CASE DIGEST
NATIONAL POWER CORPORATION
V. PROVINCE OF PAMPANGA
G.R. No. 230648 (Resolution), [October 6,
2021])
FIRST, LOPEZ, M.V
Local Taxation; Tax
Assessment need not state provision of
Ordinance; Nullity of the Assessment Letter
The tax assessment which stands as the
first instance the taxpayer is officially made aware of the pending tax
liability, should be sufficiently informative to apprise the taxpayer the legal
basis of the tax Section 195 of the Local Government Code does not go as far as
to expressly require that the notice of assessment specifically cite the
provision of the ordinance involved but it does require that it state the
nature of the tax, fee or charge, the amount of deficiency, surcharges,
interests, and penalties.
The case involves the National Power Corporation (NPC), a government-owned corporation, receiving an Assessment Letter from the Provincial Treasurer of the Province of Pampanga, demanding payment of local franchise tax. NPC, relying on the Electric Power Industry Reform Act (EPIRA Law), argued that it was no longer subject to franchise tax as its power generation was not considered a public utility operation requiring a franchise. The notice of assessment sent to the Corporation did state that the assessment was for business taxes, as well as the amount of the assessment.
NPC appealed to the Regional Trial
Court (RTC) after the Provincial Treasurer failed to act on the protest, for
failure of the assessment to state the exact legal basis for the tax. The RTC
ruled in favor of the Province of Pampanga, stating that NPC, despite EPIRA Law
modifications, remained liable for franchise tax due to its power generation
and supply activities. The Court of Tax Appeals (CTA) upheld this decision but
remanded the case to the RTC for further proceedings due to insufficient
details in the Assessment Letter. NPC properly filed to petition for review on
certiorari under Rule 45 with the Supreme Court to question the CTA’s decision.
Whether NPC properly filed to petition
for review on certiorari with the Supreme Court to assail the decision of the
CTA.
YES. Under RA No. 9282,25 approved on March
30, 2004, the CTA was elevated to the same level and equal rank as the Court of
Appeals. Upon its effectivity on April 23, 2004,26 decisions or rulings of the
CTA En Banc are now appealable to the Supreme Court via a petition for review
on certiorari under Rule 45 of the Rules of Court. Furthermore, Section 1, Rule
16, of the Revised Rules of the Court of Tax Appeals28 (RRCTA) provides that a
party adversely affected by a decision or ruling of the CTA En Banc may appeal
by filing with the Supreme Court a verified petition for review under Rule 45
of the Rules of Court. Accordingly NPC properly filed to petition for review on
certiorari with this Court.
Whether the defense of nullity of
assessment was waived as it was raised only upon filing of motion for reconsideration.
NO. The issue of nullity of the Assessment Letter is not deemed waived even if raised only in NPC's motion for reconsideration of the CTA En Banc's Decision The CTA has ample authority to determine compliance by the taxing authority of the due process requirements under the tax laws even though not expressly raised as an issue in the petition filed before them. Indeed, the validity or invalidity of the Assessment Letter is integral to the issue of NPC's liability for local franchise tax under the Provincial Tax Code of 1992 of Pampanga. If the assessment is void, NPC is not liable for the franchise tax.
Whether the Assessment Letter's lack of
specific details, including the amount of franchise tax, surcharges, interest,
and the period covered, violates NPC's right to due process, rendering the
assessment null and void.
YES. The Supreme Court ruled in favor of
NPC, holding that the Assessment Letter's deficiencies deprived NPC of its
right to due process. The Court emphasized that taxpayers must be adequately
informed of the basis, amount, and period covered by the assessment to enable
them to prepare an intelligent protest or appeal. Verily, taxpayers must be informed of
the nature of the deficiency tax, fee, or charge, as well as the amount of
deficiency, surcharge, interest, and penalty. Failure of the taxing authority
to sufficiently inform the taxpayer of the facts and law used as bases for the
assessment will render the assessment void. The Province of Pampanga failed to
observe the due process requirements in issuing a deficiency local tax
assessment; hence, the assessment is void.
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