CASE DIGEST : National Food Authority v. City Government of Tagum, City Assessor and City Treasurer of Tagum G.R. No. 261472, May 21, 2024

 

FACTS

The National Food Authority (NFA) filed a Petition for Review on Certiorari assailing the decisions of the Court of Tax Appeals (CTA) En Banc, which dismissed its petition seeking to prohibit the City Government of Tagum from collecting real property taxes (RPT) amounting to ₱2,643,816.53 on several parcels of land and buildings owned and used by the NFA in Tagum City. The CTA ruled that the NFA should have first exhausted the administrative remedies under Sections 226 and 252 of the Local Government Code (Republic Act No. 7160) by appealing to the Local Board of Assessment Appeals (LBAA) and paying the tax under protest. It likewise held that the NFA was a government-owned or controlled corporation (GOCC), not a government instrumentality, and was therefore subject to real property tax.

Before the Supreme Court, the NFA argued that the issue was purely one of law—whether it was exempt from real property tax—and therefore direct recourse to the courts was proper. It maintained that, although vested with corporate powers, it is a government instrumentality created to ensure food security, stabilize the supply and price of rice, and maintain buffer stocks under its charter and later Republic Act No. 11203 (Rice Tariffication Law). It asserted that its properties are owned by the Republic and devoted to public service, making them exempt from local taxation under Sections 133(o) and 234(a) of the Local Government Code, which prohibit local governments from taxing the National Government and exempt real property owned by the Republic unless its beneficial use is granted to a taxable person.

ISSUE

Whether the NFA was required to first exhaust the administrative remedies under Sections 226 and 252 of the Local Government Code before questioning the real property tax assessments imposed by the City of Tagum.

Whether the NFA is a government instrumentality or a government-owned or controlled corporation, and consequently whether its properties are exempt from real property tax under Sections 133(o) and 234(a) of the Local Government Code, considering their ownership by the Republic and their use for public service.

HELD

The Supreme Court granted the petition and reversed the CTA En Banc. It held that the NFA properly filed a petition for prohibition because the controversy involved a pure question of law—whether the City of Tagum had legal authority to assess and collect real property taxes from the NFA. Since the issue did not require examination of factual matters or the correctness of the assessment but merely the legal authority to tax, the doctrine of exhaustion of administrative remedies under Sections 226 and 252 of the Local Government Code did not apply. The Court emphasized that administrative remedies are unnecessary where only legal questions are involved.

On the merits, the Court ruled that the NFA is a government instrumentality vested with corporate powers, not a taxable GOCC. Although it possesses corporate powers, it performs essential governmental functions involving national food security and acts as an instrumentality of the Republic. Accordingly, its properties are properties of public dominion devoted to public service and remain owned by the Republic. Under Section 133(o) of the Local Government Code, local governments cannot tax the National Government or its instrumentalities, while Section 234(a) exempts real property owned by the Republic from real property taxation unless beneficial use has been granted to a taxable entity. Since no such beneficial use was shown, the Court declared the real property tax assessments and notices of delinquency void, reaffirming that government instrumentalities performing governmental functions are exempt from local real property taxes.