EN BANC
G.R. No. 210836, September 01, 2015
CHEVRON PHILIPPINES INC., Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
R E S O L U T I O N
BERSAMIN, J.:
Excise tax on petroleum products is essentially a tax on property, the direct liability for which pertains to the statutory taxpayer (i.e., manufacturer, producer or importer). Any excise tax paid by the statutory taxpayer on petroleum products sold to any of the entities or agencies named in Section 135 of the National Internal Revenue Code (NIRC) exempt from excise tax is deemed illegal or erroneous, and should be credited or refunded to the payor pursuant to Section 204 of the NIRC. This is because the exemption granted under Section 135 of the NIRC must be construed in favor of the property itself, that is, the petroleum products.
Considering that an excise tax is in the nature of an indirect tax where the tax burden can be shifted, Section 135(c) of the NIRC of 1997, as amended, should be construed as prohibiting the shifting of the burden of the excise tax to tax-exempt entities who buys petroleum products from the manufacturer/seller by incorporating the excise tax component as an added cost in the price fixed by the manufacturer/seller.
x x x x
The above discussion is in line with the pronouncement made by the Supreme Court in the case of Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corporation (Shell case), involving Shell's claim for excise tax refund for petroleum products sold to international carriers. The Supreme Court held that the exemption from excise tax payment on petroleum products under Section 135(a) of the NIRC of 1997, as amended, is conferred on international carriers who purchased the same for their use or consumption outside the Philippines. The oil companies which sold such petroleum products to international carriers are not entitled to a refund of excise taxes previously paid on the petroleum products sold, x x x
x x x x
Accordingly, petitioner is not entitled to any refund or issuance of tax credit certificate on excise taxes paid on its importation of petroleum products sold to CDC pursuant to the doctrine laid down by the Supreme Court in the Shell case.12
SEC. 135. Petroleum Products Sold to International Carriers and Exempt Entities or Agencies. - Petroleum products sold to the following are exempt from excise tax:ChanRoblesvirtualLawlibrary
(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;
(b) Exempt entities or agencies covered by tax treaties, conventions and other international agreement for their use or 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. (Emphasis supplied.)
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 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.
Endnotes:
1Rollo, pp. 519-531.
2 Id. at 518.
3 G.R. No. 188497, 671 SCRA 241.
4 G.R. No. 188497, 717 SCRA 53.
5Rollo, pp. 154-155.
6 Id. at 155-156.
7 Id. at 153.
8 Id. at 119-152.
9 Id. at 98-118.
10 Id. at 90-96.
11 Id. at 76-88.
12 Id. at 84-87.
13 Id. at 69-74.
14 Id. at 26-65.
15 Supra note 3.
16 Supra note 4.
17 SEC. 129. Goods Subject to Excise Taxes. - Excise taxes apply to goods manufactured or produced in the Philippines for domestic sale 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.
For purposes of this Title, excise taxes herein imposed and based on weight or volume capacity or any other physical unit of measurement shall be referred to as "specific tax" and an excise tax herein imposed and based on selling price or other specified value of the good shall be referred to as "advalorem tax. " (as amended, Executive Order No. 273).
18 Vitug and Acosta, Tax Law and Jurisprudence, Third Edition (2006), p. 26.
19Rollo, pp. 155-156.
20 See Executive Order No. 80 (April 3, 1993).
21SECTION 24. Exemption from Taxes Under the National Internal Revenue Code. — Any provision of existing laws, rules and regulations to the contrary notwithstanding, no taxes, local and national, shall be imposed on business establishments operating within the ECOZONE. In lieu of paying taxes, five percent (5%) of the gross income earned by all businesses and enterprises within the ECOZONE shall be remitted to the national government, x x x
22 Sec. 15. Clark Special Economic Zone (CSEZ) and Clark Freeport Zone (CFZ). x x x
x x x x
The provisions of existing laws, rules and regulations to the contrary notwithstanding, no national and local taxes shall be imposed on registered business enterprises within the CFZ. In lieu of said taxes, a five percent (5%) tax on gross income earned shall be paid by all registered business enterprises within the CFZ and shall be directly remitted as follows: three percent (3%) to the National Government, and two percent (2%) to the treasurer's office of the municipality or city where they are located.
23 Exxonmobil Petroleum and Chemical Holdings, Inc. - Philippine Branch v. Commissioner of Internal Revenue, G.R. No. 180909, January 19, 2011, 640 SCRA 203, 219.
24 Philippine Airlines, Inc. v. Commissioner of Internal Revenue, G.R. No. 198759, July 1, 2013, 700 SCRA 322, 332.
25cralawred Id. at 334.
DEL CASTILLO, J.:
Product Volume Price Gold 95-ron ("Gold") 570,000 liters P16,421,207 Silver 95-ron ("Silver") 934,000 liters P25,348,9665
We maintain that Section 135(a), in fulfillment of international agreement and practice to exempt aviation fuel from excise tax and other impositions, prohibits the passing [on] of the excise tax to international carriers [that buy] petroleum products from local manufacturers/sellers such as respondent. However, we agree that there is a need to re[-]examine the effect of denying the domestic manufacturers/sellers' claim for refund of the excise taxes they already paid on petroleum products sold to international carriers, and its serious implications on our Government's commitment to the goals and objectives of the Chicago Convention.
The Chicago Convention, which established the legal framework for international civil aviation, did not deal comprehensively with tax matters. Article 24(a) of the Convention simply provides that fuel and lubricating oils on board an aircraft of a Contracting State, on arrival in the territory of another Contracting State and retained on board on leaving the territory of that State, shall be exempt from customs duty, inspection fees or similar national or local duties and charges. Subsequently, the exemption of airlines from national taxes and customs duties on spare parts and fuel has become a standard element of bilateral air service agreements (ASAs) between individual countries.
The importance of exemption from aviation fuel tax was underscored in the following observation made by a British author in a paper assessing the debate on using tax to control aviation emissions and the obstacles to introducing excise duty on aviation fuel, thus:cralawlawlibraryWithout any international agreement on taxing fuel, it is highly likely that moves to impose duty on international flights, either at a domestic or European level, would encourage 'tankering': carriers filling [fuel tanks to the limit] whenever they [land] outside the EU to avoid paying tax. Clearly, this would be entirely counterproductive. Aircraft would be travelling further than necessary to fill up in low-tax jurisdictions; in addition they would be burning up more fuel when carrying the extra weight of a full fuel tank.With the prospect of declining sales of aviation jet fuel x x x to international carriers on account of major domestic oil companies' unwillingness to shoulder the burden of excise tax, or of petroleum products being sold to said carriers by local manufacturers or sellers at still high prices, the practice of "tankering" would not be discouraged. This scenario does not augur well for the Philippines' growing economy and the booming tourism industry. Worse, our Government would be risking retaliatory action under several bilateral agreements with various countries. Evidently, construction of the tax exemption provision in question should give primary consideration to its broad implications on our commitment under international agreements.
In view of the foregoing reasons, we find merit in respondent's motion for reconsideration. We therefore hold that respondent, as the statutory taxpayer who is directly liable to pay the excise tax on its petroleum products, is entitled to a refund or credit of the excise taxes it paid for petroleum products sold to international carriers, the latter having been granted exemption from the payment of said excise tax under Sec. 135(a) of the NIRC.49
Endnotes:
1Gulf Air Company, Philippine Branch (GF) v. Commissioner of Internal Revenue, G.R. No. 182045, September 19, 2012, 681 SCRA 377, 389.
2 Id.
3Rollo, p. 28.
4 "CDC is a government-owned and controlled corporation established under Executive Order (EO) No. 80, Series of 1993 as the operating and implementing arm of the Bases Conversion and Development Authority (BCDA). It manages the Clark Special Economic Zone (CSEZ) and Clark Freeport Zone (CFZ). It is a duly registered CSEZ enterprise operating within the CFZ, thus it enjoys, under Section 5 of EO No. 80, all the applicable incentives in the Subic Special Economic and Free Port Zone under Republic Act (RA) No. 7227 as well as those applicable incentives granted in the Export Processing Zones, the Omnibus Investments Code of 1987, the Foreign Investments Act of 1991 and new investments laws which may thereafter be enacted." (Id. at 103.)
5 Id. at 99.
6 SEC. 135. Petroleum Products Sold to International Carriers and Exempt Entities or Agencies. - Petroleum products sold to the following are exempt from excise tax:ChanRoblesvirtualLawlibrary
x x x x
(c) Entities which are by law exempt from direct and indirect taxes.
7 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 customs house, or by the person who is found in possession of articles which are exempt from excise taxes other than those legally entitled to exemption, x x x
8Rollo, p. 100.
9 Total Volume of Gold Products: 570,000 + Total Volume of Silver products: 934,000 = 1,504,000 x P4.35 (excise tax rate under Section 148 (f) of the NIRC = P6,542,400.00; (Id. at 125.)
10 Id. at 100.
11 Id. at 119-152.
12 Id. at 100.
13 Id. at 100-101.
14 Id. at 98-118; penned by Associate Justice Esperanza R. Fabon-Victorino and concurred in by Presiding Justice Ernesto D. Acosta and Associate Justice Erlinda P. Uy.
15 127 Phil. 461 (1967).
16Rollo, p. 112.
17 Id
18 SEC. 130. Filing of Return and Payment of Excise Tax on Domestic Products. —
x x x x
(D) Credit for Excise tax on Goods Actually Exported. — When goods locally produced or manufactured are removed and actually exported without returning to the Philippines, whether so exported in their original state or as ingredients or parts of any manufactured goods or products, any excise tax paid thereon shall be credited or refunded upon submission of the proof of actual exportation and upon receipt of the corresponding foreign exchange payment: Provided, That the excise tax on mineral products, except coal and coke, imposed under Section 151 shall not be creditable or refundable even if the mineral products are actually exported.
19Rollo, pp. 113-116.
20 G.R. No. 188497, April 25,2012, 671 SCRA241.
21Rollo, p. 113, citing Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corporation, supra.
22 Id. at 109-117.
23 Id. at 394-418.
24 Id. at 90-96.
25cralawred Id. at 419-453.
26 Id. at 76-88; penned by Associate Justice Amelia R. Cotangco-Manalastas and concurred in by Presiding Justice Roman G. Del Rosario and Associate Justices Juanito C. Castaneda, Jr., Lovell R. Bautista, Erlinda P. Uy, Caesar A. Casanova, Esperanza R. Fabon-Victorino, Cielito N. Mindaro-Grulla, and Ma. Belen M. Ringis-Liban.
27 Id. at 83.
28 Id.
29 Id. at 454-478.
30 Id. at 69-74. Supra note 20.
31 Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corporation, G.R. No. 188497, February 19, 2014, 717 SCRA 53 (Resolution).
33Rollo, pp. 520-526.
34 Id. at 526.
35 Id. at 524.
36 Id. at 524-526.
37 655 Phil. 199(2011).
38 Id. at 212.
39Rollo, pp. 526-529.
40 Issued on August 10, 2006.
41 BIR Ruling No. 036-99, dated March 29,1999 and BIR Ruling No. 051-99, dated April 19, 1999.
42Rollo, p. 524.
43 Id. at 536.
44 Id.
45 Supra note 20.
46 SEC. 135. Petroleum Products Sold to International Carriers and Exempt Entities or Agencies. - Petroleum products sold to the following are exempt from excise tax:ChanRoblesvirtualLawlibrary
(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; xxxx
47 SEC. 148. Manufactured Oils and Other Fuels. - There shall be collected on refined and manufactured mineral oils and motor fuels, the following excise taxes which shall attach to the goods hereunder enumerated as soon as they are in existence as such:ChanRoblesvirtualLawlibrary
(a) Lubricating oils and greases, including but not limited to, base stock for lube oils and greases, high vacuum distillates, aromatic extracts, and other similar preparations, and additives for lubricating oils and greases, whether such additives are petroleum based or not, per liter and kilogram respectively, of volume capacity or weight, Four pesos and fifty centavos (P4.50): Provided, however, That the excise taxes paid on the purchased feedstock (bunker) used in the manufacture of excisable articles and forming part thereof shall be credited against the excise tax due therefrom: Provided, further, That lubricating oils and greases produced from basestocks and additives on which the excise tax has already been paid shall no longer be subject to excise tax: Provided, finally, That locally produced or imported oils previously taxed as such but are subsequently reprocessed, rerefined or recycled shall likewise be subject to the tax imposed under this Section.
(b) Processed gas, per liter of volume capacity, Five centavos (P0.05);
(c) Waxes and petrolatum, per kilogram, Three pesos and fifty centavos (P3.50);
(d) On denatured alcohol to be used for motive power, per liter of volume capacity, Five centavos (P0.05): Provided, That unless otherwise provided by special laws, if the denatured alcohol is mixed with gasoline, the excise tax on which has already been paid, only the alcohol content shall be subject to the tax herein prescribed. For purposes of this Subsection, the removal of denatured alcohol of not less than one hundred eighty degrees (180°) proof (ninety percent (90%) absolute alcohol) shall be deemed to have been removed for motive power, unless shown otherwise;
(e) Naphtha, regular gasoline and other similar products of distillation, per liter of volume capacity, Four pesos and eighty centavos (P4.80): Provided, however, That naphtha, when used as a raw material in the production of petrochemical products or as replacement fuel for natural-gas-fired-combined cycle power plant, in lieu of locally-extracted natural gas during the non-availability thereof, subject to the rules and regulations to be promulgated by the Secretary of Energy, in consultation with the Secretary of Finance, per liter of volume capacity, Zero (P0.00): Provided, further, That the by-product including fuel oil, diesel fuel, kerosene, pyrolysis gasoline, liquefied petroleum gases and similar oils having more or less the same generating power, which are produced in the processing of naphtha into petrochemical products shall be subject to the applicable excise tax specified in this Section, except when such by-products are transferred to any of the local oil refineries through sale, barter or exchange, for the purpose of further processing or blending into finished products which are subject to excise tax under this Section;
(f) Leaded premium gasoline, per liter of volume capacity, Five pesos and thirty-five centavos (P5.35); unleaded premium gasoline, per liter of volume capacity, Four pesos and thirty-five centavos (P4.35);
(g) Aviation turbojet fuel, per liter of volume capacity, Three pesos and sixty-seven centavos (P3.67);
(h) Kerosene, per liter of volume capacity, Sixty centavos (P0.60): Provided, That kerosene, when used as aviation fuel, shall be subject to the same tax on aviation turbo jet fuel under the preceding paragraph (g), such tax to be assessed on the user thereof;
(i) Diesel fuel oil, and on similar fuel oils having more or less the same generating power, per liter of volume capacity, One peso and sixty-three centavos (P1.63);
(j) Liquefied petroleum gas, per liter, Zero (P0.00): Provided, That liquefied petroleum gas used for motive power shall be taxed at the equivalent rate as the excise tax on diesel fuel oil;
(k) Asphalts, per kilogram, Fifty-six centavos (P0.56); and
(l) Bunker fuel oil, and on similar fuel oils having more or less the same generating power, per liter of volume capacity, Thirty centavos (P0.30).
48Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corporation, Resolution, supra note 32.
49 Id. at 72-73.
50 Id.
51 SEC. 135. Petroleum Products Sold to International Carriers and Exempt Entities or Agencies. - Petroleum products sold to the following are exempt from excise tax:ChanRoblesvirtualLawlibrary
(b) Exempt entities or agencies covered by tax treaties, conventions and other international agreements for their use or consumption; x x x
52Silkair (Singapore) PTE., LTD. v. Commissioner of Internal Revenue, 627 Phil. 453,472 (2010).
53 SEC. 229. Recovery of Tax Erroneously or Illegally Collected. —No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, of any sum alleged to have been excessively or in any manner wrongfully collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress.
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.
54 Supra note 20.
55 Id. at 259; citing Philippine Acetylene Co., Inc. v. Commissioner of Internal Revenue, supra note 15.
56Silkair (Singapore) Pte. Ltd. v. Commissioner of Internal Revenue, 591 Phil. 754, 767 (2008).
57 Id. at 765-766.
58 Supra note 20.
59 Id. at 263.
60 Philippine Bank of Communications v. Commissioner of Internal Revenue, 361 Phil. 916, 929 (1999).
61 Supra note 32.
VILLARAMA, JR., J.:
- The ratiocination adopted in said case applies only to international carriers under Section 135(a) of the NIRC, and not to tax-exempt entities under paragraphs (b) and (c). It thus creates an unreasonable distinction since manufacturers, sellers and importers would be allowed to claim a tax refund or credit only under Section 135(a) but not under paragraphs (b) and (c).
- It was mere speculation to cite the prospect of declining sales of aviation or jet fuel to international carriers due to unwillingness of major domestic oil companies to shoulder the burden of excise tax, that would encourage "tankering."
- If the lawmakers had intended to allow manufacturers, sellers and importers to claim a refund of excise taxes paid on petroleum products sold to international carriers and tax-exempt entities under Section 135, they would have expressly provided for it, just like in Section 130 (D) which allows refund or credit of excise taxes paid on locally produced or manufactured goods subsequently exported.
- International carriers and tax exempt entities as buyers could not benefit from Section 135 of the NIRC considering that this Court has consistently ruled they are not entitled to a refund or credit of the excise taxes paid on the petroleum products because they are not the statutory taxpayers. The provision simply exempts them from paying the excise taxes passed on by manufacturers, sellers and importers to buyers of petroleum products.
The next pivotal question then that must be resolved is whether PASAR has the legal personality to file the claim for the refund of the excise taxes passed on by Petron. The petitioner insists that PASAR is not the proper party to seek a refund of an indirect tax, such as an excise tax or Value Added Tax, because it is not the statutory taxpayer. The petitioner's argument, however, has no merit.
The rule that it is the statutory taxpayer which has the legal personality to file a claim for refund finds no applicability in this case. In Philippine Airlines, Inc. v. Commissioner of Internal Revenue, the Court distinguished between the kinds of exemption enjoyed by a claimant in order to determine the propriety of a tax refund claim. "If the law confers an exemption from both direct or indirect taxes, a claimant is entitled to a tax refund even if it only bears the economic burden of the applicable tax. On the other hand, if the exemption conferred only applies to direct taxes, then the statutory taxpayer is regarded as the proper party to file the refund claim." In PASAR's case, Section 17 of P.D. No. 66, as affirmed in Commissioner of Customs, specifically declared that supplies, including petroleum products, whether used directly or indirectly, shall not be subject to internal revenue laws and regulations. Such exemption includes the payment of excise taxes, which was passed on to PASAR by Petron. PASAR, therefore, is the proper party to file a claim for refund.10 (Boldface in original text)
x x x Section 204(c) of the NIRC states that it is the statutory taxpayer which has the legal personality to file a claim for refund. Accordingly, in cases involving excise tax exemptions on petroleum products under Section 135 of the NIRC, the Court has consistently held that it is the statutory taxpayer who is entitled to claim a tax refund based thereon and not the party who merely bears its economic burden.
For instance, in the Silkair case, Silkair (Singapore) Pte. Ltd. (Silkair Singapore) filed a claim for tax refund based on Section 135(b) of the NIRC as well as Article 4(2) of the Air Transport Agreement between the Government of the Republic of the Philippines and the Government of the Republic of Singapore. The Court denied Silkair Singapore's refund claim since the tax exemptions under both provisions were conferred on the statutory taxpayer, and not the party who merely bears its economic burden. As such, it was the Petron Corporation (the statutory taxpayer in that case) which was entitled to invoke the applicable tax exemptions and not Silkair Singapore which merely shouldered the economic burden of the tax. As explained in Silkair:cralawlawlibraryThe 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.However, the abovementioned rule should not apply to instances where the law clearly grants the party to which the economic burden of the tax is shifted an exemption from both direct and indirect taxes. In which case, the latter must be allowed to claim a tax refund even if it is not considered as the statutory taxpayer under the law. Precisely, this is the peculiar circumstance which differentiates the Maceda case from Silkair.
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. (Emphasis supplied)
To elucidate, in Maceda, the Court upheld the National Power Corporation's (NPC) claim for a tax refund since its own charter specifically granted it an exemption from both direct and indirect taxes, viz:cralawlawlibraryx 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. (Emphasis and underscoring supplied)Notably, the Court even discussed the Maceda ruling in Silkair, highlighting the relevance of the exemptions in NPC's charter to its claim for tax refund:cralawlawlibrarySilkair 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.Based on these rulings, it may be observed that the propriety of a tax refund claim is hinged on the kind of exemption which forms its basis. If the law confers an exemption from both direct or indirect taxes, a claimant is (entitled to a tax refund even if it only bears the economic burden of the applicable tax. On the other hand, if the exemption conferred only applies to direct taxes, then the statutory taxpayer is regarded as the proper party to file the refund claim.12 (Additional emphasis supplied)
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.:cralawlawlibraryIt 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:cralawlawlibraryx 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 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. (Emphasis and underscoring supplied)
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.
Endnotes:
1 G.R. No. 188497, February 19, 2014, 717 SCRA 53.
2 Resolution (Second Division) dated March 19. 2014 where this Court denied the petition "for failure to sufficiently show any reversible error in the assailed judgment to warrant the exercise of this Court's discretionary appellate jurisdiction." Rollo, p. 518.
3 "Special Issues in Carbon/Energy Taxation: Marine Bunker Fuel Charges" http://www.oecd.org/officialdocuments/publicdisplavdocumentpdf? doclanguage=en&cote=ocde/gd(97)78.
4 Sec. 1.
5 The Omnibus Investments Code of 1987. 6 491 Phil. 317 (2005).
7 481 Phil. 31 (2004).
8 500 Phil. 149 (2005).
9 G.R. No. 186223, October 1, 2014, 737 SCRA 328.
10 Id. at 337.
11 G.R. No. 198759, July 1, 2013, 700 SCRA 322, 338-339.
12 Id. at 331-336.
13 127 Phil. 461 (1967).
LEONEN, J.:
SEC. 135. Petroleum Products Sold to International Carriers and Exempt Entities or Agencies. - Petroleum products sold to the following are exempt from excise tax:ChanRoblesvirtualLawlibrary
(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;
(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. (Emphasis supplied)
We maintain that Section 135 (a), in fulfillment of international agreement and practice to exempt aviation fuel from excise tax and other impositions, prohibits the passing of the excise tax to international carriers who buys [sic] petroleum products from local manufacturers/sellers such as respondent. However, we agree that there is a need to reexamine the effect of denying the domestic manufacturers/sellers' claim for refund of the excise taxes they already paid on petroleum products sold to international carriers, and its serious implications on our Government's commitment to the goals and objectives of the Chicago Convention.
The Chicago Convention, which established the legal framework for international civil aviation, did not deal comprehensively with tax matters. Article 24 (a) of the Convention simply provides that fuel and lubricating oils on board an aircraft of a Contracting State, on arrival in the territory of another Contracting State and retained on board on leaving the territory of that State, shall be exempt from customs duty, inspection fees or similar national or local duties and charges. Subsequently, the exemption of airlines from national taxes and customs duties on spare parts and fuel has become a standard element of bilateral air service agreements (ASAs) between individual countries.
The importance of exemption from aviation fuel tax was underscored in the following observation made by a British author in a paper assessing the debate on using tax to control aviation emissions and the obstacles to introducing excise duty on aviation fuel, thus:cralawlawlibraryWithout any international agreement on taxing fuel, it is highly likely that moves to impose duty on international flights, either at a domestic or European level, would encourage 'tankering': carriers filling their aircraft as full as possible whenever they landed outside the EU to avoid paying tax. Clearly this would be entirely counterproductive. Aircraft would be travelling further than necessary to fill up in low-tax jurisdictions; in addition they would be burning up more fuel when carrying the extra weight of a full fuel tank.With the prospect of declining sales of aviation jet fuel sales to international carriers on account of major domestic oil companies' unwillingness to shoulder the burden of excise tax, or of petroleum products being sold to said carriers by local manufacturers or sellers at still high prices, the practice of "tankering" would not be discouraged. This scenario does not augur well for the Philippines' growing economy and the booming tourism industry. Worse, our Government would be risking retaliatory action under several bilateral agreements with various countries. Evidently, construction of the tax exemption provision in question should give primary consideration to its broad implications on our commitment under international agreements.7 (Citation omitted)
PRESIDENTIAL DECREE NO. 1359
AMENDING SECTION 134 OF THE NATIONAL INTERNAL
REVENUE CODE OF 1977.
WHEREAS, under the present law oil products sold to international carriers are subject to the specific tax;
WHEREAS, some countries allow the sale of petroleum products to Philippine Carriers without payment of taxes thereon;
WHEREAS, to foster goodwill and better relationship with foreign countries, there is a need to grant similar tax exemption in favor of foreign international carriers;
. . . .
SECTION 1. Section 134 of National Internal Revenue Code of 1977 is hereby amended to read as follows:ChanRoblesvirtualLawlibrary
SEC. 134. Articles subject to specific tax.— . . . HOWEVER, PETROLEUM PRODUCTS SOLD TO AN INTERNATIONAL CARRIER FOR ITS USE OR CONSUMPTION OUTSIDE OF THE PHILIPPINES SHALL NOT BE SUBJECT TO SPECIFIC TAX, PROVIDED, THAT THE COUNTRY OF SAID CARRIER EXEMPTS FROM TAX PETROLEUM PRODUCTS SOLD TO PHILIPPINE CARRIERS.
In case of importations the internal-revenue tax shall be in addition to the customs duties, if any. (Emphasis supplied)
Excise tax is a tax on the production, sale, or consumption of a specific commodity in a country. . . . "It does not matter to what use the article[s] subject to tax is put; the excise taxes are still due, even though the articles are removed merely for storage in some other place and are not actually sold or consumed." The excise tax based on weight, volume capacity or any other physical unit of measurement is referred to as "specific tax." If based on selling price or other specified value, it is referred to as "ad valorem" tax.27 (Citation omitted)
SEC. 130. Filing of Return and Payment of Excise Tax on Domestic Products. -
(D) Credit for Excise Tax on Goods Actually Exported. - When goods locally produced or manufactured are removed and actually exported without returning to the Philippines, whether so exported in their original state or as ingredients or parts of any manufactured goods or products, any excise tax paid thereon shall be credited or refunded upon submission of the proof of actual exportation and upon receipt of the corresponding foreign exchange payment: Provided, That the excise tax on mineral products, except coal and coke, imposed under Section 151 shall not be creditable or refundable even if the mineral products are actually exported.
A tax exemption represents a loss of revenue to the State and must therefore not be lightly granted or inferred. When claimed, it must be strictly construed against the taxpayer, who must prove that he comes under the exemption rather than [the] rule that every one [sic] must contribute his just share in the maintenance of the government.35
[W]here the law clearly grants the party to which the economic burden of the tax is shifted an exemption from both direct and indirect taxes[,] the latter must be allowed to claim a tax refund even if it is not considered as the statutory taxpayer under the law.38
Based on these rulings [referring to Maceda and Silkair], it may be observed that the propriety of a tax refund claim is hinged on the kind of exemption which forms its basis. If the law confers an exemption from both direct or indirect taxes, a claimant is entitled to a tax refund even if it only bears the economic burden of the applicable tax. On the other hand, if the exemption conferred only applies to direct taxes, then the statutory taxpayer is regarded as the proper party to file the refund claim.39
Endnotes:
1 G.R. No. 188497, April 25, 2012, 671 SCRA 241 [Per J. Villarama, Jr., First Division].
2 Id. at 246.
3 Id. at 264.
4Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corporation, G.R. No. 188497, February 19, 2014, 717 SCRA 53 [Per J. Villarama, Jr., First Division].
5 Id. at 73.
6 Id. at 68-73.
7 Id. at 72-73.
8 Id. at 72.
9 TAX CODE, sec. 135(a) provides:ChanRoblesvirtualLawlibrary
SEC. 135. Petroleum Products Sold to International Carriers and Exempt Entities or Agencies. -Petroleum products sold to the following are exempt from excise tax:ChanRoblesvirtualLawlibrary
(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[.]
10 See Exxonmobil Petroleum and Chemical Holdings, Inc. - Philippine Branch v. Commissioner of Internal Revenue, 655 Phil. 199, 220 (2011) [Per J. Mendoza, Second Division].
11 Convention on International Civil Aviation (1944), art. 24 provides:ChanRoblesvirtualLawlibrary
Article 24. (a) Aircraft on a flight to, from, or across the territory of another contracting State shall be admitted temporarily free of duty, subject to the customs regulations of the State. Fuel, lubricating oils, spare parts, regular equipment and aircraft stores on board an aircraft of a contracting State, on arrival in the territory of another contracting State and retained on board on leaving the territory of that State shall be exempt from customs duty, inspection fees or similar national or local duties and charges. This exemption shall not apply to any quantities or articles unloaded, except in accordance with the customs regulations of the State, which may require that they shall be kept under customs supervision.
(b) Spare parts and equipment imported into the territory of a contracting State for incorporation in or use on aircraft of another contracting State engaged in international air navigation shall be admitted free of customs duty, subject to compliance with the regulations of the State concerned, which may provide that the articles shall be kept under customs supervision and control.
12 127 Phil. 461 (1967) [Per J. Ruiz Castro, En Banc].
13 G.R. No. 88291, June 8, 1993, 223 SCRA 217 [Per J. Nocon, En Banc].
14Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corporation, G.R. No. 188497, February 19, 2014, 717 SCRA 53, 64, and 67-68 [Per J. Villarama, Jr., First Division].
15 Philippine Acetylene Co. v. Commissioner of Internal Revenue, 127 Phil. 461, 470-471 (1967) [Per J. Ruiz Castro, En Banc].
16Maceda v. Macaraig, Jr., etc., et al, 274 Phil. 1060, 1092-1096 (1991) [Per J. Gancayco, En Banc].
17 Id. at 1113 and 1116.
18Maceda v. Macaraig, Jr., G.R. No. 88291, June 8, 1993, 223 SCRA 217, 259 [Per J. Nocon, En Bancc].
19 Id. at 255.
20Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corporation, G.R. No. 188497, February 19, 2014, 717 SCRA 53, 72 [Per J. Villarama, Jr., First Division],
21 Id.
22 Id. at 73.
23 Insular Lumber Company v. Court of Tax Appeals, 192 Phil. 221, 231 (1981) [Per J. De Castro, En Banc].
24 TAX CODE, sec. 129 provides:ChanRoblesvirtualLawlibrary
SEC. 129. Goods Subject to Excise Taxes. - Excise taxes apply to goods manufactured or produced in the Philippines for domestic sale 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.
For purposes of this Title, excise taxes herein imposed and based on weight or volume capacity or any other physical unit of measurement shall be referred to as 'specific tax' and an excise tax herein imposed and based on selling price or other specified value of the good shall be referred to as 'ad valorem tax'.
25cralawred Tax CODE, sec. 148 provides:ChanRoblesvirtualLawlibrary
SEC. 148. Manufactured Oils and Other Fuels. - There shall be collected on refined and manufactured mineral oils and motor fuels, the following excise taxes which shall attach to the goods hereunder enumerated as soon as they are in existence as such:ChanRoblesvirtualLawlibrary
(a) Lubricating oils and greases, including but not limited to, base stock for lube oils and greases, high vacuum distillates, aromatic extracts and other similar preparations, and additives for lubricating oils and greases, whether such additives are petroleum based or not, per liter and kilogram, respectively, of volume capacity or weight, Four pesos and fifty centavos (P4.50): Provided, however, That the excise taxes paid on the purchased feedstock (bunker) used in the manufacture of excisable articles and forming part thereof shall be credited against the excise tax due therefrom: Provided, further, That lubricating oils and greases produced from base stocks and additives on which the excise tax has already been paid shall no longer be subject to excise tax: Provided, finally, That locally produced or imported oils previously taxed as such but are subsequently reprocessed, refined or recycled shall likewise be subject to the tax imposed under this Section.
(b) Processed gas, per liter of volume capacity, Five centavos (P0.05);
(c) Waxes and petrolatum, per kilogram, Three pesos and fifty centavos (P3.50);
(d) On denatured alcohol to be used for motive power, per liter of volume capacity, Five centavos (P0.05): Provided, That unless otherwise provided by special laws, if the denatured alcohol is mixed with gasoline, the excise tax on which has already been paid, only the alcohol content shall be subject to the tax herein prescribed. For purposes of this Subsection, the removal of denatured alcohol of not less than one hundred eighty degrees (180°) proof (ninety percent (90%) absolute alcohol) shall be deemed to have been removed for motive power, unless shown otherwise;
(e) Naphtha, regular gasoline and other similar products of distillation, per liter of volume capacity, Four pesos and eighty centavos (P4.80): Provided, however, That naphtha, when used as a raw material in the production of petrochemical products or as replacement fuel for natural-gas-fired- combined-cycle power plant, in lieu of locally-extracted natural gas during the non-availability thereof, subject to the rules and regulations to be promulgated by the Secretary of Energy, in consultation with the Secretary of Finance, per liter of volume capacity, Zero (P0): Provided, further, That the by product including fuel oil, diesel fuel, kerosene, pyrolysis gasoline, liquefied petroleum gases and similar oils having more or less the same generating power, which are produced in the processing of naphtha into petrochemical products shall be subject to the applicable excise tax specified in this Section, except when such by-products are transferred to any of the local oil refineries through sale, barter or exchange, for the purpose of further processing or blending into finished products which are subject to excise tax under this Section;
(f) Leaded premium gasoline, per liter of volume capacity, Five pesos and thirty-five centavos (P5.35); unleaded premium gasoline, per liter of volume capacity, Four pesos and thirty-five centavos (P4.35);
(g) Aviation turbojet fuel, per liter of volume capacity, Three pesos and sixty-seven centavos (P3.67); (h) Kerosene, per liter of volume capacity, Sixty centavos (P0.60): Provided, That kerosene, when used as aviation fuel, shall be subject to the same tax on aviation turbo jet fuel under the preceding paragraph (g), such tax to be assessed on the user thereof;
(i) Diesel fuel oil, and on similar fuel oils having more or less the same generating power, per liter of volume capacity, One peso and sixty-three centavos (PI.63);
(j) Liquefied petroleum gas, per liter, Zero (P0): Provided, That liquefied petroleum gas used for motive power shall be taxed at the equivalent rate as the excise tax on diesel fuel oil;
(k) Asphalts, per kilogram, Fifty-six centavos (P0.56): and
(l) Bunker fuel oil, and on similar fuel oils having more or less the same generating power, per liter of volume capacity, Thirty centavos (P0.30).
26 G.R. No. 125346, November 11, 2014 [Per J. Leonen, En Banc].
27 Id. at 32-33.
28 Tax CODE, sec. 130 provides:ChanRoblesvirtualLawlibrary
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. -
. . . .
(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 from place of production: Provided, That the excise tax on locally manufactured petroleum products and indigenous petroleum levied under Sections 148 and 151(A)(4), respectively, of this Title shall be paid . . . before removal from the place of production of such products from January 1, 1999 and thereafter: Provided, further....
. . . .
(C) Manufacturer's or Producer's Sworn Statement. - Every manufacturer or producer of goods or products subject to excise taxes shall file with the Commissioner on the date or dates designated by the latter, and as often as may be required, a sworn statement showing, among other information, the different goods or products manufactured or produced and their corresponding gross selling price or market value, together with the cost of manufacture or production plus expenses incurred or to be incurred until the goods or products are finally sold.
29 TAX Code, sec. 131 provides:ChanRoblesvirtualLawlibrary
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 customs house, or by the person who is found in possession of articles which are exempt from excise taxes other than those legally entitled to exemption.
In the case of tax-free articles brought or imported into the Philippines by persons, entities, or agencies exempt from tax which are subsequently sold, transferred or exchanged in the Philippines to non-exempt persons or entities, the purchasers or recipients shall be considered the importers thereof, and shall be liable for the duty and internal revenue tax due on such importation.
. . . .
The tax due on any such goods, products, machinery, equipment or other similar articles shall constitute a lien on the article itself, and such lien shall be superior to all other charges or liens, irrespective of the possessor thereof.
(B) Rate and Basis of the Excise Tax on Imported Articles. - Unless otherwise specified, imported articles shall be subject to the same rates and basis of excise taxes applicable to locally manufactured articles.
30 Silkair (Singapore) Pte. Ltd. v. Commissioner of Internal Revenue, 591 Phil. 754, 765-766 (2008) [Per J. Carpio, First Division], citing Commissioner of Internal Revenue v. Philippine Long Distance Telephone Company, 514 Phil. 255, 266 (2005) [Per J. Garcia, Third Division] and Maceda v. Macaraig, Jr., etc., et al, 274 Phil. 1060, 1092 (1991) [Per J. Gancayco, En Banc].
31 Ponencia, pp. 5-7
32 Commissioner of Internal Revenue v. Rio Tuba Nickel Mining Corporation, 279 Phil. 144, 155 (1991) [Per C.J. Fernan, Third Division]; Commissioner of Internal Revenue v. Guerrero, 128 Phil. 197, 208 (1967) [Per J. Fernando, En Banc],
33Abad v. Court of Tax Appeals, et al, 124 Phil. 973, 984 (1966) [Per J. J. B. L. Reyes, En Banc].
34 Davao Gulf Lumber Corporation v. Commissioner of Internal Revenue, 354 Phil. 879, 891-892 (1998) [Per J. Panganiban, En Banc]; Floro Cement Corporation v. Gorospe, G.R. No. 46787, August 12, 1991, 200 SCRA 480, 488 [Per J. Bidin, Third Division].
35 J. Cruz, Dissenting Opinion in Maceda v. Macaraig, Jr., etc., et al., 274 Phil. 1060, 1117 (1991) [Per J. Gancayco, En Banc].
36 Namely: (a) Silkair (Singapore) Pie. Ltd. v. Commissioner of Internal Revenue, 568 Phil. 92 (2008) [Per J. Carpio Morales, Second Division]; (b) Silkair (Singapore) Pie. Ltd. v. Commissioner of Internal Revenue, 591 Phil. 754 (2008) [Per J. Carpio, First Division]; (c) Silkair (Singapore) Pte. Ltd. v. Commissioner of Internal Revenue, 627 Phil. 453 (2010) [Per J. Leonardo-De Castro, First Division]; and (d) Silkair (Singapore) Pte. Ltd. v. Commissioner of Internal Revenue, 680 Phil. 33 (2012) [Per J. Villarama, Jr., First Division], See also Exxonmobil Petroleum and Chemical Holdings, Inc. -Philippine Branch v. Commissioner of Internal Revenue, 655 Phil. 199 (2011) [Per J. Mendoza, Second Division] where the issue was whether the distributor and vendor of petroleum products to international carriers can claim a refund of excise taxes passed on to it by the manufacturers.
37 G.R. No. 198759, July 1, 2013, 700 SCRA 322 [Per J. Perlas-Bernabe, Second Division]. Also cited in Commissioner of Internal Revenue v. Philippine Associated Smelling and Refining Corporation, G.R. No. 186223, October 1, 2014, 737 SCRA 328, 337 [Per J. Reyes, Third Division].
38Philippine Airlines, Inc. v. Commissioner of Internal Revenue, G.R. No. 198759, July 1, 2013, 700 SCRA 322, 334 [Per J. Perlas-Bernabe, Second Division].
39Id. at 336.
40 See Philippine Trust Company and Smith, Bell & Company, Ltd. v. Mitchell, 59 Phil. 30, 36 (1933) [Per J. Malcolm, En Banc] where this court held that "[b]ut idolatrous reverence for precedent, simply as precedent, no longer rules. More important than anything else is that the court should be right. And particularly is it not wise to subordinate legal reason to case law and by so doing perpetuate error when it is brought to mind that the views now expressed conform in principle to the original decision and that since the first decision to the contrary was sent forth there has existed a respectable opinion of non-conformity in the court." See also Tan Chongv. Secretary of Labor, 79 Phil. 249, 257 (1947) [Per J. Padilla, En Banc].