Case Summary (G.R. No. 198146)
Key Dates and Procedural History
• Public biddings: 8 September 2006 (Pantabangan-Masiway) and 14 December 2006 (Magat).
• BIR demand letter: 14 August 2007; MOA and PSALM’s under-protest remittance: 30 August 2007.
• DOJ decisions: 13 March 2008 (favorable to PSALM) and denial of BIR motion for reconsideration: 14 January 2009.
• Court of Appeals (CA) certiorari petition filed by BIR Commissioner: April 2009; CA decision nullifying DOJ rulings for lack of jurisdiction: 27 September 2010; CA denial of PSALM’s motion for reconsideration: 3 August 2011.
• Supreme Court grant of petition and final decision reinstating DOJ rulings.
Applicable Law
• 1987 Philippine Constitution (Article VII, Section 17—executive control).
• Presidential Decree No. 242 (PD 242) and its embodiment in Executive Order No. 292 (Administrative Code of 1987, Book IV, Chapter 14)—administrative settlement of disputes solely among national government entities.
• National Internal Revenue Code of 1997 (NIRC), Sections 4 (jurisdiction of the CIR) and 105 (VAT liability “in the course of trade or business”), as amended by RAs 8424 and 9282.
Factual Background and MOA Terms
PSALM succeeded to NPC’s generation assets and liabilities per EPIRA. After winning bidders were selected for two hydroelectric plants, the BIR demanded VAT on the privatization sales. NPC and PSALM, under a tripartite Memorandum of Agreement with the BIR, remitted ₱3.813 billion under protest and agreed that a favorable DOJ ruling would be treated as PSALM’s refund claim.
DOJ Adjudication and Reasoning
The DOJ accepted original jurisdiction over the legal question—whether PSALM’s mandated privatization sales were VAT‐able. It ruled that:
• Jurisdiction lay with the DOJ for pure questions of law among government entities.
• PSALM, not NPC, was the seller by operation of EPIRA; Section 24(A) of RA 9337 (repealing NPC’s VAT exemption) did not apply to PSALM.
• The privatization sales were not “in the course of trade or business” but a one-time government mandate; VAT imposition would undermine optimal proceeds.
Accordingly, the DOJ declared the VAT assessment null and void and directed refund.
Court of Appeals Decision
The CA granted the BIR’s certiorari petition, holding that:
• Disputed tax assessments fall within the CIR’s authority under NIRC Section 204(C) and are appealable exclusively to the Court of Tax Appeals per NIRC Section 4 and RA 9282.
• Jurisdiction over subject matter cannot be conferred by agreement (PD 242 submission clause) where none exists by law.
• The DOJ Secretary gravely abused discretion by assuming jurisdiction over OSJ Case No. 2007-3.
Issues on Appeal
PSALM challenged whether the CA:
I. Misapplied law in entertaining the certiorari petition;
II. Erroneously held DOJ lacked jurisdiction;
III. Incorrectly denied that EPIRA-mandated privatization sales are VAT-exempt;
IV. Deserved relief by certiorari.
Supreme Court Ruling on Jurisdiction
The Supreme Court reversed the CA, holding that:
• Under PD 242 (EO 292, Book IV, Ch. 14), all disputes solely between national government offices or corporations on pure legal questions are mandatorily adjudicated by the DOJ Secretary.
• The tax dispute here is purely among government-owned or controlled entities (PSALM, NPC, BIR) and involves only questions of law; PD 242’s mandatory submission provision applies notwithstanding NIRC’s general grant of jurisdiction to the CIR.
• PD 242 is a special law governing intra-governmental disputes and, by pari materia principles, prevails over the general NIRC in such context.
• The President’s constitutional power of control (Art. VII, Sec. 17) and doctrine of exhaustion of administrative remedies favor administrative
Case Syllabus (G.R. No. 198146)
Facts
- PSALM Corp., created under RA 9136 (EPIRA), took ownership of NPC generation assets, real estate, IPP contracts, and assumed NPC’s liabilities.
- Public biddings on 8 September 2006 and 14 December 2006 led to the sale of the Pantabangan-Masiway and Magat Hydroelectric Power Plants.
- On 14 August 2007, the BIR demanded payment of ₱3,813,080,472 in deficiency VAT. NPC referred the demand to PSALM.
- On 30 August 2007, BIR, NPC and PSALM executed a Memorandum of Agreement (MOA), under which PSALM remitted the VAT under protest pending judicial resolution; the MOA provided that a favorable DOJ ruling would be tantamount to a formal refund application.
- On 21 September 2007, PSALM filed with the DOJ an original petition (OSJ Case No. 2007-3) to determine whether the plant sales were subject to VAT.
Procedural History
- 13 March 2008: DOJ ruled in favor of PSALM, declaring the BIR assessment null and void and directing refund of ₱3,813,080,472.
- 14 January 2009: DOJ denied BIR’s motion for reconsideration on grounds of jurisdictional authority and legal merits.
- 7 April 2009: BIR filed a petition for certiorari in the Court of Appeals (CA) seeking to annul DOJ decisions for lack of jurisdiction; the CA initially dismissed the petition for failure to attach pleadings, then reinstated it on motion.
- 27 September 2010: CA granted certiorari, declaring the DOJ decisions “null and void” for lack of jurisdiction.
- 3 August 2011: CA denied PSALM’s motion for reconsideration, affirming its own ruling.
- 8 August 2017: Supreme Court En Banc resolution of PSALM’s Rule 45 petition.
Issues
- Whether the CA misapplied the law in giving due course to BIR’s petition for certiorari.
- Whether the DOJ Secretary lawfully assumed jurisdiction and resolved the intra-government VAT dispute.
- Whether the DOJ decision correctly held that the plant sales under EPIRA are not subject to VAT.
- Whether certiorari relief is proper under th