Nueva Vizcaya v. CE Casecnan Water
NEW DOCTRINEFacts
The Antecedents: CE Casecnan Water and Energy Company, Inc. (CE Casecnan) entered into a Build-Operate-Transfer (BOT) contract with the National Irrigation Administration (NIA) for an irrigation and hydroelectric power generation facility. The Province of Nueva Vizcaya assessed CE Casecnan for Real Property Tax (RPT) on its project infrastructure. CE Casecnan paid the RPT under protest after NIA failed to provide instructions. Procedural History: CE Casecnan and NIA filed protests and appeals against the RPT assessments. The Local Board of Assessment Appeals (LBAA) and the Central Board of Assessment Appeals (CBAA) initially denied the protests, finding the properties not exempt and the assessments valid. However, the CBAA later modified its decision, declaring the assessments null and void for lack of a valid tax ordinance. The Court of Tax Appeals (CTA) En Banc affirmed the CBAA's ruling that there was no valid tax ordinance but applied Executive Order (EO) No. 173, remanding the case for refund computation. The Province of Nueva Vizcaya appealed to the Supreme Court. The Petition: The Province of Nueva Vizcaya questioned the CTA's application of EO No. 173, arguing it only applied to unpaid taxes and that the assessments were valid based on Tax Ordinance No. 2000-003. The Province also sought to declare EO No. 173 unconstitutional. CE Casecnan argued for the applicability of EO No. 173 and its entitlement to a refund.
Issue(s)
Whether the assessment of Real Property Tax (RPT) against CE Casecnan for the years 2003 to 2005 is valid despite the alleged absence of a valid tax ordinance. Whether Executive Order (EO) No. 173 applies to RPT liabilities, including those that have already been paid, for power generation facilities of independent power producers under build-operate-transfer contracts with government-owned or -controlled corporations. Whether the Province of Nueva Vizcaya can question the constitutionality of EO No. 173 for the first time before the Supreme Court.
Ruling
The Supreme Court partially granted the petition, reversing the CTA's conclusion that the RPT assessments were null and void. It held that the assessments were valid. However, it affirmed the CTA's application of EO No. 173 and remanded the case to the Central Board of Assessment Appeals (CBAA) for the determination of the amount to be refunded to CE Casecnan, if any, considering the provisions of EO No. 173. The Court also ruled that the Province of Nueva Vizcaya could not question the constitutionality of EO No. 173 at that late stage.
Ratio Decidendi
On the validity of the RPT assessment: The Court held that the CBAA and CTA En Banc erred in concluding that the RPT assessments were null and void due to the absence of a valid tax ordinance. Local government units are vested with the power to levy taxes, including RPT, subject to guidelines set by Congress. The Province of Nueva Vizcaya had enacted Tax Ordinance No. 99-002 and Tax Ordinance No. 2000-003, which established the 1999 Schedule of Fair Market Values and assessment levels for the years 2000 to 2002. The Court ruled that the failure of the Province to update its schedule of fair market values and assessment levels for subsequent years did not prevent it from levying RPT using the existing assessment levels and fair market value schedule. The prescription for a general revision of assessments every three years is to ensure that the values reflect economic realities, but its non-compliance does not automatically invalidate ongoing RPT levies based on existing ordinances. Therefore, the assessment of RPT against CE Casecnan was deemed valid. On the applicability of Executive Order No. 173: The Court affirmed the applicability of EO No. 173, which reduces and condones real property taxes and penalties for power generation facilities of independent power producers under build-operate-transfer contracts with government-owned or -controlled corporations. It was undisputed that CE Casecnan was an IPP with a BOT contract with NIA, a GOCC. The Province's argument that EO No. 173 only applies to unpaid taxes was deemed unmeritorious. The Court emphasized that EO No. 173 does not distinguish between outstanding liabilities and those already paid. Section 1 of EO No. 173 clearly states that the reduced amount of RPT should be deducted from whatever amounts have already been paid by the IPP, implying that a refund is due if the amount paid exceeds the reduced liability. Thus, the CTA En Banc correctly remanded the case for the computation of the refund amount. On the constitutionality of EO No. 173: The Court ruled that the Province of Nueva Vizcaya raised the question of EO No. 173's constitutionality for the first time in its petition for review before the Supreme Court. It is a settled rule that constitutional issues must be raised at the earliest opportunity before a competent court. The Court of Tax Appeals (CTA) is the competent court to resolve such issues. Since the constitutionality was not raised in the pleadings before the CTA, it could not be considered at the trial or on appeal. Therefore, the Supreme Court could not consider the question of constitutionality at this late stage of the proceedings.
Main Doctrine
The assessment of Real Property Tax (RPT) against an Independent Power Producer (IPP) under a Build-Operate-Transfer (BOT) contract is valid even if the Province failed to enact new tax ordinances for the specific years, provided existing ordinances establishing fair market values and assessment levels were in place. However, Executive Order No. 173, which reduces and condones RPT for IPPs under BOT contracts, is applicable and mandates a refund for amounts paid in excess of the reduced liability.