G.R. No. 159792 - Barangay Sangalang vs. Barangay Maguihan

National Power Corporation (NPC), a government-owned and controlled corporation (GOCC), operates the Angat Hydro-Electric Power Plant in Norzagaray, Bulacan.
The Municipal Assessor of Norzagaray issued NPC two Notices of Assessment for Real Property Tax (RPT):

Machineries Assessment dated December 12, 2006, covering January 1, 1996 to December 31, 2005, for eleven properties (machineries/structures) totaling PHP 11,396,000 per year (PHP 113,960,000 total).
Land Assessment dated December 14, 2006, covering January 1, 1997 to December 31, 2006, for three properties with an aggregate tax of PHP 82,845,188.60.

NPC questioned the assessment before the Local Board of Assessment Appeals (LBAA) on two grounds:

The properties listed in the Machineries Assessment are exempt from RPT as they are actually, directly, and exclusively used in generating and transmitting electricity (Section 234 (c) of the Local Government Code (LGC)).
The land assessment applied a 40% assessment level instead of the 10% rate prescribed for GOCCs under Section 218(d) of the LGC.

The Municipal Assessor admitted the error on assessment level for land and issued a revised assessment with a 10% rate, setting the revised Land Assessment tax due at PHP 18,475,003.20 for 1997-2006, and PHP 2,733,248.00 for 2006.
The assessor demanded payment under protest for the Machineries Assessment before proceeding with hearings.

The LBAA ruled against NPC on August 14, 2008, holding payment under protest a condition sine qua non for filing an appeal. It found NPC failed to prove exemption for the machineries, noting the dam complex’s multi-purpose use.
The Central Board of Assessment Appeals (CBAA) affirmed the LBAA decision on August 26, 2010, after conducting hearings and ocular inspections. It held that the machineries and structures are used for multiple purposes (irrigation, flood control, water supply) other than power generation, negating exclusivity.
NPC appealed to the Court of Tax Appeals (CTA) En Banc, which denied the petition on November 29, 2012, upholding the CBAA decision. The CTA emphasized NPC’s failure to pay tax under protest rendered the protest ineffective, making the LBAA appeal premature and fatally defective for lack of exhaustion of administrative remedies.
The CTA En Banc denied NPC’s motion for reconsideration on April 22, 2013, reiterating that payment under protest is mandatory for appeals involving correctness or reasonableness of assessment.

Compliance with payment under protest is not required when challenging the assessor’s authority to assess exempt properties.
The properties listed in the Machineries Assessment are exempt as they are actually, directly, and exclusively used for power generation, pollution control, and environmental protection.
The Land Assessment was erroneous; NPC should pay only the amended amount of PHP 6,485,422.60.

On November 25, 2013, the Supreme Court issued a Temporary Restraining Order (TRO) against enforcement of a Warrant of Levy on the Machineries Assessment properties.

Whether compliance with the payment under protest requirement under Section 252 of the LGC is a condition sine qua non to question the local assessor’s assessment before the LBAA?
Whether the properties listed in the Machineries Assessment are exempt from real property tax?
Whether the properties listed in the Land Assessment are exempt from real property tax?