ERNESTO M. MACEDA, PETITIONER, VS. HON. CATALINO MACARAIG, JR., IN HIS CAPACITY AS EXECUTIVE SECRETARY, OFFICE OF THE PRESIDENT, HON. VICENTE JAYME, ETC., ET AL., RESPONDENTS.

Just like lightning which
does strike the same place twice in some instances, this matter of indirect tax
exemption of the private respondent National Power Corporation (NPC) is brought
to this Court a second time. Unfazed by
the Decision We promulgated on May 31, 1991^[1] petitioner Ernesto Maceda asks this Court to
reconsider said Decision. Lest We be
criticized for denying due process to the petitioner, We have decided to take a
second look at the issues. In the
process, a hearing was held on July 9, 1992 where all parties presented their
respective arguments. Etched in this
Court’s mind are the paradoxical claims by both petitioner and private
respondents that their respective positions are for the benefit of the Filipino
people.

I

A chronological review of
the relevant NPC laws, specially with respect to its tax exemption provisions,
at the risk of being repetitious is, therefore, in order.

On November 3, 1936,
Commonwealth Act No. 120 was enacted creating the National Power Corporation, a
public corporation, mainly to develop hydraulic power from all water sources in
the Philippines.^[2] The sum of P250,000.00 was appropriated out of
the funds in the Philippine Treasury for the purpose of organizing the NPC and
conducting its preliminary work.^[3] The main source of funds for the NPC was the
flotation of bonds in the capital markets^[4] and these bonds

“x
x x issued under the authority of this Act shall be exempt from the payment of
all taxes by the Commonwealth of the Philippines, or by any authority, branch,
division or political subdivision thereof and subject to the provisions of the
Act of Congress, approved March 24, 1934, otherwise known as the Tydings
McDuffie Law, which facts shall be stated upon the face of said bonds. x x x.“^[5]

On June 24, 1938, C.A. No.
344 was enacted increasing to P550,000.00 the funds needed for the initial
operations of the NPC and reiterating the provision on the flotation of bonds
as soon as the first construction of any hydraulic power project was to be
decided by
the NPC Board.^[6] The provision on tax exemption in relation to
the issuance of the NPC bonds was neither amended nor deleted.

On September 30, 1939, C.A.
No. 495 was enacted removing the provision on the payment of the bond’s
principal and interest in “gold coins” but adding that payment could
be made in United States dollars.^[7] The provision on tax exemption in relation to
the issuance of the NPC bonds was neither amended nor deleted.

On June 4, 1949, Republic
Act No. 357 was enacted authorizing the President of the Philippines to
guarantee, absolutely and unconditionally, as primary obligor, the payment of
any and all NPC loans.^[8] He was also authorized to contract on behalf of the NPC with the International Bank
for Reconstruction and Development (IBRD) for NPC loans for the accomplishment
of NPC’s corporate objectives^[9] and for the reconstruction and development of
the economy of the country.^[10] It was expressly stated that:

“Any such loan or loans
shall be exempt from taxes, duties, fees, imposts, charges, contributions and restrictions
of the Republic of the Philippines, its provinces, cities and
municipalities.”^[11]

On the same date, R.A. No.
358 was enacted expressly authorizing the NPC, for the first time, to incur
other types of indebtedness, aside from indebtedness incurred by flotation of
bonds.^[12] As to the pertinent tax exemption provision,
the law stated as follows:

“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.”^[13]

On July 10, 1952, R.A. No.
813 was enacted amending R.A. No. 357 in that, aside from the IBRD, the
President of the Philippines was authorized to negotiate, contract and guarantee
loans with the Export-Import Bank of Washington, D.C., U.S.A., or any other
international financial institution.^[14] The tax provision for repayment of these loans,
as stated in R.A. No. 357, was not amended.

On June 2, 1954, R.A. No.
987 was enacted specifically to withdraw NPC’s tax exemption for real estate
taxes. As enacted, the law states as
follows:

“To facilitate payment of
its indebtedness, the National Power Corporation shall be exempt from all
taxes, except real property tax, and from all duties, fees, imposts, charges,
and restrictions of the Republic of the Philippines, its provinces, cities and
municipalities.”^[15]

On September 8, 1955, R.A.
No. 1397 was enacted directing that the NPC projects to be funded by the
increased indebtedness^[16] should bear the National Economic Council’s
stamp of approval. The tax exemption
provision related to the payment of this total indebtedness was not amended nor
deleted.

On June 13, 1958, R.A. No.
2055 was enacted increasing the total amount of foreign loans NPC was
authorized to incur to US$100,000,000.00 from the US$50,000,000.00 ceiling in
R.A. No. 357.^[17] The tax provision related to the repayment of
these loans was not amended nor deleted.

On June 13, 1958, R.A. No.
2058 was enacted fixing the corporate life of NPC to December 31, 2000.^[18] All laws or provisions of laws and executive
orders contrary to said R.A. No. 2058 were expressly repealed.^[19]

On June 18, 1960, R.A. No.
2641 was enacted converting the NPC from a public corporation into a stock
corporation with an authorized capital stock of P100,000,000.00 divided into
1,000,000 shares having a par value of P100.00 each, with said capital stock
wholly subscribed to by the Government.^[20] No tax exemption provision was incorporated in
said Act.

On June 17, 1961, R.A. No.
3043 was enacted increasing the above-mentioned authorized capital stock to
P250,000,000.00 with the increase to be wholly subscribed by the Government.^[21] No tax provision was incorporated in said Act.

On June 17, 1967, R.A. No.
4897 was enacted. NPC’s capital stock
was increased again to P300,000,000.00, the increase to be wholly subscribed by
the Government. No tax provision was
incorporated in said Act.^[22]

On September 10, 1971, R.A.
No. 6395 was enacted revising the charter of the NPC, C.A. No. 120, as
amended. Declared as primary objectives
of the nation were:

“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 needs
of industrial development and dispersal and the needs 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
the financial institutions.”^[23]

Section 4 of C.A. No. 120,
was renumbered as Section 8, and divided into Sections 8 (a) (Authority to
incur Domestic Indebtedness) and Section 8 (b) (Authority to Incur Foreign
Loans).

As to the issuance of bonds
by the NPC, Paragraph No. 3 of Section 8(a), states as follows:

“The bonds issued under
the authority of this subsection shall be exempt from the payment of all taxes
by the Republic of the Philippines, or by any authority, branch, division or
political subdivision thereof which facts shall be stated upon the face of said bonds. x x x.”^[24]

As to the foreign loans the
NPC was authorized to contract, Paragraph No. 5, Section 8(b), states as
follows:

“The loans, credits and
indebtedness contracted under this subsection and the payment of the principal,
interest and other charges thereon, as well as the importation of machinery,
equipment, materials and supplies by the Corporation, paid from the proceeds of
any loan, credit or indebtedness incurred under this Act, shall also be exempt
from all taxes, fees, imposts, other charges and restrictions, including import
restrictions, by the Republic of the Philippines, or any of its agencies and
political subdivisions.”^[25]

A new section was added to
the charter, now known as Section 13, R.A. No. 6395, which declares the
non-profit character and tax exemptions of NPC as follows:

“The Corporation shall be
nonprofit 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; 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.”^[26]

On November 7, 1972,
Presidential Decree No. 40 was issued declaring that the electrification of the
entire country was one of the primary concerns of the
country. And in connection with this,
it was specifically stated that:

“The setting up of
transmission line grids and the construction of associated
generation facilities in Luzon, Mindanao and major islands of the country,
including the Visayas, shall be the responsibility of the National Power Corporation (NPC) as the authorized implementing
agency of the State.”^[27]

“xxx                                       xxx                                           xxx

“It is the ultimate
objective of the State for the NPC to own and operate as a single integrated
system all generating facilities supplying electric power to the entire area
embraced by any grid set up by the NPC.”^[28]

On January 22, 1974, P.D.
No. 380 was issued giving extra powers to the NPC to enable it to fulfill its
role under aforesaid P.D. No. 40. Its
authorized capital stock was raised to P2,000,000,000.00,^[29] its total domestic indebtedness was pegged at a
maximum of P3,000,000,000.00 at any one time,^[30] and the NPC was authorized to borrow a total of
US$1,000,000,000.00^[31] in foreign loans.

The relevant tax exemption
provision for these foreign loans states as follows:

“The loans, credits and
indebtedness contracted under this subsection and the payment of the principal,
interest and other charges thereon, as well as the importation of machinery,
equipment, materials, supplies and services, by the Corporation, paid from the
proceeds of any loan, credit or indebtedness incurred under this Act, shall
also be exempt from all direct and indirect taxes, fees,
imposts, other charges and restrictions, including import restrictions
previously and presently imposed, and to be imposed by the Republic of the
Philippines, or any of its agencies and political subdivisions.”^[32] (Emphasis supplied)

Sections 13 (a) and 13 (d)
of R.A. No. 6395 were amended to read as follows:

“(a) From the payment of all taxes, duties, fees, imposts, charges and
restrictions to the Republic of the Philippines, its provinces, cities,
municipalities and other government agencies and instrumentalities including
the taxes, duties, fees, imposts and other charges provided for under the
Tariff and Customs Code of the Philippines, Republic Act Numbered Nineteen
Hundred Thirty-Seven, as amended, and as further amended by Presidential Decree
No. 34, dated October 27, 1972, and Presidential Decree No. 69, dated November
24, 1972, and costs and service fees in any court or administrative proceedings
in which it may be a party;

“xxx                                       xxx                                           xxx

“(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.”^[33] (Emphasis supplied)

On February 26, 1970, P.D.
No. 395 was issued removing certain restrictions in the NPC’s sale of
electricity to its different customers.^[34] No tax exemption provision was amended, deleted
or added.

On July 31, 1975, P.D. No.
758 was issued directing that P200,000,000.00 would be appropriated annually to
cover the unpaid subscription of the Government in the NPC authorized capital
stock, which amount would be taken from taxes accruing to the General Fund of
the Government, proceeds from loans, issuance of bonds, treasury bills or notes
to be issued by the Secretary of Finance for this particular purpose.^[35]

On May 27, 1976, P.D. No.
938 was issued

“(I)n
view of the accelerated expansion
programs for generation and transmission facilities which includes nuclear
power generation, the present capitalization of National Power Corporation
(NPC) and the ceilings for domestic and foreign borrowings are deemed
insufficient;^[36]

“xxx                                       xxx                                           xxx

“(I)n the application of
the tax exemption provisions of the Revised Charter, the non-profit character
of NPC has not been fully utilized because of restrictive interpretation of the
taxing agencies of the government on said provisions;^[37]

“xxx                                       xxx                                           xxx

“(I)n order to effect the
accelerated expansion program and attain the declared objective of total electrification
of the country, further amendments of certain sections of Republic Act No.
6395, as amended by Presidential Decrees Nos. 380, 395 and 758, have become
imperative;”^[38]

Thus NPC’s capital stock was
raised to P8,000,000,000.00,^[39] the total domestic indebtedness ceiling was
increased to P12,000,000,000.00,^[40] the total foreign loan ceiling was raised to
US$4,000,000,000.00^[41] and Section 13 of R.A. No. 6395, was amended to
read as follows:

“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.”^[42]

II

On the other hand, the
pertinent tax laws involved in this controversy are P.D. Nos. 882, 1177, 1931
and Executive Order No. 93 (S’ 86).

On January 30, 1976, P.D.
No. 882 was issued withdrawing the tax exemption of NPC with regard to its
imports as follows:

“WHEREAS, importations by
certain government agencies, including, government-owned or controlled
corporation, are exempt from the payment of customs duties and compensating
tax; and

“WHEREAS, in order to
reduce foreign exchange spending and to protect domestic industries, it is
necessary to restrict and regulate such tax-free importations.

“NOW, THEREFORE, I,
FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution; do
hereby decree and order the following:

“SECTION 1. All importations of any government agency, including
government-owned or controlled corporations which are exempt from the payment
of customs duties and internal revenue taxes, shall be subject to the prior
approval of
an Inter-Agency Committee which
shall insure compliance with the following conditions:

‘(a) That no such article of local manufacture
are available in sufficient quantity and comparable quality at reasonable
prices;

‘(b) That the articles to be imported are directly
and actually needed and will be used exclusively by the grantee of the
exemption for its operations and projects or in the conduct of its functions;
and

‘(c) The shipping documents covering the
importation are in the name of the grantee to whom the goods shall be delivered
directly by customs authorities.

“xxx                                       xxx                                           xxx

“SEC. 3. The Committee shall have the power to
regulate and control the tax-free importation of government agencies in
accordance with the conditions set forth in Section 1 hereof and the
regulations to be promulgated to implement the provisions of this Decree. Provided, however, That any government
agency or government-owned or controlled corporation, or any local manufacturer
or business firm adversely affected by any decision or ruling of the
Inter-Agency Committee may file an appeal with the Office of the President
within ten days from the date of notice thereof. x x x.

“xxx                                       xxx                                           xxx

“xxx                                       xxx                                           xxx

“SEC. 6. x x x. Section 13 of Republic Act No. 6395; x x x. and all similar provisions of all general and special laws and
decrees are hereby amended accordingly.

“xxx                                       xxx                                           xxx.”

On July 30, 1977, P.D. No.
1177 was issued as it was

“x x x declared the
policy of the State to formulate and implement a National Budget that is an
instrument of national development, reflective of national objectives,
strategies and plans. The budget shall
be supportive of and consistent with the
socio-economic development plan and shall be oriented towards the achievement
of explicit objectives and expected results, to ensure that funds are utilized
and operations are conducted effectively, economically and efficiently. The national budget shall be formulated
within the context of a regionalized government structure and of the totality
of revenues and
other receipts, expenditures and
borrowings of all levels of government-owned or controlled corporations. The budget shall likewise be prepared within
the context of the national long-term plan and of a long-term budget
program.”^[43]

In line with such policy,
the law decreed that

“All units of government,
including government-owned or controlled corporations, shall pay income taxes,
customs duties and other taxes and fees as are imposed
under revenue laws: provided, that
organizations otherwise exempted by law from the payment of such taxes/duties
may ask for a subsidy from the General Fund in the exact amount of taxes/duties
due: provided, further, that a
procedure shall be established by the Secretary of Finance and the Commissioner
of the Budget, whereby such subsidies shall automatically be considered as both
revenue and expenditure of the General Fund.”^[44]

The law also declared that
—

“[A]ll laws, decrees,
executive orders, rules and regulations or parts thereof which are inconsistent
with the provisions of the Decree are hereby repealed and/or modified
accordingly.^[45]

On June 11, 1984, most
likely due to the economic morass the Government found itself in after the Aquino
assassination, P.D. No. 1931 was issued to reiterate that:

“WHEREAS, Presidential
Decree No. 1177 has already expressly repealed the grant of tax privileges to
any government-owned or controlled corporation and all other units of
government;”^[46]

and
since there was a

“x x x need for
government-owned or controlled corporations and all other units of government
enjoying tax privileges to share in the requirements of development, fiscal or
otherwise, by paying the duties, taxes and other charges due from them.”^[47]

it
was decreed that:

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

SEC. 2. The President of the
Philippines and/or the Minister of Finance, upon the recommendation of the
Fiscal Incentives Review Board created under Presidential Decree No. 776, is
hereby empowered to restore, partially or totally, the exemptions withdrawn by
Section 1 above, or otherwise revise the scope and coverage of any applicable
tax and duty, taking into account, among others, any or all of the following:

1) The effect on the relative
price levels;

2) The relative contribution
of the corporation to the revenue generation effort;

3) The nature of the activity
in which the corporation is engaged in; or

4) In general the greater national interest to
be served.

x x x                                      x x x                                         x x x

SEC. 5. The provisions of Presidential Decree No.
1177 as well as all other laws, decrees, executive orders, administrative
orders, rules, regulations or parts thereof which are inconsistent with this
Decree are hereby repealed, amended or modified accordingly.

On December 17, 1986, E.O.
No. 93 (S’ 86) was issued with a view to correct presidential restoration or
grant of tax exemption to other government and private entities without benefit
of review by the Fiscal Incentives Review Board, to wit:

“WHEREAS, Presidential
Decree Nos. 1931 and 1955 issued on June 11, 1984 and October 14, 1984,
respectively, withdrew the tax and duty exemption
privileges, including the preferential tax treatment, of government and private
entities with certain exceptions, in order that the requirements of national
economic development, in terms of fiscal and other resources, may be met more
adequately;

“xxx                                       xxx                                           xxx

“WHEREAS, in addition to
those whose tax and duty exemption privileges were restored by the Fiscal
Incentives Review Board (FIRB), a number of affected entities, government and
private, had their tax and duty exemption privileges restored or granted by
Presidential action without benefit of review by the Fiscal Incentives Review
Board (FIRB);

“xxx                                       xxx                                           xxx.

“xxx                                       xxx                                           xxx.

Since it was decided that:

“[A]ssistance to government and private entities may be better
provided where necessary by explicit subsidy and budgetary support rather than
tax and duty exemption privileges if only to improve the fiscal monitoring
aspects of government operations.”

it
was thus ordered that:

“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
agreement to which the Government of the Republic of the Philippines is a
signatory;

c) those enjoyed by
enterprises registered with:

(i) the
Board of Investment 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 Instructions 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 commitment 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; and

d) in general, the greater national interest to be served.

“xxx                                       xxx                               xxx

“SECTION 5. All laws, orders, issuances, rules and
regulations or parts thereof inconsistent with this Executive Order are hereby
repealed or modified accordingly.”

E.O. No. 93 (S’86) was
decreed to be effective^[48] upon the promulgation of the rules and
regulations, to be issued by the Ministry of Finance.^[49] Said rules and regulations were promulgated and
published in the Official Gazette on February 23, 1987. These became effective on the 15th day after
publication^[50] in the Official Gazette,^[51] which 15th day was March 10, 1987.

III

Now, to some
definitions. We refer to the very
simplistic approach that all would-be lawyers, learn in their TAXATION I
course, which for convenient reference, is as follows:

Classifications
or Kinds of Taxes:

According
to Persons who pay or who bear the burden:

a. Direct Tax – that where the person supposed to pay the tax really
pays it, WITHOUT transferring the burden to someone else.

Examples: Individual income tax,
corporate income tax, transfer taxes (estate tax, donor’s tax), residence tax,
immigration tax

b. Indirect Tax – that where the tax is imposed
upon goods BEFORE reaching the
consumer who ultimately pays for it, not as a tax, but as a part of the
purchase price.

Examples: the internal revenue
indirect taxes (specific tax, percentage taxes, VAT) and the tariff and customs
indirect taxes (import duties, special import tax and other dues)^[52]

IV

To simplify matters, the issues raised by
petitioner in his motion for
reconsideration can be reduced to the
following:

(1) What kind of tax
exemption privileges did NPC have?

(2) For what periods in time
were these privileges being enjoyed?

(3) If there are taxes to be
paid, who shall pay for these taxes?

V

Petitioner contends that
P.D. No. 938 repealed the indirect tax exemption of NPC as the phrase “all
forms of taxes, etc.,” in its Section 10, amending Section 13, R.A. No.
6395, as amended by P.D. No. 380, does not expressly include “indirect
taxes.”

His point is not well-taken.

A chronological review of
the NPC laws will show that it has been the lawmaker’s intention that the NPC
was to be completely tax exempt from all forms of taxes — direct and indirect.

NPC’s tax exemption at first
applied to the bonds it was authorized to float to finance its operations upon
its creation by virtue of C.A. No. 120.

When the NPC was authorized
to contract with the IBRD for foreign financing, any loans obtained were to be
completely tax exempt.

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

NPC’s tax exemption from
real estate taxes was, however, specifically withdrawn by Rep. Act No. 987, as
above stated. The exemption was,
however, restored by R.A. No. 6395.

Section 13, R.A. No. 6395,
was very comprehensive in its enumeration of the tax exemptions allowed
NPC. Its Section 13(d) is the starting
point of this bone of contention among the parties. For easy reference, it is reproduced as follows:

“[T]he Corporation is
hereby declared exempt:

“xxx                                       xxx                                           xxx

“(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.”

P.D. No. 380 added the
phrase “directly or indirectly” to said Section 13(d), which now
reads as follows:

“xxx                                       xxx                                           xxx

“(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.” (Emphasis supplied)

Then came P.D. No. 938 which
amended Sec. 13(a), (b), (c) and (d) into one very simple paragraph as follows:

“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.”
(Emphasis supplied)

Petitioner reminds Us that:

“[I]t
must be borne in mind that
Presidential Decree Nos. 380 and 938 were issued by one man, acting as both the
Executive and Legislative.^[53]

“xxx                                       xxx                                           xxx

“[S]ince both
presidential decrees were made by the same person, it would have been very easy
for him to retain the same or similar language used in P.D. No. 380 in P.D. No.
938 if his intention were to preserve the indirect tax exemption of NPC.^[54]

Actually, P.D. No. 938
attests to the ingeniousness of then President Marcos no matter what his faults
were. It should be noted that Section
13, R.A. No. 6395, provided for tax exemptions for the following items:

13(a) : court or administrative proceedings;

13(b) : income, franchise, realty taxes;

13(c) : import of foreign goods required for its
operations and projects;

13(d) : petroleum products used in generation of
electric power:

P.D. No. 938 lumped up
13(b), 13(c) and 13(d) into the phrase “ALL FORMS OF TAXES, ETC.,”,
included 13(a) under the “as well as” clause and added PNOC
subsidiaries as qualified for tax exemptions.

This is the only conclusion
one can arrive at if he has read all the NPC laws in the order of enactment or
issuance as narrated above in part I hereof. President Marcos must have considered all the NPC statutes from C.A. No.
120 up to its latest amendments, P.D. No. 380, P.D. No. 395 and P.D. No. 759,
AND came up^[55] with a very simple Section 13, R.A. No. 6395,
as amended by P.D. No. 938.

One common theme in all
these laws is that the NPC must be enabled to pay its indebtedness^[56] which, as of P.D. No. 938, was P12 Billion in total domestic indebtedness, at any one time, and
US$4 Billion in total foreign loans at any one time. The NPC must be and has to be exempt from all forms of taxes if
this goal is to be achieved.

By virtue of P.D. No. 938,
NPC’s capital stock was raised to P8 Billion. It must be remembered that to pay for the government share in its
capital stock P.D. No. 758 was issued mandating that P200 Million would be
appropriated annually to cover the said unpaid subscription of the Government
in NPC’s authorized capital stock. And
significantly one of the sources of this annual appropriation of P200 million
is TAX MONEY accruing to the General Fund of the Government. It does not stand to reason then that former
President Marcos would order P200 Million to be taken partially or totally from
tax money to be used to pay the Government subscription in the NPC, on one
hand, and then order the NPC to pay all its indirect taxes, on the other.

The above conclusion that
then President Marcos lumped up Sections 13 (b), 13 (c) and 13 (d) into the
phrase “ALL FORMS OF” is supported by the
fact that he did not do the same for the tax exemption provision for the
foreign loans to be incurred.

The tax exemption on foreign
loans found in Section 8(b), R.A. No. 6395, reads as follows:

“The loans, credits and
indebtedness contracted under this subsection and the payment of the principal,
interest and other charges thereon, as well as the importation of machinery,
equipment, materials and supplies by the Corporation, paid from the proceeds of
any loan, credit or indebtedness incurred under this Act, shall also be exempt
from all taxes, fees, imposts, other charges and restrictions, including import
restrictions, by the Republic of the Philippines, or any of its agencies and
political subdivisions.”^[57]

The same was amended by P.D.
No. 380 as follows:

“The loans, credits and
indebtedness contracted under this subsection and the payment of the principal,
interest and other charges thereon, as well as the importation of machinery,
equipment, materials, supplies and services, by the Corporation, paid from the
proceeds of any loan, credit or indebtedness incurred under this Act, shall
also be exempt from all direct and indirect taxes, fees, imposts,
other charges and restrictions, including import restrictions previously
and presently imposed, and to be imposed by the Republic of the
Philippines, or any of its agencies and political subdivisions.”^[58] (Emphasis supplied)

P.D. No. 938 did not amend
the same^[59] and so the tax exemption provision in Section 8
(b), R.A. No. 6395, as amended by P.D. No. 380, still stands. Since the subject matter of this particular
Section 8 (b) had to do only with loans and machinery imported, paid for from
the proceeds of these foreign loans, THERE WAS NO OTHER SUBJECT MATTER TO
LUMP IT UP WITH, and so, the tax exemption stood as is — with
the express mention of “direct and indirect” tax exemptions. And this “direct and indirect” tax
exemption privilege extended to “taxes, fees, imposts, other charges x x x
to be imposed” in the future — surely, an indication that the
lawmakers wanted the NPC to be exempt from ALL FORMS of taxes — direct and
indirect.

It is crystal clear,
therefore, that NPC had been granted tax exemption privileges for both direct
and indirect taxes under P.D. No. 938.

VI

Five (5) years on into the
now discredited New Society, the Government decided to rationalize government
receipts and expenditures by formulating
and implementing a National Budget.^[60] The NPC, being a government owned and
controlled corporation had to shed off its tax exemption status privileges
under P.D. No. 1177. It was, however,
allowed to ask for a subsidy from the General Fund in the exact amount of
taxes/duties due.

Actually, much earlier, P.D.
No. 882 had already repealed NPC’s tax-free importation privileges. It allowed, however, NPC to appeal said
repeal with the Office of the President and to avail of tax-free importation
privileges under its Section 1, subject to the prior approval of an
Inter-Agency Committee created by virtue of said P.D. No. 882. It is presumed that the NPC, being the
special creation of the State, was allowed to continue its tax-free
importations.

This Court notes that
petitioner brought to the attention of this Court, the matter of the abolition
of NPC’s tax exemption privileges by P.D. No. 1177^[61] only in his Common Reply/Comment to Private
Respondents’ “Opposition” and “Comment” to Motion for
Reconsideration, four (4) months AFTER the Motion for Reconsideration had been
filed. During oral arguments heard on
July 9, 1992, he proceeded to discuss this tax exemption withdrawal as
explained by then Secretary of Justice Vicente Abad Santos in Opinion No. 133
(S’77).^[62] A careful perusal of petitioner’s Senate Blue
Ribbon Committee Report No. 474, the basis of the petition at bar, fails to
yield any mention of said P.D. No. 1177’s effect on NPC’s tax exemption
privileges.^[63] Applying by analogy Pulido vs. Pablo,^[64] the Court declares that the matter of P.D. No.
1177 abolishing NPC’s tax exemption privileges was not seasonably invoked^[65] by the petitioner.

Be that as it may, the Court
still has to discuss the effect of P.D. No. 1177 on the NPC tax exemption
privileges as this statute has been reiterated twice in P.D. No. 1931. The express repeal of tax privileges of any
government-owned or controlled corporation (GOCC). NPC included, was reiterated in the fourth whereas clause of P.D.
No. 1931’s preamble. The subsidy
provided for in Section 23, P.D. No. 1177, being inconsistent with Section 2,
P.D. No. 1931, was deemed repealed as the Fiscal Incentives Revenue Board was
tasked with recommending the partial or total restoration of tax exemptions
withdrawn by Section 1, P.D. No. 1931.

The
records before Us do not indicate whether or not NPC asked for the subsidy contemplated
in Section 23, P.D. No. 1177. Considering, however, that under Section 16 of P.D. No. 1177, NPC had to submit to the Office of the
President its request for the P200 million mandated by P.D. No. 758 to be appropriated annually by the
Government to cover its unpaid subscription to the NPC authorized capital stock
and that under Section 22, of the same P.D. No. NPC had to likewise submit to the Office of the President its
internal operating budget for review due to capital inputs of the government
(P.D. No. 758) and to the national government’s guarantee of the domestic and
foreign indebtedness of the NPC, it is
clear that NPC was covered by P.D. No. 1177.

There is reason to believe
that NPC availed of the subsidy granted tax exempt GOCCs that suddenly found
themselves having to pay taxes. It will
be noted that Section 23, P.D. No. 1177, mandated that the Secretary of Finance
and the Commissioner of the Budget had to establish the necessary procedures to
accomplish the tax payment/tax subsidy scheme of the Government. In effect, NPC did not put out any cash to
pay any tax as it got from the General Fund the amounts necessary to pay the
different revenue collectors for the taxes it had to pay.

In his Memorandum filed July
16, 1992, petitioner submits:

“[T]hat with the
enactment of P.D. No. 1177 on July 30, 1977, the NPC lost all its duty and tax
exemptions, whether direct or indirect. And so there was nothing to be withdrawn or to be restored under P.D. No. 1931, issued on June 11, 1984. This is evident from sections 1 and 2 of
said P.D. No. 1931 which reads:

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

‘Section 2. The President of the Philippines and/or the
Minister of Finance, upon the recommendation of the Fiscal Incentives Review
Board created under P.D. No. 776, is hereby empowered to restore partially or
totally, the exemptions withdrawn by section 1 above. xxx.’

“Hence, P.D. No. 1931 did
not have any effect nor did it change NPC’s status. Since it had already lost all its tax exemptions privilege with
the issuance of P.D. No. 1177 seven (7) years earlier or on July 30, 1977,
there were no tax exemptions to be withdrawn by section 1 which could later be
restored by the Minister of Finance upon the recommendation of the FIRB under
section 2 of P.D. No. 1931. Consequently, FIRB resolutions No. 10-85, and 1-86, were all illegally
and invalidly issued since FIRB acted beyond their statutory authority by
creating and not merely restoring the tax exempt status of NPC. The same is true for FIRB Res. No. 17-87
which restored NPC’s tax exemption under E.O. No. 93 which likewise abolished
all duties and tax exemptions but allowed the President upon recommendation of
the FIRB to restore those abolished.”

The Court disagrees.

Applying by analogy the
weight of authority that:

“When a revised and
consolidated act re-enacts in the same or substantially the same terms the
provisions of the act or acts so revised and consolidated, the revision and
consolidation shall be taken to be a continuation of the former act or acts,
although the former act or acts may be expressly repealed by the revised and
consolidated act; and all rights and liabilities under the former act or acts
are preserved and may be enforced.”^[66]

the
Court rules that when P.D. No. 1931 basically reenacted in its Section 1 the
first half of Section 23, P.D. No. 1177, on withdrawal of tax exemption
privileges of all GOCCs, said Section 1, P.D. No. 1931 was deemed to be a
continuation of the first half of Section 23, P.D. No. 1177, although the
second half of Section 23, P.D. No. 1177, on the subsidy scheme for former tax
exempt GOCCs, had been expressly repealed by Section 2 with its institution of
the FIRB recommendation of partial/total restoration of tax exemption
privileges.

The NPC tax exemption
privileges withdrawn by Section 1, P.D. No. 1931, were, therefore, the same NPC
tax exemption privileges withdrawn by Section 23, P.D. No. 1177. NPC could no longer obtain a subsidy for the
taxes it had to pay. It could, however,
under P.D. No. 1931, ask for a total restoration of its tax exemption
privileges, which it did, and the same were granted under FIRB Resolutions Nos.
10-85^[67] and 1-86^[68] as approved by the Minister of Finance.

Consequently, contrary to
petitioner’s submission, FIRB Resolutions Nos. 10-85 and 1-86 were both legally
and validly issued by the FIRB pursuant
to P.D. No. 1931. FIRB did not create
NPC’s tax exemption status but merely restored it.^[69]

Some quarters have expressed
the view that P.D. No. 1931 was illegally issued under the now rather infamous
Amendment No. 6^[70] as there was no showing that President Marcos’
encroachment on legislative prerogatives was justified under the then
prevailing condition that he could legislate “only if the Batasang
Pambansa ‘failed or was unable to act inadequately on any matter that in his
judgment required immediate action’ to meet the ‘exigency’.^[71]

Actually under said
Amendment No. 6, then President Marcos could issue decrees not only when the
Interim Batasang Pambansa failed or was unable to act adequately on any matter
for any reason that in his (Marcos’) judgment required immediate action, but
also when there existed a grave emergency or a threat or thereof. It must be remembered that said Presidential
Decree was issued only around nine (9) months after the Philippines
unilaterally declared a moratorium on its foreign debt payments^[72] as a result of the economic crisis triggered by
loss of confidence in the government brought about by the Aquino
assassination. The Philippines was then
trying to reschedule its debt payments.^[73] One of the big borrowers was the NPC^[74] which had a US$2.1 billion white elephant of a
Bataan Nuclear Power Plant on its back.^[75] From all indications, it must have been this
grave emergency of a debt rescheduling which
compelled Marcos to issue P.D. No. 1931, under his Amendment 6 power.^[76]

The rule, therefore, that
under the 1973 Constitution “no law granting a tax exemption shall be
passed without the concurrence of a majority of all the members of the Batasang
Pambansa”^[77] does not apply as said P.D. No. 1931 was not
passed by the Interim Batasang Pambansa but by then President Marcos under His
Amendment No. 6 power.

P.D. No. 1931 was,
therefore, validly issued by then President Marcos under his Amendment No. 6
authority.

Under E.O. No. 93 (S’86)
NPC’s tax exemption privileges were again clipped by, this time, President
Aquino. Its Section 2 allowed the NPC
to apply for the restoration of its tax exemption privileges. The same was granted under FIRB Resolution
No. 17-87^[78] dated June 24, 1987 which restored NPC’s tax
exemption privileges effective, starting March 10, 1987, the date of
effectivity of E.O. No. 93 (S’86).

FIRB Resolution No. 17-87
was approved by the President on October 5, 1987.^[79] There is no indication, however, from the
records of the case whether or not similar approvals were given by then
President Marcos for FIRB Resolutions Nos. 10-85 and 1?86. This has led some quarters to believe that a
“travesty of justice” might have occurred when the Minister of
Finance approved his own recommendation as Chairman of the Fiscal Incentives
Review Board as what happened in Zambales Chromite vs. Court of Appeals^[80] when the Secretary of Agriculture and Natural
Resources approved a decision earlier rendered by him when he was the Director
of Mines,^[81] and in Anzaldo vs. Clave^[82] where Presidential Executive Assistant Clave
affirmed, on appeal to Malacañang, his own decision as Chairman of the Civil Service Commission.^[83]

Upon
deeper analysis, the question
arises as to whether one can talk about “due process” being violated
when FIRB Resolutions Nos. 10-85 and 1-86 were approved by the Minister of
Finance when the same were recommended by him in his capacity as Chairman of
the Fiscal Incentives Review Board.^[84]

In Zambales Chromite
and Anzaldo,  two (2) different
parties were involved: mining groups
and scientist-doctors, respectively. Thus, there was a need for procedural due process to be followed.

In the case of the tax
exemption restoration of NPC, there is no other comparable entity — not even a
single public or private corporation — whose rights would be violated if NPC’s
tax exemption privileges were to be restored. While there might have been a MERALCO before Martial Law, it is of
public knowledge that the MERALCO generating plants were sold to the NPC in
line with the State policy that NPC was to be the State implementing arm for
the electrification of the entire country. Besides, MERALCO was limited to Manila and its environs. And as of 1984, there was no more MERALCO —
as a producer of electricity — which could have objected to the restoration of
NPC’s tax exemption privileges.

It should be noted that NPC
was not asking to be granted tax exemption privileges for the first time. It was just asking that its tax exemption
privileges be restored. It is for these
reasons that, at least in NPC’s case, the recommendation and approval of NPC’s
tax exemption privileges under FIRB Resolution Nos. 10-85 and 1-86, done by the
same person acting in his dual capacities as Chairman of the Fiscal Incentives
Review Board and Minister of Finance,
respectively, do not violate procedural due process.

While as above-mentioned,
FIRB Resolution No. 17?87 was approved by President Aquino on October 5,
1987, the view has been expressed that President Aquino, at least with regard to
E.O. 93 (S’86), had no authority to sub-delegate to the FIRB, which was
allegedly not a delegate of the legislature, the power delegated to her
thereunder.

A misconception must be
cleared up.

When E.O. No. 93 (S’86) was
issued, President Aquino was exercising both Executive and Legislative
powers. Thus, there was no power
delegated to her, rather it was she who was delegating her power. She delegated it to the FIRB, which, for
purposes of
E.O. No. 93 (S’86), is a delegate
of the legislature. Clearly, she was
not sub-delegating her power.

And E.O. No. 93 (S’86), as a
delegating law, was complete in itself — it set forth the policy to be carried
out^[85] and it fixed the standard to which the delegate
had to conform in the performance of his functions,^[86] both qualities having been enunciated by this
Court in Pelaez vs. Auditor General.^[87]

Thus, after all has been
said, it is clear that the NPC had its tax exemption privileges restored from
June 11, 1984 up to the present.

VII

The next question that projects itself is — who pays the tax?

The answer to the question
could be gleaned from the manner by which the
Commissaries of the Armed Forces of
the Philippines sell their goods.

By virtue of P.D. No. 83,^[88] veterans, members of the Armed Forces of the
Philippines, and their dependents buy groceries and other goods free of all
taxes and duties if bought from any AFP Commissaries.

In practice, the AFP
Commissary suppliers probably treat the unchargeable specific, ad valorem and
other taxes on the goods earmarked for AFP Commissaries as an added cost of operation and distribute it over the total units of
goods sold as it would any other cost. Thus, even the ordinary supermarket buyer probably pays for the
specific, ad valorem and other
taxes which these suppliers do not charge the AFP Commissaries.^[89]

IN MUCH THE SAME MANNER, it is clear
that private respondents-oil companies have to absorb the taxes they add to the
bunker fuel oil they sell to NPC.

It should be stated at this
juncture that, as early as May 14, 1954, the Secretary of Justice rendered an
opinion,^[90] wherein he stated and We quote:

“xxx                                                               xxx                                                       xxx

“Republic Act No. 358
exempts the National Power Corporation from ‘all taxes, duties, fees, imposts,
charges, and restrictions of the Republic of the Philippines and its provinces,
cities and municipalities.’ This exemption is broad enough to include all
taxes, whether direct or indirect, which the National Power Corporation may be
required to pay, such as the specific tax on petroleum products. That it is indirect is of no amount [should
be of no moment], for it is the corporation that ultimately pays it. The view which
refuses to accord the exemption because the tax is first paid by the seller
disregards realities and gives more Importance to form than to substance. Equity and law always exalt substance over
form.

“xxx                                                               xxx                                                       xxx

“Tax
exemptions are undoubtedly to be construed strictly but not so grudgingly as to
defeat their purpose. It is common
knowledge that many impositions taxpayers have to pay are in the nature of
indirect taxes. To limit the exemption
granted the National Power Corporation to direct taxes notwithstanding the
general and broad language of the statute will be to thwart the legislative
intention in giving exemption from all forms of taxes and impositions without
distinguishing between those that are direct and those that are not.”

(Emphasis
supplied)

In view of all the
foregoing, the Court rules and declares that the oil companies which supply
bunker fuel oil to NPC have to pay the taxes imposed upon said bunker fuel oil
sold to NPC. By the very nature of
indirect taxation, the economic burden of such taxation is expected to be
passed on through the channels of commerce to the user or consumer of the goods
sold. Because, however, the NPC has
been exempted from both direct and indirect taxation, the NPC must be held
exempted from absorbing the economic burden of indirect taxation. This means, on the one hand, that the oil
companies which wish to sell to NPC must absorb all or part of the economic
burden of the taxes previously paid to BIR, which they could shift to NPC if
NPC did not enjoy exemption from indirect taxes. This means also, on the other hand, that the NPC may refuse to
pay that part of the “normal” purchase price of bunker fuel oil which
represents all or part of the taxes previously paid by the oil companies to
BIR. If NPC nonetheless purchases such
oil from the oil companies — because to do so may be more convenient and ultimately
less costly for NPC than NPC itself importing and hauling and storing the oil
from overseas — NPC is entitled to be reimbursed by the BIR for that part of
the buying price of NPC which verifiably represents the tax already paid by the
oil company-vendor to the BIR.

It should be noted at this
point in time that the whole issue of who WILL pay these indirect taxes HAS
BEEN RENDERED moot and academic by E.O. No. 195 issued on June 16, 1987 by
virtue of which the ad valorem tax rate on bunker fuel oil was reduced
to ZERO (0%) PER CENTUM. Said E.O. No.
195 reads as follows:

“EXECUTIVE ORDER NO. 195

“AMENDING PARAGRAPH (b)
OF SECTION 128 OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, BY REVISING
THE EXCISE TAX RATES OF CERTAIN PETROLEUM PRODUCTS.

“XXX                                                                          XXX                                                                             XXX