Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue

DECISION

RINGPIS-LIBAN, J :

The Case

The Petition for Review flied on June 09, 2020 prays for the refund and/ or issuance of tax credit certificate in the amount of Php29,252,140.00, allegedly representing petitioner's excise taxes paid on Jet A-1 fuel sold to tax-exempt international air carriers during the period April to May 2018. 1

The Facts

Petitioner Pilipinas Shell Petroleum Corporation is a corporation organized and existing under the laws of the Philippines with principal office at the 41 sr Floor, The Finance Center, 26th Street corner 9th Avenue, Bonifacio Global City, Taguig City 1634.~ Docket, Pre-Trial Order dated February 23, 2021, Summary of the case, p. 583.

Respondent is the duly appointed Commissioner of Internal Revenue who holds office at the Bureau oflnternal Revenue ("BIR") National Office Building, located at Agham Road, Diliman, Quezon City where he may be served with summons and other legal process. 3 On March 10, 2020, petitioner ftled a formal claim for refund or tax credit with the Excise Large Taxpayers Audit Division II of the BIR, seeking the recovery of excise taxes paid in April2018 on importations of Jet A-1 fuel sold to tax-exempt international air carriers for the period April to May 2018, in the aggregate amount of Php29 ,252, 140.00.4 Petitioner ftled the present Petition for Review on June 09, 20205 The case was initially raffled to this Court's Second Division. Respondent posted his Answer on September 14, 2020,6 interposing the following special and affirmative defenses: (1) Section 135 of the Tax Code does not automatically exempt from excise tax petroleum products sold to international carriers and exempt entities and agencies; (2) there is no provision in the Tax Code which provides that petitioner is entitled to a refund or the issuance of tax credit certificate for excise taxes paid on imported Jet A-1 fuel sold to international air carriers; and (3) petitioner is clearly asking for a refund or issuance of a tax credit certificate which the law itself does not clearly provide. The Pre-Trial Conference, which was initially set on November 23,2020,7 was cancelled, and reset to,8 and held on January 20, 2021.9 Prior thereto, the Pre-Trial Bnif for Petitioner was filed on January 05, 2021,10 while Respondent's Pre- Trial Brief was submitted on January 13, 2021l1 On February 18, 2021, the parties submitted their Joint Stipulation of Facts and Issues,12 which was approved and adopted by the Court in the Pre-Trial Order dated February 23, 2021,13 thereby deeming the termination of the Pre-Trial. /!""'

Trial ensued, with the parties presented their respective testimonial and documentary evidence.

Petitioner offered the testimonies of the following individuals, namely: (1) Mr. Matias D. Aquiatan, Jr.,14 Country Operations Manager for Shell Aviation Philippines of petitioner; (2) Ms. Farida Nimfa Guyala-Dimailig,15 Country Tax Manager of petitioner; (3) Mr. Rommel F. Guevarra, 16 Tenninal Operations Supervisor at the Tabango Depot of petitioner; (4) Ms. Berenice Angelique L. Flores,17 Tax Advisor for petitioner; (5) Ms. Carla Angelica T. Peralta,18 former Import and Export Scheduler for Trading and Supply of petitioner; (6) Atty. Walter L. Abela, Jr., 19 the Court-commissioned Independent Certified Public

Accountant ("ICP A") 20

The Report of the ICP A was submitted on May 21, 2021. 21 Petitioner filed its Formal O.ffir of Evidence with Manifestation on March 25, 2022. 22 Respondent submitted his Comment (on Petitioner's Formal O.ffir of Evidence) on March 29, 2022. 23 In the Resolution dated May 02, 2022,24 the Court admitted petitioner's exhibits.

For his part, respondent offered the testimony of Revenue Officer Ma.

Cecilia Tan25

On June 28, 2022, respondent transmitted the entire BIR Records for this case, consisting of 1085 pages, contained in one (1) folder~

On September 21, 2022, respondent flied his Formal Offer of EvidenceY Petitioner then flied its Comment [on Respondent's Formal Offer of Evidence dated September 21, 2022] on October 03, 2022.28 In the Resolution dated October 25, 2022,29 the Court admitted all of respondent's offered evidence. Respondent filed his Memorandum on December 09, 2022, 30 while the Memorandum for Petitioner was submitted on December 22, 2022.31 The present case was submitted for decision on January 16, 2023. 32

The Issue

The sole issue for this Court's resolution is as follows, viz.: "Whether or not petitioner is entided to the recovery of excise taxes paid for the period April 2018 on Jet A-1 fuel sold to tax-exempt international air carriers in the amount of Php29 ,252,140. 00. " 33 Petitioner's arguments:

Petitioner argues that it timely filed its administrative and judicial claims for refund pursuant to Section 229 of the National Internal Revenue Code ("NIRC") of 1997, as amended; that it is the statutory taxpayer under Section 135 of the Tax Code; that its sale of Jet A-1 fuel to international carriers is exempt from excise tax; that petitioner previously paid excise taxes on the Jet A-1 fuel sold to international carriers; that it sold the excise tax-paid Jet A-1 fuel to international air carriers free of excise tax; and that it is clearly en tided to a refund or the issuance of tax credit certificate for excise taxes paid on Jet A-1 fuel sold to international air carriers. Respondent's counter-arguments: Respondent contends that petitioner is not en tided to the refund claimed; that Section 135 of the Tax Code does not automatically exempt from excise tax ,IV' 27 Id., pp. 1132 to 1137.

28 Id., 1140 to 1142.

29 Id., pp. 1148 to 1149.

3o Id., pp. 1150 to 1160.

31 I d., pp. 1163 to 1187.

petroleum products sold to international carriers and exempt enuues and agencies; that there is no provision in the Tax Code which provides that petitioner is entided to a refund or the issuance of a tax credit certificate for excise taxes paid on imported Jet A-1 fuel sold to international air carriers; and that petitioner is asking for a refund or issuance of a tax credit certificate which the law itself does not clearly provide.

Discussion/Ruling

The present Petition for Review is pardy meritorious. Goveming 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 -

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(C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided, however, that a return filed showing an overpayment shall be considered as a written claim for credit or refund." (Emphasis added) "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, 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 ftled with the Commissioner; but such suit or proceeding may by 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." (Emphases supplied) The afore-quoted 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 this Court. Both claims must be flied 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 explicidy provides that it be filed within two (2) years from payment of the tax "regardless of any supervening cause that may arise after payment."34 Furthermore, the above-quoted provisions 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. 35 Thus, for the present claim for refund or tax credit certificate to prosper, petitioner must not only establish that it has timely filed its refund claim, it must likewise prove that the subject thereof is an "erroneous or illegal tax".

Petitioner

timely filed its administrative and judicial claims. For excise tax on imported articles, in general, the same is paid by the owner or importer upon importation and prior to removal thereof from ~ 34 Commissioner of Internal Revenue v. San Miguel Corporation, G.R. Nos. 180740 and 180910, November 11, 2019.

35 Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corporation, G.R. No. 188497, April 2S, 2012, citing the definition provided in BLACK'S LAW DICTIONARY, Fifth Edition, p. 486.

customshouse as provided in Sections 129 and 131 of the NIRC of 1997, as amended, to wit:

"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.

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xxx." (Emphasis and underscoring added) "SEC. 131.

Payment of Excise Taxes on Imported Articles.- (A) Persons Liable. - Excise taxes on imported articles shall be paid by the owner or importer to the Customs Officers, conformably with the regulations of the Department of Finance and before the release of such articles from the customshouse, or by the person who is found in possession of articles which are exempt from excise taxes other than those legally entitled to exemption.

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xxx."

(Emphasis and underscoring added) Thus, from the foregoing, the two-year period prescribed in Sections 204(C) and 229 of the NIRC of 1997, as amended, should be reckoned from the date of actual payment of excise taxes. In relation thereto, Section 131 (A) of the NIRC of 1997, as amended, provides that 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. Thus, the reckoning point of the two (2) year prescriptive period should be the date when the imported Jet A-1 fuel was released from the Bureau of Customs ("BOC"), which in this case was on April 26, 2018, as evidenced by Authority to Release Imported Goods ("ATRIG") 36 and Statement of Settlement of Duties and Taxes ("SSDT") 37 Counting two (2) years from April 26, 2018, petitioner had until April 26, 2020, to file its administrative and judicial claims for refund. Consequently, petitioner's administrative claim was timely filed on March 10, 2020/

As for petitioner's judicial claim for refund, the Court notes that within the period allowed by law to ftle the instant Petition for Review, the Supreme Court issued the following administrative circulars ordering the physical closure of courts and extending the filing of petitions and appeals, complaints, motions, pleadings, and court submissions in the National Capital Judicial Region and nearby provinces due to surge of Covid-19 cases, vi:::::

Administrative

Circular (AC)

No.

AC No. 31-2020 AC No. 34-2020 AC No. 35-2020

Date

Issued

16 March

2020

Subject Matter/Content

Re: Rising Cases of Covid-19 Infection

"The filing of pennons and appeals, complaints, motions, pleadings, and other court submissions that fall due during the period from 15 March 2020 until 15 April 2020 is EXTENDED for THIRTY (30) calendar days counted from 16 April 2020."

8 April 2020 I Re: Extension of Enhanced Community

Quarantine Over Luzon Until 30 April

2020

27 April

2020 "The filing of pennons and appeals, complaints, motions, pleadings, and other court submissions that fall due up to 3 April 2020 is extended for 30 calendar days, counted from 1 May 2020, xxx."

Re:

Extension

of the

Enhanced

Community Quarantine in Certain Areas

Unti115 May 2020

"The filing of pet1t1ons and appeals, complaints, motions, pleadings, and other court submissions that fall due up to 15 May 2020 in the ECQ areas is extended for 30 calendar days, counted from 16 May 2020,xxx" /

CfA CASE NO. 10279

AC No. 39-2020

14 May 2020 I Re:

Modified

Enhance

Community

Quarantine in Certain Areas Unti131 May

2020 "The filing of pet1t10ns and appeals, complaints, motions, pleadings, and other court submissions that fall due up to 31 May 2020 before the courts in areas under MECQ areas is extended for 30 calendar days, counted from 1 June 2020, xxx." It can, thus, be inferred from AC No. 39-2020 that petitioner has thirty

(30) days from June 01,2020, or until July 01,2020, within which to file its judicial claim before this Court. Thus, the filing of the present Petition for Review on June 90, 202039 was likewise timely made within the two-year prescriptive period. Correspondingly, in this case, petitioner timely filed its administrative and judicial claims.

The excise taxes paid on imported Jet A-1 fuel sold to international air carriers are erroneously or illegally collected.

Respondent stresses that Section 135 of the NIRC of 1997, as amended, exempts from the payment of excise tax international air carriers and other exempt entities or agencies, but definitely not petitioner.40 He further argues that the Resolution of the Supreme Court dated February 19, 2014 in the case of Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corporation, cited by the petitioner to support its claim for refund or issuance of tax credit certificate for the excise taxes paid on the imported Jet A-1 fuel does not fall squarely with the present claim for refund or issuance of a tax credit certificate, considering that the controversy in the above cited case involved locally-manufactured Jet A-1 fuel, and not imported Jet A-1 fuel. 41 The Court disagrees.

Section 135 of the NIRC of 1997, as amended, ready

"SEC. 135. Petroleum Products Sold to International Carriers and Exempt Entities or Agencies. - Petroleum products sold to the following are exempt from excise tax: (a) International carriers of Philippine or foreign registry on their use or 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 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." (Emphases and underscoring added) A plain reading of the foregoing provision reveals that the words "petroleum products"were never qualified. The law did not distinguish whether the petroleum products sold were locally-manufactured or were imported, in order for there to be an excise tax exemption. Where the law does not distinguish, courts should not distinguish. 42 Thus, the exemption given under Section 135 of the NIRC of 1997 may be resorted regardless of whether the subject Jet A-1 fuel was locally- manufactured or imported, so long as the conditions therein are complied with by the refund-claimant.

Moreover, in Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Cmporation ("2014 Pilipinas Shell case"):3 which involved the same parties, the Supreme Court categorically declared that petitioner, as the statutory taxpayer, who paid the excise taxes on petroleum products sold to international carriers, is en tided to a refund or credit of the excise taxes paid pursuant to Section 135 of the NIRC, to wit:

"xxx We therefore hold that respondent, as the statutory taxpayer who is directly liable to pay the excise tax on it~

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." (Emphasis added) Moreover, in Chevron Philippines, Inc. v. Commissionerofinternal Revenue (''2015 Chevron case"),44 the exemption granted in Section 135 of the NIRC of 1997, as amended, was discussed as follows: "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 Intemal 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." (Emphases added) Although the exemption in 2015 Chevron case was premised on Section 135(C) of the NIRC of 1997, while the 2014 Pilipinas Shell case was premised on Section 135(A) of the same law, the Supreme Court held in 2015 Chevron case that "[n]otwithstanding that the claims for refund or credit of excise taxes were premised on different subsections of Section 135 of the NIRC, the basic tax principle applicable was the same in both cases - that excise tax is a tax on property; hence, the exemption from the excise tax expressly granted under Section 135 of the NIRC must be construed in favor of the petroleum products on which the excise tax was initially imposed." Furthermore, in the 2014 Pilipinas Shell case, the Supreme Court held therein that "exemption from payment of excise tax is conferred on international carriers who purchased the petroleum products of respondent." In contrast, the Supreme Court held in the Chevron case that "Section 135 (c) should thus be construed as an exemption in favor of the petroleum products on which the excise tax was levied in the first place." Notably, in Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue,45 the Supreme Court elucidated on certain conceptual distinctions in th/

2014 Pilipinas Shell case vis-a-vis the Court's subsequent pronouncements in the 2015 Chevron case, holding that Section 135 confers an impersonal tax exemption, to wit:

"II By its nature, an excise tax under the Philippine taxation system pertains to the tax levied on certain goods, whether at a specific rate or ad valorem. As case law characterizes, an excise tax is not a tax on the exercise of a privilege, but rather a levy on certain articles which are manufactured or imported for domestic consumption. It is equally settled that that the accrual or liability to pay the same arises immediately upon importation or as soon as the goods come into existence when manufactured.

Furthermore, excise taxes are indirect taxes, as opposed to direct taxes. Pertinendy, these types of taxes relate to the statutory taxpayer who is obligated to pay taxes to the government. In this relation, one must understand the concepts of tax incidence (or the actual liability to pay the tax) and tax burden (the economic burden of the tax incident). On the one hand, direct taxes are 'those that are exacted from the very person who, it is intended or desired, should pay them; they are impositions for which a taxpayer is direcdy liable on the transaction or business he is engaged in,' which means, the tax incidence and tax burden fall upon the same person. On the other, indirect taxes are 'those that are demanded, in the first instance, from, or are paid by, one person in the expectation and intention that he can shift the burden to someone else. Stated elsewise, indirect taxes are taxes wherein the liability for the payment of the tax falls on one person but the burden thereof can be shifted or passed on to another person, such as when the tax is imposed upon goods before reaching the consumer who ultimately pays for it. When the seller passes on the tax to his buyer, he, in effect, shifts the tax burden, not the liability to pay it, to the purchaser as part of the price of goods sold or services rendered.' As jurisprudence explains, 'this shifting process, otherwise known as 'passing on,' is largely a contractual affair between the parties.

Meaning, even if the purchaser effectively pays the value of the tax, the manufacturer [or] producer (in case of goods manufactured or produced in the Philippines for domestic sales or consumption or for any oth/ disposition) or the owner or importer (in case of imported goods) [is] still regarded as the statutory [taxpayer] under the law. To this end, the purchaser does not really pay the tax; rather, he only pays the seller more for the goods because of the latter's obligation to the government as the statutory taxpayer.' Thus, when it comes to indirect taxes, the statutory taxpayer remains to be the manufacturer or importer of the articles. Despite being able to pass the burden of the tax to the buyer as an inherent component of the total price of the article, the onus to actually pay the excise tax and to remit the returns incidental thereto remains with the statutory taxpayer. who must correspondingly benefit from any tax exemption. In effect, upon the sale of the goods, the portion of the price corresponding to the excise tax originally paid by the manufacturer or importer is not per se the excise tax liability imposed under Section 129 of the Tax Code. The price passed on, and assumed by the buyer of the goods, is therefore no different from any other component cost in arriving at the price of the article sold, such as raw material cost or distributed overhead expenses. In a similar situation, the Court held that '[e]ven if the consumers or purchasers ultimately pay for the tax, they are not considered the taxpayers. The fact that [statutory taxpayer/importer], on whom the excise tax is imposed, can shift the tax burden to its purchasers does not make the latter the taxpayers and the former the withholding agent. [The purchaser/end-consumer] ultimately bears the tax burden, but this does not transform [its] status into a statutory taxpayer.' This distinction between statutory taxpayer and the purchaser who assumes the tax burden when the costs of the taxes are passed on to it as part of the purchase price is material to understand the 'exemption' granted under Section 135 governing excise taxes. III.

At its core, the purpose of a grant of tax exemption is 'some public benefit or interest, which the law-making body considers sufficient to offset the monetary loss entailed in the grant of the exemption.' However, the object of the grant of tax exemption is not necessarily a natural person similar to how 'the objects of taxation are either persons, property[,] and property rights within the jurisdiction of the taxing authority.' As such, generally speaking, the object of tax exemptions may either be personal or impersonal. Personal exemptions conceptually pertain to those 'granted direcdy in favor of such persons as a~ within the contemplation of the law granting the exemption.' On the other hand, an impersonal exemption may be said to exist when a tax exemption is 'granted direcdy in favor of a certain class of property.' If the tax exemption is impersonal in nature, then, regardless of who transacts with the property, the exemption should still apply. This framework of personal and impersonal tax exemptions underpins the exemption granted under Section 135 on excisable articles.

Notably, the Court, in the 2014 Pilipinas Shell Resolution, stated that the 'exemption from payment of excise tax' under Section 135 is 'conferred on international carriers who purchased the petroleum products of respondent'; thus, in said case, the tax exemption under Section 135 covering said products was characterized as a grant of a personal tax exemption. However, in the subsequent case of 2015 Chevron, the Court effectively abandoned the foregoing characterization, and instead, correcdy categorized that the tax exemption under Section 135 is 'in favor of the petroleum products on which the excise tax was levied in the first place.' As such, the Court, in 2015 Chevron, validated the nature of Section 135 as a provision conferring an impersonal tax exemption, which, in fact, cogendy squares with the nature of excise taxes being a tax on property, rather than a tax on persons. Being an impersonal tax exemption, Section 135 cannot be therefore interpreted as an exemption primarily conferred to the buyers because 'they are not under any legal duty to pay the excise tax.' To reiterate, upon the buyers' purchase of the articles, the 'excise tax' they pay, if any, is, in reality, a mere passed-on cost that forms part of the purchase price. Hence, while purchasers bear the economic burden, they do not, by the mere fact of assuming the passed-on costs, become legally regarded as statutory taxpayers. In this regard, Associate Justice Henri Jean Paul B. Inting apdy observed that 'a tax immunity would lose its meaning if we insist that it is available only to a person who, in the first place, has no obligation to pay the tax due on the subject article/transaction. It can only be enjoyed in its truest sense by the person who is liable for the tax and wishes to be immune from therefrom.' The impersonal nature of the tax exemption is also expressed in the wording itself of Section 135:

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DEOSION

As worded, the object of Section 135 itself is not the enumerated persons but rather, the 'petroleum products sold.' Palpably, based on Section 135's phraseology. the enumerated persons are merely descriptive of the petroleum products. i.e .. the persons to which the products are sold to. As such, the wording of Section 135 hews more closely with the character of impersonal tax exemptions. which is, in tum, consistent with the nature of excise taxes as taxes not on persons but on the goods/articles. As equally observed by Associate Justice Alfredo Benjamin S. Caguioa, '[t]he succeeding paragraphs (a), (b), and (c) do not confer nor refer to the tax exemption. Paragraphs (a), (b)[,] and (c) simply enumerate and describe the entities to whom petroleum products must be sold to make the excise tax exemption operative.' IV.

At this juncture, it is likewise relevant to mention that since an excise tax is in the nature of a property tax, it is thus erroneous to consider the operation of a tax exemption thereto in the same way as a transactional tax, wherein every purchaser and seller may be considered as a statutory taxpayer for every succeeding transaction, only ending with the final consumer. Rather, the exemption under Section 135 must be reconciled with the idea that liability for the tax attaches to the articles as soon as they come into existence or immediately upon importation. The Court, in the 2015 Chevron, had already setded that the true status of the goods, whether ultimately taxable or tax-exempt, is actually conditional or subject to confirmation upon the sale of the articles to any of the entities enumerated under Section 135. This conditional taxability can actually be seen in another related provision in the Tax Code, i.e., Section 131 thereof: Section 131. Payment of Excise Taxes on Imported Articles.- (A) Persons Lab/e. -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.

xxx xxx xxx (Emphasis and underscoring supplied) As may be gleaned from Section 131 as above-cited, although certain articles may be free from excise taxes upon importation, they may subsequently become subject to the same depending on the subsequent buyer. This is essentially the same principle of subsequent confirmation espoused by the 2015 Chevron, and is also a necessary consequence of excise tax being a property tax, and not a tax on persons. Considering that the status of the petroleum products as tax- exempt solidifies upon the sale to any of the entities enumerated under Section 135, any excise taxes which were previously paid thereon would then be considered as 'erroneously or illegally collected,' and therefore, subject to refund. In turn, the petroleum products become exempt from excise taxes once it is determined that they are to be sold to, among others, international carriers. This reflects Section 135's wording, i.e., that the petroleum products are considered as tax-exempt once they are 'sold to [inter alia] x x x [i]nternational carriers.' Based on (a) the nature of excise taxes as a property tax and an indirect tax, and (b) the principle that a buyer, when shouldering the tax burden, does not become the statutory taxpayer, it is thus clear that the purchaser of local products (such as international carriers) cannot be deemed to have been conferred a tax exemption when it has not been imposed a tax liability. In the ordinary course of things, international carriers do not manufacture or import petroleum products and hence, are not statutory taxpayers to which the exemption under Section 135 could pertain. If anything. international carriers merely bear __./ the tax burden when the costs therefor are passed on to them by the actual manufacturers or importers. However, as earlier discussed, the 'passing on' of the tax burden is largely a contractual affair between the parties and should not determine the tax incidence imposed by law unless the contrary is provided. As such, the tax exemption under Section 135 must correspondingly benefit the one who actually bears the liability to pay the same (i.e., the importers/manufacturers of petroleum products sold to international carriers, among others), and not the one who simply bears the economic burden thereof (i.e., the purchasers of the products, such as international carriers)." Thus, contrary to respondent's argument, the tax exemption under Section 135 of the NIRC of 1997, as amended, applies regardless of whether the Jet A-1 fuel was manufactured or produced or imported by the statutory taxpayer (i.e., manufacturer or producer or owner or importer) but the status of the petroleum products as exempt from excise taxes would be confirmed only upon their sale to any of the entities enumerated under Section 135 of the NIRC of 1997, as amended.

Applying the foregoing, upon petitioner's sale of its imported Jet A-1 fuel to various international air carriers, the status of the said sold petroleum product as tax-exempt solidifies. Consequently, the excise taxes it previously paid on the importation of said petroleum products became erroneously or illegally collected taxes that are proper subject of a claim for refund or credit under Sections 204 and 229 of the NIRC of 1997. The excise taxes due on the imported Jet A-1 fuel, subject of the present claim, were duly paid by petitioner.

Petitioner's witness, Ms. Peralta, testified that prior to 2017, petitioner produced Jet A-1 fuel from its own refinery. However, in 2017, when petitioner operated its Tabangao product storage tanks as a Customs Bonded Warehouse ("CBW") from the date of approval by the BOC in July 201546 until its closure in September 2018!7 petitioner was not allowed to locally produce Jet A-1 fuel. Thus, all Jet A-1 fuel stored in its Tabangao product storage tanks were imported from abroad./

CIA CASE NO. 10279

She further testified that during the CBW period, these storage tanks contain only purely imported and tax-free Jet A-1 fuel. But when the CBW was terminated sometime in September 2018, all remaining imported and tax-free Jet A -1 fuel was accounted for and reported to the BOC. The converted Jet A -1 fuel were declared with the BOC, and the corresponding excise and value-added taxes were paid therefor. Thus, all Jet A-1 fuel withdrawn from the Tabangao product storage tanks after the conversion from bonded tanks to non-bonded tanks became tax-paid fuel. 49 Ms. Peralta likewise provided a walk-through of petitioner's process and documentation flow of the importation of petitioner's Jet A-1 fuel, which she simplified in three (3) stages: (1) requisition of goods and importation; (2) arrival and discharge of imported goods; and (3) payment of taxes and import duties. 5° She explained that the process of importation starts upon determination of the total volume of Jet A-1 fuel which petitioner intends to import. Once petitioner and its supplier agree on the price of Jet A-1 fuel, petitioner will place an order for the purchase of Jet A-1, which is then delivered from the country of origin to the CBW in Tabangao, Batangas.51 Following the receipt of Import Advice and prior to the arrival of the imported Jet A-1 fuel, petitioner will then apply for the Special Permit to Discharge52 with the District Collector of BOC submitting, among others, the Bill of Lading, Load Port Survey Report, and Proforma InvoiceY Thereafter, petitioner will present the Special Permit to Discharge to the port authorities to allow the discharge of the imported Jet A-1 fuel to the tanks in Tabangao. Upon full discharge of the products from the vessel, petitioner will execute a Certificate of Quantity Received, which indicates the quantity of the products received and their last discharge to petitioner's storage tanks in Tabangao. 54 After which, petitioner will then generate the Single Administrative Document ("SAD"),55 which contains all the information encoded through the 49 !d., Exhibit "P-50", Q&A No. 12, p. 495. 50 !d., Exhibit "P-50", Q&A No. 14, p. 496. 51 !d., Exhibit "P-50", Q&A No.16, p. 496. _../ 52 The Special Permit to Discharge is a permission from the BOC to discharge the imported Jet A- 1 fuel from the vessel to petitioner's storage tanks. 53 Docket, Exhibit "P-50", Q&A Nos. 18 and 21, pp. 496 to 497. 54 Id., Exhibit "P-50", Q&A No. 27, p. 498. 55 The SAD replaced the Import Entry and Internal Revenue Declaration (IEIRD) which was manually filed by the importer/broker prior to the implementation of the E2M System and contains the same information as the IEIRD pursuant to Customs Memorandum Order No. 29- 2015.

Electronic-to-Mobile System ("E2M"), including the assessed amount of taxes and duties under tentative liquidation to be paid on the said importation. 56 Upon payment of taxes and duties under its tentative liquidation through Security Bank, the BOC will generate the SSDT through the E2M. And, upon final liquidation by the BOC, additional duties and taxes are computed and, thereafter, paid by petitioner. This subsequent payment would then be reflected in the same SAD (annotated manually) and in another SSDT57 Thereafter, petitioner will apply for A TRIG with the BIR, which will serve as its permission from the BIR to withdraw the Jet A-1 fuel from its CBW after the settlement of taxes and duties due thereon. 58 But, in the event that there is a price and volume differential on which additional taxes and duties are due, petitioner undertakes a final liquidation of the importation through the filing of a Post-Modification of SAD, with attached Tax Invoice and Certificate of Quantity Received. 59 Such final payment of taxes and duties is evidenced by another SSDT. 60 The details of petitioner's importation of finished grade Jet A-1 fuel and payment of excise taxes thereon are as follows: 61

Amount of Excise

Volume in

Taxes Paid at

SSDT

Arrival Date

SAD No.

Liters

Php4.00

Date

April 12, c 4618 7,313,036 Php29,252,144.00 April25, 2018 2018

Total

7,313,036 Php29,252,144.00 Moreover, the foregoing importation of 7,313,036 liters of Jet A-1 fuel is supported by the following documentary evidence, viZ;:

a. Ocean Bill of Lading No. 3526102-1 0;62

b. Special Permit to Discharge dated April10, 2018;63

c. Load Port Survey Report No. 501-18-01306;64 / 56 Docket, Exhibit "P-SO", Q&A Nos. 31 and 32, p. 499. 57 Id., Exhibit "P-50", Q&A No. 34, pp. 499 to 500. 58 Id., Exhibit "P-50", Q&A Nos. 38 to 39, pp. 500 to 501. 59 Id., Exhibit "P-50", Q&A Nos. 44, p. 502. 60 Id., Exhibit "P-50", Q&A No. 46, p. 502. 61 Id., Petition for Review, Statement of the Facts, Par. 8, p. 15; Exhibit "P-50", Q&A No. 50, p. 503.

CIA CASE NO. 10279 d. Customs Invoice - Bulk Product dated April 6, 2018 issued by Shell International Eastern Trading Company (SIETCo);65

e. Certificate of Quantity Received dated April 23, 2018;66

f. SAD dated April25, 2018;67

g. Special Permit to Discharge dated April 25, 2018;68

h. Authority to Release Imported Goods dated April26, 2018;69 i.

Tax Invoice dated May 1, 2018 issued by Shell International Eastern Trading Company;70 )· E2M Post Modification of SAD;71

k. Statement of Setdement of Duties and Taxes;72 I. BOC Official Receipt No. 01877067758;73

m. Customs Payment Receipt No. 2018 R 18034/4 and

n. Memorandum for BOC re: Tentative Assessment received on April 26, 2018. 75 In the present case, petitioner paid excise tax under tentative liquidation amounting to Php29,158,296.00 for the total volume of 7,289,574 liters as evidenced by SAD No. P18CBW01 SA dated April 25, 2018 76 and SSDT. 77 However, it is to be noted that since the payment of taxes and duties under tentative liquidation was made on the basis of SAD which is based on the Customs Invoice - Bulk Product or the tentative invoice issued by SIETCo/8 such payment is finalized by way of payment of the taxes and duties on the price differential as indicated in the Tax Invoice or the final invoice issued by SIETCo (USD 85.814 per barrel) 79 and the volume differential as indicated in the Certificate of Quantity Received80 (45,357.29 barrels or 7,313,036liters) with an equivalent excise tax payment amounting to Php29,252,144.00. 81 Petitioner paid the final payment of additional excise tax of Php93,848.00 82 and additional VAT of Php2,347,744.00, or in the aggrega~ 65 !d., Exhibit "P-38", p. 1076; Exhibit "P-61.6". 66 !d., Exhibit "P-39", p. 1077; Exhibit "P-61.3". 67 !d., Exhibit "P-40", pp. 1078 to 1079; Exhibit "P-61". 68 !d., Exhibit "P-41", p. 1080; Exhibit "P-61.6". 69 Id., Exhibit "P-42", p. 1081; Exhibit "P-61.4". 70 !d., Exhibit "P-43", pp. 1082 to 1084; Exhibit "P-61.2". 71 !d., Exhibit "P-44", pp. 1085 to 1087. 72 Id., Exhibits "P-45" and "P-46", pp. 1088 to1089; Exhibit "P-61.5". 73 !d., Exhibit "P-47", p. 1090. 74 !d., Exhibit "P-48", p. 1091. 75 Id., Exhibit "P-61.6".

76 !d., Exhibit "P-40", pp. 1078 to 1079; Exhibit "P-61". 77 Id., Exhibit "P-45", p. 1088; Exhibit "P-61.5". 78 !d., Exhibit "P-38", p. 1076. 79 !d., Exhibit "P-43", p. 1082. 80 Id., Exhibit "P-39", p. 1077; Exhibit "P-61.3". 81 7,313,036 liters multiplied by the excise tax rate of Php4.00. 82 Excise tax payment of Php 29,252,144.00 based on final invoice less excise tax payment of Php29,158,296.00 based on tentative invoice.

amount of Php2,441 ,592.00, on October 30, 2018 as evidenced by Receipt No. 01877067758, 83 Customs Payment Receipt No. 2018 R 18034,84 and another SSDT.85 Based on the foregoing, the corresponding excise tax payment of Php29,252,144.0086 for petitioner's importations of Jet A-1 fuel of 7,313,03687 liters were duly paid before the release from the BOC. Petitioner sufJiciendy proved that it had erroneously paid excise taxes on imported Jet A-1 fuel sold to international air carriers but only in the amount of Php15,501, 712.00. For the period from April to May 2018, petitioner allegedly sold excise tax paid imported Jet A-1 to various international airlines for their use or consumption outside the Philippines, as follows: 88

Customers

Air China Ltd.

Air Niugini Ltd.

Asiana Airlines, Inc.

Cebu Air, Inc.

China Airlines Ltd.

China Eastern Airlines Co., Ltd. Federal Express Corp.

Japan Airlines International Co. Ltd. Jetstar Asia Airways Pte. Ltd. Tin Air Co. Ltd.

Korean Airlines Co. Ltd.

Philippine Airlines Inc.

Qantas Airways Ltd.

Shell Aircraft Limited

Thai Air Asia X Co. Ltd.

Total Aviation Sales (in Liters)

Excise Tax Rate

83 Docket, Exhibit "P-47", p. 1090. 84 !d., Exhibit "P-48", p. 1091. 85 !d., Exhibit "P-46", p. 1089; Exhibit "P-61". 86 !d., Exhibit "P-45", p. 1088; Exhibit "P-61.5". 87 !d., Exhibit "P-39", p. 1077; Exhibit "P-61.3".

Total Volume in

Liters

116,526 93,466 143,422 1,269,948 119,437 120,335 342,368 456,344 94,757 330,069 354,299 3,370,569 446,940 8,989 45,567 7,313,036 Php4.00/Liter /

[Total Excise Tax Paid

Php29,252,144.00 I Alleging that the international air carriers to which it sold imported Jet A- 1 fuel are exempt from excise taxes under Section 135(a) of NIRC of 1997,89 petitioner seeks the recovery of excise taxes paid thereon in the amount of Php29,252,140.0090 Por the sale of petroleum products to an international air carrier be exempted from excise tax under Section 135(a) of the NIRC of 1997, as amended, petitioner must present the following: 1.

proof of foreign registry of the international air carriers, or in case of Philippine-registered air carriers, the latter's proof of authority to operate international flights; 2.

proof that the imported Jet A-1 fuel were used or consumed outside the Philippines; and 3.

proof that the imported Jet A-1 fuel sold to international air carriers were stored in a bonded storage tank, and had been disposed of in accordance with the rules and regulations. Petitioner complied with the first requirement. Petitioner adduced before this Court the Certification 91 issued by the Civil Aviation Authority of the Philippines ("CAAP") on October 26, 2020, which confirms the country of registry of each of the international air carriers enumerated therein, subject of the instant claim. With regard to petitioner's international air-carrier customers which are of Philippine registry, namely, Philippine Airlines, Inc. and Cebu Air, Inc., petitioner presented the Certification92 from the Civil Aeronautics Board ("CAB") dated August 28, 2020 which certifies that: a.

Bulk Delivery Notes Bulk Delivery Notes "a. Cebu Air, Inc. has been granted a franchise permit through Republic Act No. 7151 (R.A. 7151), which was approved on August 30, 1991, from the date of effectivity of RA. 7151 to present; and

b. Philippine Airlines, Inc. has been granted a franchise permit through Presidential Decree No. 1590 from June 11, 1978 to presen~ 89 !d., Petition for Review, Discussion, Par. 22, p. 21. 90 With Php4.00 difference.

The Jaid airlines are authorized to operate and maintain air transport services in the Philippines and between the Philippines and other countries, and that RA. 7151 and P.D. 1590 authorized Cebu Air, Inc. and Philippine Airlines, Inc. to operate international flights from the date of effictivity of RA. 7151 and P.D. 1590 to present, including the years 2018-2019."

In compliance with the second requirement, the CAB Certification dated August 28, 202093 shows that the international air carriers of foreign registry listed therein have been issued with Foreign Air Carrier's Permit ("FACP") which authorized them to operate international flights only for a period, covering, but not limited to, the years 2018 to 2019. Further, the Aviation Service Returns 94 submitted by petitioner, indicated the details of the Jet A-1 fuel deliveries made by petitioner to international air carriers, including the origin and destination of the international carriers. It can be seen from the Aviation Service Returns that the route of the international air carrier named therein (whether of foreign or Philippine registry) is only between the Philippines and other country, thereby proving that the sold imported Jet A-1 fuel was used or consumed outside the Philippines.

The list of international air carriers which are authorized to operate international flights as indicated in the CAB Certification95 is shown below:

International

Air Carrier

Aircraft Registration No.96

1. Air China Ltd. BS175, B5328, BS167, B5177, BS178, BS170

2. Air Niugini Ltd. P2PXE, P2PXC HL7626, HL8293, HL7626,

3. Asiana Airlines, Inc. HL7418, HL7746, HL7428,

HL7747

B18309, B18315, B18355,

4. China Airlines, Ltd. B18657, B18352, B18308, B18307, B18657, B18709, B18301, B18305

5. China Eastern BS936, B5973, BS949, Airlines Co., Ltd.

B6538, BS908, BS938,

B8231

93 !d., Exhibit "P-32", p. 1068; Exhibit "P-65". 94 Exhibits "P-80.1" to "P-80.357". 95 Docket, Exhibit "P-32", p. 1068; Exhibit "P-65". 96 !d., Exhibit "P-31", pp. 1062 to 1067; Exhibits "P-67" and "P-67.1". 97 !d., Exhibit "P-31", pp. 1062 to 1067; Exhibits "P-67" and "P-67.1".

Country of

Registration97

China

Papua New

Guinea

Republic of Korea

China

China

/

N101FE, N103FE, N106FE, N108FE, N104FE, N112FE, United States of N130FE, N592FE, America N598FE, N601FE, N616FE, N914FD JA02JJ, JAO3]}, JAO4I], JAO5)J, JA13IJ, JA16I),

7. Japan Airlines JA17JJ, JA18]J, JA19JJ, International Co., Ltd. | JA20JJ, JA606J, JA607J, JA608J, JAG16J, JAG18], A619J, JA620J, JA621

8. Jetstar Asia Airways | 9VJSP, 9VISV, IVJSL, Sj Pte., Ltd. OVISB, IVISR, 9V]SQ ingapore HL7556, HL7557, HL7558, HL7559, HL7561, HL7562, HL7564, HL7565, HL7789, HL7798, HL8012, HL8013, HL8014, HL8016, HL8224,

HL8225

10. Korean Airlines Co., | HL7460, HL7532, HL7534, Republic of Korea Ltd. HL7573, HL7721 epubue orso VHEBL, VHEBN,

11. Qantas Airways Ltd. | VHEBR, VHEBO, Australia VHEBP, VHEBM RP-C4111, RP-C4108, RP- C4107, RP-C4106, RP- C4105, RP-C4103, RP-C4102, RP-C4101, RP- C4100, RP-C3348, RP- C3347, RP-C3346, RP-C3345, RP-C3344, RP- C3343, RP-C3277, RP- C3276, RP-C3275, RP-C3274, RP-C3273, RP- C3272, RP-C3271, RP- C3269, RP-C3267, RP-C3266, RP-C3265, RP- C3264, RP-C3263, RP- C3262, RP-C3261, RP-C3260, RP-C3250, RP- C3244, RP-C3243, RP- C3242, RP-C3238

6. Federal Express Corp.

9, Jin Air Co., Ltd. Republic of Korea 12.Cebu Air, Inc. Philippines

13. Philippine Airlines, Inc.

RP-C3435,RP-C3438,RP- C3439, RP-C7772, RP- C7773, RP-C7775, RP-C7776, RP-C7777, RP- C7779, RP-C7781, RP- C7782, RP-C8612, RP-C8614, RP-C8616, RP- C8618, RP-C8760, RP- C8762, RP-C8763, RP-C8780, RP-C8781, RP- C8782, RP-C8783, RP- C8784, RP-C8785, RP-C8786, RP-C8789, RP- C9901, RP-C9902, RP- C9905, RP-C9906, RP-C9909, RP-C9918, RP-

C9919

Thus, only the sale of imported Jet A-1 to the above enumerated airlines with valid F ACP may qualify for the refund or issuance of a TCC of the erroneously paid excise taxes. However, the Court finds that the 54,556 liters of imported Jet A-1 fuel with corresponding excise tax payments of Php218,224.00 sold to the following international air carriers without a valid F ACP should be disallowed, to wit:

International Air Carrier

Shell Aircraft Limited

Thai Air Asia X Co Ltd.

Total

Volume in

Liters

8,989 45,567 54,556

Amount of

Excise Taxes

Paid at Php4.00 Php35,956.00 182,268.00 Ph£218,224.00 We then proceed to the third requirement, i.e., that the imported Jet A-1 fuel sold to international air carriers were stored in a bonded storage tank, and had been disposed of in accordance with the rules and regulations. Petitioner's witnesses: Ms. Peralta,98 Mr. Aquiatan, Jr.,99 Mr. Guevarra,100 and Ms. Flores 101 explained the process and documentation of the receipts and 98 !d., Exhibit "P-50", pp. 492 to 506. 99 !d., Exhibit "P-51", pp. 82 to 94. 100 Id., Exhibit "P-54", pp. 429 to 433. 101 !d., Exhibit "P-49", pp. 443 to 454. /""" withdrawals of imported Jet A-1 fuel at petitioner's storage tank in Tabangao Refinery through the Tabangao Depot, and its subsequent delivery to Joint Oil Company Aviation Storage Plant ("JOCASP") and Clark Aviation Service Inc. ("CASI") for eventual sale to international air carriers. Based from their testimony, upon withdrawal of the imported Jet A-1 fuel from the Tabangao Refinery through the Tabangao Depot, the Jet A-1 fuel is delivered direcdy to JOCASP located at Ninoy International Airport or CASI located at Clark International Airport via lorries or tank trucks for eventual sale and delivery to international air carriers. 102 The movement (receipts and withdrawals) of the Jet A-1 fuel from the Tabangao Refinery is monitored by petitioner through an Official Register Book signed by the Revenue Officer on Premises and by petitioner's authorized representative, which indicates the receipts and removals of the Jet A-1 fuel for a certain period and the running balance of stored Jet A-1 for that period.103 Aside from the Official Register Book, petitioner also maintains a Daily Product Deliveries Report, which shows the Jet A-1 fuel's date of removal, shipment reference number, withdrawal certificate 104 and/or Certificate of Quantity Delivered, and the amount of excise tax paid thereon. The removal of the imported Jet A-1 fuel from the Tabangao Refinery for delivery to JOCASP or CASI is supported by Bulk Delivery Notes 105 and Certificate of Quantity Delivered 106.107 Thereafter, the imported Jet A-1 fuel is stored in storage tanks located at JOCASP and CASI to await the sale and delivery to international air carriers. In JOCASP, petitioner engages its own Into Plane Operations team, while at CASI, petitioner engages the services of a third-party Into Plane Operator. These operators deliver the Jet A-1 fuel to both international and domestic air carriers via a specialized vehicle which pumps the Jet A-1 fuel direcdy into the tank of the air carriers. The specialized vehicle is equipped with a meter that determines the volume of Jet A-1 fuel pumped into the air carrier.108 The sales and deliveries of the Jet A-1 fuel to international air carrier through Into Plane Operators are supported by Aviation Service Returns and ~ 102 Id., Exhibit "P-51", Q&A No. 11, p. 84. 103 Id., Exhibit "P-50", Q&A No. 52, p. 504; Q&A No. 12, Exhibit "P-54", p. 431. 104 The Withdrawal Certificate shows the source of the Jet A-1 fuel, its destination, the date of its withdrawal, its volume at the time withdrawn, and the fact that the same is "tax-paid".

petitioner's Invoices. The Aviation Service Return is where the customer of international carrier acknowledges the receipt of the delivery of the corresponding volume of Jet A-1 fuel, while petitioner's Invoice indicates the quantity, unit price, any other charges, and the total amount due for the Jet A-1 fuel sold and delivered to the customer. 109 In support of the aforementioned Judicial Affidavits, petitioner proffered before this Court the following documentary evidence which were all examined by the ICPA, viz.:

1.

Official Register Book;110 2.

Certificates of Quantity Delivered; 111 3.

Bulk Delivery Notes112

4.

Aviation Service Returns;113 5.

Sales Invoices for International Sales of Jet A-1 fuel;114 6.

ZF2 Display print outs; 115 7.

Sales of Jet A-1 fuel to International Carriers April17, 2018 to May 7, 2018 (Report generated thru SAP);116 8.

Schedule on Stock Monitoring and Liquidation Report117

9.

Daily Product Movement Report;118

10. Reconciliation of Official Register Book and Bulk Delivery Notes;119 and

11. Summary Table of Aviation Turbo Fuel Importations and Deliveries.120 In his supplemental report, the ICP A determined that out of the total amount of excise tax being claimed for refund or tax credit ofPhp29,252,140.00, the amount of Php640,000.00 121 was considered as an exception since this portion of the claim was passed on for local consumption of Jet A-1 fuel and was sold to its local distributor in the Philippines 122 Thus, only Php28,612,140.00 123 representing excise taxes paid on Jet A-1 fuel sold and delivered to international air carriers of Philippine or foreign registry for their use or consumption outside the Philippines for the period April 17, 2018 to May 7, 2018 was properly supported by relevant documents/¥' 109 !d., Exhibit "P-49", Q&A No. 24, p. 449. 110 Exhibits "P-63" and "P-64". 111 Exhibits "P-81.1" to "P-81.19". 112 Exhibits "P-83.1" to "P-83.186". 113 Exhibits "P-80.1" to "P-80.357". 114 Exhibits "P-82.1" to "P-82.85". 115 Exhibits "P-78.1.1" to "P-78.85.1". 116 Docket, Exhibit "P-17", p. 845. 117 Exhibits "P-75" and "P-76". 118 Exhibit "P-77".

119 Exhibit "P-85".

120 Exhibit "P-86".

121 Sale to Varace Air Corporation, Exhibit "P-84.2". 122 C. Exceptions, !CPA Report, Exhibit "P-60", p. 11. 123 Php29,252,140.00 less Php640,000.00.

However, an examination of the Daily Product Movement Report Subject to Excise Tax Claim124 in relation to the Summary of Aviation Turbo (Jet A-1) Fuel Deliveries, 125 shows that there are discrepancies with regard to the date when the importation of the Jet A-1 fuel subject of the present case were made and the date of withdrawals from Tabangao and eventual sale and delivery thereof to international carriers. Notably, Ms. Peralta testified that Jet A-1 fuel cannot be withdrawn by petitioner without the ATRIG,126 to wit: "Q-39: Why does petitioner apply for an A TRIG? A-39: The ATRIG constitutes perrmsston from the BIR to withdraw the Jet A-1 fuel from the CBW in Tabangao after the settlement of the taxes and duties due thereon. The Jet A-1 fuel cannot be withdrawn by the PSPC without the A TRIG. If the article to be withdrawn from the CBW is subject to excise tax, the A TRIG shows the amount of excise taxes to be paid. Since Jet A- 1 fuel is an excisable article, the A TRIG for imported Jet A-1 fuel indicates the amount of excise taxes to be paid thereon." As per ATRIG127 and SSDT,128 the date of settlement of taxes and duties due was made on April 26, 2018. However, the Court notes that some of the Certificates of Quantity Delivered and Bulk Delivery Notes,129 which supports the date of movement of Jet A-1 fuel from the Tabangao depot to JOCASP or CASI, were made prior to April 26, 2018, the date of the A TRIG. Considering that the date of the A TRIG for the importation was on April 26,2018,130 any withdrawal from the Tabangao Refinery which is earlier than the said date is not covered by the importation, upon which the claimed deliveries to international air carriers, subject of the instant claim, were sourced. Consequently, petitioner's claimed excise taxes in the amount of Php11,132,948.00 supported by Certificates of Quantity Delivered dated earlier than April 26, 2018 shall be disallowed for failure to show that 2,783,237 lite~

of Jet A-1 fuel sold to international carriers were sourced from the imported Jet A-1 fuel which is the subject of the present claim, as enumerated below:"*'

AVIATION SERVICE RETURNS (ASRs

EXHIB ASR AIRLIN

April 17, P- JIN AIR 10,620 42388

**P- CEBU

80.25” 42389 AIR INC 11,740 2018 | 80.224” CO LID

JETSTA

R ASIA

AIRWAY

S PTE

CERTIFICATES OF QUANTITY

DELIVERED (CQDs

owe [a DATE | IBIT | REF.

NO. | NO.

8 81.1” | 5 04/17/201 | ‘*P- April 17, 8 81.2” 190,000 103,238 04/18/201 8 300,000 2,930

LTD

JETSTA

R ASIA

AIRWAY 6,165

S PTE

LTD

ep 80.205” 04/19/201 8 42391 190,000

FEDER

04/20/201 AL

: w7si7 500,000 42392 |W pprs 14,690

S CORP

04/21/201 April 18, | 'P- JIN AIR 10,840 8 woe 659,999 2018 | go.225” | 47999 | coLrp 04/22/201

JETSTA

R ASIA

AIRWAY 1,899 April 18, | “'P- CEBU > 12.050 2018 | 30.26 | 47°94 | AIRINC 005

S PTE

April 18 “Pp.

42395 2018 | 80.206”

LID

04/23/201 | ‘*P-

8 81.8” W718 360,000 1

04/24/201 | ‘‘P-

81.9” W7518 160,000 April 18 “*p- CEBU 2018 | go.27” | 47396 | arr INC 6,299 April 18 “*P- na 239 2018 | go.14sr | 47978

7 ASIANA

April 18, P- | 45663 | AIRLIN 6,650 2018 80.13 ES INC 8,964 we 15,820 | e *p- 80.174” April 18,

2018 45666

April 18, 2018 April 18, 2018 April 18, 2018 April18, 2018 April 18, 2018 April18, 2018 April 19, 2018 April19, 2018 April19, 2018 April19, 2018 April 19, 2018 April19, 2018 April19, 2018 April19, 2018 April19, 2018 April 19, 2018

~ ~P-

80.14" up_ 80.175" up_ 80.176"

''P-

80.15" np_ 80.16"

''P-

80.17"

''P-

80.177''

''P-

80.226" np_ 80.227"

''P-

80.149"

""P-

80.28"

''P-

80.207"

''P-

80.208" up_ 80.150"

''P-

80.178"

''P-

80.18"

ASIAN A

45968

AIRLIN

17,000

ESINC

JAPAN

108186

AIRLIN

20,035 2

ES INTL

CO LTD

JAPAN

108268

AIRLIN

10,200 7 ES INTI,

CO LTD

108268

ASIAN A

AIRLIN

6,316 9

ES INC

108288

ASIAN A

AIRLIN

28,725 0

ESINC

108288

ASIAN A

AIRLIN

5,348 2

ESINC

JAPAN

40811

AIRLIN

18,211

ES INTL

CO LTD

42397

JIN AIR

11,210

CO LTD

42399

JIN AIR

11,130

CO LTD

FEDER

42400

AL

10,120

EXPRES

SCORP

42401

CEBU

7,994

AIR INC

JETSTA

RASIA

42402

AIRWAY

6,350

S PTE

LTD

JETSTA

RASIA

42404

AIRWAY

4,123

S PTE

LTD

FEDER

42405

AL

16,420

EXPRES

SCORP

JAPAN

45610

AIRLIN

10,316

ES INTL

CO LTD

ASIAN A

45620

AIRLIN

18,000

ESINC

/ erA CASE NO. 10279

April 19, 2018 April 19, 2018 April19, 2018 April 19, 2018 April19, 2018 April 20, 2018 April20, 2018 April20, 2018 April20, 2018 April20, 2018 April20, 2018 April20, 2018 April20, 2018 April20, 2018 April20, 2018 April20, 2018 April20, 2018 ttp_ 109269 80.19" 2 ttp_ 109279 80.179" 5 ttp_ 109289 80.180" 0 ttp_ 109289 80.252" 2 ••p_ 109296 80.20" 3 np_ 42403 80.228" "'P- 42406 80.229" t•p_ 42407 80.151"

''P-

42408 80.29"

''P-

42409 80.30" np_ 42410 80.152"

''P-

45621 80.253"

''P-

45622 80.31" up_ 45627 80.32"

''P-

45628 80.33"

''P-

45635 80.342" np_ 45969 80.254"

ASIAN A

AIRLIN

6,695

ES INC

JAPAN

AIRLIN

12,338 ES INTI.

CO LTD

JAPAN

AIRLIN

15,204 ES INTI.

CO LTD

KOREA

N

AIRLIN

8,036

ESCO

LTD

ASIAN A

AIRLIN

21,200

ESINC

]IN AIR

13,380

CO LTD

]IN AIR

10,272

CO LTD

FEDER

AL

4,070

EXPRES

SCORP

CEBU

11,720

AIR INC

CEBU

5,957

AIR INC

FEDER

AL

16,640

EXPRES

SCORP

KOREA

N

AIRLIN

16,709

ESCO

LTD

CEBU

13,252

AIR INC

CEBU

13,161

AIR INC

CEBU

12,516

AIR INC

QANTA

s 16,192

AIRWAY

SLID

KOREA

N

AIRLIN

1,500

ESCO

LTD

;A/

April20, 2018 April20, 2018 April 20, 2018 April20, 2018 April20, 2018 April20, 2018 April20, 2018 April20, 2018 April21, 2018 April21, 2018 April21, 2018 April21, 2018 April21, 2018 April 21, 2018 April21, 2018 April 21, 2018 April21, 2018 April21, 2018

''P-

80.255"

''P-

80.34" .. p_ 80.35"

''P-

80.343"

''P-

80.36" up_ 80.256"

''P-

80.181"

''P-

80.37"

''P-

80.230"

''P-

80.38"

''P-

80.209" ••p_ 80.39"

''P-

80.210"

''P-

80.40"

''P-

80.41, "'P- 80.42" ••p_ 80.272" ••p_ 80.273" 45971 110187 8 110187 9 110269 6 110279 7 110280

I

110289 6 110296 9 42411 42412 42413 42414 42415 42416 45624 45625 45972 46136

KOREA

N

AIRLIN

1,103

ESCO

LTD

CEBU

12,806

AIR INC

CEBU

11,186

AIR INC

QANTA

s 13,000

AIRWAY

SLTD

CEBU

715

AIR INC

KOREA

N

AIRLIN

34,261

ESCO

LTD

JAPAN

AIRLIN

11,560

ES INTL

CO LTD

CEBU

Ill

AIR INC

JIN AIR

10,635

CO LTD

CEBU

11,760

AIR INC

JETSTA

RASIA

AIRWAY

5,380

SPTE

LTD

CEBU

520

AIR INC

JETSTA

RASIA

AIRWAY

7,190

S PTE

LTD

CEBU

10,970

AIR INC

CEBU

6,691

AIR INC

CEBU

12,703

AIR INC

PHILIPP

INE

63,391

AIRLIN

ESINC

PHILIPP

INE

60,649

AIRLIN

ESINC

N"

pL 80.273” ec p- 80.274” 111270 1 e ‘Pp.

80.275” 111270 2 April 21, 2018 April 21, 2018 e¢ p- 80.43” 111270 ep 80.276” 111270 4 e ‘Pp.

80.44” pe 80.277” 5 111297 6 April 21, | “'P

2018 80.4

April 21, ) P- | 111297 2018 | 80.46” 8 April 22, ““Pp- 2018 80.278” 40812 April 22,

2018 40813

April 22 p 7 2018 | 80.2317 | 474) April 22 “Pp.

ols 42418 80.232” ep.

80.279”

April 22 “Pp-

, 42419 2018 80.153” jew et p- 80.280” 46138 112188 7 ¢ *p.

80.281” April 22, 2018

PHILIPP

INE

AIRLIN

ES INC

PHILIPP

INE

AIRLIN

ES INC

PHILIPP

INE

AIRLIN

ES INC

CEBU

3 AIR INC

PHILIPP

INE

AIRLIN

ES INC

111270 | CEBU

PHILIPP

INE

AIRLIN

ES INC

- 111297 | CEBU

5” 7 AIR INC

CEBU

AIR INC

PHILIPP

INE

AIRLIN

ES INC

PHILIPP

INE

AIRLIN

ES INC

JIN AIR

CO LTD

JIN AIR

CO LTD

FEDER

AL

EXPRES

S CORP

PHILIPP

INE

AIRLIN

ES INC

PHILIPP

INE

AIRLIN

ES INC

68,317 14,173 15,852 12,902 16,555 17,159 12,210 15,538 17,554 10,660 11,010 7,990 April 22, “*p- CEBU April 22, Dp CEBU 2018 so.4s” | 42421 | arR INC 0.408 63,346 28,522

April22, 2018 April23, 2018 April23, 2018 April 23, 2018 April23, 2018 April23, 2018 April23, 2018 April23, 2018 April 23, 2018 April23, 2018 April23, 2018 April23, 2018 April23, 2018 April23, 2018 April23, 2018 April23, 2018 April23, 2018

''P-

80.282" np_ 80.233"

''P-

80.234" "'P- 80.211, np_ 80.49"

''P-

80.50"

''P-

80.154" up_ 80.51, np_ 80.21,

''P-

80.283" up_ 80.155"

''P-

80.182"

''P-

80.140" np_ 80.284" np_ 80.52" ''P-80.1" up_ 80.183" 112281 5 42422 42423 42424 42425 42426 42428 45626 45689 113189 1 113189 2 113260 6 113271 3 113271 6 113271 7 113282 1 113282 3

PHILIPP

INE

23,542

AIRLIN

ES INC

JIN AIR

13,406

CO LTD

JIN AIR

12,990

CO LTD

JETSTA

RASIA

AIRWAY

2,690

S PTE

LTD

CEBU

11,570

AIR INC

CEBU

6,100

AIR INC

FEDER

AL

24,170

EXPRES

SCORP

CEBU

12,888

AIR INC

ASIAN A

AIRLIN

17,900

ESINC

PHILIPP

INE

133,957

AIRLIN

ESINC

FEDER

AL

17,460

EXPRES

SCORP

JAPAN

AIRLIN

11,383

ES INTL

CO LTD

CHINA

EASTER

N

14,703

AIRLIN

ESCO.,

LTD

PHILIPP

INE

16,287

AIRLIN

ES INC

CEBU

13,487

AIR INC

AIR

CHINA

20,385

LTD

JAPAN

AIRLIN

16,700

ES INTL

CO LTD

/""

CfA CASE NO. 10279

April23, 2018 April23, 2018 April23, 2018 April23, 2018 April 23, 2018 April 23, 2018 April23, 2018 April 23, 2018 April23, 2018 April23, 2018 April23, 2018 April23, 2018 April23, 2018 April23, 2018 April23, 2018 April 24, 2018 April24, 2018 April24, 2018 np_ 80.126"

''P-

80.257" np_ 80.184"

''P-

80.127" ''P-80.8" up_ 80.258" np_ 80.185" "'P- 80.53"

''P-

80.22" np_ 80.285"

''P-

80.344"

''P-

80.286"

''P-

80.54"

''P-

80.55" np_ 80.56" np_ 80.235"

''P-

80.57"

''P-

80.212" 113282 4 113282 5 113282 7 113282 8 113282 9 113283 0 113283 1 113299 0 113299 1 113299 2 113299 3 113299 4 113299 5 113320 8 113320 9 42427 42429 42430

CHINA

AIRLIN

6,975

ESLTD

KOREA

N

AIRLIN

16,050

ESCO

LTD

JAPAN

AIRLJN

15,100

ES INTL

CO LTD

CHINA

AJRLIN

7,727

ESLTD

AIR

NJUGJN

20,241

JLTD

KOREA

N

AIRLIN

27,400

ESCO

LTD

JAPAN

AJRLIN

12,080

ES INTL

CO LTD

CEBU

26,896

AIR INC

ASIAN A

AJRLIN

8,053

ES INC

PHILIPP

INE

97,907

AIRLIN

ES INC

QANTA

s 24,276

AIRWAY

SLID

PHILIPP

INE

16,611

AIRLIN

ES INC

CEBU

5

AIR INC

CEBU

12,696

AIR INC

CEBU

12,832

AIR INC

JIN AIR

12,170

CO LTD

CEBU

11,370

AIR INC

JETSTA

RASIA

3,310

AIRWAY

/

April 24, 2018 April24, 2018 April24, 2018 April 24, 2018 April24, 2018 April24, 2018 April24, 2018 April24, 2018 April24, 2018 April24, 2018 April24, 2018 April 24, 2018 April24, 2018 April24, 2018 April24, 2018 April24, 2018 up_ 80.213"

''P-

80.156"

''P-

80.287" np_ 80.58"

''P-

80.288"

''P-

80.289" np_ 80.157" nP-80.2" np_ 80.290" np_ 80.59"

''P-

80.60" np_ 80.291" np_ 80.292"

''P-

80.186"

''P-

80.61"

''P-

80.141" 42431 42432 45819 114189 3 114189 4 114189 5 114189 6 114260 7 114261 0 114272 1 114272 2 114272 3 114272 4 114283 2 114290 0 114299 6

S PTE

LTD

JETSTA

RASIA

AIRWAY

6,310

SPTE

LTD

FEDER

AL

15,940

EX PRES

SCORP

PHILIPP

INE

15,428

AIRLIN

ESINC

CEBU

27,302

AIR INC

PHILIPP

JNE

106,470

AJRLIN

ESINC

PHILIPP

INE

62,352

AIRLIN

ESINC

FEDER

AL

659

EXPRES

SCORP

AIR

CHINA

7,294

LTD

PHILIPP

INE

18,550

AIRLIN

ES INC

CEBU

13,726

AIR INC

CEBU

14,234

AIR INC

PHILIPP

INE

145,385

AIRLIN

ESINC

PHILIPP

INE

65,811

AIRLIN

ES INC

JAPAN

AJRLIN

ES INTL

11,567

CO LTD

CEBU

7,524

AIR INC

CHINA

EASTER

14,820

N

/

DEQSION

April24, 2018 April24, 2018 April24, 2018 April24, 2018 April24, 2018 April25, 2018 April25, 2018 April25, 2018 April25, 2018 April25, 2018 April 25, 2018 April25, 2018 April25, 2018 April25, 2018 April25, 2018 April25, 2018 April25, 2018 April 25, 2018

''P-

80.293"

''P-

80.62"

''P-

80.63" np_ 80.64"

''P-

80.65"

''P-

80.236"

''P-

80.158"

''P-

80.214" up_ 80.66"

''P-

80.67" up_ 80.159" nP-80.9"

''P-

80.68" up_ 80.294" up_ 80.69"

''P-

80.70" up_ 80.295" ••p_ 80.296" 114299 8 114299 9 114321 0 114321 1 114321 2 42433 42434 42435 42436 42437 42438 45867 45975 115180 0 115180 1 115180 2 115261 3 115272 6

AIRLIN

ESCO.,

LTD

PHILIPP

INE

14,437

AIRLIN

ES INC

CEBU

11,671

AIR INC

CEBU

12,513

AIR INC

CEBU

10,880

AIR INC

CEBU

15,680

AIR INC

JIN AIR

10,910

CO LTD

FEDER

AL

9,430

EXPRES

SCORP

JETSTA

RASIA

AIRWAY

4,280

S PTE

LTD

CEBU

11,760

AIR INC

CEBU

6,090

AIR INC

FEDER

AL

14,850

EXPRES

SCORP

AIR

N!UGIN 15,089 !LTD

CEBU

11,776

AIR INC

PHILIPP

INE

62,080

AIRLIN

ESINC

CEBU

13,264

AIR INC

CEBU

12,090

AIR INC

PHILIPP

INE

19,100

AIRLIN

ESINC

PHILIPP

INE

14,284

AIRLIN

ES INC

/

April25, 2018 April25, 2018 April 25, 2018 April25, 2018 April25, 2018 Apri125, 2018 April 25, 2018 Apri125, 2018 April 25, 2018

''P-

80.297'' ••p_ 80.71" up_ 80.160" ••p_ 80.298" ••p_ 80.299" ••p_ 80.300" "'P- 80.72"

''P-

80.301, ••p_ 80.73" 115272 7 115272 8 115272 9 115283 8 115283 9 115284

I

115290 1 115290 3 115290 5

PHILIPP

INE

12,778

AIRLIN

ES INC

CEBU

11,818

AIR INC

FEDER

AL

12,235

EXPRES

S CORP

PHILIPP

INE

34,321

AIRLIN

ES INC

PHILIPP

INE

27,318

AIRLIN

ESINC

PHILIPP

INE

6,600

AIRLIN

ES INC

CEBU

28,801

AIR INC

PHILIPP

INE

7,216

AIRLIN

ES INC

CEBU

2,087

AIR INC

TOTAL

2,783,237

TOTAL

2,783,237

Multiplied by: Excise Tax Rate

Php4.00

Total Disallowed Excise Tax

Phpll,l32,948.00 Moreover, upon careful examination of petitioner's supporting documents, the Court finds that the Aviation Service Returns supporting the following deliveries of 439,814liters Jet A-1 fuel are unreadable. Thus, the Court cannot ascertain the correctness of relevant details such as destination, customer name and volume. Accordingly, petitioner's claimed excise tax payment related thereto in the amount ofPhp1,759,256.00 shall be disallowed, detailed as follows:

Volume

Amount of

Exhibit

ASR

in

Excise Taxes

I

Airlines

No.

No.

Destination

Liters

Paid at Php4.00 Air Nuigini Ltd.

qp_

Port

80.1 0"

1173220 Moresby

19,377

Php

77,508.00

Sub-total

19,377 Php 77,508.00 I Cebu Air Inc.

••p_

1181818 Kansai

10,128

Php

80.79" 40,512.00

''P-

1182923

Narita

26,147 1 o4,588.oo 1 80.80" ,./

Philippine

Airlines Inc.

Qantas Airways

Ltd.

~ ~P-

80.89" eep_ 80.90" eep_ 80.302" eep_ 80.303" eep_ 80.304" eep_ 80.309" eep_ 80.347" 1202941

Narita

1202945 Shanghai

Sub-total

1162910 Vancouver

1201826 Bus an

1201827 California

1202940 Jeddah

Sub-total

1182927 Sydney

Sub-total

Total

23,540 94,160.00 11,964 47,856.00 71,779 Php 287,116.00 ' 46,914 Php 187,656.00 25,987 103,948.00 .

139,931 559,724.00 82,135 328,540.00 294,967 Php1,179,868.00

Php

53,691 214,764.00 53,691

Php

214,764.00 439,814 Php1,759,256.00 In fine, petitioner sufficiendy proved that the excise taxes it paid on April 26, 2018132 for Jet A-1 fuel imported for the period April2018, and subsequendy sold to tax-exempt international air carriers during April to May 2018 were erroneous and refundable pursuant to Sections 204 and 229 of the NIRC of 1997, as amended, but in the reduced amount of Php15,501,712.00, computed as follows:

JET A-lFUEL

Amount of

Volume

Excise Taxes

Particulars in Liters

Paid at Php4.00

Volume/ Amount of Excise Tax Claim per

7,313,035 Php29,252,140.00

Petition for Review

Less: Disallowances

I.

Disaffowanm noted by the ICPA

a. Was passed on for local consumption and was sold to its local distributor in

the Philippines

160,000 Php 640,000.00

Sub-total

160,000

Php

640,000.00 II.

DiJalfowanm found by the Court r/

a. Without valid F ACP

b. Sales made to international carriers prior to importation and payment of excise taxes

c. With unreadable ASRs

Sub-total

Volume/ Amount of Total Disallowances

Volume/ Amount of Refundable Excise

Taxes

54,556 Php 218,224.00 2,783,237 11,132,948.00 439,814 1, 7 59,256.00 3,277,607 Php 13,110,428.00 3,437,607 Phpl3,750,428.00 3,875,428 Php15,501, 712.00

WHEREFORE, in light of the foregoing considerations, the present Petition for Review is PARTIALLY GRANTED. Accordingly, respondent is ORDERED TO REFUND OR ISSUE TAX CREDIT CERTIFICATE in favor of petitioner in the reduced amount of Php15,501,712.00, representing petitioner's erroneously paid excise taxes for its imported Jet A-1 fuel for the period covering April to May, 2018.

I CONCUR:

MARIA

~ ""'· CO~NG.

~. ~

-'I'---

MA. BELEN M. RINGPIS-LIBAN

Associate Justice

PEDRO

,VA£.S

Associate Justice

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.

gy, ~ ~\......_ MA. BELEN M. RINGPIS-LIBAN

Associate Justice

Chaiperson

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the 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 writer of the opinion of the Court.

Presiding Justice