92. COMMISSIONER COMMISSIONER OF INTERNAL REVENUE (CIR), petitioner, petitioner, vs. Pilipinas Shell Petroleum Corporation, respondent. G.R. No. 188497 JR., J.:
April 25, 2012
VILLARAMA,
Because an excise tax is a tax on the manufacturer and not on the purchaser, and there being no express grant under the NIRC of exemption from payment of excise tax to local manufacturers of petroleum products products sold to international international carriers, carriers, and absent any provision in the Code authorizing the refund or crediting of such excise excise taxes paid, the Court holds that Sec. 135 (a) should be construed construed as prohibiting the the shifting of the burden burden of the excise tax to the international carriers who buys petroleum products from the the local local manufac manufactur turers ers.. The The provi provisio sion n merel merely y allows allows the international carriers to purchase petroleum products without the excise tax component as an added cost in the price fixed by the manufact manufacturer urers s or distribu distributors tors/sell /sellers. ers. Consequ Consequentl ently, y, the oil companie companies s which which sold such such petroleu petroleum m product products s to internat international ional carriers are not entitled to a refund of excise taxes previously paid on the goods. Facts:
1.
Respo Respond ndent ent is engage engaged d in the the busin business ess of proce processi ssing ng,, treating treating and refinin refining g petrole petroleum um for the purpose of producin producing g marketable products and the subsequent subsequent sale thereof. Respondent Respondent filed filed sever several al formal formal claims claims with with the the Large Large Taxpay Taxpayer ers s Audit Audit & Investigation Division II of the BIR on the following dates: refund or tax credit credit in the total total a. On July 2002 for refund amount of P28,064,925.15, P28,064,925.15, representing excise taxes it allegedly paid on sales and deliveries of gas and fuel oils to various various internat internationa ionall carriers carriers during the period October to December 2001. b. On Octobe Octoberr 2002, 2002, a similar similar claim claim for refund refund or tax credit was filed by respondent with the BIR covering the perio eriod d Jan January ary to March arch 200 2002 in the amo amount of P41,614,827.99. c. On July 2003, a formal claim for refund or tax credit in the amount of P30,652,890 P30,652,890.55 .55 covering deliveries from April to June 2002
2.
Since no action was taken by the petitioner on its claims, respondent filed petitions for review before the CTA on September and December of 2003.
CTA’s First Division ruled that respondent respondent is entitled to to the 3. refund of excise taxes in the reduced amount of P95,014,28 P95,014,283.00. 3.00. The CTA First Division relied on a previous ruling rendered by the CTA En Banc in the case of “Pilipinas Shell Petroleu Petroleum m Corporat Corporation ion v. CIR (Nov. 2006)” 2006)” where the CTA also granted respondent’s claim for refund on the basis of excise tax exemption for petroleum products sold to international carriers of fore foreig ign n regi regist stry ry for for thei theirr use use or cons consum umpt ptio ion n outs outsid ide e the the Philippines. Petitioner’s MR denied. On appeal appeal,, CTA En Banc Banc uphe upheld ld the the rulin ruling g of the First First 4. Division Division.. Petition Petitioner’s er’s MR with CTA likewise likewise denied denied.. Hence, Hence, this petition. 5. Resp Respon onde dent nt clai claims ms it is is enti entitl tled ed to to a tax tax refu refund nd bec becau ause se those petroleum products it sold to international carriers are not subj subjec ectt to exci excise se tax, tax, henc hence e the the exci excise se taxe taxes s it paid paid upon upon withdrawal of those products were erroneously or illegally collected and should not have been been paid in the first place. Since the excise excise tax exemption attached to the petroleum products themselves, themselves, the manufacturer or producer is under no duty to pay the excise tax thereon. Issue Issue:: wheth whether er respo respond nden entt as manufa manufactu cture rerr or produ produce cerr of petroleum products is exempt from the payment of excise tax on such petroleum products it sold to international carriers? Held: NO. CTA CTA decision decision REVERSED REVERSED and SET ASIDE. ASIDE. The claims for tax refund refund or credit filed by responde respondent nt are DENIED DENIED for lack of basis.
1.
Excise taxes, as the term is used in the NIRC, refer to taxes applicable to certain specified goods or articles manufactured or produced in the Philippines for domestic sales or consumption or for for any any othe otherr disp dispos osit itio ion n and and to thin things gs impo import rted ed into into the the Philippines. These taxes are imposed in addition to the value-added tax (VAT). As to petroleum products, products, Sec. 148 provides that excise taxes attach to the following refined and manufactured mineral oils and motor fuels as soon as they are in existence.
2. Beginni Beginning ng January January 1, 1999, 1999, excise excise taxes taxes levied levied on locally locally manufactured manufactured petroleum products and indigenous petroleum are requ require ired d to be paid paid befor before e their their remova removall from from the the place place of production. production. However, Sec. 135 provides: provides: “Petroleum “Petroleum Products Sold to International Carriers and Exempt Entities or Agencies. – Petroleum products sold to the following are exempt from excise tax:
(a) International carriers of Philippine or foreign registry on their use or consump consumption tion outside outside the Philippi Philippines: nes: Provided Provided,, That the petroleu petroleum m products products sold to these these internat internationa ionall carriers carriers shall be stored in a bonded storage tank and may be disposed of only in accordance with the rules and regulations to be prescribed by the Secretary of Finance, upon recommendation of the Commissioner; xxx 3. Und Under Chapt apter II “Ex “Exemption tion or Con Conditio tional TaxTax-Fr Fre ee Removal of Certain Goods” of Title VI, Sections 133, 137, 138, 139 and 140 cover conditional tax-free removal of specified goods or arti articl cles es,, wher wherea eas s Sect Sectio ions ns 134 134 and and 135 135 prov provid ide e for for tax tax exemp exemptio tions. ns. While While the the exemp exemptio tion n found found in Sec. Sec. 134 134 makes makes referen reference ce to the nature and quality quality of the goods manufact manufactured ured (domestic denatured alcohol) without regard to the tax status of the buyer of the said goods, Sec. 135 deals with the tax treatment of a specified article (petroleum (petroleum products) in relation to its buyer or consumer. consumer. Respondent’s Respondent’s failure to make this important distinction distinction apparent apparently ly led it to mistaken mistakenly ly assume assume that the tax exemption exemption under Sec. 135 (a) “attaches to the goods themselves” such that the excise tax should not have been paid in the first place. On July 1996, 1996, petition petitioner er Commissio Commissioner ner issued issued Revenue 4. Regulations 8-96 (“Excise Taxation of Petroleum Products”) Products”) which provides: “SEC. 4. Time and Manner of Payment of Excise Tax on Petrol Petroleu eum m Produ Products cts,, Non-Me Non-Metal tallic lic Miner Minerals als and and Indige Indigenou nous s Petr Petrol oleu eum m – I. Petr Petrol oleu eum m Prod Produc ucts ts x x x x a) On loca locall lly y manufactured petroleum products: The specific tax on petroleum petroleum products locally locally manufactu manufactured red or produced produced in the Philippines shall be paid by the manufacturer, producer, owner or person having possession of the same, same , and such tax shall be paid within fifteen (15) days from date of removal from the place of production. 5. Thus Thus,, if an an airl airlin ine e comp compan any y purc purcha hase sed d jet jet fuel fuel fro from m an unregistered unregistered supplier supplier who could not present proof of payment of specific tax, the company is liable to pay the specific specific tax on the date of purchase. purchase. Since Since the excise excise tax must be paid upon withdrawal from the place of production, respondent cannot anchor its claim for refund on the theory that the excise taxes due thereon should not have been collected or paid in the first place.
6. Sec. Sec. 229 229 of the the NIRC NIRC allo allows ws the the reco recove very ry of taxe taxes s erroneously erroneously or illegally collected. collected. An “erroneous or illegal tax” is defin defined ed as one levie levied d witho without ut statu statutor tory y author authority ity,, or upon upon prope property rty not not subje subject ct to taxati taxation on or by some some office officerr havin having g no
authority to levy the tax, or one which is some other similar respect is illegal.
7.
Respondent’s locally manufactured petroleum products are clearly subject to excise tax under Sec. 148. Hence, its claim for tax refund may not be predicated on Sec. 229 of the NIRC allowing a refund refund of erroneou erroneous s or excess excess payment of tax. Responden Respondent’s t’s claim claim is prem premise ised d on what what it deter determin mined ed as a tax exemp exemptio tion n “attaching to the goods themselves,” which must be based on a statute granting tax exemption, or “the result of legislative grace.” Such Such a clai claim m is to be cons constr true ued d strictis strictissimi simi juris juris against against the taxpayer, meaning that the claim cannot be made to rest on vague inference. Where Where the the rule rule of strict strict inter interpr preta etatio tion n again against st the the taxpay taxpayer er is applic applicabl able e as the the claim claim for refun refund d parta partakes kes of the the nature of an exemption, the claimant must show that he clearly falls under the exempting statute. 8. The exemp emption ion from from exci excis se tax tax paym ayment on petrole oleum products under Sec. 135 (a) is conferred on international carriers who purchased purchased the same for their their use or consump consumption tion outside outside the the Phil Philip ippi pine nes. s. The The only only cond condit itio ion n set set by law law is for for thes these e petroleum petroleum products to be stored in a bonded storage tank and may be disposed of only in accordance with the rules and regulations to be prescribed by the Secretary of Finance, upon recommendation of the Commissioner. [JURISPRUDENCE] In addition, the Solicitor General, argues 9. that that respo respond ndent ent canno cannott shift shift the the tax burd burden en to inter internat nation ional al carrie carriers rs who who are allowe allowed d to purch purchase ase its petro petroleu leum m produ products cts without having to pay the added cost of the excise tax. In Philippine Acet Acetyl ylen ene e Co., Co., Inc. Inc. v. CIR, CIR, this this Cour Courtt held held that that peti petiti tion oner er manufacturer who sold its oxygen and acetylene gases to NPC, a tax-exempt entity, cannot claim exemption from the payment of sale sales s tax tax simp simply ly beca becaus use e its its buye buyerr NPC NPC is exem exempt pt from from taxation. The Court explained that the percentage percentage tax on sales of merc mercha hand ndis ise e impo impose sed d by the the Tax Tax Code Code is due from from the the manufacturer and not from the buyer.
10.
The language of Sec. 135 indicates that the tax exemption mentioned therein is conferred on specified buyers or consumers of the excisable excisable articles articles or goods. goods. Unlike Unlike Sec. Sec. 134 which explicitly explicitly exempted exempted the article or goods itself without due regard regard to the tax status of the buyer or purchaser, purchaser, Sec. 135 exempts from excise tax petroleum products which were sold to international carriers and other tax-exempt agencies and entities.
11.
Consider Considering ing that the excise excise taxes taxes attaches attaches to petrole petroleum um products “as soon as they are in existence as such, ”there can be
no outr outrig ight ht exem exempt ptio ion n from from the the paym paymen entt of exci excise se tax tax on petroleum products products sold to international carriers. The sole basis then of respondent’s claim for refund is the express grant of excise tax exemption in favor of international carriers under Sec. 135 (a) for for thei theirr purch urchas ases es of loca locall lly y manu manufa fact ctur ured ed petr petrol oleu eum m products products.. Pursuan Pursuantt to our ruling ruling in Philippi Philippine ne Acetylen Acetylene, e, a tax exemption being enjoyed by the buyer cannot be the basis of a claim for tax exemption by the manufacturer or seller of the goods for any tax due to to it as the manufacturer manufacturer or seller. seller. The excise tax tax imposed on petroleum products under Sec. 148 is the direct liability of the manu manufac factu turer rer who cannot cannot thus thus invok invoke e the the excise excise tax exemption granted to its buyers who are international carriers.
12.
In Maceda v. Macaraig, Jr., the Court specifically mentioned excise tax as an example of an indirect tax where the tax burden can can be shif shifte ted d to the the buye buyer. r. Howe Howeve ver, r, beca becaus use e of the the tax tax exemptions privileges being enjoyed by NPC under existing laws, the tax burden may not be shifted to it by the oil companies who shall pay for fuel oil taxes on oil they supplied supplied to NPC.
13.
On April 1978, then President Ferdinand E. Marcos issued Presidential Decree (P.D.) No. 1359 which amended the 1077 Tax Code provided under 2 nd par. of Sec. 134: “However, petroleum products sold to an international carrier for its use or consumption outside outside of the Philippin Philippines es shall shall not be subject subject to specific specific tax, provi provide ded, d, that that the the countr country y of said said carrie carrierr exemp exempts ts from from tax petroleum products sold to Philippine carriers.” 14. 14. Foun Found ded on the prin princi cipl ples es of inte intern rnat atio iona nall comi comity ty and and reciproc reciprocity, ity, P.D. No. 1359 1359 granted granted exemption exemption from payment of excise tax but only to foreign international international carriers who are allowed to purchase petroleum products free of specific tax provided the country country of said carrier carrier also grants grants tax exemptio exemption n to Philippi Philippine ne carriers. Both the earlier amendment amendment in the 1977 Tax Code and the the prese present nt Sec. 135 of the the 1997 1997 NIRC NIRC did not exemp exemptt the the oil companies from the payment of excise tax on petroleum products manufactured and sold by them to international carriers. THUS: 15. 15. Becau Because se an an excis excise e tax tax is a tax tax on on the the manu manufac factur turer er and and not not on the purchaser, and there being no express grant under the NIRC of exemption from payment of excise tax to local manufacturers of petroleum products products sold to international carriers, and absent any provision in the Code authorizing the refund or crediting of such excise excise taxes paid, the Court holds that Sec. 135 (a) should should be construed construed as prohibiting the shifting of the burden of the excise tax to the international carriers who buys petroleum products from
the local manufacturers. manufacturers. Said provision provision thus thus merely merely allows allows the international carriers to purchase petroleum products without the excise tax component as an added cost in the price fixed by the manufact manufacturer urers s or distribu distributors/ tors/selle sellers. rs. Cons Conseq eque uent ntly ly,, the the oil oil companie companies s which which sold such petroleu petroleum m products products to internat international ional carriers are not entitled to a refund of excise taxes previously paid on the goods.
16.
Time and again, we have held that tax refunds refunds are in the nature of tax exemptions which result to loss of revenue for the government. government. Upon the person claiming an exemption exemption from tax payments payments rests the burden of justifying the exemption by words too plain to be mistaken and too categorical to be misinterpreted, it is neve neverr pres presum umed ed nor nor be allo allowe wed d sole solely ly on the the grou ground nd of equity. These These exemptio exemptions, ns, therefor therefore, e, must not rest on vague, vague, uncertain or indefinite inference, but should be granted only by a clear and unequivocal provisi on of law on the basis of language too plain to be mistaken. Such exemptions must be strictly construed against the taxpayer, as taxes are the lifeblood of the government.
