G.R. No. 241302 , February 01, 2021
THE PROVINCE OF NUEVA VIZCAYA, PROVINCIAL TREASURER OF NUEVA VIZCAYA, OFFICE OF THE MUNICIPAL ASSESSOR AND TREASURER MUNICIPALITY OF ALFONSO CASTANEDA PROVINCE OF NUEVA VIZCAYA, PETITIONERS, VS. CE CASECNAN WATER AND ENERGY COMPANY, INC., RESPONDENT. NATIONAL IRRIGATION ADMINISTRATION AND DEPARTMENT OF FINANCE, AS NECESSARY PARTIES.

FACTS

On November 13, 1994, CE Casecnan Water and Energy Company, Inc. (CE Casecnan) and the National Irrigation Administration (NIA) entered into a Build-Operate-Transfer (BOT) contract for a combined irrigation and hydroelectric power generation facility. On December 2, 2002, the Provincial Assessor of Nueva Vizcaya requested cost estimates from CE Casecnan for real property tax (RPT) determination. After receiving assessment notices, CE Casecnan, citing its agreement with NIA, endorsed the tax demands to NIA. NIA filed a protest with the Local Board of Assessment Appeals (LBAA), which was denied. Subsequently, the Provincial Treasurer issued final demands for RPT payment for 2003-2005. CE Casecnan paid the total delinquency of P250,734,306.98 under protest and sought reimbursement from NIA. CE Casecnan then filed a protest with the Provincial Treasurer, which was dismissed, prompting an appeal to the LBAA. The LBAA denied the appeal, ruling that the tax exemption under Section 234(c) of the Local Government Code (for machineries used by government-owned or -controlled corporations or local water districts) did not apply because CE Casecnan, the registered owner, was not such an entity. CE Casecnan and NIA appealed to the Central Board of Assessment Appeals (CBAA). Initially, the CBAA dismissed the appeals. On reconsideration, the CBAA declared the RPT assessments for 2003 and 2004 null and void due to the Province’s lack of a valid tax ordinance for those years. CE Casecnan appealed to the Court of Tax Appeals (CTA) En Banc, seeking a refund and the application of Executive Order (EO) No. 173, which reduces and condones RPT for independent power producers under BOT contracts. The CTA En Banc affirmed the CBAA’s finding on the lack of a tax ordinance (extending it to 2005) and remanded the case to the CBAA to compute the refund amount considering EO No. 173. The Province of Nueva Vizcaya filed this Petition for Review, arguing that EO No. 173 applies only to unpaid taxes, that the assessments were valid based on an existing tax ordinance, and that EO No. 173 is unconstitutional.

ISSUE

1. Whether the real property tax assessments issued by the Provincial Assessor of Nueva Vizcaya against CE Casecnan for the years 2003 to 2005 are valid.
2. Whether Executive Order No. 173 is applicable to CE Casecnan’s case.
3. Whether the constitutionality of Executive Order No. 173 can be raised in this proceeding.

RULING

1. The RPT assessments are VALID. The Supreme Court reversed the findings of the CBAA and CTA En Banc that the assessments were null due to the absence of a tax ordinance. The Court held that a tax ordinance is not a prerequisite for the validity of a real property tax assessment. The authority to assess real property taxes is derived from the Local Government Code itself, not from a local ordinance. The assessment is based on the property’s fair market value and the assessment levels prescribed by the Code. Therefore, the assessments issued by the Provincial Assessor for 2003 to 2005 were valid.
2. Executive Order No. 173 is APPLICABLE. The Court affirmed the CTA En Banc’s ruling to apply EO No. 173. The executive order reduces and condones real property taxes and interest/penalties assessed on the power generation facilities of independent power producers under build-operate-transfer contracts with government-owned or -controlled corporations. The Court held that this condonation applies even to taxes already paid, as the condonation extinguishes the tax obligation itself. Therefore, the amount to be refunded to CE Casecnan must be computed taking into account the reductions and condonation provided under EO No. 173.
3. The constitutional challenge to EO No. 173 is NOT ENTERTAINED. The Supreme Court declined to rule on the constitutionality of EO No. 173 because the Province of Nueva Vizcaya raised the issue for the first time in its Petition before the Supreme Court. The Court reiterated that a question of constitutionality must be raised at the earliest opportunity, which in this case should have been before the Court of Tax Appeals, the competent court to resolve such an issue. Having been raised belatedly, the constitutional challenge cannot be considered.
DISPOSITIVE PORTION:
The Petition for Review on Certiorari was PARTIALLY GRANTED. The Supreme Court declared the RPT assessments for 2003-2005 valid but affirmed the applicability of EO No. 173. The Decision and Resolution of the CTA En Banc were AFFIRMED with MODIFICATIONS. The case was REMANDED to the Central Board of Assessment Appeals to determine the amount to be refunded to CE Casecnan, if any, taking into consideration the provisions of Executive Order No. 173.