G.R. No. 209303. November 14, 2016.
NATIONAL POWER CORPORATION, PETITIONER, VS. THE PROVINCIAL TREASURER OF BENGUET, THE PROVINCIAL ASSESSOR OF BENGUET, THE MUNICIPAL TREASURER OF ITOGON, BENGUET AND THE MUNICIPAL ASSESSOR OF ITOGON, BENGUET, RESPONDENTS.

FACTS

The National Power Corporation (NPC) operates the Binga Hydro-Electric Power Plant in Itogon, Benguet. In May 2000, the Municipal Assessor of Itogon assessed NPC real property taxes amounting to ₱62,645,668.80 for various properties within the plant complex, including buildings, roads, and equipment. NPC, claiming its properties were exempt under Section 234(b) and (c) of the Local Government Code (LGC), filed requests for exemption in 2000 and 2001, which went unacted upon. In March 2006, NPC received a demand letter for the tax delinquency. NPC subsequently challenged the assessment before the Local Board of Assessment Appeals (LBAA) in April 2006, arguing the properties were exempt as they were actually, directly, and exclusively used in power generation.
The respondents countered that the properties were taxable as they were classified as industrial, and that NPC’s appeal to the LBAA was filed out of time. The LBAA deferred proceedings, ordering NPC to first pay the tax under protest or file a surety bond. NPC moved for reconsideration, arguing such payment was not a prerequisite for challenging the authority to tax exempt properties. The LBAA denied the motion. NPC then elevated the case to the Central Board of Assessment Appeals (CBAA), which dismissed the appeal for being filed out of time. The CBAA also ruled that payment under protest was a condition precedent for appealing to the LBAA. The Court of Tax Appeals (CTA) En Banc affirmed the CBAA’s dismissal.

ISSUE

Whether the CTA En Banc erred in dismissing NPC’s petition based on prescription and its failure to pay under protest, instead of resolving the substantive issue of tax exemption.

RULING

The Supreme Court denied the petition, upholding the dismissal. The Court clarified the procedural requirements under the LGC for contesting real property tax assessments. It distinguished between a protest on the reasonableness or excessiveness of an assessment and a challenge to the authority to assess tax-exempt properties. For the former, Section 252 of the LGC mandates payment under protest as a condition sine qua non before an appeal can be entertained by the LBAA. For the latter, which questions the very power to tax, payment under protest is not required.
However, the Court found that NPC’s case before the LBAA was not purely a challenge to authority. NPC’s arguments involved the nature and use of the properties, intertwining with the reasonableness of their classification and assessment. Consequently, the LBAA correctly applied Section 252. Furthermore, the Court ruled that NPC’s failure to timely appeal the LBAA’s July 28, 2006 Order, which required payment under protest, to the CBAA within the reglementary period rendered that order final and executory. The subsequent CBAA and CTA En Banc decisions correctly focused on this procedural lapse. The Court emphasized that adherence to procedural rules is indispensable for the orderly administration of justice, and NPC’s neglect barred a review on the merits of its exemption claim.