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MACEDA V MACARAIG
GR No 88291, May 31, 1991
FACTS:
Commonwealth Act 120 created NAPOCOR as a public corporation to undertake the development of
hydraulic power and the production of power from other sources. RA 358 granted NAPOCOR tax and duty
exemption privileges. RA 6395 revised the charter of the NAPOCOR, tasking it to carry out the policy of the
national electrification and provided in detail NAPOCOR’s tax exceptions. PD 380 specified that
NAPOCOR’s exemption includes all taxes, etc. imposed “directly or indirectly.” PD 938 dated May 27, 1976
further amended the aforesaid provision by integrating the tax exemption in general terms under one
paragraph.
ISSUE:
Whether or not NPC has ceased to enjoy indirect tax and duty exemption with the enactment of PD 938 on
May 27, 1976 which amended PD 380 issued on January 11, 1974
RULING:
No, it is still exempt.
NAPOCOR is a non-profit public corporation created for the general good and welfare, and wholly owned
by the government of the Republic of the Philippines. From the very beginning of the corporation’s
existence, NAPOCOR enjoyed preferential tax treatment “to enable the corporation to pay the indebtedness
and obligation” and effective implementation of the policy enunciated in Section 1 of RA 6395.
From the preamble of PD 938, it is evident that the provisions of PD 938 were not intended to be interpreted
liberally so as to enhance the tax exempt status of NAPOCOR.
It is recognized 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 the exception.”
Facts: Philippine Petroleum Corporation is a business enterprise engaged in the manufacture of lubricated
oil base stocks which is a petroleum product, with its refinery plant situated at Malaya, Pilillia Rizal,
conducting its business activities within the territorial jurisdiction of municipality of Pilillia, Rizal and is in
continuous operation up to the present. PPC owns and maintains an oil refinery including 49 storage tanks
for its petroleum products in Malaya, Pililla, Rizal. Under section 142 of NIRC of 1939, manufactured oils
and other fuels are subject to specific tax. Respondent municipality of Pilillia, Rizal through municipal
council resolution no. 25-s-1974 enacted municipal tax ordinance no. 1-s-1974 otherwise known as “The
Pililla Tax Code Of 1974” on June 14, 1974 which took effect on July 1, 1974. Sections 9 and 10 of the said
ordinance imposed a tax on business, except for those which fixed taxes are provided in the local tax code
on manufacturers, importers, or producers of any article of commerce of whatever kind or nature, including
brewers, distiller, rectifiers, repackers and compounders of liquors distilled spirits and/or wines in
accordance with the schedule found in the local tax code, as well as mayor’s permit sanitary inspection fee
and storage permit fee for flammable, combustible or explosive substances, while section 139 of the
disputed ordinance imposed surcharges and interests on unpaid taxes, fees or charges. Enforcing the
provisions of the above mentioned ordinance, the respondent filed a complaint on April 4, 1986 docketed
as civil case no. 057-T against PPC for the collection of the business tax from 1979 to 1986; storage permit
fees from 1975 to 1986; mayor’s permit fee and sanitary permit inspection fees from 1975 to 1984. PPC,
however, have already paid the last named fees starting 1985.
Issue: Whether or not the Municipality may validly impose taxes on petitioner’s business.
Held: No. While section 2 of PD 436 prohibits the imposition of local taxes on petroleum products, said
decree did not amend sections 19 and 19 (a) of PD 231 as amended by PD 426, wherein the municipality
is granted the right to levy taxes on business of manufacturers, importers, producers of any article of
commerce of whatever kind or nature. A tax on business is distinct from a tax on the article itself. Thus, if
the imposition of tax on business of manufacturers, etc. in petroleum products contravenes a declared
national policy, it should have been expressly stated in PD No. 436.
The exercise by local governments of the power to tax is ordained by the present constitution. To allow the
continuous effectivity of the prohibition set forth in PC no. 26-73 would be tantamount to restricting their
power to tax by mere administrative issuances. Under section 5, article X of the 1987 constitution, only
guidelines and limitations that may be established by congress can define and limit such power of local
governments.
The storage permit fee being imposed by Pilillia’s tax ordinance is a fee for the installation and keeping in
storage of any flammable, combustible or explosive substances. In as much as said storage makes use of
tanks owned not by the Municipality of Pilillia but by petitioner PPC, same is obviously not a charge for any
service rendered by the municipality as what is envisioned in section 37 of the same code.
FELS ENERGY, INC. V THE PROVINCE OF BATANGAS and THE OFFICE OF THE PROVINCIAL
ASSESSOR OF BATANGAS
G.R. No. 168557 February 16, 2007
FACTS
Two consolidated cases were filed by FELS Energy, Inc. (FELS) and National Power Corporation (NPC),
respectively.
NPC entered into a lease contract with Polar Energy, Inc. over diesel engine power barges moored at
Batangas. The contract, denominated as an Energy Conversion Agreement, was for a period of five years
wherein, NPC shall be responsible for the payment of:
(a) all taxes, import duties, fees, charges and other levies imposed by the National Government
(b) all real estate taxes and assessments, rates and other charges in respect of the Power Barges
Subsequently, Polar Energy, Inc. assigned its rights under the Agreement to FELS. Thereafter, FELS
received an assessment of real property taxes on the power barges. The assessed tax, which likewise
covered those due for 1994, amounted to P56,184,088.40 per annum. FELS referred the matter to NPC,
reminding it of its obligation under the Agreement to pay all real estate taxes. It then gave NPC the full
power and authority to represent it in any conference regarding the real property assessment of the
Provincial Assessor.
NPC sought reconsideration of the Provincial Assessor’s decision to assess real property taxes on the
power barges. However, the motion was denied. The Local Board of Assessment Appeals (LBAA) ruled
that the power plant facilities, while they may be classified as movable or personal property, are
nevertheless considered real property for taxation purposes because they are installed at a specific location
with a character of permanency.
FELS appealed the LBAA’s ruling to the Central Board of Assessment Appeals (CBAA). The CBAA
rendered a Decision finding the power barges exempt from real property tax.
It was later reversed by the cbaa upon reconsideration and affirmed by the CA
ISSUE
Whether power barges, which are floating and movable, are personal properties and therefore, not subject
to real property tax.
RULING
No. Article 415 (9) of the New Civil Code provides that "[d]ocks and structures which, though floating, are
intended by their nature and object to remain at a fixed place on a river, lake, or coast" are considered
immovable property. Thus, power barges are categorized as immovable property by destination, being in
the nature of machinery and other implements intended by the owner for an industry or work which may be
carried on in a building or on a piece of land and which tend directly to meet the needs of said industry or
work.
The findings of the LBAA and CBAA that the owner of the taxable properties is petitioner FELS is the entity
being taxed by the local government. As stipulated under the Agreement:
OWNERSHIP OF POWER BARGES. POLAR shall own the Power Barges and all the fixtures, fittings,
machinery and equipment on the Site used in connection with the Power Barges which have been supplied
by it at its own cost. POLAR shall operate, manage and maintain the Power Barges for the purpose of
converting Fuel of NAPOCOR into electricity.
It follows then that FELS cannot escape liability from the payment of realty taxes by invoking its exemption
in Section 234 (c) of R.A. No. 7160,
…the law states that the machinery must be actually, directly and exclusively used by the government
owned or controlled corporation;
The agreement POLAR undertakes that until the end of the Lease Period, it will operate the Power Barges
to convert such Fuel into electricity. Therefore, FELS shall be liable for the realty taxes and not the NPC
who is not actually, directly and exclusively using the same. It is a basic rule that obligations arising from a
contract have the force of law between the parties
PETRON vs. TIANGCO G.R. No. 158881 April 16, 2008 Taxation, LGC
JANUARY 16, 2018
FACTS:
Petron maintains a depot or bulk plant at the Navotas Fishport Complex, and through that depot, it has
engaged in the selling of diesel fuels to vessels used in commercial fishing in and around Manila Bay.
Petron received a letter from the office of Navotas Mayor, respondent Toby Tiangco, wherein the
corporation was assessed taxes relative to the figures covering sale of diesel, stating the total amount due
of P6,259,087.62, a figure derived from the gross sales of the depot from 1997 to 2001. The computation
sheets that were attached to the letter made reference to Ordinance 92-03, or the New Navotas Revenue
Code (Navotas Revenue Code), though such enactment was not cited in the letter itself.
Petron filed with the Malabon RTC a Complaint for Cancellation of Assessment for Deficiency Taxes with
Prayer for the Issuance of a Temporary Restraining Order (TRO) and/or Preliminary Injunction. The RTC
rendered its Decision dismissing Petron’s complaint and ordering the payment of the assessed amount.
Petron has opted to assail the RTC Decision directly before this Court since the matter at hand involves
pure questions of law, a characterization conceded by the RTC Decision itself. Particularly, the controversy
hinges on the correct interpretation of Section 133(h) of the LGC, and the applicability of Article 232 (h) of
the IRR.
Section 133(h) of the LGC reads as follows:
Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. – Unless otherwise
provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and Barangays shall
not extend to the levy of the following:
xxx
(h) Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes,
fees or charges on petroleum products;
ISSUE:
Whether a local government unit is empowered under the Local Government Code to impose business
taxes on persons or entities engaged in the sale of petroleum products.
RULING:
Evidently, Section 133 prescribes the limitations on the capacity of local government units to exercise their
taxing powers otherwise granted to them under the LGC. Apparently, paragraph (h) of the Section mentions
two kinds of taxes which cannot be imposed by local government units, namely: excise taxes on articles
enumerated under the NIRC; and taxes, fees or charges on petroleum products.
The power of a municipality to impose business taxes is provided for in Section 143 of the LGC. Under the
provision, a municipality is authorized to impose business taxes on a whole host of business activities.
Suffice it to say, unless there is another provision of law which states otherwise, Section 143, broad in
scope as it is, would undoubtedly cover the business of selling diesel fuels, or any other petroleum product
for that matter.
As earlier observed, Section 133(h) provides two kinds of taxes which cannot be imposed by local
government units: excise taxes on articles enumerated under the NIRC, as amended; and taxes, fees or
charges on petroleum products. There is no doubt that among the excise taxes on articles enumerated
under the NIRC are those levied on petroleum products, per Section 148 of the NIRC.
The power of a municipality to impose business taxes derives from Section 143 of the Code that specifically
enumerates several types of business on which it may impose taxes, including manufacturers, wholesalers,
distributors, dealers of any article of commerce of whatever nature; those engaged in the export or
commerce of essential commodities; retailers; contractors and other independent contractors; banks and
financial institutions; and peddlers engaged in the sale of any merchandise or article of commerce. This
obviously broad power is further supplemented by paragraph (h) of Section 143 which authorizes the
sanggunian to impose taxes on any other businesses not otherwise specified under Section 143 which the
sanggunian concerned may deem proper to tax.
This ability of local government units to impose business or other local taxes is ultimately rooted in the 1987
Constitution. Section 5, Article X assures that [e]ach local government unit shall have the power to create
its own sources of revenues and to levy taxes, fees and charges, though the power is subject to such
guidelines and limitations as the Congress may provide. There is no doubt that following the 1987
Constitution and the Code, the fiscal autonomy of local government units has received greater affirmation
than ever. Previous decisions that have been skeptical of the viability, if not the wisdom of reposing fiscal
autonomy to local government units have fallen by the wayside.
Respondents cite our declaration in City Government of San Pablo v. Reyes that following the 1987
Constitution the rule thenceforth in interpreting statutory provisions on municipal fiscal powers, doubts will
have to be resolved in favor of municipal corporations. Such policy is also echoed in Section 5(a) of the
Code, which states that any provision on a power of a local government unit shall be liberally interpreted in
its favor, and in case of doubt, any question thereon shall be resolved in favor of devolution of powers and
of the lower local government unit. But somewhat conversely, Section 5(b) then proceeds to assert that [i]n
case of doubt, any tax ordinance or revenue measure shall be construed strictly against the local
government unit enacting it, and liberally in favor of the taxpayer. And this latter qualification has to be
respected as a constitutionally authorized limitation which Congress has seen fit to provide. Evidently, local
fiscal autonomy should not necessarily translate into abject deference to the power of local government
units to impose taxes.