G.R. No. L-28739 - Davao Light and Power Co., Inc. vs. Commissioner of Customs

Davao Light & Power Co., Inc. (hereinafter “Davao Light”), the petitioner-appellant, is a franchisee granted the right to install, operate, and maintain a power plant for electric light, heat, and power in Davao.
The respondents are the Commissioner of Customs and the Court of Tax Appeals, whose rulings were appealed by Davao Light.
Davao Light, having imported electrical supplies and materials for its power plant, paid customs duties, special import taxes, compensating taxes, and wharfage fees totaling P9,928.00 on deliveries arriving at the port of Cebu City.
Davao Light filed protests regarding the imposed duties and taxes, but these were eventually ruled unfavorable by the Collector of Customs.
Following the unfavorable ruling by the Collector and the subsequent denial from the Commissioner of Customs, Davao Light sought relief before the Court of Tax Appeals, where a stipulation of facts was entered into by the parties.

Davao Light is the grantee of a legislative franchise issued under Act No. 3760, which authorizes the establishment and operation of an electric power plant within Davao.
The franchise acquired permits Davao Light to conduct a profit-making venture in the electric power industry.
The stipulation of facts further noted that:

Davao Light has been operating its power plant since receiving its Certificate of Public Convenience and Necessity in 1931.
It had imported the electrical supplies, materials, and equipment on two separate occasions in 1962, required for the installation and operation of its power plant.
The duties and taxes were remitted under protest, given the contention regarding their imposition.

Section 17 of (pre-Commonwealth) Act No. 3636 (Standard Electric Power & Light Franchises Law) provides that, in the event of favorable terms being granted to any competing entity, such terms should ipso facto become part of an earlier issued franchise to ensure equal footing.
Davao Light argued that the tax exemption granted to the National Power Corporation (NPC) by subsequent Republic Acts (notably Republic Act 358, as amended by Republic Act 987) should similarly extend to it, pursuant to Section 17 of Act 3636.
It was contended that because the NPC was operating a power plant and enjoying tax exemption, the exemption privileges should be incorporated into Davao Light’s franchise.

The NPC was created under Commonwealth Act No. 120 and given extensive authority to construct, operate, and maintain power facilities.
The law specifically empowered the NPC to supply power for public and governmental use and to acquire the necessary facilities for power generation.
The legislative enactments, including the provisions of Republic Act 358 and Republic Act 357, conferred upon the NPC a clear tax exemption (except on real property tax) to facilitate the payment of its indebtedness.
The statutory language establishing the NPC’s tax exemption was intended solely for the benefit of the NPC and was not meant to extend to private, profit-making ventures like that of Davao Light.

Davao Light maintained that by virtue of its franchise, which was specifically made subject to Act 3636, it was entitled to enjoy the same favorable tax treatment as the NPC.
The petitioner asserted that since the NPC, operating within the same locality, enjoyed tax exemption privileges, those benefits should automatically be extended to Davao Light under the equal footing principle.
The Court of Tax Appeals, however, ruled against Davao Light, holding that:

The tax exemption privileges granted to the NPC were intended only for that government corporation.
The nature and purpose of NPC’s operations differ fundamentally from those of Davao Light.

Consequently, Davao Light’s petition for refund of taxes and duties was denied, leading to the present petition for review.

Whether the favorable tax exemption privileges granted to the National Power Corporation (NPC) under Republic Act 358, as amended by Republic Act 987, should automatically extend to Davao Light under Section 17 of Act No. 3636.
Whether the inherent nature and purpose of Davao Light’s franchise, as a profit-making venture, permit it to avail the tax exemptions designed expressly for a government corporate entity like the NPC.
Whether the absence of explicit statutory language conferring tax exemption on Davao Light precludes it from claiming benefits by implication from legislation benefiting the NPC.