Republic of the Philippines

CENTRAL BOARD OF ASSESSMENT APPEALS Manila

MARCOPPER MINING CORPORATION, Petitioner-Appellant,

– versus –

THE BOARD OF ASSESSMENT APPEALS OF THE PROVINCE OF MARINDUQUE,
Appellee,

CBAA Case No. L-18-96 TD No. 05-35697

– and –

THE PROVINCIAL ASSESSOR OF MARINDUQUE AND THE MUNICIPAL TREASURER OF STA. CRUZ, MARINDUQUE,
Respondents-Appellees,

x – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – x

D E C I S I O N

Petitioner-Appellant Marcopper Mining Corporation, files this Appeal from

the Decision of the Local Board of Assessment Appeals (LBAA) of the Province

of Marinduque. As can be discerned, the Decision dealt with the following

issues:

1. Whether or not the Appeal was seasonably filed.

2. Whether or not the assessment made on Petitioner-Appellant’s Siltation Dam and Decant System in the amount of P36,360,996.19 is erroneous and/or unjust;

3. Whether or not Petitioner-Appellant’s Siltation Dam & Decant System is exempt from real property tax.

As gathered, Petitioner-Appellant, Marcopper Mining Corporation

prepared and filed with the Provincial Assessor a sworn statement on the value

of the property embodied in tax Declaration No. 05-35697, dated November 17,

1993. (Exh. “C-2”.) On March 28, 1994, Marcopper, through its Vice President

Pablo P. Paulino, sent a letter to the Municipal Treasurer of Sta. Cruz,

Marinduque protesting the assessment. At the same time, Marcopper paid

under protest the 1994 first quarter assessment (under protest). Since then

Marcopper has been paying under protest the subsequent quarterly

assessment as they fall due.

Reference: Book VIII, pp. 220-230

Since the Municipal/Provincial Treasurer failed to act on the protest,

Marcopper appealed the assessment through a Notice of Appeal dated May 16,

1994 to the LBAA according to Section 252 in relation to Section 226 of the

Code. The appeal was filed on May 27, 1994.

Petitioner-Appellant, Marcopper Mining Corp., sought realty tax

exemption of its siltation dam and decant system as follows:

“In this action, Marcopper seeks to exempt from real property taxation its siltation dam and decant tower system (‘siltation dam’) located in the Marcopper mine site in Sta. Cruz, Marinduque. The siltation dam was built by Marcopper to protect the Maguila-guila Mogpog river system as mandated in the Environmental Compliance Certificate (ECC) issued by the Department of Environment and Natural Resources (DENR).”

“Under Section 234 (e) of Republic Act No. 7160 (the Local Government Code of 1991, hereinafter the Code’), ‘machinery and equipment used for pollution control and environmental protection’ are among those exempt from payment of real property taxes. Since Marcopper’s siltation dam clearly falls under this class, it should be exempted from realty taxes under said law.”

The LBAA of Marinduque held that the Appeal was filed unseasonably,

but proceeded to hear the case, dismissing it for lack of merit: It found the

Siltation Dam and Decant System as “Improvement”, hence taxable.

Petitioner-Appellant assigns the following errors:

“I. THE LBAA GRAVELY ERRED IN RULING THAT THE APPEAL WAS FILED OUT OF TIME.

“II. THE LBAA GRAVELY ERRED IN FINDING THAT THE SILTATION DAM AND DECANT SYSTEM IS NOT EXEMPT FROM REAL PROPERTY TAX.”

Petitioner-Appellant prays,” that a Decision be rendered:

“a. reversing in toto and setting aside the Decision of the Local Board of Assessment Appeals (sic) dated November 10, 1995;

“b. declaring that Marcopper’s siltation dam as exempt from real property tax under Section 234 (e) of the Local Government Code of 1991.

“c. directing the Provincial Assessor to classify Marcopper’s siltation dam as tax exempt and thereafter remove the same from the assessment roll; and

“d. ordering the refund to or give Marcopper tax credit for all realty tax payments made under protest for the siltation dam subject of this suit which as of January 1, 1995 has reached the amount of P523,598.40.”

Appellee, Local Board’s Decision should not have delved on “prescription

of Action” as the other ground for dismissing the Appeal: it proceeded to hear

Reference: Book VIII, pp. 220-230

the case on the merit and nothing about “prescription of action” was raised at

anytime in the proceedings. In their testimonies heard before this Board:

Respondent-Appellee, Provincial Assessor of Marinduque, Atty. Angel Palomares:

“I don’t think so, your honor, personally I know I did not raise that issue before the Local Board.”

Counsel for Petitioner-Appellant, Marcopper Mining Corporation, Atty. Danilo Cortina:

“The same manifestation, your honor, that it was never raised during the hearing at the Local Board of Assessment Appeals.”

According to Appellee Local Board: “’the tax declaration covering the

siltation dam (TD No. 05-35697)’ constituted the ‘written Notice of

Assessment.’” It further held “that, for all legal intents and purposes, the sworn

statement of appellant’s Chief Accountant, regarding the Market Value of the

Siltation Dam and Decant System appearing in TD No. 05-35697 in the amount

of P36,360,996.19 which was accepted by appellee, as is, (Exh. ‘C-2’),

amounts to a substantial written notice to appellant, on November 17, 1993, of

the assessment of the Siltation Dam and Decant System.” This is not so.

“Notice” is “information” or “announcement”. “Information is actually received by

the person to whom it is intended to be imparted.” (Enriquez vs. Bautistat, 79

Phil. 224.) “Notice” should come from one who is to impart the information–the

Notice of Assessment”– in this case the appellee, Provincial Assessor,

informing or announcing to another (to whom the information or Notice of

Assessment is intended to be imparted, the Petitioner-Appellant), the

assessment made and the tax due on the property assessed.

What Petitioner-Appellant did was not to give “Notice of Assessment” to

itself but to act in compliance with Sec. 202 of the Local Government Code of

1991. (R.A. 7160):

“Declaration of Real Property by the Owner or Administrator. – It shall be the duty of all persons, natural or juridical, owning or administering real property, x x x, to prepare or cause to be prepared, and file with the provincial, city or municipal assessor, a sworn statement declaring the true value of their property, x x x, which shall be the current and fair market value of the property, as determined by the declarant. Such declaration shall contain a description of the property sufficient in detail to enable the

Reference: Book VIII, pp. 220-230

assessor or his deputy to identify the same for assessment purposes.” X x x. (Underscoring Supplied.)

Verily, a tax declaration is prepared, “to enable the assessor or his

deputy to identify the same for assessment purposes”. In other words

assessment is made on the declaration prepared and submitted by the property

owner. How could a tax declaration therefore, serve as “Notice of Assessment”

when at that point in time no assessment has yet been made? Putting the horse

before the carriage?

Section 226 of the Code (R.A. 7160) (the basis of the prescription of

action and dismissal of Marcopper’s Appeal by Appellee, Local Board),

provides:

“Local Board of Assessment Appeals. – Any owner or person having legal interest in the property who is not satisfied with the action of the provincial, city or municipal assessor in the assessment of his property may, within sixty (60) days from the date of receipt of the written notice of assessment, appeal to the Board of Assessment Appeals of the province or city by filing a petition under oath in the form prescribed for the purpose, x x x.”

There were exactly sixty (60) days reckoned from March 28, 1994 (the

date of issuance of the “Notice of Assessment”), to May 27, 1994 (the date of

the filing of the Appeal). Therefore, the appeal was seasonably filed.

Whether or not the assessment made on Petitioner-Appellant’s siltation

dam and decant system in the amount of P36,360,996.19 is erroneous and/or

unjust: This Board finds none and agrees with the finding made by Appellee

Board thereon, to wit:

“Not an iota of evidence supports Appellant’s contention. X x x, the valuation of the Siltation Dam and Decant System in the amount of P36,360,996.19, was made by Appellant itself which was merely accepted, as gospel truth, by Appellee. No evidence of fraud, error, violence, intimidation, or undue influence, whatsoever, to vitiate the free will of Appellant in declaring such amount of assessment, was presented. Appellant is now estopped from invalidating its own assessment.”

Appellee, Local Board finds that Marcopper’s Siltation Dam and Decant

System is “improvement”. Citing “Benguet Corporation vs. Central Board of

Assessment Appeals, (218 SCRA 271;276-278)”, it is taxable.

Petitioner-Appellant, however, makes no objection thereto. Petitioner-

Appellant, does not dispute the “improvement” status of its Siltation Dam and

Reference: Book VIII, pp. 220-230

Decant System nor its taxability as such “improvement”. What it claims,

however, about which Appellee Local Board failed to address, is the tax

exemption of its Siltation Dam and Decant System, as it is allegedly “machinery

and equipment used for pollution control and environmental protection”, under

Section 234(e) of the Local Government Code of 1991 (R.A. 7160).

During this Board’s hearing of the case, Petitioner-Appellant invoked the

existence of a new law enacted sometime in 1995 “exempting pollution control

devices acquired, constructed or installed. They shall not be considered as

subject to real property taxes or other assessments”. (See Sec. 91 of R.A 7942,

otherwise known as the Philippine Mining Act of 1995, approved on March 3,

1995.) Petitioner-Appellant states that this was not raised thereto as it was not

then in existence, hence it is raised for the first time in that hearing.

Respondent-Appellee, Provincial Assessor, however, points out “that the

Rules and Regulations of that law provides for a definition of what a pollution

control device is”. Respondent-Appellee maintains that “the pollution dam is not

included in what pollution control devices are, as defined by R.A. 7942”.

Section 91 of the Philippines Mining Act of 1995 (R.A. 7942) provides:

“Incentives for Pollution Control Devices. – Pollution control devices acquired, constructed or installed by contractors shall not be considered as improvements on the land or building where they are placed, and shall not be subject to real property and other taxes or assessment: Provided, however, that payment of mine wastes and tailings fees is not exempted.”

The definition of “’Pollution control and infrastructure devices’”, under

Sec. 3(am) of the same Philippine Mining Act of 1995: “refers to infrastructure,

machinery, equipment and/or improvements used for impounding, treating or

neutralizing, precipitating, filtering, conveying and cleansing mine industrial

waste and tailings as well as eliminating or reducing hazardous effects of solid

particles, chemicals, liquids or other harmful byproducts and gases emitted

from any facility utilized in mining operations for, their disposal”. (Underscoring

supplied.)

Reference: Book VIII, pp. 220-230

“The definition speaks of industrial waste and tailings, together with

hazardous elements emitted from facilities utilized in mining operations for their

disposal.”

“The differentiation of Appellant’s expert witness Astra Arciaga between a

tailings dam and a siltation dam is very revealing. Ms. Arciaga states that ‘a

siltation dam would contain stream water or surface run-off mostly resulting

from rain and the natural water going down the stream.’ (P. 10, TSN, January

20, 1995.)

“Incidentally, Ms. Arciaga comes from the DENR, the government agency

which monitors the Environmental Impact Statements (EIS) and the office

charged with issuing Certificates of Tax Exemption to deserving mining

companies. She is not an employee nor under the pay of Marcopper.”

Respondent-Appellee interposed further that before such exemption

“could be availed, the applicant, the corporation or anybody who wants to avail

of this tax exemption–tax exempting provision–must meet several conditions

and requirements. Reading the requirements, he proceeded as follows:

“The contractor shall avail of this incentive in writing to the Director supported by a sworn report containing list of such devices and infrastructure together with relevant maps or diagrams indicating their location and use in the operation. Such reports shall include the installation cause of the devices or infrastructure, the corresponding amount of tax exemption availed of by the contractor. If such devices and infrastructure after evaluation by the bureau, that’s the DENR, your honor, were found necessary and appropriate for the operations only then will the Director issue a certificate of tax exemption for the purpose of availing an exemption from Local Government taxes and assessments. And I don’t think that at this point in time, the Appellant has a certificate of tax exemption.”

Pursuant thereto, Respondent-Appellee, Provincial Assessor intimidated

that he was “willing to drop the assessment from the taxable rolls if and when

they can present a certificate of tax exemption”, i.e., from the Department of

Environment and Natural Resources (DENR).

Asked whether “all the payments under protest be returned to

Marcopper”, once the certificate is secured, Respondent-Appellee, Provincial

Assessor answered in the negative: “from the time the certificate of tax

Reference: Book VIII, pp. 220-230

exemption is presented to our office, that will be the time when we will declare it

as exempt. It will not be retroactive”.

According to Petitioner-Appellant’s counsel: “the reason why we are

invoking Section 234(e) is because of that assessment we’re claiming

exemption, and the reason why we included further the provision of Section 91

of the Mining Act, is to show the very intent of Congress that specifically, they

want to grant exemption to anti-pollution devices”.

The provision of Section 234(e) of the Local Government Code of 1991

(R.A. 7160), reads:

“SEC. 234. Exemptions from Real Property Tax. – The following are exempted from payment of the real property tax:

x x x

(e) Machinery and equipment used for pollution control and environmental protection.”

The above-quoted provision requires that before a property can be

exempt from the payment of real property tax, it has to be:

1. “machinery and equipment” and

2. “used for pollution control and environmental protection.”

Petitioner-Appellant alleges that “Macopper’s siltation dam is a pollution

control and environmental protection device built exclusively for that purpose.”

Petitioner-Appellant submits the affidavit and testimony, as heard by Appellee

Local Board, of its Chief Mining Engineer, Ricardo Esquieres, Jr. both

(testimony and affidavit) purport that “for this purpose the DENR issued the

Environmental Compliance Certificate (ECC) in order to ensure the

implementation of Marcopper Mining Corporation’s commitment for the

protection of the river system”.

The Environmental Compliance Certificate (ECC) (Annex “A”) issued is

replete with conditions about which Marcopper highlights No. 9, thereof viz:

“That Marcopper Mining Corporation shall ensure the containment of run off and silt materials from reaching the Mogpog and Boac Rivers and if ever there is some damage, immediate and appropriate compensation should be given to affected municipalities.”

Reference: Book VIII, pp. 220-230

DENR’s Carlos J. Magno, Regional Technical Director, Environmental

Management and Protected Areas Services, Region IV-B issued a certification

(Attach “E”), “that the Mine Waste Disposal Facility of Marcopper Mining

Corporation located at Mogpog, Marinduque is a Siltation Dam structure

intended primarily for pollution control and silted materials in order to protect the

environmental degradation of Maguila-guila, Mangamu-Mogpog, system from

getting turbid”.

Notice that contradiction No. 9 of the ECC, supra, provides for

Marcopper’s ensuring “the containment of run off and silt materials from

reaching the Mogpog and Boac Rivers” and the certification of DENR’s Director

Magno, supra, is that the Siltation Dam is “intended primarily for pollution

control”.

The question is: Did the Siltation Dam and Decant System attain that of

being “used for pollution control and environmental protection”, as defined in

Section 234(e) of R.A. 7160? In this Board’s ocular inspection of the Siltation

Dam, a steel structure, water gate-like, occupies a portion of the side of a pond-

like waterway–a restrain on the course of water naturally flowing. Some

distance therefrom, are articulated tubular floats semi-circularly spanning the

pond. The Siltation Dam is apparently out of commission-and not apt to its

function as would control pollution and protect the environment. It betrayed the

purpose for which it was created. Hence the Resolutions, 95-1 and 96-1,

(furnished this Board), of the Barangays of the Municipality of Mogpog,

Marinduque, affected therefor, dated July 4, 1995 and May 29, 1996,

respectively both calling for the removal of the Siltation Dam as follows:

“alisin ang itinayong Siltation Dam sa madaling panahon upang ang mamamayan ng Mogpog ay matahimik na ang kalooban, x x x.”

Assuming, however, that the Siltation Dam and Decant System passes

the test that it is “used for pollution control and environmental protection”, it is

not likely to survive the test that it is “machinery and equipment”. Consequently,

therefore, it is taxable.

Reference: Book VIII, pp. 220-230

In Sec. 199(o) of the Local Government Code of 1991 (R.A. 7160),

“machinery” is defined as follows:

“’Machinery’ embraces machines, equipment, mechanical contrivances, instruments, appliances or apparatus which may or may not be attached permanently or temporarily, to the real property. It includes the physical facilities for production, the installations and appurtenant service facilities, those which are mobile, self-powered or self-propelled, and those not permanently attached to the real property which are actually, directly and exclusively used to meet the needs of the particular industry, business or activity and which by their very nature and purpose are designed for, or necessary to its manufacturing, mining, logging, commercial, industrial or agricultural purpose.”

“Machinery”, therefore, as above-defined has the following attributes:

1. “physical facilities for production”,

2. “service facilities”,

3. actually, directly, and exclusively used to meet the needs of the particular industry, business or activity and which by their very nature and purpose are designed for, or necessary to its manufacturing, mining, logging, commercial, industrial or agricultural purpose”.

Under “physical facilities for production”, the Siltation Dam and Decant

System produces nothing, hence it is not one such facilities. “Service”, could be

(a) “offering a product useful to another product” or (b) “to perform any business

functions auxiliary to production”. (See Webster’s Third New International

Dictionary). Marcopper’s Siltation Dam and Decant System offers no product

useful to another product and does not perform any business functions auxiliary

to production. It is therefore, not “service facilities”. The Siltation Dam and

System is not “actually, directly, and exclusively used to meet the needs of the

particular industry, business or activity and which by their very nature and

purpose are designed for, or necessary to its manufacturing, mining, logging,

commercial, industrial or agricultural purpose”: the Siltation Dam is:

“to contain the silt and other sediments so these would not be discharged downstream or that the water discharged x x x will have a negligible amount of silt or pollutants.”

The Siltation Dam is not:

“utilized nor needed for Marcopper’s mining operation as the siltation dam x x x does not hold water which is used for the operations of the mine.”

On Petitioner-Appellant’s contention that “the legislature intended to

include dams as machinery and equipment for the purpose of Section 234 on

Reference: Book VIII, pp. 220-230

exemptions on real property taxation”, the deliberations of the Bicameral

Committee on Local Government which it cites is about Sec. 234(c), of R.A.

7160, not Sec. 234(e) thereof. The proceedings on the deliberation is as

follows:

“Hon. De Pedro: How about dams and reservoirs and watershed areas?

Hon. Osmeña: Wala yun eh.

Hon. Paterno: Well, the dams and reservoirs would, I suppose, be considered as machinery and equipment.

One Voice: Approved. x x x”

The “dams and reservoirs and watershed areas”, supra, that are

considered “machineries and equipment that are actually, directly and

exclusively used by local water districts and government-owned or-controlled

corporations engaged in the supply and distribution of water and/or generation

and transmission of electric power”, (see Sec. 234(c), as distinguished from

Siltation Dams, are “facilities for production” of water and/or generation and

transmission of electric power. Siltation Dams, as have been pointed out, are

not. The former, therefore, fit into the definition of “machinery”, the latter do not.

Without sustaining the finding of Appellee, Local Board of Assessment

Appeals of Marinduque, this Board finds that the Marcopper Siltation Dam and

Decant System is not “machinery and equipment”, as alleged, and is not within

the coverage of Sec. 234(e) of R.A. 7160. Petitioner-Appellant therefore, cannot

claim exemption from payment of real property tax thereon.

WHEREFORE, in view of the foregoing, the herein Appeal of Marcopper

Mining Corporation is hereby dismissed for lack of merit.

SO ORDERED.

Manila, Philippines, December 21, 1998.

(Signed) MARGARITA G. MAGISTRADO
Chairman

Reference: Book VIII, pp. 220-230

(On Leave)
ANGEL P. PALOMARES Member

(Signed) BENJAMIN M. KASALA
Member

Reference: Book VIII, pp. 220-230