Tuesday, February 21, 2012

National Power Corporation (NAPOCOR) vs. Province of Albay (1990)

Facts: Newspapers published in March 1989 carried respondents’ (Province of Albay, Albay Governor, Albay Provincial Treasurer) notice for auction sale of NAPOCOR properties (buildings, machines, and similar improvements) standing on their Tiwi offices. The proceeds from the sale were supposed to be applied to the real property taxes NAPOCOR allegedly owed the Albay provincial government from June 1984 to March 1987. 

NAPOCOR opposed the sale, citing 

Resolution No. 17-87 of the Fiscal Incentives Review Board (FIRB), which stated “That the tax and duty exemption privileges of the [NAPOCOR], including those pertaining to its domestic purchases of petroleum and petroleum products, granted under the terms and conditions of Commonwealth Act No. 120 (Creating the [NAPOCOR], defining its powers, objectives and functions, and for other purposes), as amended, are restored effective March 10, 1987.” Note: several FIRB Resolutions (Nos. 10-85 and 1-86) prior to this one purportedly granted tax exemptions to NAPOCOR for certain periods 

The Memorandum of the Executive Secretary, which provided, “Pursuant to Sections 1 (f) and 2 (e) of Executive Order No. 93, series of 1986, FIRB Resolution No. 17-87, series of 1987, restoring, subject to certain conditions prescribed therein, the tax and duty exemption privileges of NPC as provided under Commonwealth Act No. 120, as amended, effective March 10, 1987, is hereby confirmed and approved.” 

The Court issued a TRO on the auction sale. However, it appears the order did not reach the Albay Provincial Government before the scheduled bidding, so the event pushed through. The Province of Albay was the highest bidder. 

Issue: Whether or not the FIRB issuances granting tax exemption are an undue delegation of the taxing power and thus, unconstitutional

Held: YES. PD 776, which created the FIRB, provided that the Board’s power was merely to "recommend to the President of the Philippines and for reasons of compatibility with the declared economic policy, the withdrawal, modification, revocation or suspension of the enforceability of any of the above-cited statutory subsidies or tax exemption grants, except those granted by the Constitution." It has no authority to impose taxes or revoke existing ones, which, after all, under the Constitution, only the legislature may accomplish. 

The FIRB may only recommend tax exemptions. By itself, it could not have validly prescribed exemptions or restore taxability. Hence, as of June 11, 1984 (promulgation of PD 1931), NAPOCOR had ceased to enjoy tax exemption privileges. The fact that under EO 93, the FIRB has been given the prerogative to "restore tax and/or duty exemptions withdrawn hereunder in whole or in part," and "impose conditions for ... tax and/or duty exemption" is of no moment. These provisions are prospective in character and can not affect the Board's past acts. 

It is to be stressed that the provincial government of Albay admits that as of March 10, 1987 (the date Resolution No. 17-87 was affirmed by the Memorandum of the Office of the President, dated October 5, 1987), NAPOCOR's exemption had been validly restored. What it questions is NAPOCOR's liability in the interregnum between June 11, 1984, the date its tax privileges were withdrawn, and March 10, 1987, the date they were purportedly restored. To be sure, it objects to Executive Order No. 93 as allegedly a delegation of legislative power, but only insofar as its (NAPOCOR's) June 11, 1984 to March 10, 1987 tax accumulation is concerned. We therefore leave the issue of "delegation" to the future and its constitutionality when the proper case arises. For the nonce, we leave Executive Order No. 93 alone, and so also, its validity as far as it grants tax exemptions (through the FIRB) beginning December 17, 1986, the date of its promulgation. 

NAPOCOR must then be held liable for the stated intervening years. So it has been held: 

xxx xxx xxx 

The last issue to be resolved is whether or not the private-respondent is liable for the fixed and deficiency percentage taxes in the amount of P3,025.96 (i.e. for the period from January 1, 1946 to February 29, 1948) before the approval of its municipal franchises. As aforestated, the franchises were approved by the President only on February 24, 1948. Therefore, before the said date, the private respondent was liable for the payment of percentage and fixed taxes as seller of light, heat, and power which, as the petitioner claims, amounted to P3,025.96. The legislative franchise (R.A. No. 3843) exempted the grantee from all kinds of taxes other than the 2% tax from the date the original franchise was granted. The exemption, therefore, did not cover the period before the franchise was granted, i.e. before February 24, 1948. ... 

Actually, the State has no reason to decry the taxation of NAPOCOR's properties, as and by way of real property taxes. Real property taxes, after all, form part and parcel of the financing apparatus of the Government in development and nation-building, particularly in the local government level. To all intents and purposes, real property taxes are funds taken by the State with one hand and given to the other. In no measure can the Government be said to have lost anything. 

As a rule, claims of tax exemption are construed strongly against the claimant. They must also be shown to exist clearly and categorically, and supported by clear legal provisions.

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