National Power Corporation vs. City of Cabanatuan

Facts:

National Power Corporation v. City of Cabanatuan, G.R. No. 149110, April 09, 2003, the Supreme Court Third Division, Puno, J., writing for the Court. Petitioner is National Power Corporation (NPC), a government-owned and controlled corporation created under Commonwealth Act No. 120, as amended (notably Rep. Act No. 6395); respondent is City of Cabanatuan. NPC sold electric power within Cabanatuan and reported gross receipts of P107,814,187.96 for 1992. Pursuant to Section 37 of Ordinance No. 165-92, the City assessed NPC a franchise tax of P808,606.41 (75% of 1% of gross receipts) for 1992 and sought similar taxes for subsequent years plus statutory surcharges and interest.

NPC refused payment, relying on its charter exemption—Section 13 of Republic Act No. 6395, as amended by P.D. No. 938—purporting exemption from "all income taxes, franchise taxes and realty taxes" payable to national and local governments, and on the doctrine that local governments cannot tax national instrumentalities (citing Basco v. Philippine Amusement and Gaming Corporation). The City countered that Section 193 of the Local Government Code (RA No. 7160) withdrew such exemptions and that Sections 137 and 151 of the LGC authorized local franchise taxation.

The City filed a collection suit in the Regional Trial Court (Civil Case No. 1659-AF). On January 25, 1996 the trial court dismissed the case, holding (1) that the NPC charter (a special law) was not repealed by the LGC (a general law), (2) that implied repeal is disfavored, and (3) that local governments lack power to tax national instrumentalities, citing Basco. The City appealed. On March 12, 2001 the Court of Appeals reversed, finding that Section 193, read with Sections 137 and 151 of the LGC, expressly withdrew NPC's tax exemptions; it ordered payment of the assessed tax, future taxes, a 25% surcharge and P10,000 litigation expenses. The CA denied NPC's motion for reconsideration on July 10, 2001.

NPC filed a Petition for Review on Certiorari under Rule 45 seeking reversal of the Court of Appeals decision, presenting i...(Pro-only)

Issues:

• Does Sections 137 and 151 of the Local Government Code, read with Section 131's definition of "franchise," limit the city’s franchise tax to private persons or corporations so that NPC (a GOCC) is not liable for the franchise tax?
• Did the Local Government Code, particularly Section 193, repeal or withdraw NPC’s tax exemptions under its charter despite the charter being a special law?
• Does NPC’s charter as an exercise of police power (and its non-profit characterization) prevail over the Local Government Code so ...(Pro-only)

Ruling:

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Ratio:

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Doctrine:

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