G.R. No. 88291 June 8, 1993

MACEDA taxpayer, senator VS. MACARAIG Executive Secretary

(Original Decision - promulgated on May 31, 1991)

(Subject case – Motion for Reconsideration)

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. On June 4, 1949, Republic Act No. 357 was enacted authorizing the President of the Philippines (Pres. Quirino) to guarantee, absolutely and unconditionally, as primary obligor, the payment of any and all NPC loans.

He was also authorized to contract on behalf of the NPC with the International Bank for Reconstruction and Development (IBRD) for NPC loans for the accomplishment of NPC's corporate objectives and for the reconstruction and development of the economy of the country. It was expressly stated that any such loan or loans shall be exempt from taxes, duties, fees, imposts, charges, contributions and restrictions of the Republic of the Philippines, its provinces, cities and municipalities.

On June 2, 1954, R.A. No. 987 was enacted specifically to withdraw NPC's tax exemption for real estate taxes and on September 10, 1971, R.A. No. 6395 was enacted revising the charter of the NPC, C.A. No. 120, as amended. A new section was added to the charter, now known as Section 13, R.A .No. 6395, which declares the non-profit character and tax exemptions of NPC.

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 declared exempt from the payment of all taxes, duties, fees, imposts, charges costs and service fees in any court or administrative proceedings.

It is also exempt from all income taxes, franchise taxes and realty taxes to be paid to the National Government including import duties, compensating taxes and advanced sales tax, and wharfage fees on import of foreign goods and all taxes, duties, fees, imposts on all petroleum products used by the Corporation in the generation, transmission, utilization, and sale of electric power.

On January 22, 1974, P.D. No. 380 was issued giving extra powers to the NPC to enable it to fulfill its role under aforesaid P.D. No. 40. PD 380 specified that NAPOCORs exemption includes all taxes, etc. imposed directly or indirectly.

PD 938 integrated the exemptions in favor of GOCCs including their subsidiaries; however, empowering the President or the Minister of Finance, upon recommendation of the Fiscal Incentives Review Board (FIRB) to restore, partially or completely, the exemptions withdrawn or revised. The FIRB issued Resolution 10-85 restoring the duty and tax exemptions privileges of NAPOCOR for period 11 June 1984- 30 June 1985. Resolution 1-86 restored such exemption indefinitely effective July 1, 1985.

EO 93 withdrew the exemption. FIRB issued Resolution 17-87 restoring NAPOCORs exemption .Since 1976, oil firms never paid excise or specific and ad valorem taxes for petroleum products sold and delivered to NAPOCOR. Oil companies started to pay specific and ad valorem taxes on their sales of oil products to NAPOCOR only in 1984.

ISSUE

Whether or not the NAPOCOR is no longer subject to tax exemption from indirect tax when PD 938 stated the exemption in general term.

HELD:

NEGATIVE.

Petitioner contends that P.D. No. 938 repealed the indirect tax exemption of NPC as the phrase "all forms of taxes etc.," in its section 10, amending Section 13, R.A. No. 6395, as amended by P.D. No. 380, does not expressly include "indirect taxes (Indirect Tax - tax is imposed upon goods BEFORE reaching the consumer who ultimately pays for it, not as a tax, but as a part of the purchase price. E.g. the internal revenue indirect taxes (specific tax, percentage taxes, (VAT) and the tariff and customs indirect taxes (import duties, special import tax and other dues).

Supreme Court ruled that NPC laws show that it has been the lawmaker's intention that the NPC was to be completely tax exempt from all forms of taxes — direct and indirect. And when the NPC was authorized to contract with the IBRD for foreign financing, any loans obtained were to be completely tax exempt.

After the NPC was authorized to borrow from other sources of funds — aside issuance of bonds — it was again specifically exempted from all types of taxes "to facilitate payment of its indebtedness." Even when the ceilings for domestic and foreign borrowings were periodically increased, the tax exemption privileges of the NPC were maintained.

NPC's tax exemption from real estate taxes was, however, specifically withdrawn by Rep. Act No. 987 but the exemption was, however, restored by R.A. No. 6395. In fact P.D. No. 380 added phrase "directly or indirectly" to said Section 13(d).

Furthermore SC held that both presidential decrees were made by the same person, it would have been very easy for him to retain the same or similar language used in P.D. No. 380 P.D. No. 938 if his intention were to preserve the indirect tax exemption of NPC. One common theme in all these laws is that the NPC must be enable to pay its indebtedness which, as of P.D. No. 938, was P12 Billion in total domestic indebtedness, at any one time, and U$4 Billion in total foreign loans at any one time. The NPC must be and has to be exempt from all forms of taxes if this goal is to be achieved.