G.R. No. 198146 , August 8, 2017
POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT CORPORATION, Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, Respondent.

FACTS

Petitioner Power Sector Assets and Liabilities Management Corporation (PSALM), a government-owned and controlled corporation created under the Electric Power Industry Reform Act (EPIRA), conducted the privatization of the Pantabangan-Masiway and Magat hydroelectric power plants. The Bureau of Internal Revenue (BIR) subsequently issued a demand to the National Power Corporation (NPC) for deficiency value-added tax (VAT) on these sales, which was endorsed to PSALM. The parties executed a Memorandum of Agreement (MOA) wherein PSALM remitted the VAT amount under protest, and they mutually agreed to seek a final resolution from the appropriate court or body on the taxability issue.
Pursuant to the MOA, PSALM filed a petition for adjudication with the Department of Justice (DOJ) to resolve the legal question of whether the sale of the power plants was subject to VAT. The DOJ assumed jurisdiction and ruled in favor of PSALM, declaring the transactions VAT-exempt. The Court of Appeals, however, nullified the DOJ’s decision, holding that the Secretary of Justice lacked jurisdiction over the tax dispute. PSALM elevated the case to the Supreme Court.

ISSUE

Whether the Secretary of Justice had jurisdiction to adjudicate the dispute between PSALM and the BIR regarding the imposition of VAT on the privatization sales.

RULING

The Supreme Court ruled in the negative, affirming the Court of Appeals’ decision. The Court held that the Secretary of Justice lacked jurisdiction over the controversy. Presidential Decree No. 242, which provides for the administrative settlement of disputes among government agencies, applies only to disputes involving purely questions of law. However, the Court emphasized that this law cannot confer jurisdiction where none exists, and it cannot override specific statutory provisions vesting exclusive jurisdiction in other bodies.
The Court explained that the National Internal Revenue Code (NIRC) vests exclusive original jurisdiction over tax disputes, specifically those involving disputed assessments or claims for tax refunds, in the Court of Tax Appeals (CTA). The issue of whether PSALM’s privatization sales are subject to VAT is intrinsically a tax dispute falling under the CTA’s exclusive domain. The MOA between the parties, which referred the issue to the DOJ, could not validly confer jurisdiction upon the DOJ, as jurisdiction is conferred solely by law. The authority of the Secretary of Justice under P.D. No. 242 is limited and does not extend to supplanting the specialized jurisdiction of the CTA. Consequently, the DOJ’s decision was rendered without jurisdiction and is void. The proper recourse for PSALM is to seek a ruling from the CTA on the substantive VAT issue.