G.R. No. 88291 June 8, 1993

G.R. No.
88291 June 8, 1993
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.
Angara, Abello, Concepcion & Cruz for respondent Pilipinas Shell Petroleum
Corporation.
Siguion Reyna, Montecillo & Ongsiako for Caltex.
FACTS:
The National Power Corporation (NPC) stands as a cornerstone in the

Philippines' pursuit of energy development. Established through Commonwealth Act No.
120 on November 3, 1986, the NPC was tasked with harnessing hydraulic power and
diversifying energy sources. Over the years, the corporation's operations have been
subject to a dynamic legislative framework governing tax and duty exemptions. This
essay traces the evolution of tax exemption privileges granted to the NPC, highlighting
key legislative milestones that have shaped its financial standing and operational
capabilities.
Republic Act No. 358: Granting of Initial Tax Exemptions (1949) in 1949,
Republic Act No. 358 marked a significant milestone in the financial landscape of the
NPC. This legislation conferred extensive tax and duty exemption privileges on the
corporation, shielding it from a wide array of financial impositions imposed by various
levels of government. Such exemptions were pivotal in facilitating the NPC's early
growth and bolstering its capacity to drive energy development initiatives.
Presidential Decree No. 380: Broadening the Scope of Exemptions (1974).The

evolution of tax exemptions for the NPC took a significant step forward in 1974 with the
issuance of Presidential Decree No. 380. This decree extended the exemptions to cover
all petroleum products utilized in the corporation's operations. By sparing these critical
resources from direct and indirect financial obligations, the decree empowered the NPC
to operate with increased financial flexibility, amplifying its contribution to the nation's
energy sector.
Presidential Decree No. 1931: A Period of Reevaluation (1984) June 11, 1984,
saw the issuance of Presidential Decree No. 1931, a critical juncture in the NPC's tax
exemption journey. This decree temporarily rescinded all tax exemption privileges
previously granted to government-owned or controlled corporations, including the NPC
and its subsidiaries. However, it also introduced a mechanism for potential
reinstatement, vesting the President and/or the Minister of Finance, upon
recommendation by the Fiscal Incentives Review Board (FIRB), with the authority to
selectively reintroduce exemptions. This pivotal shift marked a period of reevaluation,
prompting a reconsideration of the NPC's financial standing in the context of broader
economic imperatives.
FIRB Resolutions: Navigating Restoration and Revision (1986-1987)the period

spanning 1986 to 1987 witnessed a series of FIRB resolutions that played a pivotal role
in determining the tax exemption landscape for the NPC. Resolution No. 1-86, issued
on January 7, 1986, reinstated the NPC's tax and duty exemption privileges, signaling a
renewed commitment to support the corporation's operational vitality. However, this
reprieve was not without its challenges.
The evolution of tax exemption privileges for the National Power Corporation
embodies a dynamic interplay between fiscal policy, economic imperatives, and the
strategic goals of the energy sector. From its inception in 1949 through a series of
legislative milestones, the NPC's financial standing has been subject to a complex and
evolving framework. Each legislative shift reflects a nuanced response to the prevailing
economic climate, underscoring the importance of balancing financial sustainability with
broader national objectives. As the NPC continues to evolve in tandem with the nation's
energy landscape, this journey serves as a testament to the corporation's enduring role
in powering the Philippines forward.
ISSUE:
1. Does the petitioner possess the legal standing to contest the orders and resolution in
question?
2. Has the respondent NPC's entitlement to indirect tax and duty exemption been
terminated following the enactment of P.D. No. 938 on May 27, 1976, which amended
P.D. No. 380 issued on January 11, 1974?
HELD::
The petitioner, in their capacity as a taxpayer, holds the right to bring forth the
current petition, as established by the precedent in the Lozada case, particularly when it
pertains to the improper utilization of public funds. The petition raises questions
regarding the legality of the tax refund granted to NPC through tax credit certificates, as
well as the use of these designated tax credits by respondent oil companies to settle
their tax and duty obligations to the BIR and Bureau of Customs.
Direct taxes place a direct responsibility on the taxpayer based on the transaction
or business activity they are engaged in. For instance, this encompasses the customs
duties and ad valorem taxes paid by oil companies to the Bureau of Customs for the
importation of crude oil. Additionally, it encompasses specific and ad valorem taxes paid
to the Bureau of Internal Revenue after processing crude oil into petroleum products.
Conversely, "indirect taxes are levies primarily paid by individuals who have the
ability to transfer the burden to someone else." For instance, the excise and ad valorem
taxes paid by oil companies to the Bureau of Internal Revenue upon the release of
petroleum products from their refinery can be passed on to their buyers, such as the
NPC, by adding them to the "cash" and/or "selling price."
It is worth noting that in the earlier legislation, R.A. No. 358, the exemption was
stated in broad terms, encompassing "all taxes, duties, fees, imposts, charges, etc. . . ."
However, the amendment introduced by Republic Act No. 6395 provided a detailed list
of the exemptions covered. Subsequently, P.D. No. 380 further specified the
exemptions granted to NPC, including both direct and indirect taxes on all petroleum
products utilized in its operations. Presidential Decree No. 938 modified the tax
exemption by simplifying the language, plainly exempting NPC from "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."
The use of the phrase "all forms" of taxes clearly illustrates the legislative intent
to maintain all the tax exemptions previously enjoyed by NPC. The underlying rationale
for this exemption is that as a non-profit entity, NPC is mandated to allocate all returns
from its capital investments and any surplus revenue from its operations towards
expansion.
Petitioner cannot invoke the principle of strictissimi juris in the interpretation of
statutes granting tax exemptions to NPC.
Furthermore, it is a well-established principle that the rule of strict interpretation

does not apply to exemptions in favor of a government entity, political subdivision, or
instrumentality.

G.R. No. 88291 June 8, 1993

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G.R. No.

88291 June 8, 1993

ERNESTO M. MACEDA, petitioner,

Siguion Reyna, Montecillo & Ongsiako for Caltex.

The National Power Corporation (NPC) stands as a cornerstone in the

Presidential Decree No. 380: Broadening the Scope of Exemptions (1974).The

FIRB Resolutions: Navigating Restoration and Revision (1986-1987)the period

Furthermore, it is a well-established principle that the rule of strict interpretation

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