA Account for fiscal year 2003 amounts to P-6,259,078.30
only. Hence, this portion of the rental income, being the substantiated disbursements of the CF-CPA
Account, was considered by the Special First Division as used actually, directly and exclusively for
educational purposes. Since for fiscal year 2003, the total disbursements per voucher is P6,259,078.3
57
(Exhibit "LL-25-C"), and the total disbursements per subsidiary ledger amounts to P23,463,543.02
(Exhibit "LL-29-C"), the ratio of substantiated disbursements for fiscal year 2003 is 26.68%
(P6,259,078.30/P23,463,543.02). Thus, the substantiated portion of CF-CPA Disbursements for
fiscal year 2003, arrived at by multiplying the ratio of 26.68% with the total rent income added to
and used in the CF-CPA Account in the amount of P6,602,655.00 ts P1,761,588.35.131 (emphasis
supplied)ChanRoblesVi rt ualawlib ra ry
For better understanding, we summarize the CTA's computation as follows:
1. The CTA subtracted the rent income used in the construction of the Sports Complex
(P4,007,724.00) from the rental income (P10,610,379.00) earned from the abovementioned
concessionaries. The difference (P6,602,655.00) was the portion claimed to have been
deposited to the CF-CPA Account.
2. The CTA then subtracted the supposed substantiated portion of CF-CPA disbursements
(P1,761,308.37) from the P6,602,655.00 to arrive at the supposed unsubstantiated portion of
the rental income (P4,841,066.65).132
3. The substantiated portion of CF-CPA disbursements (P1,761,308.37)133 was derived by

multiplying the rental income claimed to have been added to the CF-CPA Account
(P6,602,655.00) by 26.68% or the ratio of substantiated disbursements to total
disbursements (P23,463,543.02).
4. The 26.68% ratio134 was the result of dividing the substantiated disbursements from the CF-
CPA Account as found by the Independent CPA (P6,259,078.30) by the total disbursements
(P23,463,543.02) from the same account.
We find that this system of calculation is incorrect and does not truly give effect to the
constitutional grant of tax exemption to non-stock, nonprofit educational institutions. The CTA's
reasoning is flawed because it required DLSU to substantiate an amount that is greater than the
rental income deposited in the CF-CPA Account in 2003.
To reiterate, to be exempt from tax, DLSU has the burden of proving that the proceeds of its rental
income (which amounted to a total of P10.61 million)135 were used for educational purposes. This
amount was divided into two parts: (a) the P4.01 million, which was used to pay the loan obtained
for the construction of the Sports Complex; and (b) the P6.60 million,136 which was transferred to
the CF-CPA account.
For year 2003, the total disbursement from the CF-CPA account amounted to P23.46
million.137 These figures, read in light of the constitutional exemption, raises the question: does
DLSU claim that the whole total CF-CPA disbursement of P23.46 million is tax-exempt so
that it is required to prove that all these disbursements had been made for educational
purposes?
The records show that DLSU never claimed that the total CF-CPA disbursements of P23.46 million
had been for educational purposes and should thus be tax-exempt; DLSU only claimed P10.61
million for taxexemption and should thus be required to prove that this amount had been used as
claimed.
Of this amount, P4.01 had been proven to have been used for educational purposes, as confirmed
by the Independent CPA. The amount in issue is therefore the balance of P6.60 million which was
transferred to the CF-CPA which in turn made disbursements of P23.46 million for various general
58
purposes, among them the P6.60 million transferred by DLSU.
Significantly, the Independent CPA confirmed that the CF-CPA made disbursements for educational
purposes in year 2003 in the amount P6.26 million. Based on these given figures, the CTA
concluded that the expenses for educational purposes that had been coursed through the CF-CPA
should be prorated so that only the portion that P6.26 million bears to the total CF-CPA
disbursements should be credited to DLSU for tax exemption.
This approach, in our view, is flawed given the constitutional requirement that revenues actually
and directly used for educational purposes should be tax-exempt. As already mentioned above,
DLSU is not claiming that the whole P23.46 million CF-CPA disbursement had been used for
educational purposes; it only claims that P6.60 million transferred to CF-CPA had been used for
educational purposes. This was what DLSU needed to prove to have actually and directly used for
educational purposes.
That this fund had been first deposited into a separate fund (the CF-CPA established to fund capital
projects) lends peculiarity to the facts of this case, but does not detract from the fact that the
deposited funds were DLSU revenue funds that had been confirmed and proven to have been
actually and directly used for educational purposes via the CF-CPA. That the CF-CPA might have
had other sources of funding is irrelevant because the assessment in the present case pertains only
to the rental income which DLSU indisputably earned as revenue in 2003. That the proven CF-CPA
funds used for educational purposes should not be prorated as part of its total CF-CPA
disbursements for purposes of crediting to DLSU is also logical because no claim whatsoever had
been made that the totality of the CF-CPA disbursements had been for educational purposes. No
prorating is necessary; to state the obvious, exemption is based on actual and direct use and this
DLSU has indisputably proven.
Based on these considerations, DLSU should therefore be liable only for the difference between
what it claimed and what it has proven. In more concrete terms, DLSU only had to prove that its
rental income for taxable year 2003 (P10,610,379.00) was used for educational purposes. Hence,
while the total disbursements from the CF-CPA Account amounted to P23,463,543.02, DLSU only
had to substantiate its P10.6 million rental income, part of which was the P6,602,655.00
transferred to the CF-CPA account. Of this latter amount, P6.259 million was substantiated to have
been used for educational purposes.
To summarize, we thus revise the tax base for deficiency income tax and VAT for taxable year
2003 as follows:
CTA Decision138 Revised
Rental income 10,610,379.00 10,610,379.00
Less: Rent income used in construction of the

4,007,724.00 4,007,724.00
Sports Complex
Rental income deposited to the CF-CPA Account 6,602,655.00 6,602.655.00
59
Less: Substantiated portion of CF-CPA
1,761,588.35 6,259,078.30
disbursements
Tax base for deficiency income tax and VAT 4,841,066.65 343,576.70
On DLSU's argument that the CTA should have appreciated its evidence in the same way as it did
with the evidence submitted by Ateneo in another separate case, the CTA explained that the issue
in the Ateneo case was not the same as the issue in the present case.
The issue in the Ateneo case was whether or not Ateneo could be held liable to pay income taxes
and VAT under certain BIR and Department of Finance issuances139 that required the educational
institution to own and operate the canteens, or other commercial enterprises within its campus, as
condition for tax exemption. The CTA held that the Constitution does not require the educational
institution to own or operate these commercial establishments to avail of the exemption. 140
Given the lack of complete identity of the issues involved, the CTA held that it had to evaluate the
separate sets of evidence differently. The CTA likewise stressed that DLSU and Ateneo gave distinct
defenses and that its wisdom "cannot be equated on its decision on two different cases with two
different issues."141
DLSU disagrees with the CTA and argues that the entire assessment must be cancelled because it
submitted similar, if not stronger sets of evidence, as Ateneo. We reject DLSU's argument for
being non sequitur. Its reliance on the concept of uniformity of taxation is also incorrect.
First, even granting that Ateneo and DLSU submitted similar evidence, the sufficiency and
materiality of the evidence supporting their respective claims for tax exemption would necessarily
differ because their attendant issues and facts differ.
To state the obvious, the amount of income received by DLSU and by Ateneo during the taxable
years they were assessed varied. The amount of tax assessment also varied. The amount of
income proven to have been used for educational purposes also varied because the amount
substantiated varied.142 Thus, the amount of tax assessment cancelled by the CTA varied.
On the one hand, the BIR assessed DLSU a total tax deficiency of P17,303,001.12 for taxable
years 2001, 2002 and 2003. On the other hand, the BIR assessed Ateneo a total deficiency tax
of P8,864,042.35 for the same period. Notably, DLSU was assessed deficiency DST, while Ateneo
was not.143
Thus, although both Ateneo and DLSU claimed that they used their rental income actually, directly
and exclusively for educational purposes by submitting similar evidence, e.g., the testimony of
their employees on the use of university revenues, the report of the Independent CPA, their income
summaries, financial statements, vouchers, etc., the fact remains that DLSU failed to prove that a
portion of its income and revenues had indeed been used for educational purposes.
The CTA significantly found that some documents that could have fully supported DLSU's claim
were not produced in court. Indeed, the Independent CPA testified that some disbursements had
not been proven to have been used actually, directly and exclusively for educational purposes.144
The final nail on the question of evidence is DLSU's own admission that the original of these
documents had not in fact been produced before the CTA although it claimed that there was no bad
60
faith on its part.145 To our mind, this admission is a good indicator of how the Ateneo and the DLSU
cases varied, resulting in DLSU's failure to substantiate a portion of its claimed exemption.
Further, DLSU's invocation of Section 5, Rule 130 of the Revised Rules on Evidence, that the
contents of the missing supporting documents were proven by its recital in some other authentic
documents on record,146 can no longer be entertained at this late stage of the proceeding. The CTA
did not rule on this particular claim. The CTA also made no finding on DLSU's assertion of lack of
bad faith. Besides, it is not our duty to go over these documents to test the truthfulness of their
contents, this Court not being a trier of facts.
Second, DLSU misunderstands the concept of uniformity oftaxation. Equality and uniformity of
taxation means that all taxable articles or kinds of property of the same class shall be taxed at the
same rate.147 A tax is uniform when it operates with the same force and effect in every place
where the subject of it is found.148 The concept requires that all subjects of taxation similarly
situated should be treated alike and placed in equal footing.149
In our view, the CTA placed Ateneo and DLSU in equal footing. The CTA treated them alike because
their income proved to have been used actually, directly and exclusively for educational purposes
were exempted from taxes. The CTA equally applied the requirements in the YMCA case to test if
they indeed used their revenues for educational purposes.
DLSU can only assert that the CTA violated the rule on uniformity if it can show that,
despite proving that it used actually, directly and exclusively for educational purposes its income
and revenues, the CTA still affirmed the imposition of taxes. That the DLSU secured a different
result happened because it failed to fully prove that it used actually, directly and exclusively for
educational purposes its revenues and income.
On this point, we remind DLSU that the rule on uniformity of taxation does not mean that subjects
of taxation similarly situated are treated in literally the same way in all and every occasion. The
fact that the Ateneo and DLSU are both non-stock, non-profit educational institutions, does not
mean that the CTA or this Court would similarly decide every case for (or against) both universities.
Success in tax litigation, like in any other litigation, depends to a large extent on the sufficiency of
evidence. DLSU's evidence was wanting, thus, the CTA was correct in not fully cancelling its tax
liabilities.
b. DLSU proved its payment of the DST
The CTA affirmed DLSU's claim that the DST due on its mortgage and loan transactions were paid
and remitted through its bank's On-Line Electronic DST Imprinting Machine. The Commissioner
argues that DLSU is not allowed to use this method of payment because an educational institution
is excluded from the class of taxpayers who can use the On-Line Electronic DST Imprinting
Machine.
We sustain the findings of the CTA. The Commissioner's argument lacks basis in both the Tax Code
and the relevant revenue regulations.
DST on documents, loan agreements, and papers shall be levied, collected and paid for by the
person making, signing, issuing, accepting, or transferring the same.150 The Tax Code provides
that whenever one party to the document enjoys exemption from DST, the other party not exempt
from DST shall be directly liable for the tax. Thus, it is clear that DST shall be payable by any party
to the document, such that the payment and compliance by one shall mean the full settlement of
the DST due on the document.
61
In the present case, DLSU entered into mortgage and loan agreements with banks. These
agreements are subject to DST.151 For the purpose of showing that the DST on the loan agreement
has been paid, DLSU presented its agreements bearing the imprint showing that DST on the
document has been paid by the bank, its counterparty. The imprint should be sufficient proof that
DST has been paid. Thus, DLSU cannot be further assessed for deficiency DST on the said
documents.
Finally, it is true that educational institutions are not included in the class of taxpayers who can pay
and remit DST through the On-Line Electronic DST Imprinting Machine under RR No. 9-2000. As
correctly held by the CTA, this is irrelevant because it was not DLSU who used the On-Line
Electronic DST Imprinting Machine but the bank that handled its mortgage and loan transactions.
RR No. 9-2000 expressly includes banks in the class of taxpayers that can use the On-Line
Electronic DST Imprinting Machine.
Thus, the Court sustains the finding of the CTA that DLSU proved the payment of the assessed DST
deficiency, except for the unpaid balance of P13,265.48.152
WHEREFORE, premises considered, we DENY the petition of the Commissioner of Internal

Revenue in G.R. No. 196596 and AFFIRM the December 10, 2010 decision and March 29, 2011
resolution of the Court of Tax Appeals En Banc in CTA En Banc Case No. 622, except for the total
amount of deficiency tax liabilities of De La Salle University, Inc., which had been reduced.
We also DENY both the petition of De La Salle University, Inc. in G.R. No. 198841 and the petition
of the Commissioner of Internal Revenue in G.R. No. 198941 and thus AFFIRM the June 8, 2011
decision and October 4, 2011 resolution of the Court of Tax Appeals En Banc in CTA En Banc Case
No. 671, with the MODIFICATION that the base for the deficiency income tax and VAT for taxable
year 2003 is P343,576.70.
SO ORDERED.
62

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EN BANC

G.R. No. 163583 August 20, 2008

BRITISH AMERICAN TOBACCO, petitioner,

Paragraph (c) of Section 145, 1 states –

SEC. 145. Cigars and cigarettes. –

SECTION 2. Definition of Terms.

Pertinent portions, of RA 9334, provides:

SEC. 145. Cigars and Cigarettes. –

Effective on January 1, 2005, Two pesos (P2.00) per pack;

Effective on January 1, 2011, Twelve pesos (P12.00) per pack.

Effective on January 1, 2005, Twenty-five pesos (P25.00) per pack;

Sec. 7. Jurisdiction. — The CTA shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

In Drilon v. Lim,27 it was held:

Sec. 2. Conclusive presumptions. — The following are instances of conclusive presumptions:

Now to the substantive issues.

SEC. 145. Cigars and Cigarettes. –

Effective on January 1, 2005, Two pesos (P2.00) per pack;

Effective on January 1, 2011, Twelve pesos (P12.00) per pack.

Effective on January 1, 2005, Twenty-five pesos (P25.00) per pack;

SEC. 142. Cigars and cigarettes.—

"SEC. 142. Cigars and cigarettes. –

Pressing this point, Senator Roco continued his query:

1. That the automatic adjustment clause is at best questionable in law.

We answer in the negative.

We now tackle the second issue.

II. POLICIES AND GUIDELINES

Large Taxpayers Assistance Division II

1. Perform the following preparatory procedures on the identification of brands to be surveyed,

b. On the tax reclassification of new brands

We now tackle the last issue.

G.R. No. 115455 October 30, 1995

ARTURO M. TOLENTINO, petitioner,

On June 27, 1995 the matter was submitted for resolution.

The contention has no merit.

1. R.A. NO. 7642

House Bill No. 2165, October 5, 1992

Senate Bill No. 32, December 7, 1992

2. R.A. NO. 7643

AN ACT TO EMPOWER THE COMMISSIONER OF INTERNAL REVENUE TO REQUIRE THE

House Bill No. 1503, September 3, 1992

Senate Bill No. 968, December 7, 1992

3. R.A. NO. 7646

AN ACT AUTHORIZING THE COMMISSIONER OF INTERNAL REVENUE TO PRESCRIBE THE

House Bill No. 1470, October 20, 1992

Senate Bill No. 35, November 19, 1992

4. R.A. NO. 7649

AN ACT REQUIRING THE GOVERNMENT OR ANY OF ITS POLITICAL SUBDIVISIONS,

House Bill No. 5260, January 26, 1993

Senate Bill No. 1141, March 30, 1993

5. R.A. NO. 7656

AN ACT REQUIRING GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS TO

House Bill No. 11024, November 3, 1993

Senate Bill No. 1168, November 3, 1993

6. R.A. NO. 7660

House Bill No. 7789, May 31, 1993

Senate Bill No. 1330, November 18, 1993

7. R.A. NO. 7717

AN ACT IMPOSING A TAX ON THE SALE, BARTER OR EXCHANGE OF SHARES OF STOCK

House Bill No. 9187, November 3, 1993

Senate Bill No. 1127, March 23, 1994

Indeed, so far as pertinent, the Rules of the Senate only provide:

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