FACTS: On November 3, 1936, Commonwealth Act No. 120 was
enacted creating the National Power Corporation, a public corporation. The main source of funds for the NPC was the flotation of bonds in the capital markets and these bonds shall be exempt from the payment of all taxes. On June 4, 1949, R.A. No. 358 was enacted expressly authorizing the NPC to incur other types of indebtedness, aside from indebtedness incurred by flotation of bonds. The law stated that any loans obtained were to be completely tax exempt. On June 2, 1954, R.A. No. 987 was enacted specifically to withdraw NPC's tax exemption for real estate taxes. The exemption was, however, restored by R.A. No. 6395. Later on, R.A. No 6395 as amended by P.D. 380 was issued and specified that NPC’s exemption includes all taxes imposed “directly and indirectly” on all products used by NPC in its operation. On July 30, 1977, P.D. 1177 was issued and expressly repealed the grant of tax privileges to any government-owned or controlled corporation and all other units of government, which include NPC. After a series of withdrawal and restoration of NPC’s tax exemption, the Fiscal Incentives Review Board, possessing the power restore tax exemptions, issued a resolution restoring NPC’s exemption. Since 1976, oil firms never paid excise or specific and ad valorem taxes for petroleum products sold and delivered to NPC. Such taxes were paid on their sales of oil products to NPC only in 1984, thus, NPC claimed for refund paid by the oil companies to the BIR from 1984 to 1986 but only a portion was approved claiming that all the deliveries of petroleum products to NPC are tax exempt. Petitioner contends that P.D. No. 938 repealed the indirect tax exemption of NPC as the phrase "all forms of taxes etc.," does not expressly include "indirect taxes."
ISSUE: Whether or not NPC still possessed indirect tax exemption
RULING: Yes. NPC laws show that it has been the lawmaker's intention that the NPC was to be completely tax exempt from all forms of taxes — direct and indirect. One common theme in all these laws is that the NPC must be enable to pay its indebtedness which, as of P.D. No. 938, was P12 Billion in total domestic indebtedness, at any one time, and U$4 Billion in total foreign loans at any one time. The NPC must be and has to be exempt from all forms of taxes if this goal is to be achieved. P.D. No. 938 did not amend the same and so the tax exemption provision in R.A. No. 6395, as amended by P.D. No. 380, still stands. The tax exemption stood as is with the express mention of "direct and indirect" tax exemptions. And this "direct and indirect" tax exemption privilege extended to "taxes, fees, imposts, other charges to be imposed" in the future, an indication that the lawmakers wanted the NPC to be exempt from all forms of taxes,direct and indirect. Therefore, NPC had been granted tax exemption privileges for both direct and indirect taxes under P.D. No. 938.