G.R. No. 170532 April 30, 2009
THE PROVINCIAL ASSESSOR OF MARINDUQUE, Petitioner, vs. THE HONORABLE COURT OF APPEALS AND MARCOPPER MINING CORPORATION, Respondents.

FACTS

The Provincial Assessor of Marinduque issued an Assessment Notice dated March 28, 1994, for real property taxes on Marcopper Mining Corporation’s properties, including its Siltation Dam and Decant System at Barangay Lamese, Sta. Cruz, Marinduque, with a market value of Php36,360,996.19. Marcopper paid the tax but appealed to the Local Board of Assessment Appeals (LBAA), claiming the property is exempt under Section 234(e) of the Local Government Code (R.A. No. 7160) as “machinery and equipment used for pollution control and environmental protection.” Marcopper submitted an affidavit from its Chief Mining Engineer stating the dam was constructed to comply with a DENR requirement to prevent contamination of the Mogpog and Boac Rivers, and a DENR certification describing it as a structure intended primarily for pollution control. The LBAA dismissed the appeal as filed out of time and held the property was a taxable improvement, citing a ruling that a tailings dam is a permanent improvement. The Central Board of Assessment Appeals (CBAA) held the appeal was timely but lacked merit, finding the property was neither machinery nor equipment but a permanent improvement, and noted it had been out of operation since 1993. The Court of Appeals reversed, declaring the Siltation Dam and Decant System exempt from real property tax, qualifying as a pollution control device under the Philippine Mining Act of 1995 (R.A. No. 7942), and directed a refund or tax credit. The Provincial Assessor filed a Petition for Certiorari under Rule 65.

ISSUE

Whether the Court of Appeals committed grave abuse of discretion in declaring Marcopper’s Siltation Dam and Decant System exempt from real property tax.

RULING

The Supreme Court granted the petition, reversed the Court of Appeals Decision, and reinstated the CBAA Decision. The Court held that the proper remedy from the CA Decision was a petition for review on certiorari under Rule 45, not a special civil action for certiorari under Rule 65, as the error ascribed was a reversible error in the interpretation of law, not a grave abuse of discretion. On the substantive issue, the Court ruled that the Siltation Dam and Decant System is not exempt from real property tax. It is not “machinery and equipment” under Section 234(e) of the Local Government Code, as it is a permanent improvement or infrastructure, not falling within the statutory definition of machinery. Furthermore, it does not qualify for the incentive under Section 91 of the Philippine Mining Act of 1995, as the provision applies prospectively and requires a certification from the DENR Secretary, which Marcopper did not possess. The Court also noted that the dam was non-operational during the relevant period, thus not actually, directly, and exclusively used for pollution control. Tax exemptions are construed strictly against the taxpayer, and Marcopper failed to prove its clear entitlement to the exemption.