G.R. No. L-28739 and L-28902. March 29, 1972.
DAVAO LIGHT AND POWER CO., INC., petitioner-appellant, vs. THE COMMISSIONER OF CUSTOMS and COURT OF TAX APPEALS, respondents-appellees.

FACTS

Davao Light and Power Co., Inc. (Davao Light), a grantee of a legislative franchise under Act No. 3760, imported electrical supplies and materials in 1962 for use in its power plant. The Collector of Customs imposed and collected customs duties, taxes, and fees thereon. Davao Light paid under protest and sought a refund, claiming exemption from such impositions. Its claim was denied by the Collector and subsequently by the Commissioner of Customs. Davao Light then appealed to the Court of Tax Appeals (CTA).
The core of Davao Light’s argument rested on Section 17 of the Standard Electric Power & Light Franchises Law (Act No. 3636), which was incorporated into its franchise. This provision states that if a competing entity receives a franchise with more favorable terms, those terms shall ipso facto become part of the earlier grantee’s franchise. Davao Light contended that since the National Power Corporation (NPC), a competing entity operating in Davao City, was granted exemption from all taxes and duties under Republic Act No. 358 (as amended), this exemption should automatically extend to Davao Light by operation of Section 17.

ISSUE

Whether Davao Light is entitled to the same tax and duty exemption privileges granted to the National Power Corporation by virtue of Section 17 of Act No. 3636.

RULING

No. The Supreme Court affirmed the decision of the Court of Tax Appeals, denying the claim for refund. The legal logic is clear and twofold. First, the tax exemption granted to the NPC under Republic Act No. 358 must be construed in light of its specific legislative purpose. The law explicitly states the exemption is granted “to facilitate payment of its indebtedness.” This condition is peculiar to the NPC, a government corporation created to develop power resources, for which the Republic guaranteed loans. The exemption was a deliberate waiver of government revenue to enable the NPC to meet its financial obligations efficiently, thereby ultimately protecting the government’s own fiscal position as the guarantor. This rationale is unique to the NPC and does not apply to a private franchise holder like Davao Light.
Second, the Court reiterated the fundamental principle that tax exemptions are never presumed and must be granted in clear and unequivocal language. The “most-favored treatment” clause in Section 17 of Act No. 3636 cannot be invoked to extend the NPC’s exemption to Davao Light through vague implication. The exemption enjoyed by the NPC is a special privilege anchored on a specific statutory grant for a distinct public purpose related to its character as a government instrumentality. It is not a standard “term” of a franchise that can be automatically equalized under Section 17. For Davao Light to be exempt, the law must expressly say so. Since no such express grant exists, the imposition of customs duties and taxes on its importations was valid.