TOLENTINO VS.

THE SECRETARY OF FINANCE Case Digest

ARTURO M. TOLENTINO VS. THE SECRETARY OF FINANCE and THE
COMMISSIONER OFINTERNAL REVENUE1994 Aug 25G.R. No. 115455235
SCRA 630FACTS:
The valued-added tax (VAT) is levied on the sale, barter or exchange of goods
andproperties as well as on the sale or exchange of services. It is equivalent to 10%
of the gross sellingprice or gross value in money of goods or properties sold, bartered
or exchanged or of the grossreceipts from the sale or exchange of services. Republic
Act No. 7716 seeks to widen the tax baseof the existing VAT system and enhance its
administration by amending the National InternalRevenue Code.The Chamber of
Real Estate and Builders Association (CREBA) contends that the imposition of
VATon sales and leases by virtue of contracts entered into prior to the effectivity of the
law would violate
the constitutional provision of “non
-im
pairment of contracts.”

ISSUE:
Whether R.A. No. 7716 is unconstitutional on ground that it violates the contract
clauseunder Art. III, sec 10 of the Bill of Rights.
RULING:
No. The Supreme Court the contention of CREBA, that the imposition of the VAT on
thesales and leases of real estate by virtue of contracts entered into prior to the
effectivity of the lawwould violate the constitutional provision of non-impairment of
contracts, is only slightly less abstractbut nonetheless hypothetical. It is enough to say
that the parties to a contract cannot, through theexercise of prophetic discernment,
fetter the exercise of the taxing power of the State. For not onlyare existing laws read
into contracts in order to fix obligations as between parties, but the reservationof
essential attributes of sovereign power is also read into contracts as a basic postulate
of the legalorder. The policy of protecting contracts against impairment presupposes
the maintenance of agovernment which retains adequate authority to secure the
peace and good order of society. In truth,the Contract Clause has never been thought
as a limitation on the exercise of the State's power of taxation save only where a tax
exemption has been granted for a valid consideration.

Such is not the case of PAL in G.R. No. 115852, and the Court does not understand
it to make thisclaim. Rather, its position, as discussed above, is that the removal of its
tax exemption cannot bemade by a general, but only by a specific, law.Further, the
Supreme Court held the validity of Republic Act No. 7716 in its formal and
substantiveaspects as this has been raised in the various cases before it. To sum up,
the Court holds:(1) That the procedural requirements of the Constitution have been
complied with by Congress in theenactment of the statute;(2) That judicial inquiry
whether the formal requirements for the enactment of statutes - beyondthose
prescribed by the Constitution - have been observed is precluded by the principle
of separation of powers;(3) That the law does not abridge freedom of speech,
expression or the press, nor interfere with thefree exercise of religion, nor deny to any
of the parties the right to an education; and(4) That, in view of the absence of a factual
foundation of record, claims that the law is regressive,oppressive and confiscatory
and that it violates vested rights protected under the Contract Clauseare prematurely
raised and do not justify the grant of prospective relief by writ of
prohibition.WHEREFORE, the petitions are DISMISSED.

Tolentino vs. Secretary of Finance G.R. No. 115455, August 25, 1994
Sunday, January 25, 2009 Posted by Coffeeholic WritesLabels: Case
Digests, Political Law
Facts:

The value-added tax (VAT) is levied on the sale, barter or

exchange of goods and properties aswell as on the sale or
exchange of services. RA 7716 seeks to widen the tax base of the
existing VATsystem and enhance its administration by amending
the National Internal Revenue Code. There arevarious suits
challenging the constitutionality of RA 7716 on various
grounds.One contention is that RA 7716 did not originate
exclusively in the House of Representatives asrequired by Art. VI,
Sec. 24 of the Constitution, because it is in fact the result of the
consolidation of 2distinct bills, H. No. 11197 and S. No. 1630.
There is also a contention that S. No. 1630 did not pass
3readings as required by the Constitution.
Issue:

Whether or not RA 7716 violates Art. VI, Secs. 24 and 26(2) of

the Constitution
Held:
The argument that RA 7716 did not originate exclusively in the
House of Representatives asrequired by Art. VI, Sec. 24 of the
Constitution will not bear analysis. To begin with, it is not the
lawbut the revenue bill which is required by the Constitution to
originate exclusively in the House of Representatives. To insist
that a revenue statute and not only the bill which initiated the
legislativeprocess 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
proposeamendments. 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 applicationmust come from the House of
Representatives on the theory that, elected as they are from
thedistricts, the members of the House can be expected to be
more sensitive to the local needs andproblems. Nor does the
Constitution prohibit the filing in the Senate of a substitute bill in
anticipationof its receipt of the bill from the House, so long as
action by the Senate as a body is withheld pendingreceipt of the
House bill.The next argument of the petitioners was that S. No.
1630 did not pass 3 readings on separate daysas required by the
Constitution because the second and third readings were done on
the same day.But this was because the President had certified S.
No. 1630 as urgent. The presidential certificationdispensed with
the requirement not only of printing but also that of reading the
bill on separate days.That upon the certification of a bill by the
President the requirement of 3 readings on separate days
and of printing and distribution can be dispensed with is
supported by the weight of legislativepractice.
*****
Tolentino vs. Secretary of Finance
Facts:
These are motions seeking reconsideration of our decision dismissing the
petitions filed inthese cases for the declaration of unconstitutionality of
R.A. No. 7716, otherwise known as theExpanded Value-Added Tax Law.
Now it is contended by the PPI that by removing theexemption 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."
Issue: Does sales tax on bible sales violative of religious freedom?Held: No.
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, isunconstitutional. As the U.S. Supreme Court put it, "it is one
thing to impose a tax on income or property of apreacher. It is quite
another thing to exact a tax on him for delivering a sermon."The VAT is,
however, different. It is not a license tax. It is not a tax on the exercise of a
privilege, much less aconstitutional right. It is imposed on the sale, barter,
lease or exchange of goods or properties or the sale or exchangeof 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 isnot to
violate its freedom under the Constitution