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88291 MAY 31, 1991

"A taxpayer may question the legality of a law or regulation when it involves illegal
expenditure of public money."

 Senator Ernesto Maceda sought to nullify certain decisions, orders, rulings, and
resolutions of respondents Executive Secretary, SOF, CIR, Commissioner of Customs and
the Fiscal Incentives Review Board FIRB for exempting the National Power Corporation
(NPC) from indirect tax and duties.
 RA 358, RA 6395 and PD 380 expressly grant NPC exemptions from all taxes whether
direct or indirect.
 In 1984, however, PD 1931 and EO 93 withdrew all tax exemptions granted to all
GOCCs including the NPC but granted the President and/or the Secretary of Finance
by recommendation of the FIRB the power to restore certain tax exemptions.
 Pursuant to the latter law, FIRB issued a resolution restoring the tax and duty exemption
privileges of the NPC.
 The actions of the respondents were thus questioned by the petitioner for certiorari,
prohibition and mandamus with prayer for a writ of preliminary injunction and/or restraining
 To which public respondents argued, that petitioner does not have the standing to
challenge the questioned orders and resolution because he was not in any way
affected by such grant of tax exemptions.

Has a taxpayer the capacity to question the legality of the resolution issued by the FIRB
restoring the tax exemptions?

 Yes.
 In this petition it is alleged that petitioner is "instituting this suit in his capacity as a
taxpayer and a duly-elected Senator of the Philippines."
 Public respondent argues that petitioner must show that he has sustained direct injury as
a result of the action and that it is not sufficient for him to have a mere general interest
common to all members of the public.
 The Court however agrees with the petitioner that as a taxpayer he may file the instant
petition following the ruling in Lozada when it involves illegal expenditure of public
 The petition questions the legality of the tax refund to NPC by way of tax credit
certificates and the use of said assigned tax credits by respondent oil companies to pay
for their tax and duty liabilities to the BIR and Bureau of Customs.

Other version:

 Act 120 created NPC as a public corporation to undertake the development of hydraulic
power and the production of power from other sources
 RA 358 granted NPC tax duty and exemption privileges
 RA 6395 revised the charter of NPC, tasking it to carry out the policy of the national
electrification, and provided in detail NPC tax exemptions
 PD 380 specified that NPC’s exemptions include all taxes, etc. imposed “directly or indirectly”
 PD 938 integrated the exemptions in favor of GOCCs including their subsidiaries, however,
empowering the president or minister of finance, upon recommendation of FIRB to restore,
partially or completely, the exemptions withdrawn or revised
 FIRB issued resolution 10-85 restoring the duty and tax exemptions privileges of NPC from
june 1984 to june 1985
 Resolution 1-86 restored such exemption indefinitely effective July 1985
 EO 93 again withdraw the exemption
 FIRB issued Resolution 17-87 restoring NPC’s exemption, which was approved by the
president on October 1987
 Since 1976, oil firms never paid excise or specific and ad valorem taxes for petroleum
products sold and delivered to NPC
 Oil companies started to pay specific and ad valorem taxes on their sales of oil products to
NPC only in 1984
 NPC claimed for a refund (468.58M)
 Only portion thereof, corresponding ot Caltex, was approved and released by way of tax
credit memo. The claim for refund of taxes paid by PetroPhil, Shell and Caltex amounting to
410.58M was denied
 NPC moved for reconsideration, starting that all deliveries of petroleum products to NPC are
tax exempt, regardless of the period of delivery

WON NPC cease to enjoy exemption from indirect tax when PD 938 stated exemption in general

 NPC is a nonprofit public corporation created for the general good and welfare, and
wholly owned by the Philippine gov’t
 From the very beginning of the corporation’s existence, NPC enjoyed preferential tax
treatment “to enable the corporation to pay the indebtedness and obligation” and
effective implementation if the policy enunciated in Sec. 1 of RA 6395
 From the preamble of PD 938, it is evident that its provisions were not intended to be
strictly construed against NPC
 On the contrary, the law mandates that it should be interpreted liberally so as to enhance
the tax exempt status of NPC.
 It is a recognized principle that the rule on strict interpretation does not apply in the case
of exemptions in favor of government political subdivision or instrumentality
 In the case of property owned by the state or a city or other public corporations, the
express exception should not be construed with the same degree of strictness that
applies to exemptions contrary to the policy of the state, since as to such property, “
exception is the rule and taxation is the exception”