NATIONAL POWER CORPORATION, PETITIONER, VS. THE PROVINCE OF ALBAY, ALBAY GOVERNOR ROMEO R. SALALIMA, AND ALBAY PROVINCIAL TREASURER ABUNDIO M. NUÑEZ, RESPONDENTS.

The National Power Corporation (NAPOCOR) questions the power of
the provincial government of Albay to collect real
property taxes on its properties located at Tiwi, Albay, amassed between June 11, 1984 up to March 10, 1987.

It appears that on March 14 and 15, 1989, the respondents caused
the publication of a notice of auction sale
involving the properties of NAPOCOR and the Philippine Geothermal Inc.
consisting of buildings, machines, and similar improvements standing on their
offices at Tiwi, Albay.  The amounts to be realized from this
advertised auction sale are supposed to be applied to the tax delinquencies
claimed, as and for, as we said, real property taxes.  The back taxes NAPOCOR has supposedly
accumulated were computed at P214,845,184.76.

NAPOCOR opposed the sale,
interposing in support of its non-liability Resolution No. 17-87, of the Fiscal
Incentives Review Board (FIRB), which 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]

as
well as the Memorandum of Executive Secretary Catalino
Macaraig, which also states thus:

Pursuant to Sections 1(f) and 2(e) of Executive Order No. 93,
series of 1986, FIRB Resolution No. 17-87, series of 1987, restoring, subject to certain conditions
prescribed therein, the tax and duty exemption privileges of NPC as provided
under Commonwealth Act No. 120, as amended, effective March 10, 1987, is hereby
confirmed and approved.^[2]

On March 10, 1989,
the Court resolved to issue a temporary restraining order directing the Albay provincial government “to CEASE AND DESIST from
selling and disposing of the NAPOCOR properties subject matter of this
petition.”^[3]
It appears, however, that “the temporary restraining order failed to reach
respondents before the scheduled bidding at 10:00
a.m. on March 30, 1989…[h]ence, the respondents proceeded with the bidding wherein
the Province of Albay was the highest
bidder.”^[4]

The Court gathers from the records that:

(1)            Under Section
13, of Republic Act No. 6395, amending Commonwealth Act No. 120 (charter of
NAPOCOR):

Section 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 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.^[5]

(2)            On August 24, 1975, Presidential Decree
No. 776 was promulgated, creating the Fiscal Incentives Review Board
(FIRB).  Among other things, the Board
was tasked as follows:

Section 2.  A Fiscal
Incentives Review Board is hereby
created for the purpose of determining what subsidies and tax exemptions should
be modified, withdrawn, revoked or suspended, which shall be composed of the
following officials:

Chairman           – Secretary
of Finance

Members           – Secretary
of Industry

– Director General
of the National Economic and Development Authority

– Commissioner of
Internal Revenue

– Commissioner of
Customs

The Board may recommend 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 above-cited statutory subsidies or tax exemption grants, except those
granted by the Constitution.  To attain
its objectives, the Board may require the assistance of any appropriate
government agency or entity.  The Board
shall meet once a month, or oftener at the call of the Secretary of Finance.^[6]

(3)            On June 11, 1984, Presidential Decree
No. 1931 was promulgated, prescribing, among other things, that:

Section 1.  The provisions of
special or general law to the contrary notwithstanding, all exemptions from the
payment of duties, taxes, fees, impost and other charges heretofore granted in
favor of government-owned or controlled corporations including their
subsidiaries are hereby withdrawn.^[7]

(4)            Meanwhile, FIRB
Resolution No. 10-85 was issued, “restoring” NAPOCOR’s
tax exemption effective June 11, 1984
to June 30, 1985;

(5)            Thereafter,
FIRB Resolution No. 1-86 was issued, granting tax exemption privileges to
NAPOCOR from July 1, 1985
and indefinitely thereafter;

(6)            Likewise,
FIRB Resolution No. 17-87 was promulgated, giving NAPOCOR tax exemption
privileges effective until March 10,
1987;^[8]

(7)            On December 17, 1986, Executive Order
No. 93 was promulgated by President Corazon Aquino,
providing, among other things, 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:^[9]

and

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.^[10]

(8)            On October 5, 1987, the Office of the
President issued the Memorandum, confirming NAPOCOR’s
tax exemption aforesaid.^[11]

The provincial government of Albay now
defends the auction sale in question on the theory that the various FIRB
issuances constitute an undue delegation of the taxing power and hence, null
and void, under the Constitution.  It is
also contended that, insofar as Executive Order No. 93 authorizes the FIRB to
grant tax exemptions, the same is of no
force and effect under the constitutional provision allowing the legislature
alone to accord tax exemption privileges.

It is to be pointed out that under Presidential Decree No. 776,
the power of the FIRB was merely to “recommend to the President of the
Philippines and for reasons of compatibility with the declared ecomomic policy, the withdrawal, modification, revocation
or suspension of the enforceability of any of the above-cited 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.^[12]
The question therefore is whether or not the various tax exemptions granted by
virtue of FIRB Resolutions Nos. 10-85, 1-86, and 17-87 are valid and
constitutional.

We shall deal with FIRB No. 17-87 later, but with respect to FIRB
Resolutions Nos. 10-85 and 1-86, we sustain the provincial government of Albay.

As we said, the FIRB, under its charter, Presidential Decree No.
776, had been empowered merely to “recommend” tax exemptions.  By itself, it could not have validly
prescribed exemptions or restore taxability. 
Hence, as of June 11, 1984
(promulgation of Presidential Decree No. 1931), NAPOCOR had ceased to enjoy tax
exemption privileges.

The fact that under
Executive Order No. 93, the FIRB has been given the prerogative to “restore tax
and/or duty exemptions withdrawn hereunder in whole or in part,”^[13] and “impose conditions for…tax and/or duty
exemption”^[14] is of no moment.  These provisions are prospective in character
and can not affect the Board’s past acts.

The Court is aware that
in its preamble, Executive Order No. 93 states:

WHEREAS, a number of affected entities, government and private were
able to get back their tax and duty exemption privileges through the review
mechanism implemented by the Fiscal Incentives Review Board (FIRB);^[15]

but
by no means can we say that it has “ratified” the acts of FIRB.  It is to misinterpret the scope of FIRB’s powers under Presidential Decree No. 776 to say that
it has.  Apart from that, Section 2 of
the Executive Order was clearly intended to amend Presidential Decree No. 776,
which means, mutatis mutandis, that FIRB did not have the right, in the first
place, to grant tax exemptions or withdraw existing ones.

Does Executive Order No. 93 constitute an unlawful delegation of legislative power?  It is to be stressed that the provincial
government of Albay admits that as of March
10, 1987 (the date
Resolution No. 17-87 was affirmed by the Memorandum of the Office of the
President, dated October 5, 1987), NAPOCOR’s tax
exemption had been validly restored. 
What it questions is NAPOCOR’s liability in
the interregnum between June 11, 1984, the date its tax privileges were withdrawn,
and March 10, 1987,
the date they were purportedly restored. 
To be sure, it objects to Executive Order No. 93 as allegedly a
delegation of legislative power, but only insofar as its (NAPOCOR’s)
June 11, 1984
to March 10, 1987
tax accumulation is concerned.  We therefor leave the issue of “delegation” to the future and its
constitutionality when the proper case arises. 
For the nonce, we leave Executive Order No. 93 alone, and so also, its
validity as far as it grants tax exemptions (through the FIRB) beginning
December 17, 1986, the date of its promulgation.

NAPOCOR must then be held
liable for the intervening years aforesaid. 
So it has been held:

xxx                     xxx                   xxx

The last issue to be resolved is whether or not the
private-respondent is liable for the fixed and deficiency percentage taxes in
the amount of P3,025.96 (i.e. for the period from January 1, 1946 to February
29, 1948) before the approval of its municipal franchises.  As aforestated, the
franchises were approved by the President only on February 24, 1948. 
Therefore, before the said date, the private respondent was liable for
the payment of percentage and fixed taxes as seller of light, heat, and
power–which, as the petitioner claims, amounted to P3,025.96.  The legislative franchise (R.A. No. 3843)
exempted the grantee from all kinds of taxes other than the 2% tax from the date the original franchise was
granted.  The exemption, therefore, did
not cover the period before the franchise was granted, i.e. before February 24, 1948.  x x x^[16]

Actually, the State has no reason to decry the taxation of NAPOCOR’s properties, as and by way of real property
taxes.  Real roperty
taxes, after all, form part and parcel of the financing apparatus of the
Government in development and nation-building, particularly in the local
government level.  Thus:

SEC. 86.  Distribution of pro­ceeds.
– (a) The proceeds of the real property tax, except as otherwise provided in
this Code, shall accrue to the province, city or municipality where the
property subject to the tax is situated and shall be applied by the respective
local government unit for its own use and benefit.

(b) Barrio shares in real property tax collections. – The annual
shares of the barrios in real property tax collections shall be as follows:

(1)   Five per cent of the
real property tax collections of the province and another five percent of the
collections of the municipality shall accrue to the barrio where the property
subject to the tax is situated.

(2)   In the case of the city,
ten per cent of the collections of the tax shall likewise accrue to the barrio
where the property is situated.

Thirty per cent of the barrio shares herein referred to may be
spent for salaries or per diems of the barrio officials and other
administrative expenses, while the remaining seventy per cent shall be utilized
for development projects approved by the Secretary of Local Government and
Community Development or by such committee created, or representatives
designated, by him.

SEC. 87.  Application of pro­ceeds.
– (a) The proceeds of the real property tax pertaining to the city and to the
municipality shall accrue entirely to their respective general funds.  In the case of the province, one-fourth
thereof shall accrue to its road and bridge fund and the remaining
three-fourths, to its general fund.

(b)          The entire
proceeds of the additional one per cent real property tax levied for the
Special Education Fund created under R.A. No. 5447 collected in the province or
city on real property situated in their respective territorial jurisdictions
shall be distributed as follows:

(1)   Collections in the
provinces:  Fifty per cent shall accrue
to the municipality where the property subject to the tax is situated; twenty
per cent shall accrue to the province; and thirty per cent shall be remitted to
the Treasurer of the Philippines to be expended exclusively for stabilizing the
Special Education Fund in municipalities, cities and provinces in accordance
with the provisions of Section seven of R.A. No. 5447.

(2)   Collections in the
cities:  Sixty per cent shall be retained
by the city; and forty per cent shall be remitted to the Treasurer of the Philippines
to be expended exclusively for stabilizing the special education fund in
municipalities, cities and provinces as provided under Section 7 of R.A. No.
5447.

However, any increase in the shares of provinces, cities and
municipalities from said additional tax accruing to their respective local
school boards commencing with fiscal year 1973-74 over what has been actually
realized during the fiscal year 1971-72 which, for purposes of this Code, shall
remain as the base year, shall be divided equally between the general fund and
the special education fund of the local government units concerned.  The Secretary of Finance may, however, at his
discretion, increase to not more than seventy-five per cent the amount that
shall accrue annually to the local general fund.

(c)          The proceeds of
all delinquent taxes and penalties, as well as the income realized from the
use, lease or other disposition of real property acquired by the province or
city at a public auction in accordance with the provisions of this Code, and
the proceeds of the sale of the delinquent real property or of the redemption
thereof, shall accrue to the province, city or municipality in the same manner
and proportion as if the tax or taxes had been paid in regular course.

(d)          The proceeds of
the additional real property tax on idle private lands shall accrue to the
respective general funds of the province, city and municipality where the land
subject to the tax is situated.^[17]

To all intents and purposes,
real property taxes are funds taken by the State with one hand and given to the
other.  In no measure can the Government
be said to have lost anything.

As a rule finally, claims
of tax exemption are construed strongly against the claimant.^[18] They must also be shown to exist clearly and
categorically, and supported by clear legal provisions.^[19]

Taxes are the lifeblood
of the nation.^[20] Their primary purpose is to generate funds
for the State to finance the needs of the citizenry and to advance the common
weal.

WHEREFORE, the petition is DENIED.  No costs. 
The auction sale of the petitioner’s properties to answer for real
estate taxes accumulated between June 11, 1984 through March 10, 1987 is hereby declared valid.

SO ORDERED.

Fernan, C.J., Narvasa,
Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Padilla, Bidin, Cortes, and Medialdea, JJ., concur.

Feliciano, J., in the result.

Gancayco and Griño-Aquino, JJ., on leave.

Regalado, J., no part; related to respondent’s counsel.

^[1]
Rollo, 9.

^[2]
Id., 10.

^[3]
Id., 31.

^[4]
Id., 79.

^[5]
Id., 28.

^[6]
Pres. Decree No. 776 (1975).

^[7]
Id., 43.

^[8]
Rollo, id., 67.

^[9]
Id., 64.

^[10]
Id., 65.

^[11]
See above, 2.

^[12]
CONST. (1973), art. VIII, sec. 17, par.
(4); also CONST. (1987), art. VI, sec. 28, par. (4).

^[13]
Exec. Order No. 93, sec. 2, Par. (a)

^[14]
Supra, par. (c).

^[15]
Rollo, id., 63.

^[16]
Commission of Internal Revenue v. Lingayen
Gulf Electric Power Co. Inc., No. L–23771, August 4, 1988, 164 SCRA 27.

^[17]
Pres. Decree No. 464, secs. 86, 87.

^[18]
Commissioner of Internal Revenue v.
Guerrero, No. L-20942, September 22, 1967, 21 SCRA 180.

^[19]
Supra.

^[20]
Commissioner of Internal Revenue v.
Pineda, No. L-22734, September 15, 1967, 21 SCRA 105.