The Supreme Court (SC) has affirmed its earlier decision dismissing the petition of the National Power Corp. (NPC) to stop the municipal government of Pagbilao, Quezon from collecting P1.5 billion in unpaid real property taxes from an independent power producer.

NPC has been insisting that it already agreed to assume the tax obligations of Mirant Pagbilao Corp. since they are partners in the build-operate-transfer (BOT) project for the construction of the power plant in the municipality.

And that being a government-owned and controlled corporation (GOCC), Napocor said it is exempted from payment of real property taxes.

But the SC’s special second division maintained that NPC lacked sufficient legal interest to protest the tax assessment.

“Napocor is clearly not vested with the requisite interest to protest the tax assessment, as it is not an entity having the legal title over the machineries. It has absolutely no solid claim of ownership or even of use and possession of the machineries, as our July 15, 2009 decision,” said in a 19-page resolution penned by Associate Justice Arturo Brion and concurred in by Associate Justices Conchita Carpio Morales, Teresita Leonardo de Castro, Roberto Abad, and Jose Perez.

Without the requisite interest, the High Court ruled that the tax assessment of P1.5 billion for the machineries located in the Pagbilao power plant “stands and no claim of exemption or privilege can prevail.”

The SC threw out NPC’s claim that it is the beneficial owner of the subject machineries, with Mirant retaining merely a naked title to secure certain obligations.

Court records showed that in 1991, NPC and Mirant signed an Energy Conversion Agreement (ECA) which called for the latter to build and finance a coal-fired thermal power plant to convert fuel into electricity on the property owned by the former in Pagbilao town.

Also, the ECA provided that the NPC would supply the fuel and use the electricity generated for the needs of its consumers. After 25 years, Mirant would turn over to NPC all the machineries and equipment at no cost.

But the ECA provided that the NPC would shoulder all the taxes the government may impose on Mirant.

In 2006, the Court of Tax Appeals (CTA) dismissed the petition of NPC to reverse the ruling of the Local Board of Assessment Appeals (LBAA) denying the power firm’s move to exempt it from the payment of taxes on the machineries and equipment put up by Mirant.