G.R. No. 198146 - Power Sector Assets and Liabilities Management Corp. vs. Commissioner of Internal Revenue

Republic Act No. 9136 (EPIRA) established the Power Sector Assets and Liabilities Management Corporation (PSALM) to take ownership of all National Power Corporation (NPC) generation assets, real estate, IPP contracts and to manage their sale, disposition, and privatization.
Section 50 of EPIRA provides that PSALM’s principal purpose is to liquidate all NPC financial obligations and stranded contract costs in an optimal manner through these privatizations.

On 8 September 2006 and 14 December 2006, PSALM conducted public biddings for the Pantabangan-Masiway and Magat Hydroelectric Power Plants, respectively. First Gen Hydropower Corporation and SN Aboitiz Power Corporation emerged as winning bidders.
On 28 August 2007, the Bureau of Internal Revenue (BIR) issued a demand letter dated 14 August 2007, claiming a deficiency VAT of ₱3,813,080,472 on the sale of the two plants.

On 30 August 2007, NPC, PSALM, and the BIR executed a Memorandum of Agreement (MOA) under which PSALM remitted the ₱3,813,080,472 under protest, preserved all legal positions, and agreed that a favorable DOJ ruling shall be tantamount to a refund application.
Complying with the MOA, on 21 September 2007 PSALM filed OSJ Case No. 2007-3 with the Department of Justice (DOJ) seeking declaratory relief on VAT liability.

On 13 March 2008, the DOJ Secretary ruled in favor of PSALM, declaring the VAT assessment null and void and directing a refund, finding PSALM’s sale not “in the course of trade or business” and noting DOJ’s jurisdiction under PD 242. On 14 January 2009, the DOJ denied the BIR’s motion for reconsideration.
On 7 April 2009, the BIR filed a petition for certiorari with the Court of Appeals (CA) to annul the DOJ decisions for lack of jurisdiction. The CA, in its Decision dated 27 September 2010 and Resolution of 3 August 2011, nullified the DOJ rulings, holding that VAT disputes fall exclusively under the Commissioner of Internal Revenue (CIR) and the Court of Tax Appeals (CTA).

PSALM filed a petition for review under Rule 45 of the Rules of Civil Procedure (G.R. No. 198146), assailing the CA decisions and seeking reinstatement of the DOJ rulings.

Whether the Court of Appeals misapplied the law in granting the petition for certiorari declaring the DOJ decisions void.
Whether the Secretary of Justice lawfully assumed jurisdiction over PSALM’s dispute with the BIR under PD 242 and EO 292.
Whether the DOJ correctly ruled that the sale of generation assets by PSALM is not subject to VAT.
Whether the BIR is entitled to certiorari relief against the DOJ decisions.