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PROVINCIAL ASSESSOR OF MARINDUQUE v. CA

FACTS:

This case involves a Petition for Certiorari filed by the Provincial Assessor of the Province of Marinduque (petitioner) against the Court of Appeals (CA), contesting the CA's decision that declared the Siltation Dam and Decant System of Marcopper Mining Corporation (respondent) exempt from real property tax. The petitioner issued an Assessment Notice to the respondent for real property taxes due on its real properties, which included the Siltation Dam and Decant System. The respondent appealed the assessment, claiming that the subject property is exempt from real property taxation under Section 234(e) of the Local Government Code of 1991 because it is machinery and equipment used for pollution control and environmental protection. The respondent supported its claim with an Affidavit and Certification from the Department of Environment and Natural Resources (DENR), stating that the subject property is intended for pollution control purposes. The Local Board of Assessment Appeals (LBAA) dismissed the appeal for being filed out of time and ruled that the subject property is taxable as an improvement. The Central Board of Assessment Appeals (CBAA) upheld the LBAA's decision, stating that the subject property is not tax exempt because it does not fall under the definition of machinery provided in the Local Government Code and has not actually been used for pollution control. However, the Court of Appeals reversed the LBAA and CBAA's decision, declaring the subject property exempt from real property tax and directing the refund of tax payments made by the respondent.

In another case, Petitioner Rizal Commercial Banking Corporation (RCBC) filed a petition against the Court of Appeals, contesting its decision that exempted the siltation dam and decant system of Respondent Marcopper Mining Corporation from real property tax. The subject property is considered a machinery under Section 199 of the Local Government Code of 1991 as it functions as machinery and is used for the mining business of Marcopper. It was constructed to comply with a DENR requirement and is a device used for cleaning up after production to clean the water before it flows into the Mogpog and Boac Rivers. The Court of Appeals ruled that the subject property is exempt from real property taxation under Section 91 of the Philippine Mining Act of 1995 because it qualifies as a pollution control device under DENR Administrative Order No. 95-23, as it is used to impound, treat, neutralize, precipitate, filter, convey, and cleanse mine industrial waste and tailings. The petitioner filed a Motion for Reconsideration, but it was denied by the Court of Appeals. Thus, the petitioner filed the present petition, raising issues on the propriety of the action for certiorari, the availability of other remedies, and the alleged grave abuse of discretion committed by the Court of Appeals. The petitioner argues that the subject property should not be exempt from real property tax because it has not been in operation since 1993, and Marcopper does not have a certificate of tax exemption from the DENR under the Philippine Mining Act of 1995. The petitioner claims that the Court of Appeals' decision disregarded factual findings made by the Local Board of Assessment Appeals and the Central Board of Assessment Appeals.

ISSUES:

  1. Whether the mode of appeal by Petition for Certiorari under Rule 65 is proper.

  2. Whether the subject property is exempt from real property taxation.

  3. Whether the subject property is entitled to exemption from real property taxes under Section 234(e) of R.A. No. 7160.

  4. Whether respondent complied with the evidentiary requirements for exemption under Section 206 of R.A. No. 7160.

  5. Whether or not the subject property qualifies as a machinery or equipment used for pollution control as contemplated under Republic Act No. 7160.

  6. Whether or not the expanded definition of pollution control device under Republic Act No. 7942 can be retroactively applied to benefit the respondent.

RULING:

  1. The petitioner erred in its mode of appeal by filing a Petition for Certiorari under Rule 65 instead of a Petition for Review on Certiorari under Rule 45. However, the Court gave due course to the petition considering the power of taxation of a local government unit and its stewardship of the environment. The Court suspended its rules in order to resolve the merits of the petition.

  2. The validity of the assessment notice is determined by the provisions of Title II of R.A. No. 7160, which grants exemptions from real property taxation based on ownership, character, or usage. Ownership exemptions include real properties owned by the Republic, a province, a city, a municipality, a barangay, and registered cooperatives.

  3. The subject property is not entitled to exemption from real property taxes under Section 234(e) of R.A. No. 7160. As held in Mactan Cebu International Airport Authority (MCIAA) v. Marcos, the exemption granted under Section 234(e) is based on usage, requiring actual, direct, and exclusive use for pollution control and environmental protection. The burden is on the taxpayer to prove such use, which respondent failed to do in this case. The evidence shows that the subject property, which is a "zoned earth siltation dam," is a structure primarily intended for pollution control, rather than machinery or equipment.

  4. Respondent failed to comply with the evidentiary requirements for exemption under Section 206 of R.A. No. 7160. There is no allegation or evidence that respondent filed an application for exemption or submitted documentary evidence of the exempt status of the subject property within 30 days from the date of the declaration of real property. The documents submitted by respondent, namely the Affidavit of Esquieres, the project design, and the DENR Certification, do not establish the tax-exempt status of the subject property but classify it as a structure for pollution control.

  5. The subject property does not qualify as a machinery or equipment used for pollution control under Republic Act No. 7160. The Court held that the subject property is a structure adhering to the soil and intended for pollution control, but has not been actually applied for that purpose during the period under assessment. The expanded definition of pollution control device in Republic Act No. 7942, which includes "infrastructure" or "improvement," cannot benefit the respondent in this case since the assessment notice pertains to a period prior to the amendment of the relevant provisions.

  6. The Court granted the petition, reversing and setting aside the Decision and Resolution of the Court of Appeals. The Assessment Notice is declared valid under the then applicable Republic Act No. 7160.

PRINCIPLES:

  • The proper mode of appeal from a decision rendered by the CBAA is a Petition for Review on Certiorari filed with the CA. (Revised Administrative Circular No. 1-95)

  • The validity of an assessment notice is determined by the provisions of Title II of R.A. No. 7160. (Mactan Cebu International Airport Authority v. Marcos)

  • The exemption under Section 234(e) of R.A. No. 7160 for machinery and equipment used for pollution control and environmental protection is based on actual, direct, and exclusive use. (Mactan Cebu International Airport Authority v. Marcos)

  • The burden is on the taxpayer to prove, by clear and convincing evidence, the legal and factual basis for claiming exemption from real property taxes. (Mactan Cebu International Airport Authority v. Marcos)

  • To claim exemption under Section 206 of R.A. No. 7160, a taxpayer must file with the assessor sufficient documentary evidence of the claim, including the necessary supporting documents, within 30 days from the date of the declaration of real property. Failure to comply with this requirement will result in the property being listed as taxable in the assessment roll. (Mactan Cebu International Airport Authority v. Marcos)

  • Tax laws are prospective in application, unless expressly provided to apply retroactively.

  • The definition of pollution control device under Republic Act No. 7942 includes "infrastructure" or "improvement" in addition to machinery or equipment.

  • A structure adhering to the soil and intended for pollution control but not actually used for that purpose does not qualify as a machinery or equipment used for pollution control.