Maceda v Macaraig

GR No 88291, May 31, 1991

FACTS:
Commonwealth Act 120 created NAPOCOR as a public corporation to undertake the
development of hydraulic power and the production of power from other sources. RA 358
granted NAPOCOR tax and duty exemption privileges. RA 6395 revised the charter of the
NAPOCOR, tasking it to carry out the policy of the national electrification and provided in
detail NAPOCORs tax exceptions. PD 380 specified that NAPOCORs exemption includes
all taxes, etc. imposed directly or indirectly. PD 938 dated May 27, 1976 further
amended the aforesaid provision by integrating the tax exemption in general terms
under one paragraph.
ISSUE:
Whether or not NPC has ceased to enjoy indirect tax and duty exemption with the
enactment of PD 938 on May 27, 1976 which amended PD 380 issued on January 11,
1974
RULING:
No, it is still exempt.
NAPOCOR is a non-profit public corporation created for the general good and welfare,
and wholly owned by the government of the Republic of the Philippines. From the very
beginning of the corporations existence, NAPOCOR enjoyed preferential tax treatment
to enable the corporation to pay the indebtedness and obligation and effective
implementation of the policy enunciated in Section 1 of RA 6395.
From the preamble of PD 938, it is evident that the provisions of PD 938 were not
intended to be interpreted liberally so as to enhance the tax exempt status of NAPOCOR.
It is recognized that the rule on strict interpretation does not apply in the case of
exemptions in favor of government political subdivision or instrumentality. In the case of
property owned by the state or a city or other public corporations, the express exception
should not be construed with the same degree of strictness that applies to exemptions
contrary to the policy of the state, since as to such property exception is the rule and
taxation the exception.

Maceda v Macaraig
Facts:
The petition seeks to nullify certain decisions, orders, ruling, and resolutions of the
respondents (Macaraig et. al) for exempting the National Power Corporation (NPC) from
indirect tax and duties. Commonwealth Act 120 created NPC as a public corporation. RA
6395 revised the charter of NPC and provided in detail the exemption of NPC from all
taxes, duties and other charges by the government. There were many resolutions and
decisions that followed after RA 6395 which talked about the exemption and nonexemption from taxes of NPC.

Issue:
Whether or not NPC is really exempt from indirect taxes

Held:
Yes. NPC is a non-profit public corporation created for the general good and welfare of
the people. From the very beginning of its corporate existence, NPC enjoyed preferential
tax treatment to enable it to pay its debts and obligations. From the changes made in the
NPC charter, the intention to strengthen its preferential tax treatment is obvious. The tax
exemption is intended not only to insure that the NPC shall continue to generate
electricity for the country but more importantly, to assure cheaper rates to be paid by
consumers.
-----------------Some Notes on Direct and Indirect Taxes:
Direct Taxes those which a taxpayer is directly liable on the transaction or business it
engages in. Examples are: custom duties, ad valorem taxes paid by oil companies for
importation of crude oil
Indirect Taxes paid by persons who can shift the burden upon someone else.
Examples are: ad valorem taxes that oil companies pay to BIR upon removal of
petroleum products from its refinery can be shifted to its buyer, like the NPC

Dissenting Opinion of Justice Sarmiento: The fact that NPC has been tasked with the
enormous undertaking to improve the quality of life, is no reason, to include indirect
taxes, within the coverage of its preferential tax treatment. The deletion of indirect
taxes as stated in one of the assailed orders (PD 938), is significant, because if said law
truly intends to exempt NPC from indirect taxes, it would have said so specifically.