Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue

DECISION

MANAHAN,J.:

THE CASE

In this Petition for Review filed by petitioner Pilipinas Shell Petroleum Corporation, petitioner seeks for the refund or issuance of a tax credit certificate in the total amount of P71, 182,352.00, allegedly representing excise taxes paid by petitioner on imported Jet A-1 fuel that were sold and delivered to tax-exempt international air carriers, from April to May 2019.

THE PARTIES

Petitioner Pilipinas Shell Petroleum Corporation is a corporation organized and existing under the laws of the Philippines1 with office address at 41st Floor, The Finance Center, 26th Street corner 9th Avenue, Bonifacio Global City, 1635 Taguig City.2

Respondent is the duly appointed Commissioner of Internal Revenue who holds office at the Bureau of Internal Revenue (BIR) National Office Building located at Agham Road, Diliman, Quezon City.3

THE FACTS

On November 4, 2020, petitioner filed its letter- application for refund or tax credit dated September 14, 2020 and Application for Tax Credits/Refunds (BIR Form No. 1914) with the Excise Large Taxpayers Audit Division II of the BIR,4 seeking for the recovery of alleged excise taxes paid on Jet A -1 fuel imported in April 20 19 which were sold to various international airlines for the period from April 9, 2019 to May 8, 2019, in the aggregate amount of .f>71,182,352.00, determined as follows:

--·----

Description

Volume in

Excise Tax

Amount

Liters

Rate

Sales to international earners of Philippine or foreign registry 17,795,588 N.OO per liter r 71,182,352.00 pursuant to Section

135 of the Tax Code

PROCEEDINGS BEFORE THIS COURT

On May 17, 2021, petitioner filed the present Petition for Review. 5 The case was initially raffled to this Court's First Division.

On October 26, 2021, respondent filed his Answer,6 where he raised 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.

On March 22, 2022, respondent transmitted the BIR Records of the case, consisting of 190 pages in one ( 1) folder.7 The Pre-Trial Conference was initially set on January 27, 2022, 8 but was later reset on April 7, 2022,9 where respondent's counsel manifested that he is waiving the right to present evidence in this case. Prior thereto, the Pre-Trial Brief for Petitioner was filed on

March

11, 2022, 1o while Respondent's Pre-Trial Briefwas filed on March 22, 2022. 11 On April 27, 2022, pet1t1oner filed a Manifestation [On Non-Filing of Joint Stipulation of Facts and Issuesj,12 stating, among others, that it failed to enter into admissions and stipulation of facts with respondent, which was noted by the Court in the Resolution dated May 6, 2022. 13 On May 26, 2022, the Court issued the Pre-Trial Order.14 During trial, petitioner presented the following witnesses: (1) Ms.

Anna

Beatriz

Vergel

de Dios,15 petitioner's Import/ Additives Scheduler; (2) Mr. Matias D. Aquiatan, Jr.,16 petitioner's Country Operations Manager; (3) Mr. Jonathan Juanillo, 17 petitioner's Terminal Operations Manager at the Tabangao Depot;

(4) Atty.

Farida Nimfa G.

Dimailig,1s petitioner's Country Tax Manager; (5) Ms. Berenice Angelique L. Flores, 19 petitioner's Tax Advisor; (6) Ms. Maria Luz S. 7 Compliance dated March 21, 2022, Docket- Vol. I, pp. 381 to 383. B Notice of Pre-Trial Conference dated November 25, 2021, Docket- Vol. I, pp. 350 to 352.

9 Notice of Resetting dated February 18, 2022, Docket- Vol. I, p. 356; Minutes of the hearing held on, and Order dated, April 7, 2022, Docket- Vol. I, pp. 394 to 396 and 399 to 399-B, respectively.

10 Docket- Vol. I, pp. 359 to 376.

11 Docket- Vol. I, pp. 385 to 388.

1' Docket- Vol. I, pp. 470 to 486.

13 Docket- Vol. I, p. 489.

14 Docket- Vol. II, pp. 533 to 556.

15 Exhibit "P-44", Docket- Vol. I, pp. 60 to 75; Minutes of the hearing held on, and Order dated, June 14, 2022, Docket- Vol. II, pp. 596 to 603. 16 Exhibit "P-45", Docket- Vol. I, pp. 107 to 121; Minutes of the hearing held on, and Order dated, June 14, 2022, Docket- Vol. II, pp. 596 to 603. 17 Exhibit "P-46", Docket- Vol. II, pp. 570 to 575; Minutes of the hearing held on, and Order dated, June 14, 2022, Docket- Vol. ll, pp. 596 to 603. 18 Exhibits "P-49" and "P-50", Docket- Vol. I, pp. 154 to 161 and Docket- Vol. II, pp. 579 to 582, respectively; Minutes of the hearing held on, and Order dated, July 28, 2022, Docket- Vol. II, pp. 645 to 654.

Verdejo,2o Head Librarian at the Carlos P. Romulo Library of the Department of Foreign Affairs - Foreign Service Institute; and (7) Ms.

Madonna

Mia

S.

Dayego,21 the

Court-

commissioned independent certified public accountant (ICPA).22 The Report of the ICPA was submitted on July 5, 2022.23 On August 26, 2022, petitioner filed an Omnibus Motion For Leave of Court: I. to Reopen the Case for Presentation of Additional Evidence; II. to Admit the Supplemental Judicial Affidavit of Atty. Farida Nimfa G. Dimailig; and III. to Defer the Filing [of] Formal Offer of Evidence. 24 Respondent failed to file his comment thereto. 25 In the Resolution dated December 1, 2022,26 the Court granted the Omnibus Motion For Leave of Court: I. to Reopen the Case for Presentation of Additional Evidence; II. to Admit the Supplemental Judicial Affidavit of Atty. Farida Nimfa G. Dimailig, while the [Motion] III. to Defer the Filing [of] Formal Offer of Evidence was deemed moot. Thus, Atty. Farida Nimfa G. Dimailig was recalled to testify again.27 On August 30, 2022, petitioner filed its Formal Offer of Evidence Ad Cautelam with Manifestation [On Omnibus Motion For Leave of Court dated August 26, 2022 and filed on even datej, 2 8 to which respondent filed a Comment (Re: Formal Offer of Evidence) on October 4, 2022.29 Thereafter, petitioner filed its Supplemental Formal Offer of Evidence with Manifestation on March 13, 2023; 30 however, respondent failed to file 20 Exhibit "P-48", Docket - Vol. I, pp. 406 to 412; Minutes of the hearing held on, and Order dated, July 28, 2022, Docket- Vol. II, pp. 645 to 654. 21 Exhibit "P-70", Docket- Vol. II, pp. 638 to 644; Minutes of the hearing held on, and Order dated, July 28, 2022, Docket- Vol. II, pp. 645 to 654. 22 Oath of Commission dated May 31, 2022, Docket - Vol. II, p. 563; Minutes of the hearing held on, and Order dated May 31, 2022, Docket- Vol. II, pp. 560 to 562 and 564 to 565, respectively.

23 Exhibit "P-69", Docket- Vol. II, pp. 607 to 629. 24 Docket- Vol. II, pp. 665 to 670.

25 Records Verification dated October 28, 2022 issued by the Judicial Records Division of this Court, Docket- Vol. II, p. 921. 26 Docket- Vol. II, pp. 923 to 928.

n Exhibit "P-71", Docket- Vol. II, pp. 671 to 674; Minutes of the hearing held on, and Order dated, March 7, 2023, Docket- Vol. II, pp. 941 to 944. 28 Docket- Vol. II, pp. 679 to 710.

29 Docket- Vol. II, pp. 912 to 914.

3o Docket- Vol. II, pp. 946 to 952. ~ comment thereto.3 1 In the Resolution dated June 6, the Court admitted all of petitioner's offered exhibits.

2023 32

) In the meantime, the present case was transferred to the Third Division of this Court pursuant to the Notice of Resolution dated May 31, 2023.33 On July 14, 2023, respondent filed his Memorandum,34 while the Memorandum for Petitioner was submitted on July 26, 2023.35 The present case was considered submitted for decision on September 22, 2023.36

THE ISSUE

The parties submitted this lone 1ssue for the Court's resolution:

"Whether or not petitioner is entitled to the recovery of excise taxes in the amount of P71,182,352.00 paid in April 2019 on imported Jet A-1 fuel sold to international air carriers for use or consumption outside the Philippines during the period from April to May 2019."37

THE COURT'S RULING

The present Petition for Review is partly meritorious.

Governing

provisions for refund claims.

31 Records Verification dated March 22, 2023 issued by the Judicial Records Division of this Court, Docket- Vol. II, p. 953.

''Docket- Vol. II, pp. 957 to 967.

Sections 204(C) and 229 of the 1997 National Internal Revenue Code (NIRC), as amended, respectively 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 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 fllegally 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." (Emphases added) The above-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 the courts of law. Both claims must be filed within a two (2)-year reglementary period. Timeliness of the filing of the claim is mandatory and jurisdictional, and thus, 01r:wo-- 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."38 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_39 In other words, what can be refunded or credited is a tax that is erroneously, illegally, excessively or in any manner wrongfully collected. In short, there must be a wrongful payment because what is paid, or part of it, is not legally due.4o Thus, for the present claim for refund to prosper, petitioner must not only establish that it timely filed its refund claim, it must likewise prove that the subject excise tax paid is erroneous, illegal, or wrongful.

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 the customshouse as provided in Sections 129 and 131 of the 1997 NIRC, 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.

38 Commissioner of Internal Revenue us. San Miguel Corporation, et seq., G.R. Nos. 180740 and 180910, November 11,2019.

39 Commissioner of Internal Revenue us. Pilipinas Shell Petroleum Corporation, G.R. No. 188497, April 25, 2012, citing the definition provided in BLACK'S LAW DICTIONARY, Fifth Edition, p. 486.

4° Commissioner of Internal Revenue us. San Roque Power Corporation, et seq., G.R. Nos. 187485, 196113, and 197156, February 12, 2013.~

XXX

XXX

xxx."(Emphasis 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.

XXX

XXX

xxx." (Emphasis added} Based on the foregoing provisions, the two (2)-year period prescribed in Sections 204(C) and 229 of the 1997 NIRC, as amended, should be reckoned from the date of actual payment of excise taxes.

Here, petitioner paid the excise taxes on its Jet A-1 fuel importations on AprilS, 2019,41 April17, 2019,42 and May 28, 2019, respectively. 43 Counting two (2) years from the earliest payment, i.e., April 5, 2019, petitioner had until April 5, 2021, within which to file its administrative and judicial claims for refund. In this case, petitioner's administrative claim for refund was filed on November 4, 2020.44 Thus, the administrative claim was filed within the two (2)-year prescriptive period.

On the other hand, the judicial claim for refund was only filed before this Court on May 17, 2021.45 In this regard, the Supreme Court issued the following Administrative Circulars (ACs) that extended or suspended the filing periods for pleadings or court submissions in the National Capital Region until the physical reopening of the relevant court, by reason of the COVID-19 pandemic: ACNo.

Date Issued

Subject

15-2021 April 3,

RE:

EXTENSION

OF

2021

THE

41 Exhibit "P-5", Docket- Vol. II, p. 715. 42 Exhibit "P-15", Docket- Vol. II, p. 730.

PHYSICAL

Content

"Likewise) the filing periods of pleadings

CLOSURE OF COURTS

AND

THE

FILING

PERIODS

FOR

PLEADINGS

AND

OTHER

COURT

SUBMISSIONS

IN

LIGHT

OF

THE

FURTHER EXTENSION

OF

THE

ENHANCED

COMMUNITY

QUARANTINE

FROM

APRIL 5 TO APRIL 11, and other court submissions that fell due or would fall due during the period beginning from March 29 to April 11, 2021 are hereby EXTENDED for seven (7) calendar days, counted from April 12, 2021. xxx" 2021.

~2~1-~2~0~2~1--\--~A_p_r~i1~1~0~,--~R~E~:~~E~X~T~E~N~S~I~O~N~~O~F~~"C~on-s~i~d-er~in--g------~th~e~ 22-2021 2021

PHYSICAL

CLOSURE unabated rise of COVID- April 14, 2021

OF COURT

19 cases, the requests of the judges and court personnel, and upon the concurrence of the members of the Court en bane, ALL the courts and judicial offices m the

National

Capital

Judicial Region and the

provmces of Bulacan, Cavite, Laguna, and

Rizal

(NCJR+)

shall remain physically closed until 18

April

2021.

They may be reached through their hotlines and email addresses as posted in the Supreme Court website.

RE:

PHYSICAL

CLOSURE OF COURTS

IN

ENHANCED

COMMUNITY

QUARANTINE

AND

MODIFIED ENHANCED

COMMUNITY

QUARANTINE AREAS

XXX

XXX

XXX

The time for filing and service of pleadings and motions during this period is SUSPENDED and shall resume seven (7) calendar days counted from the first day of physical reopening of the relevant court."

"Considering that the National Capital Region, and the provmces of Abra, Bulacan, Cavite, Laguna,

Quirino

and Rizal, and Santiago City are under

Modified

Enhanced

Community

Quarantine

(MECQ)

until 30 April 2021, the physical closure of courts in the said areas

L_ ______ ~

__________ L_ ________________ _L~~~~~~~~~~

29-2021 April 30, 2021

RE:

WORK

ARRANGEMENTS

IN

COURTS ON 3- 14 MAY

2021 is likewise extended to 30 April 2021.

XXX

XXX

XXX

The time for filing and service of pleadings and motions during this period is SUSPENDED and shall resume seven (7) calendar days counted from the first day of physical reopening of the relevant court."

"Considering that the National Capital Region, the provmces of Abra, Bulacan, Cavite, Laguna, Quirino, and Rizal, and Santiago City, lsabela, continue to be under

Modified

Enhanced

Community

Quarantine

(MECQ)

until 14 May 2021, ALL first and second level courts, and appellate collegiate courts, and their judicial offices m the said areas shall continue to be physically closed until 14 May 2021.

XXX

XXX

XXX

The time for filing and service of pleadings and motions during this period in these areas is SUSPENDED and shall resume after seven (7) calendar days counted from the first day of the physical reopenmg of the relevant court."

!-------+------·----·-·--·-------- ·--··· -------- 33-2021 May 14, 2021

RE:

COURT "Considering that the

OPERATIONS

National Capital Region

STARTING 17 MAY 2021 and nearby provinces of Bulacan, Cavite, Laguna, and Rizal, together with some provmces and cities, have been placed under

General

Community

Quarantine

(GCQ)

starting 15 May until 31 May 2021, all first and ·- second level courts, and appellate collegiate courts (except the

Supreme

Court), and the judicial offices in these areas under GCQ shall be physically opened with a skeleton force of at least thirty percent (30%) to at most fifty percent (50%), beginning 17 May 2021 until further notice."

Based on the foregoing ACs, the reopening of the courts resumed on May 17, 2021, and petitioner had seven (7) days therefrom, or until May 24, 2021, within which to file its Petition for Review. Considering that petitioner filed its judicial claim for refund on May 17, 2021, the same is timely filed. The excise taxes paid on imported Jet A-1 fuel sold to international air carriers are erroneously or illegally collected.

Section 135 of the 1997 NIRC, as amended, reads: "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 entitles 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 law did not distinguish between locally-manufactured or imported petroleum products, in relation to excise tax exemption. Where the law does not distinguish, courts should not distinguish. 46 In other words, the taxpayer may claim exemption under Section 135 of the 1997 NIRC, as amended, regardless of whether the subject Jet A-1 fuel was locally- manufactured or imported, provided that the taxpayer satisfies the conditions set forth therein.

In addition, in Commissioner of Internal Revenue us. Pilipinas Shell Petroleum Corporation ("2014 Pilipinas Shell case"),47 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 entitled to a refund or credit of the excise taxes paid pursuant to Section 135 of the 1997 NIRC, as amended, to wit:

"xxx We therefore hold that respondent, as the statutory taxpayer who is directly liable to pay the excise tax on its petroleum products, is entitled to a refund or credit of the excise taxes it paid for petroleum products sold to international carriers, the latter having been granted exemption from the payment of said excise tax under Sec. 135 (a) of the NIRC." (Emphasis added) Moreover, in Chevron Philippines, Inc. us. Commissioner of Internal Revenue ("20 15 Chevron case"), 48 the exemption granted under Section 135 of the 1997 NIRC, 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 Internal Revenue Code (NIRC) exempt from excise tax is deemed illegal or erroneous; and should be credited or refunded to the payor pursuant to Section 204 of the NIRC. This is because the exemption granted under Section 135 of the NIRC must be construed in favor of the property itself, that is, the petroleum products." (Emphases added) Although the exemption in 2015 Chevron case was premised on Section 135(C) of the 1997 NIRC, as amended, 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 1997 NIRC, as amended, 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 1997 NIRC, as amended, 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 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 us. Commissioner of Internal Revenue,49 the Supreme Court elucidated on certain conceptual distinctions in the 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 the accrual or liability to pay the same arises immediately uuon importation or as soon as the goods come into existence when manufactured.

Furthermore, exCJse taxes are indirect taxes, as opposed to direct taxes. Pertinently, 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 directly 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 other disposition) or the owner or importer (in case of imported goods) ris1 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.'a..__L--

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 rstatutory 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. rThe purchaser I end-consumer] ultimately bears the tax burden, but this does not transform rits] 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, propertyr,] 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 directly in favor of such persons as are 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 directly 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 earners 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, correctly 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, cogently 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. lnting aptly 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 1s also expressed in the wording itself of Section 135:

XXX

XXX

XXX

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 turn, 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, 'rt1he 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 settled 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 Liable. - Excise taxes on imported articles shall be paid by the owner or importer to the Customs Officers, conformably with the regulations of the Department of Finance and before the release of such articles from the customs house, or by the person who is found in possession of articles which are exempt from excise taxes other than those legally entitled to exemption.

In the case of tax-free articles brought or imported into the Philippines by persons, entities, or agencies exempt from tax which are subsequently sold, transferred or exchanged in the Philippines to non-exempt persons or entities, the purchasers or recipients shall be considered the importers thereof, and shall be liable for the duty and internal revenue tax due on such importation.

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 tl'ol _ - 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, the tax exemption under Section 135 of the 1997 NIRC, as amended, applies regardless of whether the Jet A-1 fuel was manufactured, produced, or imported by the statutory taxpayer (i.e., manufacturer or producer or owner or importer). However, 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 1997 NIRC, as amended.~

Moreover, with respect to the availability of the refund remedy, the Supreme Court explained that 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). Applying the foregoing to the instant case, the subject Jet A-1 fuel importations are tax exempt upon its sale to various international air carriers. Consequently, petitioner's payment of excise taxes on its imported petroleum products became erroneously or illegally collected. Hence, these are proper subjects of a claim for refund or credit under Sections 204 and 229 of the 1997 NIRC, as amended.

The excise taxes due on the imported

Jet

A-1

fuel, subject of the present claim, were duly paid by petitioner.

Records show that petitioner has its own refinery in Tabangao, Batangas, which generally produces Jet A-1 fuel from crude refining process.so Meanwhile, petitioner resorts to occasional importation of finished Jet A-1 fuel in instances where the refinery shuts down or if the demand for Jet A-1 fuel fails to meet the projected supply of locally manufactured Jet A-1 fuel.5 1 Petitioner follows a specific process and document flow on its of Jet A-1 fuel importations, as follows: (1) requisition of goods and importation; (2) arrival and discharge of imported goods; and (3) payment of taxes and import duties. 52 In relation to the subject case, petitioner had two (2) importations of Jet A-1 fuel in April 2019 at the Batangas port. 53 so Exhibit "P-44" (Q&A No. 10), Docket- Vol. I, pp. 62 to 63. st Exhibit "P-44" (Q&A No. 11), Docket- Vol. I, p. 63.

1st importation:

The 1st importation was on April 5, 2019 for 8,324,660 liters of Jet A-1 fuel, which arrived at the Tabangao Refinery private port. The latter is located within the jurisdiction of the Port of Batangas based on the Certificate of Quantity Received (CQR).54 This was declared under Bureau of Customs (BOC)

Single

Administrative

Document

(SAD)

with

Customs

Reference C 5043 and shipped in the vessel, MT Everhard Schulte.ss Petitioner paid excise taxes in the amount of :1'33,298,640.00.56 The importation of the said 8,324,660 liters of Jet A-1 fuel and the amount of excise taxes paid thereon were evidenced by the following documents, viz.:

a. Bill of Lading dated March 30, 2019 showing the quantity of 8,327, 131 liters (@ 30°C) or its equivalent 8,318,388 liters(@ Obs. Temp);57

b. Load Port Survey Report (LPSR) dated April 3, 20 19;58

c. Customs Invoice - Bulk Product dated April 1, 20 19;59

d. BOC SAD with Customs Reference C 5043 dated April 4, 2019, with date stamped April 5, 2019, showing the quantity at 8,318,388 liters;6o

e. Statement of Settlement of Duties and Taxes (SSDT) dated April 5, 20 19;61

f. Authority To Release Imported Goods (ATRIG) dated April4, 2019;62

g. CQR with date received on April 7, 2019, showing the quantity at air of 8,324,660 liters and its equivalent quantity at metric tons of 6,557,069 liters;63

h. Tax Invoice dated April 22, 20 19;64

1. Assessment

Notice

with attached updated computation for additional taxes;65

j. BOC Official Receipt (OR) No. 01879220830 dated May 28, 2019;66 and

k. Updated SSDT dated May 28, 2019.67 An examination of SAD with Customs Reference C 504368 as well as SSDT dated April 5, 201969 reveals that petitioner paid excise tax amounting to only P33,273,552.00 for 8,318,388 liters of Jet A-1 fuel for the 1st importation. However, an updated SSDT dated May 28, 201970 and the Assessment Notice with attached updated computation of additional taxes71 was submitted by petitioner, reflecting the amount of P33,298,640.00 as the payment for excise tax for 8,324,660 liters of imported Jet A-1. The difference of P25,088.00 (P33,298,640.00 less P33,273,552.00) was included in the payment made to BOC under OR No. 01879220830 dated

May

28, 2019 amounting to P3,025,679.00,72 broken down as follows: Value-added tax p 3,000,591.00 Excise tax 25,088.00

Total Duties/Taxes

p 3,025,679.0073 2nd importation:

The 2nd importation was for 11,378,738 liters of Jet A-1 fuel, which arrived on April 15, 2019 at the Tabangao Refinery, which is likewise located within the jurisdiction of the Port of Batangas. This was declared under BOC SAD with Customs Reference C 5699 and shipped in the vessel, MT Ocean Venus.74 Petitioner paid excise taxes in the amount of P45,514,952.0075 in relation to this importation. The importation of the said 11,378,738 liters of Jet A-1 fuel and the amount of excise taxes paid thereon were evidenced by the following documents, to wit: 65 Exhibit "P-9", Docket- Vol. II, pp. 722 to 723. 66 Exhibit "P-10", Docket- Vol. II, pp. 724 to 725. 67 Exhibit "P-5-1", Docket- Vol. 11, p. 716. 68 Exhibit "P-4", Docket- Vol. II, p. 714. 69 Exhibit "P-5", Docket- Vol. 11, p. 715. 7o Exhibit "P-5-1", Docket- Vol. II, p. 716. 71 Exhibit "P-9", Docket- Vol. II, pp. 722 to 723. n Exhibit "P-10", Docket- Vol. II. pp. 724 to 725.

a. Ocean Bill of Lading dated April 7, 2019 showing the quantity of 11,378,738 liters(@ OBSRD);76

b. LPSR dated April 7, 2019;77

c. Customs Invoice - Bulk Product dated April 8, 20 19;78

d. BOC SAD with Customs Reference C 5699 dated

April

15, 2019 showing the quantity at 11,378,738 liters;79

e. SSDT dated April 17, 2019;8o

f. ATRIG dated April 15, 2019;81

g. CQR with date received on April 15, 2019, showing the quantity at air of 11,330,275 liters and its equivalent quantity at metric tons of 8,868,614 liters;82

h. Tax Invoice dated May 1, 20 19;83

i. Assessment Notice;84

j. BOC OR No. 01879221325 dated June 25, 2019;85 and

k. Updated SSDT dated May 28, 2019 with attached updated computation for additional taxes.86 A perusal of the SAD with Customs Reference C 5699,87 as well as the Assessment Notice,88 SSDT dated April 17, 20 19,89 and updated SSDT90 reveals that petitioner paid excise tax amounting to P45,514,952.00 on its 2nd importation of Jet A-1 fuel.

Petitioner

sufficiently proved that it had erroneously paid excise taxes on imported Jet A-1 fuel sold to international air carriers but only in the amount ofP70, 767,488.00.

76 Exhibit "P-11", Docket- Vol. U, p. 726. 77 Exhibit "P-12", Docket- Vol. U, p. 727. 78 Exhibit "P-13'', Docket- Vol. U, p. 728. 79 Exhibit "P-14", Docket- Vol. U, p. 729. so Exhibit "P-15", Docket- Vol. II, p. 730. s1 Exhibit "P-16", Docket- Vol. U, p. 733. 82 Exhibit "P-1 7", Docket- Vol. U, p. 735. 83 Exhibit "P-18", Docket- Vol. U, pp. 736 to 738. 84 Exhibit "P-19", Docket- Vol. II, p. 739. 8s Exhibit "P-20", Docket- Vol. U, pp. 740 to 741. 86 Exhibit "P-15-1", Docket- Vol. II, pp. 731 to 732. 87 Exhibit "P-14", Docket- Vol. U, p. 729. 88 Exhibit "P-19", Docket- Vol. U, p. 739. 89 Exhibit "P-15", Docket- Vol. II, p. 730. 90Exhibit"P-15-1", Docket-Val. U, pp. 731 to 732.~ For the period April to May 20 19, petitioner allegedly sold excise tax-paid Jet A-1 from the 1st and 2nd importations to various international airlines for their use or consumption outside the Philippines, as follows:91

CUSTOMER

TOTAL VOLUME IN

LITERS

Air China Ltd

674,309

Air Nuiguini Ltd

273,515

Airasia Berhad

474,954

Asiana Airlines Inc

834,627

China Airlines Ltd

531,466 China Eastern Airlines Co. Ltd.

413,122 China Southern Airlines Co.

Ltd.

540,270

Deutsche Lufthansa AG

103,716

Federal Express Corp

389,766

Jetstar Asia Airways Pte Ltd

177,011

Scoot Tigerair Pte Ltd

86,955

Silkair Singapore Private

Limited

236,313

Xiamen Airline Co Ltd

114,635

Cebu Air Inc

2,629,679

Philippine Airasia Inc

1,318,467

Philippine Airlines Inc

8,996,783 Total Aviation Sales jin Liters) 17,795,588

Excise Tax Rate

1'4.00/Liter

Total Excise Tax

P71,182,352.00 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, petitioner seeks the recovery of excise taxes paid thereon in the amount of 1"71, 182,352.00, as computed above.

In order for the excise tax exemption, i.e., sale of petroleum products to an international air carrier, under Section 135(a) of the 1997 NIRC, as amended, to apply, petitioner must present the following:

1. proof of foreign registry of the international mr 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. 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 As to the first requirement, petltwner presented the Certifications issued by the Civil Aviation Authority of the Philippines (CAAP) dated March 31, 2021 92 and February 22, 2022.93 Later on, another Certificate dated August 12, 2022 was issued to correct some information due to typographical error94 to confirm the countries of registry of the international air carriers to whom the petitioner sold and delivered Jet A-1 fuel, based on the aircraft registration code as provided by such international airline customers and as appearing in the Aviation Service Returns. 95 As to petitioner's international air-carrier customers which are of Philippine registry, namely, Philippine Airlines, Inc., Cebu Air, Inc., and Philippines AirAsia, Inc., petitioner presented the Certification from the Civil Aeronautics Board (CAB) dated March 24, 202196 which certifies that: "a. Philippine Airlines, Inc. has been granted a franchise permit through Presidential Decree No. 1590 from June 11, 1978 to present, b.

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 R.A. 7151 to present; and c.

Philippines

AirAsia, Inc., through its predecessor Asian Spirit, Inc., has been granted a franchise th[rjough Republic Act No. 9183 (R.A. 9183), which was approved on January 09, 2003.

The said airlines are authorized to operate and maintain air transport services in the Philippines and between the Philippines and other countries, and that R.A. 9183, R.A. 7151 and P.D. 1590 authorized Philippines AirAsia, Inc., Cebu Air, Inc. and Philippine Airlines, Inc. to operate international flights from the date of effectivity of R.A. 7151 and P.D. 1590 to present, including the year 20 19."

Considering the said pieces of evidence, the Court finds that petitioner satisfied the first requirement. Proof that the imported Jet A-1 fuel were used or consumed outside the Philippines As to the second requirement, the CAB Certification dated March 24, 202197 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 year 2019. Furthermore, the Aviation Service Returns (ASRs)98 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 each of the ASRs 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 is authorized to operate international flights and its respective country of

registration as indicated in the CAB Certification?? vis-a-vis CAAP Certifications! is shown below:

International Country of

Air Carrier _—s Aircraft Registration No. | Registration B1909, B5167, B5170, B5179, B5236, B5312, B5326, B5328, B5901, B5906, B5912, B5913, B5916, B5919, B5946, B5947,

1. Air China Ltd. B5948, B5956, B5957, B5977, B5978, B6075, B6076, B6080, B6091, B6092, B6101, B6113, B6117, B6503, B8383, B8385, B8386, B8579, B8689 P2PXC, P2PXD, P2PXV, P2PXW Papua New

Guinea

2. Air Niugini Ltd.

QOMAFB, 9MAFC, 9MAFD, 9MAFE, QMAFF, 9MAFV, 9MAFW, 9MAGA, OMAGB, 9MAGC, 9MAGD, Q9MAGE, 9MAGF, 9MAGG, OMAGH, 9MAGI, 9MAGJ, 9MAGK, Q9MAGL, 9MAGM, 9MAGN, 9MAGO, 9MAGP, 9MAGR, Q9MAGS, 9MAGT, 9MAGU, 9MAGV, 9MAGW, 9MAGX, Q9MAGY, 9MAGZ, 9MAHE, 9MAHL, O9MAHS, 9MAHV, 9MAHX, QIMAHY, 9MAHZ, 9MAIP, 9MAJA, 9MAJC, IMAJD, YMAJE, 9MAJG, QMAJH, 9MAJI, YMAJJ, 9MAJK, 9MAJN, YMAJP, 9MAJS, IMAUT, IMAJW, 9MAJX, 9MAJY, YMAJZ, IMAQA, 9MAQB, 9MAQC, Q9MAQF, 9MAQH, 9MAOM, Q9MAON, 9MAQP, 9MAQQ, 9MAOS, 9MAQZ, 9MNEO, QMRAA, 9MRAB, 9MRAC, Q9MRAD, 9MRAE, 9MRAG, 9MRAH, 9MRAI, 9MRAJ, 9MRAK, S9MRAL, 9MRAM, 9MRAO, 9MRAP, IMRAQ, 9MRAR, 9MRAT, 9MVAA, 9MVAB, 9MVAD, 9MYAA, 9VAJG, AK585, 9MXBE, 9MXXA, 9MXXI,

9MXXP

HL7413, HL7415, HL7417, HL7418, HL7428, HL7579, HL7625, HL7626, HL7732, HL7736, HL7739, HL7740, HL7741, HL7746, HL7747, Republic of HL7754, HL7755, HL7756, Korea HL7775, HL7791, HL7793, HL7794, HL8254, HL8258, HL8259, HL8284, HL8286, HL8293, HL8362,— | B15358, B18210, B18301, B18302, B18303, B18305, B18306, B18307, B18308, B18309, B18310, B18311,

3. Air Asia Berhad Malaysia

4. Asiana Airlines, Inc.

5. China Airlines, Ltd. China

B18315, B18316, B18317, B18351, B18352, B18353, B18355, B18356, B18357, B18358, B18359, B18360, B18361, B18610, B18612, B18615, B18617, B18622, B186507, B18651, B18652, B18653, B18655, B18656, B18657, B18658, B18659, B18660, B18661, B18662, B18663, B18665, B18666, B18667, B18701, B18706, B18707, B18708, B18709, B18710, B18711, B18712, B18715, B18716, B18717, B18718, B18719, B18720, B18721, B18722, B18723, B18725, B8655

6. China Eastern Airlines Co., Ltd.

B1033, B1041, B1049, B1066, B1073, B1211, B1520, B1525, B1607, B1615, B1640, B1679, B1680, B1700, B1701, B1736, Bi748, B1781, B1782, B1835, B1860, B1861, B1916, B1917, B1950, B1952, B1953, B2207, B2208, B2290, B2335, B2336, B2337, B2338, B2413, B2419, B300P, B300Q, B300R, B3026, B302G, B302W, B303E, B304C, B304P, B5300, B5586, B5598, B5749, B5902, B5906, B5908, B5920, B5926, B5930, B5931, B5936, B5937, B5938, B5941, B5942, B5943, B5952, B5961, B5968, B5973, B5976, B6001, B6002, B6003, B6008, B6009, B6010, B6012, B6082, B6099, B6370, B6506, B6507, B6537, B6538, B6545, B6559, B6586, B6587, B6591, B6592, B66 16, B6617, B6642, B6668, B67 16, B6753, B6755, B6802, B6831, B6870, B6886, B6925, B6926, B6927, B6951, B7969, B8172, B8230, B8231, B8276, B8360, B8406, B8566, B8571, B8572, B8573, B8575, B8576, B8650, B8652, B8653, B8862, B8863, B8967, B8968, B8970, B8971 B8972, B9900, B9906, B9946, B9947,

7. China Southern Airlines Co., Ltd.

—_ B1520, B1525, B1585, B1700, B1701, B1736, B1737, B1748, B1749, B1781, B1782, B1916, B1917, B1925, B1950, B1952, B1953, B1979, B209D, B209x, B20AA, B20CJ, B2693, B2694, B2695, B2696, B2697, B2725, B2726, B2727, B2732 B2733, B2735, B2736, B2737, B2787, B2788, B5041, B5042, B5067, B5 147, B5149, B5189, B5191, BS192, B5195, B5300, B5340, B5356, B5445, B5446, B5586, B5598, B5609, B5675, B5677,

China

China

B5678, B5698, B5715, B5741, B5745, B5749, B5760, B5917, B5922, B5928, B5939, B5940, B5951, B6086, B6087, B6135, B6502, B6515, B6516, B6526, B6528, B6531, B6532, B6542, B6547, B6548, B7969, B8358, B8360, B8363, B8365, B8426,

B8870

B18667, B18716, B884FD, N101FE, N102FE, N103FD, N103FE, N104FE, N106FE, N107FE, N108FE, N121FE, N132FE, N194FD, N410FE, N522FE, N529FE, N574FE, N584FE, NS88FE, N589FE, N597FE, N598FE, N602FE, N603FE, N605FE, N608FE, N613FE, N617FE, N618FE, N619FE, N621FE, N642FE, N643FE, N844FD, N850FD, N854FD, N855FD, N856FD, N858FD, N859FD, N861FD, N863FD, N865FD, N866FD, N868FD, N869FD, N876FD, N882FD, N885FD, N891FD, N892FD, N893FD, N895FD, N897FD, N914FD, N914FE, N918FD, N919FD, N919FE, N924FD, N946FD, N947FD,

N948FD

QVJSB, 9VJSF, IVJSH, 9VJSL, 9VJSM, 9VJSN, 9VJSO, 9VUSP, 9VJSQ, IVISR, IVISS, 9VJSU 9VJJH, 9VJSA, 9VJSB, 9VJUSF, QVJSH, 9VJSI, 9VISJ, 9VJSK, QVJSL, 9VJSM, 9VJSN, 9VJSO, OVJSP, 9VJSOQ, 9VISR, 9VJSS, QVJISU, IVJSV, 9VISW QVTAN, 9VTAO, 9VTAQ, 9VTAU, OVTAV, 9VTAX, 9VTAZ, 9VTRA, OVTRB, 9VTRC, 9VTRD, 9VTRE, OVTRH, 9VTRI, 9VTRK, YVTRL, OVTRM, 9VTRN, 9VTRO, 9VTRP, OVTRQ, SVTRR, SVTRS, 9VTRT, OVTRU, 9VTRV, 9VTRW, 9VTRX OVMGA, 9VMGB, 9VMGC, OVMGD, 9VMGE, 9VMGF, Q9VMGG, 9VMGH, 9VMGI, 9VMGJ, 9VMGK, 9VMGL, 9VMGM, OVMGN, 9VMGO, 9VMGP, O9VMGQ, 9VMGU, 9VSLL, 9VSLM, OVSLO, 9VSLP, 9VSLQ, 9VSLR,

9VSLS

B1352, B1356, B1566, B1567, B1706, B1707, B1708, B1709, B1749, B1911, B1912, B1913, B1915, B1964, B1966, B1969, B1970, B1971, B2760, B2762, B2763, B2769, B5151, B5152, B5160, B5161, B5162, B5167, B5216, B5218, B5219, B5278, B5279, B5280, B5301, B5302, B5303, B5305, B5306, B5307, B5308, B5355, B5382, B5383,

8. Federal Express Corp.

9. Jetstar Asia Airways Pte., Ltd.

10. Scoot Tigerair Pte., Ltd.

11. Silkair Singapore

Private Limited

ae

12. Xiamen Airline Co., Ltd.

United States of

America

Singapore

Zambia

Singapore

Singapore

China

13. Cebu Air, Inc.

14. Philippine Airasia Inc.

15. Philippine Airlines, Inc. B5385, B5386, B5388, B5435, B5458, B5476, 85487, 85488, 85489,85528,85529,85532, B5533, 85535, B5565, B5595, 55601,55602,55603,55605, B5630, B5631, 85632, B5633, 85635, B5653, 85656, B5657, B5658, 85659,55688,85706, 85707,85750, B5751, 85752, 85788, 85789, B5790, 85791, 85792, B5845, 85847, 86482, 86483, 86485, 86487, B6488, B6489, B6490, B7836, B7838, B7846,B7849 RPC3287, RPC3228, RPC3231, RPC3233, RPC3237, RPC3238, RPC3239, RPC3244, RPC3249, RPC3250, RPC3260, RPC3261, RPC3262, RPC3263, RPC3264, RPC3265, RPC3266, RPC3267, RPC3268, RPC3269, RPC3270, RPC3271, RPC3272, RPC3273, RPC3274, RPC3275, RPC3276, RPC3277, RPC3278, RPC3279, RPC3281, RPC3287, RPC3341, RPC3342, RPC3343, RPC3344, RPC3345, RPC3346, RPC3347, RPC3348, RPC4100, RPC4101, RPC4102, RPC4103, RPC4104, RPC4105, RPC4106, RPC4108, RPC4109, RPC4110, RPC4111, RPC4112, RPC4113, RPC4114, RPC4115, RPC4116, RPC4117, RPC4118, RPC4119, RPC4120, RPC4121, RPC4122 RPC3227, RPC3228, RPC3504, RPC8189, RPC8641, RPC8896, RPC8940, RPC8941, RPC8946, RPC8948, RPC8949, RPC8950, RPC8963, RPC8964, RPC8965,

Philippines

RPC8966, RPC8967, RPC8970, RPC8971, RPC8972, RPC8974, RPC8975, RPC8976, RPC8977, RPC8978, RPC8979, RPC8986,

RPC9948

---- HL7778, RP-C8760, RPC124, RPC3327, RPC3328, RPC3278, RPC3501, RPC3503, RPC3504, RPC3506, RPC3507, RPC3508, RPC7772, RPC7773, RPC7774, RPC7775, RPC7776, RPC7777, RPC7778, RPC7779, RPC7781, RPC7782, RPC8189, RPC8613, RPC8616, RPC8619, RPC8620, RPC8760, RPC8762, RPC8763, RPC8764, RPC8765, RPC8766, RPC8771, RPC8780, RPC8781, RPC8782, RPC8783, RPC8784, RPC8785, RPC8786, RPC8789, RPC8941, RPC8948, RPC8980, RPC9901, RPC9902, RPC9003, RPC9005, RPC9906, RPC9907, RPC9909, RPC9912, RPC9914, RPC9915, RPC9916, RPC9917, RPC9918,RPC9919,RPC9925, 1"'~- RPC9926, RPC9928, RPC9929, RPC9930, RPC9932, RPC9933, RPC9934, RPC9935, RPC9936, RPC9937, RPC9938, Thus, only the sale of imported Jet A-1 fuel to the above enumerated airlines with valid FACP may qualify for the refund or issuance of a tax credit certificate of the erroneously paid excise taxes.

However, the Court finds that petitioner's customer Deutsche Lufthansa Ag was not included in the list with valid FACP. Thus, the sale of 103,716 liters of Jet A-1 fuel thereto, with corresponding excise tax payment of P414,864.00, is disallowed.

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 Finally, as to the third requirement, petitioner presented the following witnesses to explain the process and documentation of the receipts and withdrawals of imported Jet A-1 fuel at petitioner's storage tanks in Tabangao Refinery through the Tabangao Depot and its subsequent delivery to:

(1) Joint Oil Company Aviation Storage Plant at the Ninoy Aquino International Airport in Manila (JOCASP); (2) Clark Aviation Services, Inc. facility in the Clark International Airport in Pampanga (CASI), and (3) storage facility leased from Total Oil and Gas Resources, Inc., formerly the Total Bulk Corporation, near Mactan Cebu International Airport in Mandaue, Cebu (TOGRI) for eventual sale to international earners:

1. Ms.

Anna

Beatriz

Vergel

de Dios, petitioner's Import/ Additives Scheduler; 101

2. Mr. Matias D. Aquiatan, Jr., petitioner's Country Operations Manager for Aviation;102

3. Ms. Berenice Angelique L. Flores, petitioner's Tax Advisor; 1o3 and

4. Mr.

Jonathan

Juanillo, petitioner's

Terminal

Operations Manager at Tabangao Depot.104 Based on their testimonies, the liters of imported Jet A-1 fuel that are stored in product tanks are withdrawn from the Tabangao Refinery to be delivered to intermediate storage facilities in JOCASP, CASI, and TOGRI. Deliveries to JOCASP, CASI and TOGRI are eventually sold and delivered to international mr earners refueling m the international airports. 105 Furthermore, these fuel withdrawn from the Tabangao Refinery and delivered to JOCASP and CASI pass through the Tabangao Depot and are delivered by lorries or tank trucks. Those withdrawn from the Tabangao Refinery and delivered to TOGRI are delivered straight from Tabangao Refinery by barge and do not pass through the Tabangao Depot. Once in JOCASP, CASI and TOGRI, the same are then sold and delivered to international air carriers which are refueling in the international airports.106 The importation, as well as the withdrawal, of Jet A-1 fuel in the Tabangao Refinery are recorded and summarized in the Official Register Book (ORB), 107 which is jointly signed by an authorized representative of petitioner and the Revenue Officer on Premises (ROOP). The ORB indicates the receipts and removals of Jet A -1 fuel for a certain period and the running balance of stored Jet A-1 fuel for that period. lOS Aside from the ORB, removals of Jet A-1 fuel are recorded in the Daily Product Deliveries Report (DPDR) which shows the date of removal of the Jet A-1 fuel, its shipment reference number, the Withdrawal Certificate (WC) covering the same, and the amount of excise tax paid thereon. Before the removal of the imported Jet A-1 fuel from the Tabangao Refinery, the WC 109 is prepared and signed by the ROOP and a representative of petitioner. The WC shows the source of the 103 Exhibit "P-47'', Docket- Vol. I, pp. 297 to 308. 104 Exhibit "P-46", Docket- Vol. II, pp. 570 to 574. 10s Exhibit "P-44" (Q&A No. 50), Docket- Vol. I, pp. 71-72.

Jet A-1 fuel, its destination, the date of its withdrawal, and its volume at the time withdrawn.IIO Upon removal of the imported Jet A-1 fuel from the Tabangao Refinery through the Tabangao Depot for deliveries to JOCASP and CASI or directly from the Tabangao Refinery for deliveries to TOGRI, the Jet A-1 fuel is accompanied by a Bulk Delivery Note (BDN),1 11 which provides the date of the transfer of the imported Jet A-1 fuel, its volume, its source, and its destination.ll2 From JOCASP, CASI and TOGRI, the Jet A-1 fuel is eventually delivered to customer international air carriers via a specialized vehicle which pumps the Jet A-1 fuel directly into the tank of the air carrier. The specialized vehicle is equipped with a meter that determines the volume of Jet A-1 fuel pumped into the air carrier.ll3 The sales and deliveries of imported Jet A-1 fuel to international air carriers are supported by ASRsll4 and petitioner's Invoices. 115 In an ASR, the customer acknowledges the receipt from petitioner of a particular volume of Jet A-1 fuel. On the other hand, the 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.ll6 The ASR is either printed through the Data Capture System (DCS) used by petitioner or manually prepared when the system is down. With the DCS, the details of the delivery are immediately captured by petitioner's computer system, enabling it to generate a report on a daily basis.ll7 A Monthly Supplier Sales Report (MSSR) may be generated by the DCS to summarize the daily deliveries to air carrier customers. It indicates the ASR number and date, the customer, the aircraft registration number, the volume of Jet A-1 fuel delivered to that customer, the destination of the aircraft, and the invoice number, and date. A Daily Product Movement Report Subject to Excise Tax Claim is also liD Exhibit "P-47'' (Q&A No. 14), Docket- Vol. I, p. 300. 111 Exhibits "P-61-1" to "P-61-490", USB. 112 Exhibit "P-47'' (Q&A No. 17), Docket- Vol. I, p. 301. 113 Exhibit "P-47'' (Q&A No. 24), Docket- Vol. I, p. 303. 114 Exhibits "P-68-1" to "P-68-961 ", USB. 11s Exhibits "P-63-1" to "P-63-136", USB. 116 Exhibit "P-47'' (Q&A No. 25), Docket- Vol. I, p. 303. '' 7 Exhibit "P-45" (Q&A No. 22), Docket- Vol. I, pp. 112-113. ~ prepared, which is the summary of all transactions for the day including receipts from Tabangao Refinery. liS Based on the foregoing, the Court finds that petitioner satisfied the third requirement.

In sum, petitioner sufficiently proved that the excise taxes it paid for the imported Jet A-1 fuel and subsequently sold to tax-exempt international air carriers were erroneous and thus, refundable, pursuant to Sections 204 and 229 of the NIRC of 1997, but only in the reduced amount of P70,767,488.00, computed as follows:

Amount of Excise

Volume in

Particulars

Liters

Taxes Paid at

P4.00

Volume/ Amount of Excise Tax Claim per

17,795,588 p 71,182,352.00

Petition for Review

Less: Sales made to international earner without valid FACP 103,716 414,864.00

Volume/ Amount of Refundable Excise

17,691,872 p 70,767,488.00

Taxes

ACCORDINGLY, the present Petition for Review 1s

PARTIALLY

GRANTED.

Respondent

is

ORDERED

TO

REFUND OR ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner the amount of P70,767,488.00, representing petitioner's erroneously paid excise taxes for its imported Jet A-1 fuel sold and delivered to tax-exempt international mr carriers during the period from April to May 20 19.

WE CONCUR:

118 Jd.

C'~ ?·~~----- CATHERINE T. MANAHAN

Associate Justice

~~ f ~-Poj~ MARIAN IW F. RE~S-FAJARDO

Associate Justice

HENRY j/~NGELES

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's Division. ~ iT· A:t.c.o,~·-· ·'""'----- cATHERINE T. MANAHAN

Associate Justice

Chairperson, 3rd Division

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's Division. 0

Presiding Justice