Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No.

81921 June 30, 1988 INTEGRATED CUSTOMS BROKERS ASSOCIATION OF T E P I!IPPINES "n# JESUS B. BANA!, petitioners, vs. T$e ON. COMMISSIONER, BUREAU OF INTERNA! RE%ENUE respondent. G.R. No. 821&2 June 30, 1988 RICARDO C. %A!MONTE, petitioner, vs. T E E'ECUTI%E SECRETAR(, SECRETAR( OF FINANCE, COMMISSIONER OF INTERNA! RE%ENUE "n# SECRETAR( OF BUDGET, respondents. Franklin S. Farolan for individual petitioner Kapatiran in G.R. No. 81311. Jaime C. Opinion for individual petitioners in G.R. No. 81311. Ban uela! Flores "iralles! Raneses S#! $a%uio and asso&iates for petitioners in G.R. No. 818'(. )nion of la*#ers and +dvo&ates for ,eoples Ri-.t &olla/oratin&ounsel for petitioners in G.R. No. 818'(. Jose C. 0ea/res and Joselito R. 1nri%ue for petitioners in G.R. No. 812'1.

PADI!!A, J.:
These four (4 petitions, !hich have been consolidated because of the si"ilarit# of the "ain issues involved therein, see$ to nullif# E%ecutive &rder No. '() (E& '(), for short , issued b# the President of the Philippines on '* +ul# ,-.(, to ta$e effect on , +anuar# ,-.., and !hich a"ended certain sections of the National /nternal Revenue Code and adopted the value0added ta% (1AT for short , for bein2 unconstitutional in that its enact"ent is not alled2edl# !ithin the po!ers of the President3 that the 1AT is oppressive, discri"inator#, re2ressive, and violates the due process and e4ual protection clauses and other provisions of the ,-.( Constitution. The 5olicitor 6eneral pra#s for the dis"issal of the petitions on the 2round that the petitioners have failed to sho! 7ustification for the e%ercise of its 7udicial po!ers, vi8. (, the e%istence of an appropriate case3 (' an interest, personal and substantial, of the part# raisin2 the constitutional 4uestions3 () the constitutional 4uestion should be raised at the earliest opportunit#3 and (4 the 4uestion of constitutionalit# is directl# and necessaril# involved in a 7usticiable controvers# and its resolution is essential to the protection of the ri2hts of the parties. Accordin2 to the 5olicitor 6eneral, onl# the third re4uisite0that the constitutional 4uestion should be raised at the earliest opportunit#0has been co"plied !ith. 9e also 4uestions the le2al standin2 of the petitioners !ho, he contends, are "erel# as$in2 for an advisor# opinion fro" the Court, there bein2 no 7usticiable controvers# for resolution. &b7ections to ta%pa#ers: suit for lac$ of sufficient personalit# standin2, or interest are, ho!ever, in the "ain procedural "atters. Considerin2 the i"portance to the public of the cases at bar, and in $eepin2 !ith the Court:s dut#, under the ,-.( Constitution, to deter"ine !hether or not the other branches of 2overn"ent have $ept the"selves !ithin the li"its of the Constitution and the la!s and that the# have not abused the discretion 2iven to the", the Court has brushed aside technicalities of procedure and has ta$en co2ni8ance of these petitions, But, before resolvin2 the issues raised, a brief loo$ into the ta% la! in 4uestion is in order. The 1AT is a ta% levied on a !ide ran2e of 2oods and services. /t is a ta% on the value, added b# ever# seller, !ith a22re2ate 2ross annual sales of articles and;or services, e%ceedin2 P'<<,<<<.<<, to his purchase of 2oods and services, unless e%e"pt. 1AT is co"puted at the rate of <= or ,<= of the

2ross sellin2 price of 2oods or 2ross receipts reali8ed fro" the sale of services. The 1AT is said to have eli"inated privile2e ta%es, "ultiple rated sales ta% on "anufacturers and producers, advance sales ta%, and co"pensatin2 ta% on i"portations. The fra"ers of E& '() clai" that it is principall# ai"ed to rationali8e the s#ste" of ta%in2 2oods and services3 si"plif# ta% ad"inistration3 and "a$e the ta% s#ste" "ore e4uitable, to enable the countr# to attain econo"ic recover#. The 1AT is not entirel# ne!. /t !as alread# in force, in a "odified for", before E& '() !as issued. As pointed out b# the 5olicitor 6eneral, the Philippine sales ta% s#ste", prior to the issuance of E& '(), !as essentiall# a sin2le sta2e value added ta% s#ste" co"puted under the >cost subtraction "ethod> or >cost deduction "ethod> and !as i"posed onl# on ori2inal sale, barter or e%chan2e of articles b# "anufacturers, producers, or i"porters. 5ubse4uent sales of such articles !ere not sub7ect to sales ta%. 9o!ever, !ith the issuance of P? ,--, on ), &ctober ,-.*, a )= ta% !as i"posed on a second sale, !hich !as reduced to ,.*= upon the issuance of P? '<<@ on ), ?ece"ber ,-.*, to ta$e effect , +anuar# ,-.@. Reduced sales ta%es !ere i"posed not onl# on the second sale, but on ever# subse4uent sale, as !ell. E& '() "erel# increased the 1AT on ever# sale to ,<=, unless 8ero0rated or e%e"pt. Petitioners first contend that E& '() is unconstitutional on the 2round that the President had no authorit# to issue E& '() on '* +ul# ,-.(. The contention is !ithout "erit. /t should be recalled that under Procla"ation No. ), !hich decreed a Provisional Constitution, sole le2islative authorit# !as vested upon the President. Art. //, sec. , of the Provisional Constitution statesA 5ec ,. Bntil a le2islature is elected and convened under a ne! Constitution, the President shall continue to e%ercise le2islative po!ers. &n ,* &ctober ,-.@, the Constitutional Co""ission of ,-.@ adopted a ne! Constitution for the Republic of the Philippines !hich !as ratified in a

plebiscite conducted on ' Cebruar# ,-.(. Article D1///, sec. @ of said Constitution, hereafter referred to as the ,-.( Constitution, providesA 5ec. @. The incu"bent President shall continue to e%ercise le2islative po!ers until the first Con2ress is convened. /t should be noted that, under both the Provisional and the ,-.( Constitutions, the President is vested !ith le2islative po!ers until a le2islature under a ne! Constitution is &onvened. The first Con2ress, created and elected under the ,-.( Constitution, !as convened on '( +ul# ,-.(. 9ence, the enact"ent of E& '() on '* +ul# ,-.(, t!o (' da#s before Con2ress convened on '( +ul# ,-.(, !as !ithin the President:s constitutional po!er and authorit# to le2islate. Petitioner 1al"onte clai"s, additionall#, that Con2ress !as reall# convened on )< +une ,-.( (not '( +ul# ,-.( . 9e contends that the !ord >convene> is s#non#"ous !ith >the date !hen the elected "e"bers of Con2ress assu"ed office.> The contention is !ithout "erit. The !ord >convene> !hich has been interpreted to "ean >to call to2ether, cause to asse"ble, or convo$e,> 1 is clearl# different fro" assu"ption of office b# the individual mem/ers of Con2ress or their ta$in2 the oath of office. As an e%a"ple, !e call to "ind the interi" National Asse"bl# created under the ,-() Constitution, !hich had not been >convened> but so"e "e"bers of the bod#, "ore particularl# the dele2ates to the ,-(, Constitutional Convention !ho had opted to serve therein b# votin2 affir"ativel# for the approval of said Constitution, had ta$en their oath of office. To uphold the sub"ission of petitioner 1al"onte !ould stretch the definition of the !ord >convene> a bit too far. /t !ould also defeat the purpose of the fra"ers of the ,-.( Constitution and render "eanin2less so"e other provisions of said Constitution. Cor e%a"ple, the provisions of Art. 1/, sec. ,*, re4uirin2 Con2ress to &onvene once ever# #ear on the fourth Monda# of +ul# for its re2ular session !ould be a contrariet#, since Con2ress !ould alread# be dee"ed to be in session after the individual "e"bers have ta$en their oath of office. A portion of the provisions of Art. 1//, sec. ,<, re4uirin2 Con2ress to &onvene for the purpose of enactin2 a la! callin2 for a special election to elect a President and 1ice0President in case a vacanc# occurs in said offices, !ould also be a surplusa2e. The portion of Art. 1//, sec. ,,, third para2raph, re4uirin2 Con2ress to &onvene, if not in session, to decide a

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conflict bet!een the President and the Cabinet as to !hether or not the President can re0assu"e the po!ers and duties of his office, !ould also be redundant. The sa"e is true !ith that portion of Art. 1//, sec. ,., !hich re4uires Con2ress to &onvene !ithin t!ent#0four ('4 hours follo!in2 the declaration of "artial la! or the suspension of the privile2e of the !rit of .a/eas &orpus. The ,-.( Constitution "entions a specific date !hen the President loses her po!er to le2islate. /f the fra"ers of said Constitution had intended to ter"inate the e%ercise of le2islative po!ers b# the President at the be2innin2 of the ter" of office of the "e"bers of Con2ress, the# should have so stated (but did not in clear and une4uivocal ter"s. The Court has no po!er to re0 !rite the Constitution and 2ive it a "eanin2 different fro" that intended. The Court also finds no "erit in the petitioners: clai" that E& '() !as issued b# the President in 2rave abuse of discretion a"ountin2 to lac$ or e%cess of 7urisdiction. >6rave abuse of discretion> has been defined, as follo!sA 6rave abuse of discretion: i"plies such capricious and !hi"sical e%ercise of 7ud2"ent as is e4uivalent to lac$ of 7urisdiction (Abad 5antos vs. Province of Tarlac, ). &ff. 6a8. .)4 , or, in other !ords, !here the po!er is e%ercised in an arbitrar# or despotic "anner b# reason of passion or personal hostilit#, and it "ust be so patent and 2ross as to a"ount to an evasion of positive dut# or to a virtual refusal to perfor" the dut# en7oined or to act at all in conte"plation of la!. (Taver0 aEuna /nc. vs. Nable, ). &ff. 6a8. @' . 2 Petitioners have failed to sho! that E& '() !as issued capriciousl# and !hi"sicall# or in an arbitrar# or despotic "anner b# reason of passion or personal hostilit#. /t appears that a co"prehensive stud# of the 1AT !as "ade before E& '() !as issued. /n fact, the "erits of the 1AT had been e%tensivel# discussed b# its fra"ers and other 2overn"ent a2encies involved in its i"ple"entation, even under the past ad"inistration. As the 5olicitor 6eneral correctl# stated. >The si2nin2 of E.&. '() !as "erel# the last sta2e in the e%ercise of her le2islative po!ers. The le2islative process started lon2 before the si2nin2 !hen the data !ere 2athered, proposals !ere !ei2hed and the final !ordin2s of the "easure !ere drafted, revised and finali8ed. Certainl#, it cannot be said that the President "ade a 7u"p so to spea$, on the Con2ress, t!o da#s before it convened.> 3

Ne%t, the petitioners clai" that E& '() is oppressive, discri"inator#, un7ust and re2ressive, in violation of the provisions of Art. 1/, sec. '.(l of the ,-.( Constitution, !hich statesA 5ec. '.. (, The rule of ta%ation shall be unifor" and e4uitable. The Con2ress shall evolve a pro2ressive s#ste" of ta%ation. The petitioners: assertions in this re2ard are not supported b# facts and circu"stances to !arrant their conclusions. The# have failed to ade4uatel# sho! that the 1AT is oppressive, discri"inator# or un7ust. Petitioners "erel# rel# upon ne!spaper articles !hich are actuall# hearsa# and have no evidentiar# value. To 7ustif# the nullification of a la!, there "ust be a clear and une4uivocal breach of the Constitution, not a doubtful and ar2u"entative i"plication. ) As the Court sees it, E& '() satisfies all the re4uire"ents of a valid ta%. /t is unifor". The Court, in Cit# of Ba2uio vs. ?e Eeon, & saidA . .. /n Philippine Trust Co"pan# v. Fatco (@- Phil. 4'< , +ustice Eaurel, spea$in2 for the Court, statedA :A ta% is considered unifor" !hen it operates !ith the sa"e force and effect in ever# place !here the sub7ect "a# be found. There !as no occasion in that case to consider the possible effect on such a constitutional re4uire"ent !here there is a classification. The opportunit# ca"e in Eastern Theatrical Co. v. Alfonso (.) Phil. .*', .@' . ThusA :E4ualit# and unifor"it# in ta%ation "eans that all ta%able articles or $inds of propert# of the sa"e class shall be ta%ed at the sa"e rate. The ta%in2 po!er has the authorit# to "a$e reasonable and natural classifications for purposes of ta%ation3 . . . About t!o #ears later, +ustice Tuason, spea$in2 for this Court in Manila Race 9orses Trainers Assn. v. de la Cuente (.. Phil. @<, @* incorporated the above e%cerpt in his opinion and continued3 Ta$in2 ever#thin2 into account, the differentiation a2ainst !hich the plaintiffs co"plain confor"s to the practical dictates of 7ustice and e4uit# and is not discri"inator# !ithin the "eanin2 of the Constitution. To satisf# this re4uire"ent then, all that is needed as held in another case decided t!o #ears later, (B# Matias v. Cit# of

Cebu, -) Phil. )<< is that the statute or ordinance in 4uestion :applies e4uall# to all persons, fir"s and corporations placed in si"ilar situation.: This Court is on record as acceptin2 the vie! in a leadin2 A"erican case (Car"ichael v. 5outhern Coal and Co$e Co., )<, B5 4-* that :ine4ualities !hich result fro" a sin2lin2 out of one particular class for ta%ation or e%e"ption infrin2e no constitutional li"itation. (Eut8 v. Araneta, -. Phil. ,4., ,*) . The sales ta% adopted in E& '() is applied si"ilarl# on all 2oods and services sold to the public, !hich are not e%e"pt, at the constant rate of <= or ,<=. The disputed sales ta% is also e4uitable. /t is i"posed onl# on sales of 2oods or services b# persons en2a2e in business !ith an a22re2ate 2ross annual sales e%ceedin2 P'<<,<<<.<<. 5"all corner sari3sari stores are conse4uentl# e%e"pt fro" its application. Ei$e!ise e%e"pt fro" the ta% are sales of far" and "arine products, so that the costs of basic food and other necessities, spared as the# are fro" the incidence of the 1AT, are e%pected to be relativel# lo!er and !ithin the reach of the 2eneral public. * The Court li$e!ise finds no "erit in the contention of the petitioner /nte2rated Custo"s Bro$ers Association of the Philippines that E& '(), "ore particularl# the ne! 5ec. ,<)(r of the National /nternal Revenue Code, undul# discri"inates a2ainst custo"s bro$ers. The contested provision statesA 5ec ,<). 14empt transa&tions.GThe follo!in2 shall be e%e"pt fro" the value0added ta%A %%% %%% %%% (r 5ervice perfor"ed in the e%ercise of profession or callin2 (e%cept custo"s bro$ers sub7ect to the occupation ta% under the Eocal Ta% Code, and professional services perfor"ed b# re2istered 2eneral professional partnerships3 The phrase >e%cept custo"s bro$ers> is not "eant to discri"inate a2ainst custo"s bro$ers. /t !as inserted in 5ec. ,<)(r to co"ple"ent the provisions of 5ec. ,<' of the Code, !hich "a$es the services of custo"s bro$ers sub7ect to the pa#"ent of the 1AT and to distin2uish custo"s bro$ers fro" other

professionals !ho are sub7ect to the pa#"ent of an occupation ta% under the Eocal Ta% Code. Pertinent provisions of 5ec. ,<' readA 5ec. ,<'. 5alue3added ta4 on sale of servi&es G There shall be levied, assessed and collected, a value0added ta% e4uivalent to ,<= percent of 2ross receipts derived b# an# person en2a2ed in the sale of services. The phrase sale of services: "eans the perfor"ance of all $inds of services for others for a fee, re"uneration or consideration, includin2 those perfor"ed or rendered b# construction and service contractors3 stoc$, real estate, co""ercial, custo"s and i""i2ration bro$ers3 lessors of personal propert#3 lessors or distributors of cine"ato2raphic fil"s3 persons en2a2ed in "illin2 processin2, "anufacturin2 or repac$in2 2oods for others3 and si"ilar services re2ardless of !hether or not the perfor"ance thereof calls for the e%ercise or use of the ph#sical or "ental facultiesA ... Hith the insertion of the clarificator# phrase >e%cept custo"s bro$ers> in 5ec. ,<)(r , a potential conflict bet!een the t!o sections, (5ecs. ,<' and ,<) , insofar as custo"s bro$ers are concerned, is averted. At an# rate, the distinction of the custo"s bro$ers fro" the other professionals !ho are sub7ect to occupation ta% under the Eocal Ta% Code is based upon "aterial differences, in that the activities of custo"s bro$ers (li$e those of stoc$, real estate and i""i2ration bro$ers parta$e "ore of a business, rather than a profession and !ere thus sub7ected to the percenta2e ta% under 5ec. ,(4 of the National /nternal Revenue Code prior to its a"end"ent b# E& '(). E& '() abolished the percenta2e ta% and replaced it !ith the 1AT. /f the petitioner Association did not protest the classification of custo"s bro$ers then, the Court sees no reason !h# it should protest no!. The Court ta$es note that E& '() has been in effect for "ore than five (* "onths no!, so that the fears e%pressed b# the petitioners that the adoption of the 1AT !ill tri22er s$#roc$etin2 of prices of basic co""odities and services, as !ell as "ass actions and de"onstrations a2ainst the 1AT should b# no! be evident. The fact that nothin2 of the sort has happened sho!s that the fears and apprehensions of the petitioners appear to be "ore i"a2ined than real. /t !ould see" that the 1AT is not as bad as !e are "ade to believe. /n an# event, if petitioners seriousl# believe that the adoption and continued application of the 1AT are pre7udicial to the 2eneral !elfare or the interests of

the "a7orit# of the people, the# should see$ recourse and relief fro" the political branches of the 2overn"ent. The Court, follo!in2 the ti"e0honored doctrine of separation of po!ers, cannot substitute its 7ud2"ent for that of the President as to the !isdo", 7ustice and advisabilit# of the adoption of the 1AT. The Court can onl# loo$ into and deter"ine !hether or not E& '() !as enacted and "ade effective as la!, in the "anner re4uired b#, and consistent !ith, the Constitution, and to "a$e sure that it !as not issued in 2rave abuse of discretion a"ountin2 to lac$ or e%cess of 7urisdiction3 and, in this re2ard, the Court finds no reason to i"pede its application or continued i"ple"entation. H9EREC&RE, the petitions are ?/5M/55E?. Hithout pronounce"ent as to costs. 5& &R?ERE?.