Tolentino v.

Secretary of Finance
Facts:

It appears that on various dates between July 22, 1992 and August 31, 1993, several bills 1 were introduced in the
House of Representatives seeking to amend certain provisions of the National Internal Revenue Code relative to the
value-added tax or VAT. These bills were referred to the House Ways and Means Committee which recommended
for approval a substitute measure, H. No. 11197, entitled

AN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT) SYSTEM TO WIDEN ITS TAX BASE
AND ENHANCE ITS ADMINISTRATION, AMENDING FOR THESE PURPOSES SECTIONS 99,
100, 102, 103, 104, 105, 106, 107, 108 AND 110 OF TITLE IV, 112, 115 AND 116 OF TITLE V, AND
236, 237 AND 238 OF TITLE IX, AND REPEALING SECTIONS 113 AND 114 OF TITLE V, ALL OF
THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED

The bill (H. No. 11197) was considered on second reading starting November 6, 1993 and, on November 17, 1993,
it was approved by the House of Representatives after third and final reading.

It was sent to the Senate on November 23, 1993 and later referred by that body to its Committee on Ways and
Means.

On February 7, 1994, the Senate Committee submitted its report recommending approval of S. No. 1630, entitled

AN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT) SYSTEM TO WIDEN ITS TAX BASE
AND ENHANCE ITS ADMINISTRATION, AMENDING FOR THESE PURPOSES SECTIONS 99,
100, 102, 103, 104, 105, 107, 108, AND 110 OF TITLE IV, 112 OF TITLE V, AND 236, 237, AND
238 OF TITLE IX, AND REPEALING SECTIONS 113, 114 and 116 OF TITLE V, ALL OF THE
NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER PURPOSES

It was stated that the bill was being submitted "in substitution of Senate Bill No. 1129, taking into consideration P.S.
Res. No. 734 and H.B. No. 11197."

On February 8, 1994, the Senate began consideration of the bill (S. No. 1630). It finished debates on the bill and
approved it on second reading on March 24, 1994. On the same day, it approved the bill on third reading by the
affirmative votes of 13 of its members, with one abstention.

H. No. 11197 and its Senate version (S. No. 1630) were then referred to a conference committee which, after
meeting four times (April 13, 19, 21 and 25, 1994), recommended that "House Bill No. 11197, in consolidation with
Senate Bill No. 1630, be approved in accordance with the attached copy of the bill as reconciled and approved by
the conferees."

The Conference Committee bill, entitled "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," was thereafter approved by the House of Representatives on April
27, 1994 and by the Senate on May 2, 1994. The enrolled bill was then presented to the President of the Philippines
who, on May 5, 1994, signed it. It became Republic Act No. 7716. On May 12, 1994, Republic Act No. 7716 was
published in two newspapers of general circulation and, on May 28, 1994, it took effect, although its implementation
was suspended until June 30, 1994 to allow time for the registration of business entities. It would have been
enforced on July 1, 1994 but its enforcement was stopped because the Court, by the vote of 11 to 4 of its members,
granted a temporary restraining order on June 30, 1994.

Issues:
I. Procedural Issues:
Tolentino v. Secretary of Finance
A. Does Republic Act No. 7716 violate Art. VI, § 24 of the Constitution?
B. Does it violate Art. VI, § 26(2) of the Constitution?
C. What is the extent of the power of the Bicameral Conference Committee?
II. Substantive Issues:
A. Does the law violate the following provisions in the Bill of Rights (Art. III)?
1. §1
2. § 4
3. § 5
4. § 10
B. Does the law violate the following other provisions of the Constitution?
1. Art. VI, § 28(1)
2. Art. VI, § 28(3)

Rule:

Ratio:

I. Procedural Issues

A. First, petitioners' contention is that Republic Act No. 7716 did not "originate exclusively" in the House of
Representatives as required by Art. VI, §24 of the Constitution, because it is in fact the result of the
consolidation of two distinct bills, H. No. 11197 and S. No. 1630. In this connection, petitioners point out that
although Art. VI, SS 24 was adopted from the American Federal Constitution, 2 it is notable in two respects: the
verb "shall originate" is qualified in the Philippine Constitution by the word "exclusively" and the phrase "as on
other bills" in the American version is omitted. This means, according to them, that to be considered as having
originated in the House, Republic Act No. 7716 must retain the essence of H. No. 11197..

Art. VI, § 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.

Id., § 26(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 contention lacks merit.

It is not the law — but the revenue bill — which is required by the Constitution to "originate exclusively" in the House
of Representatives. A bill originating in the House may undergo such extensive changes in the Senate that the result
may be a rewriting of the whole. The possibility of a third version by the conference committee will be discussed
later. 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. 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.

It is insisted, however, that S. No. 1630 was passed not in substitution of H. No. 11197 but of another Senate bill (S.
No. 1129) earlier filed and that what the Senate did was merely to "take [H. No. 11197] into consideration" in
enacting S. No. 1630. There is really no difference between the Senate preserving H. No. 11197 up to the enacting
Tolentino v. Secretary of Finance
clause and then writing its own version following the enacting clause (which, it would seem, petitioners admit is an
amendment by substitution), and, on the other hand, separately presenting a bill of its own on the same subject
matter. In either case the result are two bills on the same subject.

Indeed, what the Constitution simply means is that the initiative for filing revenue, tariff, or tax bills, bills authorizing
an increase of the public debt, private bills and bills of local application must come from the House of
Representatives on the theory that, elected as they are from the districts, the members of the House can be
expected to be more sensitive to the local needs and problems. On the other hand, the senators, who are elected at
large, are expected to approach the same problems from the national perspective. Both views are thereby made to
bear on the enactment of such laws.

Nor does the Constitution prohibit the filing in the Senate of a substitute bill in anticipation of its receipt of
the bill from the House, so long as action by the Senate as a body is withheld pending receipt of the House
bill.

Second, petitioners contend that S. No. 1630 did not pass three readings on separate days as required by the
Constitution 8 because the second and third readings were done on the same day, March 24, 1994. But this was
because on February 24, 1994 9 and again on March 22, 1994, 10 the President had certified S. No. 1630 as
urgent. The presidential certification dispensed with the requirement not only of printing but also that of
reading the bill on separate days.

Third. Petitioners contended that the bill which became Republic Act No. 7716 is the bill which the Conference
Committee prepared by consolidating H. No. 11197 and S. No. 1630. It is claimed that the Conference Committee
report included provisions not found in either the House bill or the Senate bill and that these provisions were
"surreptitiously" inserted by the Conference Committee.

The Court recently 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. 17 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. The charge that in
this case the Conference Committee acted as a third legislative chamber is thus without any basis.

Petitioners argued that under the respective Rules of the Senate and the House of Representatives a conference
committee can only act on the differing provisions of a Senate bill and a House bill, and that contrary to these Rules
the Conference Committee inserted provisions not found in the bills submitted to it.

Nothing in the Rules nor the Constitution limits a conference committee to a consideration of conflicting
provisions.

Petitioners contend that the Rules of the two chambers were likewise disregarded in the preparation of the
Conference Committee Report because the Report did not contain a "detailed and sufficiently explicit statement of
changes in, or amendments to, the subject measure."

The Court ruled that “parliamentary rules are merely procedural and with their observance the courts have
no concern”. The Court’s concern is with the procedural requirements of the Constitution for the enactment
of law.

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. 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.

Fourth. Whatever doubts there may be as to the formal validity of Republic Act No. 7716 must be resolved in its
favor. Our cases 20 manifest firm adherence to the rule that an enrolled copy of a bill is conclusive not only of its
Tolentino v. Secretary of Finance
provisions but also of its due enactment (Enrolled Bill Rule). Not even claims that a proposed constitutional
amendment was invalid because the requisite votes for its approval had not been obtained 21 or that certain
provisions of a statute had been "smuggled" in the printing of the bill 22 have moved or persuaded us to look behind
the proceedings of a coequal branch of the government. In the instant case, there is no reason now to depart from
this rule.

Where allegations that the constitutional procedures for the passage of bills have not been observed have no more
basis than another allegation that the Conference Committee "surreptitiously" inserted provisions into a bill which it
had prepared, we should decline the invitation to go behind the enrolled copy of the bill. To disregard the "enrolled
bill" rule in such cases would be to disregard the respect due the other two departments of our government.

Enrolled Bill Rule

Enroll bill is a final product of the entire legislative enactment process and is accorded absolute
verity and is conclusively presumed to have been validly adopted. Though not absolute in Philippine
jurisdiction, the court is prevented from looking beyond the enrolled bill to determine if a statute was
validly enacted.

Fifth. Philippine Airlines, Inc., petitioner in G.R. No. 11582, namely, that it violates Art. VI, § 26(1) which provides
that "Every bill passed by Congress shall embrace only one subject which shall be expressed in the title thereof." It
is contended that neither H. No. 11197 nor S. No. 1630 provided for removal of exemption of PAL transactions from
the payment of the VAT and that this was made only in the Conference Committee bill which became Republic Act
No. 7716 without reflecting this fact in its title.

One Title – One Subject (as opposed to One Subject - One Bill)

The trend in our cases is to construe the constitutional requirement in such a manner that courts do not
unduly interfere with the enactment of necessary legislation and to consider it sufficient if the title
expresses the general subject of the statute and all its provisions are germane to the general subject
thus expressed.

Sixth. PAL contended that amendment of petitioner's franchise may only be made by special law, in view of § 24 of
P.D. No. 1590 which provides:

This franchise, as amended, or any section or provision hereof may only be modified, amended, or
repealed expressly by a special law or decree that shall specifically modify, amend, or repeal this
franchise or any section or provision thereof.

Republic Act No. 7716 expressly amends PAL's franchise (P.D. No. 1590) by specifically excepting from the grant
of exemptions from the VAT PAL's exemption under P.D. No. 1590. This is within the power of Congress to do
under Art. XII, § 11 of the Constitution, which provides that the grant of a franchise for the operation of a public utility
is subject to amendment, alteration or repeal by Congress when the common good so requires.