Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

DECISION

FERRER-FLORES, J.:

The Petition for Review involves a claim for refund or tax credit in the aggregate amount of P43,667 ,566.35, representing excise taxes. 1

THE PARTIES

Petitioner Philippine Airlines, Inc. is a domestic corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with registered address at PNB Financial Center, President Diosdado P. Macapagal Avenue, CCP Complex, 1307, Pasay City.2 Respondent Commissioner of Internal Revenue (CIR) is the duly appointed Commissioner of the Bureau of Internal Revenue (BIR), a government agency tasked with assessment and collection of all national 1 Nature of the Case, Joint Stipulation of Facts and Issues (JSFI), Docket- Vol. III, p. 1461. 2 Par. 2, Admitted Facts, JSFI, Docket- Vol. Ill, pp. 1461 to 1462. \

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue revenue taxes, fees, charges, including excise taxes paid on wine, liquors, and cigarettes under Section 142 and 145 of the National Internal Revenue Code (NIRC) of 1997, as amended, with office at the BIR National Office Building, Agham Road, Diliman, Quezon City.3

ANTECEDENTS (ADMINISTRATIVE LEVEL)

On June 11, 1987, petitioner was granted a franchise to operate air transport services domestically and internationally by virtue of Presidential Decree (P.D.) No. 1590, otherwise known as "An Act Granting a New Franchise to Philippine Airlines, Inc. to Establish, Operate, and Maintain Air-Transport Services in the Philippines and Between the Philippines and Other Countries. "4 During the period from July 2013 to July 2017, petitioner imported assorted cigarettes, liquors and wine for international in-flight consumption as evidenced by various Bureau of Customs (BOC) Informal Import Declaration and Entry (IIDE), Air Waybills/Airway Bills or Bills of Lading/Sea Waybills, and Authorities to Release Imported Goods (ATRIGs).5 In the said ATRIGs, petitioner was assessed to pay the excise taxes stated therein, in the aggregate amount of P43,667,566.45.6 The BOC likewise wrote twenty-six (26) letters to petitioner demanding payment of excise taxes for its importation of liquor, wine and tobacco. 7 On February 28, 2018, petitioner paid under protest8 the said total amount of P43,667,566.35 as shown on BOC Official Receipt No. 01889898427.9 Thereafter, petitioner filed an administrative claim for refund or tax credit on alleged excise taxes paid under protest on imported alcohol products constituting commissary and catering supplies for use or consumption in its international flights before the office of respondent, through the Excise Large Taxpayers Audit Division II, on February 21 , 2020. 10 \ 3 Par. 2, Petition for Review, vis-a-vis Par. 1, Answer, Docket- Vol. I, p. 8 and Docket- Vol. II, p. 1082, respectively.

4 Par. 3, Admitted Facts, JSFI, Docket- Vol. III, p. 1462. 5 Exhibits "P-4" to "P-4.254", "P-5" to "P-5.254", and "P-6" to "P-6.254", attached to petitioner's Amended Formal Offer of Evidence filed on July 4, 2022. 6 The difference ofP0.1 0 from the amount actually paid is traced to A TRIG No. ELTRDALC43470 (Refer to Exhibit "P-6.140"), where the amount assessed in the A TRIG is actually Pl2,266.10 but per BOC Letter dated February 9, 2018, the excise tax due indicated is only P12,266.00 (Refer to Exhibit "P-8.18").

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

PROCEEDINGS BEFORE THIS COURT

Petitioner filed the present Petition for Review on February 28, 2020. 11 The case was initially raffled to this Court's former Second Division. Respondent filed his Answer on June 15, 2020, 12 interposing his special and affirmative defenses.

The Pre-Trial Conference was initially set on July 13, 2020 _13 In view, however, of the failure of petitioner's counsel to file a Pre-Trial Brief and absence in the Pre-Trial Conference, the Petition for Review was dismissed and the case was closed and terminated. 14 Upon petitioner's Motion for Reconsideration filed on August 28, 2020, 15 with respondent's Opposition (Re: Motion for Reconsideration of the Order dated 13 July 2020) filed on October 5, 2020, 16 the Court, in the Resolution dated December 18,2020, 17 reversed and set aside its Order dated July 13, 2020 dismissing the instant case, and, accordingly, set the case for Pre-Trial Conference on February 24,2021.

The Pre-Trial Conference, however, was reset to March 24, 2021, 18 and further reset to, and eventually held on, July 5, 2021. 19 Prior thereto, the Respondent's Pre-Trial Brief was posted on July 1, 2020,20 while petitioner's Pre-Trial Briefwas submitted on March 19, 2021. 21 On October 21, 2021, the parties submitted their Joint Stipulation of Facts and Issues,22 which was approved and adopted by the Court in the Pre- Trial Order dated October 21, 2021,23 thereby deeming the termination of the Pre-Trial. \ 11 Docket- Vol. I, pp. 6 to 36.

12 Docket- Vol. II, pp. I 082 to 1087.

13 Notice of Pre-Trial Conference dated June 17, 2020, Docket- Vol. III, pp. 1089 to 1090. 14 Minutes of the hearing held on, and Order dated, July 13, 2020, Docket- Vol. III, pp. 1099 to 1100. 15 Docket- Vol. III, pp. 1101 to 1108.

16 Docket- Vol. III, pp. 1133 to 1137, attached to respondent's Motion to Admit Attached Opposition, Docket- Vol. III, pp. 1128 to 1131 , which was granted by the Court in the Resolution dated October 9, 2020, Docket- Vol. III, p. 1139.

17 Docket- Vol. III, pp. 1141 to 1146.

18 Notice ofResetting dated February 10,2021, Docket- Vol. III, p. 1147. 19 Notice of Resetting dated May 17, 2021 , Docket- Vol. III, p. 1456; Minutes of the hearing held on, and Order dated, July 5, 2021 , Docket - Vol. ITT, pp. 1457 and 1459, respectively. 20 Docket- Vol. III, pp. 1092 to 1095.

·

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

As trial ensued, petitioner presented its testimonial and documentary evidence. It offered the testimonies of the following individuals, namely: ( 1) Ms. Cheryl V. Capinpin,24 Manager of petitioner's In-flight Materials Purchasing Division; (2) Mr. Jonathan R. Castillo Lee,25 Manager for petitioner's Company Materials Handling Division; and (3) Mr. Ruel Ryan 0. Julian,26 Manager for petitioner's Tax Services Division. On November 19, 2021, petitioner filed its Formal Offer ofEvidence. 27 Thereafter, petitioner filed its Amended Formal Offer of Evidence on July 4, 2022, 28 to which respondent filed his Comment (Re: Amended Formal Offer of Evidence) on July 8, 2022.29 In the Resolution dated September 21,2022,30 the Court admitted petitioner's offered exhibits, except for (1) Exhibits "P-3", "P-4", "P-4.14", "P-4.23", "P-4.71", "P-4.83", "P-4.97", "P-4.164", "P- 4.194", "P-4.218", "P-4.244", "P-6.2", "P-6.6", "P-8.19", "P-8.21" and "P- 1 0", for failure of the exhibit formally offered to correspond with the duly marked document; (2) Exhibit "P-30-a", for not being found in the records of the case; and, (3) Exhibits "P-4.84", "P-5.61", "P-5.73" and "P-5.215", for being unclear/unreadable.

In the meantime, the present case was transferred to the Third Division of this Court, per the Order dated June 29, 2022. 31 Thereafter, petitioner filed its Omnibus Motion (1. For Partial Reconsideration of the Resolution dated 21 September 2022; II. For Commissioner's Hearing; and III. To Defer Filing of Memoranda) on October 24, 2022,32 to which respondent failed to file a comment.33 The Court, in the Resolution dated February 17,2023,34 granted the setting of a commissioner's hearing and deferred the filing of petitioner's memorandum. Thereafter, in the Resolution dated April 25, 2023,35 the Court granted petitioner's motion and admitted all of its denied exhibits.

24 Exhibit "P-51 ", attached to petitioner's Amended Formal Offer of Evidence filed on July 4, 2022; Order dated October 20, 2021, Docket- Vol. III, p. 1566. 25 Exhibit "P-49", attached to petitioner's Amended Formal Offer of Evidence filed on July 4, 2022; Order dated October 20, 2021, Docket- Vol. III, p. 1566. 26 Exhibit "P-50", attached to petitioner's Amended Formal Offer of Evidence filed on July 4, 2022; Order dated October 20, 2021 , Docket- Vol. III, p. 1566. 27 Docket- Vol. III, pp. 1474 to 1565.

28 Separate bundle.

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

In the Notice of Resolution dated June 6, 2023,36 the present case was transferred to the Second Division of this Court. Respondent filed his Memorandum on October 17, 2022,37 while petitioner's Memorandum was filed via accredited courier service and received by the Court on June 9, 2023.38 This case was considered submitted for decision on June 27, 2023.39

THE ISSUE

As stipulated, the sole issue for the Court's determination is as follows: Whether [petitioner] PAL is entitled to the refund of excise taxes allegedly paid under protest for various importations on

[February

28, 2018]40 amounting to

FORTY-THREE

MILLION SIX HUNDRED SIXTY-SEVEN THOUSAND

FIVE HUNDRED SIXTY-SIX PESOS AND 35/100 (PHP

43,667 ,566.35) for its importations of liquor and wine for its catering and commissary supplies for international consumption.41 Petitioner's arguments:

Petitioner argues that its importation of commissary and catering supplies are exempt from all taxes, pursuant to its franchise as Republic Act (R.A.) No. 933442 did not repeal P.D. No. 1590. Respondent's counter-arguments:

Respondent contends that Section 131 of the NIRC of 1997, as amended by R.A. No. 9334, expressly withdrew the conditional tax exemption granted to petitioner and that the letter of the law should prevail over rules of construction. Respondent also claims that petitioner failed to prove that the commissary supplies are not locally available in reasonable quantity, quality " Docket - V ol.IV, p. 1790.

\ 37 Docket- Vol. IV, pp. 1686 to 1702.

38 Docket- Vol. IV, pp. 1797 to 1821.

39 Docket- Vol. IV, p. 1825.

40 Exhibit "P-1 0", attached to petitioner's Amended Formal Offer of Evidence filed on July 4, 2022. 41 Stipulated Issue, JSFI, Docket- Vol. III, p. 1464. 42 An Act Increasing the Excise Tax Rates Imposed on Alcohol and Tobacco Products, Amending for the Purpose Sections 131 , 141 , 142, 143, 144, 145 and 288 of the National Internal Revenue Code of 1997, As Amended, December 21, 2004.

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue and price. Lastly, respondent maintains that the exemption granted to petitioner is not absolute, and to sustain petitioner's misguided and self- serving interpretation of its franchise provisions would ultimately convert the conditional exemption to one that is absolute.

THE COURT'S RULING

The present Petition for Review is partly meritorious. Governing provisions for refund claims Sections 204(C) and 229 of the NIRC of 1997, as amended, read: SEC. 204. Authority of the Commissioner to Compromise/Abate and Refund or Credit Taxes. -The Commissioner may-

XXX

XXX

XXX

(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 ofthe tax or penalty: Provided, however, that a return filed showing an overpayment shall be considered as a written claim for credit or refund.

XXX

XXX

XXX

SEC. 229. Recovery ofTax 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, 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. (Emphasis supplied) \

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

The above-stated provisions are clear: within two (2) years from the date of payment of tax, the claimant must first file an administrative claim with respondent before filing its judicial claim with the courts of law. Both claims, however, must be filed within a two (2)-year reglementary period. Timeliness of the filing of the claim is mandatory and jurisdictional, and thus, the Court cannot take cognizance of a judicial claim for refund filed either prematurely or out of time. It is worthy to stress that, as for the judicial claim, tax law even explicitly provides that it be filed within two (2) years from payment of the tax "regardless of any supervening cause that may arise after payment. "43 Moreover, the foregoing prov1s10ns allow the recovery of taxes erroneously or illegally collected. An "erroneous or illegal tax" is defined as one levied without statutory authority, or upon property not subject to taxation, or by some officer having no authority to levy the tax, or one which is some other similar aspect is illegal.44 Thus, for the present claim for refund to prosper, petitioner must not only establish that it has timely filed its refund claim, it must likewise prove that the subject excise taxes paid are "erroneous or illegal".

Petitioner

timely filed its administrative and judicial claims.

In the present case, it is already shown that petitioner paid excise taxes totaling P43,667,566.35 to the BOC on February 28, 2018.45 Counting from said date, petitioner had two (2) years, or until February 28, 2020, to file its administrative and judicial claims for refund, pursuant to the above-quoted prov1s10ns.

Petitioner's administrative claim for refund was filed on February 21, 2020 before respondent,46 while the judicial claim for refund was filed before this Court on February 28, 2020.47 Clearly, both administrative and judicial claims were timely filed within the two (2)-year prescriptive period. \

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

As to respondent's argument that he was not given the opportunity to ascertain the veracity and validity of the claim considering that petitioner filed the present Petition for Review on February 28,2020, or barely seven (7) days from the filing of the administrative claim for refund on February 21, 2020, allegedly rendering the Petition for Review dismissible, it should be noted that the law only requires that an administrative claim be priorly filed, to give the BIR an opportunity to act on said claim at the administrative level. In other words, for as long as the administrative claim and judicial claim were filed within the two (2)-year prescriptive period, then there was exhaustion of administrative remedies.48 The taxpayer need not wait for respondent to act on the administrative claim for refund.49 Petitioner was able to prove that there was an erroneous or illegal excise tax which was collected by the government but only to the extent of ?27,275,640.48 of the excise taxes being claimed for refund.

Petitioner anchors its claim for refund of erroneously paid excise taxes on its exemption from payment of such taxes pursuant to P.D. No. 1590. Respondent argues that Section 131 of the NIRC of 1997, as amended by R.A. No. 9334, reveals the unmistakable intent of Congress to withdraw the conditional tax exemptions granted to petitioner under Section 13 ofP.D. No. 1590. On the other hand, petitioner contends that, despite the passage of R.A. No. 9334, its tax exemption under P.D. No. 1590 remains unamended. From the foregoing, in order to determine whether there was indeed erroneously paid excise tax, the issue on petitioner's exemption from excise taxes must first be settled.

Petitioner 's exemption (rom payment of excise taxes on importations of alcohol and tobacco products under P.D. No. 1590 was not repealed by R.A. No. 9334 We agree with petitioner that it remains to be exempt from payment of excise taxes on its importation of alcohol and tobacco products for use in its transport operations. \ ' 48 Commissioner of Internal Revenue vs. Univation Motor Philippines, Inc. (formerly Nissan Motor Philippines, Inc.), G.R. No. 231581 , April10, 2019. 49 !d.

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

The Supreme Court has already settled the matter. In Commissioner of Internal Revenue, et al. vs. Philippine Airlines, Inc., 50 the Supreme Court held:

This issue is not novel. Thus, as in previous cases resolving the same question and involving substantially similar factual backgrounds, the ruling will not change.

In the fairly recent case of Commissioner of Internal Revenue and Commissioner of Customs v. Philippine Airlines, Inc., 51 the core issue raised was whether or not PAL's importations of alcohol and tobacco products for its commissary supplies are subject to excise tax. This Court, ruling in favor of PAL, held that:

It is a basic principle of statutory construction that a later law, general in terms and not expressly repealing or amending a prior special law, will not ordinarily affect the special provisions of such earlier statute. So it must be here. Indeed, as things stand, PD 15 90 has not been revoked by the NIRC of 1997, as amended. Or to be more precise, the tax privilege of PAL provided in Sec. 13 of PD 1590 has not been revoked by Sec. 131 of the NIRC of 1997, as amended by Sec. 6 of RA 9334. We said as much in Commissioner of Internal Revenue v. Philippine Air Lines, Inc. [G.R. No. 180066, July 7, 2009, 609 Phil. 695]: That the Legislature chose not to amend or repeal [PD] 1590 even after PAL was privatized reveals the intent of the Legislature to let PAL continue to enjoy, as a private corporation, the very same rights and privileges under the terms and conditions stated in said charter. x x x To be sure, the manner to effectively repeal or at least modify any specific provision of PAL's franchise under PD 1590, as decreed in the aforequoted Sec. 24, has not been demonstrated. And as aptly held by the CT A en bane, borrowing from the same Commissioner of Internal Revenue case:

While it is true that Sec. 6 ofRA 9334 as previously quoted states that 'the provisions of any special or general law to the contrary notwithstanding,' such phrase left alone cannot be considered as an express repeal of the exemptions granted under

PAL's

franchise because it fails to 50 G.R. Nos. 215705-07, February 22,2017.

51 G.R. Nos. 212536-37, August 27, 2014.

\

CT A Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue specifically identify PD 1590 as one of the acts intended to be repealed. x x x Noteworthy is the fact that PD 1590 is a special law, which governs the franchise of PAL. Between the provisions under PD 1590 as against the provisions under the NIRC of 1997, as amended by 9334, which is a general law, the former necessary prevails. This is in accordance with the rule that on a specific matter, the special law shall prevail over the general law, which shall be resorted only to supply deficiencies in the former. In addition, where there are two statutes, the earlier special· and the later general - the terms of the general broad enough to include the matter provided for in the special - the fact that one is special and other general creates a presumption that the special is considered as remaining an exception to the general, one as a general law of the land and the other as the law of a particular case. Any lingering doubt, however, as to the continued entitlement of PAL under Sec. 13 of its franchise to excise tax exemption on otherwise taxable items contemplated therein, e.g., aviation gas, wine, liquor or cigarettes, should once and for all be put to rest by the fairly recent pronouncement in Philippine Airlines, Inc. v. Commissioner of Internal Revenue. In that case, the Court, on the premise that the 'propriety of a tax refund is hinged on the kind of exemption which forms its basis,' declared in no uncertain terms that PAL has 'sufficiently prove[ d]' its entitlement to a tax refund of the excise taxes and that PAL's payment of either the franchise tax or basic corporate income tax in the amount fixed thereat shall be in lieu of all other taxes or duties, and inclusive of all taxes on all importations of commissary and catering supplies, subject to the condition of their availability and eventual use. x x x In the more recent consolidated cases of Republic of the Philippines

v. Philippine Airlines, Inc. (PALY 2 and Commissioner of Internal Revenue

v. Philippine Airlines, Inc. (PAL), 53 this Court, echoing the ruling in the abovecited case of CIR v. PAL, held that:

In other words, the franchise of PAL remains the governing law on its exemption from taxes. Its payment of either basic corporate income tax or franchise tax - whichever is lower - shall be in lieu of all other taxes, duties, royalties, registrations, licenses, and other fees and charges, except only real property tax. The phrase 'in lieu of all other " G.R. Nos 209 :::e 5 :. ::::~::,:ut is not limited to taxes, duties, charges\

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue royalties, or fees due on all importations by the grantee of the commissary and catering supplies, provided that such articles or supplies or materials are imported for the use of the grantee in its transport and nontransport operations and other activities incidental thereto and are not locally available in reasonable quantity, quality, or price. On July 1, 2005, Republic Act No. 9337 (RA 9337) took effect thereby further amending certain provisions of the NIRC. Section 22 ofRA 9337 specifically provides as follows:

SEC. 22. Franchises of Domestic Airlines. - The provisions of P.D. No. 1590 on the franchise tax of Philippine Airlines, Inc., R.A. No. 7151 on the franchise tax of Cebu Air, Inc., R.A. No. 7583 on the franchise tax of Aboitiz Air Transport Corporation, R.A. No. 7909 on the franchise tax of Pacific Airways Corporation, R.A. No. 8339 on the franchise tax of Air Philippines, or any other franchise agreement or law pertaining to a domestic airline to the contrary notwithstanding:

(A) The franchise tax is abolished;

(B) The franchisee shall be liable to the corporate income tax;

(C) The franchisee shall register for value-added tax under Section 236, and to account under Title IV of the National Internal Revenue Code of 1997, as amended, for value-added tax on its sale of goods, property or services and its lease of property; and (D) The franchisee shall otherwise remain exempt from any taxes, duties, royalties, registration, license, and other fees and charges, as may be provided by their respective franchise agreement.

Thus, this Court held in the abovecited PAL consolidated cases: However, upon the amendment of the 1997 NIRC, Section 22 of R.A. 9337 abolished the franchise tax and subjected PAL and similar entities to corporate income tax and value-added tax (VAT). PAL nevertheless remains exempt from taxes, duties, royalties, registrations, licenses, and other fees and charges, provided it pays corporate income tax as granted in its franchise agreement. Accordingly, PAL is left with no other option but to pay its basic corporate income tax, the payment of which shall be in lieu of all other taxes, except VAT, and subject to certain conditions provided in its charter. It bears to note that the repealing clause ofRA 9337 enumerated the laws or provisions of laws which it repeals. However, there is nothing in the repealing clause, nor in any other provisions of the said \

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue law, which makes specific mention of PD 1590 as one of the acts intended to be repealed. (Emphasis supplied) The foregoing jurisprudential pronouncements were reiterated by the Supreme Court in the later case of Philippine Airlines, Inc. vs. Commissioner of Internal Revenue, et seq., 54 to wit:

PAL's tax liability was also modified on July 1, 2005, when Republic Act No. 9337 further amended the National Internal Revenue Code. Section 22 of Republic Act No. 9337 abolished the franchise tax and subjected PAL to corporate income tax and to value-added tax. Nonetheless, it maintained PAL's exemption from "any taxes, duties, royalties, registration, license, and other fees and charges, as may be provided by their respective franchise agreement."

XXX

XXX

XXX

Again, in Commissioner of Internal Revenue v. Philippine Airlines, Inc., 55 this Court maintained that despite these amendments to the National Internal Revenue Code, PAL remains exempt from all other taxes, duties, royalties, registrations, licenses, and other fees and charges, provided it pays the corporate income tax as granted in its franchise agreement. It further emphasized that no explicit repeals were made on Presidential Decree No. 1590.

Thus, Presidential Decree No. 1590 and PAL's tax exemptions subsist. xxx. (Emphasis supplied) Accordingly, despite the enactment and effectivity of R.A. No. 9334, amending Section 131 of the NIRC of 1997, petitioner's tax exemptions subsist.

It must be emphasized, however, that petitioner's tax exemptions are not without conditions.

As can be gleaned from the above-quoted rulings of the High Court, petitioner remains exempt from taxes, duties, royalties, registrations, licenses, and other fees and charges, provided it pays corporate income tax as granted in its franchise agreement; the payment of which shall be in lieu of all other taxes, except VAT, and subject to certain conditions provided in its charter.

In addition to the payment of the corporate income tax, Section 13(b )(2) of P .D. No. 1590 enumerates certain conditions that petitioner must comply 54 G.R. Nos. 206079-80 and 206309, January 17, 2018. 55 G.R. Nos. 215705-07, February 22, 2017. \

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue with, in order to be exempt from excise tax for its imported alcohol and tobacco products, to wit:

SECTION 13. XXX

XXX

XXX

XXX

The 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:

XXX

XXX

XXX

(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; xxx (Emphasis and underscoring supplied) In sum, on the basis of jurisprudence and the foregoing provision, the following conditions must be fulfilled by petitioner for it to be exempt from excise tax on its importation of alcohol and tobacco products, to wit: ( 1) payment of the corporate income tax;

(2) the said supplies are imported for the use of the franchisee in its transport/non-transport operations and other incidental activities;56 and,

(3) they are not locally available in reasonable quantity, quality or price. 57 We now proceed to evaluate petitioner's compliance with the above- mentioned conditions. \ 56 Commissioner of Internal Revenue, et al. vs. Philippine Airlines, Inc., G.R. Nos. 215705-07, February 22, 2017; Commissioner of Internal Revenue, eta/. vs. Philippine Airlines, Inc., G.R. Nos. 212536-37, August 27, 2014.

57 !d.

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

First

condition:

Petitioner

paid corporate income tax for calendar years (CYs) 2013 to 2017.

To prove its payment of its corporate income taxes for the covered years, petitioner presented in evidence its Original/ Amended Annual Income Tax Returns for CYs 2013 to 2018.58 Such being the case, petitioner has fulfilled the said .first condition.

Parenthetically, petitioner further proved that it is a VAT-registered entity, that it paid the annual registration fee and VAT on its sales/receipts as evidenced by its BIR Certificate of Registration, 59 BIR Payment Form No. 0605 for CYs 2013 to 201860 and 3rd Quarterly VAT Return for CY 2013 to 4 th Quarterly VAT Return for CY 2018.61 Second condition: Subject articles are imported for the use of petitioner in its transport operations.

Petitioner likewise fulfilled the second condition. The imported articles were described as "lnflight Materials " or "Catering Materials" under the column "Description of Articles" in the IIDE.62 Moreover, as indicated in the ATR1Gs63 issued by the respondent addressed to the Commissioner of Customs, it was stated that" .. . the shipment to be released at the port of Ninoy Aquino Int 'l Airport/Port of

Manila/Mindanao

Container

Terminal/Manila

Int 'l

Container Port

consisting of the above described articles, will be used exclusively For International Inflight Consumption Only xxx". Clearly, the imported articles are for the use of petitioner in its transport operations. \,

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

Third condition: Petitioner was able to prove that certain imported articles were not locally available in reasonable quantity, quality or price.

To support its claim, petitioner presented several documents, which includes BOC IIDE,64 Air Waybills/Airway Bills or Bills of Lading/Sea Waybills, 65 ATR1Gs,66 lnvoices,67 Table of Comparison,68 Absolute Sales Corporation 2013 to 2015 Price Lists,69 Future Trade International inc. Price Lists for 2013 to 2017,7° Minivan Enterprise Price Lists for 2013 to 2017,7 1 AB Heineken Philippines, Inc. 2016 and 2017 Price Lists,72 BIR Revenue Memorandum Circular (RMC) No. 90-2012 with annexes/3 Bangko Sentral ng Pilipinas (BSP) Peso per US Dollar Rate (2013-2017),74 and BSP US Dollar Rates of Selected Currencies. 75 In the Judicial Affidavit of Ms. Capinpin, 76 she explained that, for alcohol products, she compared the local prices based on the prices provided by Absolute Sales Corporation (ASC), Future Trade International, Inc. (FTII), Minivan Enterprise (MEnt), Heineken Philippines, Inc. (HPI) and the prices listed in BIR RMC No. 90-2012 against the importation costs based on the actual product value. She then concluded that it is cheaper to import the alcohol and tobacco products than to purchase them locally. We quote: 7.

Q: As the Manager of the In-flight Materials Purchasing Division, why would PAL import said supplies instead of just buying them for the local sellers of similar products?

A: PAL imported catering and commissary supplies, such as, alcohol, liquor, and tobacco products because the cost of said products, when imported, are cheaper compared to those locally \ --------------------

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue available. Said products are not available locally in reasonable quantity, quality, or price.

8.

Q: Why do you say that importing the said catering and commissary supplies are cheaper and reasonably priced than purchasing them locally?

A: I have compared the local prices and the importation cost for the alcohol, liquor, and tobacco products. Upon comparison of these prices, it is easily determinable that importing these products are way cheaper than purchasing them locally.

9.

Q: How do you compare the local prices and importation costs? A: I have prepared a Table of Comparison, comprised of different prices from local suppliers when purchased abroad, to show the complete comparison of prices for the alcohol, liquor, and tobacco products imported by PAL for the period July 2013 to July 2017.

XXX

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XXX

13.

Q: You mentioned that you compared the local prices and the importation costs for the alcohol products. What documents did you use in comparing these prices?

A: For alcohol products, I used the following as my sources of local pnces:

1.

Absolute Sales Corporation 2013, 2014, and 2015 Price Lists;

11. Future Trade International Travel Retail for 2013, 2014, 2015, 2016, and 2017 Price List;

iii. Minivan Enterprise 2013, 2014, 2015, 2016 and 20 17Price Lists;

iv. Heineken Philippines, Inc. 2016 and 2017 Price Lists; and

v. Bureau of Internal

Revenue's ("BIR") Revenue

Memorandum Circular ("R.M.C.") No. 90-2012 Price List.

For the importation costs, I used the actual product value as shown in the sales invoice issued by PAL's suppliers, product value as shown in the Authority to Release Imported Goods ("A TRIG"), and Product Value as shown in the Informal Import Declaration Entry ("IIDE").

For tobacco products, I used BIR R.M.C. No. 90-2012 Price List as source of local prices. For importation cost, I used actual product value as shown in the sales invoice issued by PAL's suppliers, product value as shown in the A TRIG, and Product Value as shown in the IIDE. \

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

XXX

XXX

XXX

31.

Q: How do you compare the local prices and importation costs using the documents you just mentioned and identified? A: In using the pricing costs of several documents, it can be seen that the cost of importing goods is way cheaper than purchasing them locally. (Emphasis supplied) Essentially, petitioner is claiming that it has determined local prices based on five (5) price lists (i.e., ASC, FTII, MEnt, HPI, and RMC No. 90- 2012).

At the outset, records show that, on February 28, 2018, petitioner paid under protest77 the excise taxes on its importations of alcohol products and cigarettes for the period July 2013 to July 2017 in the total amount of P43,667,566.35 evidenced by BC Form No. 38-A with OR No. 01889898427.78 This amount was corroborated by the related IIDE/9 Airway Bills/Bills of Lading,80 ATRIGs,81 and Sales Invoices, 82 which were identified by petitioner's witnesses, Ms. Capinpin, Manager of petitioner's In-flight Materials Purchasing Division, in her Judicial Affidavit dated March 19, 2021,83 and Mr. Castillo Lee, Manager for petitioner's Company Materials Handling Division, in his Judicial Affidavit dated March 19,2021,84 with the pertinent details summarized as follows:

Arrival

Date

Table I: Summary of Excise Taxes Paid Under Protest and the Pertinent Supporting Documents

I IIDE

II

Air Waybill/Bill of [

I

;

Value

!I

Excise Taxes Paid

:

· A TRIG No.

I

Description

Under Protest

· No.

i Lading No.

· 1

(In USD)

I

(In PhP)

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

Table I; Summary of Excise Taxes Paid Under Protest and the Pertinent Supporting Documents

Arrival TIDE Air Waybill/Bill of

Date No. Lading No.

Excise Taxes Paid

Under Protest

In PhP)

Value

ATRIG No. Description (In USD)

_|_Hardy’s Stamp Reis

48,514.24 {22082030000 _| [22030090000 [22042911000 [22085020000 378,764.10 ~_079-4334-0640 079-4222 -2924

WG00496813

— oe oo = . a2, | Beringer California Charda

_|_22082020000 | JW Double Black La 1

160-6757-0580 | 22082020000

WG00S02026 | 22082030000

"22030090000 | {22082030000

04/16/2017_| 1822 | BQFGAUA70287__|_ 22042911000 _|

10/04/2019 | 6058 | BOEGEGS012402 | 22082030000 | Remi Martin

| | 22082030000 | Charles Heidsie

LE 22082030000 | Russian | Vodka Sti

| 22082030000 22042911000 22082030000 22082030000 22082030000 Chivas Regal Whisky _ . i i Royal Salute Whisky __ _ ( 209,094.43 ieux Sabadie _ 72047911000 [22042911000 | 22083020000 7

~ 22083020000 = Walker Blue Slin

22030090000 | Asahi Super Dry- -Beer ——

22082030000 | Johnnie Walker Black Label_

22082030000.

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

Table I: Summary of Excise Taxes Paid Under Protest and the Pertinent Supporting Documents . k a Excise Taxes Paid | Arrival TIDE Air Waybill/Bill of ATRIG No. Description Value y Under Protest Date No. Lading No. Se | (In USD) In PhP 09/30/2016 | 5607. 079-4257-1244 22042911000. | | __ 4433. 42 | 37,968.75 2.

"22042911000 22042911000 pees | 22085020000 | —_—— | 22042911000 "4675 | HLCULEI160535384 22042911000

2204291 ‘1000_| Chateau Haut Sociondo 201¢

Chateau ‘Haut Rozier

22082030000 | Camus XO Elegance

J 22082030000 | Hennessy VSOP

22030090000 _| Asahi Super Dry-Beer

11,266.03 128,288.16 “22030090000 079-4056-4731 22030090000 | 3,072.00

079-4056-4731 | 2 22030090000 | Heineken Beer_

Beringer California Chard ay Camus Cognac. xO Elegance

~ 22082030000 | Johnnie Walker Black Label

22082030000 | Stolichnaya Gold 70cl 22082030000 f Johnnie Walker Double Black Label_

22082030000 | Johnnie Walker Black Label _

— Siruela Roble =

‘Yegua Ro Roja Red Wine ___.079- 3809. 1981 079-3809-1966 “a 687.50

Bottega Sparkling |

Gordon’s Gin.

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

Arrival

IIDE \ Air Way. bill/Bill of 1, ATRIG No.

D

. .

I

Value

!

I

escnphon 1 '

Date

No.

1 Ladmg No.

i ! (In USD) j \

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

Table I: Summary of Excise Taxes Paid Under Protest and the Pertinent Supporting Documents

Air Waybill/Bill of Excise Taxes Paid

Lading No. Description Under Protest 22082030000 _ “T"22030090000 22042911000 8,013.83 9,216.00 08/02/2015 _| 04/01/2016 ~ Camus ; Cognac XC

Camus VSOP Elegance

Johnnie Walker Black Label

Ze Yegua Roja Red Wine

__| 22082030000 | Patron Silver Tequill

| 22082030000 i | Hennessy SOF 079-4218-0460 a + 079-4257- 1093. \ 2204291 1000 22083020000 22083020000

J&B Rare Scotch \

“22085020000 Gordon’ s Gin 22030090000 22082030000 | 22042911000 22030010000.

22042911000 | Ye;

“22082030000 22082030000 “Hennessy VSOP _

Heineken Beer

12/17/2016.

12/07/2016 220429 11000 22042911000 22042911000 “22042911000 22042911000 "22042911000 | 22042911000 Yegua Ro koja Red Wine

Rawson Private Releas

CT A Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

Table I: Summary of Excise Taxes Paid Under Protest and the Pertinent Supporting Documents

Arrival

Date

IIDE

1 i Excise Taxes Paid Air Wa~biiVBill of I A TRIG No.

Description

Value

1 U d

P

t No.

Ladmg No.

!

,I (In USD) i n er rotes , 1

(In PhP)

1 06/14/2016 In order to show that the imported wine and liquor products were not locally available in reasonable quantity, quality or price, the cost per unit of importation was compared against the prices provided by the ASC,85 FTII,86 \

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

MEnt,87 HPI. 88 With regard to the prices provided in RMC No. 90-2012, considering that the prices therein were based on the 2010 BIR price survey of alcohol and tobacco products, there can be no valid comparison between the prices of petitioner's imported alcohol and tobacco products for July 2013 to July 2017 and that of the said 2010 price survey; thus, the prices in RMC No. 90-2012 were no longer considered in the price comparison. In Table II, we summarize the computed purchase price of the imported products on a per unit basis:

Description

Table II: Computation of Purchase Price Per Importation (Per Unit)

Excise Taxes Paid

Under Protest

(In PhP)

87 Exhibits "P-46-h" to "P-46-1".

88 Exhibits "P-46-m" to "P-46-n".

.. ?.?.:.~.; ··~- 26.3 26.32

Total

Purchase

.j

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

Table IT: Computation of Purchase Price Per Importation (Per Unit) a wart ' Ave. Purchase | F Total Excise Taxes Paid | Vile f Price per Ave. Excise Purchake

Under Protest | Can/Bottl Tax per Price P

an/Bottle Product rice Per

(in PhP) Importation

Description

Preignes Le Vieux

Cabernet Sauvignon

Madison Sabadic

Rawson Private

Release Shiraz

48,433.95 12,636.00 1,800.00 eT) han nnn Aa { 49.8626 | 49,9614 11,448.33

Russian Vodka

| standard Original

Charles Heidsieck Brut

40] 1,300.32 | nmssansetsredesonenaneqornrenteessnen + 31,208.80 . . : enmnernnnnd 26,81 | 7,843.2

Sabadie 14400

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

Table IT: Computation of Purchase Price Per Importation (Per Unit) Excise Taxes Paid Ave. Purchase | Gove, | Ave-Purchase | 4). price Total Description Vader Provast Value Price per Can/ a si Price per Tax “ Purchase |

(In USD) Can/Bottle P

50.2752_

J&B Rare Scotch

Whisky al 21,781.42 | 2,350.00 ~Gordon’s Gin 7,090.55 75.00 |

Rawson Private

Release Shiraz _ ma 75,937.50 | 11,448.33 | wideineken Beer | 109,961.28 | 9,216.00

Gold Prosecco Spum

|_ Bottega | .92054,72 427.57 | 12

Rose Gold Spumante

BOC GE ccunmenfnmeennnenneed D2 193,12 | 1,285.16 | 24 Chivas Regal Whisky | 31,450.31 | 3,921.60) 240 Johnnie Walker Blue i 7 Pita TT enema 93487,25 | 8,664.50) TSS Asahi Super Dry-Beer 128,288.16 | 11,266.03 | 16800 |

Johnnie Walker Black

2 nnn 1238.90 | 3,684.24 | 204

Johnnie Walker Double

22). 2 on 51,188.56 | 6,450.00 | 300 |

Hardy’s Stamp

| Reisgwtz Row Pe 37,968.75 | 4,433.42 | 1500

Johnnie Walker Black

Label (Genex) =| Ee 85,508.57}. 9,048.00 | 1440.

J&B Rare Scotch

IIS Ym en APB TS | 22350.00 ne 600 I nmmnenmnnnd? 22m 44136

Rawson Private

Release Sir az dn 83;531,25 |.

Hardy’s Stamp

Reisgwiz Row eh eed 8,949.75

Lindemans Premier

Shiraz Cabernet 75,937.50 | __9,023.98 Cabernet Sauvignon). 88,087.23 _ 18,225.40 Merlot Rogue 2015 | 45,562.38 21,780.46 | 2,090.24 nnn $3,99.1,85 af senenk TD | 46.2845 128.96 as 25.42 mmm d 4-37, surnam 952987,74_| 40,120.63 | | 2.79 | 46,2845 | 25.42 154,37 119,020.41

Chateau Le Grand

Moulin Cotes =

Chateau Haut Sociondo

2014 4,427.28 (79,164.16 |

Rawson Private

Release Saaz mmm dt 108.75

Hardy’s Stamp

Reisgwiz Row

CT A Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

Description

Table II: Computation of Purchase Price Per Importation (Per Unit)

Excise Taxes Paid

Under Protest

(In PhP)

A

Value

(In USD)

B

I Ave. Purchase Ave. Purchase

Bottles

.1

Conver-

/Cans

....... [ !

Total

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

Table IT: Computation of Purchase Price Per Importation (Per Unit) | Ave. Purchase ae | Ave. Purchase A aN CIRE Total | Value Price per Can/ iin | Price per Tax “i Purchase

| (In USD) | P Price Per

i i ate Product

Excise Taxes Paid

Under Protest

(In PhP)

Description

i 49.9509 |

| Elegance

7,488.00 1 1560 5,550.00 | Lindemans Premier i Shiraz Caberne 50,368.06 | 8,880.00 | 2400 | 3:10 | 43.5546, 161.15 1 20.99 | 182.14 | Release Snirag al 65,988.00

Camus Cognac XO

i Queen Adelaide Cab.

auvignon . 14,550.00 288.16 | 11,266.03 | 7,380.00 | 3,095.06 | 22,559.30 | 4,489.20 | 24.94 | ~ 3,370.93. 670.80 118 | 41,322.67 | 9,417.0 [180 2:

1 Beringer California

Chardonnay al i_Wolf Blass Eaglehaw!

|_ 1875.00 | __2100 31,500.00 | 12600 804.96

Reisgwtz Row

1,483.19 ooyonorsewtssrssssteveouesrororeoseranaseeesmnstasesseeetnarscogeerteesosetenssssnennafneepgennnnneserseenenereconsssnee svvnnemmvoncessssacssssssclossssssssssssessserseseessnnvsevenssenenronenenegenseedeonerensanessgessssnsssseniter foe veneseens400ePePBDEISUSO

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

Table IT: Computation of Purchase Price Per Importation (Per Unit) i F . i Ave. Purchase _ | Ave. Purchase . Total ! Description gine Rary soy Value | Bottles | Price per Can/ op vy Price per sr i Purchase (In USD) | /Cans Bottle Can/Bottle | pat sae Price Per | __Gn USD) ___QnPhP) . -.

Cc = peel i 3,173.40 | 1,238.40 |

Rawson Private

Release Shiraz

Scotch Whisly

Rawson Private

es morro a doers neterrot eo seer lifer eer ese ssereset tt erwer waver Waereeresvereerenes rs Uoerine nerWaneel 51,108.75 i depeleties Shiraz

| Heineken Beer

— = 24,243.52 | 10800 28,284.10 12600 |

Martini Sweet /Dry

eM CTOUED mm ns 5,451.60 | 17,640.00 | | 1680. |

Beringer California

DATION BY 14,602.50 | = 2,250.00 |! 600

Johnnie Walker Double |

BLACK CAN nef O2299:12 | 632100 fn 300 |

| Johnnie Walker Black

a — $7,165.52 | __7,193.04 | 408 | [Louis Royer XO 700mi_ Se | 60 |

Camus Cognac XO°

NCBA CE enn | 26,028.95 | 2,507.76 | 54

| Camus VSOP Elegance

DUO PACK annnnfemmnnend 12673,98 | 1,702,801 120 |

Johnnie Walker Black

26,280.00 | 12000 | 6,963.89 | 10800 8,013.83 | __2100 ll 9,023.98 |... 30!

BIS KY mmmnenennf ened 4,670.69 | 2,012.40 OO 9 afm 47.0581 | 1578.33 |

Chivas Royal Salute

14,783.54 47.0581 P.

(Hemesy VSOP

1,568.01 1,769.33 | 1,827.67

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

Description

Excise Taxes Paid

Under Protest

(In PhP)

Table IT: Computation of Purchase Price Per Importation (Per Unit) Ave. Purchase | (1), | Ave. Purchase Ave. Excise Total Price per Can/ ; Price per * Purchase | sion Tax per | = Can/Bottle Product i Price Per SD) enieeneneefeoedl PAP) - rehnnie ia Double Black Lae dn 0,849.12 | 5,056.8

Johnnie Walker Black

ao ol nnn 32925,92 | 2,961.

Lindemans Premier |

_Shiraz Cabernet. \. ao! _75,937.50 _ |_Asahi Super Dry-Beer ae 288.16 | 11

Beringer Se

15,187.50 | “J&B Rare Scotch

Whisky _

Johnnie Walker Double |

_Black Label

46.1420_ 3 44.9831 3 | 46.3609 | 47.0581

Rawson Private

Release Shiraz

Johnnie Walker Double

Black Label

5,118.72 2,477.49 1,702.80 1,318.66 | |..28,704.19

Rawson Private

| _24,137.62_|

Release Shiraz

Rawson Private

_Release Shiraz

2820

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

Table IT: Computation of Purchase Price Per Importation (Per Unit) j Excise Taxes Paid j Ave. Purchase Ave. Purchase Ave. Excise Total Description | Under Protest Value Bottles Price per Can/ oul Price per Tax or Purchase

(In USD) /Cans Bottle Can/Bottle P Price Per

(In PhP)

318,937.50 | pevssnsecsssessessonstatsnsentonssatessectnrvonnneeradtosemenerennressnsesonsnvassensuntesesssssssisinesestest nd i le riot __Shiraz Cabernet | 75,937.50 | Remi Martion 22,420.79

Russian Vodka

| Standard Original L 42,143.88 | Charles Heidsieck Brut newwnend33 06,865.48 |

J

[Gordon’sGin | 6,755.12 JW Blue Label Scotch 12,869.15

JW Double Black

_ Label

a 364,499.95 |

Preignes Le Vieux

379,080.00 | 82,470.96

AOC Medox

Hennebelle Red 42,563.71 | _9,867.07 | 1200 | 8.22 | 47.6361 523 | 47.6361 | 249.26 22.57. | 271.83 ~QAC Blaye | nnn 39,299.38 | 32,292.22. | s400_ AT BART. 25.80 } 310.66

Louis Royer XO_

Ballantines Scotch

44.2214 47.0303. |

Black Label

travepneevertetnerneerienrnenrennenrenennna iain

JW Black Label

" CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue Table IT: Computation of Purchase Price Per Importation (Per Unit) . ‘ Ave. Purchase Ave. Purchase . Total Description Sayan Value Bottles | Price per Can/ Gere Price per axe ROO Purchase Under Protest sion Tax per :

(In PhP) (In USD) Rate Can/Bottle Product Price Per he ee SS ee : _(in PhP Importation 'Ballantines21YO. | | Scotch Whisky 0 |. 19,041.05 | __2,559.36

Ballantines 17YO

Scotch Whisky 23,954.87 3,219.84 Using the purchase price per importation computed in Table I above, we now compare said prices with the prevailing prices of the products at the time of importation based on the periodic price lists (covering 2013 to 2017), as applicable, to wit:

i |

Arrival Date | Description

Excise Tax Paid

Under Protest

. Price Per Table III: Comparison of Purchase Price Per Importation Against Local Suppliers’ Price List

Purchase

ASC

Importation Exhibits “P-

(Table Il)

02/25/2015 _| er

Exhibits “P- | Exhibits “P-

Local Price per Price Lists

FTI HPI i { | i

MEnt |

Exhibits “P-46- i i i - 46-m” to “P- 10/24/2015 |

Johnnie Walker Double Black

Label/ Johnnie Walker Black

01/13/2016 01/20/2016

Preignes Le Vieux Cabernet

02/14/2017__| Sauvignon

oe LS — 183,853.83 nnnmnt S293. | aon | None

Arrival Date

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

Table Ill: Comparison of Purchase Price Per Importation Against Local Suppliers' Price List

Description

1 '!,!

Purchase

1- 1 ----::-:--.--L""=oc=a"'=l :=-P.:..;ric:.ce.:,-.:.pe::..:r-'P'::.:r::':ic::..:e_;L::c:i:=-stT-s--------1

Excise Tax Paid

ASC

FTII

'

HPI

\ 1

Price Per

, i .

MEnt

Under Protest

I,

Importation

',·

Exhibits "P-

Exhibits "P-

i Exhibits "P-

Exhibits "P-46-

(In PhP)

46" to "P-

46-c" to "P- i 46-m" to "P- i

(Table II)

46-b" 46_ ..

i 46_,..

i h" to "P-46-1" A~a.:hi _~.l:IP ~r. .RI.Y:I?..~~r.-.... __ _

Johnnie Walker Black Label

............................................................................. ~ ................. .

None

None

.. .............. N2ri~ . E9~~ 1::

................................ t!s>J:l.~ .. !

Arrival Date

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

Table III: Comparison of Purchase Price Per Importation Against Local Suppliers' Price List

Description

MEnt

Arrival Date

CT A Case No. I 0263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

Table III: Comparison of Purchase Price Per Importation Against Local Suppliers' Price List

I

Purchase

I

Local Price per Price Lists

Excise Tax Paid

ASC

FTII

I

HPJ

I

Description

Under Protest

!

Price Per

; Exhibits "P-

Exhibits "P- I Exhibits "P-

·

MEnt

(In PhP)

I Importation

46" to "P-

46-c" to "P- i 46-m" to "P-

Exhibits "P-46-

(Table II)

46-b" i 46_ 11 " It " to uP-46-1"

None

None -~·--.... -.=.N ~~:::1:=:~--·~one

None

N~~~

~ None i ............................ - ............................ !

I

CTA Case No. 10263 Philippine Airlines, Inc, vs. Commissioner of Internal Revenue

Table III; Comparison of Purchase Price Per Importation Against Local Suppliers’ Price List

Purchase Local Price per Price Lists

MEnt

; a | Excise Tax Paid Price Per ASC FTI HPI | Arrival Date Description Under Protest Importation Exhibits “P. Exhibits pee Exhibits ae | Exhibits “P-46- i (In PhP) (Table 11) 46" to “P- 46-c” to “P- | 46-m" to “P- h’ to “P-46-1" 02/01/2015 | Asahi Super Dry-Beer i 37,380.00. + 36,55 i= 50.00 None None i None | 37,380.00 | 51,108.75 | "37,380.00 292,050.00 |

Beringer California |

Chardonnay i 49,140.00 Wolf Blass Eaglehaw 294,840.00

Private Release ‘

YO Sco

202.74 nw 5,579.84 | 1,827.67 | None _| nensneneoesonsenensenensnsnenesnnreriecunnerensusonsnngseneserynsnenereuaenserueatnsentnsnoenpnsrgpstnabecse Wolf Blass Eag | __ 306,652.50 _ ; = None | k

Wolf

cae 18,721.72 109,961.28 82,470.96 "53,156.25

I

Arrival Date

i

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

Table Ill: Comparison o• Purchase Price Per Importation Against Local Suppliers' Price List

Purchase

Local Price per Price Lists

Excise Tax Paid

Price Per

ASC

FTII

HPI

I

Description

Under Protest

Exilibits "P-

Exhibits "P-

Exhibits "P-

(In PhP)

Importation

46" to "P-

46-c" to "P- 46-m" to "P-

(Table II)

46-b" 46-!!"

46-11"

Lindemans

Premier

Shiraz 1

' !

!

I

MEnt

Exilibits "P-46-

II " to "P-46-1"

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue portation Against Local Suppliers’ Price List

Porchase Local Price per Price Lists

Excise Tax Paid A ASC FTI HPI

, -— i Price Per MEnt | Arrival Date | Description Under Protest Impartufion Exhibits “P- | Exhibits“P- | Exhibits “P- | ps nine up_gg, (In PhP) P 46” to “P- 46-c" to “P- | 46-m" to “P- | oe p Seis 07/19/2016 "05/04/2016 "05/04/2016 | 06/14/2016 16,684.91 | il 15,890.39 ._JW Black Label . i 35,889.60 |

| Beringer

EE —— 15,187.50

California |

| ____ 12,150.00 | ‘=

Baron Duval

Sauvignon Red

Preignes Le Vieux Cabernet

Sauvignon

| | Camus

_.01/21/2016 Asahi Super Dry-Beer a | | 139,299.38 310,66 06/24/2016 _| [30,951.76 1,804.07 06/24/2016 | — 32,180.00 3,029.91 | | 25,509.69 976.89 4,147.37 | |_...02/19/2016._ |.

Ballantines 17YO

| Whis

2/19/201 11,516.76 "19,594.49 ~ 877,854.84

Russian

Original {60,151.83 | 242,287.16

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

While the above table of comparison is sufficient in determining whether the cost of importing commissary and catering supplies is lower than purchasing them locally, the determination is limited, however, with the imported wine and liquor products which can be compared with the local prices for the same brand or products. As regards to those imported wine and liquor products without comparative prices from Absolute Sales Corporation, Future Trade International Travel, Minivan Enterprise or Heineken Philippines, Inc., this Court finds that the lack of comparative prices from said establishments is not conclusive proof of the products' unavailability in the local market.

In fine, petitioner complied with the third condition, but only to the extent of the imported wine and liquor products that are supported by evidence showing that the cost per bottle of importing the same is lower than purchasing them locally from at least one supplier, to wit: Table IV: Summary of Imported Wine and Liquor Products with Comparative Prices [rom at Least One Local Supplier 0•••0 m••••••••~ •••••••••••••••••i 4' 1.50 i •••••••••.•..•.•..•...••..... Niiii~ ···l 579.00 i 579.00 i 451.50 !

e 579.00 !

\

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

Table IV: Summa

Arrival Date

Description

\

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue i Table IV: Summary of Imported Wine and Liquor Products with Comparative Prices from at Least One Local Supplier . : Local Price per Price Lists Roepe Jax ag Purchase Price | _ ASC FTi HPI MEnt Exhibits “P- Exhibits “P- Exhibits “P- Exhibits “P- | 46” to “P-46- | 46-c"to “P- | 46-m"to"P- | 46-h"to“P- | Arrival Date Description Under Protest ;

(In PhP) Per Importation |

15,937.50 [ a Chardonnay.

i Berin er iger Californi:

109,961.28 “L_P27,275,640.48 | Based on the foregoing, insofar as the excise tax paid on imported wine and liquor products, the above amount of ®27,275,640.48 constitutes erroneously paid excise tax which is refundable pursuant to Sections 204 and 229(C) of the NIRC of 1997, as amended.

As regards its importation of tobacco products, petitioner failed to offer supporting evidence through which the Court can verify the statement made by Ms. Capinpin in her Judicial Affidavit that the subject tobacco products are not locally available in reasonable quantity, quality or price. Petitioner failed to submit, at the very least, price lists of tobacco products which indicate the local market prices of the said products. The Court observes that only the price for West Full Flavor and West Lights listed on RMC No. 90-2012 were presented in the Table of Comparison.” As stated earlier, the prices listed in the said RMC were based on the 2010 BIR price survey of alcohol and tobacco products and, therefore, cannot be validly used for comparison since the present case involves importations for July 2013 to July 2017. Verily, the testimony of Ms. Capinpin, standing alone, is insufficient to ascertain whether the subject tobacco products were, indeed, not locally available in reasonable quantity, quality or price.

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

WHEREFORE, premises considered, the present Petition for Review is PARTIALLY GRANTED. Accordingly, respondent is ORDERED TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE, in favor of petitioner, in the amount of P27 ,275,640.48, representing the latter's erroneously paid excise tax on its importations of wine and liquor products for its international flight consumption.

WE CONCUR:

{On official business) MA. BELEN M. RINGPIS-LIBAN

MARIA

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

MARIA

CTA Case No. 10263 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution and the Acting Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the write of the opinion of the Court.

Presiding Justice