THIRD DIVISION
G.R. No. 180402, February 10, 2016
COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. PILIPINAS SHELL PETROLEUM CORPORATION, Respondent.
D E C I S I O N
REYES, J.:
Assailed in the present Petition for Review on Certiorari1 under Rule 45 of the Rules of Court is the Decision2 dated July 13, 2007 rendered by the Court of Tax Appeals (CTA) en banc in CTA EB Case No. 279, which affirmed the Decision3 dated November 28, 2006 of the CTA Second Division in CTA Case No. 6554, ordering the refund or issuance of a tax credit certificate in favor of respondent Pilipinas Shell Petroleum Corporation (Pilipinas Shell) for the excise taxes it paid on petroleum products sold to international carriers. Petitioner Commissioner of Internal Revenue (CIR) also assailed the CTA Resolution4 dated October 18, 2007 denying its motion for reconsideration.chanRoblesvirtualLawlibrary
WHEREFORE, the Court hereby resolves to:In granting Pilipinas Shell's motions for reconsideration, the Court ruled:ChanRoblesVirtualawlibrary
(1) GRANT the original and supplemental motions for reconsideration filed by respondent Pilipinas Shell Petroleum Corporation; and (2) AFFIRM the Decision dated March 25, 2009 and Resolution dated June 24, 2009 of the Court of fax Appeals En Banc in CTA EB No. 415; and DIRECT petitioner Commissioner of Internal Revenue to refund or to issue a tax credit certificate to Pilipinas Shell Petroleum Corporation in the amount of P95,014,283.00 representing the excise taxes it paid on petroleum products sold to international carriers from October 2001 to June 2002.
SO ORDERED.17chanroblesvirtuallawlibrary
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 petroleum products from local manufacturers/sellers such as respondent. However, we agree that there is a need to rcexamine 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.Under the doctrine of stare decisis,19 the Court must adhere to the principle of law laid down in Pilipinas Shell and apply the same in the present case, especially since the facts, issues, and even the parties involved are exactly identical. Thus, the Court hereby holds that Pilipinas Shell's claim for refund/tax credit must be granted pursuant to Pilipinas Shell, as its petroleum products sold to international carriers for the period of November 2000 to March 2001 are exempt from excise tax, these international carriers being exempt from payment of excise tax under Section 135(a) of the NIRC.
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:
x x x x
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 "Hankering" 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.18 (Citation omitted and emphases ours)
Endnotes:
* Additional member per Raffle dated October 20, 2014 vice Associate Justice Francis H. Jardeleza.
1Rollo, pp. 11-39.
2 Penned by Presiding Justice Ernesto D. Acosta, with Associate Justices Juanito C. Castañeda, Jr., Lovell R. Bautista, Erlinda P. Uy, Caesar A. Casanova and Olga Palanca-Enriquez, concurring; id. at 42-50.
3 Penned by Associate Justice Juanito C. Castañeda, Jr. with Associate Justices Erlinda P. Uy and Olga Palanca-Enriquez concurring; id. at 57-77.
4 Id. at 52-55.
5 Id. at 43.
6 Id.
7 Id. at 75.
8 Id. at 81-85.
9 Id. at 44.
10 Id. al 52-55.
11 Id. at 17-34.
12 Id. at 125-130.
13 April 25, 2012, 671 SCRA 241.
14 Id.
15 Id. at 263.
16Rollo, pp. 258-267.
17 Id. at 266.
18 Id. at 265-266.
19J.R.A. Philippines, Inc. v. CIR, 647 Phil. 33 (2010).
20 G.R. No. 210836, September 1, 2015.
21 The CIR's motion for reconsideration of the Court's Decision dated September 1, 2015 in Chevron case was denied with finality in a Resolution dated November 10, 2015.
22 <ftp://ftp.bir.gov.ph/webadmin/pdfs/rulings1999_digest.pdf> (visited July 24, 2012). A summary of BIR Ruling No. 05 1-99 dated April 19, 1999 reads:
The petroleum product withdrawals by Petron Corporation are for use by entities or agencies exempt from excise tax under Section 135 of the Tax Code of 1997, and that the petroleum products are to be delivered to the tax-exempt entities within ten (10) days (for the period of January 1, 1998 to June 30, 1998); within five (5) days (for the period July 1, 1998 to December 31, 1998) from the date of removal of such products; and before removal from the place of production of such products (from January 1, 1999 and thereafter). Accordingly, Petron is allowed to claim a tax credit/refund of the excise taxes paid on petroleum products sold to tax-exempt entities or agencies, subject to the two-year prescriptive period under Section 229 of the Tax Code of 1997. (Emphasis ours)
23 <http://www.bir.gov.ph/lumangweb/rr2000.html#rr5-2000> (visited July 24, 2012). A summary of
Revenue Regulations No. 5-2000 states:
REVENUE REGULATIONS No. 5-2000 issued August 15, 2000 prescribes the regulations governing the manner of the issuance of Tax Credit Certificates (TCCs) and the conditions for their use, revalidation and transfer. A TCC may be used by the grantee or his assignee in the payment of his direct internal revenue tax liability. However, in no case shall the TCC be used in the payment of the following: 1) payment or remittance for any kind of withholding tax; 2) payment arising from the availment of tax amnesty declared under a legislative enactment; 3) payment of deposits on withdrawal of excisable articles; 4) payment of taxes not administered or collected by the BIR; and 5) payment of compromise penalty. Moreover, in no case shall a tax refund or TCC be given resulting from availment of incentives granted pursuant to special laws for which no actual tax payment was made.
BIR-issued TCCs may be transferred in favor of an assignee subject only to the following conditions: 1) the transfer of a valid TCC must be with prior approval of the Commissioner or his duly authorized representative; 2) the transfer should be limited to one transfer only; and 3) the transferee shall use the ICC assigned to him strictly in payment of his direct internal revenue tax liability and in no case shall the same be available for conversion to cash in his hands. Any TCC issued which remains unutilized after five (5) years from the date of issue shall, unless invalidated before the end of the fifth year, be considered invalid. This means that the TCC shall not be allowed for use in payment of any of the taxpayer's internal revenue tax liability nor allowed to be transferred and the unutilized amount thereof shall revert to the General Fund of the National Government. The invalidated TCC shall be valid for a period of live years from the date of issue. Any request for conversion into cash refund of unutilized tax credits may be allowed during the validity period of the TCC, subject to conditions specified in the Revenue Regulations. Any TCC issued prior to January 1, 1998, may be submitted for revalidation by the holder within six (6) months prior to the end of the fifth (5th) year. No invalidated TCC shall be issued unless the Commissioner's duly authorized representative has certified that the applicant taxpayer has no outstanding tax liability. If the holder has any outstanding tax liability, said liability should be applied first against the TCC sought to be revalidated through the issuance of a Tax Debit Memo.