SECOND DIVISION
BATANGAS POWER
CORPORATION,
Petitioner,
G.R.
No.
152675
April 28, 2004
-versus-
BATANGAS CITY AND
NATIONAL POWER CORPORATION,
Respondents.
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NATIONAL POWER
CORPORATION,
Petitioner,
G.R.
No.
152771
April 28, 2004
-versus-
HON.
RICARDO R.
ROSARIO, IN HIS CAPACITY AS PRESIDING JUDGE,RTC, BRANCH 66,
MAKATI CITY; BATANGAS CITY GOVERNMENT;ATTY. TEODULFO
DEGUITO,
IN HIS CAPACITY AS CHIEF LEGAL OFFICER,BATANGAS CITY; AND
BENJAMIN PARGAS, IN HIS CAPACITY AS CITYTREASURER, BATANGAS
CITY,
Respondents.
|
D E C I S I
O N
PUNO,
J.:chanroblesvirtuallawlibrary
Before us are two (2) consolidated
petitions for review under Rule 45 of the Rules of Civil Procedure,
seeking
to set aside the rulings of the Regional Trial Court of Makati in its
February
27, 2002 Decision in Civil Case No. 00-205.
The facts show that
in the early 1990’s, the country suffered from a crippling power
crisis.
Power outages lasted 8-12 hours daily and power generation was badly
needed.
Addressing the problem, the government, through the National Power
Corporation
(NPC), sought to attract investors in power plant operations by
providing
them with incentives, one of which was through the NPC’s assumption of
payment of their taxes in the Build Operate and Transfer (BOT)
Agreement.cralaw:red
On June 29, 1992, Enron
Power Development Corporation (Enron) and petitioner NPC entered into a
Fast Track BOT Project. Enron agreed to supply a power station to
NPC and transfer its plant to the latter after ten (10) years of
operation.
Section 11.02 of the BOT Agreement provided that NPC shall be
responsible
for the payment of all taxes that may be imposed on the power station,
except income taxes and permit fees. Subsequently, Enron assigned its
obligation
under the BOT Agreement to petitioner Batangas Power Corporation (BPC).cralaw:red
On September 13, 1992,
BPC registered itself with the Board of Investments (BOI) as a pioneer
enterprise. On September 23, 1992, the BOI issued a certificate
of
registration[1]
to BPC as a pioneer enterprise entitled to a tax holiday for a period
of
six (6) years. The construction of the power station in
respondent
Batangas City was then completed. BPC operated the station.chanrobles virtual law library
On October 12, 1998,
Batangas City (the city, for brevity), thru its legal officer Teodulfo
A. Deguito, sent a letter to BPC demanding payment of business taxes
and
penalties, commencing from the year 1994 as provided under Ordinance XI
or the 1992 Batangas City Tax Code.[2]
BPC refused to pay, citing its tax-exempt status as a pioneer
enterprise
for six (6) years under Section 133 (g) of the Local Government Code
(LGC).[3]
On April 15, 1999, city
treasurer Benjamin S. Pargas modified the city’s tax claim[4]
and demanded payment of business taxes from BPC only for the years
1998-1999.
He acknowledged that BPC enjoyed a 6-year tax holiday as a pioneer
industry
but its tax exemption period expired on September 22, 1998, six (6)
years
after its registration with the BOI on September 23, 1992. The city
treasurer
held that thereafter BPC became liable to pay its business taxes.cralaw:red
BPC still refused to
pay the tax. It insisted that its 6-year tax holiday commenced
from
the date of its commercial operation on July 16, 1993, not from the
date
of its BOI registration in September 1992.[5]
It furnished the city with a BOI letter[6]
wherein BOI designated July 16, 1993 as the start of BPC’s income tax
holiday
as BPC was not able to immediately operate due to force majeure.
BPC claimed that the local tax holiday is concurrent with the income
tax
holiday. In the alternative, BPC asserted that the city should
collect
the tax from the NPC as the latter assumed responsibility for its
payment
under their BOT Agreement.cralaw:red
The matter was not put
to rest. The city legal officer insisted[7]
that BPC’s tax holiday has already expired, while the city argued that
it directed its tax claim to BPC as it is the entity doing business in
the city and hence liable to pay the taxes. The city alleged that
it was not privy to NPC’s assumption of BPC’s tax payment under their
BOT
Agreement as the only parties thereto were NPC and BPC.cralaw:red
BPC adamantly refused
to pay the tax claims and reiterated its position.[8]
The city was likewise unyielding on its stand.[9]
On August 26, 1999, the NPC intervened.[10]
While admitting assumption of BPC’s tax obligations under their BOT
Agreement,
NPC refused to pay BPC’s business tax as it allegedly constituted an
indirect
tax on NPC which is a tax-exempt corporation under its Charter.[11]chanrobles virtual law library
In view of the deadlock,
BPC filed a petition for declaratory relief[12]
with the Makati Regional Trial Court (RTC) against Batangas City and
NPC,
praying for a ruling that it was not bound to pay the business taxes
imposed
on it by the city. It alleged that under the BOT Agreement, NPC
is
responsible for the payment of such taxes but as NPC is exempt from
taxes,
both the BPC and NPC are not liable for its payment. NPC and
Batangas
City filed their respective answers.cralaw:red
On February 23, 2000,
while the case was still pending, the city refused to issue a permit to
BPC for the operation of its business unless it paid the assessed
business
taxes amounting to close to P29M.cralaw:red
In view of this supervening
event, BPC, whose principal office is in Makati City, filed a
supplemental
petition[13]
with the Makati RTC to convert its original petition into an action for
injunction to enjoin the city from withholding the issuance of its
business
permit and closing its power plant. The city opposed on the
grounds
of lack of jurisdiction and lack of cause of action.[14]
The Supplemental Petition was nonetheless admitted by the Makati RTC.cralaw:red
On February 27, 2002,
the Makati RTC dismissed the petition for injunction. It held
that:
(1) BPC is liable to pay business taxes to the city; (2) NPC’s
tax
exemption was withdrawn with the passage of R.A. No. 7160 (The Local
Government
Code); and, (3) the 6-year tax holiday granted to pioneer
business
enterprises starts on the date of registration with the BOI as provided
in Section 133 (g) of R.A. No. 7160, and not on the date of its actual
business operations.[15]
BPC and NPC filed with
this Court a petition for review on certiorari[16]
assailing the Makati RTC decision. The petitions were
consolidated
as they impugn the same decision, involve the same parties and raise
related
issues.[17]chanrobles virtual law library
In G.R. No. 152771,
the NPC contends:
I
RESPONDENT
COURT
ACTED
WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION
WHEN IT ARBITRARILY AND CAPRICIOUSLY RULED THAT PETITIONER NPC HAS LOST
ITS TAX EXEMPTION PRIVILEGE BECAUSE SECTION 193 OF R.A. 7160 (LOCAL
GOVERNMENT
CODE) HAS WITHDRAWN SUCH PRIVILEGE DESPITE THE SETTLED JURISPRUDENCE
THAT
THE ENACTMENT OF A LEGISLATION, WHICH IS A GENERAL LAW, CANNOT REPEAL A
SPECIAL LAW AND THAT SECTION 13 OF R.A. 6395 (NPC LAW) WAS NOT
SPECIFICALLY
MENTIONED IN THE REPEALING CLAUSE IN SECTION 534 OF R.A. 7160, AMONG
OTHERS.
II
RESPONDENT
COURT
ACTED
WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION
WHEN IT ARBITRARILY AND CAPRICIOUSLY OMITTED THE CLEAR PROVISION OF
SECTION
133, PARAGRAPH (O) OF R.A. 7160 WHICH EXEMPTS “NATIONAL GOVERNMENT, ITS
AGENCIES
AND INSTRUMENTALITIES” FROM THE IMPOSITION OF “TAXES, FEES OR CHARGES
OF
ANY KIND.”
III
RESPONDENT
COURT
ACTED
WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION
WHEN IT ERRONEOUSLY AND CAPRICIOUSLY ADMITTED BPC’s SUPPLEMENTAL
PETITION
FOR INJUNCTION NOTWITHSTANDING THAT IT HAD NO JURISDICTION OVER THE
PARTY
(CITY GOVERNMENT OF BATANGAS) SOUGHT TO BE ENJOINED.
In G.R. No. 152675,
BPC also contends that the trial court erred: 1) in holding it liable
for
payment of business taxes even if it is undisputed that NPC has already
assumed payment thereof; and, 2) in ruling that BPC’s 6-year tax
holiday
commenced on the date of its registration with the BOI as a pioneer
enterprise.cralaw:red
The issues for resolution
are:
1. whether BPC’s
6-year tax holiday commenced on the date of its BOI registration as a
pioneer
enterprise or on the date of its actual commercial operation as
certified
by the BOI;
2. whether the
trial court had jurisdiction over the petition for injunction against
Batangas
City; and,
3. whether NPC’s
tax exemption privileges under its Charter were withdrawn by Section
193
of the Local Government Code (LGC).cralaw:red
We find no merit in
the petition.cralaw:red
On the first issue,
petitioners BPC and NPC contend that contrary to the impugned decision,
BPC’s 6-year tax holiday should commence on the date of its
actual
commercial operations as certified to by the BOI, not on the date of
its
BOI registration.chanrobles virtual law library
We disagree. Sec.
133 (g) of the LGC, which proscribes local government units (LGUs) from
levying taxes on BOI-certified pioneer enterprises for a period of six
years from the date of registration, applies specifically to taxes
imposed
by the local government, like the business tax imposed by Batangas City
on BPC in the case at bar. Reliance of BPC on the provision of
Executive
Order No. 226,[18]
specifically Section 1, Article 39, Title III, is clearly misplaced as
the six-year tax holiday provided therein which commences from the date
of commercial operation refers to income taxes imposed by the national
government on BOI-registered pioneer firms. Clearly, it is the
provision
of the Local Government Code that should apply to the tax claim of
Batangas
City against the BPC. The 6-year tax exemption of BPC should thus
commence from the date of BPC’s registration with the BOI on July 16,
1993
and end on July 15, 1999.cralaw:red
Anent the second issue,
the records disclose that petitioner NPC did not oppose BPC’s
conversion
of the petition for declaratory relief to a petition for injunction or
raise the issue of the alleged lack of jurisdiction of the Makati RTC
over
the petition for injunction before said court. Hence, NPC is estopped
from
raising said issue before us. The fundamental rule is that a
party
cannot be allowed to participate in a judicial proceeding, submit the
case
for decision, accept the judgment only if it is favorable to him but
attack
the jurisdiction of the court when it is adverse.[19]
Finally, on the third
issue, petitioners insist that NPC’s exemption from all taxes under its
Charter had not been repealed by the LGC. They argue that NPC’s
Charter
is a special law which cannot be impliedly repealed by a general and
later
legislation like the LGC. They likewise anchor their claim of
tax-exemption
on Section 133 (o) of the LGC which exempts government
instrumentalities,
such as the NPC, from taxes imposed by local government units (LGUs),
citing
in support thereof the case of Basco v. PAGCOR.[20]chanrobles virtual law library
We find no merit in
these contentions. The effect of the LGC on the tax exemption
privileges
of the NPC has already been extensively discussed and settled in the
recent
case of National Power Corporation v. City of Cabanatuan.[21]
In said case, this Court recognized the removal of the blanket
exclusion
of government instrumentalities from local taxation as one of the most
significant provisions of the 1991 LGC. Specifically, we stressed
that Section 193 of the LGC,[22]
an express and general repeal of all statutes granting exemptions from
local taxes, withdrew the sweeping tax privileges previously enjoyed by
the NPC under its Charter. We explained the rationale for this
provision,
thus:
In recent years, the
increasing social challenges of the times expanded the scope of state
activity,
and taxation has become a tool to realize social justice and the
equitable
distribution of wealth, economic progress and the protection of local
industries
as well as public welfare and similar objectives. Taxation
assumes
even greater significance with the ratification of the 1987
Constitution.
Thenceforth, the power to tax is no longer vested exclusively on
Congress;
local legislative bodies are now given direct authority to levy taxes,
fees and other charges pursuant to Article X, section 5 of the 1987
Constitution,
viz:
Section 5.- Each
Local Government unit shall have the power to create its own sources of
revenue, to levy taxes, fees and charges subject to such guidelines and
limitations as the Congress may provide, consistent with the basic
policy
of local autonomy. Such taxes, fees and charges shall accrue
exclusively
to the Local Governments.chanrobles virtual law library
This paradigm shift
results from the realization that genuine development can be achieved
only
by strengthening local autonomy and promoting decentralization of
governance.
For a long time, the country’s highly centralized government structure
has bred a culture of dependence among local government leaders upon
the
national leadership. It has also “dampened the spirit of
initiative,
innovation and imaginative resilience in matters of local development
on
the part of local government leaders. The only way to shatter
this
culture of dependence is to give the LGUs a wider role in the delivery
of basic services, and confer them sufficient powers to generate their
own sources for the purpose. To achieve this goal, x x
x
the 1987 Constitution mandates Congress to enact a local government
code
that will, consistent with the basic policy of local autonomy, set the
guidelines and limitations to this grant of taxing powers x x x.”
To recall, prior to
the enactment of the x x x Local Government Code x x x,
various
measures have been enacted to promote local autonomy.
x
x x Despite these initiatives, however, the shackles
of dependence on the national government remained. Local
government
units were faced with the same problems that hamper their capabilities
to participate effectively in the national development efforts, among
which
are: (a) inadequate tax base, (b) lack of
fiscal
control over external sources of income, (c) limited authority to
prioritize and approve development projects, (d) heavy dependence
on external sources of income, and (e) limited supervisory
control
over personnel of national line agencies.chanrobles virtual law library
Considered as the most
revolutionary piece of legislation on local autonomy, the LGC
effectively
deals with the fiscal constraints faced by LGUs. It widens the
tax
base of LGUs to include taxes which were prohibited by previous
laws
x x x.cralaw:red
Neither can the NPC
successfully rely on the Basco case[23]
as this was decided prior to the effectivity of the LGC, when there was
still no law empowering local government units to tax instrumentalities
of the national government.cralaw:red
Consequently, when NPC
assumed the tax liabilities of the BPC under their 1992 BOT Agreement,
the LGC which removed NPC’s tax exemption privileges had already been
in
effect for six (6) months. Thus, while BPC remains to be the
entity
doing business in said city, it is the NPC that is ultimately liable to
pay said taxes under the provisions of both the 1992 BOT Agreement and
the 1991 Local Government Code.cralaw:red
IN VIEW WHEREOF, the
petitions are DISMISSED. No costs.cralaw:red
SO ORDERED.cralaw:red
Quisumbing,
Austria-Martinez,
Callejo, Sr., and Tinga, JJ.,
concur.
____________________________
Endnotes:
[1]
G.R. No. 152771 Rollo, p. 66.chanrobles virtual law library
[2]
In the amount of P34, 551, 543.96; G.R. No. 152675 Rollo, p. 60.chanrobles virtual law library
[3]
Republic Act No. 7160 which took effect on January 1, 1992; See letter
of BPC President Miguel T. Gaffud, Jr.; G.R. No. 152675 Rollo, p. 61.
[4]
Amount of business tax assessed was lowered to P28, 689, 732.41 as of
July
1999, based on the gross receipt of every preceding year; G.R. No.
152675
Rollo, p. 62.
[5]
See BPC Letter, G.R. No. 152675 Rollo, p. 63.chanrobles virtual law library
[6]
G.R. No. 152771 Rollo, p. 67; BOI cited Article 7 (14) of Executive
Order
226 to support its decision to designate a later date.
[7]
G.R. No. 152675 Rollo, p. 64.chanrobles virtual law library
[8]
BPC Letter, dated July 21, 1999; G.R. No. 152675 Rollo, pp. 65-66.
[9]
See Letter of City Legal Officer; G.R. No. 152675 Rollo, p. 67.chanrobles virtual law library
[10]
See Letter of NPC OIC Comie P. Doromal, G.R. No. 152675 Rollo, pp.
68-70.
[11]
Under Section 13, Republic Act No. 6395, as amended.chanrobles virtual law library
[12]
Docketed as Civil Case No. 00-205 and raffled to RTC Branch 66, Makati
City, presided by public respondent Judge Ricardo R. Rosario; G.R. No.
152771 Rollo, pp. 58-65.
[13]
G.R. No. 152771 Rollo, pp. 89-94.chanrobles virtual law library
[14]
G.R. No. 152771 Rollo, pp. 97-99.
[15]
Decision, id., pp. 49-57.chanrobles virtual law library
[16]
Docketed as G.R. No. 152675.chanrobles virtual law library
[17]
October 2, 2002 Resolution, G.R. No. 152771 Rollo, p. 130.chanrobles virtual law library
[18]
Otherwise known as the 1987 Omnibus Investment Code, as amended in 1995
by Republic Act No. 7918.
[19]
Roxas vs. Court of Appeals, 391 SCRA 351 (2002).chanrobles virtual law library
[20]
197 SCRA 51 (1991).chanrobles virtual law library
[21]
Promulgated April 9, 2003, G.R. No. 149110.chanrobles virtual law library
[22]
“Sec. 193. Withdrawal of Tax Exemption Privileges. -
Unless otherwise provided in this Code, tax exemptions or incentives
granted
to, or presently enjoyed by all persons, whether natural or juridical,
including government-owned or controlled corporations, except local
water
districts, cooperatives duly registered under R.A. No. 6938, non-stock
and non-profit hospitals and educational institutions, are hereby
withdrawn
upon the effectivity of this Code.”chanrobles virtual law library
Section
534, the repealing clause of the LGC, also states that all general and
special laws, acts, city charters, decrees, executive orders,
proclamations
and administrative regulations or parts thereof inconsistent with the
provisions
of this Code are repealed or modified accordingly.
[23]
Supra. |