University of the Philippines College of Law

CCC D2022

Case Name ABAKADA GURO PARTY LIST v. EXECUTIVE SECRETARY ERMITA

Topic Separation of Powers; General Principles; Delegation of Powers
Case No. | Date G.R. No. 168056 | Sept. 1, 2005; Oct. 18, 2005
Ponente Austria-Martinez, J.
Petitioners ABAKADA GURO Party List, et al., Pimentel, Jr., et al., and Escudero, et al. contend
in common that Sections 4 1, 52 and 63 of R.A. No. 9337, amending Sections 106, 107 and 108,
respectively, of the NIRC giving the President the stand-by authority to raise the VAT rate
from 10% to 12% when a certain condition is met, constitutes undue delegation of the
Case Summary
legislative power to tax. Petitioners allege that the grant of the stand-by authority to the
President to increase the VAT rate is a virtual abdication by Congress of its exclusive power to
tax because such delegation is not within the purview of Section 28 (2), Article VI of the
Constitution.
Sept. 1, 2005: R.A. No. 9337 not unconstitutional. Petition dismissed.
Decision
Oct. 18, 2005: Motions for reconsideration denied with finality.
Doctrine ● In testing whether a statute constitutes an undue delegation of legislative power or not, it
is usual to inquire whether the statute was complete in all its terms and provisions when
it left the hands of the legislature so that nothing was left to the judgment of any other
appointee or delegate of the legislature.
● The powers which Congress is prohibited from delegating are those which are strictly, or
inherently and exclusively, legislative. Purely legislative power, which can never be
delegated, has been described as the authority to make a complete law — complete as to
the time when it shall take effect and as to whom it shall be applicable — and to
determine the expediency of its enactment.
Nonetheless, the general rule barring delegation of legislative powers is subject to the
following recognized limitations or exceptions:
(1) Delegation of tariff powers to the President under Section 28 (2) of Article VI of the
Constitution;
(2) Delegation of emergency powers to the President under Section 23 (2) of Article VI
of the Constitution;

1 SEC. 4. Sec. 106 of the same Code, as amended, is hereby further amended to read as follows:
● SEC. 106. Value-Added Tax on Sale of Goods or Properties.
➢ . . . provided, that the President, upon the recommendation of the Secretary of Finance, shall, effective
January 1, 2006, raise the rate of value added tax to twelve percent (12%), after any of the following
conditions has been satisfied.
2 SEC. 5. Section 107 of the same Code, as amended, is hereby further amended to read as follows:
● SEC. 107. Value-Added Tax on Importation of Goods.
➢ . . . provided, further, that the President, upon the recommendation of the Secretary of Finance, shall,
effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%) after any of the following
conditions has been satisfied.
3 SEC. 6. Section 108 of the same Code, as amended, is hereby further amended to read as follows:
● SEC. 108.Value-added Tax on Sale of Services and Use or Lease of Properties
➢ . . .provided, that the President, upon the recommendation of the Secretary of Finance, shall, effective January
1, 2006, raise the rate of value-added tax to twelve percent (12%), after any of the following conditions has
been satisfied.
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(3) Delegation to the people at large;
(4) Delegation to local governments; and
(5) Delegation to administrative bodies.

RELEVANT FACTS
● R.A. No. 9337 (VAT Reform Act) is a consolidation of three legislative bills namely, House Bill Nos. 3555
and 3705, and Senate Bill No. 1950.
● The Senate agreed to the request of the House of Representatives for a committee conference on the
disagreeing provisions of the proposed bills. The Senate and the House of Representatives approved the
report of the Conference Committee on the Disagreeing Provisions of House Bill No. 3555, House Bill No.
3705, and Senate Bill No. 1950, “after having met and discussed in full free and conference”.
● The enrolled copy of the consolidated House and Senate version was then transmitted to the President, who
signed the same into law on May 24, 2005. Thus, came R.A. No. 9337.
● Upon effectivity of R.A. No. 9337, the Court issued a temporary restraining order, effective immediately and
continuing until further orders, enjoining respondents from enforcing and implementing the law, because of
the confusion in its implementation.
● Before RA 9337 took effect, petitioners ABAKADA GURO Party List, et al., filed a petition for prohibition
arguing that the law is unconstitutional, specifically Sections 4, 5 and 6 of RA 9337, amending Sections 106,
107 and 108, respectively, of the National Internal Revenue Code (NIRC).
➢ Section 4 imposes a 10% VAT (Value-added Tax) on sale of goods and properties
➢ Section 5 imposes a 10% VAT on importation of goods, and
➢ Section 6 imposes a 10% VAT on sale of services and use or lease of properties.
● These questioned provisions (Sec 4-6) contain a uniform proviso authorizing the President, upon
recommendation of the Secretary of Finance, to raise the VAT rate to 12% (which is an undue delegation of
legislative power), effective Jan 1, 2006, after any of the following conditions have been satisfied:
➢ VAT collection as a percentage of GDP of the previous year exceeds 2 4/5% (two and four/fifths %)
or;
➢ National government deficit as a percentage of GDP of the previous year exceeds 1.5% (one and a
half %)
● Petitioners (ABAKADA GURO Party list) argued that this is unconstitutional as it constitutes abandonment
by
Congress of its exclusive authority to fix the rate of taxes, granting “stand-by” authority to the President to increase
VAT rate, under Article VI, Section 28(2) of the Constitution.
● Petitioners (House of Representatives) filed a petition for Certiorari on June 2005 and questions the
constitutionality of RA 9337 specifically in the Bicameral Conference Committee (BCC) that acted without
jurisdiction in deleting the “no pass on” provisions present in Senate Bill 1950 and 3705; BCC’s insertion of
several sections on the RA 9337 violates Article VI, Section 24(1) of the Constitution.
● Respondents contend that RA 9337 enjoys the presumption of constitutionality and petitioners failed to cast
doubt on its validity.

RATIO DECIDENDI
Issue Ratio
PROCEDURAL a. NO. R.A. No. 9337 Does Not Violate Article VI, Section 24 of the Constitution on
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ISSUE Exclusive Origination of Revenue Bills.
1. W/N R.A. No. 9337
violates the following There is no question that the revenue bill exclusively originated in the House of
provisions of the Representatives, the Senate was acting within its constitutional power to introduce
Constitution: amendments to the House bill when it included provisions in Senate Bill No. 1950
a. Article VI, Section amending corporate income taxes, percentage, excise and franchise taxes. Verily, Article
244, and VI, Section 24 of the Constitution does not contain any prohibition or limitation on the
b. Article VI, Section extent of the amendments that may be introduced by the Senate to the House revenue bill.
26(2)5
OTHER FACTS:
The foregoing question had been squarely answered in the Tolentino case6,
wherein the Court held, thus:

. . To begin with, it is not the law — but the revenue bill — which is required by
the Constitution to "originate exclusively" in the House of Representatives. It is
important to emphasize this, because a bill originating in the House may undergo
such extensive changes in the Senate that the result may be a rewriting of the
whole. . . . At this point, what is important to note is that, as a result of the Senate
action, a distinct bill may be produced. To insist that a revenue statute — and
not only the bill which initiated the legislative process culminating in the
enactment of the law — must substantially be the same as the House bill
would be to deny the Senate's power not only to "concur with amendments"
but also to "propose amendments." It would be to violate the coequality of
legislative power of the two houses of Congress and in fact make the House
superior to the Senate.

. . .Given, then, the power of the Senate to propose amendments, the Senate
can propose its own version even with respect to bills which are required by
the Constitution to originate in the House.

4 SECTION 24. All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local application, and
private bills shall originate exclusively in the House of Representatives, but the Senate may propose or concur with
amendments.
5 (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.
6 In the earlier cases of Philippine Judges Association vs. Prado and Tolentino vs. Secretary of Finance, the Court recognized
the long-standing legislative practice of giving said conference committee ample latitude for compromising differences between
the Senate and the House. Thus, in the Tolentino case, it was held that: . . . it is within the power of a conference committee to
include in its report an entirely new provision that is not found either in the House bill or in the Senate bill. If the committee can
propose an amendment consisting of one or two provisions, there is no reason why it cannot propose several provisions,
collectively considered as an "amendment in the nature of a substitute," so long as such amendment is germane to the subject
of the bills before the committee. After all, its report was not final but needed the approval of both houses of Congress to
become valid as an act of the legislative department.
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what the Constitution simply means is that the initiative for filing revenue, tariff
or tax bills, bills authorizing an increase of the public debt, private bills and bills
of local application must come from the House of Representatives on the theory
that, elected as they are from the districts, the members of the House can be
expected to be more sensitive to the local needs and problems. On the other
hand, the senators, who are elected at large, are expected to approach the
same problems from the national perspective. Both views are thereby made
to bear on the enactment of such laws.

b. NO. R.A. No. 9337 Does Not Violate Article VI, Section 26(2) of the Constitution on
the "No-Amendment Rule".

Petitioners' argument that the practice where a bicameral conference committee is allowed
to add or delete provisions in the House bill and the Senate bill after these had passed
three readings is in effect a circumvention of the "no amendment rule", fails to convince
the Court to deviate from its ruling in the Tolentino case that:

Nor is there any reason for requiring that the Committee's Report in these cases
must have undergone three readings in each of the two houses. If that be the case,
there would be no end to negotiation since each house may seek modification of
the compromise bill. . . .

Art. VI. § 26 (2) must, therefore, be construed as referring only to bills introduced
for the first time in either house of Congress, not to the conference committee report.

The Court reiterates here that the "no-amendment rule" refers only to the procedure to be
followed by each house of Congress with regard to bills initiated in each of said
respective houses, before said bill is transmitted to the other house for its concurrence or
amendment.
SUBSTANTIVE NO. The legislature may delegate to executive officers or bodies the power to determine
ISSUES certain facts or conditions, or the happening of contingencies, on which the operation of a
1. Whether Sections 4, statute is, by its terms, made to depend, but the legislature must prescribe sufficient
5 and 6 of R.A. No. standards, policies or limitations on their authority. While the power to tax cannot be
9337, amending delegated to executive agencies, details as to the enforcement and administration of an
Sections 106, 107 and exercise of such power may be left to them, including the power to determine the
108 of the NIRC, existence of facts on which its operation depends. The rationale for this is that the
violate the following preliminary ascertainment of facts as basis for the enactment of legislation is not of itself
provisions of the a legislative function, but is simply ancillary to legislation. Thus, the duty of correlating
Constitution: information and making recommendations is the kind of subsidiary activity which the
a. Article VI, Section legislature may perform through its members, or which it may delegate to others to
28(1)7, and perform.
The case before the Court is not a delegation of legislative power. It is simply a

7 SECTION 28. (1) The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of
taxation.
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b. Article VI, Section delegation of ascertainment of facts upon which enforcement and administration of the
28(2)8 increase rate under the law is contingent. The legislature has made the operation of the
12% rate effective January 1, 2006, contingent upon a specified fact or condition. It leaves
the entire operation or non-operation of the 12% rate upon factual matters outside of the
control of the executive.
● There is no undue delegation of legislative power but only of the discretion as to
the execution of a law. This is constitutionally permissible.
● The Secretary of Finance is not acting as the alter ego of the President or even her
subordinate. In such instance, he is not subject to the power of control and
direction of the President. He is acting as the agent of the legislative department,
to determine and declare the event upon which its expressed will is to take effect.
● Congress does not abdicate its functions or unduly delegate power when it
describes what job must be done, who must do it, and what is the scope of his
authority; in our complex economy that is frequently the only way in which the
legislative process can go forward. There is no undue delegation of legislative
power but only of the discretion as to the execution of a law. This is
constitutionally permissible. What was delegated was the mere implementation of
the law but not the power to tax
2. W/N there was a Supreme Court held no decision on this matter. The power of the State to make
violation of Article III, reasonable and natural classifications for the purposes of taxation has long been
Section 19 established. Whether it relates to the subject of taxation, the kind of property, the rates to
be levied, or the amounts to be raised, the methods of assessment, valuation and
collection, the State’s power is entitled to presumption of validity. As a rule, the judiciary
will not interfere with such power absent a clear showing of unreasonableness,
discrimination, or arbitrariness.

The Court will not engage in a legal joust where premises are what ifs, arguments,
theoretical and facts, uncertain. Any disquisition by the Court on this point will only be,
as Shakespeare describes life in Macbeth, "full of sound and fury, signifying nothing."

RULING
(Sept. 2005) WHEREFORE, Republic Act No. 9337 not being unconstitutional, the petitions in G.R. Nos. 168056,
168207, 168461, 168463, and 168730, are hereby DISMISSED. There being no constitutional impediment to the full
enforcement and implementation of R.A. No. 9337, the temporary restraining order issued by the Court on July 1,
2005 is LIFTED upon finality of herein decision.
(Oct. 2005) WHEREFORE, the Motions for Reconsideration are hereby DENIED WITH FINALITY. The temporary
restraining order issued by the Court is LIFTED. SO ORDERED.
SEPARATE OPINIONS

8 (2) The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and
restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts
within the framework of the national development program of the Government.
9 SECTION 1. No person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied
the equal protection of the laws.
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DAVIDE, JR., C.J., CONCURRING AND DISSENTING:
Doubtless, the Senate has the constitutional power to concur with the amendments to the VAT provisions introduced
in the House Bills or even to propose its own version of VAT measure. But that power does not extend to initiation of
other tax measures, such as introducing amendments to provisions on corporate income taxes, percentage taxes,
franchise taxes, and excise taxes like what the Senate did in these cases. It was beyond the ambit of the authority of
the Senate to propose amendments to provisions not covered by the House Bills or not related to the subject matter of
the House Bills, which is VAT. To allow the Senate to do so would be tantamount to vesting in it the power to initiate
revenue bills -- a power that exclusively pertains to the House of Representatives under Section 24, Article VI of the
Constitution. The provisions inserted by the Bicameral Conference Committee (BCC), namely, Sections 121
(Percentage Tax on Banks and Non-Bank Financial Intermediaries) and 151 (Excise Tax on Mineral Products) of the
NIRC, as amended, are undoubtedly germane to SB No. 1950, which introduced amendments to the provisions on
percentage and excise taxes -- but foreign to HB Nos. 3555 and 3705, which dealt with VAT only. Since the proposed
amendments in the Senate bill relating to percentage and excise taxes cannot themselves be sustained because they
did not take their root from, or are not related to the subject of, HB Nos. 3705 and 3555, in violation of Section 24,
Article VI of the Constitution, the new provisions inserted by the BCC on percentage and excise taxes would have no
leg to stand on. I vote to declare R.A. No. 9337 as constitutional insofar as it amends provisions pertaining to VAT.
However,
I vote to declare as unconstitutional the amendments that deal with subject matters which were not touched or covered
by the bills emanating from the House of Representatives, thereby violating Section 24 of Article VI of the
Constitution.

PUNO, J. CONCURRING AND DISSENTING:

The Bicameral Conference Committee exercised powers that went beyond reconciling the differences between Senate
Bill No. 1950 and House Bill Nos. 3705 and 3555. A Bicameral Conference Committee has limited powers and
cannot be allowed to act as if it were a “third house” of Congress. Committees of conference are appointed for the
sole purpose of compromising and adjusting the differing and conflicting opinions of the two Houses and the
committees of conference alone can grant compromises and modify propositions of either Houses within the limits of
the disagreement. Conferees are limited to the consideration of differences between the two Houses. Congress shall
not insert in their report matters not committed to them by either House, nor shall they strike from the bill matters
agreed to by both Houses. No matter on which there is nothing in either the Senate or House passed versions of a bill
may be included in the conference report and actions to the contrary would subject the report to a point of order. I
respectfully submit that the acts of the Bicameral Conference Committee constitute grave abuse of discretion
amounting to lack or excess of jurisdiction and should be struck down as unconstitutional nullities.

PANGANIBAN, J., CONCURRING AND DISSENTING:

The Bicameral Conference Committee (BCC) is a mere creation of Congress. Hence, the BCC may resolve
differences only in conflicting provisions of congressional bills that are referred to it; and it may do so only on the
condition that such resolution does not violate the origination, the three-reading, and the no-amendment rules of the
Constitution. The BCC blatantly violated the origination and the germaneness principles when it inserted provisions
not found in the House versions of the E-VAT Law: (1) increasing the tax rates on domestic, resident foreign and
nonresident foreign corporations; (2) increasing the tax credit against taxes due from nonresident foreign corporations
on intercorporate dividends; and (3) reducing the allowable deduction for interest expense. Hence, I find these
insertions unconstitutional.
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YNARES-SANTIAGO, J., CONCURRING AND DISSENTING:
The amendments introduced by the Bicameral Conference Committee which are not found either in the House or
Senate
versions of the VAT reform bills, but are inserted merely by the Bicameral Conference Committee and thereafter
included in Republic Act No. 9337, should be declared unconstitutional. The insertions and deletions made do not
merely settle conflicting provisions but materially altered the bill, thus giving rise to the instant petitions.

SANDOVAL – GUTIERREZ, J., CONCURRING AND DISSENTING:

The Senate could not, without violating the germaneness rule and the principle of “exclusive origination” propose tax
matters not included in the House Bills.

CALLEJO, SR., J., CONCURRING AND DISSENTING:

Suffice it to say here that serious evils have marked the development of the conference committee system. Despite
rules to the contrary, conferees do not confine themselves to matters in dispute, but often initiate entirely new
legislation and even strike out identical provisions previously approved by both houses. What happens in practice is
that Congress surrenders its legislative function to irresponsible committees of conference. The standing rules against
including new and extraneous matter in conference reports have been gradually whittled away in recent years by the
decisions of presiding officers. Senate riders attached to appropriation bills enable conference committees to legislate
and the House usually accepts them rather than withhold supply. As a practical proposition we have legislation, then,
not by the voice of the members of the Senate, not by the members of the House of Representatives, but we have
legislation by the voice of five or six men.

AZCUNA, J. CONCURRING AND DISSENTING:

I vote to GRANT the petitions to the extent of declaring unconstitutional the provisions in Republic Act. No. 9337
that are not germane to the subject matter and DENY said petitions as to the rest of the law, which are constitutional.

Tinga, J., DISSENTING:

I agree that any amendment made by the Bicameral Conference Committee that is not germane to the subject matter
of the House or Senate Bills is not valid. It is the only valid ground by which an amendment introduced by the
Bicameral
Conference Committee may be judicially stricken.