G.R. No. 198146, August 8, 2017
Power Sector Assets and Liabilities Management Corporation (PSALM) vs. Commissioner of Internal Revenue (CIR)

FACTS

The case originated from a dispute between two government entities, PSALM and the CIR, regarding the Value-Added Tax (VAT) treatment of PSALM’s sale of National Power Corporation (NPC) assets. The CIR issued a formal assessment demanding VAT payment. Instead of appealing to the Court of Tax Appeals (CTA), PSALM invoked the jurisdiction of the Secretary of Justice (SOJ) under Presidential Decree No. 242, which provides for the settlement of administrative disputes between government agencies. The SOJ ruled in favor of PSALM, declaring the sale not subject to VAT. The CIR then directly elevated the matter to the Supreme Court via a petition for review.

ISSUE

The primary legal issue is whether the Secretary of Justice properly exercised jurisdiction over this tax dispute between government agencies, or whether such disputes fall under the exclusive jurisdiction of the Commissioner of Internal Revenue and the Court of Tax Appeals.

RULING

The Supreme Court, through the ponencia of Senior Associate Justice Antonio T. Carpio, ruled that the Secretary of Justice correctly assumed jurisdiction. The legal logic is anchored on the specific statutory framework governing intra-governmental disputes. Presidential Decree No. 242 explicitly grants the Secretary of Justice, or the Government Corporate Counsel, jurisdiction to settle disputes, claims, and controversies solely between government agencies and instrumentalities. This law is a special provision that takes precedence over general tax procedures. The Court emphasized that the dispute is purely between government entities, with no private party involved, and concerns the interpretation of a contractual stipulation in the Asset Purchase Agreement regarding tax liability. Therefore, it is an administrative controversy falling squarely under PD 242, not a disputed tax assessment under the National Internal Revenue Code (NIRC). Consequently, the CIR’s proper recourse from the SOJ’s adverse ruling was an appeal to the Office of the President, not a direct petition to the Supreme Court. The Court denied the CIR’s petition, affirming the SOJ’s jurisdiction and decision.
CONCURRING AND DISSENTING OPINIONS
Justice Velasco concurred but underscored procedural hierarchy, stating that appeals from the SOJ should go to the Office of the President under the President’s constitutional power of control, and only thereafter to the Court of Appeals under its appellate jurisdiction over quasi-judicial bodies. Justice Del Castillo dissented, arguing that tax disputes, even between government agencies, involve the sovereign power of taxation and are governed by the NIRC. He maintained that jurisdiction lies exclusively with the CIR and the CTA to ensure uniformity in tax law interpretation, citing a potential conflict where the SOJ’s ruling contradicted an existing CTA decision on a similar VAT issue.