21. HYDRO RESOURCES V. COURT OF TAX APPEALS ET AL.

GR 80276; December 21, 1990

Facts: Hydro Resources Contractors Corporation entered into a contract of sale

with the National Irrigation Authority (NIA) for the construction of Magat River
Multipurpose Project in Isabella in August 1978. The contract provided that Hydro
will import parts, construction equipment and tools and taxes and duties to be
paid by NIA. Tools and equipment arrived during 1978 and 1979. NIA reneged
on the contract. Therefore causing the transfer its sale to Hydro in seperate dates
in December 6, 1982 and March 24, 1983. Executive Order 860 took effect during
December 21, 1982 provided for 3% ad valorem tax on importations and it
specifically provided that it should have no retroactive effect. During the
contract of sale execution, Hydro was assessed and paid the said 3% ad valorem
tax worth P 281,591 under protest. The Hydro when filing for refund with Customs
Commissioner who indorsed the approval of the refund but was denied by the
Secretary of Finance and motion was denied by the Court of Tax Appeals.

Issue: W/N should the Executive Order 860 should have a retroactive effect.

Held: No, The Court of Tax Appeals erred in applying a retroactive effect for the
Executive Order therefore should not have been subject to the additional 3% ad
valorem tax. In general tax laws are not retroactive in nature. Not only that
Executive Order 860 specifically provides that it is not retroactive in nature, but
also when the conditional contract of sale was executed, its had a suspensive
condition contemplated in the Civil Code (Article 1187) where it returned
ownership to the seller Hydro because NIA was not able to comply with its part of
the contract, it was deemed executed as if during the constitution of the
obligation which was in 1978 and not in 1982.