G.R. No.

L-19667 November 29, 1966

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
AMERICAN RUBBER COMPANY and COURT OF TAX APPEALS, respondents.

G.R. No. L-19801-03 November 29, 1966

AMERICAN RUBBER COMPANY, petitioner,

vs.
THE COMMISSIONER OF INTERNAL REVENUE, ET AL., respondents.

These cases are brought on appeal from the Court of Tax Appeals by the State (G.R. No. L-19667) as well as by the
American Rubber Company (G.R. Nos. L-19801, 19802, 19803).

The factual background is the same in all four cases, and is not in controversy, having been stipulated between the parties.

Petitioner, American Rubber Company, a domestic corporation, from January 1, 1955 to December 1, 1958, was engaged in
producing rubber from its approximately 900 hectare rubber tree plantation, which it owned and operated in Latuan, Isabela,
City of Basilan. Its products, known in the market as Preserved Latex, Pale Crepe No. 1, Pale Crepe No. 2, Ribbed Smoked
Sheets Nos. 1 and 2, Flat Bark Rubber, 2X Brown Crepe and 3X Brown Crepe, are turned out in the following manner:

The initial step common to the production of all the foregoing rubber products is tapping, i.e., the collection of latex (rubber
juice) from rubber trees. This is done by the daily cutting, early in the morning, of a spiral incision in the bark of rubber trees
and placing a cup below the lower end of the incision to receive the flow of latex. The collecting cup is filled after two hours.
The tapper then collects the latex into buckets and carries them to the collecting shed. The tapper subsequently pours the
latex collected into big milk cans. The filled milk cans are then taken in motor vehicles to a coagulating shed, also within the
premises of petitioner's plantation, where the latex is strained into coagulating tanks to remove foreign matter such as leaves
and dirt. After these initial steps, the processes vary in the production of the various rubber products mentioned above. Said
processes are described hereunder.

Preserved Rubber Latex

Fresh latex is diluted with 5 to 5-1/4 ounces of ammonia per gallon of latex. The mixture is thoroughly stirred and then poured
into metal drums. The addition of ammonia preserves the latex in liquid form and prevents its deterioration or its acquisition of
a repulsive smell, and at the same time preserves its uniform color. Latex which has been thus artificially preserved in its
liquid form generally lasts for about a month without spoiling. On the other hand, fresh latex in its original state lasts for only
about two hours, after which it becomes spoiled.

Petitioner sells preserved latex only upon previous orders of customers who supply empty metal drum containers.

Pale Crepe Nos. 1 and 2 and Ribbed Smoked Sheets Nos. 1 and 2

To produce Pale Crepe Nos. 1 and 2 and Ribbed Smoked Sheets Nos. 1 and 2, the petitioner adds to the latex in the
coagulating tank about 15 or 16 ounces of glacial acetic acid per gallon of latex. The mixture is stirred thoroughly. Thereafter
aluminum partitions are placed crosswise inside the tank so that the latex will coagulate into uniform slabs. Acetic acid is
added to the latex to hasten coagulation which otherwise takes place naturally, and to preserve its fresh state and color. The
similarity in the production of Pale Crepe Nos. 1 and 2 and Ribbed Smoked Sheets Nos. 1 and 2 ends at the point of
removing the coagulum (coagulated rubber sheets) from the coagulating tanks.

To produce Pale Crepe No. 1, the coagulum is passed through a series of rollers until the desired thickness is attained,
whereupon it is removed to the air-drying house situated inside petitioner's plantation and hung for a period of about twelve or
thirteen days to dry. There are no mechanical driers used; the air-drying is done naturally. As soon as the Pale Crepe is
dried, the sheets are sorted; those which are of uniform pale color are classified as Pale Crepe No. 2, whereupon they are
baled and stored, ready for market.

Ribbed & Smoked Sheets Nos. 1 and 2 are produced practically in the same manner as Pale Crepe, except that the
coagulum is passed only once through a roller provided with ribs after which the flattened and ribbed coagulum is removed to
petitioner's smoke-house where it is hung and cured by exposure to heat and smoke from wood fires for about six or seven
days. The resulting smoked sheets are sorted and classified dependent upon color and opaqueness into ribbed smoked
sheets (RSS) No. 1 and No. 2, baled, and stored ready for the market. No mechanical equipment is used in generating the
smoke in the smoke-house.
The petitioner's rollers are powered by engines although they could be turned by hand as it is done in small rubber
plantations. If Pale Crepe Nos. 1 and 2 and Ribbed Smoked Sheets Nos. 1 and 2 are not air-dried and smoked they
deteriorate, get spoiled, and the color varies.

Flat Bark Rubber

Each morning after a tapper makes a fresh incision in the bark of a rubber tree, he gathers the latex dripping from the ground
around the tree, called "ground rubber", as well as the dried latex from the incisions made the previous day, called "bark
rubber". Ground and bark rubber are not intentionally produced. No chemicals are added to the latex transformed into ground
and bark rubber. This kind of dried latex is spoiled and has a bad odor.

Ground and bark rubber when gathered in sufficient quantities are passed numerous times through the rollers or mills until
they form a uniform mass or sheet which, finally is called Flat Bark Rubber. No chemical is used to coagulate the dried
ground and bark rubber because they are already coagulated. They are formed into sheets by means only of pressure of the
mills or rollers through which they are passed. Flat Bark Rubber commands the lowest prices in the rubber market.

3X Brown Crepe

Every morning, before a fresh incision is made in the bark of the rubber trees, the tapper collects not only ground and bark
rubber but removes and collects the latex in the cups, known as "cup rubber". The cup rubber coagulates and dries through
natural processes and, when gathered in sufficient quantities, is milled and rolled through a series of rollers until by force of
pressure it is formed into a mass of the desired thickness called "3X Brown Crepe." Like ground and bark rubber, no
chemicals are added to cup rubber to produce 3X Brown Crepe. Cup rubber in its original form, like ground and bark rubber,
is spoiled and has a bad odor.

2X Brown Crepe

2X Brown Crepe is obtained by milling or rolling the excess pieces of coagulated rubber latex which had been cut or trimmed
from the from the ribbed smoked sheets No. 2 into a uniform mass. 2X Brown Crepe is produced in the same manner as the
other sheets of crepe rubber, i.e., without the addition of any chemicals.

Petitioner during the said period sold its foregoing rubber products locally and as prescribed by the respondent's regulations
declared same for tax purposes which respondent accordingly assessed. Petitioner paid, under protest, the corresponding
sales taxes thereon claiming exemption therefrom under Section 188 (b) of the National Internal Revenue Code.

The following sales taxes on the aforementioned rubber products were paid under protest —

From Jan. 1, 1955 to Dec. 31, P83,193.48

1956

From Jan. 1, 1957 to June 30, P20,504.99

1957

From July 1, 1957 to Dec. 31, P52,378.90

1958

It is further stipulated that the sales tax collected from petitioner American Rubber Company on the local sales of its rubber
products, following Internal Revenue General Circulars Nos. 431 and 440, had been separately itemized and billed by
petitioner Company in the invoices issued to the customers, that paid both the value of the rubber articles and the separately
itemized sales tax, from January 1, 1955 to August 2, 1957.

After paying under protest, the petitioner claimed refund of the sales taxes paid by it on the ground that under section 188,
paragraph b, of the Internal Revenue Code, as amended,1 its rubber products were agricultural products exempt from sales
tax, and upon refusal of the Commissioner of Internal Revenue, brought the case on appeal to the Court of Tax Appeals
(C.T.A. Nos. 356, 440,, 632). The respondent Commissioner interposed defenses, denying that petitioner's products were
agricultural ones within the exemption; claiming that there had been no exhaustion of administrative remedies; and argued
that the sales tax having been passed to the buyers during the period that elapsed from January 1, 1955 to August 2, 1957,
the petitioner did not have personality to demand, sue for and recover the aforesaid sales taxes, plus interest.

In its decision, now under appeal, the Tax Court held Preserved Latex, Flat Bark Rubber, and 3X Brown Crepe to be
agricultural products, "because the labor employed in the processing thereof is agricultural labor", and hence, the sales of
such products were exempt from sales tax, but declared Pale Crepe No. 1, Ribbed Smoked Sheets Nos. 1 and 3, as well as
2X Brown Crepe (which is obtained from rolling excess pieces of Smoked Sheets) to be manufactured products, sales of
which were subject to the tax. It overruled the defense of non-exhaustion of administrative remedies and upheld the Revenue
Commissioner's stand that petitioner Company was not entitled to recover the sales tax that had been separately billed to its
customers, and paid by the latter. Hence, it dismissed the appeal in C.T.A. Nos. 356 and 440 and ordered respondent
Commissioner to refund only P3,916.49 without interest, or costs.

Both parties then duly appealed to this.

The issues posed on these appeals are:

(1) Whether the plaintiff's rubber products above described should be considered agricultural or manufactured for
purposes of their subjection to the sales tax;

(2) Whether plaintiff is or is not entitled to recover the sales tax paid by it, but passed on to and paid by the buyers of
its products; and

(3) Whether plaintiff is or is not entitled to interest on the sales tax paid by it under protest, in case recovery thereof is
allowed.

The first issue, in our opinion, is governed by the principles laid down by this Court in Philippine Packing Corporation vs.
Collector of Internal Revenue, 100 Phil. 545 et seq. We there ruled that the exemption from sales tax established in section
188 (b) of the Internal Revenue Tax Code in favor of sales of agricultural products, whether in their original form or not, made
by the producer or owner of the land where produced is not taken away merely because the produce undergoes processing
at the hand of said producer or owner for the purpose of working his product into a more convenient and valuable form suited
to meet the demand of an expanded market; that the exemption was not designed in favor of the small agricultural producer,
already exempted by the subsequent paragraphs of the same section 188, but that said exemption is not incompatible with
large scale agricultural production that incidentally required resort to preservative processes designed to increase or prolong
marketability of the product.

In the case before us, the parties have stipulated that fresh latex directly obtained from the rubber tree, which is clearly an
agricultural product, becomes spoiled after only two hours. It has, therefore, a severely limited marketability. The addition of
ammonia prevents its deterioration for about a month, and we see no reason why this preservative process should wrest
away from the preserved latex the protective mantle of the tax exemption.

Taking also into account the great distance that separates the plaintiff's plantation from the main rubber processing centers in
Japan, the United States and Europe, and the difficulty in handling products in liquid form, it can be discerned without
difficulty that preserved, latex, with its 30-day spoilage limit, is still severely handicapped for export and dollar earning
purposes.

To overcome these shortcomings, and extend its useful life almost indefinitely, it becomes necessary to separate and solidify
the rubber granules diffused in the latex, and hence, according to the stipulation of facts and the evidence, acetic acid is
added to hasten coagulation. There is nothing on record to show that the acetic acid in way produces anything that was not
originally in the source, the liquid latex. The coagulum is then rolled and compacted and afterwards air dried to make Pale
Crepe(1 and 2), or else cured and smoked to produce rubber sheets. Once again we see nothing in this processing to alter
the agricultural nature of the result; what takes place is merely an accelerated coagulation and dessication that would
naturally occur anyway, only within a longer period of time, coupled with greater spoilage of the product.

Thus the operations carried out by plaintiff appear to be purely preservative in nature, made necessary, by its production of
fresh rubber latex in a large scale. they are purely incidental to the latter, just as the canning of skinned and cored pineapples
in syrup was held to be incidental to the large-scale cultivation of the fruit in the Philippine Packing Corporation case (ante).
Being necessary to suit the product to the demands of the market, the operations in both cases should lead to the same
result, non-taxability of the sales of the respective agricultural products. In not so holding, the Tax Court was in error.

Even less justifiable is the position taken by the Revenue Commissioner in his appeal against the finding of the Tax Court
that Flat Bark 3X Brown Crepe rubber are agricultural products. According to the record, these sheets result from the
drippings and waste rubber that have dried naturally, that are rolled and compacted into the desired thickness, without any
other processing.

As to 2X Brown Crepe which is compacted out of the trimmings and waste left over from the production of ribbed smoked
sheets, no reason is seen why it should be treated differently from the ribbed smoked sheets themselves.
In his appeal, the Revenue Commissioner contends that all of plaintiff's products should be deemed manufactured articles,
on the strength of section 194 (n) of the Revenue Code defining a "manufacturer" as

every person who by physical or chemical process alters the exterior texture or form or inner substances of any raw
material or manufactured or partially manufactured product in such manner as to prepare it for a special use or uses
to which it could not have been put to in its original condition, or who . . . alters the quality of any such raw material . .
. as to reduce it to marketable shape . . . .

But, as pointed out in the Philippine Packing Corporation case, this definition is not applicable to the exemption of agricultural
products, "whether in their original form or not". The use of this last phrase in the statute clearly indicates that the agricultural
product may be altered in texture or form without being divested of the exemption (cas cit. 100 Phil., p. 548). The exception
would be sales of agricultural products while Republic Act No. 1612 was in effect because under this Act the freedom from
sales tax became restricted to agricultural products "in their original form" only. So that plaintiff's sales from August 24, 1956
(approval of Republic Act 1612) to June 22, 1957 (when Republic Act 1856 became effective and restored the exemption to
agricultural products "whether in their original form or not") became properly taxable. Under paragraphs (A)2 and B(4) of the
additional stipulation of facts (CTA Rec. pp. 261-262, G.R. L-19801), the sales tax properly collected during this period of
plaintiff's transactions amounted to P18,187.19 from August 24 to December 31, 1956; and P18,888.28 from January 1 to
June 21, 1957, or a total of P37,075.47. This last amount is, therefore non-recoverable.2

The second issue in this appeal concerns the holding of the Court of Tax Appeals that the plaintiff Company is not entitled to
recover the sales tax paid by it from January, 1955 to August 2, 1957, because during that period the plaintiff had separately
invoiced and billed the corresponding sales tax to the buyers of its products. In so holding, the Tax Court relied on our
decisions in Medina vs. City of Baguio, 91 Phil. 854; Mendoza, Santos & Co. vs. Municipality of Meycawayan, L-6069-6070,
April 30, 1954 (94 Phil. 1047); and Zosimo Rojas & Bros. vs. City of Cavite, L-10730, May 27, 1958.

The basic ruling is that of Medina vs. City of Baguio, supra, where this Court affirmed the ruling of the court of First Instance
to the effect that —

"The amount collected from the theatergoers as additional price of admission tickets is not the property of plaintiffs or
any of them. It is paid by the public. If anybody has the right to claim it, it is those who paid it. Only owners of property
has the right to claim said property. The cine owner acted as mere agents of the city in collecting additional price
charged in the sale of admission tickets." (Medina vs. City of Baguio, 91 Phil. 854) (Emphasis supplied)

We agree with the plaintiff-appellant that the Medina ruling is not applicable to the present case, since the municipal taxes
therein imposed were taxes on the admission tickets sold, so that, in effect, they were levies upon the theatergoers who
bought them; so much so that (as the decision expressly ruled) the tax was collected by the theater owners as agents of the
respective municipal treasurers. This does not obtain in the case at bar. The Medina ruling was merely followed in Rojas &
Bros. vs. Cavite, supra; and in Mendoza, Santos & Co. vs. Municipality of Meycawayan, 94 Phil. 1047.

By contrast with the municipal taxes involved in the preceding cases, the sales tax is by law imposed directly, not on the thing
sold, but on the act (sale) of the manufacturer, producer or importer (Op. of the Secretary of Justice, June 15, 1946; 47
C.J.S., p. 1141), who is exclusively made liable for its timely payment. There is no proof that the tax paid by plaintiff is the
very money paid by its customers. Where the tax money paid by the plaintiff came from is really no concern of the
Government, but solely a matter between the plaintiff and its customers. Anyway, once recovered, the plaintiff must hold the
refund taxes in trust for the individual purchasers who advanced payment thereof, and whose names must appear in
plaintiff's records.

Moreover, the separate billing of the sales tax in appellant's invoices was a direct result of the respondent Commissioner's
General Circular No. 440, providing that —

if a manufacturer, producer, or importer, in fixing the gross selling price of an article sold by him, has included an
amount intended to cover the sales tax in the gross selling price of the article, the sales tax shall be based on the
gross selling price less the amount intended to cover the tax, if the same is billed to the purchaser as a separate item
in the invoice. . . . (Emphasis supplied)

In other words, the separate itemization of the sales tax in the invoices was permitted to avoid the taxpayer being compelled
to pay a sales tax on the tax itself. It does not seem either just or proper that a step suggested by the Internal Revenue
authorities themselves to protect the taxpayer from paying a double tax should now be used to block his action to recover
taxes collected without legal sanction.

Finally, a more important reason that militates against extensive and indiscriminate application of the Medina vs. City of
Baguio ruling is that it would tend to perpetuate illegal taxation; for the individual customers to whom the tax is ultimately
shifted will ordinarily not care to sue for its recovery, in view of the small amount paid by each and the high cost of litigation
for the reclaiming of an illegal tax. In so far, therefore, as it favors the imposition, collection and retention of illegal taxes, and
encourages a multiplicity of suits, the Tax Court's ruling under appeal violates morals and public policy.

The plaintiff Company also urges that the refund of the taxes should include interest thereon. While this Court has allowed
recovery of interest in some cases, it has done so only in cases of patent arbitrariness on the part of the Revenue authorities;
and in this instance we agree with the Tax Court that no such patent arbitrariness has been shown.

IN VIEW OF THE FOREGOING, the decision of the Court of Tax Appeals is affirmed in Case G.R. No. L-19667 and modified
in cases G.R. Nos. L-19801, L-19802 and L-19803, by declaring the sales taxes therein involved to have been improperly
denied levied and collected and ordering respondent Commissioner of Internal Revenue to refund the same, except the taxes
corresponding to the period from August 24, 1956 to June 22, 1957, during which Republic Act No. 1612 was in force. The
amount of P37,075.47 paid by the taxpayer for this period is hereby declared properly collected and not refundable. Without
special pronouncement as to costs.

Concepcion, C.J., Barrera, Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar and Sanchez, JJ., concur.

Footnotes

1"SEC. 188. Transactions and persons not subject to percentage tax.—In computing the tax impose in section one
hundred eighty-four, one hundred eighty-five, and one hundred eighty-six, transactions in the following commodities
shall be excluded:

(a) Articles subject to tax under Title IV of this Code.

(b) Agricultural products and the ordinary salt whether in their original form or not when sold, bartered, or
exchanged in this country by the producer or owner of the land where produced, as well as all kinds of fish
and its by-products when sold, bartered, or exchanged by the fisherman or fishing operator whether in their
original state or not.

2Collector of Internal Revenue vs. American Rubber Co., L-10963, April 30, 1963; Tan Kim Tee vs. Court of Tax
Appeals, L-18080, April 22, 1963.

G.R. No. L-22074 April 30, 1965

THE PHILIPPINE GUARANTY CO., INC., petitioner,

vs.
THE COMMISSIONER OF INTERNAL REVENUE and THE COURT OF TAX APPEALS, respondents.

Josue H. Gustilo and Ramirez and Ortigas for petitioner.

Office of the Solicitor General and Attorney V.G. Saldajena for respondents.

BENGZON, J.P., J.:

The Philippine Guaranty Co., Inc., a domestic insurance company, entered into reinsurance contracts, on various dates, with
foreign insurance companies not doing business in the Philippines namely: Imperio Compañia de Seguros, La Union y El
Fenix Español, Overseas Assurance Corp., Ltd., Socieded Anonima de Reaseguros Alianza, Tokio Marino & Fire Insurance
Co., Ltd., Union Assurance Society Ltd., Swiss Reinsurance Company and Tariff Reinsurance Limited. Philippine Guaranty
Co., Inc., thereby agreed to cede to the foreign reinsurers a portion of the premiums on insurance it has originally
underwritten in the Philippines, in consideration for the assumption by the latter of liability on an equivalent portion of the risks
insured. Said reinsurrance contracts were signed by Philippine Guaranty Co., Inc. in Manila and by the foreign reinsurers
outside the Philippines, except the contract with Swiss Reinsurance Company, which was signed by both parties in
Switzerland.

The reinsurance contracts made the commencement of the reinsurers' liability simultaneous with that of Philippine Guaranty
Co., Inc. under the original insurance. Philippine Guaranty Co., Inc. was required to keep a register in Manila where the risks
ceded to the foreign reinsurers where entered, and entry therein was binding upon the reinsurers. A proportionate amount of
taxes on insurance premiums not recovered from the original assured were to be paid for by the foreign reinsurers. The
foreign reinsurers further agreed, in consideration for managing or administering their affairs in the Philippines, to
compensate the Philippine Guaranty Co., Inc., in an amount equal to 5% of the reinsurance premiums. Conflicts and/or
differences between the parties under the reinsurance contracts were to be arbitrated in Manila. Philippine Guaranty Co., Inc.
and Swiss Reinsurance Company stipulated that their contract shall be construed by the laws of the Philippines.

Pursuant to the aforesaid reinsurance contracts, Philippine Guaranty Co., Inc. ceded to the foreign reinsurers the following
premiums:

1953 . . . . . . . . . . . . . . . . . . . . . P842,466.71
1954 . . . . . . . . . . . . . . . . . . . . . 721,471.85

Said premiums were excluded by Philippine Guaranty Co., Inc. from its gross income when it file its income tax returns for
1953 and 1954. Furthermore, it did not withhold or pay tax on them. Consequently, per letter dated April 13, 1959, the
Commissioner of Internal Revenue assessed against Philippine Guaranty Co., Inc. withholding tax on the ceded reinsurance
premiums, thus:

1953

Gross premium per investigation . . . . . . . . . . P768,580.00

Withholding tax due thereon at 24% . . . . . . . . P184,459.00
25% surcharge . . . . . . . . . . . . . . . . . . . . . . . . . . 46,114.00

Compromise for non-filing of withholding

100.00
income tax return . . . . . . . . . . . . . . . . . . . . . . . . .

TOTAL AMOUNT DUE & COLLECTIBLE . . . . P230,673.00

==========

1954
Gross premium per investigation . . . . . . . . . . P780.880.68

Withholding tax due thereon at 24% . . . . . . . . P184,411.00

25% surcharge . . . . . . . . . . . . . . . . . . . . . . . . . . P184,411.00

Compromise for non-filing of withholding
100.00
income tax return . . . . . . . . . . . . . . . . . . . . . . . . .

TOTAL AMOUNT DUE & COLLECTIBLE . . . . P234,364.00

==========

Philippine Guaranty Co., Inc., protested the assessment on the ground that reinsurance premiums ceded to foreign reinsurers
not doing business in the Philippines are not subject to withholding tax. Its protest was denied and it appealed to the Court of
Tax Appeals.

On July 6, 1963, the Court of Tax Appeals rendered judgment with this dispositive portion:

IN VIEW OF THE FOREGOING CONSIDERATIONS, petitioner Philippine Guaranty Co., Inc. is hereby ordered to
pay to the Commissioner of Internal Revenue the respective sums of P202,192.00 and P173,153.00 or the total sum
of P375,345.00 as withholding income taxes for the years 1953 and 1954, plus the statutory delinquency penalties
thereon. With costs against petitioner.

Philippine Guaranty Co, Inc. has appealed, questioning the legality of the Commissioner of Internal Revenue's assessment
for withholding tax on the reinsurance premiums ceded in 1953 and 1954 to the foreign reinsurers.

Petitioner maintain that the reinsurance premiums in question did not constitute income from sources within the Philippines
because the foreign reinsurers did not engage in business in the Philippines, nor did they have office here.
The reinsurance contracts, however, show that the transactions or activities that constituted the undertaking to reinsure
Philippine Guaranty Co., Inc. against loses arising from the original insurances in the Philippines were performed in the
Philippines. The liability of the foreign reinsurers commenced simultaneously with the liability of Philippine Guaranty Co., Inc.
under the original insurances. Philippine Guaranty Co., Inc. kept in Manila a register of the risks ceded to the foreign
reinsurers. Entries made in such register bound the foreign resinsurers, localizing in the Philippines the actual cession of the
risks and premiums and assumption of the reinsurance undertaking by the foreign reinsurers. Taxes on premiums imposed
by Section 259 of the Tax Code for the privilege of doing insurance business in the Philippines were payable by the foreign
reinsurers when the same were not recoverable from the original assured. The foreign reinsurers paid Philippine Guaranty
Co., Inc. an amount equivalent to 5% of the ceded premiums, in consideration for administration and management by the
latter of the affairs of the former in the Philippines in regard to their reinsurance activities here. Disputes and differences
between the parties were subject to arbitration in the City of Manila. All the reinsurance contracts, except that with Swiss
Reinsurance Company, were signed by Philippine Guaranty Co., Inc. in the Philippines and later signed by the foreign
reinsurers abroad. Although the contract between Philippine Guaranty Co., Inc. and Swiss Reinsurance Company was signed
by both parties in Switzerland, the same specifically provided that its provision shall be construed according to the laws of the
Philippines, thereby manifesting a clear intention of the parties to subject themselves to Philippine law.

Section 24 of the Tax Code subjects foreign corporations to tax on their income from sources within the Philippines. The word
"sources" has been interpreted as the activity, property or service giving rise to the income. 1 The reinsurance premiums were
income created from the undertaking of the foreign reinsurance companies to reinsure Philippine Guaranty Co., Inc., against
liability for loss under original insurances. Such undertaking, as explained above, took place in the Philippines. These
insurance premiums, therefore, came from sources within the Philippines and, hence, are subject to corporate income tax.

The foreign insurers' place of business should not be confused with their place of activity. Business should not be continuity
and progression of transactions 2 while activity may consist of only a single transaction. An activity may occur outside the
place of business. Section 24 of the Tax Code does not require a foreign corporation to engage in business in the Philippines
in subjecting its income to tax. It suffices that the activity creating the income is performed or done in the Philippines. What is
controlling, therefore, is not the place of business but the place of activity that created an income.

Petitioner further contends that the reinsurance premiums are not income from sources within the Philippines because they
are not specifically mentioned in Section 37 of the Tax Code. Section 37 is not an all-inclusive enumeration, for it merely
directs that the kinds of income mentioned therein should be treated as income from sources within the Philippines but it does
not require that other kinds of income should not be considered likewise. 1äwphï1.ñët

The power to tax is an attribute of sovereignty. It is a power emanating from necessity. It is a necessary burden to preserve
the State's sovereignty and a means to give the citizenry an army to resist an aggression, a navy to defend its shores from
invasion, a corps of civil servants to serve, public improvement designed for the enjoyment of the citizenry and those which
come within the State's territory, and facilities and protection which a government is supposed to provide. Considering that
the reinsurance premiums in question were afforded protection by the government and the recipient foreign reinsurers
exercised rights and privileges guaranteed by our laws, such reinsurance premiums and reinsurers should share the burden
of maintaining the state.

Petitioner would wish to stress that its reliance in good faith on the rulings of the Commissioner of Internal Revenue requiring
no withholding of the tax due on the reinsurance premiums in question relieved it of the duty to pay the corresponding
withholding tax thereon. This defense of petitioner may free if from the payment of surcharges or penalties imposed for failure
to pay the corresponding withholding tax, but it certainly would not exculpate if from liability to pay such withholding tax The
Government is not estopped from collecting taxes by the mistakes or errors of its agents.3

In respect to the question of whether or not reinsurance premiums ceded to foreign reinsurers not doing business in the
Philippines are subject to withholding tax under Section 53 and 54 of the Tax Code, suffice it to state that this question has
already been answered in the affirmative in Alexander Howden & Co., Ltd. vs. Collector of Internal Revenue, L-19393, April
14, 1965.

Finally, petitioner contends that the withholding tax should be computed from the amount actually remitted to the foreign
reinsurers instead of from the total amount ceded. And since it did not remit any amount to its foreign insurers in 1953 and
1954, no withholding tax was due.

The pertinent section of the Tax Code States:

Sec. 54. Payment of corporation income tax at source. — In the case of foreign corporations subject to taxation under
this Title not engaged in trade or business within the Philippines and not having any office or place of business
therein, there shall be deducted and withheld at the source in the same manner and upon the same items as is
 provided in Section fifty-three a tax equal to twenty-four per centum thereof, and such tax shall be returned and paid
in the same manner and subject to the same conditions as provided in that section.

The applicable portion of Section 53 provides:

(b) Nonresident aliens. — All persons, corporations and general copartnerships (compañias colectivas), in what ever
capacity acting, including lessees or mortgagors of real or personal property, trustees acting in any trust capacity,
executors, administrators, receivers, conservators, fiduciaries, employers, and all officers and employees of the
Government of the Philippines having the control, receipt, custody, disposal, or payment of interest, dividends, rents,
salaries, wages, premiums, annuities, compensation, remunerations, emoluments, or other fixed or determinable
annual or periodical gains, profits, and income of any nonresident alien individual, not engaged in trade or business
within the Philippines and not having any office or place of business therein, shall (except in the case provided for in
subsection [a] of this section) deduct and withhold from such annual or periodical gains, profits, and income a tax
equal to twelve per centum thereof: Provided That no deductions or withholding shall be required in the case of
dividends paid by a foreign corporation unless (1) such corporation is engaged in trade or business within the
Philippines or has an office or place of business therein, and (2) more than eighty-five per centum of the gross
income of such corporation for the three-year period ending with the close of its taxable year preceding the
declaration of such dividends (or for such part of such period as the corporation has been in existence)was derived
from sources within the Philippines as determined under the provisions of section thirty-seven: Provided, further, That
the Collector of Internal Revenue may authorize such tax to be deducted and withheld from the interest upon any
securities the owners of which are not known to the withholding agent.

The above-quoted provisions allow no deduction from the income therein enumerated in determining the amount to be
withheld. According, in computing the withholding tax due on the reinsurance premium in question, no deduction shall be
recognized.

WHEREFORE, in affirming the decision appealed from, the Philippine Guaranty Co., Inc. is hereby ordered to pay to the
Commissioner of Internal Revenue the sums of P202,192.00 and P173,153.00, or a total amount of P375,345.00, as
withholding tax for the years 1953 and 1954, respectively. If the amount of P375,345.00 is not paid within 30 days from the
date this judgement becomes final, there shall be collected a surcharged of 5% on the amount unpaid, plus interest at the
rate of 1% a month from the date of delinquency to the date of payment, provided that the maximum amount that may be
collected as interest shall not exceed the amount corresponding to a period of three (3) years. With costs againsts petitioner.

Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon and Regala, JJ., concur.
Makalintal and Zaldivar, JJ., took no part.

Footnotes

1 Mertens, Jr., Jacob, Law On Federal Income Taxation, Vol. 8, Section 45.27.

2 Imperial v. Collector of Internal Revenue, L-7924, September 30, 1955.

3Hilado v. Collector of Internal Revenue, 53 O.G. 2471; Koppel (Philippines), Inc. v. Collector of Internal Revenues, L-
10550, September 19, 1961; Compañia General de Tabacos de Filipinas v. City of Manila, L-16619, June 29, 1963.

G.R. No. L-31092 February 27, 1987

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
JOHN GOTAMCO & SONS, INC. and THE COURT OF TAX APPEALS, respondents.

YAP, J.:

The question involved in this petition is whether respondent John Gotamco & Sons, Inc. should pay the 3% contractor's tax
under Section 191 of the National Internal Revenue Code on the gross receipts it realized from the construction of the World
Health Organization office building in Manila.

The World Health Organization (WHO for short) is an international organization which has a regional office in Manila. As an
international organization, it enjoys privileges and immunities which are defined more specifically in the Host Agreement
entered into between the Republic of the Philippines and the said Organization on July 22, 1951. Section 11 of that
Agreement provides, inter alia, that "the Organization, its assets, income and other properties shall be: (a) exempt from all
direct and indirect taxes. It is understood, however, that the Organization will not claim exemption from taxes which are, in
fact, no more than charges for public utility services; . . .

When the WHO decided to construct a building to house its own offices, as well as the other United Nations offices stationed
in Manila, it entered into a further agreement with the Govermment of the Republic of the Philippines on November 26, 1957.
This agreement contained the following provision (Article III, paragraph 2):

The Organization may import into the country materials and fixtures required for the construction free from all
duties and taxes and agrees not to utilize any portion of the international reserves of the Government.

Article VIII of the above-mentioned agreement referred to the Host Agreement concluded on July 22, 1951 which granted the
Organization exemption from all direct and indirect taxes.

In inviting bids for the construction of the building, the WHO informed the bidders that the building to be constructed belonged
to an international organization with diplomatic status and thus exempt from the payment of all fees, licenses, and taxes, and
that therefore their bids "must take this into account and should not include items for such taxes, licenses and other
payments to Government agencies."

The construction contract was awarded to respondent John Gotamco & Sons, Inc. (Gotamco for short) on February 10, 1958
for the stipulated price of P370,000.00, but when the building was completed the price reached a total of P452,544.00.

Sometime in May 1958, the WHO received an opinion from the Commissioner of the Bureau of Internal Revenue stating that
"as the 3% contractor's tax is an indirect tax on the assets and income of the Organization, the gross receipts derived by
contractors from their contracts with the WHO for the construction of its new building, are exempt from tax in accordance with
. . . the Host Agreement." Subsequently, however, on June 3, 1958, the Commissioner of Internal Revenue reversed his
opinion and stated that "as the 3% contractor's tax is not a direct nor an indirect tax on the WHO, but a tax that is primarily
due from the contractor, the same is not covered by . . . the Host Agreement."

On January 2, 1960, the WHO issued a certification state 91 inter alia,:

When the request for bids for the construction of the World Health Organization office building was called for,
contractors were informed that there would be no taxes or fees levied upon them for their work in connection
with the construction of the building as this will be considered an indirect tax to the Organization caused by
the increase of the contractor's bid in order to cover these taxes. This was upheld by the Bureau of Internal
Revenue and it can be stated that the contractors submitted their bids in good faith with the exemption in
mind.

The undersigned, therefore, certifies that the bid of John Gotamco & Sons, made under the condition stated
above, should be exempted from any taxes in connection with the construction of the World Health
Organization office building.

On January 17, 1961, the Commissioner of Internal Revenue sent a letter of demand to Gotamco demanding payment of P
16,970.40, representing the 3% contractor's tax plus surcharges on the gross receipts it received from the WHO in the
construction of the latter's building.

Respondent Gotamco appealed the Commissioner's decision to the Court of Tax Appeals, which after trial rendered a
decision, in favor of Gotamco and reversed the Commissioner's decision. The Court of Tax Appeal's decision is now before
us for review on certiorari.

In his first assignment of error, petitioner questions the entitlement of the WHO to tax exemption, contending that the Host
Agreement is null and void, not having been ratified by the Philippine Senate as required by the Constitution. We find no
merit in this contention. While treaties are required to be ratified by the Senate under the Constitution, less formal types of
international agreements may be entered into by the Chief Executive and become binding without the concurrence of the
legislative body. 1 The Host Agreement comes within the latter category; it is a valid and binding international agreement even
without the concurrence of the Philippine Senate.

The privileges and immunities granted to the WHO under the Host Agreement have been recognized by this Court as legally
binding on Philippine authorities. 2

Petitioner maintains that even assuming that the Host Agreement granting tax exemption to the WHO is valid and
enforceable, the 3% contractor's tax assessed on Gotamco is not an "indirect tax" within its purview. Petitioner's position is
that the contractor's tax "is in the nature of an excise tax which is a charge imposed upon the performance of an act, the
enjoyment of a privilege or the engaging in an occupation. . . It is a tax due primarily and directly on the contractor, not on the
owner of the building. Since this tax has no bearing upon the WHO, it cannot be deemed an indirect taxation upon it."

We agree with the Court of Tax Appeals in rejecting this contention of the petitioner. Said the respondent court:

In context, direct taxes are those that are demanded from the very person who, it is intended or desired,
should pay them; while indirect taxes are those that are demanded in the first instance from one person in the
expectation and intention that he can shift the burden to someone else. (Pollock vs. Farmers, L & T Co., 1957
US 429, 15 S. Ct. 673, 39 Law. Ed. 759.) The contractor's tax is of course payable by the contractor but in the
last analysis it is the owner of the building that shoulders the burden of the tax because the same is shifted by
the contractor to the owner as a matter of self-preservation. Thus, it is an indirect tax. And it is an indirect tax
on the WHO because, although it is payable by the petitioner, the latter can shift its burden on the WHO. In
the last analysis it is the WHO that will pay the tax indirectly through the contractor and it certainly cannot be
said that 'this tax has no bearing upon the World Health Organization.

Petitioner claims that under the authority of the Philippine Acetylene Company versus Commissioner of Internal Revenue, et
al., 3 the 3% contractor's tax fans directly on Gotamco and cannot be shifted to the WHO. The Court of Tax Appeals,
however, held that the said case is not controlling in this case, since the Host Agreement specifically exempts the WHO from
"indirect taxes." We agree. The Philippine Acetylene case involved a tax on sales of goods which under the law had to be
paid by the manufacturer or producer; the fact that the manufacturer or producer might have added the amount of the tax to
the price of the goods did not make the sales tax "a tax on the purchaser." The Court held that the sales tax must be paid by
the manufacturer or producer even if the sale is made to tax-exempt entities like the National Power Corporation, an agency
of the Philippine Government, and to the Voice of America, an agency of the United States Government.

The Host Agreement, in specifically exempting the WHO from "indirect taxes," contemplates taxes which, although not
imposed upon or paid by the Organization directly, form part of the price paid or to be paid by it. This is made clear in Section
12 of the Host Agreement which provides:

While the Organization will not, as a general rule, in the case of minor purchases, claim exemption from
excise duties, and from taxes on the sale of movable and immovable property which form part of the price to
be paid, nevertheless, when the Organization is making important purchases for official use of property on
which such duties and taxes have been charged or are chargeable the Government of the Republic of the
Philippines shall make appropriate administrative arrangements for the remission or return of the amount of
duty or tax. (Emphasis supplied).

The above-quoted provision, although referring only to purchases made by the WHO, elucidates the clear intention of the
Agreement to exempt the WHO from "indirect" taxation.

The certification issued by the WHO, dated January 20, 1960, sought exemption of the contractor, Gotamco, from any taxes
in connection with the construction of the WHO office building. The 3% contractor's tax would be within this category and
should be viewed as a form of an "indirect tax" On the Organization, as the payment thereof or its inclusion in the bid price
would have meant an increase in the construction cost of the building.

Accordingly, finding no reversible error committed by the respondent Court of Tax Appeals, the appealed decision is hereby
affirmed.

SO ORDERED.

Narvasa, Melencio-Herrera, Cruz, Feliciano, Gancayco and Sarmiento, JJ., concur.

Footnotes

1 Usaffe Veterans Association, Inc. vs. Treasurer of the Philippines, et. al., 105 Phil. 1030.

2 World Health Organization and Dr. Leonce Verstuyft v. Hon. Benjamin Aquino, etc., et al., 48 SCRA 242.

3 127 Phil. 461.

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.

NOCON, J.:

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, 19911 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.

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 markets4 and these bonds

. . . 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 McDuffle Law,
which facts shall be stated upon the face of said bonds. . . . .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 of 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 objectives9 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 of Washigton, 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 enacting 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 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. . . . 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 indebtedeness 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 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 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, and 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 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)

Section 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 Funds 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 to 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 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, and do hereby decree and order the following:
 Sec. 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. . . . .

xxx xxx xxx

Sec. 6. . . . . Section 13 of Republic Act No. 6395; . . .. 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. 1177 was issued as it was

. . . 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 a 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 are imposed under revenues 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 July 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

 . . . 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:

Sec. 1. The provisions of special on 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, 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.

xxx xxx xxx

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 fiscals and other resources, may be met more adequately;

xxx xxx xxx

WHEREAS, in addition to those 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 or review by the Fiscal
Incentives Review Board (FIRB);

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:

Sec. 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 internation 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, was 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.

Sec. 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 of 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.

Sec. 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

Sec. 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 promulgation 50 in the Official Gasetter, 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 fro convenient reference, is as follows:

Classifications or kinds of Taxes:

According to Persons who pay or who bear the burden:

a. Direct Tax — the 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 simply matter, 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?

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 exemptions 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 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 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 such 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 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 ingenuousness of then President Marcos no matter what his fault 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 enable to pay its indebtedness 56 which, as of P.D. No. 938,
was P12 Billion in total domestic indebtedness, at any one time, and U$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 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 (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 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 . . . 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 be 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 Committed 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 subsidy granted to exempt GOCC's 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 procedure to accomplish the tax payment/tax subsidy scheme of the Government.
In effect, NPC, did not put any cash to pay any tax as it got from the General Fund the amounts necessary to pay 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."

Sec. 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. . . .

Hence, P.D. No. 1931 did not have any effect or 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 validly 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 GOCC's 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. 177, 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 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 created 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
Chromate 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 gleamed 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 of the Philippines, and their defendants but 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 theses 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 renders an opinion, 90wherein 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 or 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 from.

xxx xxx xxx

Tax exemptions are undoubtedly to be construed strictly but not so grudgingly as 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 statue will
be to thwrat 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 beheld 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 absorb all or part of the economic burden of the taxes previously paid to BIR, which could they 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 the 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

Sec. 1. Paragraph (b) of Section 128 of the National Internal Revenue Code, as amended, is hereby
amended to read as follows:

Par. (b) — For products subject to ad valorem tax only:

PRODUCT AD VALOREM TAX RATE

1. . . .

2. . . .

3. . . .

4. Fuel oil, commercially known as bunker oil and on similar fuel oils having more or less the same generating
power 0%

xxx xxx xxx

Sec. 3. This Executive Order shall take effect immediately.

Done in the city of Manila, this 17th day of June, in the year of Our Lord, nineteen hundred and eighty-seven.
(Emphasis supplied)

The oil companies can now deliver bunker fuel oil to NPC without having to worry about who is going to bear the economic
burden of the ad valorem taxes. What this Court will now dispose of are petitioner's complaints that some indirect tax money
has been illegally refunded by the Bureau of Internal Revenue to the NPC and that more claims for refunds by the NPC are
being processed for payment by the BIR.

A case in point is the Tax Credit Memo issued by the Bureau of Internal Revenue in favor of the NPC last July 7, 1986 for
P58.020.110.79 which were for "erroneously paid specific and ad valorem taxes during the period from October 31, 1984 to
April 27, 1985. 91 Petitioner asks Us to declare this Tax Credit Memo illegal as the PNC did not have indirect tax exemptions
with the enactment of P.D. No. 938. As We have already ruled otherwise, the only questions left are whether NPC Is entitled
to a tax refund for the tax component of the price of the bunker fuel oil purchased from Caltex (Phils.) Inc. and whether the
Bureau of Internal Revenue properly refunded the amount to NPC.

After P.D. No. 1931 was issued on June 11, 1984 withdrawing the
tax exemptions of all GOCCs — NPC included, it was only on May 8, 1985 when the BIR issues its letter authority to the NPC
authorizing it to withdraw tax-free bunker fuel oil from the oil companies pursuant to FIRB Resolution No. 10-85. 92 Since the
tax exemption restoration was retroactive to June 11, 1984 there was a need. therefore, to recover said amount as Caltex
(PhiIs.) Inc. had already paid the BIR the specific and ad valorem taxes on the bunker oil it sold NPC during the period above
indicated and had billed NPC correspondingly. 93 It should be noted that the NPC, in its letter-claim dated September 11, 1985
to the Commissioner of the Bureau of Internal Revenue DID NOT CATEGORICALLY AND UNEQUIVOCALLY STATE that
itself paid the P58.020,110.79 as part of the bunker fuel oil price it purchased from Caltex (Phils) Inc. 94

The law governing recovery of erroneously or illegally, collected taxes is section 230 of the National Internal Revenue Code
of 1977, as amended which reads as follows:

Sec. 230. Recover of tax erroneously or illegally collected. — No suit or proceeding shall be maintained in any
court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or
illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any
sum alleged to have been excessive or in any Manner wrongfully collected. until a claim for refund or credit
has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not
such tax, penalty, or sum has been paid under protest or duress.

In any case, no such suit or proceeding shall be begun after the expiration of two years from the date of
payment of the tax or penalty regardless of any supervening cause that may arise after payment; Provided,
however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where
on the face of the return upon which payment was made, such payment appears clearly, to have been
erroneously paid.

xxx xxx xxx

Inasmuch as NPC filled its claim for P58.020,110.79 on September 11, 1985, 95 the Commissioner correctly issued the Tax
Credit Memo in view of NPC's indirect tax exemption.

Petitioner, however, asks Us to restrain the Commissioner from acting favorably on NPC's claim for P410.580,000.00 which
represents specific and ad valorem taxes paid by the oil companies to the BIR from June 11, 1984 to the early part of 1986. 96

A careful examination of petitioner's pleadings and annexes attached thereto does not reveal when the alleged claim for a
P410,580,000.00 tax refund was filed. It is only stated In paragraph No. 2 of the Deed of Assignment 97executed by and
between NPC and Caltex (Phils.) Inc., as follows:

That the ASSIGNOR(NPC) has a pending tax credit claim with the Bureau of Internal Revenue amounting to
P442,887,716.16. P58.020,110.79 of which is due to Assignor's oil purchases from the Assignee (Caltex
[Phils.] Inc.)

Actually, as the Court sees it, this is a clear case of a "Mexican standoff." We cannot restrain the BIR from refunding said
amount because of Our ruling that NPC has both direct and indirect tax exemption privileges. Neither can We order the BIR
to refund said amount to NPC as there is no pending petition for review on certiorari of a suit for its collection before Us. At
any rate, at this point in time, NPC can no longer file any suit to collect said amount EVEN IF lt has previously filed a claim
with the BIR because it is time-barred under Section 230 of the National Internal Revenue Code of 1977. as amended, which
states:

In any case, no such suit or proceeding shall be begun after the expiration of two years from the date of
payment of the tax or penalty REGARDLESS of any supervening cause that may arise after payment. . . .
(Emphasis supplied)

The date of the Deed of Assignment is June 6. 1986. Even if We were to assume that payment by NPC for the amount of
P410,580,000.00 had been made on said date. it is clear that more than two (2) years had already elapsed from said date. At
the same time, We should note that there is no legal obstacle to the BIR granting, even without a suit by NPC, the tax credit
or refund claimed by NPC, assuming that NPC's claim had been made seasonably, and assuming the amounts covered had
actually been paid previously by the oil companies to the BIR.

WHEREFORE, in view of all the foregoing, the Motion for Reconsideration of petitioner is hereby DENIED for lack of merit
and the decision of this Court promulgated on May 31, 1991 is hereby AFFIRMED.

SO ORDERED.

Narvasa, C.J., Feliciano, Bidin, Regalado, Romero, Bellosillo and Melo, JJ., concur.

Padilla and Quiason, JJ. took no part.

# Footnotes

1 Penned by Justice Gancayo, concurred in by Justices Narvasa, Melencio-Herrera, Feliciano, Bidin,

Medialdea, and Regalado; separate dissenting opinions by Justices Cruz, Paras, and Sarmiento, with justices
Griño-Aquino and Davide joining in the dissent of Justice Sarmiento while Justice Gutierrez joined in the
dissents. Chief Justice Gutierrez joined in the dissents. Chief Justice Fernan and Justice Padilla took no part.

2 Com. Act No. 120, secs. 1, & 2 (g).

3 Com. Act No. 120, sec. 11.

4 Com. Act No. 120, sec. 2(k).

5 Com. Act No. 120, sec. 4, par. 3.

6 Com. Act No. 344, sec. 1.

7 Com. Act No. 495, sec. 1.

8 Rep. Act No. 357, sec. 3.

9 Rep. Act No. 357, sec. 1.

10 Rep. Act No. 357, sec. 2.

11 Rep. Act No. 357, sec. 8.

12 Rep. Act No. 358, sec. 1.

13 Rep. Act No. 358, sec. 2.

14 Rep. Act No. 813, sec. 1.

15 Rep. Act No. 987, sec. 2.

16 Increased to P500,000,000.00 from P170,500,000.00 in Rep. Act No. 358 (Rep. Act No. 1397, sec. 1).

17 Rep Act No. 2055, secs. 1 and 2.

18 Rep Act No. 2058, sec. 1.

19 Rep Act No. 2058, sec. 2.

20 Rep Act No. 2641, sec. 1.

21 Rep Act No. 3043, sec. 1.

22 Rep Act No. 4897, sec. 1.

23 Rep Act No. 6395, sec. 2.

24 Rep Act No. 6395, sec. 8(a).

25 Rep Act No. 6395, sec. 8(b).

26 Rep Act No. 6395, sec. 13.

27 Pres. Dec. No. 40, par. 2.

28 Pres. Dec. No. 40, par. 5.

29 Pres. Dec. No. 380, sec. 5.

30 Pres. Dec. No. 380, sec. 8.

31 Pres. Dec. No. 380, sec. 9, par. 1.

32 Pres. Dec. No. 380, sec. 9, par. 4.

33 Pres. Dec. No. 380, sec. 10.

34 Pres. Dec. No. 395, par. 1.

35 Pres. Dec. No. 758, sec. 1.

36 Pres. Dec. No. 938, 1st Whereas clause.

37 Pres. Dec. No. 938, 4th Whereas clause.

38 Pres. Dec. No. 938, 6th Whereas clause.

39 Pres. Dec. No. 938, sec. 5.

40 Pres. Dec. No. 938, sec. 6.

41 Pres. Dec. No. 938, sec. 8.

42 Pres. Dec. No. 938, sec. 10.

43 Pres. Dec. No. 1177, sec. 4.

44 Pres. Dec. No. 1177, sec. 23.

45 Pres. Dec. No. 1177, sec. 90.

46 Pres. Dec. No. 1931, Fourth Whereas clause.

47 Pres. Dec. No. 1931, Fifth Whereas clause.

48 Exec. Order No. 93 (S'86). sec. 6.

49 Exec. Order No. 93, sec. 4.

50 Rule V, Rules and Regulations to Implement Exec. Order No. 93.

51 83 O.G. 8, pp. 722-725.

52 PARAS, TAXATION FUNDAMENTALS, 24-25 (1966)

53 Rollo, p. 687; Motion for Reconsideration, p. 12.

54 Rollo, p. 688; Motion for Reconsideration, p. 13.

55 "Statutes are considered to be in pari materia — to pertain to the same subject matter — when they relate
to the same person or thing, or to the same class of persons of things, or have the same purpose or object.
They may be independent or amendatory in form; they may be complete enactments dealing with a single,
limited subject matter or sections of code or revision; or they may be combination of these. (2 Sutherland
Statutory Construction, 2nd Ed., sec. 5202, p. 535)

xxx xxx xxx

Statutes in pari materia, although some may be special and some general, in the event one of them is
ambiguous or uncertain, are to be construed together, even if the various statutes have not been enacted
simultaneously, and do not refer to each other expressly, and although some of them have been repealed or
have expired, or held unconstitutional, or invalid. (Crawford, Statutory Construction, sec. 231, p. 431.)

xxx xxx xxx

The reasons which support this rule are twofold. In the first place, all the enactments of the same legislature
on the general subject-matter are to be regarded as parts of one uniform system. Later statutes are
considered as supplementary or complementary to the earlier enactments. In the passage of each act, the
legislative body must be supposed to have had in mind and in contemplation the existing legislation on the
same subject, and to have shaped its new enactment with reference thereto. Secondly, the rule derives
support from the principle which requires the interpretation of a statute shall be such, if possible, as to avoid
any repugnancy or inconsistency between different enactments of the same legislature. To achieve this result,
it is necessary to consider all previous acts relating to the same matters, and to construe the act in hand so as
to avoid, as far as it may be possible, any conflict between them. Hence for example, when the legislature has
used a word in a statute in one sense and with one meaning, and subsequently uses the same word in
legislating on the same subject matter, it will be understood as using the word in the same sense, unless
there is something in the context or in the nature of things to indicate that it intended a different meaning
thereby. (Black on Interpretation of Laws, 2nd Ed., pp. 232-234) FRANCISCO, STATUTORY
CONSTRUCTION, 287-288 (1986).

56 The NPC is the implementing arm of the State in its policy of electrification of the entire country. Its
authorized capital stock and total local and foreign debt ceiling have, therefore, been regularly raised to
provide NPC with massive fund flows to achieve said policy.

57 Rep. Act No. 6395. sec. 8 (b), par. 5.

58 Rep. Act No. 6395, sec. 8 (b), par. 5. was deleted and paragraph 5, sec. 8(b) became paragraph 4,
Section 8(b), as amended by Pres. Dec. 380.

59 "Sec. 8. The first paragraph of Section 8(b) of the same Act is hereby further amended and a new
paragraph shall be inserted between the third and fourth paragraph of said section which shall both read as
follows: . . .."

60 See Pres. Dec. No. 1177, sec. 4.

61 Rollo, p. 783.

62 T.S.N., July 9, 1992, pp. 19-21.

63 Rollo, pp. 53-119. In the report submitted to the Senate Blue Ribbon Committee, the discussion centered
on NPC's tax exemption privileges being abolished by Pres. Dec. No. 1931 in paragraphs 11, 37, 81, 83.1
and F.1 Pres. Dec. No. 1177 was mentioned in paragraph C(2) in the Recommendation portion but only by
way of its state policy being made a model for a future bill to be filled by the Senators involved in the
investigation.

64 117 SCRA 16 (1980).

65 In this case, Judge Magno Pulido of then CFI of Alaminos, Pangasinan, Branch XIII, promulgated a
decision on May 17, 1974 in Criminal Case No. 266-A entitled "People vs. Bantolino." Bantolino filed a
complaint against the judge charging him with ignorance of the law because his sentence was "with
subsidiary imprisonment." The case dismissed after respondent judge therein state that he had corrected
"with" to "without" but Bantolino's lawyer, Atty. Pulido, refused to return his (Atty. Pulido) copy for a corrected
copy.
Later, Atty. Pulido filed another charge against Judge Pablo, this time, for falsifying a Court of Appeals'
decision (re Bantolino's appeal with the Com. Act No.) and minutes of court hearings as well as insertions in
the record of a false commitment order. Respondent judge pleaded, among others, res adjudicata.

The Court made a distinction between the two administrative complaints and concluded that there was no res
adjudicata. On the procedural aspect involved, the Court stated:

"Furthermore, the defense of res adjudicata was not seasonably invoked.

"It may be noted that respondent Judge initially raised the defense of res adjudicata only in the motion for
reconsideration dated November 8, 1981. Atty. Pulido filed this complaint on April 6, 1978. Respondent failed
to set up the defense of res adjudicata when he filed his comment dated June 19, 1974 in compliance with the
first indorsement dated June 3, 1974 of the then Assistant to the Judicial Consultant, now Deputy Court
Administrator Arturo B. Buena. Such failure to interpose the defense of res adjudicata at the earliest
opportunity is fatal as it deemed waived."

66 73 Am Jur 2d 518, sec. 410, citing United States v. Grainger 346 US 235, 97 L Ed 1575, 73 S Ct 1069;
State v Bean 159 Me 455, 195 A2d 68; States v. Holland, 202 Or 656, 277 P2d 386.

For example, State vs. Bean was an action by the State ton recover for goods and services rendered an
inmate of a state hospital.

The defendant was committed to the Augusta State Hospital on September 21, 1949 by order of court after he
had been found not guilty of the commission of a crime by reason of insanity.

The defendant was confined when the prevailing laws were R.S. Ch. 27, Sec. 121 which provided that the
person so committed shall be there supported at his own expense, if he has sufficient means; otherwise at the
expense of the State,' and R.S. Ch. 27 Sec. 139 which provided that "The state may recover from the insane,
if able, or from persons legally liable for his support, the reasonable expenses of his support in either insane
hospital.' R.S. Ch. 27, Sec 121, was expressly repealed by P.L. 1961, Ch. 304, Sec 17 while R.S. Ch. 27,
Sec. 139 was expressly repealed by P.L. 1961, Ch. 304, Sec. 26.

However, by P.L. 1961, Ch. 304, Secs. 4 and 5, the legislature simultaneously enacted amendments which in
the case of Sec. 4 thereof charged the Department of Mental Health and Corrections with the duty of
determining the ability of the patient to pay for his support and of establishing rates and fees therefor, and in
the case of sec. 5, it provided that "such fees charges shall be a debt of the patient or any person legally
liable for his support."

It was only on January 20,1960 that the hospital billed the defendant for his stay from September 21, 1949 in
the amount of $6651.72. Plaintiff filed on October 26, 1962 a case to recover said amount. Defendant
disclaimed liability by arguing that the enactment of P.L. 1961, Ch. 304 was to terminate his liability for board
and care furnished prior to its enactment.

The State of Maine's Supreme Judicial Court rebuffed the defendant and held that:

"[I]n the instant case P.L. 1961, Ch. 304 was intended to be a revision and condensation of the statutes
relating to the Department of Mental Health and Corrections by which the substance of the right of the State
of Maine to reimbursement for care and support from the criminally insane in accordance with "means" or
"ability" to pay remained undisturbed. We are satisfied that it was the intention of the Legislature that there
should be no moment when the right to such reimbursement did not exist. We think, the governing principle
was well stated in 50 Am. Jur. 559, Sec. 555;

"It is a general rule of law that where a statute is repealed and all or some of its provisions are not the same
time re-enacted, the re-enactment is considered a reaffirmance of the old law, and a neutralization of the
repeal, so that the provisions of the repealed act which are thus re-enacted continue in force without
interruption, and all rights and liabilities incurred thereunder are preserved and may be enforced. Similarly,
the rule of construction applicable to acts which revise and consolidate other acts is, that when the 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." (State vs. Bean,
195 A2d 68, 71, 72; Emphasis supplied)
 67 BE IT RESOLVED, AS IT HEREBY RESOLVED, That:

1. Effective June 11, 1984, the tax and duty exemption privileges enjoyed by the National Power Corporation
under Com. Act No. No. 120 as amended are restored up to June 30, 1985.

2. Provided, That this restoration does not apply to the following:

a. importations of fuel oil (crude equivalent) and coal as per FIRB Resolutions No. 1-84;

b. commercially-funded importations; and

c. interest income derived from any investment source.

3. Provided further, That in the case of importations funded by international financing agreements, the NPC is
hereby required to furnish the FIRB on a periodic basis the particulars of items received or to be received
through such arrangements, for purposes of tax and duty exemption privileges.

(SGD.)
ALFREDO PIO
DE RODA, JR.

Acting Minister
of Finance

Acting
Chairman, FIRB

SUBJECT: National Power Corporation (NPC)"

68 BE IT RESOLVED, AS IT IS HEREBY RESOLVED: That

1. Effective July 1, 1985, the tax and duty exemption privileges enjoyed by the National Power Corporation
(NPC) under Commonwealth Act No. 120, as amended, are restored; Provided, That importations of fuel oil
(crude oil equivalent) and coal of the herein grantee shall be subject to the basic and additional imports
duties; Provided, further, That the following shall remain fully taxable:

a. Commercially funded importations; and

b. Interest income derived by said grantee from bank deposits and yield or any other monetary benefits from
deposits substitutes, trust funds and other similar arrangements.

2. The NPC as a government corporation is exempt from the real property tax on land and improvements
owned by it provided that the beneficial use of the property is not transferred to another pursuant to the
provisions of Sec. 10(a) of the Real Property Tax Code, as amended.

(
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SUBJECT: National Power Corporation."

69 Note should be taken that FIRB Resolution No. 10-85 covered the period from June 11, 1984 up to June
30, 1985 while FIRB Resolution No. 1-86 covered the period from July 1, 1985 up to March 10, 1987.

70 "Whenever in the judgment of the President, there exists a grave emergency or a threat or imminence
thereof, or whenever the interim Batasang Pambansa or the regular National Assembly fails or is unable to
act adequately on any matter for any reason that in his judgment requires immediate action, he may in order
to meet the exigency, issued the necessary decrees, orders, or letters of instruction, which shall form part of
the law of the land."

71 Rollo, p. 652.

72 "The Philippines and International Monetary Fund (IMF) have failed in talks here to finalize an agreement
on a $630 million standby credit badly needed by the Philippines, informed sources close to the talks told
Reuters yesterday.

xxx xxx xxx

"Talks on the credit began in October when the Philippines declared a moratorium on repayments on its $26-
billion foreign debt and asked creditor banks to reschedule some of the debt." (Times Journal, June 21, 1984)

73 The Philippines will not default in the payment of its $25-billion foreign debt because it could be branded
as an outlaw in the international community, President Marcos said yesterday." (Times Journal, June 18,
1984)
74 WASHINGTON, D.C. — The Philippines and a consortium of international banks have signed in New York
an agreement restructuring $2.9 billion in maturing short and medium terms loans of the Central Bank and six
other government corporations.

"The amount restructed represents 90 percent of the public sector loans to be restructured with international
banks.

Included in the restructuring were the loans of the Philippine National Bank (PNB), National Investment
Development Corp. (NIDC), Development Bank of the Philippines (DBP), Philippine National Oil Corp.
(PNOC), National Power Corporation (NAPOCOR) and Philippine Airlines (PAL)." (Express, January 12,
1986)

75 "The $2.1-billion BNPP, nestled on a plateau hugging the South China Sea, is planned to generate 620
megawatts for the Luzon grid. The 'people power' revolt in 1986, however, toppled the plant's proponent, then
President Marcos, from power.

"So many technical defects were said to have been discovered in the plant, and this "most prodigious" project
of the government-owned National Power Corp. was mothballed and has remained so up to the present. It is
a "white elephant" and the country continues to pay a huge interests to its builder, Westinghouse, every
month." (Manila Bulletin, July 15, 1992)

76 President Marcos issued for decrees yesterday, among them Decree No. 1934 (should be 1939 amending
Rep. Act No. 4850 (should be Rep. Act No. 4850 (should be Rep. Act. No. 4860) to allow an increase in the
ceiling on direct foreign borrowings of the government from $5 billion to $10 billion.

"It would allow him to exclude specific categories of external debt from the debt service limitation whenever
necessary in connection with the general rescheduling or refinancing of foreign credits.

"The decree also increases the ceiling on the government's guarantee from the present $2.5 billion to $7.5
billion.

"It authorizes the government's guarantee of external debts of government corporations.

"He also issued:

1. Decree No. 1932 (should be No. 1937) amending the Central Bank Charter to allow it greater flexibility in
administering the monetary, banking and credit system and to give a policy direction in the areas of money,
banking and credit.

2. Decree No 1933 (should be no. 1938) clothing the government with expanded authority to guarantee
foreign loans of the Central Bank.

3. Decree no. 1936 (should be No. 1939) authorizing the Credit Information Bureau, to secure credit
information on individuals and institutions in the possession of government and private entities.

(Manila Bulletin, June 29, 1984)

77 "Section 17(4), Article VIII, 1973 Constitution.

78 "BE IT RESOLVED, AS IT IS HEREBY RESOLVED, That the tax and duty exemption privileges of the
National Power Corporation, including those pertaining to its domestic purchases of petroleum and petroleum
products, granted under the terms and conditions of Commonwealth Act No. 120 (Creating the National
Power Corporation, defining its powers, objectives and functions, and for other purposes), as amended, are
restored effective March 10, 1987, subject to the following conditions:

1. The restoration of the tax and duty exemption privileges does not apply to the following:

1.1. Importations of fuel oil (crude equivalent) and coal;

1.2. Commercially-funded importations (i.e., importations which include but are not limited to those financed
by the NPC's own internal funds, domestic borrowings from any source whatsoever, borrowings from foreign-
based private financial institutions, etc.); and

1.3. Interest income derived from any source.

2. The NPC shall submit to the FIRB a report of its expansion of relieved program, including details of
disposition of relieved tax and duty payments for such expansion on an annual basis or as often as the FIRB
may require it to do so. This report shall be in addition to the usual FIRB reporting requirements on incentive
availment.

(SGD.)
ALFREDO PIO
DE RODA, JR.

Acting Secretary
of Finance

Chairman,
FIRB"

79 Rollo, p. 233; Annex "M" of the Petition.

80 94 SCRA 261 (1974).

81 In order that the review of the decision of a subordinate officer might not turn out to be a farce, the
reviewing officer must perforce be other than the officer whose decision is under review; otherwise, there
could be no different view or there would be no real view of the case. The decision of the reviewing officer
would be biased view; inevitably, it would be the same view since being human, he would not admit that he
was mistaken in his first view of the case." (Ibid., p. 267)

82 119 SCRA 353 (1982).

83 "Due process of law means fundamental fairness It is not fair to Doctor Anzaldo that Presidential Executive
Assistant Clave should decide whether his own recommendation as Chairman of the Civil Service
Commission, as to who between Doctor Anzaldo and Doctor Venzon should be appointed Science Research
Supervisor II, should be adopted by the President of the Philippines." (Ibid. p. 357).

84 "A Fiscal Incentive Review Board is hereby created for the purpose of determining what subsidies and tax
exemptions should be modified, withdrawn, revoked and suspended, which shall be composed of the
following officials:

Chairman — Secretary of Finance

Members — Secretary of Industry

— Director General of the National

Economic and Development Authority

— Commissioner of Internal Revenue

— Commissioner of Customs

"The Board may recommend to the President of the Philippines and for reasons of compatibility with the
declared economic policy, the withdrawal, modification revocation or suspension of the enforceability of any of
the above-cited statutory or tax exemption grants, except those granted by the Constitution. To attain its
objectives, the Board may require the assistance of any appropriate government agency or entity. The Board
shall meet once a month, or oftener at the call of Secretary of Finance." (Sec. 2, Pres. Dec. No. 776)
85 WITHDRAWING ALL TAX AND DUTY INCENTIVES, SUBJECT TO CERTAIN EXCEPTIONS,
EXPANDING THE POWERS OF THE FISCAL INCENTIVES REVIEW BOARD AND FOR OTHER
PURPOSES."

86 In the discharge of its authority hereunder the Fiscal Incentives Review Board shall take into account or
any 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."

87 15 SCRA 569 (1965).

88 "WHEREAS, pursuant to Proclamation No. 1081, dated September 21, 1972, martial law is in effect
throughout the land;

"WHEREAS, in order to extend further assistance to the Veterans of the Philippines in World War II, and their
windows and orphans, as well as to the members of the Armed Forces of the Philippines (who are now
carrying the greater part of the burden of suppressing the activities of groups of men actively engaged in a
criminal conspiracy to seize political and state powers in the Philippines and of eradicating lawlessness,
anarchy, disorder and wanton destruction of lives and property) and their dependents, I ordered the Philippine
Veterans Bank to set aside the sum of five million pesos (P5,000,000.00) in Letter of Instruction No. 31,
October 23, 1972, as amended, for the operation and maintenance of commissary and PX facilities for the
aforementioned veterans, their widows and orphans, and the members of the Armed Forces of the Philippines
and their dependents;

"WHEREAS, to better realize the objectives of the aforementioned Leter Instructions and in order to render
fuller meaning to said objectives, it is necessary that certain commodities which are to be sold by the
commissary from local producers, manufacturers or suppliers be free of all taxes, duties and/or charges
imposed by the Government;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers in me
vested by the Constitution as Commander-in-Chief of all the Armed Forces of the Philippines, and pursuant to
the Letter of Instruction cited above, do hereby promulgate and decree as part of the law of the land that all
purchases from local sources, manufacturers, suppliers and producers of commodities or items decided by
the AFP Exchange and Commissary Service to be sold to persons entitled to commissary and PX privileges
under Letter of Instruction No. 31, dated October 23, 1972, as amended, shall be free of all taxes, duties and
other charges prescribed for similar commodities or items under existing revenue and other laws and
regulations.

The Chief of Staff, AFP, with approval of December, in the year of Our Lord, nineteen hundred and seventy-
two." (Emphasis Supplied)

89 Footnote No. 15 Philippine Acetylene Co., Inc. vs. Commissioner of Internal Revenue, 20 SCRA 1056, at
1064: "In the long run a sales tax is probably shifted to the consumer, but during the period when supply is
being adjusted to changes in demand it must be in part absorbed. In practice the business man will treat the
levy as an added cost of operation and distribute it over his sales as he would any other cost, increasing by
more than the amount of tax prices of goods demand for which will be least affected and leaving other prices
unchanged." [47 Harv. Ld. Rev. 860, 869 (1934)].

90 Opinion No. 106, S'54.

91 Rollo, p. 212; Petition, Annex "F".

92 Rollo, p. 124 Petition, Annex "D" of Annex "A".

93 Rollo, p. 156; Petition, Annex "N-1" of Annex "A".

94 Rollo, p. 128; Petition, Annex "G" of Annex "A".

95 Ibid.

96 Rollo, p. 12.

97 Rollo, p. 213, Petition, Annex "G".