H.9 Maceda Vs Macaraig GR No. 88291 05311991 PDF

8/31/2016 G.R.No.
88291
TodayisWednesday,August31,2016
RepublicofthePhilippines
SUPREMECOURT
Manila
ENBANC
G.R.No.88291May31,1991
ERNESTOM.MACEDA,petitioner,
vs.
HON.CATALINOMACARAIG,JR.,inhiscapacityasExecutiveSecretary,OfficeofthePresidentHON.
VICENTER.JAYME,inhiscapacityasSecretaryoftheDepartmentofFinanceHON.SALVADORMISON,
inhiscapacityasCommissioner,BureauofCustomsHON.JOSEU.ONG,inhiscapacityas
CommissionerofInternalRevenueNATIONALPOWERCORPORATIONtheFISCALINCENTIVESREVIEW
BOARDCaltex(Phils.)Inc.PilipinasShellPetroleumCorporationPhilippineNationalOilCorporation
andPetrophilCorporation,respondents.
Villamor&VillamorLawOfficesforpetitioner.
Angara,Abello,Concepcion,Regala&CruzforPilipinasShellPetroleumCorporation.
SiguionReyna,Montecillo&OngsiakoforCaltex(Phils.),Inc.
GANCAYCO,J.:
Thispetitionseekstonullifycertaindecisions,orders,rulings,andresolutionsofrespondentsExecutiveSecretary,
Secretary of Finance, Commissioner of Internal Revenue, Commissioner of Customs and the Fiscal Incentives
ReviewBoardFIRBforexemptingtheNationalPowerCorporation(NPC)fromindirecttaxandduties.
Therelevantfactsarenotindispute.
On November 3, 1986, Commonwealth Act No. 120 created the NPC as a public corporation to undertake the
developmentofhydraulicpowerandtheproductionofpowerfromothersources.1
OnJune4,1949,RepublicActNo.358grantedNPCtaxanddutyexemptionprivilegesunder
Sec.2.Tofacilitatepaymentofitsindebtedness,theNationalPowerCorporationshallbeexemptfromall
taxes,duties,fees,imposts,chargesandrestrictionsoftheRepublicofthePhilippines,itsprovinces,cities
andmunicipalities.
OnSeptember10,1971,RepublicActNo.6395revisedthecharteroftheNPCwhereinCongressdeclaredasa
national policy the total electrification of the Philippines through the development of power from all sources to
meet the needs of industrial development and rural electrification which should be pursued coordinately and
supported by all instrumentalities and agencies of the government, including its financial institutions. 2 The
corporate existence of NPC was extended to carry out this policy, specifically to undertake the development of
hydroelectricgenerationofpowerandtheproductionofelectricityfromnuclear,geothermalandothersources,
aswellasthetransmissionofelectricpoweronanationwidebasis.3Beinganonprofitcorporation,Section13of
thelawprovidedindetailtheexemptionoftheNPCfromalltaxes,duties,fees,impostsandotherchargesbythe
governmentanditsinstrumentalities.
OnJanuary22,1974,PresidentialDecreeNo.380amendedsection13,paragraphs(a)and(d)ofRepublicAct
No. 6395 by specifying, among others, the exemption of NPC from such taxes, duties, fees, imposts and other
charges imposed "directly or indirectly," on all petroleum products used by NPC in its operation. Presidential
DecreeNo.938datedMay27,1976furtheramendedtheaforesaidprovisionbyintegratingthetaxexemptionin
generaltermsunderoneparagraph.
On June 11, 1984, Presidential Decree No. 1931 withdrew all tax exemption privileges granted in favor of
governmentowned or controlled corporations including their subsidiaries. 4 However, said law empowered the
Presidentand/orthethenMinisterofFinance,uponrecommendationoftheFIRBtorestore,partiallyortotally,the
exemptionwithdrawn,orotherwiserevisethescopeandcoverageofanyapplicabletaxandduty.
Pursuant to said law, on February 7, 1985, the FIRB issued Resolution No. 1085 restoring the tax and duty
exemption privileges of NPC from June 11, 1984 to June 30, 1985. On January 7, 1986, the FIRB issued
resolutionNo.186indefinitelyrestoringtheNPCtaxanddutyexemptionprivilegeseffectiveJuly1,1985.
However, effective March 10, 1987, Executive Order No. 93 once again withdrew all tax and duty incentives
granted to government and private entities which had been restored under Presidential Decree Nos. 1931 and
1955butitgavetheauthoritytoFIRBtorestore,revisethescopeandprescribethedateofeffectivityofsuchtax
and/ordutyexemptions.
On June 24, 1987 the FIRB issued Resolution No. 1787 restoring NPC's tax and duty exemption privileges
effectiveMarch10,1987.OnOctober5,1987,thePresident,throughrespondentExecutiveSecretaryMacaraig,
Jr.,confirmedandapprovedFIRBResolutionNo.1787.
Asallegedinthepetition,thefollowingarethebackgroundfacts:
ThefollowingarethefactsrelevanttoNPC'squestionedclaimforrefundsoftaxesanddutiesoriginallypaid
byrespondentsCaltex,PetrophilandShellforspecificandadvaloremtaxestotheBIRandforCustoms
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duties and ad valorem taxes paid by PNOC, Shell and Caltex to the Bureau of Customs on its crude oil
importation.
Many of the factual statements are reproduced from the Senate Committee on Accountability of Public
Officers and Investigations (Blue Ribbon) Report No. 474 dated January 12, 1989 and approved by the
SenateonApril21,1989(copyattachedheretoasAnnex"A")andareidentifiedinquotationmarks:
1. Since May 27, 1976 when P.D. No. 938 was issued until June 11, 1984 when P.D. No. 1931 was
promulgated abolishing the tax exemptions of all governmentowned orcontrolled corporations, the oil
firmsneverpaidexciseorspecificandadvaloremtaxesforpetroleumproductssoldanddeliveredtothe
NPC.Thisnonpaymentoftaxesthereforespannedaperiodofeight(8)years.(par.23,p.7,Annex"A")
During this period, the Bureau of Internal Revenue was not collecting specific taxes on the purchases of
NPC of petroleum products from the oil companies on the erroneous belief that the National Power
Corporation (NPC) was exempt from indirect taxes as reflected in the letter of Deputy Commissioner of
InternalRevenue(DCIR)RomuloVillatotheNPCdatedOctober29,1980grantingblanketauthoritytothe
NPCtopurchasepetroleumproductsfromtheoilcompanieswithoutpaymentofspecifictax(copyofthis
letterisattachedheretoaspetitioner'sAnnex"B").
2.TheoilcompaniesstartedtopayspecificandadvaloremtaxesontheirsalesofoilproductstoNPConly
afterthepromulgationofP.D.No.1931onJune11,1984,withdrawingallexemptionsgrantedinfavorof
governmentownedorcontrolledcorporationsandempoweringtheFIRBtorecommendtothePresidentor
totheMinisterofFinancetherestorationoftheexemptionswhichwerewithdrawn."Specifically,Caltexpaid
thetotalamountofP58,020,110.79inspecificandadvaloremtaxesfordeliveriesofpetroleumproductsto
NPCcoveringtheperiodfromOctober31,1984toApril27,1985."(par.23,p.7,Annex"A")
3. Caltex billings to NPC until June 10, 1984 always included customs duty without the tax portion.
Beginning June 11, 1984, when P.D. 1931 was promulgated abolishing NPC's tax exemptions, Caltex's
billingstoNPCalwaysincludedbothdutiesandtaxes.(Caturla,tsn,Oct.10,1988,pp.15)(par.24,p,7,
Annex"A")
4. For the sales of petroleum products delivered to NPC during the period from October, 1984 to April,
1985, NPC was billed a total of P522,016,77.34 (sic) including both duties and taxes, the specific tax
componentbeingvaluedatP58,020,110.79.(par.25,p.8,Annex"A").
5.FiscalIncentivesReviewBoard(FIRB)Resolution1085,datedFebruary7,1985,certifiedtruecopyof
whichisheretoattachedasAnnex"C",restoredthetaxexemptionprivilegesofNPCeffectiveretroactively
toJune11,1984uptoJune30,1985.Thefirstparagraphofsaidresolutionreadsasfollows:
1. Effective June 11, 1984, the tax and duty exemption privileges enjoyed by the National Power
CorporationunderC.A.No.120,asamended,arerestoreduptoJune30,1985.
Becauseofthisrestoration(Annex"G")theNPCappliedonSeptember11,1985withtheBIRfora"refund
ofSpecificTaxespaidonpetroleumproducts...inthetotalamountofP58,020,110.79.(par.26,pp.89,
Annex"A")
6. In a letter to the president of the NPC dated May 8, 1985 (copy attached as petitioner's Annex "D"),
ActingBIRCommissionerRubenAnchetadeclared:
FIRBResolutionNo.1085servesassufficientbasistoallowNPCtopurchasepetroleumproducts
fromtheoilcompaniesfreeofspecificandadvaloremtaxes,duringtheperiodinquestion.
The"periodinquestion"isJune11,1984toJune30,1985.
7.OnJune6,1985ThepresidentoftheNPC,Mr.GabrielItchon,wroteMr.CesarVirata,Chairmanofthe
FIRB(Annex"E"),requesting"theFIRBtoresolveconflictingrulingsonthetaxexemptionprivilegesofthe
NationalPowerCorporation(NPC)."TheserulingsinvolveFIRBResolutionsNo.184and1085.(par.40,
p.12,Annex"A")
8.InalettertothePresidentofNPC(Annex"F"),datedJune26,1985,MinisterCesarVirataconfirmedthe
rulingofMay8,1985ofActingBIRCommissionerRubenAncheta,(par.41,p.12,Annex"A")
9.OnOctober22,1985,however,underBIRRulingNo.18685,addressedtoHanilDevelopmentCo.,Ltd.,
aKoreancontractorofNPCforitsinfrastructureprojects,certifiedtruecopyofwhichisattachedheretoas
petitioner'sAnnex"E",BIRActingCommissionerRubenAnchetaruled:
InReplypleasebeinformedthatafterarestudyofSection13,R.A.6395,asamendedbyP.D.938,
thisOfficeisoftheopinion,andsoholds,thatthescopeofthetaxexemptionprivilegeenjoyedby
NPCundersaidsectioncoversonlytaxesforwhichitisdirectlyliableandnotontaxeswhichareonly
shiftedtoit.(Phil.Acetylenevs.C.I.R.etal.,G.R.L19707,Aug.17,1967)Sincecontractor'staxis
directlypayablebythecontractor,notbyNPC,yourrequestforexemption,basedonthestipulation
intheaforesaidcontractthatNPCshallassumepaymentofyourcontractor'staxliability,cannotbe
grantedforlackoflegalbasis."(Annex"H")(emphasisadded)
SaidBIRrulingclearlystatesthatNPC'sexemptionprivilegescovers(sic)onlytaxesforwhichitisdirectly
liableanddoesnotcovertaxeswhichareonlyshiftedtoitorforindirecttaxes.TheBIR,throughAncheta,
reversed its previous position of May 8, 1985 adopted by Ancheta himself favoring NPC's indirect tax
exemptionprivilege.
10.Furthermore,"inaBIRRuling,unnumbered,"datedJune30,1986,"addressedtoCaltex(Annex"F"),
theBIRCommissionerdeclaredthatPAL'staxexemptionislimitedtotaxesforwhichPALisdirectlyliable,
and that the payment of specific and ad valorem taxes on petroleum products is a direct liability of the
manufacturerorproducerthereof".(par.51,p.15,Annex"A")
11.OnJanuary7,1986,FIRBResolutionNo.186wasissuedrestoringNPC'staxexemptionsretroactively
fromJuly1,1985toaindefiniteperiod,certifiedtruecopyofwhichisheretoattachedaspetitioner'sAnnex
"H".
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12. NPC's total refund claim was P468.58 million but only a portion thereof i.e. the P58,020,110.79
(correspondingtoCaltex)wasapprovedandreleasedbywayofaTaxCreditMemo(Annex"Q")datedJuly
7,1986,certifiedtruecopyofwhich[is)attachedheretoaspetitioner'sAnnex"F,"whichwasassignedby
NPC to Caltex. BIR Commissioner Tan approved the Deed of Assignment on July 30, 1987, certified true
copyofwhichisheretoattachedaspetitioner'sAnnex"G").(pars.26,52,53,pp.9and15,Annex"A")
The Deed of Assignment stipulated among others that NPC is assigning the tax credit to Caltex in partial
settlement of its outstanding obligations to the latter while Caltex, in turn, would apply the assigned tax
creditagainstitsspecifictaxpaymentsfortwo(2)months.(permemorandumdatedJuly28,1986ofDCIR
Villa,copyattachedaspetitionerAnnex"G")
13.AsaresultofthefavorableactiontakenbytheBIRintherefundoftheP58.0milliontaxcreditassigned
toCaltex,theNPCreiterateditsrequestforthereleaseofthebalanceofitspendingrefundsoftaxespaid
by respondents Petrophil, Shell and Caltex covering the period from June 11, 1984 to early part of 1986
amountingtoP410.58million.(Theclaimofthefirsttwo(2)oilcompaniescoverstheperiodfromJune11,
1984 to early part of 1986 while that of Caltex starts from July 1, 1985 to early 1986). This request was
denied on August 18, 1986, under BIR Ruling 15286 (certified true copy of which is attached hereto as
petitioner'sAnnex"I").TheBIRruledthatNPC'staxfreeprivilegetobuypetroleumproductscoveredonly
theperiodfromJune11,1984uptoJune30,1985.Itfurtherdeclaredthat,despiteFIRBNo.186,NPC
hadalreadylostitstaxanddutyexemptionsbecauseitonlyenjoysspecialprivilegefortaxesforwhichitis
directly liable. This ruling, in effect, denied the P410 Million tax refund application of NPC (par. 28, p. 9,
Annex"A")
14.NPCfiledamotionforreconsiderationonSeptember18,1986.UntilnowtheBIRhasnotresolvedthe
motion.(Benigna,II3,Oct.17,1988,p.2MemorandumfortheComplainant,Oct.26,1988,p.15)."(par.
29,p.9,Annex"A")
15. On December 22, 1986, in a 2nd Indorsement to the Hon. Fulgencio S. Factoran, Jr., BIR
Commissioner Tan, Jr. (certified true copy of which is hereto attached and made a part hereof as
petitioner's Annex "J"), reversed his previous position and states this time that all deliveries of petroleum
productstoNPCaretaxexempt,regardlessoftheperiodofdelivery.
16. On December 17, 1986, President Corazon C. Aquino enacted Executive Order No. 93, entitled
"Withdrawing All Tax and Duty Incentives, Subject to Certain Exceptions, Expanding the Powers of the
FiscalIncentivesReviewBoardandOtherPurposes."
17.OnJune24,1987,theFIRBissuedResolutionNo.1787,whichrestoredNPC'staxexemptionprivilege
and included in the exemption "those pertaining to its domestic purchases of petroleum and petroleum
products, and the restorations were made to retroact effective March 10, 1987, a certified true copy of
whichisheretoattachedandmadeaparthereofasAnnex"K".
18.OnAugust6,1987,theHon.SedfreyA.Ordoez,SecretaryofJustice,issuedOpinionNo.77,seriesof
1987,opiningthat"thepowerconferreduponFiscalIncentivesReviewBoardbySection2a(b),(c)and(d)
of Executive order No. 93 constitute undue delegation of legislative power and, therefore, [are]
unconstitutional,"acopyofwhichisheretoattachedandmadeaparthereofasPetitioner'sAnnex"L."
19.OnOctober5,1987,respondentExecutiveSecretaryMacaraig,Jr.inaMemorandumtotheChairman
oftheFIRBacertifiedtruecopyofwhichisheretoattachedandmadeaparthereofaspetitioner'sAnnex
"M,"confirmedandapprovedFIRBRes.No.1787datedJune24,1987,allegedlypursuanttoSections1
(f)and2(e)ofExecutiveOrderNo.93.
20.SecretaryVicenteJaymeinareplydatedMay20,1988toSecretaryCatalinoMacaraig,whobyletter
dated May 2, 1988 asked him to rule "on whether or not, as the law now stands, the National Power
Corporation is still exempt from taxes, duties . . . on its local purchases of . . . petroleum products . . ."
declaredthat"NPCundertheprovisionsofitsRevisedCharterretainsitsexemptionfromdutiesandtaxes
imposedonthepetroleumproductspurchasedlocallyandusedforthegenerationofelectricity,"acertified
truecopyofwhichisattachedheretoaspetitioner'sAnnex"N."(par.30,pp.910,Annex"A")
21.RespondentExecutiveSecretarycameuplikewisewithaconfirmatoryletterdatedJune15,1988but
withouttheusualofficialformof"BytheAuthorityofthePresident,"acertifiedtruecopyofwhichishereto
attachedandmadeaparthereofasPetitioner'sAnnex"O".
22. The actions of respondents Finance Secretary and the Executive Secretary are based on the
RESOLUTIONNo.1787ofFIRBrestoringthetaxanddutyexemptionoftherespondentNPCpertainingto
itsdomesticpurchasesofpetroleumproducts(petitioner'sAnnexKsupra).
23.Subsequently,thenewspapersparticularly,theDailyGlobe, in its issue of July 11, 1988 reported that

theOfficeofthePresidentandtheDepartmentofFinancehadorderedtheBIRtorefundthetaxpayments
of the NPC amounting to Pl.58 Billion which includes the P410 Million Tax refund already rejected by BIR
CommissionerTan,Jr.,inhisBIRRulingNo.15286.AndinaletterdatedJuly28,1988ofUndersecretary
Marcelo B. Fernando to BIR Commissioner Tan, Jr. the Pl.58 Billion tax refund was ordered released to
NPC(par.31,p.10,Annex"A")
24.OnAugust8,1988,petitioner"wrotebothUndersecretaryFernandoandCommissionerTanrequesting
them to hold in abeyance the release of the Pl.58 billion and await the outcome of the investigation in
regardtoSenateResolutionNo.227,"copiesattachedasPetitioner'sAnnexes"P"and"P1"(par.32,p.
10,Annex"A").
Reactingtothisletterofthepetitioner,UndersecretaryFernandowroteCommissionerTanoftheBIRdated
August, 1988 requesting him to hold in abeyance the release of the tax refunds to NPC until after the
terminationoftheBlueRibboninvestigation.
25. In the Bureau of Customs, oil companies import crude oil and before removal thereof from customs
custody, the corresponding customs duties and ad valorem taxes are paid. Bunker fuel oil is one of the
petroleumproductsprocessedfromthecrudeoilandsameissoldtoNPC.Afterthesale,NPCappliesfor
taxcreditcoveringthedutiesandadvaloremexemptionunderitsCharter.Suchapplicationsareprocessed
bytheBureauofCustomsandthecorrespondingtaxcreditcertificatesareissuedinfavorofNPCwhich,in
8/31/2016 G.R.No.88291
turn assigns it to the oil firm that imported the crude oil. These certificates are eventually used by the
assigneeoilfirmsinpaymentoftheirotherdutyandtaxliabilitieswiththeBureauofCustoms.(par.70,p.
19,Annex"A")
A lesser amount totalling P740 million, covering the period from 1985 to the present, is being sought by
respondent NPC for refund from the Bureau of Customs for duties paid by the oil companies on the
importation of crude oil from which the processed products sold locally by them to NPC was derived.
However, based on figures submitted to the Blue Ribbon Committee of the Philippine Senate which
conductedaninvestigationonthismatterasmandatedbySenateResolutionNo.227ofwhichtheherein
petitionerwasthesponsor,amuchbiggerfigurewasactuallyrefundedtoNPCrepresentingdutiesandad
valorem taxes paid to the Bureau of Customs by the oil companies on the importation of crude oil from
1979to1985.
26.Meantime,petitioner,asmemberofthePhilippineSenateintroducedP.S.Res.No.227,entitled:
ResolutionDirectingtheSenateBlueRibbonCommittee,InAidofLegislation,ToconductaFormal
andExtensiveInquiryintotheReportedMassiveTaxManipulationsandEvasionsbyOilCompanies,
particularly Caltex (Phils.) Inc., Pilipinas Shell and Petrophil, Which Were Made Possible By Their
Availing of the NonExisting Exemption of National Power Corporation (NPC) from Indirect Taxes,
Resulting Recently in Their Obtaining A Tax Refund Totalling P1.55 Billion From the Department of
Finance, Their Refusal to Pay Since 1976 Customs Duties Amounting to Billions of Pesos on
ImportedCrudeOilPurportedlyfortheUseoftheNationalPowerCorporation,theNonPaymentof
Surtax on Windfall Profits from Increases in the Price of Oil Products in August 1987 amounting
MaybetoasMuchasPl.2BillionSurtaxPaidbyThemin1984andForOtherPurposes.
27.ActingontheaboveResolution,theBlueRibbonCommitteeoftheSenatedidconductalengthyformal
inquiry on the matter, calling all parties interested to the witness stand including representatives from the
differentoilcompanies,andinduetimesubmitteditsCommitteeReportNo.474...TheBlueRibbon
Committeerecommendedthefollowingcoursesofaction.
1.CancelitsapprovalofthetaxrefundofP58,020,110.70totheNationalPowerCorporation(NPC)
anditsapprovalofTaxCreditmemocoveringsaidamount(Annex"P"hereto),datedJuly7,1986,
andcancelitsapprovaloftheDeedofAssignment(Annex"Q"hereto)byNPCtoCaltex,datedJuly
28,1986,andcollectfromCaltexitstaxliabilitieswhichwereerroneouslytreatedaspaidorsettled
withtheuseofthetaxcreditcertificatethatNPCassignedtosaidfirm.:
1.1. NPC did not have any indirect tax exemption since May 27, 1976 when PD 938 was
issued. Therefore, the grant of a tax refund to NPC in the amount of P58 million was illegal,
andtherefore,nullandvoid.Suchrefundwasanullityrightfromthebeginning.Hence,itnever
transferredanyrightinfavorofNPC.
2.Stoptheprocessingand/orreleaseofPl.58billiontaxrefundtoNPCand/oroilcompaniesonthe
samegroundthattheNPC,sinceMay27,1976uptoJune17,1987wasnevergrantedanyindirect
taxexemption.So,theP1.58billionrepresenttaxeslegallyandproperlypaidbytheoilfirms.
3.Startcollectionactionsofspecificorexciseandadvaloremtaxesdueonpetroleumproductssold
toNPCfromMay27,1976(promulgationofPD938)toJune17,1987(issuanceofEO195).
B.FortheBureauofCustoms(BOC)todothefollowing:
1. Start recovery actions on the illegal duty refunds or duty credit certificates for purchases of petroleum
productsbyNPCandallegedlygrantedundertheNPCchartercoveringtheyears19781988...
28.OnMarch30,1989,actingontherequestofrespondentFinanceSecretaryforclearancetodirectthe
BureauofInternalRevenueandofCustomstoproceedwiththeprocessingofclaimsfortaxcredits/refunds
oftheNPC,respondentExecutiveSecretaryrenderedhisruling,thedispositiveportionofwhichreads:
INVIEWOFTHEFOREGOING,theclearanceisherebyGRANTEDand,accordingly,unlessrestrainedbyproper
authorities,thatdepartmentand/oritslinetaxbureausmaynowproceedwiththeprocessingoftheclaimsofthe
National Power Corporation for duty and tax free exemption and/or tax credits/ refunds, if there be any, in
accordancewiththerulingofthatDepartmentdatedMay20,1988,asconfirmedbythisOfficeonJune15,1988.
..5
Hence,thispetitionforcertiorari,prohibitionandmandamuswithprayerforawritofpreliminaryinjunctionand/or
restrainingorder,prayingamongothersthat:
1. Upon filing of this petition, a temporary restraining order forthwith be issued against respondent FIRB
ExecutiveSecretaryMacaraig,andSecretaryofFinanceJaymerestrainingthemandotherpersonsacting
for,under,andintheirbehalffromenforcingtheirresolution,ordersandruling,towit:
A.FIRBResolutionNo.1787datedJune24,1987(petitioner'sAnnex"K")
B.MemorandumOrderoftheOfficeofthePresidentdatedOctober5,1987(petitioner'sAnnex"M")
C.OrderoftheExecutiveSecretarydatedJune15,1988(petitioner'sAnnex"O")
D.OrderoftheExecutiveSecretarydatedMarch30,l989(petitioner'sAnnex"Q")and
E.RulingoftheFinanceSecretarydatedMay20,1988(petitioner'sAnnex"N").
2.SaidtemporaryrestrainingordershouldalsoincluderespondentCommissionersofCustomsMisonand
InternalRevenueOngrestrainingthemfromprocessingandreleasinganypendingclaimorapplicationby
respondentNPCfortaxanddutyrefunds.
3. Thereafter, and during the pendency of this petition, to issue a writ or preliminary injunction against
abovenamedrespondentsandallpersonsactingforandintheirbehalf.
4.Adecisionberenderedinfavorofthepetitionerandagainsttherespondents:
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A.DeclaringthatrespondentNPCdidnotenjoyindirecttaxexemptionprivilegesinceMay27,1976upto
thepresent
B.Nullifyingthesettingasidethefollowing:
1.FIRBResolutionNo.1787datedJune24,1987(petitioner'sAnnex"K")
2.MemorandumOrderoftheOfficeofthePresidentdatedOctober5,1987(petitioner'sAnnex"M")
3.OrderoftheExecutiveSecretarydatedJune15,1988(petitioner'sAnnex"O")
4.OrderoftheExecutiveSecretarydatedMarch30,1989(petitioner'sAnnex"Q")
5.RulingoftheFinanceSecretarydatedMay20,1988(petitioner'sAnnex"N"
6. Tax Credit memo dated July 7, 1986 issued to respondent NPC representing tax refund for
P58,020,110.79(petitioner'sAnnex"F")
7.DeedofAssignmentofsaidtaxcreditmemotorespondentCaltexdatedJuly30,1987(petitioner's
Annex"G")
8. Application of the assigned tax credit of Caltex in payment of its tax liabilities with the Bureau of
InternalRevenueand
9. Illegal duty and tax refunds issued by the Bureau of Customs to respondent NPC by way of tax
creditcertificatesfrom1979uptothepresent.
C. Declaring as illegal and null and void the pending claims for tax and duty refunds by respondent NPC
withtheBureauofCustomsandtheBureauofInternalRevenue
D. Prohibiting respondents Commissioner of Customs and Commissioner of Internal Revenue from

enforcingtheabovequestionedresolution,ordersandrulingofrespondentsExecutiveSecretary,Secretary
ofFinance,andFIRBbyprocessingandreleasingrespondentNPC'staxanddutyrefunds
E.OrderingtherespondentCommissionerofCustomstodenyasbeingnullandvoidthependingclaims
forrefundofrespondentNPCwiththeBureauofCustomscoveringtheperiodfrom1985tothepresentto
cancel and invalidate the illegal payment made by respondents Caltex, Shell and PNOC by using the tax
credit certificates assigned to them by NPC and to recover from respondents Caltex, Shell and PNOC all
theamountsappearinginsaidtaxcreditcertificateswhichwereusedtosettletheirdutyandtaxliabilities
withtheBureauofCustoms.
F. Ordering respondent Commissioner of Internal Revenue to deny as being null and void the pending
claimsforrefundofrespondentNPCwiththeBureauofInternalRevenuecoveringtheperiodfromJune11,
1984toJune17,1987.
PETITIONERpraysforsuchotherreliefandremedyasmaybejustandequitableinthepremises.6
Theissuesraisedinthepetitionarethefollowing:
To determine whether respondent NPC is legally entitled to the questioned tax and duty refunds, this
HonorableCourtmustresolvethefollowingissues:
Mainissue
Whether or not the respondent NPC has ceased to enjoy indirect tax and duty exemption with the
enactmentofP.D.No.938onMay27,1976whichamendedP.D.No.380,issuedonJanuary11,1974.
Corollaryissues
1.WhetherornotFIRBResolutionNo.1085datedFebruary7,1985whichrestoredNPC'staxexemption
privilege effective June 11, 1984 to June 30, 1985 and FIRB Resolution No. 186 dated January 7, 1986
restoring NPC's tax exemption privilege effective July 1, 1985 included the restoration of indirect tax
exemptiontoNPCand
2. Whether or not FIRB could validly and legally issue Resolution No. 1787 dated June 24, 1987 which
restoredNPC'staxexemptionprivilegeeffectiveMarch10,1987andifsaidResolutionwasvalidlyissued,
thenatureandextentofthetaxexemptionprivilegerestoredtoNPC.7
InaresolutiondatedJune6,1989,theCourt,withoutgivingduecoursetothepetition,requiredrespondentsto
comment thereon, within ten (10) days from notice. The respondents having submitted their comment, on
October10,1989theCourtrequiredpetitionertofileaconsolidatedreplytothesame.Aftersaidreplywasfiled
by petitioner on November 15, 1989 the Court gave due course to the petition, considering the comments of
respondents as their answer to the petition, and requiring the parties to file simultaneously their respective
memorandawithintwenty(20)daysfromnotice.Thepartieshavingsubmittedtheirrespectivememoranda,the
petitionwasdeemedsubmittedforresolution.
Firstthepreliminaryissues.
Public respondents allege that petitioner does not have the standing to challenge the questioned orders and
resolution.
In the petition it is alleged that petitioner is "instituting this suit in his capacity as a taxpayer and a dulyelected
SenatorofthePhilippines."Publicrespondentarguesthatpetitionermustshowhehassustaineddirectinjuryasa
resultoftheactionandthatitisnotsufficientforhimtohaveameregeneralinterestcommontoallmembersof
thepublic.8
TheCourthoweveragreeswiththepetitionerthatasataxpayerhemayfiletheinstantpetitionfollowingtheruling
inLozadawhenitinvolvesillegalexpenditureofpublicmoney.Thepetitionquestionsthelegalityofthetaxrefund
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toNPCbywayoftaxcreditcertificatesandtheuseofsaidassignedtaxcreditsbyrespondentoilcompaniesto
payfortheirtaxanddutyliabilitiestotheBIRandBureauofCustoms.
Assumingpetitionerhasthepersonalitytofilethepetition,publicrespondentsalsoallegethattheproperremedy
for petitioner is an appeal to the Court of Tax Appeals under Section 7 of R.A. No. 125 instead of this petition.
HoweverSection11ofsaidlawprovides
Sec.11.WhomayappealeffectofappealAnyperson,associationorcorporationadverselyaffectedbya
decision or ruling of the Commissioner of Internal Revenue, the Collector of Customs (Commissioner of
Customs) or any provincial or City Board of Assessment Appeals may file an appeal in the Court of Tax
Appealswithinthirtydaysafterreceiptofsuchdecisionorruling.
From the foregoing, it is only the taxpayer adversely affected by a decision or ruling of the Commissioner of
InternalRevenue,theCommissionerofCustomsoranyprovincialorcityBoardofAssessmentAppealwhomay
appealtotheCourtofTaxAppeals.Petitionerdoesnotfallunderthiscategory.
PublicrespondentsalsocontendthatmandamusdoesnotlietocompeltheCommissionerofInternalRevenueto
impose a tax assessment not found by him to be proper. It would be tantamount to a usurpation of executive
functions.9
Even in Meralco, this Court recognizes the situation when mandamus can control the discretion of the
CommissionersofInternalRevenueandCustomswhentheexerciseofdiscretionistaintedwitharbitrarinessand
graveabuseastogobeyondstatutoryauthority.10
Public respondents then assert that a writ of prohibition is not proper as its function is to prevent an unlawful
exerciseofjurisdiction 11ortopreventtheoppressiveexerciseoflegalauthority. 12Precisely,petitionerquestions
thelawfulnessoftheactsofpublicrespondentsinthiscase.
Nowtothemainissue.
Itmaybeusefultomakeadistinction,forthepurposeofthisdisposition,betweenadirecttaxandanindirecttax.
Adirecttaxisataxforwhichataxpayerisdirectlyliableonthetransactionorbusinessitengagesin.Examples
are the custom duties and ad valorem taxes paid by the oil companies to the Bureau of Customs for their
importationofcrudeoil,andthespecificandadvaloremtaxestheypaytotheBureauofInternalRevenueafter
convertingthecrudeoilintopetroleumproducts.
Ontheotherhand,"indirecttaxesaretaxesprimarilypaidbypersonswhocanshifttheburdenuponsomeone
else."13Forexample,theexciseandadvaloremtaxesthatoilcompaniespaytotheBureauofInternalRevenue
uponremovalofpetroleumproductsfromitsrefinerycanbeshiftedtoitsbuyer,liketheNPC,byaddingthemto
the"cash"and/or"sellingprice."
ThemainthrustofthepetitionisthatunderthelatestamendmenttotheNPCcharterbyPresidentialDecreeNo.
938,theexemptionofNPCfromindirecttaxationwasrevokedandrepealed.WhilepetitionerconcedesthatNPC
enjoyedbroadexemptionprivilegesfrombothdirectandindirecttaxesonthepetroleumproductsitused,under
Section13ofRepublicActNo,6395andmoresounderPresidentialDecreeNo.380,however,bythedeletionof
the phrases "directly or indirectly" and "on all petroleum products used by the Corporation in the generation,
transmission, utilization and sale of electric power" he contends that the exemption from indirect taxes was
withdrawnbyP.D.No.938.
Petitioner further states that the exemption of NPC provided in Section 13 of Presidential Decree No. 938
regarding the payments of "all forms of taxes, etc." cannot be interpreted to include indirect tax exemption. He
citesPhilippineAceyteleneCo.Inc.vs.CommissionerofInternalRevenue.14Petitioneremphasizestheprinciple
intaxationthattheexceptioncontainedinthetaxstatutesmustbestrictlyconstruedagainsttheoneclaimingthe
exemption, and that the rule that a tax statute granting exemption must be strictly construed against the one
claiming the exemption is similar to the rule that a statute granting taxing power is to be construed strictly, with
doubts resolved against its existence. 15 Petitioner cites rulings of the BIR that the phrase exemption from "all
taxes,etc."from"allformsoftaxes"and"inlieuofalltaxes"coversonlytaxesforwhichthetaxpayerisdirectly
liable.16
Onthecorollaryissues.First,FIRBResolutionNos.1085and1086issuedunderPresidentialDecreeNo.1931,
therelevantprovisionofwhicharetowit:
P.D.No.1931providesasfollows:
Sec. 1. The provisions of special or general law to the contrary notwithstanding, all exemptions from the
paymentofduties,taxes...heretoforegrantedinfavorofgovernmentownedorcontrolledcorporations
areherebywithdrawn.(Emphasissupplied.)
Sec. 2. The PresidentofthePhilippinesand/orthe Minister of Finance, upon the recommendation of the

Fiscal Incentives Review Board . . . is hereby empowered to restore, partially or totally, the exemptions
withdrawnbySection1above...(Emphasissupplied.)
TherelevantprovisionsofFIRBresolutionNos.1085and186arethefollowing:
Resolution.No.1085
BEITRESOLVEDASITISHEREBYRESOLVED,That:
CorporationunderC.A.No.120asamendedarerestoreduptoJune30,1985.
2.Provided,Thattorestorationdoesnotapplytothefollowing:
a.importationsoffueloil(crudeequivalent)andcoalasperFIRBResolutionNo.184
b.commerciallyfundedimportationsand
c.interestincomederivedfromanyinvestmentsource.
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3.Providedfurther, That in case of importations funded by international financing agreements, the

NPCisherebyrequiredtofurnishtheFIRBonaperiodicbasistheparticularsofitemsreceivedorto
bereceivedthroughsucharrangements,forpurposesoftaxanddutyexemptionsprivileges.17
ResolutionNo.186
BEITRESOLVEDASITISHEREBYRESOLVED:That:
1. Effective July 1, 1985, the tax and duty exemption privileges enjoyed by the National Power
Corporation (NPC) under Commonwealth Act No. 120, as amended, are restored: Provided, That
importations of fuel oil (crude oil equivalent), and coal of the herein grantee shall be subject to the
basicandadditionalimportdutiesProvided,further,thatthefollowingshallremainfullytaxable:
a.Commerciallyfundedimportationsand
b.Interestincomederivedbysaidgranteefrombankdepositsandyieldoranyothermonetary
benefitsfromdepositsubstitutes,trustfundsandothersimilararrangements.
2. The NPC as a government corporation is exempt from the real property tax on land and
improvements owned by it provided that the beneficial use of the property is not transferred to
anotherpursuanttotheprovisionsofSec.10(a)oftheRealPropertyTaxCode,asamended.18
PetitionerdoesnotquestionthevalidityandenforceabilityofFIRBResolutionNos.1085and186.Indeed,they
wereissuedincompliancewiththerequirementofSection2,P.D.No.1931,wherebytheFIRBshouldmakethe
recommendationsubjecttotheapprovalof"thePresidentofthePhilippinesand/ortheMinisterofFinance."While
saidResolutionsdonotappeartohavebeenapprovedbythePresident,theywereneverthelessapprovedbythe
MinisterofFinancewhoisalsodulyauthorizedtoapprovethesame.InfactitwastheMinisterofFinancewho
signedandpromulgatedsaidresolutions.19
The observation of Mr. Justice Sarmiento in the dissenting opinion that FIRB Resolution Nos. 1085 and 186
whichwerepromulgatedbythenActingMinisterofFinanceAlfredodeRoda,Jr.andMinisterofFinanceCesar
E.A Virata, as Chairman of FIRB respectively, should be separately approved by said Minister of Finance as
requiredbyP.D.1931is,asuperfluity.Anexaminationofthesaidresolutionswhicharereproducedinfullinthe
dissenting opinion show that the said officials signed said resolutions in the dual capacity of Chairman of FIRB
andMinisterofFinance.
Mr. Justice Sarmiento also makes reference to the case National Power Corporation vs. Province of Albay, 20
wherein the Court observed that under P.D. No. 776 the power of the FIRB was only recommendatory and
requirestheapprovalofthePresidenttobevalid.Thus,insaidcasetheCourtheldthatFIRBResolutionsNos.
1085and186nothavingbeenapprovedbythePresidentwerenotvalidandeffectivewhilethevalidityofFIRB
1787wasupheldasitwasdulyapprovedbytheOfficeofthePresidentonOctober5,1987.
However,underSection2ofP.D.No.1931ofJune11,1984,hereinabovereproduced,whichamendedP.D.No.
776, it is clearly provided for that such FIRB resolution, may be approved by the "President of the Philippines
and/ortheMinisterofFinance."Torepeat,asFIRBResolutionsNos.1085and186weredulyapprovedbythe
Minister of Finance, hence they are valid and effective. To this extent, this decision modifies or supersedes the
Court'searlierdecisioninAlbayaforereferredto.
Petitioner,however,arguesthatunderbothFIRBresolutions,onlythetaxanddutyexemptionprivilegesenjoyed
by the NPC under its charter, C.A. No. 120, as amended, are restored, that is, only its direct tax exemption
privilege and that it cannot be interpreted to cover indirect taxes under the principle that tax exemptions are
construedstricissimijurisagainstthetaxpayerandliberallyinfavorofthetaxingauthority.
PetitionerarguesthatthereleasebytheBIRoftheP58.0millionrefundtorespondentNPCbywayofataxcredit
certificate 21whichwasassignedtorespondentCaltexthroughadeedofassignmentapprovedbytheBIR 22 is
patentlyillegal.HealsocontendsthatthependingclaimofrespondentNPCintheamountofP410.58millionwith
respondentBIRforthesaleanddeliverytoitofbunkerfuelbyrespondentsPetrophil,ShellandCaltexfromJuly
1,1985upto1986,beingillegal,shouldnotbereleased.
NowtothesecondcorollaryissueinvolvingthevalidityofFIRBResolutionNo.1787issuedonJune24,1987.It
wasissuedunderauthorityofExecutiveOrderNo.93datedDecember17,1986whichgrantstotheFIRBamong
others,thepowertorecommendtherestorationofthetaxanddutyexemptions/incentiveswithdrawnthereunder.
PetitionerstressesthatonAugust6,1987theSecretaryofJusticerenderedOpinionNo.77totheeffectthatthe
powersconferredupontheFIRBbySection2(a),(b),and(c)and(4)ofExecutiveOrderNo.93"constituteundue
delegation of legislative power and is, therefore, unconstitutional." Petitioner observes that the FIRB did not
merelyrecommendbutcategoricallyrestoredthetaxanddutyexemptionoftheNPCsothatthememorandumof
therespondentExecutiveSecretarydatedOctober5,1987approvingthesameisasurplusage.
FurtherassumingthatFIRBResolutionNo.1787tohavebeenlegallyissued,followingthedoctrineinPhilippine
Aceytelene,petitioneraversthattherestorationcannotcoverindirecttaxesanditcannotcreatenewindirecttax
exemptionnototherwisegrantedintheNPCcharterasamendedbyPresidentialDecreeNo.938.
Thepetitionisdevoidofmerit.
The NPC is a nonprofit public corporation created for the general good and welfare 23 wholly owned by the
government of the Republic of the Philippines. 24 From the very beginning of its corporate existence, the NPC
enjoyed preferential tax treatment 25 to enable the Corporation to pay the indebtedness and obligation and in
furtherance and effective implementation of the policy enunciated in Section one of "Republic Act No. 6395" 26
whichprovides:
Sec. 1. Declaration of PolicyCongress hereby declares that (1) the comprehensive development,
utilizationandconservationofPhilippinewaterresourcesforallbeneficialuses,includingpowergeneration,
and(2)thetotalelectrificationofthePhilippinesthroughthedevelopmentofpowerfromallsourcestomeet
theneedofruralelectrificationareprimaryobjectivesofthenationwhichshallbepursuedcoordinatelyand
supportedbyallinstrumentalitiesandagenciesofthegovernmentincludingitsfinancialinstitutions.
FromthechangesmadeintheNPCcharter,theintentiontostrengthenitspreferentialtaxtreatmentisobvious.
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UnderRepublicActNo.358,itsexemptionisprovidedasfollows:
Sec.2.Tofacilitatepaymentofitsindebtedness,theNationalPowerCorporationshallbeexemptfromall
taxes,duties,fees,imposts,charges,andrestrictionsoftheRepublicofthePhilippines,itsprovinces,cities
andmunicipalities."
UnderRepublicActNo.6395:
Sec. 13. Nonprofit Character of the Corporation Exemption from all Taxes, Duties, Fees, Imposts and
otherChargesbyGovernmentandGovernmentalInstrumentalities.TheCorporationshallbenonprofit
andshalldevoteallitsreturnsfromitscapitalinvestment,aswellasexcessrevenuesfromitsoperation,for
expansion. To enable the Corporation to pay its indebtedness and obligations and in furtherance and
effective implementation of the policy enunciated in Section one of this Act, the Corporation is hereby
declaredexempt:
(a) From the payment of all taxes, duties, fees, imposts, charges, costs and service fees in any court or
administrative proceedings in which it may be a party, restrictions and duties to the Republic of the
Philippines,itsprovinces,cities,municipalitiesandothergovernmentagenciesandinstrumentalities
(b) From all income taxes, franchise taxes and realty taxes to be paid to the National Government, its
provinces,cities,municipalitiesandothergovernmentagenciesandinstrumentalities
(c) From all import duties, compensating taxes and advanced sales tax, and wharfage fees on import of
foreigngoodsrequiredforitsoperationsandprojectsand
(d)Fromalltaxes,duties,fees,imposts,andallotherchargesimposedbytheRepublicofthePhilippines,
its provinces, cities, municipalities and other government agencies and instrumentalities, on all petroleum
products used by the Corporation in the generation, transmission, utilization, and sale of electric power.
(Emphasissupplied.)
UnderPresidentialDecreeNo.380:
Sec. 13. Nonprofit Character of the Corporation: Exemption from all Taxes, Duties, Fees, Imposts and
otherChargesbytheGovernmentandGovernmentInstrumentalities.TheCorporationshallbenonprofit
andshalldevoteallitsreturnsfromitscapitalinvestmentaswellasexcessrevenuesfromitsoperation,for
expansion. To enable the Corporation to pay its indebtedness and obligations and in furtherance and
effective implementation of the policy enunciated in Section one of this Act, the Corporation, including its
subsidiaries,isherebydeclared,exempt:
(a)Fromthepaymentofalltaxes,duties,fees,imposts,charges,costsandservicesfeesinanycourtor
administrative proceedings in which it may be a party, restrictions and duties to the Republic of the
Philippines,itsprovinces,cities,municipalitiesandothergovernmentagenciesandinstrumentalities
(b) From all income taxes, franchise taxes and realty taxes to be paid to the National Government, its
provinces,cities,municipalitiesandothergovernmentalagenciesandinstrumentalities
(c) From all import duties, compensating taxes and advanced sales tax, and wharfage fees on import of
foreigngoodsrequiredforitsoperationandprojectsand
(d)Fromalltaxes,duties,fees,imposts,andallotherchargesimposeddirectlyorindirectlybytheRepublic
ofthePhilippines,itsprovinces,cities,municipalitiesandothergovernmentagenciesandinstrumentalities,
onallpetroleumproducedusedbytheCorporationinthegeneration,transmission,utilization,andsaleof
electricpower.(Emphasissupplied.)
UnderPresidentialDecreeNo.938:
Sec. 13. Nonprofit Character of the Corporation: Exemption from All Taxes, Duties, Fees, Imposts and
OtherChargesbytheGovernmentandGovernmentInstrumentalities.TheCorporationshallbenonprofit
andshalldevoteallitsreturnsfromitscapitalinvestmentaswellasexcessrevenuesfromitsoperation,for
expansion. To enable the Corporation to pay the indebtedness and obligations and in furtherance and
effective implementation of the policy enunciated in Section One of this Act, the Corporation, including its
subsidiariesherebydeclaredexemptfromthepaymentofallformsoftaxes,duties,fees,impostsaswell
as costs and service fees including filing fees, appeal bonds, supersedeas bonds, in any court or
administrativeproceedings.(Emphasissupplied.)
Itisnotedthatintheearlierlaw,R.A.No.358theexemptionwaswordedingeneralterms,astocover"alltaxes,
duties,fees,imposts,charges,etc...."However,theamendmentunderRepublicActNo.6395enumeratedthe
details covered by the exemption. Subsequently, P.D. No. 380, made even more specific the details of the
exemption of NPC to cover, among others, both direct and indirect taxes on all petroleum products used in its
operation.PresidentialDecreeNo.938amendedthetaxexemptionbysimplifyingthesamelawingeneralterms.
It succinctly exempts NPC from "all forms of taxes, duties, fees, imposts, as well as costs and service fees
includingfilingfees,appealbonds,supersedeasbonds,inanycourtoradministrativeproceedings."
Theuseofthephrase"allforms"oftaxesdemonstratetheintentionofthelawtogiveNPCallthetaxexemptions
ithasbeenenjoyingbefore.TherationaleforthisexemptionisthatbeingnonprofittheNPC"shalldevoteallits
returns from its capital investment as well as excess revenues from its operation, for expansion. To enable the
Corporationtopaytheindebtednessandobligationsandinfurtheranceandeffectiveimplementationofthepolicy
enunciatedinSectiononeofthisAct,..."27
ThepreambleofP.D.No.938states
WHEREAS, in the application of the tax exemption provision of the Revised Charter, the nonprofit
characteroftheNPChasnotbeenfullyutilizedbecauseofrestrictiveinterpretationsofthetaxingagencies
ofthegovernmentonsaidprovisions....(Emphasissupplied.)
ItisevidentfromtheforegoingthatthelawmakerdidnotintendthatthesaidprovisionsofP.D.No.938shallbe
construedstrictlyagainstNPC.Onthecontrary,thelawmandatesthatitshouldbeinterpretedliberallysoasto
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enhancethetaxexemptstatusofNPC.
Hence,petitionercannotinvoketheruleonstrictissimijuriswithrespecttotheinterpretationofstatutesgranting
taxexemptionstoNPC.
Moreover,itisarecognizedprinciplethattheruleonstrictinterpretationdoesnotapplyinthecaseofexemptions
infavorofagovernmentpoliticalsubdivisionorinstrumentality.28
The basis for applying the rule of strict construction to statutory provisions granting tax exemptions or
deductions,evenmoreobviousthanwithreferencetotheaffirmativeorlevyingprovisionsoftaxstatutes,is
to minimize differential treatment and foster impartiality, fairness, and equality of treatment among tax
payers.
Thereasonfortheruledoesnotapplyinthecaseofexemptionsrunningtothebenefitofthegovernment
itselforitsagencies.Insuchcasethepracticaleffectofanexemptionismerelytoreducetheamountof
moneythathastobehandledbygovernmentinthecourseofitsoperations.Forthesereasons,provisions
grantingexemptionstogovernmentagenciesmaybeconstruedliberally,infavorofnontaxliabilityofsuch
agencies.29
Inthecaseofpropertyownedbythestateoracityorotherpubliccorporations,theexpressexemptionshould
notbeconstruedwiththesamedegreeofstrictnessthatappliestoexemptionscontrarytothepolicyofthestate,
sinceastosuchproperty"exemptionistheruleandtaxationtheexception."30
ThecontentionofpetitionerthattheexemptionofNPCfromindirecttaxesunderSection13ofR.A.No.6395and
P.D.No.380,isdeemedrepealedbyP.D.No.938whenthereferencetoitwasdeletedisnotwelltaken.
Repealbyimplicationisnotfavoredunlessitismanifestthatthelegislaturesointended.Aslawsarepresumedto
bepassedwithdeliberationandwithknowledgeofallexistingonesonthesubject,itislogicaltoconcludethatin
passingastatuteitisnotintendedtointerferewithorabrogateaformerlawrelatingtothesamesubjectmatter,
unlesstherepugnancybetweenthetwoisnotonlyirreconcilablebutalsoclearandconvincingasaresultofthe
languageused,orunlessthelatterActfullyembracesthesubjectmatteroftheearlier.31Thefirsteffortofacourt
must always be to reconcile or adjust the provisions of one statute with those of another so as to give sensible
effecttobothprovisions.32
Thelegislativeintentmustbeascertainedfromaconsiderationofthestatuteasawhole,andnotofanisolated
partoraparticularprovisionalone. 33Whenconstruingastatute,thereasonforitsenactmentshouldbekeptin
mindandthestatuteshouldbeconstruedwithreferencetoitsintendedscopeandpurpose34andtheevilsought
toberemedied.35
The NPC is a government instrumentality with the enormous task of undertaking development of hydroelectric
generationofpowerandproductionofelectricityfromothersources,aswellasthetransmissionofelectricpower
onanationwidebasis,toimprovethequalityoflifeofthepeoplepursuanttotheStatepolicyembodiedinSection
E,ArticleIIofthe1987Constitution.
ItisevidentfromtheprovisionofP.D.No.938thatitspurposeistomaintainthetaxexemptionofNPCfromall
formsoftaxesincludingindirecttaxesasprovidedforunderR.A.No.6895andP.D.No.380ifitistoattainits
goals.
Further,theconstructionofP.D.No.938bytheOfficechargedwithitsimplementationshouldbegivencontrolling
weight.36
SincetheMay8,1985rulingofCommissionerAncheta,totheletteroftheSecretaryofFinanceofJune26,1985
confirming said ruling, the letters of the BIR of August 18, 1986, and December 22, 1986, the letter of the
SecretaryofFinanceofFebruary19,1987,theMemorandumoftheExecutiveSecretaryofOctober9,1987,by
authority of the President, confirming and approving FIRB Resolution No. 1787, the letter of the Secretary of
Finance of May 20, 1988 to the Executive Secretary rendering his opinion as requested by the latter, and the
latter'sreplyofJune15,1988,itwasuniformlyheldthatthegrantoftaxexemptiontoNPCunderC.A.No.120,
as amended, included exemption from payment of all taxes relative to NPC's petroleum purchases including
indirecttaxes. 37 Thus, then Secretary of Finance Vicente Jayme in his letter of May 20, 1988 to the Executive
SecretaryMacaraigaptlystatedthejustificationforthistaxexemptionofNPC
The issue turns on the effect to the exemption of NPC from taxes of the deletion of the phrase 'taxes
imposed indirectly on oil products and its exemption from 'all forms of taxes.' It is suggested that the
changeinlanguageevidencedanintentiontoexemptNPConlyfromtaxesdirectlyimposedonorpayable
byitsincetaxesonfueloilpurchasedbyitsincetaxesonfueloilpurchasedbyNPClocallyareleviedon
andpaidbyitsoilsuppliers,NPCtherebylostitsexemptionfromthosetaxes.Theprincipalauthorityrelied
onisthe1967caseofPhilippineAcetyleneCo.,Inc.vs.CommissionerofInternalRevenue,20SCRA1056.
Firstofall,tracingthechangesmadethroughtheyearsintheRevisedCharter,thestrengtheningofNPC's
preferential tax treatment was clearly the intention. To the extent that the explanatory "whereas clauses"
may disclose the intent of the lawmaker, the changes effected by P.D. 938 can only be read as being
expansiveratherthanrestrictive,includingitsversionofSection13.
OurTaxCodedoesnotrecognizethattherearetaxesdirectlyimposedandthoseimposedindirectly.The
textbook distinction between a direct and an indirect tax may be based on the possibility of shifting the
incidenceofthetax.Adirecttaxisonewhichisdemandedfromtheverypersonintendedtobethepayor,
althoughitmayultimatelybeshiftedtoanother.Anexampleofadirecttaxisthepersonalincometax.On
the other hand, indirect taxes are those which are demanded from one person in the expectation and
intention that he shall indemnify himself at the expense of another. An example of this type of tax is the
salestaxleviedonsalesofacommodity.
Thedistinctionbetweenadirecttaxandoneindirectlyimposed(oranindirecttax)isreallyofnomoment.
Whatismorerelevantisthatwhenan"indirecttax"ispaidbythoseuponwhomthetaxultimatelyfalls,itis
paidnotasataxbutasanadditionalpartofthecostorofthemarketpriceofthecommodity.
ThisdistinctionwasmadeclearbyChiefJusticeCastrointhePhilippineAcetylenecase,whenheanalyzed
the nature of the percentage (sales) tax to determine whether it is a tax on the producer or on the
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purchaser of the commodity. Under out Tax Code, the sales tax falls upon the manufacturer or producer.
Thephrase"passon"thetaxwascriticizedasbeinginaccurate.JusticeCastrosaysthatthetaxremains
on the manufacturer alone. The purchaser does not pay the tax he pays an amount added to the price
becauseofthetax.Therefore,thetaxisnot"passedon"anddoesnotforthatreasonbecomean"indirect
tax"onthepurchaser.It is eminently possible that the law maker in enacting P.D. 938 in 1976 may have
usedlessonsfromtheanalysisofChiefJusticeCastroin1967PhilippineAcetylenecase.
When P.D. 938 which exempted NPC from "all forms of taxes" was issued in May 1976, the socalled oil
crunchhadalreadydrasticallypushedupcrudeoilPricesfromabout$1.00perbblin1971toabout$10
and a peak (as it turned out) of about $34 per bbl in 1981. In 197478, NPC was operating the Meralco
thermalplantsunderaleaseagreement.ThepowergeneratedbytheleasedplantswassoldtoMeralco
for distribution to its customers. This lease and sale arrangement was entered into for the benefit of the
consuming public, by reducing the burden on the swiftly rising world crude oil prices. This objective was
achievedbytheuseofNPC's"taxumbrellaunderitsRevisedChartertheexemptionfromspecifictaxes
onlocallypurchasedfueloil.Inthiscontext,IcannotinterpretP.D.938tohavewithdrawntheexemption
fromtaxonfueloiltowhichNPCwasalreadyentitledandwhichexemptionGovernmentinfactwasutilizing
tosoftentheburdenofhighcrudeprices.
ThereisoneotherconsiderationwhichIconsiderpivotal.Thetaxespaidbyoilcompaniesonoilproducts
sold to NPC, whether paid to them by NPC or no never entered into the rates charged by NPC to its
customersnotevenduringthoseperiodsofuncertaintyengenderedbytheissuanceofP.D.1931andE.0.
93onNP/Cstaxstatus.NotaxcomponentonthefuelhavebeenchargedorrecoveredbyNPCthroughits
rates.
Thereisanimportdutyonthecrudeoilimportedbythelocalrefineries.Aftertherefiningprocess,specific
andadvaloremtaxesareleviedonthefinishedproductsincludingfueloilorresidueupontheirwithdrawal
fromtherefinery.Thesetaxesarepaidbytheoilcompaniesasthemanufacturerthereof.
In selling the fuel oil to NPC, the oil companies include in their billings the duty and tax component. NPC
pays the oil companies' invoices including the duty component but net of the tax component. NPC then
appliesfordrawbackofcustomsdutiespaidandforacreditinamountequivalenttothetaxpaid(bytheoil
companies) on the products purchased. The tax credit is assigned to the oil companiesas payment, in
effect, of the tax component shown in the sales invoices. (NOTE: These procedures varied over time
There were instances when NPC paid the tax component that was shifted to it and then applied for tax
credit.TherewerealsosideissuesraisedbecauseofP.D.1931andE.O.93whichwithdrewallexemptions
ofgovernmentcorporations.Intheselatterinstances,theresolutionsoftheFiscalIncentivesReviewBoard
(FIRB)comeintoplay.Theseincidentswillnotbetoucheduponforpurposesofthisdiscussion).
NPCratesofelectricityarestructuredsuchthatchangesinitscostoffuelareautomatically(withoutneed
offreshapprovals)reflectedinthesubsequentmonthsbillingrates.
ThisFuelCostAdjustmentclauseprotectsNPC'srateofreturn.IfNPCshouldeveracceptliabilitytothetax
and duty component on the oil products, such amount will go into its fuel cost and be passed on to its
customers through corresponding increases in rates. Since 1974, when NPC operated the oilfired
generatingstationsleasedfromMeralco(whichplantsitboughtin1979),untilthepresenttime,notaxon
fueloileverwentintoNPC'selectricrates.
ThattheexemptionofNPCfromthetaxonfuelwasnotwithdrawnbyP.D.938isimpresseduponmeby
yet another circumstance. It is conceded that NPC at the very least, is exempt from taxes to which it is
directly liable. NPC therefore could very well have imported its fuel oil or crude residue for burning at its
thermalplants.Therewouldhavebeennoquestioninsuchacaseastoitsexemptionfromalldutiesand
taxes, even under the strictest interpretation that can be put forward. However, at the time P.D. 938 was
issued in 1976, there were already operating in the Philippines three oil refineries. The establishment of
these refineries in the Philippines involved heavy investments, were economically desirable and enabled
the country to import crude oil and process / refine the same into the various petroleum products at a
savingstotheindustryandthepublic.Therefiningprocessproducedasitslargestoutput,involume,fuel
oil or residue, whose conventional economic use was for burning in electric or steam generating plants.
Hadtherebeennouselocallyfortheresidue,theoilrefinerieswouldhavebecomelargelyunviable.
Again,inthiscircumstances,IcannotacceptthatP.D.938wouldhaveineffectforcedNPCtobypassthe
localoilrefineriesandimportitsfossilfuelrequirementsdirectlyinordertoavailitselfofitsexemptionfrom
"directtaxes."Theoilrefinerieshadtokeepoperatingbothforeconomicdevelopmentandnationalsecurity
reasons. In fact, the restoration by the FIRB of NPC's exemption after P.D. 1931 and E.O. 93 expressly
excluded direct fuel oil importations, so as not to prejudice the continued operations of the local oil
refineries.
To answer your query therefore, it is the opinion of this Department that NPC under the provisions of its
RevisedCharterretainsitsexemptionfromdutiesandtaxesimposedonthepetroleumproductspurchased
locallyandusedforthegenerationofelectricity.
TheDepartmentinissuingthisrulingdoessopursuanttoitspowerandfunctiontosuperviseandcontrol
the collection of government revenues by the application and implementation of revenue laws. It is
preparedtotakethemeasuressupplementaltothisrulingnecessarytocarrythesameintofulleffect.
Aspresentedratherextensivelyabove,theNPCelectricpowerratesdidnotcarrythetaxesanddutiespaid
on the fuel oil it used. The point is that while these levies were in fact paid to the government, no part
thereof was recovered from the sale of electricity produced. As a consequence, as of our most recent
information, some P1.55 B in claims represent amounts for which the oil suppliers and NPC are "outof
pocket. There would have to be specific order to the Bureaus concerned for the resumption of the
processingoftheseclaims."38
In the latter of June 15, 1988 of then Executive Secretary Macaraig to the then Secretary of Finance, the said
opinionrulingofthelatterwasconfirmedanditsimplementationwasdirected.39
The Court finds and so holds that the foregoing reasons adduced in the aforestated letter of the Secretary of
Finance as confirmed by the then Executive Secretary are welltaken. When the NPC was exempted from all
8/31/2016 G.R.No.88291
formsoftaxes,duties,fees,impostsandothercharges,underP.D.No.938,itmeansexactlywhatitsays,i.e.,all
formsoftaxesincludingthosethatwereimposeddirectlyorindirectlyonpetroleumproductsusedinitsoperation.
ReferenceismadeinthedissentingopiniontocontraryrulingsoftheBIRthattheexemptionoftheNPCextends
only to taxes for which it is directly liable and not to taxes merely shifted to it. However, these rulings are
predicatedonPhilippineAcytelene.
ThedoctrineinPhilippineAcytelenedecidedin1967bythisCourtcannotapplytothepresentcase.Itinvolved
thesalestaxofproductstheplaintiffsoldtoNPCfromJune2,1953toJune30,1958whenNPCwasenjoyingtax
exemptionfromalltaxesunderCommonwealthActNo.120,asamendedbyRepublicActNo.358issuedonJune
4,1949hereinabovereproduced.
Insaidcase,thisCourtheld,thatthesalestaxisduefromthemanufacturerandnotthebuyer,soplaintiffcannot
claimexemptionssimplybecausetheNPC,thebuyer,wasexempt.
However, on September 10, 1971, Republic Act No. 6395 was passed as the revised charter of NPC whereby
Section 13 thereof was amended by emphasizing its nonprofit character and expanding the extent of its tax
exemption.
As petitioner concedes, Section 13(d) aforestated of this amendment under Republic Act No. 6345 spells out
clearlytheexemptionoftheNPCfromindirecttaxes.Andashereinabovestated,inP.D.No.380,theexemption
of NPC from indirect taxes was emphasized when it was specified to include those imposed "directly and
indirectly."
Thereafter,underP.D.No.938thetaxexemptionofNPCwasintegratedunderSection13definingthesamein
generaltermstocover"allformsoftaxes,duties,fees,imposts,etc."which,ashereinabovediscussed,logically
includesexemptionfromindirecttaxesonpetroleumproductsusedinitsoperation.
ThisisthestatusofthetaxexemptionstheNPCwasenjoyingwhenP.D.No.1931waspassed,ontheauthority
ofwhichFIRBResolutionNos.1085and186wereissued,andwhenExecutiveOrderNo.93waspromulgated,
bywhichFIRBResolution1787wasissued.
Thus, the ruling in Philippine Acetylene cannot apply to this case due to the different environmental
circumstances.Asamatteroffact,theamendmentsofSection13,underR.A.No.6395,P.D.No,380andP.D.
No. 838 appear to have been brought about by the earlier inconsistent rulings of the tax agencies due to the
doctrineinPhilippineAcetylene,soastoleavenodoubtastotheexemptionoftheNPCfromindirecttaxeson
petroleumproductsitusesinitsoperation.Effectively,saidamendmentssupersededifnotabrogatedtherulingin
PhilippineAcetylenethatthetaxexemptionofNPCshouldbelimitedtodirecttaxesonly.
Inthelightoftheforegoingdiscussionthefirstcorollaryissuemustconsequentlyberesolvedintheaffirmative,
thatis,FIRBResolutionNo.1085datedFebruary7,1985andFIRBResolutionNo.186datedJanuary7,1986
whichrestoredNPC'staxexemptionprivilegesincludedtherestorationoftheindirecttaxexemptionoftheNPC
onpetroleumproductsitused.
OnthesecondcorollaryissueastothevalidityofFIRBresolutionNo.1787datedJune24,1987whichrestored
NPC'staxexemptionprivilegeeffectiveMarch10,1987,theCourtfindsthatthesameisvalidandeffective.
Itprovidesasfollows:
BE IT RESOLVED, AS IT IS HEREBY RESOLVED, That the tax and duty exemption privileges of the
National Power Corporation, including those pertaining to its domestic purchases of petroleum and
petroleumproducts,grantedunderthetermsandconditionsofCommonwealthActNo.120(Creatingthe
National Power Corporation, defining its powers, objectives and functions, and for other purposes), as
amended,arerestoredeffectiveMarch10,1987,subjecttothefollowingconditions:
1.Therestorationofthetaxanddutyexemptionprivilegesdoesnotapplytothefollowing:
1.1.Importationoffueloil(crudeequivalent)andcoal
1.2. Commerciallyfunded importations (i.e., importations which include but are not limited to those
financed by the NPC's own internal funds, domestic borrowings from any source whatsoever,
borrowingfromforeignbasedprivatefinancialinstitutions,etc.)and
1.3.Interestincomederivedfromanysource.
2. The NPC shall submit to the FIRB a report of its expansion program, including details of disposition of
relievedtaxanddutypaymentsforsuchexpansiononanannualbasisorasoftenastheFIRBmayrequire
ittodoso.ThisreportshallbeinadditiontotheusualFIRBreportingrequirementsonincentiveavailment.
40
ExecutiveOrderNo.93providesasfollows
Sec. 1. The provisions of any general or special law to the contrary notwithstanding, all tax and duty
incentivesgranted"togovernmentandprivateentitiesareherebywithdrawn,except:
a)thosecoveredbythenonimpairmentclauseoftheConstitution
b)thoseconferredbyeffectiveinternationalagreementstowhichtheGovernmentoftheRepublicof
thePhilippinesisasignatory
c)thoseenjoyedbyenterprisesregisteredwith:
(i)theBoardofInvestmentspursuanttoPresidentialDecreeNo.1789,asamended
(ii)theExportProcessingZoneAuthority,pursuanttoPresidentialDecreeNo.66,asamended
(iii)thePhilippineVeteransInvestmentDevelopmentCorporationIndustrialAuthoritypursuant
toPresidentialDecreeNo.538,asamended
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d)thoseenjoyedbythecopperminingindustrypursuanttotheprovisionsofLetterofInstructionNo.
1416
e)thoseconferredunderthefourbasiccodesnamely:
(i)theTariffandCustomsCode,asamended
(ii)theNationalInternalRevenueCode,asamended
(iii)theLocalTaxCode,asamended
(iv)theRealPropertyTaxCode,asamended
f)thoseapprovedbythePresidentupontherecommendationoftheFiscalIncentivesReviewBoard.
Sec.2.TheFiscalIncentivesReviewBoardcreatedunderPresidentialDecreeNo.776,asamended,is
herebyauthorizedto:
a)restoretaxand/ordutyexemptionswithdrawnhereunderinwholeorinpart
b)revisethescopeandcoverageoftaxand/ofdutyexemptionthatmayberestored.
c)imposeconditionsfortherestorationoftaxand/ordutyexemption
d)prescribethedateorperiodofeffectivityoftherestorationoftaxand/ordutyexemption
e)formulateandsubmittothePresidentforapproval,acompletesystemforthegrantofsubsidiesto
deservingbeneficiaries,inlieuoforincombinationwiththerestorationoftaxanddutyexemptionsor
preferentialtreatmentintaxation,indicatingthesourceoffundingtherefor,eligiblebeneficiariesand
thetermsandconditionsforthegrantthereoftakingintoconsiderationtheinternationalcommitments
ofthePhilippinesandthenecessaryprecautionssuchthatthegrantofsubsidiesdoesnotbecome
thebasisforcountervailingaction.
Sec. 3. In the discharge of its authority hereunder, the Fiscal Incentives Review Board shall take into
accountanyorallofthefollowingconsiderations:
a)theeffectonrelativepricelevels
b)relativecontributionofthebeneficiarytotherevenuegenerationeffort
c)natureoftheactivitythebeneficiaryisengaged
d)ingeneral,thegreaternationalinteresttobeserved.
True it is that the then Secretary of Justice in Opinion No. 77 dated August 6, 1977 was of the view that the
powers conferred upon the FIRB by Sections 2(a), (b), (c), and (d) of Executive Order No. 93 constitute undue
delegation of legislative power and is therefore unconstitutional. However, he was overruled by the respondent
Executive Secretary in a letter to the Secretary of Finance dated March 30, 1989. The Executive Secretary, by
authority of the President, has the power to modify, alter or reverse the construction of a statute given by a
departmentsecretary.41
AreadingofSection3ofsaidlawshowsthatitsetthepolicytobethegreaternationalinterest.Thestandardsof
thedelegatedpowerarealsoclearlyprovidedfor.
Therequired"standard"neednotbeexpressed.InEduvs.Ericta42andinDelaLlanavs.Alba43thisCourtheld:
"The standard may be either express or implied. If the former, the nondelegated objection is easily met. The
standardthoughdoesnothavetobespelledoutspecifically.Itcouldbeimpliedfromthepolicyandpurposeof
theactconsideredasawhole."
InPeoplevs.Rosenthal44thebroadstandardof"publicinterest"wasdeemedsufficient.InCalalangvs.Williams,
45
,itwas"publicwelfare"andinCervantesvs.AuditorGeneral, 46itwasthepurposeofpromotionof"simplicity,
economyandefficiency."And,impliedfromthepurposeofthelawasawhole,"nationalsecurity"wasconsidered
sufficientstandard47andsowas"protectionoffishfryorfisheggs.48
TheobservationofpetitionerthattheapprovalofthePresidentwasnotevenrequiredinsaidExecutiveOrderof
thetaxexemptionprivilegeapprovedbytheFIRBunlikeinprevioussimilarissuances,isnotwelltaken.Onthe
contrary,underSectionl(f)ofExecutiveOrderNo.93,aforestated,suchtaxanddutyexemptionsextendedbythe
FIRB must be approved by the President. In this case, FIRB Resolution No. 1787 was approved by the
respondentExecutiveSecretary,byauthorityofthePresident,onOctober15,1987.49
Mr.JusticeIsaganiA.Cruzcommentingonthedelegationoflegislativepowerstated
The latest in our jurisprudence indicates that delegation of legislative power has become the rule and its
nondelegation the exception. The reason is the increasing complexity of modern life and many technical
fieldsofgovernmentalfunctionsasinmatterspertainingtotaxexemptions.Thisiscoupledbythegrowing
inability of the legislature to cope directly with the many problems demanding its attention. The growth of
society has ramified its activities and created peculiar and sophisticated problems that the legislature
cannotbeexpectedreasonablytocomprehend.Specializationeveninlegislationhasbecomenecessary.
To many of the problems attendant upon present day undertakings, the legislature may not have the
competence, let alone the interest and the time, to provide the required direct and efficacious, not to say
specificsolutions.50
Thus, in the case of Tablarin vs. Gutierrez, 51 this Court enunciated the rationale in favor of delegation of
legislativefunctions
Onethinghowever,isapparentinthedevelopmentoftheprincipleofseparationofpowersandthatisthat
themaximofdelegatusnonpotestdelegareordelegatipotestasnonpotestdelegare,adoptedthispractice
(Delegibus et Consuetudiniis Anglia edited by G.E. Woodline, Yale University Press, 1922, Vol. 2, p. 167)
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butwhichisalsorecognizedinprincipleintheRomanLawd.17.18.3)hasbeenmadetoadaptitselftothe
complexities of modern government, giving rise to the adoption, within certain limits, of the principle of
subordinatelegislation,notonlyintheUnitedStatesandEnglandbutinpracticallyallmoderngovernments.
(People vs. Rosenthal and Osmea, 68 Phil. 318, 1939). Accordingly, with the growing complexities of
modern life, the multiplication of the subjects of governmental regulation, and the increased difficulty of
administeringthelaws,thereisaconstantlygrowingtendencytowardthedelegationofgreaterpowerby
thelegislative,andtowardtheapprovalofthepracticebytheCourts.(Emphasissupplied.)
Thelegislativeauthoritycouldnotorisnotexpectedtostateallthedetailedsituationswhereinthetaxexemption
privilegesofpersonsorentitieswouldberestored.Thetaskmaybeassignedtoanadministrativebodylikethe
FIRB.
Moreover, all presumptions are indulged in favor of the constitutionality and validity of the statute. Such
presumption can be overturned if its invalidity is proved beyond reasonable doubt. Otherwise, a liberal
interpretationinfavorofconstitutionalityoflegislationshouldbeadopted.52
E.O.No.93iscompleteinitselfandconstitutesavaliddelegationoflegislativepowertotheFIRBAndasabove
discussed, the tax exemption privilege that was restored to NPC by FIRB Resolution No. 1787 of June 1987
includesexemptionfromindirecttaxesanddutiesonpetroleumproductsusedinitsoperation.
Indeed,thevalidityofExecutiveOrderNo.93aswellasofFIRBResolutionNo.1787hasbeenupheldinAlbay.
53
InthedissentingopinionofMr.JusticeCruz,itisstatedthatP.D.Nos.1931and1955issuedbyPresidentMarcos
in1984areinvalidastheywerepresumablypromulgatedundertheinfamousAmendmentNo.6andthatasthey
cover tax exemption, under Section 17(4), Article VIII of the 1973 Constitution, the same cannot be passed
"withouttheconcurrenceofthemajorityofallthemembersoftheBatasanPambansa."And,evenconcedingthat
thereservationoflegislativepowerinthePresidentwasvalid,itisopinedthatitwasnotvalidlyexercisedasthere
isnoshowingthatsuchpresidentialencroachmentwasjustifiedundertheconditionsthenexisting.Consequently,
it is concluded that Executive Order No. 93, which was intended to implement said decrees, is also illegal. The
authorityofthePresidenttosubdelegatetotheFIRBpowersdelegatedtohimisalsoquestioned.
InAlbay,54asabovestated,thisCourtupheldthevalidityofP.D.Nos.776and1931.Thelatterdecreewithdrew
tax exemptions of governmentowned or controlled corporations including their subsidiaries but authorized the
FIRBtorestorethesame.Nevertheless,inAlbay, as abovediscussed, this Court ruled that the tax exemptions
underFIRBResolutionNos.1085and186cannotbeenforcedassaidresolutionswereonlyrecommendatory
and were not duly approved by the President of the Philippines as required by P.D. No. 776. 55 The Court also
sustained in Albay the validity of Executive Order No. 93, and of the tax exemptions restored under FIRB
ResolutionNo.1787whichwasissuedpursuantthereto,asitwasdulyapprovedbythePresidentasrequiredby
saidexecutiveorder.
Moreover,underSection3,ArticleXVIIIoftheTransitoryProvisionsofthe1987Constitution,itisprovidedthat:
All existing laws, decrees, executive orders, proclamation, letters of instructions, and other executive
issuancesnotinconsistentwiththisconstitutionshallremainoperativeuntilamended,repealedorrevoked.
Thus, P.D. Nos. 776 and 1931 are valid and operative unless it is shown that they are inconsistent with the
Constitution. 1 w p h i1
Even assuming arguendo that P.D. Nos. 776, 1931 and Executive Order No. 93 are not valid and are
unconstitutional, the result would be the same, as then the latest applicable law would be P.D. No. 938 which
amended the NPC charter by granting exemption to NPC from all forms of taxes. As above discussed, this
exemptionofNPCcoversdirectandindirecttaxesonpetroleumproductsusedinitsoperation.Thisisasitshould
be,ifWearetoholdasinvalidandinoperativethewithdrawalofsuchtaxexemptionsunderP.D.No.1931aswell
asunderExecutiveOrderNo.93andthedelegationofthepowertorestoretheseexemptionstotheFIRB.
TheCourtrealizesthemagnitudeoftheconsequencesofthisdecision.Toreiterate,inAlbaythisCourtruledthat
theNPCisliableforrealestatetaxesasofJune11,1984(thedateofpromulgationofP.D.No.1931)whenNPC
hadceasedtoenjoytaxexemptionprivilegessinceFIRBResolutionNos.1085and186werenotvalidlyissued.
The real estate tax liability of NPC from June 11, 1984 to December 1, 1990 is estimated to amount to P7.49
billionplusanotherP4.76billioninfuelimportdutiesthefirmhadearlierpaidtothegovernmentwhichtheNPC
nowproposedtopassontotheconsumersbyanother33centavoincreaseperkilowatthourinpowerrateson
topofthe17centavoincreaseperkilowatthourthattookeffectjustoveraweekago.,56Hence,anothercasehas
beenfiledinthisCourttostopthisproposedincreasewithoutahearing.
Asabovediscussed,atthetimeFIRBResolutionsNos.1085and186wereissued,P.D.No.776datedAugust
24, 1975 was already amended by P.D. No. 1931 ,57 wherein it is provided that such FIRB resolutions may be
approvednotonlybythePresidentofthePhilippinesbutalsobytheMinisterofFinance.Suchresolutionswere
promulgated by the Minister of Finance in his own right and also in his capacity as FIRB Chairman. Thus, a
separateapprovalthereofbytheMinisterofFinanceorbythePresidentisunnecessary.
As earlier stated a reexamination of the ruling in Albay on this aspect is therefore called for and consequently,
Albaymustbeconsideredsupersededtothisextentbythisdecision.ThisisbecauseP.D.No.938whichisthe
latest amendment to the NPC charter granting the NPC exemption from all forms of taxes certainly covers real
estatetaxeswhicharedirecttaxes.
ThistaxexemptionisintendednotonlytoinsurethattheNPCshallcontinuetogenerateelectricityforthecountry
butmoreimportantly,toassurecheaperratestobepaidbytheconsumers.
Theallegationthatthisisineffectallowingtaxevasionbyoilcompaniesisnotquitecorrect. Therearevarious
1 a \^/p h i1
arrangements in the payment of crude oil purchased by NPC from oil companies. Generally, the custom duties
paid by the oil companies are added to the selling price paid by NPC. As to the specific and advalorem taxes,
theyareaddedapartoftheseller'sprice,butNPCpaysthepricenetoftax,onconditionthatNPCwouldseeka
tax refund to the oil companies. No tax component on fuel had been charged or recovered by NPC from the
consumersthroughitspowerrates. 58Thus,thisisnotacaseoftaxevasionoftheoilcompaniesbutoftaxrelief
fortheNPC.Thebillionsofpesosinvolvedintheseexemptionswillcertainlyinuretotheultimategoodandbenefit
8/31/2016 G.R.No.88291
of the consumers who are thereby spared the additional burden of increased power rates to cover these taxes
paidortobepaidbytheNPCifitisheldliableforthesame.
ThefearoftheseriousimplicationofthisdecisioninthatNPC'ssuppliers,importersandcontractorsmayclaim
thesameprivilegeshouldbedispelledbythefactthat(a)thisdecisionparticularlytreatsofonlytheexemptionof
theNPCfromalltaxes,duties,fees,impostsandallotherchargesimposedbythegovernmentonthepetroleum
productsitusedorusesforitsoperationand(b)Section13(d)ofR.A.No.6395andSection13(d)ofP.D.No.
380,bothspecificallyexempttheNPCfromalltaxes,duties,fees,impostsandallotherchargesimposedbythe
government on all petroleum products used in its operation only, which is the very exemption which this Court
deemstobecarriedoverbythepassageofP.D.No.938.AsamatteroffactinSection13(d)ofP.D.No.380itis
specified that the aforesaid exemption from taxes, etc. covers those "directly or indirectly" imposed by the
"Republic of the Philippines, its provincies, cities, municipalities and other government agencies and
instrumentalities"onsaidpetroleumproducts.Theexemptionthereforefromdirectandindirecttaxonpetroleum
products used by NPC cannot benefit the suppliers, importers and contractors of NPC of other products or
services.
TheCourtrealizesthelaudableobjectiveofpetitionertoimprovetherevenueofthegovernment.Theamountof
revenue received or expected to be received by this tax exemption is, however, not going to any of the oil
companies.Therewouldbenolosstothegovernment.ThesaidamountshallaccruetothebenefitoftheNPC,a
government corporation, so as to enable it to sustain its tremendous task of providing electricity for the country
andattheleastcosttotheconsumers.Denyingthistaxexemptionwouldmeanhamperingifnotparalyzingthe
operationsoftheNPC.Theresultingincreasedrevenueinthegovernmentwillalsomeanincreasedpowerrates
tobeshoulderedbytheconsumersiftheNPCistosurviveandcontinuetoprovideourpowerrequirements. 59
Thegreaterinterestofthepeoplemustbeparamount.
WHEREFORE,thepetitionisDISMISSEDforlackofmerit.Nopronouncementastocosts.
SOORDERED.
Narvasa,MelencioHerrera,Feliciano,Bidin,MedialdeaandRegalado,JJ.,concur.
FernanC.J.,Nopart.
Paras,J.,Idissent,buttheNPCshouldberefundednotbytheconsumingpublicbutbytheoilcompaniesfor
ultimatelytheseoilcompaniesgetthebenefitoftheallegedtaxexemption.
Padilla,J.,tooknopart.
SeparateOpinions
CRUZ,J.,Dissenting:
I join Mr. Justice Abraham F. Sarmiento in his excellent dissent and would stress only the following additional
observations.
AtaxexemptionrepresentsalossofrevenuetotheStateandmustthereforenotbelightlygrantedorinferred.
When claimed, it must be strictly construed against the taxpayer, who must prove that he comes under the
exemption rather than the rule that every one must contribute his just share in the maintenance of the
government.
Inthecaseatbar,theponenciawouldjustifythetaxexemptionashavingbeenvalidlygrantedunderP.D.Nos.
1931and1955andResolutionsNos.1085and186oftheFiscalIncentivesReviewBoard.Itisalsoasserted
that FIRB Resolution No. 1787, which restored MPC's tax exemption effective March 10 1987, was lawfully
adoptedpursuanttoavaliddelegationofpowermadebyExecutiveOrderNo.93.
WhenP.D.Nos.1931and1955wereissuedbyPresidentMarcosin1984,theBatasangPambansawasalready
in existence and discharging its legislative powers. Presumably, these decrees were promulgated under the
infamousAmendmentNo.6.AssumingthatthereservationoflegislativepowerinthePresidentwasthenvalid,I
submit that the power was nevertheless not validly exercised. My reason is that the President could legislate
underthesaidamendmentonlyiftheBatasangPambansa"failedorwasunabletoactadequatelyonanymatter
thatinhisjudgmentrequiredimmediateaction"tomeetthe"exigency."Thereisnoshowingthatthepresidential
encroachmentonlegislativeprerogativeswasjustifiedundertheseconditions.Simplybecausetherubberstamp
legislaturethenmeeklysubmitteddidnotmaketheusurpationvalid.
By these decrees, President Marcos, exercising legislative power, delegated it to himself as executive and
empoweredhimselfand/ortheMinisterofFinancetorestoretheexemptionspreviouslywithdrawn.
AsthedecreesthemselveswereinvaliditshouldfollowthatExecutiveOrderNo.93,whichwasintendedonlyto
implementthem,shouldalsobeillegal.Butevenassumingthelegalityofthesaiddecrees,Iwouldstillquestion
theauthorityofthePresidenttosubdelegatethepowersdelegatedtoherthereunder.
Such subdelegation was not permissible because potestas delegata non delegari potest Even if we were to
disregard the opinion of Secretary of Justice Sedfrey A. Ordoez that there were no sufficient standards in
Executive Order No. 93 (although he was reversed on this legal questions by the Executive Secretary), the
President'sdelegatedauthoritycouldstillnotbeextendedtotheFIRBwhichwasnotadelegateofthelegislature.
It is remarkable that the respondents could seriously argue that a mere administrative body like the FIRB can
exercisethelegislativepowertogranttaxexemptions.Iamnotawarethatanyothersuchagency,includingthe
BureauofInternalRevenueandtheBureauofCustoms,hasthisauthority.Anadministrativebodycanapplytax
exemptionsunderexistinglawbutitcannotitselfcreatesuchexemptions.ThisisaprerogativeoftheCongress
thatcannotbeusurpedbyorevendelegatedtoamereadministrativebody.
Infact,thedecreesclearlyprovidedthatitwasthePresidentand/ortheMinisterofFinancewhocouldrestorethe
exemption,subjectonlytotherecommendationoftheFIRB.TheFIRBwasnotempoweredtodirectlyrestorethe
exemption.AndevenifitbeacceptedthattheFIRBmerelyrecommendedtheexemption,whichwasapprovedby
the Finance Minister, there would still be the curious anomaly of Minister Virata upholding his very own act as
chairmanoftheFIRB.
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This Court called it a "travesty of justice" when in Zambales Chromite vs. Court of Appeals, 94 SCRA 261, the
Secretary of Agriculture and Natural Resources approved a decision earlier rendered by him when he was the
Director of Mines, and in Anzaldo vs. Clave, 119 SCRA 353, where the respondent, as presidential executive
assistant,affirmedonappealtoMalacaanghisowndecisionaschairmanoftheCivilServiceCommission.
ItisimportanttonotethatwhenP.D.Nos.1931and1955wereissuedbyPresidentMarcos,theruleunderthe
1973Constitutionwasthat"nolawgrantingataxexemptionshallbepassedwithouttheconcurrenceofamajority
ofallthemembersoftheBatasangPambansa."(Art.VIII,Sec.17[4]).Lawsareusuallypassedbyonlyamajority
ofthosepresentinthechamber,therebeingaquorum,butnotwhereitgrantsataxexemption.Thisrequiresan
absolute majority. Yet, despite this stringent limitation on the national legislature itself, such stricture does not
inhibitthePresidentandtheFIRBintheexerciseoftheirdelegatedpower.Itwouldseemthatthedelegatehas
morepowerthantheprincipal.Significantly,thislimitationismaintainedinthepresentConstitutionunderArticle
VI,Section28(4).
Theponencia holds that the rule of strict construction is not applicable where the grantee is an agency of the
government itself, like the MPC in the case before us. I notice, however, that the ultimate beneficiaries of the
expectedtaxcreditwillbetheoilcompanies,whichcertainlyarenotpartoftheRepublicofthePhilippines.Asthe
tax refunds will not be enjoyed by the MPC itself, I see no reason why we should be exceptionally lenient in
applyingtheexception.
ThetaxcreditsinvolvedinthispetitionaretremendousnolessthanPl.58billion.Thisamountcouldgoalong
way in improving the national economy and the wellbeing of the Filipino people, who deserve the continuing
solicitudeofthegovernment,includingthisCourt.Irespectfullysubmitthatitistothemthatweoweourforemost
loyalty.
Gutierrez,Jr.,J.,concurs
SARMIENTO,J.,dissenting:
I would like to point out specifically two things in connection with the majority's disposition as to: (1) Finance
Incentives Review Board FIRB Resolutions Nos. 1085 and 186 and (2) the National Power Corporation's tax
exemptionvisavisourdecisioninthecaseofPhilippineAcetyleneCo.,Inc.vs.CommissionofInternalRevenue,
1
andinthelightoftheprovisionsofitscharter,RepublicActNo.6395,andthevariousamendmentsenteredinto
it.
(1)
On pages 2023 of the Decision, the majority suggests that FIRB Resolutions Nos. 1085 and 186 had validly
restored the National Power Corporation's tax exemption privileges, which Presidential Decree No. 1931 had
meanwhilesuspended.IwishtostressthatinthecaseofNationalPowerCorporationvs.ProvinceofAlbay,2the
CourtheldthattheFIRBResolutionsNos.1085and186hadthebareforceofrecommendationsanddidnot
operateasarestoration,intheabsenceofanapprovalbythePresident(inthenPresidentMarcos'exerciseof
legislativepowers),oftaxexemptions.TheCourtnotedthatthereisnothinginPresidentialDecreeNo.776,the
FIRBcharter,conferringonittheauthoritytograntorrestoreexemptions,otherthantomakerecommendations
onwhatexemptionstograntorrestore.Iquote:
xxxxxxxxx
It is to be pointed out that under Presidential Decree No. 776, the power of the FIRB was merely to
"recommendtothePresidentofthePhilippinesandforreasonsofcompatibilitywiththedeclaredeconomic
policy,thewithdrawal,modification,revocationorsuspensionoftheenforceabilityofanyoftheabovecited
statutorysubsidiesortaxexemptiongrants,exceptthosegrantedbytheConstitution."Ithasnoauthorityto
impose taxes or revoke existing ones, which, after all, under the Constitution, only the legislature may
accomplish....3
xxxxxxxxx
As the Court held there, it was only on March 10, 1987 that the restoration became effective, not because
ResolutionsNos.1085and186decreedarestoration,butbecauseofResolutionNo.1787which,ontheother
hand,carriedtheapprovaloftheOfficeofthePresident. 4(FIRBResolutionNo.1787madetheNationalPower
Corporation's exemption effective March 10, 1987.) Hence, the National Power Corporation, so the Court held,
was liable for payment of real property taxes to the Province of Albay between. June 11, 1984, the date
PresidentialDecreeNo.1931(withdrawingitstaxexemptions)tookeffect,andMarch10,1987,
AsfarthereforeasthemajorityinthepresentcaserulesthattheNationalPowerCorporationisalsoentitledtoa
refund as a result of FIRB Resolutions Nos. 1015 and 186, I respectfully submit that a serious conflict has
arisen.
WhileitistruethatFIRBResolutionsNos.1085and186weresignedbytheFinanceMinisterCesarVirata, 5I
submit nonetheless, as Albay in fact held, that the signature of the Mr. Virata is not enough to restore an
exemption.ThereasonisthatMr.Viratasignedthem(FIRBResolutionsNos.1085and186)inhiscapacityas
chairmanoftheFinanceIncentivesReviewBoardFIRB.IfindthisclearfromtheveryResolutionsinquestion:
FISCALINCENTIVESREVIEWBOARD
RESOLUTIONNO.1085
BEITRESOLVED,ASITISHEREBYRESOLVED,That:
CorporationunderC.A.No.120asamendedarerestoreduptoJune30,1985.
2.Provided,Thatthisrestorationdoesnotapplytothefollowing:
a.importationsoffueloil(crudeequivalent)andcoalasperFIRBResolutionNo.184
b.commerciallyfundedimportationsand
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c.interestincomederivedfromanyinvestmentsource.
3.Providedfurther,Thatincaseofimportationsfundedbyinternationalfinancingagreements,theNPCis
herebyrequiredtofurnishtheFIRBonaperiodicbasistheparticularsofitemsreceivedortobereceived
throughsucharrangements,forpurposesoftaxanddutyexemptionprivileges.
(Sgd.)ALFREDOPIODERODA,JR.
ActingMinisterofFinance
ActingChairman,FIRB
FISCALINCENTIVESREVIEWBOARD
RESOLUTIONNO.186
BEITRESOLVED,ASITISHEREBYRESOLVED:That:
1.EffectiveJuly1,1985,thetaxanddutyexemptionprivilegesenjoyedbytheNationalPowerCorporation
(NPC)underCommonwealthActNo.120,asamended,arerestoredProvided,Thatimportationsoffueloil
(crude oil equivalent) and coal of the herein grantee shall be subject to the basic and additional import
dutiesProvided,further,Thatthefollowingshallremainfullytaxable:
a.Commerciallyfundedimportationsand
b. Interest income derived by said grantee from bank deposits and yield or any other monetary
benefitsfromdepositsubstitutes,trustfundandothersimilararrangements.
2.TheNPCasagovernmentcorporationisexemptfromtherealpropertytaxonlandandimprovements
owned by it provided that the beneficial use of the property is not transferred to another pursuant to the
provisionsofSec.40(a)oftheRealPropertyTaxCode,asamended.
(Sgd.)CESARE.A.VIRATA
MinisterofFinance
ChairmanFIRB
IrespectfullysubmitthattosaythatMr.Virata'ssignatureissufficient(pleasenotethatResolutionNo.1085was
notevensignedbyMr.Virata,butratherbyMr.AlfredoPiodeRoda,Jr.)isinfacttoconferontheBoardactual
"restoration"orevenexemptionpowers,becauseinallcases,FIRBResolutionsaresignedbyMr.Virata(orthe
actingchairman)inhiscapacityasBoardChairman.IsubmitthatwecannotconsideranFIRBResolutionasan
actofMr.ViratainhiscapacityasMinisterofFinance(andtherefore,asagrantorrestorationoftaxexemption)
althoughMr.Virataalsohappenedtobeconcurrently,MinisterofFinance,becausetodosowouldbetoblurthe
distinctionbetweenthecapacitiesinwhichhe,Mr.Virata,actuallyacted.Isubmitthathe,Mr.Virata,needhave
issuedseparateapprovalsoftheResolutionsinquestion,inhiscapacityasFinanceMinister.
Parenthetically,ontheissueoftheconstitutionalvalidityofExecutiveOrderNo.93,insofarasit"delegates"the
power to restore exemptions to the FIRB, I hold that in the first place, Executive Order No. 93 makes no
delegationatall.Asthemajoritypointsout,"[u]nderSection1(f)ofExecutiveOrderNo.93,aforestated,suchtax
and duty exemptions extended by the FIRB must be approved by the President." 6 Hence, the FIRB does not
exerciseanypowerandasIhadheld,itspowersdoesnotmerelyrecommendatoryanditisthePresidentwho
in fact exercises it. It is true that Executive Order No. 93 has set out certain standards by which the FIRB as a
reviewingbody,mayact,butIdonotbelievethatagenuinedelegationquestionhasarisenbecauseprecisely,the
acts of the Board are subject to approval by the President, in the exercise of her legislative powers under the
FreedomConstitution.7
(2)
AccordingtotheDecision,theNationalPowerCorporation,underitscharter,isalsoexemptfromindirecttaxes,
and that there is nothing irregular about what is apparently standard operating procedure between the
Corporation and the oil firms in which the latter sell to the Corporation of "net of tax" and that thereafter, the
Corporationassignstothemitstaxcredit.
Igatherfirst,andwithallduerespect,thattherehasbeenamisunderstandingaboutsocalledindirecttaxesand
the theory of shifting taxes. In Philippine Acetylene Co., Inc., supra, the Court intimated that there are no such
things as indirect taxes for purposes of exemption, and that the National Power Corporation's exemption from
taxes can not be claimed, as well, by a manufacturer (who sells his products to the Corporation) on the theory
thatthetaxeshewillshiftwillbeshiftedtoataxexemptentity.AccordingtotheCourt,"thepurchaserdoesnot
paythetax...[h]epaysormaypaythesellermoreforthegoodsbecauseoftheseller'sobligation,butthatisall
andtheamountaddedbecauseofthetaxispaidtogetthegoodsandfornothingelse."8
It is true that a tax may be shifted, that is, to enable the payor to escape its effects by adding it to the price,
therebytransferringtheburdentothepurchaserofwhomtheincidenceofthetaxsettles(indirecttax).Isubmit,
however, that it is only for purposes of escape from taxation. As Acetylene has clarified, the tax which the
manufacturer is liable to pay directly under a statute is still a personal tax and in "passing and tax on" to the
purchaser,hedoesnotreallymakethelatterpaythetax,andwhatthelatterpaysactuallyisjusttheprice.Thus,
forpurposesofexemption,andsoAcetylenetellsus,themanufacturercannotclaimonebecausethepurchaser
happens to be exempted from taxes. Mutatis mutandis and so I respectfully submit, the purchaser can not be
allowedtoacceptthegoods"netoftax"becauseitneverpaidforthetaxinthefirstplace,andwasneverliable
thereforinthesecondplace.
According to the majority, Philippine Acetylene has been "abrogated," and the majority points to the various
amendmentstothecharteroftheNationalPowerCorporationasauthorityforitsview.
First,thereisnothinginthoseamendmentsthatwouldremotelypointtothisconclusion.
Second,Acetylene'spronouncementisfoundedontheveryscienceoftaxationthatindirecttaxesarenotaxes
for purposes of exemption, and that consequently, one who did not pay taxes can not claim an exemption
although the price he paid for the goods included taxes. To enable him to claim an exemption, as the majority
wouldnowenablehim(Acetylenehavingbeen"abrogated"),is,Isubmit,todefeattheverylawsofscience.
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Thetheoryof"indirecttaxes"andthatnoexemptionispossibletherefrom,soIreiterate,arewellsettledconcepts
of taxation, as the law of supply and demand is to the law of economics. A President is said (unfairly) to have
attemptedit,butonecannotrepealthelawonsupplyanddemand.
IdonotfindtheNationalPowerCorporation'sallegedexemptionfromindirecttaxevident,asthemajorityfindsit
evident, from the Corporation's charter, Republic Act No. 6395, as amended by Presidential Decrees Nos. 380
and938.ItistruethatsinceCommonwealthActNo.120(theCorporation'soriginalcharter,whichRepublicAct
No. 6395 repealed), the Corporation has enjoyed a "preferential tax treatment," I seriously doubt, however,
whetherornotthatpreferenceembraces"indirecttaxes"aswellwhich,asIsaid,arenotaxesforpurposesof
claimsforexemptionsbythe"indirectpayor."AndalbeitPresidentialDecreeNo.938refersto"allformsoftaxes,"
Icannottakethattoinclude,asamatteroflogic,"indirecttaxes,"andasdiscussedabove,thatscenarioisnot
possible.
Iquiteagreethatthelegislativeintent,basedonaperusalofRepublicActNo.6395andsubsequentamendatory
statutes was to give the National Power Corporation a broad tax preference on account of the vital functions it
performs, indeed, "to enable the Corporation to pay the indebtedness and obligation and in furtherance and
effectiveimplementationofthepolicyinitiated"byitscharter.Isubmit,however,thatthatalonecannotentitlethe
Corporationtoclaimanexemptionforindirecttaxes.Ialsobelievethatitsexistingexemptionfromdirecttaxesis
sufficienttoservethelegislativepurpose.
ThefactthattheNationalPowerCorporationhasbeentaskedwithanenormousundertaking"toimprove,"asthe
majority puts it, "the quality of life of the people" pursuant to constitutional mandates is no reason, I believe, to
includeindirecttaxeswithinthecoverageofitspreferentialtaxtreatment.Afterall,itisexemptfromdirecttaxes,
and the fact that it will be made to shoulder indirect taxes (which are no taxes) will not defeat its exemption or
frustratetheintentofbothlegislatureandConstitution.
I do not think that the majority can point to the various executive constructions as authorities for its own
construction.Firstandforemost,withrespecttothenCommissionerRubenAncheta'srulingofMay8,1985cited
onpages3233oftheDecision,itisnotablethatinhisBIRRulingNo.18385,datedOctober22,1985,heinfact
reversedhimself,Iquote:
InreplypleasebeinformedthatafterarestudyofSection13,R.A.6395asamendedbyP.D.No.938,this
Officeisoftheopinion,andsoholds,thatthescopeofthetaxexemptionprivilegeenjoyedbyNPCunder
saidsectioncoversonlytaxesforwhichitisdirectlyliableandnotontaxeswhicharemerelyshiftedtoit.
(Phil.AcetyleneCo.vs.Comm.ofInternalRevenue,20SCRA1056,1967).Sincecontractor'staxisdirectly
payable by the contractor, not by NPC, your request for exemption, based on the stipulation in the
aforesaid contract that NPC shall assume payment of your contractor's tax liability, cannot be granted for
lackoflegalbasis.(emphasisadded)9
Inyetanotherruling,thenCommissionerBienvenidoTanlikewisedeclared,inconnectionwithanapparentclaim
forrefundbythePhilippineAirlines,that"PAL'staxexemptionislimitedtotaxesforwhichPALisdirectlyliable,
and that the payment of specific and ad valorem taxes on petroleum products is a direct liability of the
manufacturerorproducerthereof..."10
Again, under BIR Ruling No. 15286, the Bureau of Internal Revenue reiterated, as to the National Power
Corporation'sclaimforarefundIquote:
...thisOfficehasmaintainedthestandthatyourtaxexemptionprivilegescoversonlytaxesforwhichyou
aredirectlyliable.11
Per BIR Ruling No. 70043, dated August 27, 1970, the Bureau likewise held that the term "all forms of taxes"
coversonlydirecttaxes,12
InhisletteraddressedtoformerBIRCommissionerTan,Atty.ReynosoFloreza,BIRAssistantCommissionerfor
Legal, opposed Caltex Philippines' claim for a P58million refund, and although the Commissioner at that time
hedgedhewaslaterpersuadedbySpecialAssistantAbrahamDelaViaandinfact,instructedAtty.DelaViato
"prepare [the] corresponding notice to NPC and Caltex" 13 to inform them that their claim has been denied.
(Althoughstrangely,hechangedhismindlater.)
Hence, I do not think that we can judiciously rely on executive construction because executive construction has
beenatbest,erratic,andatworst,conflicting.
Idonotfindthatmajority'shistoricalconstructionareliableyardstickinthiscase,forifthehistoricaldevelopment
ofthelawwereanyindication,thelegislativeintentis,onthecontrary,toexcludeindirecttaxesfromthecoverage
oftheNationalPowerCorporation'staxexemption.Thus,underCommonwealthActNo.120,theCorporationwas
made exempt from the payment of all taxes in connection with the issuance of bonds. Under Republic Act No.
358, it was made exempt from the payment of all taxes, duties, fees, imposts, and charges of the national and
localgovernments.
UnderRepublicActNo.6395,theNationalPowerCorporationwasfurtherdeclaredexempt:
(e)Fromalltaxes,duties,fees,imposts,andallotherchargesimposedbytheRepublicofthePhilippines,
its provinces, cities, municipalities and other government agencies and instrumentalities, on all petroleum
productsusedbytheCorporation...
ByvirtueofPresidentialDecreeNo.380,itwasmadeexempt:
(d)fromalltaxes,duties,fees,imposts,andallotherchargesimposeddirectlyorindirectlybytheRepublic
ofthePhilippines,itsprovinces,cities,municipalitiesandothergovernmentagenciesandinstrumentalities,
on all petroleum products used by the corporation in the generation, transmission, utilization and sale of
electricpower.
ByvirtuehoweverofPresidentialDecreeNo.938,referenceto"indirecttaxes"wasomittedthus:
. . .To enable the Corporation to pay its indebtedness and obligations and in furtherance and effective
implementation of the policy enunciated in Section One of this Act, the Corporation, including its
subsidiaries,isherebydeclaredexemptfromthepaymentofallformsoftaxes,duties,fees,impostsaswell
8/31/2016 G.R.No.88291
as costs and service fees including filing fees, appeal bonds, supersedeas bonds, in any court or
administrativeproceedings.
Thedeletionof"indirecttaxes"intheDecreeis,soIhold,significant,becauseiftheintentofthelawweretrulyto
exempt the National Power Corporation from socalled indirect taxes as well, the law would have said so
specifically,asitsaidsospecificallyinPresidentialDecreeNo.380.
IlikewisedonotthinkthatthereferencetothewhereasclausesofPresidentialDecreeNo.938iswarranted,in
particular,thefollowingwhereasclause:
WHEREAS, in the application of the tax exemption provisions of the Revised Charter, the nonprofit
characterofNPChasnotbeenfullyutilizedbecauseoftherestrictiveinterpretationsofthetaxingagencies
ofthegovernmentonsaidprovisions
I am not certain whether it can be basis for a "liberal" construction. I am more inclined to believe that the term
"restrictive interpretations" refers to BIR rulings confining the exemption to the Corporation alone (but not its
subsidiaries),andnot,rather,tothescopeofitsexemption.Indeed,asPresidentialDecreeNo.938specifically
declares,"theCorporation,includingitssubsidiaries,isherebydeclaredexempt..."14
The majority expresses the apprehension that if the National Power Corporation were to be made to assume
"indirecttaxes,"thelatterwillbeforcedtopassthemontotheconsumingpublic.
First,andasAcetyleneheld,wedonotevenknowifthepayorwillinfact"passthemon.""Adecisiontoabsorb
theburdenofthetaxislargelyamatterofeconomics."15Furthermore:
Inthelongrunasalestaxisprobablyshiftedtotheconsumer,butduringtheperiodwhensupplyisbeing
adjustedtochangesindemanditmustbeinpartabsorbed.Inpracticethebusinessmanwilltreatthelevy
as an added cost of operation and distribute it over his sales as he would any other cost, increasing by
morethantheamountofthetaxpricesofgoodsdemandforwhichwillbeleastaffectedandleavingother
pricesunchanged.47Harv.Ld.Rev.860,869(1934).16
Itthereforeappearstomethatanytalkofthepublicultimatelyabsorbingthetaxispurespeculation.
Second,ithastypicallybeenthebogeymanthatbusiness,withduerespect,hasinvokedtoavoidthepaymentof
tax.Andtobesure,thepopulistallureofthatargumenthasappealedtomany,yetithasprobablyalsoobscured
whatisasfundamentalasprotectingconsumerspreservingpublicrevenue,theverylifebloodofthenation.Iam
afraidthatthisisnothealthypolicy,andwhatoccurstomeandwhatindeedleavesmeveryuncomfortableis
thatbythestrokeofthepen,weshouldhaveinfactgivenawayP13,750,214,639.00(soitissaid)oflegitimate
governmentmoney.
According moreover to Committee Report No. 474 of the Senate, "NPC itself says that it does not use taxes to
increase prices of electricity to consumers because the cost of electric generation and sale already takes into
accountthetaxcomponent."17
Icannotacceptfinally,whattomeisanunabashedeffortbytheoilfirmstoevadetaxes,thearrangement(asI
gather from the Decision) between the National Power Corporation and the oil companies in which the former
assignsitstaxcredittothelatter.Ialsopresumethatthisisthenaturalconsequenceofthe"understanding,"asI
discussedabove,topurchaseoil"netoftax"betweenNAPOCORandtheoilfirms,becauselogically,thelatterwill
lookforothersourcesfromwhichtorecoupthetaxestheyhadfailedtoshiftandrecovertheirlossesasaresult.
AccordingtotheDecision,notaxisleftunpaidbecausetheyhavebeenprepaidbeforetheoilisdeliveredtothe
National Power Corporation. But whatever taxes are paid are in fact wiped out because the subsequent credit
transferwillenabletheoilcompaniestorecoverthetaxesprepaid.
Accordingtothemajority,"[t]hisisnotacaseoftaxevasionoftheoilcompaniesbutataxrelieffortheNPC." 18
Theproblem,precisely,isthatwhileitisNPCwhichisentitledto"taxrelief,"thearrangementbetweenNPCand
theoilcompanieshasenabledinsteadthelattertoenjoyreliefwhenreliefisduetoNPCalone.Thepointstill
remainsthatnotaxmoneyactuallyreachesourcoffersbecauseasIsaid,thatarrangementenablesthemtowipe
itout.IftheNPCwerethedirectimporter,Iwouldthenhavenoreasontoobject,afterall,theNPCisexemptfrom
direct taxation and secondly, the money it is paying to finance its importations belongs to the government. The
law,however,gavetheexemptiontoNPC,nottheoilcompanies.
AccordingtotheDecision:"Theamountofrevenuereceivedorexpectedtobereceivedbythistaxexemptionis,
however,notgoingtoanyoftheoilcompanies..."19andthat"[t]herewouldbenolosstothegovernment."20
With due respect to the majority, it is erroneous, if not misleading, to say that no money is going to the oil
companies and that the government is not losing anything. Definitely, the tax credit assignment arrangement
between the NPC and the oil firms enables the latter to recover revenue they have paid. And definitely, that
meanslossforthegovernment.
The majority is concerned with the high cost of electricity. The increasing cost of electricity is however due to
myriad factors, foremost of which, is the devaluation of the peso 21 and as recent events have suggested,
"miscalculations"atthetoplevelsofNPC.Icannothoweverattributeit,asthemajorityinallearnestattributesit,
tothefact,farfetchedasitis,thattheNPChasnotbeenallowedtoenjoyexemptionfromindirecttaxes.
Taxexemptionsfurthermoreareamatterofpersonalprivilegeofthegrantee.Ithasbeenheldthatassuch,they
cannotbeassigned,unlessthestatutegrantingthempermitsanassignment.22
While"shiftingtheburdenoftax"isapermissiblemethodofavoidingatax,evadingitisatotallydifferentmatter.
AndwhileIagreewiththeNationalPowerCorporationshouldbegiventhewidestfinancialassistancepossible,
assistanceshouldnotbeanexcuseforplaintaxevasion,ifnottaxfraud,byBigBusiness,inparticular,BigOil.
(3)Postscripts
With all due respect, I do not think that the majority has appreciated enough the serious implications of its
decisionto the contrary, in particular, its shrinking coffers. I do not think that we are, after all, talking here of
"simple"billions,butinfact,billionsuponbillionsinlostrevenueloominglarge.
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Iamalsoafraidthatthemajorityisnotquiteawarethatitissettingaprecedentnotonlyfortheoilcompaniesbut
in fact, for the National Power Corporation's suppliers, importers, and contractors. Although I am not, as of this
writing,awareoftheirexactnumberorthepreciseamounttheNationalPowerCorporationhasspentinpayment
of supplies and equipment, I can imagine that the Corporation's assets consisting of those supplies and
equipment,machinesandmachinery,areworthnofewerthanbillions.
Withthisprecedent,thereisnostoppingindeedtheNAPOCOR'ssuppliers,frommakersofstoragetanks,steel
towers, cables and cable poles, to builders of dikes, to layers of pipelines, and pipes, from claiming the same
privilege.
ThereisnostoppingtheNPC'scontractors,fromsuppliersofcementforplantfixturesandlumberforedifices,to
theveryengineersandtechnicianswhodesignedthem,fromdemandingequalrights.
TherewillbenostoppingtheCorporation'stransporters,fromcontainervanandrigownerstosuppliersofservice
vehiclesofNPCexecutives,fromdemandingtheprivilege.
What is to stop, indeed, caterers of food served in board meetings or in NAPOCOR cafeterias from asking for
exemption, since food billed includes sales taxes shifted to a taxexempt entity and, following the theory of the
majority,taxesthatmayberefunded?
Whatis,indeed,tostopallimaginedclaimantsfromdemandingallimaginedclaims,sinceasweareaware,the
ruleoftaxationandconsequently,taxexemptionisuniformandequitable?23
Of course, we have discussed NAPOCOR alone we have not touched other taxexempt entities, say, the
MarinduqueMiningCorporationandNonocMiningCorporation.Perexistingrecordsandperreliableinformation,
Caltex Philippines, between 1979 and 1986, successfully recovered the total sum of P49,835,791.00. In 1985,
CaltexwassaidtohavebeenrefundedtheamountofP4,217,423.00arisingfromthesametaxarrangementwith
theNonocMiningCorporation.
Again, what is stoppingby virtue of this decision notonly the oil firms but also Marinduque's and Nonoc's
suppliers,importers,andridiculously,caterers,fromclaimingafuturerefund?
The Decision, to be sure, attempts to allay these apprehensions and "dispel[s] [them] by the fact that . . . the
decision particularly treats of only the exemption of the NPC from all taxes, duties, fees, imposts and all other
chargesimposedbythegovernmentonthepetroleumproductsitneedorusesforitsoperation..." 24 Firstly,
under Presidential Decree No. 938, the supposed tax exemption of the National Power Corporation covers "all
formsoftaxes.25Iftherefore"allformsoftaxescoversaswellindirecttaxesbecausePresidentialDecreeNo.380
supposedlyextendedtheCorporation'sexemptiontoindirecttaxes(andthemajority"deemsPresidentialDecree
No.380tohavebeencarriedovertoPresidentialDecreeNo.938"),thentheconclusionseemsinescapable
following the logic of the majoritythat the Corporation is exempt from all indirect taxes, on petroleum and any
andallotherproductsandservices.
The fact of the matter, second of all, is that the Decision is premised on the alleged exemption of the National
Power Corporation from all forms of taxes, meaning, direct and indirect taxes. It is a premise that is allegedly
supportedbystatutoryhistory,andthelegislature'sallegedintenttogranttheCorporationawesomeexemptions.
If that were the case, the Corporation must logically be exempt from all kinds of taxes payable. Logically, the
majoritycannotlimitthesweepofitspronouncementbyexemptingtheNationalPowerCorporationfrom"indirect
taxes on petroleum" alone. What is sauce for the goose (taxes on petroleum) is also sauce for the gander (all
othertaxes).
Istillwouldhavereasonformyfears.
Icannot,inallcandor,acceptthemajority'sefforts,andgoingbacktotheCorporation'scharters,to"carryover,"
in particular, Section 13(d) of Presidential Decree No. 380, to Presidential Decree No. 938. First of all, if
PresidentialDecreeNo.938meanttoabsorbPresidentialDecreeNo.380itwouldhavesaidsospecifically,orat
theveryleast,leftitalone.Obviously,PresidentialDecreeNo.938meantotherwise,tobeginwith,becauseitis
preciselyanamendatorystatute.Secondly,a"carryover"wouldhaveallowedthisCourttomakelaw,soonlyit
canfitinitstheories.
The country has gone to lengths fashioning an elaborate tax system and an efficient tax collection machinery.
Planners' efforts have seen various shifts in the taxing system, from specific, to ad valorem, to valueadded
taxation,purportedlytominimizecollection.Forthisyear,theBureauofInternalRevenuehasacollectiontarget
ofP130billion,andsignificantly,ithasbeenunrelentinginitstaxandtaxconsciousnessdrive.Iamnotprepared
tocitenumbersbutIfigurethatthemoneyitwilllosebyvirtueofthisDecisionisameaningfulchunkoffitstarget,
andasignificantsetbacktothegovernment'sprograms.
IamafraidthatbythisDecision,themajorityhasignoredtheforest(thewelfareoftheentirenation)infavorofa
tree(thewelfareofagovernmentcorporation).Theissue,inmyopinion,isnottheviabilityoftheNationalPower
CorporationasifthefateofthenationdependedaloneonitbuttheverysurvivaloftheRepublic.Iamnotof
coursetobemistakenasbeinglessconcernedwithNAPOCOR'sfiscalchart.Thepicture,asIseeithowever,is
that we are in fact assisting the oil companies, out of that alleged concern, in evading taxes at the expense,
needlesstostate,ofourcoffers.Idonotthinkthatthatisaquestionoflegalhermeneutics,butrather,ofplain
loveofcountry.
GrioAquino,Davide,Jr.andGutierrez,Jr.,JJ.,concur
Footnotes
1
Section1,Com.ActNo.120(1936).
2
Section1,Rep.ActNo.6395(1971).
3
Section2,Rep.ActNo.6395(1971).
4
Section1,Pres.DecreeNo.1931(1984).
8/31/2016 G.R.No.88291
5
Pages7to19,rollo.
6
Pages49to52,rollo.
7
Page19,rollo.
8
Citing Ex parte Levit 302 U.S. 633 Tileson vs. Ullman, 318 U.S. 446 Lozada vs. Commission on
Elections,120SCRA337(1983).
9
CitingMeralcoSecuritiesCorporationvs.Savellano,117SCRA804(1982).
10
Ibid.,page812.
11
CitingStrongvs.Castro,137SCRA322(1985).
12
CitingFortunvs.Labang,104SCRA607(1981).
13
51Am.Jur.Section2161C.J.Section6,note57(e),p.73.
14
20SCRA1056(1967).
15
CitingUnitedGarmentCo.,Inc.vs.CourtofTaxAppeals,4SCRA304(1962)andButuanSawmill,Inc.
vs.CityofButuan,16SCRA755(1966).
16
Seepage27ofPetition.
17
AnnexC,petition,page123,Rollo.
18
AnnexH,petitionpage135,Rollo.
19
AnnexesCandItothePetition.
20
G.R.No.87479promulgatedonJune4,1990.
21
Annex3tothePetition(taxcreditmemo).
22
AnnexFtothePetition.
23
Section1,CommonwealthActNo.120Sections2and13,RepublicActNo.6395inrelationtoSection3,
ActNo.1495.
24
Section5,RepublicActNo.6395.
25
Section 4, Republic Act No. 120 Section 2, Republic Act No. 358 Section 13, Republic Act No. 6395
Section10,PresidentialDecreeNo.380.
26
Section13,RepublicActNo.6395,asamendedbyPresidentialDecreesNos.380and938.
27
Section13,P.D.No.938.
28
2CooleyontheLawofTaxation,4thedition,1414(1927).
29
C.DallasSands,StatutesandStatutoryConstruction,Vol.3,p.207,citingCrosbyvs.U.S.,292F.Supp.
314Pasadenavs.LosAngelesCountry,187P.418andothercases.
30
Com.vs.CityofRichmond,116Va.69,81S.E.69.
31
U.S. vs. Palacio, 33 Phil. 208 (1916) Commissioner of Customs vs. Esso Standard Eastern, Inc., 66
SCRA113(1975).
32
Largavs.Ranada,Jr.,164SCRA18(1988).
33
Aboitiz Shipping Corp. vs. City of Cebu, 12 SCRA 449 (1965) and Aisporna vs. Court of Appeals, 113
SCRA459(1982).
34
StatutoryConstructionbyE.T.Crawford,pages604to605,citedinCommissionerofInternalRevenue
vs.FilipinasCompaniadeSeguros,107Phil.1055(1960).
35
LuzonStevedoringCorporationvs.CourtofTaxAppeals,163SCRA647(1988).
36
Pascual vs. Director of Lands, 10 SCRA 354 (1964) Solaria vs. Buenviaje, 81 SCRA 722 (1978) La
SuerteCigarandCigaretteFactoryvs.CourtofTaxAppeals,134SCRA29(1985).
37
Annexes7,8,T,V,Wand17.
38
AnnexNemphasissupplied.
39
AnnexOtothePetition.
40
AnnexKtothePetitionpage176,Rollo.
41
AnnexQtopetition,citingUniversityoftheEastvs.U.E.FacultyAssociation,117SCRA554,572(1982).
42
35SCRA481(1970).
43
112SCRA294(1982).
44
68Phil.328(1939).
45
70Phil.726(1940).
8/31/2016 G.R.No.88291
46
91Phil.359(1952).
47
Hirabayashivs.UnitedStates,320U.S.99.
48
Araneta vs. Gatmaitan, 101 Phil. 328 (1957) seealso Justice Isagani A. Cruz, Philippine Political Law,
1984Ed.,pages105to106.
49
AnnexMtothePetition.
50
Pages82to83,PhilippinePoliticalLaw,IsaganiA.Cruz,1989ed.
51
152SCRA730(1987).
52
Victorianovs.ElizaldeRopeWorkersUnion,59SCRA54,66(1974).
53
Supra.
54
Supra.
55
P.D. No. 1955 was issued effective October 15, 1984 providing for the withdrawal of tax exemptions of
privatebusinessenterprisesand/orpersonsengagedinanyeconomicactivity.Itisnotrelevanttothiscase
whichinvolvesagovernmentcorporation.
56
SeeMarch5,1991issueofthePhilippineDailyInquirerandothernewspapersofsamedayaswellas
theMarch10,1991issueoftheManilaBulletin.
57
PleaseseeSec.5ofP.D.No.1931whichprovidethatallotherlaws,decrees,etc.inconsistentwiththe
samedecreeare"therebyrepealed,amendedormodifiedaccordingly."
58
SeeletteropinionofSecretaryofFinanceVicenteJaymedatedMay20,1988.
59
NPCVicePresidentCrisHerrerasaidtheaveragerateincreasetobepassedtoconsumersisP0.23per
year.(PleaseseeDailyInquirerofMarch5,1991"Napocorwantsnewpowerrateincrease").
SARMIENTO,J.,dissenting:
1
No.L19707,August17,1967,20SCRA1056.
2
G.R.No.87479,June4,1990.
3
Supra,7.
4
Supra,5.
5
UnderPresidentialDecreeNo.1931,theMinisterofFinancecouldrestoreexemptions.
6
Decision,42.
7
Please note that under the 1987 Constitution, tax exemptions may be granted alone by Congress
(CONST.,art.VI,sec.28,par.4.)UnlessanduntilCongress,however,repealsExecutiveOrderNo.93,the
Presidentmaycontinuetograntexemptions.
8
At1063.
9
See Comm. on Accountability of Public Officers and Investigations, S. Rpt. 474, lst Cong., 2nd Sess.
(1989),45also13also25also29emphasisintheoriginal.
10
Id.,4also15also25also39,40emphasisintheoriginal.
11
Id.,16emphasisintheoriginal,
12
Id.,24alsoBIRRulingNo.06879(1979),Id.,involvingspecifictaxes.
13
Id.,31.
14
Pres.DecreeNo.938,sec.13:emphasissupplied.
15
At1064.
16
Supra,fn.15.
17
Comm.onAccountabilityofPublicOfficersandInvestigations,S.Rpt474,Id.,61.
18
Decision,47,
19
Supra,51.
20
Supra.
21
SeeMacedavs.EnergyRegulatoryBoard,G.R.Nos.9520305and9511921,December18,1990.
22
DELEONTHEFUNDAMENTALSOFTAXATION55(1980ed.)
23
CONST.,art.VI,sec.28(l).
24
Supra.
25
Pres.DecreeNo.938,supra,sec.10.
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