National Power Corporation v. Provincial Government of Bulacan
REITERATIONFacts
The Antecedents: The National Power Corporation (NPC), a government-owned and controlled corporation (GOCC), received Notices of Assessment for Real Property Tax (RPT) from the Municipality of Norzagaray, Bulacan, for its Angat Hydro-Electric Power Plant properties. The assessments covered periods from 1996 to 2005 for machineries and 1997 to 2006 for land. NPC questioned these assessments before the Local Board of Assessment Appeals (LBAA), claiming exemption for the machineries under Section 234(c) of the Local Government Code (LGC) as they were allegedly used exclusively for electricity generation and transmission. NPC also argued that the assessment level for the land was erroneously high. Procedural History: The Municipal Assessor admitted a mistake in the land assessment level and issued a revised notice. However, the assessor insisted on payment under protest for the machineries assessment. The LBAA ruled that payment under protest is mandatory and denied NPC's petition. The Central Board of Assessment Appeals (CBAA) affirmed the LBAA's decision, finding that the machineries were not exclusively used for power generation and that the dam complex was multi-purpose, serving irrigation and water supply needs. The Court of Tax Appeals (CTA) En Banc denied NPC's petition, reiterating that failure to pay under protest rendered the protest and subsequent appeal premature. The CTA En Banc affirmed the RPT assessment. The Petition: NPC filed a Petition for Review before the Supreme Court, arguing that payment under protest was not required as it was questioning the very authority of the assessor to assess exempt properties, not the correctness of the assessment. NPC also maintained that the machineries were exempt and that the land assessment should be based on the revised amount.
Issue(s)
Whether compliance with the payment under protest requirement in Section 252 of the LGC is a condition sine qua non to question the assessment of the local assessor before the LBAA. Whether the properties listed in the Machineries Assessment are exempt from RPT. Whether the properties listed in the Land Assessment are exempt from RPT.
Ruling
The Supreme Court denied the Petition for Review. It set aside the Court of Tax Appeals En Banc's Decision and Resolution. The Court ruled that NPC is liable to pay the Municipality of Norzagaray, Bulacan, real property tax over the Machineries Assessment for the period from January 1, 1996, to December 31, 2005, in the amount of PHP 113,960,000.00, and over the Land Assessment covering the period of January 1, 1996, to December 31, 2006, in the reduced amount of PHP 6,485,422.60. The Temporary Restraining Order issued by the Court was lifted.
Ratio Decidendi
On the issue of payment under protest: The Court reiterated that a claim for exemption from real property tax, whether full or partial, is a question of fact pertaining to the reasonableness or correctness of the assessment, not the legality of the assessment or the authority of the assessor. Therefore, compliance with the 'payment under protest' requirement under Section 252 of the Local Government Code is mandatory. NPC's failure to pay the tax under protest rendered its protest and subsequent appeal to the LBAA premature, as it failed to exhaust administrative remedies. The Court clarified that the cases of Ty v. Trampe and Olivarez v. Marquez, relied upon by NPC, were distinguished as they involved questions of law concerning the assessor's authority, unlike the present case which primarily involved factual questions about the use of the properties for exemption purposes. On the exemption of properties in the Machineries Assessment: The Court ruled that the properties listed in the Machineries Assessment are not exempt from real property tax. To be exempt under Section 234(c) of the LGC, the machineries and equipment must be actually, directly, and exclusively used by GOCCs engaged in power generation and transmission. The Court found that the eleven properties assessed (main dam, spillway, taintor gates, diversion canals, tailrace tunnel, penstock, auxiliary draft tube gates, draft tube gates and hoists, power tunnel, power intake structure, surge tunnel, and power intake service and bulkhead gates) were described by the LBAA and CBAA as multi-purpose structures used for irrigation, flood control, and water supply for Metro Manila, in addition to power generation. This multi-purpose use, and the fact that some structures were for maintenance and safety, negated the requirement of exclusive use for power generation and transmission. The Court also found no basis for exemption under Section 234(e) for pollution control and environmental protection, as NPC failed to present evidence of such exclusive use. On the exemption of properties in the Land Assessment: The Court found NPC's claim for exemption as a 'government instrumentality' misplaced. NPC is a GOCC, and its exemption from local taxes, if any, was repealed by Section 193 of the LGC. The Court noted that under Sections 216 and 218 of the LGC, GOCCs rendering essential public services in power generation and transmission are classified as special classes of real property subject to a 10% assessment level. The Court also acknowledged the amended statement of account for the Land Assessment, reducing the RPT due to PHP 6,485,422.60, and upheld this reduced assessment.
Main Doctrine
A claim for exemption from real property tax, whether full or partial, does not question the authority of the local assessor to assess but pertains to the reasonableness or correctness of the assessment, thus requiring compliance with the 'payment under protest' requirement under Section 252 of the Local Government Code before an appeal can be entertained.