16 Maceda v. Macaraig

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2/26/23, 7:39 PM [ G.R. No. 88291.

May 31, 1991 ]

274 Phil. 1060

EN BANC
[ G.R. No. 88291. May 31, 1991 ]
ERNESTO M. MACEDA, PETITIONER, VS. HON. CATALINO
MACARAIG, JR., IN HIS CAPACITY AS EXECUTIVE SECRETARY,
OFFICE OF THE PRESIDENT; HON. VICENTE R. JAYME, IN HIS
CAPACITY AS SECRETARY OF THE DEPARTMENT OF FINANCE;
HON. SALVADOR MISON, IN HIS CAPACITY AS COMMISSIONER,
BUREAU OF CUSTOMS; HON. JOSE U. ONG, IN HIS CAPACITY AS
COMMISSIONER OF INTERNAL REVENUE; NATIONAL POWER
CORPORATION; THE FISCAL INCENTIVES REVIEW BOARD;
CALTEX (PHILS.) INC.; PILIPINAS SHELL PETROLEUM
CORPORATION; PHILIPPINE NATIONAL OIL CORPORATION; AND
PETROPHIL CORPORATION, RESPONDENTS.
DECISION

GANCAYCO, J.:

This petition seeks to nullify certain decisions, orders, rulings, and resolutions of respondents
Executive Secretary, Secretary of Finance, Commissioner of Internal Revenue, Commissioner
of Customs and the Fiscal Incentives Review Board (FIRB) for exempting the National Power
Corporation (NPC) from indirect tax and duties.

The relevant facts are not in dispute.

On November 3, 1936, Commonwealth Act No. 120 created the NPC as a public corporation to
undertake the development of hydraulic power and the production of power from other sources.
[1]

On June 4, 1949, Republic Act No. 358 granted NPC tax and duty exemption privileges under -

"Sec. 2. To facilitate payment of its indebtedness, the National Power Corporation


shall be exempt from all taxes, duties, fees, imposts, charges and restrictions of the
Republic of the Philippines, its provinces, cities and municipalities."

On September 10, 1971, Republic Act No. 6395 revised the charter of the NPC wherein
Congress declared as a 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 hydro
electric generation of power and the production of electricity from nuclear, geothermal and
other sources, as well as the transmission of electric power on a nationwide basis.[3] Being a
non-profit corporation, Section 13 of the law provided in detail the exemption of the NPC from
all taxes, duties, fees, imposts and other charges by the government and its instrumentalities.

On January 22, 1974, Presidential Decree No. 380 amended section 13, paragraphs (a) and (d)
of Republic Act 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 Decree No. 938 dated May 27, 1976 further
amended the aforesaid provision by integrating the tax exemption in general terms under one
paragraph.

On June 11, 1984, Presidential Decree No. 1931 withdrew all tax exemption privileges granted
in favor of government-owned or controlled corporations including their subsidiaries.[4]

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However, said law empowered the President and/or the then Minister of Finance, upon
recommendation of the FIRB, to restore, partially or totally, the exemption withdrawn, or
otherwise revise the scope and coverage of any applicable tax and duty.

Pursuant to said law, on February 7, 1985, the FIRB issued Resolution No. 10-85 restoring the
tax and duty exemption privileges of NPC from June 11, 1984 to June 30, 1985.  On January 7,
1986, the FIRB issued resolution No. 1-86 indefinitely restoring the NPC tax and duty
exemption privileges effective July 1, 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 1955 but it gave the authority to FIRB to restore, revise the
scope and prescribe the date of effectivity of such tax and/or duty exemptions.

On June 24, 1987 the FIRB issued Resolution No. 17-87 restoring NPC's tax and duty
exemption privileges effective March 10, 1987.  On October 5, 1987, the President, through
respondent Executive Secretary Macaraig, Jr., confirmed and approved FIRB Resolution No.
17-87.

As alleged in the petition, the following are the background facts:

The following are the facts relevant to NPC's questioned claim for refunds of taxes and duties
originally paid by respondents Caltex, Petrophil and Shell for specific and ad valorem taxes to
the BIR; and for Customs 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 Senate on April 21, 1989 (copy attached hereto as Annex "A") and are
identified in quotation marks:

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 government-
owned or-controlled corporations, the oil firms never paid excise or specific and ad
valorem taxes for petroleum products sold and delivered to the NPC.  This non-
payment of taxes therefore spanned a period of eight (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 Internal Revenue (DCIR) Romulo Villa to the NPC dated October 29,
1980 granting blanket authority to the NPC to purchase petroleum products from the oil
companies without payment of specific tax (copy of this letter is attached hereto as petitioner's
Annex "B").

2. The oil companies started to pay specific and ad valorem taxes on their sales of oil
products to NPC only after the promulgation of P.D. No. 1931 on June 11, 1984,
withdrawing all exemptions granted in favor of government-owned or-controlled
corporations and empowering the FIRB to recommend to the President or to the
Minister of Finance the restoration of the exemptions which were withdrawn. 
"Specifically, Caltex paid the total amount of P58,020,110.79 in specific and ad
valorem taxes for deliveries of petroleum products to NPC covering the period from
October 31, 1984 to April 27, 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 billings to NPC always included both
duties and taxes.  (Caturla, tsn, Oct. 10, 1988, pp. 1-5)" (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 component being valued at
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P58,020,110.79." (par. 25, p. 8, Annex "A").

5.  "Fiscal Incentives Review Board (FIRB) Resolution 10-85, dated February 7,
1985, certified true copy of which is hereto attached as Annex "C", restored the tax
exemption privileges of NPC effective retroactively to June 11, 1984 up to June 30,
1985.  The first paragraph of said resolution reads as follows:

"1. Effective June 11, 1984, the tax and duty exemption privileges
enjoyed by the National Power Corporation under C.A. No. 120, as
amended, are restored up to June 30, 1985."

Because of this restoration (Annex "G") the NPC applied on September 11, 1985
with the BIR for a "refund of Specific Taxes paid on petroleum products  in the total
amount of P58,020,110.79." (par. 26, pp. 8-9, Annex "A")

6. In a letter to the president of the NPC dated May 8, 1985 (copy attached as
petitioner's Annex "D"), Acting BIR Commissioner Ruben Ancheta declared:

"FIRB Resolution No. 10-85 serves as sufficient basis to allow NPC to


purchase petroleum products from the oil companies free of specific and
ad valorem taxes, during the period in question."

The "period in question" is June 11, 1984 to June 30, 1985.

7.  "On June 6, 1985, - The president of the NPC, Mr. Gabriel Itchon, wrote Mr.
Cesar Virata, Chairman of the FIRB (Annex "E"), requesting "the FIRB to resolve
conflicting rulings on the tax exemption privileges of the National Power
Corporation (NPC)." These rulings involve FIRB Resolutions No. 1-84 and 10-85.
(par. 40, p. 12, Annex "A")

8.  In a letter to the President of NPC (Annex "F"), dated June 26, 1985, Minister
Cesar Virata confirmed the ruling of May 8, 1985 of Acting BIR commissioner
Ruben Ancheta. (par. 41, p. 12, Annex "A")

9.  On October 22, 1985, however, under BIR Ruling No. 186-85, addressed to Hanil
Development Co., Ltd., a Korean contractor of NPC for its infrastructure projects,
certified true copy of which is attached hereto as petitioner's Annex "E", BIR Acting
Commissioner Ruben Ancheta ruled:

"In Reply please be informed that after a re-study of Section 13, R.A.
6395, as amended by P.D. 938, this Office is of the opinion, and so holds,
that the scope of the tax exemption privilege enjoyed by NPC under said
section covers only taxes for which it is directly liable and not on taxes
which are only shifted to it.  (Phil. Acetylene vs. C.I.R. et al., G.R. L-
19707, Aug. 17, 1967) Since contractor's tax is directly 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 lack of legal basis."
(Annex "H") (italics added)

Said BIR ruling clearly states that NPC's exemption privileges covers (sic) only
taxes for which it is directly liable and does not cover taxes which are only shifted to
it or for indirect taxes.  The BIR, through Ancheta, reversed its previous position of
May 8, 1985 adopted by Ancheta himself favoring NPC's indirect tax exemption
privilege.

10.  Furthermore, "in a BIR Ruling, unnumbered," dated June 30, 1986, "addressed
to Caltex (Annex "F"), the BIR Commissioner declared that PAL's tax exemption is
limited to taxes for which PAL is directly liable, and that the payment of specific and
ad valorem taxes on petroleum products is a direct liability of the manufacturer or
producer thereof".  (par. 51, p. 15, Annex "A")

11.  "On January 7, 1986, FIRB Resolution No. 1-86 was issued restoring NPC's tax
exemptions retroactively from July 1, 1985 to an indefinite period," certified true
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copy of which is hereto attached as petitioner's Annex "H".

12.  NPC's total refund claim was P468.58 million but only a portion thereof i.e. the
P58,020,110.79 (corresponding to Caltex) was approved and released by way of a
Tax Credit Memo (Annex "Q") dated July 7, 1986, certified true copy of which [is]
attached hereto as petitioner's Annex "F," which was assigned by NPC to Caltex. 
BIR Commissioner Tan approved the Deed of Assignment on July 30, 1987, certified
true copy of which is hereto attached as petitioner's Annex "G").  (pars. 26, 52, 53,
pp. 9 and 15, 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 credit against its specific tax payments
for two (2) months.  (per memorandum dated July 28, 1986 of DCIR Villa, copy
attached as petitioner Annex "G")

13.  As a result of the favorable action taken by the BIR in the refund of the P58.0
million tax credit assigned to Caltex, the NPC reiterated its request for the release of
the balance of its pending refunds of taxes paid by respondents Petrophil, Shell and
Caltex covering the period from June 11, 1984 to early part of 1986 amounting to
P410.58 million.  (The claim of the first two (2) oil companies covers the period
from June 11, 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
152-86 (certified true copy of which is attached hereto as petitioner's Annex "I"). 
The BIR ruled that NPC's tax free privilege to buy petroleum products covered only
the period from June 11, 1984 up to June 30, 1985.  It further declared that, despite
FIRB No. 1-86, NPC had already lost its tax and duty exemptions because it only
enjoys special privilege for taxes for which it is directly liable.  This ruling, in effect,
denied the P410-Million tax refund application of NPC." (par. 28, p. 9, Annex "A")

14.  "NPC filed a motion for reconsideration on September 18, 1986.  Until now the
BIR has not resolved the motion.  (Benigna, II-3, Oct. 17, 1988, p. 2; Memorandum
for the Complainant, 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 products to NPC are tax exempt,
regardless of the period of delivery.

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 Fiscal Incentives Review Board and Other
Purposes".

17.  On June 24, 1987, the FIRB issued Resolution No. 17-87, which restored NPC's
tax exemption privilege 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 which is hereto
attached and made a part hereof as Annex "K".

18.  On August 6, 1987, the Hon. Sedfrey A. Ordoñez, Secretary of Justice, issued
Opinion No. 77, series of 1987, opining that "the power conferred upon Fiscal
Incentives Review Board by Section 2-(a), (b), (c) and (d) of Executive Order No. 93
constitute undue delegation of legislative power and, therefore, [are]
unconstitutional," a copy of which is hereto attached and made a part hereof as
Petitioner's Annex "L".

19.  On October 5, 1987, respondent Executive Secretary Macaraig, Jr. in a


Memorandum to the Chairman of the FIRB, a certified true copy of which is hereto
attached and made a part hereof as petitioner's Annex "M," confirmed and approved
FIRB Res. No. 17-87 dated June 24, 1987, allegedly pursuant to Sections 1 (f) and 2
(e) of Executive Order No. 93.
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20.  "Secretary Vicente Jayme in a reply dated May 20, 1988 to Secretary Catalino
Macaraig, who by letter 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..." declared that "NPC under
the provisions of its Revised Charter retains its exemption from duties and taxes
imposed on the petroleum products purchased locally and used for the generation of
electricity," a certified true copy of which is attached hereto as petitioner's Annex
"N". (par. 30, pp. 9-10, Annex "A")

21.  Respondent Executive Secretary came up likewise with a confirmatory letter


dated June 15, 1988 but without the usual official form of "By the Authority of the
President," a certified true copy of which is hereto attached and made a part hereof
as Petitioner's Annex "O".

22.  The actions of respondents Finance Secretary and the Executive Secretary are
based on the RESOLUTION No. 17-87 of FIRB, restoring the tax and duty
exemption of the respondent NPC pertaining to its domestic purchases of petroleum
products (petitioner's Annex "K", supra).

23.  "Subsequently, the newspapers particularly, the Daily Globe, in its issue of July
11, 1988 reported that the Office of the President and the Department of Finance had
ordered the BIR to refund the tax payments of the NPC amounting to P1.58 Billion
which includes the P410 Million Tax refund already rejected by BIR Commissioner
Tan, Jr., in his BIR Ruling No. 152-86.  And in a letter dated July 28, 1988 of
Undersecretary Marcelo B. Fernando to BIR Commissioner Tan, Jr. the P1.58
Billion tax refund was ordered released to NPC.", (par. 31, p. 10, Annex "A")

24.  On August 8, 1988, petitioner “wrote both Undersecretary Fernando and


Commissioner Tan requesting them to hold in abeyance the release of the P1.58
billion and await the outcome of the investigation in regard to Senate Resolution No.
227," copies attached as Petitioner's Annexes "P" and "P-1" (par. 32, p. 10, Annex
"A").

Reacting to this letter of the petitioner, Undersecretary Fernando wrote


Commissioner Tan of the BIR dated August, 1988 requesting him to hold in
abeyance the release of the tax refunds to NPC until after the termination of the Blue
Ribbon investigation.

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 petroleum products processed from the
crude oil; and same is sold to NPC.  After the sale, NPC applies for tax credit
covering the duties and ad valorem exemption under its Charter.  Such applications
are processed by the Bureau of Customs and the corresponding tax credit certificates
are issued in favor of NPC which, in turn assigns it to the oil firm that imported the
crude oil.  These certificates are eventually used by the assignee-oil firms in payment
of their other duty and tax liabilities with the Bureau of Customs." (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
conducted an investigation on this matter as mandated by Senate Resolution No. 227
of which the herein petitioner was the sponsor, a much bigger figure was actually
refunded to NPC representing duties and ad valorem taxes paid to the Bureau of
Customs by the oil companies on the importation of crude oil from 1979 to 1985.

26.  Meantime, petitioner, as member of the Philippine Senate introduced P. S. Res.


No. 227, entitled:

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"Resolution Directing the Senate Blue Ribbon Committee, In Aid of


Legislation, To Conduct a Formal and Extensive Inquiry into the
Reported Massive Tax Manipulations and Evasions by Oil Companies,
particularly Caltex (Phils.) Inc., Pilipinas Shell and Petrophil, Which
Were Made Possible By Their Availing of the Non-Existing 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 Imported Crude Oil
Purportedly for the Use of the National Power Corporation, the Non-
Payment of Surtax on Windfall Profits from Increases in the Price of Oil
Products in August 1987 amounting  Maybe to as Much as P1.2 Billion
Surtax Paid by Them in 1984 and For Other Purposes".

27.  Acting on the above Resolution, the Blue Ribbon Committee of the Senate did
conduct a lengthy formal inquiry on the matter, calling all parties interested to the
witness stand including representatives from the different oil companies, and in due
time submitted its Committee Report No. 474 . . ..-  The Blue Ribbon Committee
recommended the following courses of action.

"1.  Cancel its approval of the tax refund of P58,020,110.70 to the


National Power Corporation (NPC) and its approval of Tax Credit memo
covering said amount (Annex "P" hereto), dated July 7, 1986, and cancel
its approval of the Deed of Assignment (Annex "Q" hereto) by NPC to
Caltex, dated July 28, 1986, and collect from Caltex its tax liabilities
which were erroneously treated as paid or settled with the use of the tax
credit certificate that NPC assigned to said firm.:

"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,
and therefore, null and void.  Such refund was a nullity right
from the beginning.  Hence, it never transferred any right in
favor of NPC.

"2.  Stop the processing and/or release of P1.58 billion tax refund to NPC
and/or oil companies on the same ground that the NPC, since May 27,
1976 up to June 17, 1987 was never granted any indirect tax exemption. 
So, the P1.58 billion represent taxes legally and properly paid by the oil
firms.

"3.  Start collection actions of specific or excise and ad valorem taxes due
on petroleum products sold to NPC from May 27, 1976 (promulgation of
PD 938) to June 17, 1987 (issuance of EO 195).

"B.  For the Bureau of Customs (BOC) to do the following:

"1.  Start recovery actions on the illegal duty refunds or duty credit certificates for
purchases of petroleum products by NPC and allegedly granted under the NPC
charter covering the years 1978-1988 . . .".

28.  On March 30, 1989, acting on the request of respondent Finance Secretary for
clearance to direct the Bureaus of Internal Revenue and of Customs to proceed with
the processing of claims for tax credits/refunds of the NPC, respondent Executive
Secretary rendered his ruling, the dispositive portion of which reads:

"IN VIEW OF THE FOREGOING, the clearance is hereby GRANTED and,


accordingly, unless restrained by proper authorities, that department and/or its line-
tax bureaus may now proceed with the processing of the claims of the National
Power Corporation for duty and tax free exemption and/or tax credits/refunds, if
there be any, in accordance with the ruling of that Department dated May 20, 1988,
as confirmed by this Office on June 15, 1988.”  . . . .[5]

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Hence, this petition for certiorari, prohibition and mandamus with prayer for a writ
of preliminary injunction and/or restraining order, praying among others that:

"1.  Upon filing of this petition, a temporary restraining order forthwith be issued
against respondent FIRB, Executive Secretary Macaraig, and Secretary of Finance
Jayme restraining them and other persons acting for, under, and in their behalf from
enforcing their resolution, orders and ruling, to wit:

A. FIRB Resolution No. 17-87 dated June 24, 1987 (petitioner's Annex
"K");

B. Memorandum-Order of the Office of the President dated October 5,


1987 (petitioner's Annex "M");

C. Order of the Executive Secretary dated June 15, 1988 (petitioner’s


Annex "O");

D. Order of the Executive Secretary dated March 30, 1989 (petitioner's


Annex "Q"); and

E. Ruling of the Finance Secretary dated May 20, 1988 (petitioner's


Annex "N").

2. Said temporary restraining order should also include respondents Commissioners


of Customs Mison and Internal Revenue Ong restraining them from processing and
releasing any pending claim or application by respondent NPC for tax and duty
refunds.

3. Thereafter, and during the pendency of this petition, to issue a writ or preliminary
injunction against above-named respondents and all persons acting for and in their
behalf.

4. A decision be rendered in favor of the petitioner and against the respondents:

A. Declaring that respondent NPC did not enjoy indirect tax


exemption privilege since May 27, 1976 up to the present;

B. Nullifying and setting aside the fallowing:

1. FIRB Resolution No. 17-87 dated June 24, 1987


(petitioner's Annex "K");

2. Memorandum-Order of the Office of the President


dated October 5, 1987 (petitioner's Annex "M");

3. Order of the Executive Secretary dated June 15,


1988 (petitioner's Annex "O");

4. Order of the Executive Secretary dated March 30,


1989 (petitioner's Annex "Q");

5. Ruling of the Finance Secretary dated May 20,


1988 (petitioner’s Annex "N");

6. Tax Credit memo dated July 7, 1986 issued to


respondent NPC representing tax refund for
P58,020,110.79 (petitioner's Annex "F");

7. Deed of Assignment of said tax credit memo to


respondent Caltex dated July 30, 1987 (petitioner's
Annex "G");

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8. Application of the assigned tax credit of Caltex in


payment of its tax liabilities with the Bureau of
Internal Revenue; and

9. Illegal duty and tax refunds issued by the Bureau


of Customs to respondent NPC by way of tax
credit certificates from 1979 up to the present.
C. Declaring as illegal and null and void the pending claims for tax
and duty refunds by respondent NPC with the Bureau of Customs
and the Bureau of Internal Revenue;

D. Prohibiting respondents Commissioner of Customs and


Commissioner of Internal Revenue from enforcing the above-
questioned resolution, orders and ruling of respondents Executive
Secretary, Secretary of Finance, and FIRB by processing and
releasing respondent NPC's tax and duty refunds;

E. Ordering the respondent Commissioner of Customs to deny as


being null and void the pending claims for refund of respondent
NPC with the Bureau of Customs covering the period from 1985 to
the present; to 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 respond­‐
ents Caltex, Shell and PNOC all the amounts appearing in said tax
credit certificates which were used to settle their duty and tax
liabilities with the Bureau of Customs.

F. Ordering respondent Commissioner of Internal Revenue to deny as


being null and void the pending claims for refund of respondent
NPC with the Bureau of Internal Revenue covering the period from
June 11, 1984 to June 17, 1987.

PETITIONER prays for such other relief and remedy as may be just and equitable in
the premises."[6]

The issues raised in the petition are the following:

"To determine whether respondent NPC is legally entitled to the questioned tax and
duty refunds, this Honorable Court must resolve the following issues:

Main issue -

Whether or not the respondent NPC has ceased to enjoy indirect tax and duty
exemption with the enactment of P.D. No. 938 on May 27, 1976 which amended
P.D. No. 380, issued on January 22, 1974.

Corollary issues -

1. Whether or not FIRB Resolution No. 10-85 dated February 7, 1985 which restored
NPC's tax exemption privilege effective June 11, 1984 to June 30, 1985 and FIRB
Resolution No. 1-86 dated January 7, 1986 restoring NPC's tax exemption privilege
effective July 1, 1985 included the restoration of indirect tax exemption to NPC; and

2. Whether or not FIRB could validly and legally issue Resolution no. 17-87 dated
June 24, 1987 which restored NPC's tax exemption privilege effective March 10,
1987; and if said Resolution was validly issued, the nature and extent of the tax
exemption privilege restored to NPC."[7]

In a resolution dated June 6, 1989, the Court, without giving due course to the petition, required
respondents to comment thereon, within ten (10) days from notice.  The respondents having
submitted their comment, on October 10, 1989 the Court required petitioner to file a
consolidated reply to the same.  After said reply was filed by petitioner on November 15, 1989
the Court gave due course to the petition, considering the comments of respondents as their
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answer to the petition, and requiring the parties to file simultaneously their respective
memoranda within twenty (20) days from notice.  The parties having submitted their respective
memoranda, the petition was deemed submitted for resolution.

First the preliminary issues.

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 duly-elected Senator of the Philippines." Public respondent argues that petitioner must show
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.[8]

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 money.  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.

Assuming petitioner has the personality to file the petition, public respondents also allege that
the proper remedy for petitioner is an appeal to the Court of Tax Appeals under Section 7 of
R.A. No. 125 instead of this petition.  However Section 11 of said law provides -

"Sec. 11 Who may appeal; effect of appeal - Any person, association or corporation
adversely affected by a 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 Appeals within
thirty days after receipt of such decision or ruling."

From the foregoing, it is only the taxpayer adversely affected by a decision or ruling of the
Commissioner of Internal Revenue, the Commissioner of Customs or any provincial or city
Board of Assessment Appeal who may appeal to the Court of Tax Appeals.  Petitioner does not
fall under this category.

Public respondents also contend that mandamus does not lie to compel the Commissioner of
Internal Revenue to 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 Commissioners of Internal Revenue and Customs when the exercise of discretion is
tainted with arbitrariness and grave abuse as to go beyond statutory authority.[10]

Public respondents then assert that a writ of prohibition is not proper as its function is to prevent
an unlawful exercise of jurisdiction[11] or to prevent the oppressive exercise of legal authority.
[12] Precisely, petitioner questions the lawfulness of the acts of public respondents in this case.

Now to the main issue.

It may be useful to make a distinction, for the purpose of this disposition, between a direct tax
and an indirect tax.  A direct tax is a tax for which a taxpayer is directly liable on the transaction
or business it engages in.  Examples are the custom duties and ad valorem taxes paid by the oil
companies to the Bureau of Customs for their importation of crude oil, and the specific and ad
valorem taxes they pay to the Bureau of Internal Revenue after converting the crude oil into
petroleum products.

On the other hand, "indirect taxes are taxes primarily paid by persons who can shift the burden
upon someone else."[13] For example, the excise and ad valorem taxes that oil companies pay to
the Bureau of Internal Revenue upon removal of petroleum products from its refinery can be
shifted to its buyer, like the NPC, by adding them to the "cash" and/or "selling price."

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The main thrust of the petition is that under the latest amendment to the NPC charter by
Presidential Decree No. 938, the exemption of NPC from indirect taxation was revoked and
repealed.  While petitioner concedes that NPC enjoyed broad exemption privileges from both
direct and indirect taxes on the petroleum products it used, under Section 13 of Republic Act
No. 6395 and more so under Presidential Decree No. 380, however, by the deletion of 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 withdrawn by P. 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 cites Philippine Aceytelene Co. Inc. vs. Commissioner of
Internal Revenue.[14] Petitioner emphasizes the principle in taxation that the exception
contained in the tax statutes must be strictly construed against the one claiming the 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 "all forms of taxes" and "in lieu of all
taxes" covers only taxes for which the taxpayer is directly liable.[16]

On the corollary issues.  First, FIRB Resolution Nos. 10-85 and 1-86 issued under Presidential
Decree No. 1931, the relevant provision of which are to wit:

"P. D. No. 1931 provides as follows:

"SECTION 1. The provisions of special or general law to the contrary


notwithstanding, all exemptions from the payment of duties, taxes … heretofore
granted in favor of government-owned or controlled corporations ... are hereby
withdrawn.  (Italics supplied.)

"SECTION 2. The President of the Philippines and/or the Minister of Finance, upon
the recommendation of the Fiscal Incentives Review Board... is hereby empowered
to restore, partially or totally, the exemptions withdrawn by Section 1 above ..."
(Italics supplied.)

The relevant provisions of FIRB resolution Nos. 10-85 and 1-86 are the following:

Resolution No. 10-85

"BE IT RESOLVED AS IT IS HEREBY RESOLVED, That:

"1.  Effective June 11, 1984, the tax and duty exemption privileges enjoyed by the
National Power Corporation under C.A. No. 120 as amended are restored up to June
30, 1985.

"2.  Provided, That this restoration does not apply to the following:

a. importations of fuel oil (crude equivalent) and coal as per FIRB Resolution
No. 1-84;

b. commercially-funded importations; and

c. interest income derived from any investment source.

"3.  Provided further, That in case of importations funded by international financing


agreements, the NPC is hereby required to furnish the FIRB on a periodic basis the
particulars of items received or to be received through such arrangements, for
purposes of tax and duty exemptions privileges."[17]

Resolution No. 1-86

"BE IT RESOLVED AS IT IS HEREBY RESOLVED: That:


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"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 basic and additional import duties;
Provided, further, that the following shall remain fully taxable:

a.  Commercially-funded importations; and

b.  Interest income derived by said grantee from bank deposits and yield
or any other monetary benefits from deposit substitutes, trust funds and
other similar arrangements.

"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 another pursuant to the provisions of Sec. 10(a) of the Real
Property Tax Code, as amended."[18]

Petitioner does not question the validity and enforceability of FIRB Resolution Nos. 10-85 and
1-86.  Indeed, they were issued in compliance with the requirement of Section 2, P.D. No. 1931,
whereby the FIRB should make the recommendation subject to the approval of "the President of
the Philippines and/or the Minister of Finance." While said Resolutions do not appear to have
been approved by the President, they were nevertheless approved by the Minister of Finance
who is also duly authorized to approve the same.  In fact it was the Minister of Finance who
signed and promulgated said resolutions.[19]

The observation of Mr. Justice Sarmiento in the dissenting opinion that FIRB Resolution Nos.
10-85 and 1-86 which were promulgated by then Acting Minister of Finance Alfredo de Roda,
Jr. and Minister of Finance Cesar E.A. Virata, as Chairman of FIRB, respectively, should be
separately approved by said Minister of Finance as required by P.D.1931 is, a superfluity.  An
examination of the said resolutions which are reproduced in full in the dissenting opinion show
that the said officials signed said resolutions in the dual capacity of Chairman of FIRB and
Minister of Finance.

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 requires the approval of the President to be valid.  Thus, in said case
the Court held that FIRB Resolutions Nos. 10-85 and 1-86 not having been approved by the
President were not valid and effective while the validity of FIRB 17-87 was upheld as it was
duly approved by the Office of the President on October 5, 1987.

However, under Section 2 of P.D. No. 1931 of June 11, 1984, hereinabove reproduced, which
amended P.D. No. 776, it is clearly provided for that such FIRB resolution, may be approved by
the "President of the Philippines and/or the Minister of Finance." To repeat, as FIRB
Resolutions Nos. 10-85 and 1-86 were duly approved by the Minister of Finance, hence they are
valid and effective.  To this extent, this decision modifies or supersedes the Court's earlier
decision in Albay afore-referred to.

Petitioner, however, argues that under both FIRB resolutions, only the tax and duty exemption
privileges enjoyed 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 construed strictissimi juris against the taxpayer and
liberally in favor of the taxing authority.

Petitioner argues that the release by the BIR of the P58.0 million refund to respondent NPC by
way of a tax credit certificate[21] which was assigned to respondent Caltex through a deed of
assignment approved by the BIR[22] is patently illegal.  He also contends that the pending claim
of respondent NPC in the amount of P410.58 million with respondent BIR for the sale and
delivery to it of bunker fuel by respondents Petrophil, Shell and Caltex from July 1, 1985 up to
1986, being illegal, should not be released.

Now to the second corollary issue involving the validity of FIRB Resolution No. 17-87 issued
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on June 24, 1987.  It was issued under authority of Executive Order No. 93 dated December 17,
1986 which grants to the FIRB, among others, the power to recommend the restoration of the
tax and duty exemptions/incentives withdrawn thereunder.

Petitioner stresses that on August 6, 1987 the Secretary of justice rendered Opinion No. 77 to
the effect that the powers conferred upon the FIRB by Section 2(a), (b), (c) and (4) of Executive
Order No. 93 "constitute undue delegation of legislative power and is, therefore,
unconstitutional." Petitioner observes that the FIRB did not merely recommend but
categorically restored the tax and duty exemption of the NPC so that the memorandum of the
respondent Executive Secretary dated October 5, 1987 approving the same is a surplusage.

Further assuming that FIRB Resolution No. 17-87 to have been Legally issued, following the
doctrine in Philippine Acetylene, petitioner avers that the restoration cannot cover indirect taxes
and it cannot create new indirect tax exemption not otherwise granted in the NPC charter as
amended by Presidential Decree No. 938.

The petition is devoid of merit.

The NPC is a non-profit 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] which provides:

“Section 1. Declaration of Policy -- Congress hereby declares that (1) the


comprehensive development, utilization and conservation of Philippine water
resources for all beneficial uses, including power generation, and (2) the total
electrification of the Philippines through the development of power from all sources
to meet the need of rural electrification are primary objectives of the nation which
shall be pursued coordinately and supported by all instrumentalities and agencies of
the government including its financial institutions."

From the changes made in the NPC charter, the intention to strengthen its preferential tax
treatment is obvious.

Under Republic Act No. 358, its exemption is provided as follows:

"SEC 2. To facilitate payment of its indebtedness, the National Power Corporation


shall be exempt from all taxes, duties, fees, imposts, charges, and restrictions of the
Republic of the Philippines, its provinces, cities and municipalities."

Under Republic Act No. 6395:

"Sec. 13. Non-profit Character of the Corporation; Exemption from all Taxes,
Duties, Fees, Imposts and other Charges by Government and Governmental
Instrumentalities.-- The Corporation shall be non-profit and shall devote all its
returns from its capital investment, as well as excess revenues from its operation, 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 declared exempt:

"(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, its provinces, cities,
municipalities and other government agencies and instrumentalities;

"(b)  From all income taxes, franchise taxes and realty taxes to be paid to the
National Government, its provinces, cities, municipalities and other government
agencies and instrumentalities;

"c)  From all import duties, compensating taxes and advanced sales tax, and
wharfage fees on import of foreign goods required for its operations and projects;

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and

"(d)  From all taxes, duties, fees, imposts, and all other charges imposed by the
Republic of the Philippines, 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.” 
(Italics supplied.)

Under Presidential Decree No. 380:

“Sec. 13. Non-profit Character of the Corporation: Exemption from all Taxes,
Duties, Fees, Imposts and other Charges by the Government and Government
Instrumentalities. -    The Corporation shall be non-profit and shall devote all its
returns from its capital investment as well as excess revenues from its operation, 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, is hereby declared, exempt:

(a)  From the payment of all taxes, duties, fees, imposts, charges, costs and services
fees in any court or administrative proceedings in which it may be a party,
restrictions and duties to the Republic of the Philippines, its provinces, cities,
municipalities and other government agencies and instrumentalities;

(b)  From all income taxes, franchise taxes and realty taxes to be paid to the National
Government, its provinces, cities, municipalities and other governmental agencies
and instrumentalities;

(c)  From all import duties, compensating taxes and advanced sales tax, and
wharfage fees on import of foreign goods required for its operations and projects; 
and

(d)  From all taxes, duties, fees, imposts, and all other charges imposed directly or
indirectly by the Republic of the Philippines, its provinces, cities, municipalities and
other government agencies and instrumentalities, on all petroleum produced used by
the Corporation in the generation, transmission, utilization and sale of electric
power." (Italics supplied.)

Under Presidential Decree No. 938:

"Sec. 13. Non-Profit Character of the Corporation: Exemption from All Taxes,
Duties, Fees, Imposts and Other Charges by the Government and Government
Instrumentalities. - The Corporation shall be non-profit and shall devote all its
returns from its capital investment as well as excess revenues from its operation, 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 subsidiaries hereby declared exempt from the
payment of all forms of taxes, duties, fees, imposts as well as costs and service fees
including filing fees, appeal bonds, supersedeas bonds, in any court or
administrative proceedings.”  (Italics supplied)"

It is noted that in the earlier law, R.A. No. 358, the exemption was worded in general
terms, as to cover "all taxes, duties, fees, imposts, charges, etc. x x x." However, the
amendment under Republic Act No. 6395 enumerated the 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 an all
petroleum products used in its operation.  Presidential Decree No. 938 amended the
tax exemption by simplifying the same law in general terms.  It succinctly exempts
NPC from "all forms of taxes, duties, fees, imposts, as well as costs and service fees
including filing fees, appeal bonds, supersedeas bonds, in any court or administrative
proceedings."

The use of the phrase "all forms" of taxes demonstrate the intention of the law to
give NPC all the tax exemptions it has been enjoying before.  The rationale for this

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exemption is that being non-profit the NPC "shall devote all its returns from its
capital investment as well as excess revenues from its operation, 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, . . .
."[27]

The preamble of P. D. No. 938 states -

"WHEREAS, in the application of the tax exemption provision of the Revised


Charter, the non-profit character of the NPC has not been fully utilized because of
restrictive interpretations of the taxing agencies of the government on said
provisions. . . .  " (Underscoring Supplied.)

It is evident from the foregoing that the lawmaker did not intend that the said provisions of P.D.
No. 938 shall be construed strictly against NPC.  On the contrary, the law mandates that it
should be interpreted liberally so as to enhance the tax-exempt status of NPC.

Hence, petitioner cannot invoke the rule on strictissimi juris with respect to the interpretation of
statutes granting tax exemptions to NPC.

Moreover, it is a recognized principle that the rule on strict interpretation does not apply in the
case of exemptions in favor of a government political subdivision or instrumentality.[28]

"The basis for applying the rule of strict construction to statutory provisions granting
tax exemptions or deductions, even more obvious than with reference to the
affirmative or levying provisions of tax statutes, is to minimize differential treatment
and foster impartiality, fairness, and equality of treatment among tax payers.

The reason for the rule does not apply in the case of exemptions running to the
benefit of the government itself or its agencies.  In such case the practical effect of
an exemption is merely to reduce the amount of money that has to be handled by
government in the course of its operations.  For these reasons, provisions granting
exemptions to government agencies may be construed liberally, in favor of non tax-
liability of such agencies."[29]

In the case of property owned by the state or a city or other public corporations, the express
exemption 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 "exemption is the rule and taxation
the exception."[30]

The contention of petitioner that the exemption of NPC from indirect taxes under Section 13 of
R.A. No. 6395 and P.D. No. 380, is deemed repealed by P.D. No. 938 when the reference to it
was deleted is not well-taken.

Repeal by implication is not favored unless it is manifest that the legislature so intended.  As
laws are presumed to be passed with deliberation and with knowledge of all existing ones on the
subject, it is logical to conclude that in passing a statute it is not intended to interfere with or
abrogate a former law relating to the same subject matter, unless the repugnancy between the
two is not only irreconcilable but also clear and convincing as a result of the language used, or
unless the latter Act fully embraces the subject matter of the earlier.[31] The first effort of a court
must always be to reconcile or adjust the provisions of one statute with those of another so as to
give sensible effect to both provisions.[32]

The legislative intent must be ascertained from a consideration of the statute as a whole, and not
of an isolated part or a particular provision alone.[33] When construing a statute, the reason for
its enactment should be kept in mind and the statute should be construed with reference too its
intended scope and purpose[34] and the evil sought to be remedied.[35]

The NPC is a government instrumentality with the enormous task of undertaking development
of hydroelectric generation of power and production of electricity from other sources, as well as
the transmission of electric power on a nationwide basis, to improve the quality of life of the
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people pursuant to the State policy embodied in Section E, Article II of the 1987 Constitution.

It is evident from the provisions of P.D. No. 938 that its purpose is to maintain the tax
exemption of NPC from all forms of taxes including indirect taxes as provided for under R.A.
No. 6395 and P.D. No. 380 if it is to attain its goals.

Further, the construction of P. D. No. 938 by the Office charged with its implementation should
be given controlling weight.[36]

Since the May 8, 1985 ruling of Commissioner Ancheta, to the letter of the Secretary of Finance
of June 26, 1985 confirming said ruling, the letters of the BIR of August 18, 1986, and
December 22, 1986, the letter of the Secretary of Finance of February 19, 1987, the
Memorandum of the Executive Secretary of October 9, 1987, by authority of the President,
confirming and approving FIRB Resolution No. 17-87, 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's reply of June 15, 1988, it was uniformly held that the grant of tax exemption to NPC
under C. A. No. 120, as amended, included exemption from payment of all taxes relative to
NPC's petroleum purchases including indirect taxes.[37] Thus, then Secretary of Finance Vicente
Jayme in his letter of May 20, 1988 to the Executive Secretary Macaraig aptly stated the
justification for this tax exemption of NPC -

"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 change in language evidenced an intention to
exempt NPC only from taxes directly imposed on or payable by it; since taxes on
fuel-oil purchased by NPC locally are levied on and paid by its oil suppliers, NPC
thereby lost its exemption from those taxes.  The principal authority relied on is the
1967 case of Philippine Acetylene Co., Inc. vs. Commissioner of Internal Revenue,
20 SCRA 1056.

"First of all, tracing the changes made through the years in the Revised Charter, the
strengthening of NPC’s preferential tax treatment was clearly the intention.  To the
extent that the explanatory ‘whereas clauses’ may disclose the intent of the law-
maker, the changes effected by P.D. 938 can only be read as being expansive rather
than restrictive, including its version of Section 13.

"Our Tax Code does not recognize that there are taxes directly imposed and those
imposed indirectly.  The textbook distinction between a direct and an indirect tax
may be based on the possibility of shifting the incidence of the tax.  A direct tax is
one which is demanded from the very person intended to be the payor, although it
may ultimately be shifted to another.  An example of a direct tax is the personal
income tax.  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 sales tax levied on sales of
a commodity.

"The distinction between a direct tax and one indirectly imposed (or an indirect tax)
is really of no moment.  What is more relevant is that when an 'indirect tax' is paid
by those upon whom the tax ultimately falls, it is paid not as a tax but as an
additional part of the cost or of the market price of the commodity.

"This distinction was made clear by Chief Justice Castro in the Philippine Acetylene
case, when he analyzed the nature of the percentage (sales) tax to determine whether
it is a tax on the producer or on the purchaser of the commodity.  Under our Tax
Code, the sales tax falls upon the manufacturer or producer.  The phrase 'pass on' the
tax was criticized as being inaccurate.  Justice Castro says that the tax remains on the
manufacturer alone.  The purchaser does not pay the tax; he pays an amount added to
the price because of the tax.  Therefore, the tax is not ‘passed on’ and does not for
that reason become an 'indirect tax' on the purchaser.  It is eminently possible that the
law maker in enacting P.D. 938 in 1976 may have used lessons from the analysis of
Chief Justice Castro in 1967 Philippine Acetylene case.

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"When P.D. 938 which exempted NPC from ‘all forms of taxes’ was issued in May
1976, the so-called oil crunch had already drastically pushed up crude oil prices
from about $1.00 per bbl. in 1971 to about $10 and a peak (as it turned out) of about
$34 per bbl. in 1981.  In 1974-78, NPC was operating the Meralco thermal plants
under a lease agreement.  The power generated by the leased plants was sold to
Meralco for distribution to its customers.  This lease and sale arrangement was
entered into for the benefit of the consuming public, by reducing the tax burden on
the swiftly rising world crude oil prices.  This objective was achieved by the use of
NPC's ‘tax umbrella’ under its Revised Charter - the exemption from specific taxes
on locally purchased fuel oil.  In this context, I can not interpret P.D. 938 to have
withdrawn the exemption from tax on fuel oil to which NPC was already entitled and
which exemption Government in fact was utilizing to soften the burden of high crude
prices.

"There is one other consideration which I consider pivotal.  The taxes paid by oil
companies on oil products sold to NPC, whether paid to them by NPC or not, never
entered into the rates charged by NPC to its customers - not even during those
periods of uncertainty engendered by the issuance of P.D. 1931 and E.O 93 on
NPC's tax status.  No tax component on the fuel have been charged or recovered by
NPC through its rates.

"There is an import duty on the crude oil imported by the local refineries.  After the
refining process, specific and ad valorem taxes are levied on the finished products
including fuel oil or residue upon their withdrawal from the refinery.  These taxes
are paid by the oil companies as the manufacturer thereof.

"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 applies for drawback of customs
duties paid and for a credit in amount equivalent to the tax paid (by the oil
companies) on the products purchase.  The tax credit is assigned to the oil
companies - as 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.  There were
also side issues raised because of P.D. 1931 and E.O. 93 which withdrew all
exemptions of government corporations.  In these latter instances, the resolutions of
the Fiscal Incentives Review Board (FIRB) come into play.  These incidents will not
be touched upon for purposes of this discussion).

"NPC rates of electricity are structured such that changes in its cost of fuel are
automatically (without need of fresh approvals) reflected in the subsequent months'
billing rates.

"This Fuel Cost Adjustment clause protects NPC’s rate of return.  If NPC should
ever accept liability to the tax 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 oil-fired generating stations
leased from Meralco (which plants it bought in 1979), until the present time, no tax
on fuel oil ever went into NPC's electric rates.

"That the exemption of NPC from the tax on fuel was not withdrawn by P.D. 938 is
impressed upon me by 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 thermal
plants.  There would have been no question in such a case as to its exemption from
all duties and 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 savings to the industry and the public.  The refining process
produced as its largest output, in volume, fuel oil or residue, whose conventional
economic use was for burning in electric or steam generating plants.  Had there
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been no use locally for the residue, the oil refineries would have become largely
unviable.

"Again, in this circumstance, I cannot accept that P. D. 938 would have in effect
forced NPC to by-pass the local oil refineries and import its fossil fuel requirements
directly in order to avail itself of its exemption from ‘direct taxes.’  The oil refineries
had to keep operating both for economic development and national security
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 Revised Charter retains its exemption from duties and taxes
imposed on the petroleum products purchased locally and used for the generation of
electricity.

"The Department in issuing this ruling does so pursuant to its power and function to
supervise and control the collection of government revenues by the application and
implementation of revenue laws.  It is prepared to take the measures supplemental to
this ruling necessary to carry the same into full effect.

"As presented rather extensively above, the NPC electric power rates did not carry
the taxes and duties paid 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 ‘out-
of-pocket.’  There would have to be specific order  to the Bureaus concerned for the
resumption of the processing of these claims."[38]

In the letter of June 15, 1988 of then Executive Secretary Macaraig to the then Secretary of
Finance, the said opinion-ruling of the latter was confirmed and its implementation was
directed.[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 well-taken.  When the
NPC was exempted from all forms of taxes, duties, fees, imposts and other charges, under P. D.
No. 938, it means exactly what it says, i.e., all forms of taxes including those that were imposed
directly or indirectly on petroleum products used in its operation.

Reference is made in the dissenting opinion to contrary rulings of the BIR that the exemption of
the NPC extends only to taxes for which it is directly liable and not to taxes merely shifted to it. 
However, these rulings are predicated on Philippine Acetylene.

The doctrine in Philippine Acetylene decided in 1967 by this Court cannot apply to the present
case.  It involved the sales tax of products the plaintiff sold to NPC from June 2, 1953 to June
30, 1958 when NPC was enjoying tax exemption from all taxes under Commonwealth Act No.
120, as amended by Republic Act No. 358 issued on June 4, 1949 hereinabove reproduced.

In said case, this Court held, that the sales tax is due from the manufacturer and not the buyer,
so plaintiff cannot claim exemptions simply because the NPC, the buyer, was exempt.

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 non-profit 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 clearly the exemption of the NPC from indirect taxes.  And as hereinabove
stated, in P.D. No. 380, the exemption of NPC from indirect taxes was emphasized when it was
specified to include those imposed "directly and indirectly."

Thereafter, under P.D. No. 938 the tax exemption of NPC was integrated under Section 13
defining the same in general terms to cover "all forms of taxes, duties, fees, imposts, etc."

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which, as hereinabove discussed, logically includes exemption from indirect taxes on petroleum
products used in its operation.

This is the status of the tax exemptions the NPC was enjoying when P.D. No. 1931 was passed,
on the authority of which FIRB Resolution Nos. 10-85 and 1-86 were issued, and when
Executive Order No. 93 was promulgated, by which FIRB Resolution 17-87 was issued.

Thus, the ruling in Philippine Acetylene cannot apply to this case due to the different
environmental circumstances.  As a matter of fact, the amendments of Section 13, under R.A.
No. 6395, P.D. No. 380 and P.D. No. 838 appear to have been brought about by the earlier
inconsistent rulings of the tax agencies due to the doctrine in Philippine Acetylene, so as to
leave no doubt as to the exemption of the NPC from indirect taxes on petroleum products it uses
in its operation.  Effectively, said amendments superseded if not abrogated the ruling in
Philippine Acetylene that the tax exemption of NPC should be limited to direct taxes only.

In the light of the foregoing discussion the first corollary issue must consequently be resolved in
the affirmative, that is, FIRB Resolution No. 10-85 dated February 7, 1985 and FIRB
Resolution No. 1-86 dated January 7, 1986 which restored NPC's tax exemption privileges
included the restoration of the indirect tax exemption of the NPC on petroleum products it used.

On the second corollary issue as to the validity of FIRB resolution No. 17-87 dated June 24,
1987 which restored NPC's tax exemption privilege effective March 10, 1987, the Court finds
that the same is valid and effective.

It provides as follows:

"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 petroleum products, granted under the
terms and conditions of Commonwealth Act No. 120 (Creating the National Power
Corporation, defining its powers, objectives and functions, and for other purposes),
as amended, are restored effective March 10, 1987, subject to the following
conditions:

"1.  The restoration of the tax and duty exemption privileges does not
apply to the following:

1.1 Importation of fuel oil (crude equivalent) and coal;

1.2 Commercially-funded 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, borrowing from
foreign-based private financial institutions, etc.); and

1.3 Interest income derived from any source.

"2. The NPC shall submit to the FIRB a report of its expansion program, including
details of disposition of relieved tax and duty payments for such expansion on an
annual basis or as often as the FIRB may require it to do so.  This report shall be in
addition to the usual FIRB reporting requirements on incentive availment."[40]

Executive Order No. 93 provides as follows -

"SECTION 1. The provisions of any general or special law to the contrary


notwithstanding, all tax and duty incentives granted to government and private
entities are hereby withdrawn, except:

a) those covered by the non-impairment clause of the Constitution;

b)  those conferred by effective international agreements to which the Government


of the Republic of the Philippines is a signatory;

c) those enjoyed by the enterprises registered with:


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(i) the Board of Investments pursuant to Presidential Decree No. 1789, as


amended;

(ii) the Export Processing Zone Authority, pursuant to Presidential


Decree No. 66, as amended;

(iii) the Philippine Veterans Investment Development Corporation


Industrial Authority pursuant to Presidential Decree No. 538, as
amended;

d) those enjoyed by the copper mining industry pursuant to the provisions of letter of
Instruction No. 1416;

e) those conferred under the four basic codes namely:

(i) the Tariff and Customs Code, as amended;

(ii) the National Internal Revenue Code, as amended;

(iii) the Local Tax Code, as amended;

(iv)  the Real Property Tax Code, as amended;

f) those approved by the President upon the recommendation of the Fiscal Incentives
Review Board.

"SECTION 2. The Fiscal Incentives Review Board created under Presidential


Decree No. 776, as amended, is hereby authorized to:

a) restore tax and/or duty exemptions withdrawn hereunder in whole or


in part;
 
b) revise the scope and coverage of tax and/or duty exemption that may
be restored.
 
c) impose conditions for the restoration of tax and/or duty exemption;
 
d) prescribe the date or period of effectivity of the restoration of tax
and/or duty exemption;
 
e) formulate and submit to the President for approval, a complete
system for the grant of subsidies to deserving beneficiaries, in lieu of
or in combination with the restoration of tax and duty exemptions or
preferential treatment in taxation, indicating the source of funding
therefor, eligible beneficiaries and the terms and conditions for the
grant thereof taking into consideration the international commitments
of the Philippines and the necessary precautions such that the grant of
subsidies does not become the basis for countervailing action.

"SECTION 3. In the discharge of its authority hereunder, the Fiscal Incentives


Review Board shall take into account any or all of the following considerations:

a) the effect on relative price levels;


 
b) relative contribution of the beneficiary to the revenue generation
effort;
 
c) nature of the activity the beneficiary is engaged;
 
d) in general, the greater national interest to be served."

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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 department secretary.
[41]

A reading of Section 3 of said law shows that it set the policy to be the greater national interest. 
The standards of the delegated power are also clearly provided for.

The required "standard" need not be expressed.  In Edu vs. Ericta[42] and in De la Llana vs.
Alba,[43] this Court held:  “The standard may be either express or implied.  If the former, the
non-delegated objection is easily met.  The standard though does not have to be spelled out
specifically.  It could be implied from the policy and purpose of the act considered as a whole."

In People vs. Rosenthal[44] the broad standard of "public interest" was deemed sufficient.  In
Calalang vs. Williams,[45] it was "public welfare" and in Cervantes vs. Auditor General,[46] it
was the purpose of promotion of "simplicity, economy and efficiency." And, implied from the
purpose of the law as a whole, "national security" was considered sufficient standard[47] and so
was “protection of fish-fry or fish eggs".[48]

The observation of petitioner that the approval of the President was not even required in said
Executive Order of the tax exemption privilege approved by the FIRB, unlike in previous
similar issuances, is not well-taken.  On the contrary, under Section 1(f) of Executive Order No.
93, aforestated, such tax and duty exemptions extended by the FIRB must be approved by the
President.  In this case, FIRB Resolution No. 17-87 was approved by the respondent Executive
Secretary, by authority of the President, on October 15, 1987.[49]

Mr. Justice Isagani A. Cruz commenting on the delegation of legislative power stated -

"The latest in our jurisprudence indicates that delegation of legislative power has
become the rule and its non-delegation the exception.  The reason is the increasing
complexity of modern life and many technical fields of governmental functions as in
matters pertaining to tax exemptions.  This is coupled by the growing 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 cannot be expected reasonably to comprehend. 
Specialization even in legislation has become necessary.  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 specific solutions."[50]

Thus, in the case of Tablarin v. Gutierrez,[51] this Court enunciated the rationale in favor of
delegation of legislative functions -

"One thing however, is apparent in the development of the principle of separation of powers and
that is that the maxim of delegatas non potest delegare or delegati potestas non potest delegare,
adopted this practice (Delegibus et Consuetudiniis, Anglia edited by G.E. Woodline, Yale
University Press, 1922, Vol. 2, p.167) but which is also recognized in principle in the Roman
Law (d. 17.18.3) has been made to adapt itself to the complexities of modern government,
giving rise to the adoption, within certain limits, of the principle of subordinate legislation, not
only in the United States and England but in practically all modern governments.  (People vs.
Rosenthal and Osmeña, 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 administering the laws, there is a constantly growing tendency toward the
delegation of greater power by the legislative, and toward the approval of the practice by the
Courts."(Italics supplied.)

The legislative authority could not or is not expected to state all the detailed situations wherein
the tax exemption privileges of persons or entities would be restored.  The task may be assigned
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to an administrative body like the 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 interpretation in favor of constitutionality of legislation should be
adopted.[52]

E. O. No. 93 is complete in itself and constitutes a valid delegation of legislative power to the
FIRB.  And as above discussed, the tax exemption privilege that was restored to NPC by FIRB
Resolution No. 17-87 of June 1987 includes exemption from indirect taxes and duties on
petroleum products used in its operation.

Indeed, the validity of Executive Order No. 93 as well as of FIRB Resolution No. 17-87 has
been upheld in Albay.[53]

In the dissenting opinion of Mr. Justice Cruz, it is stated that P.D. Nos. 1931 and 1955 issued by
President Marcos in 1984 are invalid as they were presumably promulgated under the infamous
Amendment No. 6 and that as they cover tax exemption, under Section 17(4), Article VIII of the
1973 Constitution, the same cannot be passed "without the concurrence of the majority of all the
members of the Batasang Pambansa." And, even conceding that the reservation of legislative
power in the President was valid, it is opined that it was not validly exercised as there is no
showing that such presidential encroachment was justified under the conditions then existing. 
Consequently, it is concluded that Executive Order No. 93, which was intended to implement
said decrees, is also illegal.  The authority of the President to sub-delegate to the FIRB powers
delegated to him is also questioned.

In Albay,[54] as above stated, this Court upheld the validity of P.D. Nos. 776 and 1931.  The
latter decree withdrew tax exemptions of government-owned or controlled corporations
including their subsidiaries but authorized the FIRB to restore the same.  Nevertheless, in Albay,
as above-discussed, this Court ruled that the tax exemptions under FIRB Resolution Nos. 10-85
and 1-86 cannot be enforced as said resolutions were only recommendatory 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 Resolution No. 17-87 which was issued pursuant thereto, as it was duly approved
by the President as required by said executive order.

Moreover, under Section 3, Article XVIII of the Transitory Provisions of the 1987 Constitution,
it is provided that:

"All existing laws, decrees, executive orders, proclamation, letters of instructions,


and other executive issuances not inconsistent with this constitution shall remain
until amended, repealed or revoked."

Thus, P.D. Nos. 776 and 1931 are valid and operative unless it is shown that they are
inconsistent with the Constitution.

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 exemption of NPC covers direct and indirect taxes on petroleum
products used in its operation.  This is as it should be, if We are to hold as invalid and
inoperative the withdrawal of such tax exemptions under P.D. No. 1931 as well as under
Executive Order No. 93 and the delegation of the power to restore these exemptions to the
FIRB.

The Court realizes the magnitude of the consequences of this decision.  To reiterate, in Albay
this Court ruled that the NPC is liable for real estate taxes as of June 11, 1984 (the date of
promulgation of P.D. No. 1931) when NPC had ceased to enjoy tax exemption privileges since
FIRB Resolutions Nos. 1085 and 1-86 were not validly issued.  The real estate tax liability of
NPC from June 11, 1984 to December 1, 1990 is estimated to amount to P7.49 billion plus
another P4.76 billion in fuel import duties the firm had earlier paid to the government which the
NPC now proposed to pass on to the consumers by another 23-centavo increase per kilowatt
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hour in power rates on top of the 17-centavo increase per kilowatt hour that took effect just over
a week ago.[56] Hence, another case has been filed in this Court to stop this proposed increase
without a hearing.

As above-discussed, at the time FIRB Resolutions Nos. 10-85 and 1-86 were issued, P.D. No.
776 dated August 24, 1975 was already amended by P.D. No. 1931,[57] wherein it is provided
that such FIRB resolutions may be approved not only by the President of the Philippines but
also by the Minister of Finance.  Such resolutions were promulgated by the Minister of Finance
in his own right and also in his capacity as FIRB Chairman.  Thus, a separate approval thereof
by the Minister of Finance or by the President is unnecessary.

As earlier stated, a reexamination of the ruling in Albay on this aspect is therefore called for and
consequently, Albay must be considered superseded to this extent by this decision.  This is
because P.D. No. 938 which is the latest amendment to the NPC charter granting the NPC
exemption from all forms of taxes certainly covers real estate taxes which are direct taxes.

This tax exemption is intended not only to insure that the NPC shall continue to generate
electricity for the country but more importantly, to assure cheaper rates to be paid by the
consumers.

The allegation that this is in effect allowing tax evasion by oil companies is not quite correct. 
There are various 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 ad valorem taxes, they are added as part of the seller's
price, but NPC pays the price net of tax, on condition that NPC would seek a tax refund to the
oil companies.  No tax component on fuel had been charged or recovered by NPC from the
consumers through its power rates.[58] Thus, this is not a case of tax evasion of the oil
companies but of tax relief for the NPC.  The billions of pesos involved in these exemptions
will certainly inure to the ultimate good and benefit of the consumers who are thereby spared
the additional burden of increased power rates to cover these taxes paid or to be paid by the
NPC if it is held liable for the same.

The fear of the serious implication of this decision in that NPC's suppliers, importers and
contractors may claim the same privilege should be dispelled by the fact that (a) this decision
particularly treats of only the exemption of the NPC from all taxes, duties, fees, imposts and all
other charges imposed by the government on the petroleum products it used or uses for its
operation; and (b) Section 13(d) of R.A. No. 6395 and Section 13(d) of P.D. No. 380, both
specifically exempt the NPC from all taxes, duties, fees, imposts and all other charges imposed
by the Government on all petroleum products used in its operation only, which is the very
exemption which this Court deems to be carried over by the passage of P.D. No. 938.  As a
matter of fact in Section 13(d) of P.D. No. 380 it is specified that the aforesaid exemption from
taxes, etc. covers those "directly or indirectly" imposed by the "Republic of the Philippines, its
provinces, cities, municipalities and other government agencies and instrumentalities” on said
petroleum products.  The exemption therefore from direct and indirect tax on petroleum
products used by NPC cannot benefit the suppliers, importers and contractors of NPC of other
products or services.

The Court realizes the laudable objective of petitioner to improve the revenue of the
government.  The amount of revenue received or expected to be received by this tax exemption
is, however, not going to any of the oil companies.  There would be no loss to the government. 
The said amount shall accrue to the benefit of the NPC, a government corporation, so as to
enable it to sustain its tremendous task of providing electricity for the country and at the least
cost to the consumers.  Denying this tax exemption would mean hampering if not paralyzing the
operations of the NPC.  The resulting increased revenue in the government will also mean
increased power rates to be shouldered by the consumers if the NPC is to survive and continue
to provide our power requirements.[59] The greater interest of the people must be paramount.

WHEREFORE, the petition is DISMISSED for lack of merit.  No pronouncement as to costs.

SO ORDERED.

Narvasa, Melencio-Herrera, Feliciano, Bidin, Medialdea, and Regalado, JJ., concur.


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Fernan, C. J., no part, formerly counsel for one of the respondents.


Gutierrez, Jr., J., joins the dissents.
Cruz, J., dissents.
Paras, J., dissents, but the NPC should be refunded not by the consuming public but by the oil
companies, for ultimately these oil companies get the benefit of the alleged tax exemption.
Padilla, J., no part; counsel for respondent Pilipinas Shell Petroleum Corp. formerly member of
his legal staff.
Sarmiento, J., dissents.
Griño-Aquino and Davide, Jr., JJ., joins the dissent of Justice Sarmiento.

[1] Section 1, Com. Act No. 120 (1936).

[2] Section 1, Rep. Act No. 6395 (1971).

[3] Section 2, Rep. Act No. 6395 (1971).

[4] Section 1, Pres. Decree No. 1931 (1984).

[5] Pages 7 to 19, rollo.

[6] Pages 49 to 52, rollo.

[7] Page 19, rollo.

[8]
Citing Ex parte Levit, 302 U.S. 633; Tileson vs. Ullman, 318 U.S. 446; Lozada vs.
Commission on Elections, 120 SCRA 337 (1983).

[9] Citing Meralco Securities Corporation vs. Savellano, 117 SCRA 804 (1982).

[10] Ibid, page 812.

[11] Citing Strong vs. Castro, 137 SCRA 322 (1985).

[12] Citing Fortun vs. Labang, 104 SCRA 607 (1981)

[13] 51 Am. Jur. Section 21; 61 C.J. Section 6, note 57(e), p. 73.

[14] 20 SCRA 1056 (1967).

[15]
Citing United Garment Co., Inc. vs. Court of Tax Appeals, 4 SCRA 304 (1962); and Butuan
Sawmill, Inc. vs. City of Butuan, 16 SCRA 755 (1966).

[16] See page 27 of Petition.

[17] Annex C, petition; page 123, Rollo

[18] Annex H, petition; page 135, Rollo.

[19] Annexes C and I to the Petition.

[20] G.R. No. 87479 promulgated on June 4, 1990.

[21] Annex 3 to the Petition (tax credit memo).

[22] Annex F to the Petition.


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[23] Section 1, Commonwealth Act No. 120; Sections 2 and 13, Republic Act No. 6395 in
relation to Section 3, Act No.1495.

[24] Section 5, Republic Act No. 6395.

[25]Section 4, Republic Act No. 120; Section 2, Republic Act No. 358; Section 13, Republic Act
No. 6395; Section 10, Presidential Decree No. 380.

[26] Section 13, Republic Act No. 6395, as amended by Presidential Decrees Nos. 380 and 938.

[27] Section 13, P.D. No. 938.

[28] 2 Cooley on the Law of Taxation, 4th edition, 1414 (1927).

[29]C. Dallas Sands, Statutes and Statutory Construction, Vol. 3, p. 207, citing Crosby vs. U.S.,
292 F. Supp. 314; Pasadena vs. Los Angeles Country, 187 P. 418 and other cases.

[30] Com. vs. City of Richmond, 116 Va. 69, 81 S.E. 69.

[31] U.S. v. Palacio. 33 Phil. 208 (1916); Commissioner of Customs v. Esso Standard Eastern,
Inc., 66 SCRA 113 (1975).

[32] Larga vs. Ranada, Jr., 164 SCRA 18 (1988).

[33]
Aboitiz Shipping Corp. vs. City of Cebu, 12 SCRA 449(1965); and Aisporna vs. Court of
Appeals, 113 SCRA 459 (1982).

[34] Statutory Construction by E.T. Crawford, pages 604 to 605, cited in Commissioner of
Internal Revenue vs. Filipinas Compania de Seguros, 107 Phil. 1055 (1960).

[35] Luzon Stevedoring Corporation vs. Court of Tax Appeals, 163 SCRA 647 (1988).

[36]Pascual vs. Director of Lands, 10 SCRA 354 (1964); Salaria vs. Buenviaje, 81 SCRA 722
(1978); La Suerte Cigar and Cigarette Factory vs. Court of Tax Appeals, 134 SCRA 29 (1985).

[37] Annexes 7, 8, T, V, W and 17.

[38] Annex N; Italics supplied.

[39] Annex O to the Petition.

[40] Annex K to the Petition; page 176, Rollo.

[41]Annex Q to petition, citing University of the East vs. U.E. Faculty Association, 117 SCRA
554, 572 (1982).

[42] 35 SCRA 481 (1970).

[43] 112 SCRA 294 (1982).

[44] 68 Phil. 328 (1939).

[45] 70 Phil. 726 (1940).

[46] 91 Phil. 359 (1952).


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[47] Hirabayashi vs. United States, 320 U.S. 99.

[48]Araneta vs. Gatmaitan, 101 Phil. 328 (1957); see also Justice Isagani A. Cruz, Philippine
Political Law, 1984 Ed., pages 105 to 106.

[49] Annex M to the Petition.

[50] Pages 82 to 83, Philippine Political Law, lsagani A. Cruz, 1989 ed.

[51] 152 SCRA 730 (1987).

[52] Victoriano vs. Elizalde Rope Workers Union, 59 SCRA 54, 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 private business enterprises and/or persons engaged in any economic activity. It
is not relevant to this case which involves a government corporation.

[56]See March 5, 1991 issue of the Philippine Daily Inquirer and other newspapers of same day
as well as the March 10, 1991 issue of the Manila Bulletin.

[57]Please see Sec. 5 of P.D. No. 1931 which provide that all other laws, decrees, etc.
inconsistent with the same decree are "thereby repealed, amended or modified accordingly."

[58] See letter opinion of Secretary of Finance Vicente Jayme dated May 20, 1988.

[59]NPC Vice-President Cris Herrera said the average rate increase to be passed to consumers is
P0.23 per year.  (Please see Daily Inquirer of March 5, 1991; "Napocor wants new power rate
increase").

DISSSENTING OPINION

CRUZ, J.:

I join Mr. Justice Abraham F. Sarmiento in his excellent dissent and would stress only the
following additional observations.

A tax exemption represents a loss of revenue to the State and must therefore not be lightly
granted or inferred.  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.

In the case at bar, the ponencia would justify the tax exemption as having been validly granted
under P.D. Nos. 1931 and 1955 and Resolutions Nos. 10-85 and 1-86 of the Fiscal Incentives
Review Board.  It is also asserted that FIRB Resolution No. 17-87, which restored MPC's tax
exemption effective March 10, 1987, was lawfully adopted pursuant to a valid delegation of
power made by Executive Order No. 93.

When P.D. Nos. 1931 and 1955 were issued by President Marcos in 1984, the Batasang
Pambansa was already in existence and discharging its legislative powers.  Presumably, these
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decrees were promulgated under the infamous Amendment No. 6.  Assuming that the
reservation of legislative power in the President was then valid, I submit that the power was
nevertheless not validly exercised.  My reason is that the President could legislate under the said
amendment only if the Batasang Pambansa "failed or was unable to act adequately on any
matter that in his judgment required immediate action" to meet the "exigency." There is no
showing that the presidential encroachment on legislative prerogatives was justified under these
conditions.  Simply because the rubber-stamp legislature then meekly submitted did not make
the usurpation valid.

By these decrees, President Marcos, exercising legislative power, delegated it to himself as


executive and empowered himself and/or the Minister of Finance to restore the exemptions
previously withdrawn.

As the decrees themselves were invalid, it should follow that Executive Order No. 93, which
was intended only to implement them, should also be illegal.  But even assuming the legality of
the said decrees, I would still question the authority of the President to sub-delegate the powers
delegated to her thereunder.

Such sub-delegation was not permissible because potestas delegata non delegari potest.  Even if
we were to disregard the opinion of Secretary of Justice Sedfrey A. Ordoñez 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's delegated authority could still not be extended to the
FIRB, which was not a delegate of the legislature.

It is remarkable that the respondents could seriously argue that a mere administrative body like
the FIRB can exercise the legislative power to grant tax exemptions.  I am not aware that any
other such agency, including the Bureau of Internal Revenue and the Bureau of Customs, has
this authority.  An administrative body can apply tax exemptions under existing law but it
cannot itself create such exemptions.  This is a prerogative of the Congress that cannot be
usurped by or even delegated to a mere administrative body.

In fact, the decrees clearly provided that it was the President and/or the Minister of Finance who
could restore the exemption, subject only to the recommendation of the FIRB.  The FIRB was
not empowered to directly restore the exemption.  And even if it be accepted that the FIRB
merely recommended the exemption, which was approved by the Finance Minister, there would
still be the curious anomaly of Minister Virata upholding his very own act as chairman of the
FIRB.

This Court called it a "travesty of justice" when in Zambales Chromite v. 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 v. Clave, 119 SCRA 353,
where the respondent, as presidential executive assistant, affirmed on appeal to Malacañang his
own decision as chairman of the Civil Service Commission.

It is important to note that when P.D. Nos. 1931 and 1955 were issued by President Marcos, the
rule under the 1973 Constitution was that "no law granting a tax exemption shall be passed
without the concurrence of a majority of all the members of the Batasang Pambansa." (Art. VIII,
Sec, 17[4]).  Laws are usually passed by only a majority of those present in the chamber, there
being a quorum, but not where it grants a tax exemption.  This requires an absolute majority. 
Yet, despite this stringent limitation on the national legislature itself, such stricture does not
inhibit the President and the FIRB in the exercise of their delegated power.  It would seem that
the delegate has more power than the principal.  Significantly, this limitation is maintained in
the present Constitution under Article VI, Section 28(4).

The ponencia 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 expected tax credit will be the oil companies, which certainly are
not part of the Republic of the Philippines.  As the tax refunds will not be enjoyed by the MPC
itself, I see no reason why we should be exceptionally lenient in applying the exception.

The tax credits involved in this petition are tremendous - no less than P1.58 billion.  This
amount could go a long way in improving the national economy and the well-being of the
Filipino people, who deserve the continuing solicitude of the government, including this Court. 
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I respectfully submit that it is to them that we owe our foremost loyalty.

DISSENTING OPINION

SARMIENTO, J.

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. 10-85 and 1-86; and  (2) the
National Power Corporation's tax exemption vis-a-vis our desicion in the case of Philippine
Acertylene Co., Inc. v. Commission of Internal Revenue[1] and in the light of the provisions of
its charter, Republic Act No. 6395, and the various amendments entered into it.

(1)

On pages 20-23 of the Decision, the majority suggests that FIRB Resolutions Nos. 10-85 and 1-
86 had validly restored the National Power Corporations's tax exemption privileges, which
Presidential Decree No. 1931 had meanwhile suspended.  I wish to stress that in the case of
National Power Corporation v. Province of Albay,[2] the Court held that the FIRB Resolution
Nos. 10-85 and 1-86 had the bare force of recommendations and did not operate as a 
restoration, in the absence of an approval by the President (in then President Marcos' exercise of
legislative powers), of tax exemptions.  The Court noted that there is nothing in Presidential
Decree No. 776, the FIRB charter, conferring on it the authority to grant or restore exemptions,
other that to make recommendations on what exemptions to grant or restore. I quote:

. . .                                                           . . .                                                           . . .

"It is to be pointed out that under Presidential Decree No. 776, the power of the
FIRB was merely to "recommed to the President of the Philippines and for reasons
of compatibility with the declared economic policy, the withdrawal, modification,
revocation or suspension of the enforceability of any of the abovecited statutory
subsidies or tax exemption grants, except those granted by the Constitution." It has
no authority to impose taxes or revoke existing ones, which, after all, under the
Constitution, only the legislature may accomplish. . .

. . .                                                           . . .                                                           . . .

As the Court held there, it was only on March 10,1987 that the restoration became effective, not
because Resolutions Nos. 10-85 and 1 -86 decreed a restoration, but because of Resolution No.
17-87 which, on the other hand, carried the approval of the Office of the President. [4] (FERB
Resolution No. 17-87 made the National Power 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 Presidential Decree
No. 1931 (withdrawing its tax exemptions) took effect, and March 10, 1987.

As far therefore as the majority in the present case rules that the National Power Corporation is
also entitled to a refund as a result of FIRB Resolutions Nos. 10-15 and 1-86, I respectfully
submit that a serious conflict has arisen.

While it is true that FERB Resolutions Nos. 10-85 and 1-86 were signed by then Finance
Minister Cesar Virata,[5] submit nonetheless, as Albay in fact held, that the signature of Mr.
Virata is not enough to restore an exemption.  The reason is that Mr. Virata signed them (FIRB
Resolutions Nos. 10-85 and 1-86) in his capacity as chairman of the Finance Incentives Review
Board (FIRB).  I find this clear from the very Resolutions in question:

FISCAL INCENTIVES REVIEW BOARD

RESOLUTION NO. 10-85


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BE IT RESOLVED, AS IT IS HEREBY RESOLVED, That:

1. Effective June 11, 1984, the lax and duty exemption privileges enjoyed by the
National Power Corporation under  C.A. No. 120 as amended are restored up to June
30, 1985.

2. Provided, That this restoration docs not apply to the following:

a. importations of fuel oil (crude equivalent) and coal as per  FIRB


Resolution No. 1-84:

b. commercially-funded importations; and

c. interest income derived from any investment source.

3. Provided further, That in case of importations funded by international  financing


agreements, the NPC is hereby required to furnish the FIRB on a periodic basis the
particulars of items received or to be received through such arrangements,  for
purposes of tax and duty exemption privileges.

  (Sgd.) ALFREDO PIO


DE RODA, JR.
Acting Minister of
Finance
Acting Chairman, FIRB

FISCAL INCENTIVES REVIEW BOARD

RESOLUTION NO. 1-86

BE IT RESOLVED, AS IT IS HEREBY RESOLVED: 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 basic and
additional import duties; Provided, further, That the following shall remain
fully taxable:

a. Commercially-funded importations; and

b. Interest income derived by said grantee from bank deposits and yield or
any other monetary beneSts from deposit substitutes, trust fund and other
similar arrangements.

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 another pursuant to the provisions of Sec. 40(a) of
the Real Property Tax Code, as amended.

  (Sgd.) CESAR E.A.


VIRATA
Minister of Finance
Chairman - FIRB

I respectfully submit that to say that Mr. Virata's signature is sufficient (please note that
Resolution No. 10-85 was not even signed by Mr. Virata, but rather by Mr. Alfredo Pio de Roda,
Jr.) is in fact to confer on the Board actual "restoration" or even exemption powers, because, in
all cases, FIRB Resolutions are signed by Mr. Virata (or the acting chairman) in his capacity as
Board Chairman.  I submit that we can not consider an FIRB Resolution as an act of Mr. Virata
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in his capacity as Minister of Finance (and therefore, as a grant or resloration of tax exemption)
although Mr. Virata also happened to be concurrently, Minister of Finance, because to do so
would be to blur the distinction between the capacities in which he, Mr. Virata, actually acted. I
submit that he, Mr. Virata, need have issued separate approvals of the Resolutions in question,
in his capacity as Finance Minister.

Parenthetically, on the issue of the constitutional validity of Executive Order No. 93, insofar as
it "delegates" the power to restore exemptions to the FIRB, I hold that in the first place,
Executive Order No. 93 makes no delegation at all.  As the majority points out, "[u]nder Section
1(f) of Executive Order No. 93, aforestated, such tax and duty exemptions extended by the
FIRB must be approved by the President."[6]  Hence, the FIRB does not exercise any power—
and as I had held, its powers are merely recommendatory—and it is the President who in fact
exercises it.  It is true that Executive Order No. 93 has set out certain standards by which the
FIRB, as a reviewing body, may act, but I do not believe that a genuine delegation question has
arisen because precisely, the acts of the Board are subject to approval by the President, in the
exercise of her legislative powers under the Freedom Constitution.[7]

(2)

According to the Decision, the National Power Corporation, under its charter, is also exempt
from indirect taxes, 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 oil "net of tax" and that thereafter, the Corporation assigns to them its tax credit.

I gather first, and with all due respect, that there has been a misunderstanding about so-called
indirect taxes and 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 that the taxes he will
shift will be shifted to a tax-exempt entity.  According to the Court, "the purchaser does not pay
the tax...[h]e pays or may pay the seller more for the goods because of the seller's obligation,
but that is all and the amount added because of the tax is paid to get the goods and for nothing
else."[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, thereby transferring the burden to the purchaser of whom the incidence of the tax
settles (indirect tax).  I submit, 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 the tax on'' to the purchaser, he does not really make the latter
pay the tax, and what the latter pays actually is just the price.  Thus, for purposes of exemption,
and so Acetylene tells us, the manufacturer can not claim one because the purchaser happens to
be exempted from taxes.  Mutatis mutandis, and so I respectfully submit, the purchaser can not
be allowed to accept the goods ' 'net of tax1' because it never paid for the tax in the first place,
and was never liable therefor, in the second place.

According to the majority, Philippine Acetylene has been "abrogated," and the majority points to
the various amendments to the charter of the National Power Corporation as authority for its
view.

First, there is nothing in those amendments that would remotely point to this conclusion.

Second, Acetylene's pronouncement is founded on the very science of taxation—that indirect


taxes are no taxes 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 would now enable him (Acetylene having been
"abrogated"), is, I submit, to defeat the very laws of science.

The theory of "indirect taxes" and that no exemption is possible therefrom, so I reiterate, are
well-settled concepts of taxation, as the law of supply and demand is to the law of economics. 
A President is said (unfairly) to have attempted it, but one can not repeal the law on supply and
demand.

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I do not find the National Power Corporation's alleged exemption from indirect tax evident, as
the majority finds it evident, from the Corporation's charter, Republic Act No. 6395, as amended
by Presidential Decrees Nos. 380 and 938.  It is true that since Commonwealth Act No. 120 (the
Corporation's original charter, which Republic Act No. 6395 repealed), the Corporation has
enjoyed a "preferential tax treatment," I seriously doubt, however, whether or not that
preference embraces "indirect taxes" as well— which, as I said, are no taxes for purposes of
claims for exemptions by the "indirect payor".  And albeit Presidential Decree No. 938 refers to
"all forms of taxes," I can not take that to include, as a matter of logic, "indirect taxes," and as I
discussed above, that scenario is not possible.

I quite agree that the legislative intent, based on a perusal of Republic Act No. 6395 and
subsequent amendatory 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 effective implementation of the
policy initiated" by its charter.  I submit, however, that that alone can not entitle the Corporation
to claim an exemption for indirect taxes.  I also believe that its existing exemption from direct
taxes is sufficient to serve the legislative purpose.

The fact that the National Power Corporation has been tasked with an enormous undertaking "to
improve," as the majority puts it, "the quality of life of the people" pursuant to constitutional
mandates is no reason, I believe, to include indirect taxes within the coverage of its preferential
tax treatment.  After all, it is exempt from direct taxes, and in fact that it will be made to
shoulder indirect taxes (which are no taxes) will not defeat its exemption or frustrate the intent
of both legislature and Constitution.

I do not think the majority can point to the various executive constructions as authorities for its
own construction.  First and foremost, with respect to then Commissioner Ruben Ancheta's
ruling of May 8, 1985 cited on pages 32-33 of the Decision, it is notable that in his BIR Ruling
No. 183-85, dated October 22,1985, he in fact reversed himself, I quote:

"In reply please be informed that after a re-study of Section 13, R. A. 6395 as
amended by P.D. No, 938, this Office is of the opinion, and so holds, that the scope
of the tax exemption privilege enjoyed by NPC under said section covers only taxes
for which it is directly liable and not on taxes which are merely shifted to it. (Phil.
Acetylene Co. v. Comm. of Internal Revenue, 20 SCRA 1056, 1967). Since
contractor's tax is directly 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 lack of legal basis. "
(italics added)[9]

In yet another ruling, then Commissioner Bienvenido Tan Likewise declared, in connection with
an apparent claim for refund by the Philippine Airlines, that "PAL's tax exemption is limited to
taxes for which PAL is directly liable, and that the payment of specific and ad valorem taxes on
petroleum products is a direct liability of the manufacturer or producer thereof..." [10]

Again, under BIR Ruling No. 152-86, the Bureau of Internal Revenue reiterated, as to the
National Power Corporation's claim for a refund, I quote:

. . . this Office has maintained the stand that your rax exemption privileges covers
only taxes for which you are directly liable.[11]

Per BIR Ruling No.70-043, dated August 27,1970, the Bureau likewise held that the term "all
forms of taxes" covers only direct taxes.[12]

In his letter addressed to former BIR Commissioner Tan, Atty. Reynoso Floreza, BIR Assistant
Commissioner for Legal, opposed Caltex Philippines' claim for a P58-million refund, and
although the Commissioner at that time hedged, he was later persuaded by Special Assistant
Abraham De la Viña, and in fact, instructed Atty. De la Viña to "prepare [the] corresponding
notice to NPC and Caltex''[13] to inform them that their claim has been denied (Although
strangely, he changed his mind later.)

Hence, I do not think that we can judiciously rely on executive construction because executive
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construction has been at best, erratic, and at worst, conflicting.

I do not find the majority's historical construction a reliable yardstick in this case, for if the
historical development of the law were any indication, the legislative intent is, on the contrary,
to exclude indirect taxes from the coverage of the National Power Corporation's tax exemption. 
Thus, under Commonwealth Act No. 120, the Corporation was 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
local governments.

Under Republic Act No. 6395, the National Power Corporation was further declared exempt:

(e) From all taxes, duties, fees, imposts, and all other charges imposed by the
Republic of the Philippines, its provinces, cities, municipalities and other
government agencies and instrumentalities, on all petroleum products used by the
Corporation . . .

By virtue of Presidential Decree No. 380, it was made exempt:

(d) from all taxes, duties, fees, imposts, and all other charges imposed directly or
indirectly by the Republic of the Philippines, 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.

By virtue however of Presidential Decree No. 938, reference to "indirect taxes" was omitted
Urns:

... 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, is hereby declared exempt from
the payment of all forms of taxes, duties, fees, imposts as well as costs and service
fees including filing fees, appeal bonds, supersedeas bonds, in any court or
administrative proceedings.

The deletion of "indirect taxes" in the Decree is, so I hold, significant, because if the intent of
the law were truly to exempt the National Power Corporation from so-called indirect taxes as
well, the law would have said so specifically, as it said so specifically in Presidential Decree No.
380.

I likewise do not think that the reference to the whereas clauses of Presidential Decree No. 938
is warranted, in particular, the following whereas clause:

WHEREAS, in the application of the tax exemption provisions of the Revised Charter, the non-
profit character of NPC has not been fully utilized because of the restrictive interpretations of
the taxing agencies of the government on said provisions;

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), and not, rather, to the scope of its exemption. 
Indeed, as Presidential Decree No. 938 specifically declares, "the Corporation, including its
subsidiaries, is hereby declared exempt...''[14]

The majority expresses the apprehension that if the National Power Corporation were to be
made to assume "indirect taxes," the latter will be forced to pass them on to the consuming
public.

First, and as Acetylene held, we do not even know if the payor will in fact "pass them on." "A
decision to absorb the burden of the tax is largely a matter of economics."[15] Furthermore:

In the long run a sales tax is probably shifted to the consumer, but during the period
when supply is being adjusted to changes in demand it must be in part absorbed.  In
practice the businessman will treat the levy as an added cost of operation and
distribute it over his sales as he would any other cost, increasing by more than the
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amount of the tax prices of goods demand for which will be least affected and
leaving other prices unchanged.  47 Harv. Ld.   Rev. 860, 869 (1934).[16]

It therefore appears to me that any talk of the public ultimately absorbing the tax is pure
speculation.

Second, it has typically been the bogeyman that business, with due respect, has invoked to avoid
the payment of tax. And to be sure, the populist allure of that argument has appealed to many,
yet it has probably also obscured what is as fundamental as protecting consumers - preserving
public revenue, the very lifeblood of the nation.  I am afraid that this is not healthy policy, and
what occurs to me — and what indeed leaves me very uncomfortable — is that by the stroke of
the pen, we would have in fact given away P13,750,214,639.00 (so it is said) of legitimate
government money.

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 account the tax component."[17]

I can not accept finally, what to me is an unabashed effort by the oil firms to evade taxes, the
arrangement (as I gather from the Decision) between the National Power Corporation and the
oil companies in which the former assigns its tax credit to the latter.  I also presume that this is
the natural consequence of the ''understanding,'' as I discussed above, to purchase oil' "net of
tax" between NAPOCOR and the oil firms, because logically, the latter will look for other
sources from which to recoup the taxes they had failed to shift and recover their losses as a
result.  According to the Decision, no tax is left unpaid because they have been pre-paid before
the oil is delivered to the National Power Corporation.  But whatever taxes are paid are in fact
wiped out because the subsequent credit transfer will enable the oil companies to recover the
taxes pre-paid.

According to the majority, "[t]his is not a case of tax evasion of the oil companies but a tax
relief for the NPC."[18]  The problem, precisely, is that while it is NPC which is entitled to "tax
relief," the arrangement between NPC and the oil companies has enabled instead the latter to
enjoy relief -- when relief is due to NPC alone.  The point still remains that no tax money
actually reaches our coffers because as I said, that arrangement enables them to wipe it out.  If
the NPC were the direct importer, I would then have no reason to object, after all, the NPC is
exempt from direct taxation and secondly, the money it is paying to finance its importations
belongs to the government.  The law, however, gave the exemption to NPC, not the oil
companies.

According to the Decision: "The amount of revenue received or expected to be received by this
tax exemption is, however, not going to any of the oil companies..."[19] and that "[t]here would
be no loss to the government."[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 means loss for the government.

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" at the top levels of NPC.  I can not however
attribute it, as the majority in all earnest attributes it, to the fact, far-fetched as it is, that the NPC
has not been allowed to enjoy exemption from indirect taxes.

Tax exemptions furthermore are a matter of personal privilege of the grantee.  It has been held
that as such, they can not be assigned, unless the statute granting them permits an assignment.
[22]

While "shifting the burden of tax" is a permissible method of avoiding a tax, evading it is a
totally different matter.  And while I agree that the National Power Corporation should be given
the widest financial assistance possible, assistance should not be an excuse for plain tax evasion,
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if not tax fraud, by Big Business, in particular, Big Oil.

(3) Postscripts

With all due respect, I do not think that the majority has appreciated enough the serious
implications of its decision—to the country, in particular, its shrinking coffers.  I do not think
that we are, after all, taking here of "simple'' billions, but in fact, billions upon billions in lost
revenue looming large.

I am also afraid that the majority is not quite aware that it is setting a precedent not only for the
oil companies but in fact, for the National Power Corporation's suppliers, importers, and
contractors.  Although I am not, as of this writing, aware of their exact number ot the precise
amount the National Power Corporation has spent in payment of supplies and equipment, I can
imagine that the Corporation's assets consisting of those supplies and equipment, machines and
machinery, are worth no fewer than billions.

With this precedent, there is no stopping indeed the NAPOCOR's suppliers, from makers of
storage tanks, steel towers, cables and cable poles, to builders of dikes, to layers of pipelines,
and pipes, from claiming the same privilege.

There is no stopping the NPC's contractors, from suppliers of cement for plant fixtures and
lumber for edifices, to the very engineers and technicians who designed them, from demanding
equal rights.

There will be no stopping the Corporation's transporters, from container van and rig owners to
suppliers of service vehicles of NPC executives, from demanding the privilege.

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 tax-exempt entity
and, following the theory of the majority, taxes that may be refundend?

What is, indeed, to slop all imagined claimants from demanding all imagined claims, since as
we are aware, the rule of taxation-and consequently, tax exemption-is uniform and equitable?
[23]

Of course, we have discussed NAPOCOR alone; we have not touched other tax-exempt entities,
say, the Marinduque Mining Corporation and Nonoc Mining Corporation.  Per existing records
and per reliable information, Caltex Philippines, between 1979 and 1986, successfully
recovered the total sum of P49,835,791.00.  In 1985, Caltex was said to have been refunded the
amount of P4,217,423.00 arising from the same tax arrangement with the Nonoc Miming
Corporation.

Again, what is stopping — by virtue of this decision — not only the oil firms but also
Marinduque's and Nonce's suppliers, importers, ridiculously, caterers, from claiming a future
refund?

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 charges imposed by the government on the petroleum products it
need or uses for its operation... "[24]  Firstly, under Presidential Decree No. 938, the supposed
tax exemption of the National Power Corporation covers "all forms of taxes."[25]  If therefore
"all forms of taxes" covers as well, indirect taxes because Presidential Decree No. 380
supposedly extended the Corporation's exemption to indirect taxes (and the majority "deems
Presidential Decree No. 380 to have been carried over to Presidential Decree No. 938"), then the
conclusion seems inescapable -- following the logic of the majority - that the Corporation is
exempt from all indirect taxes, on petroleum and any and all other products and services.

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 supported by statutory history, and the legislature's alleged intent
to grant the Corporation awesome exemptions.  If that were the case, the Corporation must
logically be exempt from all kinds of taxes payable.  Logically, the majority can not limit the
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sweep of its pronouncement by exempting the National Power Corporation from "indirect taxes
on petroleum" alone.  What is sauce for the goose (taxes on petroleum) is also sauce for the
gander (all other taxes).

I still would have reason for my fears.

I can not, in all candor, accept the majority's efforts, and going back to the Corporation's chaters,
to "carry over," in particular.  Section 13(d) of Presidential Decree No. 380, to Presidential
Decree No. 938.  First of all, if Presidential Decree No. 938 meant to absorb Presidential Decree
No. 380 it would have said so specifically, or at the very least, left it alone.  Obviously,
Presidential Decree No. 938 meant otherwise, to begin with, because it is precisely an
amendatory statute.  Secondly, a "carry-over" would have allowed this Court to make law, so
only it can fit in its theories.

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 value-added taxation, purportedly to maximize collection.  For this
year, the Bureau of Internal Revenue has a collection target of P130 billion, and sugnificantly, it
has been unrelenting in its tax and tax-consciousness drive.  I am not prepared to cite numbers
but I figure that the money it will lose by virtue of this Decision is a meaningful chunk off its
target, and a significant setback to the government's programs.

I am afraid that by this Decision, the majority has ignored the forest (the welfare of the entire
nation) in favor of a tree (the welfare of a government corporation).  The issue, in may opinion,
is not the viability of the National Power Corporation — as if the fate of the nation depended
alone on it — but the very survival of the Republic.  I am not of course to be mistaken as being
less concerned with NAPOCOR's fiscal chart.  The picture, as I see it however, is that we are in
fact assisting the oil companies, out of that alleged concern, in evading taxes at the expense,
needless to state, of our coffers.  I do not think that that is a question of legal hermeneutics, but
rather, of plain love of country.

[1] No. L-19707, August 17, 1967, 20 SCRA 1056.

[2] G. R. No. 87479, June 4, 1990.

[3] Supra, 7.

[4] Supra, 5.

[5] Under Presidential Decree No. 1931, the Minister of Finance could restore exemption.

[6] Decision, 42.

[7]Please note rliai under the 1987 Constitution, tax exemption may be granted alone by
Congress, (Const, art. VI, sec. 28, par. 4.) Unless and until Congress, however, repeals
Executive Order No. 93, the President may continue to grant exemptions.

[8] At 1063

[9]See Comm. on Accountability of Public Officers and Investigations. S. Rpt, 474, ist Cong.
2nd Sess. (1989), 4-5; also 13; also 25; also 29; italics in ibe original.

[10] Id., 4; also 15; also 25; also 39,40; italics in the original.

[11] Id., 16; italics in the original.

[12] Id., 24; also BIR Ruling No. 069-79 (1979).

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[13] Id., 31

[14] Pres. Decree No. 938, secc. 13; italics supplied.

[15] At 1064.

[16] Supra. fn. 15.

[17] Comm. on Accountability of Public Officers and Investigations. S. Rpt. 474, id., 61.

[18] Decision, 47.

[19] Supra, 51,

[20] Supra.

[21]
Sec Maceda v. Energy Regulatory Board, OR. Nra. 95203-05 and 95119-21, December 18,
1990.

[22] DE LEON, THE FUNDAMENTALS OF TAXATION 55 (1980 ed.).

[23] CONST, Art. Vl, sec,28 (1).

[24] Supra.

[25] Pres. Decree No. 938, supra, sec. 10

Source: Supreme Court E-Library | Date created: October 23, 2014


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