G.R. No. 198759, July 01, 2013 - PHILIPPINE AIRLINES, INC., Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
SECOND DIVISION
G.R. No. 198759, July 01, 2013
PHILIPPINE AIRLINES, INC., Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
D E C I S I O N
PERLAS-BERNABE, J.:
The proper party to question, or seek a refund of, an indirect tax is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same even if he shifts the burden thereof to another. Section 130(A)(2) of the NIRC provides that “[u]nless otherwise specifically allowed, the return shall be filed and the excise tax paid by the manufacturer or producer before removal of domestic products from place of production.” Thus, Petron Corporation, not Silkair, is the statutory taxpayer which is entitled to claim a refund based on Section 135 of the NIRC of 1997 and Article 4(2) of the Air Transport Agreement between RP and Singapore.
Even if Petron Corporation passed on to Silkair the burden of the tax, the additional amount billed to Silkair for jet fuel is not a tax but part of the price which Silkair had to pay as a purchaser.32 (Emphasis supplied)
x x x [T]he Court rules and declares that the oil companies which supply bunker fuel oil to NPC have to pay the taxes imposed upon said bunker fuel oil sold to NPC. By the very nature of indirect taxation, the economic burden of such taxation is expected to be passed on through the channels of commerce to the user or consumer of the goods sold. Because, however, the NPC has been exempted from both direct and indirect taxation, the NPC must be held exempted from absorbing the economic burden of indirect taxation. This means, on the one hand, that the oil companies which wish to sell to NPC absorb all or part of the economic burden of the taxes previously paid to BIR, which they could shift to NPC if NPC did not enjoy exemption from indirect taxes. This means also, on the other hand, that the NPC may refuse to pay the part of the "normal" purchase price of bunker fuel oil which represents all or part of the taxes previously paid by the oil companies to BIR. If NPC nonetheless purchases such oil from the oil companies — because to do so may be more convenient and ultimately less costly for NPC than NPC itself importing and hauling and storing the oil from overseas — NPC is entitled to be reimbursed by the BIR for that part of the buying price of NPC which verifiably represents the tax already paid by the oil company-vendor to the BIR.33 (Emphasis and underscoring supplied)
Silkair nevertheless argues that it is exempt from indirect taxes because the Air Transport Agreement between RP and Singapore grants exemption "from the same customs duties, inspection fees and other duties or taxes imposed in the territory of the first Contracting Party." It invokes Maceda v. Macaraig, Jr. which upheld the claim for tax credit or refund by the National Power Corporation (NPC) on the ground that the NPC is exempt even from the payment of indirect taxes.
Silkair’s argument does not persuade. In Commissioner of Internal Revenue v. Philippine Long Distance Telephone Company, this Court clarified the ruling in Maceda v. Macaraig, Jr., viz:cralavvonlinelawlibraryIt may be so that in Maceda vs. Macaraig, Jr., the Court held that an exemption from "all taxes" granted to the National Power Corporation (NPC) under its charter includes both direct and indirect taxes. But far from providing PLDT comfort, Maceda in fact supports the case of herein petitioner, the correct lesson of Maceda being that an exemption from "all taxes" excludes indirect taxes, unless the exempting statute, like NPC’s charter, is so couched as to include indirect tax from the exemption. Wrote the Court:cralavvonlinelawlibraryThe exemption granted under Section 135(b) of the NIRC of 1997 and Article 4(2) of the Air Transport Agreement between RP and Singapore cannot, without a clear showing of legislative intent, be construed as including indirect taxes. Statutes granting tax exemptions must be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority, and if an exemption is found to exist, it must not be enlarged by construction. 34 (Emphasis and underscoring supplied)x x x However, the amendment under Republic Act No. 6395 enumerated the details covered by the exemption. Subsequently, P.D. 380, made even more specific the details of the exemption of NPC to cover, among others, both direct and indirect taxes on all petroleum products used in its operation. Presidential Decree No. 938 [NPC’s amended charter] amended the tax exemption by simplifying the same law in general terms. It succinctly exempts NPC from "all forms of taxes, duties[,] fees…"
The use of the phrase "all forms" of taxes demonstrates the intention of the law to give NPC all the tax exemptions it has been enjoying before. . .
x x x x
It is evident from the provisions of P.D. No. 938 that its purpose is to maintain the tax exemption of NPC from all forms of taxes including indirect taxes as provided under R.A. No. 6395 and P.D. 380 if it is to attain its goals.
SEC. 13. In consideration of the franchise and rights hereby granted, the grantee [PAL] shall pay to the Philippine Government during the life of this franchise whichever of subsections (a) and (b) hereunder will result in a lower tax:cralavvonlinelawlibrary(a) The basic corporate income tax based on the grantee's annual net taxable income computed in accordance with the provisions of the National Internal Revenue Code; orThe tax paid by the grantee under either of the above alternatives shall be in lieu of all other taxes, duties, royalties, registration, license, and other fees and charges of any kind, nature, or description, imposed, levied, established, assessed, or collected by any municipal, city, provincial, or national authority or government agency, now or in the future, including but not limited to the following:cralavvonlinelawlibrary
(b) A franchise tax of two per cent (2%) of the gross revenues derived by the grantee from all sources, without distinction as to transport or nontransport operations; provided, that with respect to international air-transport service, only the gross passenger, mail, and freight revenues from its outgoing flights shall be subject to this tax.
1. All taxes, duties, charges, royalties, or fees due on local purchases by the grantee of aviation gas, fuel, and oil, whether refined or in crude form, and whether such taxes, duties, charges, royalties, or fees are directly due from or imposable upon the purchaser or the seller, producer, manufacturer, or importer of said petroleum products but are billed or passed on the grantee either as part of the price or cost thereof or by mutual agreement or other arrangement; provided, that all such purchases by, sales or deliveries of aviation gas, fuel, and oil to the grantee shall be for exclusive use in its transport and nontransport operations and other activities incidental thereto;chanroblesvirtualawlibrary
2. All taxes, including compensating taxes, duties, charges, royalties, or fees due on all importations by the grantee of aircraft, engines, equipment, machinery, spare parts, accessories, commissary and catering supplies, aviation gas, fuel, and oil, whether refined or in crude form and other articles, supplies, or materials; provided, that such articles or supplies or materials are imported for the use of the grantee in its transport and transport operations and other activities incidental thereto and are not locally available in reasonable quantity, quality, or price; (Emphasis and underscoring supplied)
x x x x
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, do hereby order and direct that the tax-exemption privilege granted to PAL on its purchase of domestic petroleum products for use in its domestic operations is hereby withdrawn. (Emphasis and underscoring supplied)
DATE OF FILING AND PAYMENT FILING REFERENCE NO. July 26, 2004 074400000178825 July 27, 2004 070400000179115 July 28, 2004 070400000179294 July 29, 2004 070400000179586
DATE OF SALE | ||||||
DOCUMENT | July 24, 2004 | July 25, 2004 | July 26, 2004 | July 27, 2004 | July 28, 2004 | TOTAL |
Certification | 174,070 | 158,570 | 187,130 | 166,370 | 118,230 | 804,370 |
Summary of Local Sales | 177,070 | 158,570 | 187,130 | 166,370 | 121,730 | 810,870 |
DIFFERENCE | 3,000 | 0 | 0 | 0 | 3,500 | 6,500 |
Endnotes:
1Rollo, pp. 13-50.cralawlibrary
2 Id. at 64-85. Penned by Associate Justice Cielito N. Mindaro-Grulla, with Presiding Justice Ernesto D. Acosta (on wellness leave), and Associate Justices Juanito C. Castañeda, Jr., Lovell R. Bautista, Erlinda P. Uy, Caesar A. Casanova (on wellness leave), Olga Palanca-Enriquez, Esperanza R. Fabon-Victorino, and Amelia R. Cotangco-Manalastas, concurring.cralawlibrary
3 Id. at 55-63. Penned by Associate Justice Cielito N. Mindaro-Grulla, with Presiding Justice Ernesto D. Acosta, and Associate Justices Juanito C. Castañeda, Jr., Lovell R. Bautista, Erlinda P. Uy, Caesar A. Casanova, Olga Palanca-Enriquez, Esperanza R. Fabon-Victorino, and Amelia R. Cotangco-Manalastas, concurring.cralawlibrary
4 Id. at 68.cralawlibrary
5 Id. at 68-69.cralawlibrary
6 Id.cralawlibrary
7 “An Act Granting A New Franchise To Philippine Airlines, Inc. To Establish, Operate and Maintain Air-Transport Services In The Philippines and Other Countries.”
8Rollo, pp. 69-70.cralawlibrary
9 Id. at 70.cralawlibrary
10 Id.cralawlibrary
11 G.R. No. 173594, February 6, 2008, 544 SCRA 100.cralawlibrary
12Rollo, p. 112-113.cralawlibrary
13 Id. at 116-124.cralawlibrary
14 Id. at 87-102. Penned by Associate Justice Erlinda P. Uy, with Associate Justices Juanito C. Castañeda, Jr. and Olga Palanca-Enriquez, concurring.cralawlibrary
15 Id. at 64-85.cralawlibrary
16 Id. at 80.cralawlibrary
17 Id. at 81-82.cralawlibrary
18 Id. at 55-63.cralawlibrary
19 Id. at 153-161.cralawlibrary
20 G.R. No. 88291, June 8, 1993, 223 SCRA 217. This is the resolution denying the petitioner’s motion for reconsideration of the Court’s May 31, 1991 Decision in the same case and in effect, upholding the tax refund claim of the National Power Corporation.cralawlibrary
21 Republic Act No. 8424, otherwise known as the “Tax Reform Act of 1997.”
22 SEC. 129. Goods Subject to Excise Taxes. - Excise taxes apply to goods manufactured or produced in the Philippines for domestic sales or consumption or for any other disposition and to things imported. The excise tax imposed herein shall be in addition to the value-added tax imposed under Title IV. (Emphasis and underscoring supplied)
x x x x
23 SEC. 130. Filing of Return and Payment of Excise Tax on Domestic Products. -
(A) Persons Liable to File a Return, Filing of Return on Removal and Payment of Tax. –
x x x x
(2) Time for Filing of Return and Payment of the Tax. - Unless otherwise specifically allowed, the return shall be filed and the excise tax paid by the manufacturer or producer before removal of domestic products form place of production x x x. (Emphasis and underscoring supplied)
x x x x
24 SEC. 131. Payment of Excise Taxes on Imported Articles. -
(A) Persons Liable. - Excise taxes on imported articles shall be paid by the owner or importer to the Customs Officers, conformably with the regulations of the Department of Finance and before the release of such articles from the customshouse, or by the person who is found in possession of articles which are exempt from excise taxes other than those legally entitled to exemption. (Emphasis and underscoring supplied)
25CIR v. John Gotamco & Sons, Inc., G.R. No. L- 31092, February 27, 1987, 148 SCRA 36, 40.cralawlibrary
26 See Silkair Singapore Pte. Ltd. v. CIR, G.R. Nos. 171383 & 172379, November 14, 2008, 571 SCRA 141, 156.cralawlibrary
27 Exxonmobil Petroleum and Chemical Holdings, Inc.-Philippine Branch v. CIR, G.R. No. 180909, January 19, 2011, 640 SCRA 203, 222, citing Justice Oliver Wendell Holmes’ opinion in Lash’s Products v. United States, 278 U.S. 175 (1928).cralawlibrary
28 SEC. 204. Authority of the Commissioner to Compromise, Abate, and Refund or Credit Taxes. The Commissioner may –
x x x x
(C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided, however, That a return filed showing an overpayment shall be considered as a written claim for credit or refund. (Emphasis and underscoring supplied)
29 SEC. 135. Petroleum Products Sold to International Carriers and Exempt Entities or Agencies. - Petroleum products sold to the following are exempt from excise tax:cralavvonlinelawlibrary
(a) International carriers of Philippine or foreign registry on their use or consumption outside the Philippines: Provided, That the petroleum products sold to these international 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;chanroblesvirtualawlibrary
(b) Exempt entities or agencies covered by tax treaties, conventions and other international agreements for their use of consumption: Provided, however, That the country of said foreign international carrier or exempt entities or agencies exempts from similar taxes petroleum products sold to Philippine carriers, entities or agencies; and
(c) Entities which are by law exempt from direct and indirect taxes.cralawlibrary
30 See the three (3) subsequent Silkair cases namely: (a) Silkair Singapore Pte. Ltd. v. CIR, supra note 26; (b) Silkair Singapore Pte. Ltd. v. CIR, G.R. No. 184398, February 25, 2010, 613 SCRA 638; and (c) Silkair Singapore Pte. Ltd. v. CIR, G.R. No. 166482, January 25, 2012, 664 SCRA 33. See also Exxonmobil Petroleum and Chemical Holdings, Inc. v. CIR, supra note 27.cralawlibrary
31 Fuel, lubricants, spare parts, regular equipment and aircraft stores introduced into, or taken on board aircraft in the territory of one Contracting party by, or on behalf of, a designated airline of the other Contracting Party and intended solely for use in the operation of the agreed services shall, with the exception of charges corresponding to the service performed, be exempt from the same customs duties, inspection fees and other duties or taxes imposed in the territories of the first Contracting Party , even when these supplies are to be used on the parts of the journey performed over the territory of the Contracting Party in which they are introduced into or taken on board. The materials referred to above may be required to be kept under customs supervision and control.cralawlibrary
32 Supra note 11, at 112.cralawlibrary
33 Supra note 20, at 256.cralawlibrary
34 Supra note 11, at 112-114.cralawlibrary
35 SEC. 13 of PAL’s franchise. See also CIR v. PAL, G.R. No. 180066, July 7, 2009, 592 SCRA 237, 250.cralawlibrary
36 SEC. 13(b)(1) of PAL’s franchise.cralawlibrary
37 The pertinent portion of PAL’s franchise reads:cralavvonlinelawlibrary1. All taxes, duties, charges, royalties, or fees due on local purchases by the grantee of aviation gas, fuel, and oil, whether refined or in crude form x x x. (Emphasis and underscoring supplied)38 The pertinent portion of PAL’s franchise reads:cralavvonlinelawlibraryx x x and whether such taxes, duties, charges, royalties, or fees are directly due from or imposable upon the purchaser or the seller, producer, manufacturer, or importer of said petroleum products but are billed or passed on the grantee either as part of the price or cost thereof or by mutual agreement or other arrangement; (Emphasis and underscoring supplied)39 The pertinent portion of PAL’s franchise reads:cralavvonlinelawlibrary
x x x x2. All taxes, including compensating taxes, duties, charges, royalties, or fees due on all importations by the grantee of aircraft, engines, equipment, machinery, spare parts, accessories, commissary and catering supplies, aviation gas, fuel, and oil, whether refined or in crude form and other articles, supplies, or materials; provided, that such articles or supplies or materials are imported for the use of the grantee in its transport and transport operations and other activities incidental thereto and are not locally available in reasonable quantity, quality, or price; (Emphasis and underscoring supplied)40 See SEC. 129 in relation to SEC. 131 of the NIRC.cralawlibrary
x x x x
41 The first tax exemption under the second kind of tax privilege, relating to the first type of excisable articles under SEC. 129 of the NIRC.cralawlibrary
42 The second type of excisable articles under SEC. 129 of the NIRC.cralawlibrary
43 BLACK’S LAW DICTIONARY, 9th Ed. (2009), p. 557.cralawlibrary
44 (visited January 25, 2013).cralawlibrary
45 The first type of excisable articles under SEC. 129 of the NIRC.cralawlibrary
46 The second type of excisable articles under SEC. 129 of the NIRC.cralawlibrary
47 WHEREAS, by virtue of a ruling of the Department of Finance, now Ministry, dated November 17, 1969, domestic petroleum products sold to PAL for use in its domestic operations are exempt from the payment of specific and ad valorem taxes;chanroblesvirtualawlibrary
WHEREAS, this tax-exemption privilege enjoyed by PAL has resulted in serious tax base erosions and distortions in the tax treatment of similarly situated enterprises; (Emphasis and underscoring supplied)
x x x x
48 By way of background, the Subject DOF Ruling was issued in response to a letter seeking for the DOF’s opinion regarding the scope of the “imposition of the specific tax on aviation gasoline and other fuels purchased locally by airline companies direct from local sources of production for use in domestic flight operations.” The conflict stemmed from the import of BIR Ruling No. 65-116, issued on October 5, 1965, which “exempted from the specific tax aviation fuel and other fuel oils imported by [PAL], and similar franchise grantees but not those locally purchased by them for use in domestic flight operations.” Through the Subject DOF Ruling, the DOF eventually overturned BIR Ruling No. 65-116, clarifying that PAL’s franchise also conferred upon it tax exemption privileges concerning aviation gas, fuel and oil which are manufactured or produced in the Philippines for domestic sales and not only to those imported. The DOF stated:cralavvonlinelawlibraryIn view thereof, and considering that Ruling No. 65-116 of the [BIR] is not in harmony with the established doctrine laid down by the Supreme Court on the matter, this Department hereby modifies the same and rules that aviation gasoline and other fuel oils directly purchased for domestic consumption by airline companies which are exempt from the payment of specific tax pursuant to their franchise are also exempt from the payment of specific tax on their domestic purchases of the same articles provided such airline companies are already owners and possessors of such products prior to or at the time of their removal from the place of production or bonded warehouses of the local refineries. x x x (See Subject DOF Ruling, p. 3-4; emphasis and underscoring supplied)
49 “x x x On many occasions, the Court, in the public interest and expeditious administration of justice, has resolved action on the merits, instead of remanding them for further proceedings, as where the ends of justice would not be subserved by the remand of the case or where the trial court had already received all the evidence of the parties.” (Apo Fruits Corporation v. CA, G.R. No. 164195, February 6, 2007, 514 SCRA 537).cralawlibrary
50 SEC. 229. Recovery of Tax Erroneously or Illegally Collected. –
x x x x
In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid.cralawlibrary
51Rollo, p. 69.cralawlibrary
52 Id. at 70.cralawlibrary
53 Exhibits “VVV”- “BBBB,” CTA rollo, pp. 573-596.cralawlibrary
54 Exhibits “PPP”- “SSS,” CTA rollo, pp. 339-357.cralawlibrary
55Rollo, p. 126.cralawlibrary
56 Exhibit “GGG,” CTA rollo, p. 321.cralawlibrary
57 Exhibit “DDD,” CTA rollo, pp. 314-315.cralawlibrary
58 810,870 liters minus 804,370 liters.cralawlibrary
59 CTA rollo, pp. 48-49, 53-54, 58-59, and 63-64.cralawlibrary
60 Exhibits “G” to “BBB,” CTA rollo, pp. 264-311.cralawlibrary
61 Exhibit “CCC,” CTA rollo, pp. 312-313.