CASE NAME ABAKADA Guro Party List vs.

Ermita,
GR Number/ Case Date: GR No. 168056, Sept 1, 2005, Oct 18, 2005
Ponente: J puno en banc
Petitioners: ABAKADA GURO PARTY LIST, OFFICERS SAMSON S. ALCANTARA and ED VINCENT S. ALBANO,

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

Subject: Consti 1
Topic: Delegation of Powers

Doctrine: A distinction has rightfully been made between delegation of power to make the laws which necessarily involves a
discretion as to what it shall be, which constitutionally may not be done, and delegation of authority or discretion as to its
execution to be exercised under and in pursuance of the law, to which no valid objection can be made

Rule of law: SECTION 24 of Article VI. 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.

Facts
The petitioners in these consolidated cases are challenging the constitutionality of the common proviso in sections 4,5
and 6 of RA 9337, the VAT Reform Act which reads as follows:

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:

(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year
exceeds two and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-
half percent (1 %).

Petitioners alleged 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

They argued that the VAT is a tax levied on the sale, barter or exchange of goods and properties as well as on the sale or
exchange of services, which cannot be included within the purview of tariffs under the exempted delegation as the latter
refers to customs duties, tolls or tribute payable upon merchandise to the government and usually imposed on goods or
merchandise imported or exported.
They averred that the President has ample powers to cause, influence or create the conditions provided by the law to
bring about either or both the conditions precedent.

Moreover, they alleged that no guiding standards are provided in the law on what basis and as to how the Secretary of
Finance will make his recommendation.

Issue:

Whether RA 9337 granting the standby authority to the executive to increase the rate of the VAT upon recommendation of the
Secretary of Finance constitutes undue delegation of legislative power.

Held:
No, 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.It is the nature of the power, and not the liability of its use or the manner of its exercise, which determines the
validity of its delegation.

The limitations or exceptions are

(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;
 (3) Delegation to the people at large;

(4) Delegation to local governments; and

(5) Delegation to administrative bodies.

For the delegation to be valid the law, must be:

(a) complete in itself, setting forth therein the policy to be executed, carried out, or implemented by the
delegate; and

(b) fixes a sufficient standard which defines legislative policy, marks its limits, maps out its boundaries and
specifies the public agency to apply it. It indicates the circumstances under which the legislative command is to be
effected.

Both tests are intended to prevent a total transference of legislative authority to the delegate, who is not
allowed to step into the shoes of the legislature and exercise a power essentially legislative.

In Edu vs. Ericta, the Court reiterated:

The legislative does not abdicate its functions when it describes what job must be done,
who is to do it, and what is the scope of his authority. For a complex economy, that may be the only way
in which the legislative process can go forward. A distinction has rightfully been made between
delegation of power to make the laws which necessarily involves a discretion as to what it shall be,
which constitutionally may not be done, and delegation of authority or discretion as to its execution to
be exercised under and in pursuance of the law, to which no valid objection can be made

This case is not a delegation of legislative power. It is simply a delegation of ascertainment of facts upon which
enforcement and administration of the 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.

No discretion would be exercised by the President. Highlighting the absence of discretion is the fact that
the word shall is used in the common proviso. The use of the word shall connotes a mandatory order. Its use in a
statute denotes an imperative obligation and is inconsistent with the idea of discretion.

It is the ministerial duty of the President to immediately impose the 12% rate upon the existence of any
of the conditions specified by Congress. This is a duty which cannot be evaded by the President. It s a clear directive
to impose the 12% VAT rate when the specified conditions are present.

In the present case, in making his recommendation to the President on the existence of either of the two
conditions, the Secretary of Finance is not acting as the alter ego of the President or even her subordinate. 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.

The Secretary of Finance becomes the means or tool by which legislative policy is determined and
implemented, considering that he possesses all the facilities to gather data and information and has a much broader
perspective to properly evaluate them. His function is to gather and collate statistical data and other pertinent
information and verify if any of the two conditions laid out by Congress is present.

Congress 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

Ruling
WHEREFORE, Republic Act No. 9337 not being unconstitutional, the petitions in G.R. Nos. 168056, 168207, 168461, 168463, and
168730, are hereby DISMISSED.

Separate Opinions

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.

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.