The Province of Nueva Vizcaya vs. CE Casecnan Water And Energy Company, Inc.

G.R. No. 241302, February 01, 2021

FACTS:

CE Casecnan, an independent power producer (IPP) entered into a build-operate-transfer contract with National Irrigation Administration (NIA), a GOCC to deliver to Pantabangan Reservoir all water diverted from the Casecnan Watershed and all net electrical energy generated by the project. Provincial Assessor’s Office informed CE Casecnan of the initial appraisal and assessment of the properties for real property tax (RPT) due.  CE Casecnan endorsed the letter to NIA because their agreement provides that all fees paid to the government shall be for the account of NIA. However, NIA did not give any instructions to CE Casecnan regarding the same and instead filed its Protest to the Local Board of Assessment Appeals (LBAA) of the Province of Nueva Vizcaya. LBAA denied the protest filed by NIA.

The Office of the Provincial Treasurer of the Province of Nueva Vizcaya issued a Final Demand addressed to CE Casecnan for the payment of RPT. For failure of NIA to respond to CE Casecnan, the latter paid the RPT delinquency under protest. CE Casecnan sent an invoice to NIA and demanded reimbursement of the amount paid invoking the provisions of their earlier Agreements. 

The LBAA denied the appeal and held that contrary to CE Casecnan’s claim that it should be exempt from RPT under Section 234(c) of the LGC, the LBAA held that the said provision is not applicable. 

The CBAA modified its earlier decision and declared null and void the assessments issued by the Provincial Assessor’s Office. It gave merit to NIA’s argument that there was no valid and legal tax ordinance which would support the assessments made by the local assessor. Hence, the Province of Nueva Vizcaya is bereft of any authority to impose RPT against CE Casecnan. 

The CTA agreed with the CBAA that the assessments made by the local assessor against CE Casecnan were not supported by a valid and legal tax ordinance. 

ISSUE: 

Whether the assessment issued by the Provincial Assessor against CE Casecnan for the years 2003 to 2005 is null and void because no valid and legal tax ordinance exists to support the same.

HELD: 

NO. Local governments are vested with the power to create their own sources of revenue. Article X, Section 5 of the 1987 Constitution provides that:

Section 5. Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees, and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local governments.

One of the taxes which a local government unit may levy is real property tax. The base of the RPT, or the assessment level, is defined as the “percentage applied to the fair market value of the property to determine its taxable value.

The ruling of the CTA En Banc invalidating the assessment of the RPT in the absence of an ordinance fixing the assessment levels and fair market values is dangerous and it is tantamount to curtailing the power of local governments to levy RPT. The prescription under Section 219 of the LGC for local governments to undertake a general revision of real property assessments within two years after the effectivity of the LGC and every three years thereafter is only to make sure that the schedule of fair market values and assessment levels capture the true economic realities in the community where the property is located taking into consideration inflation and other economic indicators.

Hence, the assessment of RPT against CE Casecnan was valid.

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