Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue

DECISION

BACORRO-VILLENA, J.:

Before the Court is a Petition for Review1 filed by petitioner Pilipinas Shell Petroleum Corporation (petitioner /PSPC) pursuant to Section 3(a)', Rule 8, in relation to Section 3(a)(2)3, Rule 4, of thet 1 Filed on 12 July 2022, Division Docket, pp. 6-414, with annexes. SEC. 3. Who may appeal; period to file petition. -

(a) A party adversely affected by a decision, ruling or the inaction of the Commissioner of Internal Revenue on disputed assessments or claims for refund of internal revenue taxes, or by a decision or ruling of the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry, the Secretary of Agriculture, or a Regional Trial Court in the exercise of its original jurisdiction may appeal to the Court by petition for review tiled within thirty days after receipt of a copy of such decision or ruling, or expiration of the period fixed by law for the Commissioner of Internal Revenue to act on the disputed assessments. In case of inaction of the Commissioner of Internal Revenue on claims for refund of internal revenue taxes erroneously or illegally collected, the taxpayer must file a petition for review within the two-year period prescribed by law from payment or collection of the taxes. (Emphasis and underscoring supplied) SEC. 3. Cases within the jurisdiction of the Court in Division. - The Court in Division shall exercise:

(a) Exclusive original over or appellate jurisdiction to review by appeal the following:

(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code or

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

Revised Rules of the Court of Tax Appeals4 (RRCTA). It seeks a refund in the aggregate amount of P18,9o8a7o.oo, which allegedly represents excise taxes paid on petroleum products sold to Shell Philippines Exploration, B.V. (SPEX), an entity exempt from excise tax, covering the period from July to November 202o.s

PARTIES TO THE CASE

Petitioner is a corporation organized and existing under the laws of the Philippines with office address at 41st Floor, The Finance Center, 26th Street corner 9th Avenue, Bonifacio Global City, Brgy. Fort Bonifacio, Taguig City, Metro Manila, 1635.6 It is engaged, among others, in the business of manufacturing, processing, treating and refining petroleum for the purpose of producing marketable products and by-products and the subsequent sale thereof.7 Through its own refinery in Tabangao, Batangas (the "Tabangao Refinery"), petitioner generally produces, and sometimes imports, various petroleum products, including automotive diesel oil (ADO), which petitioner sells and delivers to different customers, such as SPEX.

Respondent, on the other hand, is the duly appointed Commissioner of Internal Revenue (respondent/CIR), who is tasked to assess and collect all national internal revenue taxes, fees, charges, and enforce all forfeitures, penalties, and fines connected therewith. He or she holds office at the Bureau of Internal Revenue (BIR) t other applicable law provides a specific period for action: Provided, that in case of disputed assessments, the inaction of the Commissioner of Internal Revenue within the one hundred eighty day-period under Section 228 of the National Internal Revenue Code shall be deemed a denial for purposes of allowing the taxpayer to appeal his case to the Court and does not necessarily constitute a formal decision of the Commissioner of Internal Revenue on the tax case; Provided, further, that should the taxpayer opt to await the final decision of the Commissioner of Internal Revenue on the disputed assessments beyond the one hundred eighty day-period abovementioned. the taxpayer may appeal such final decision to the Court under Section 3(a), Rule 8 of these Rules; and Provided, still further, that in the case of claims for refund of taxes erroneously or illegally collected, the taxpayer must file a petition for review with the Court prior to the expiration of the two-year period under Section 229 of the National Internal Revenue Code[.] (Emphasis and underscoring supplied) A.M. No. 05-11-07-CTA dated 22 November 2005. Summary of the Case, Pre-Trial Order dated May 26, 2023, Division Docket, Volume I, p. 523. See Certificate of Filing of Amended Articles of Incorporation (AOI) dated 25 January 2019 (with attached Amended AOI), Exhibit "P-23'', id., Volume II, pp. l 077-1091. Paragraph 4, Statement of Facts, Petition for Review, supra at note 1, p. 7.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

National Office Building, Agham Road (now, Senator Miriam P. Defensor-Santiago Avenue), Diliman, Quezon City.8

FACTS OF THE CASE

From July to November 2020, petitioner imported ADO through its Tabangao Refinery, paying the corresponding excise taxes therefor, as follows:

Single

Vessel

Administrative

SAD Date

Volume

Amount of

Payment Date

Document

Paid

Excise Tax

(SAD) No.

Mt. Silver Ebalina c 1015182.9 10 July zozo 48·353.795 1"290,122,770.00

13 July 2020

Mt. CSC Amethyst c 1015645'0 21 July zozo 48,428-434 zgo,s7o,6o4.oo 24 July zozo Mt. Oriental Gold C 1016o8t1

03 August 2020

48,521,)25 291,127,950.00 04 August zozo Mt. Songa Diamond c 101655112 u August 2020 I6,{IJ,202 98-479,212.00 12 August :wzo Mt. Everhard Schulte c 1016951 13 19 August zozo 16,160,837 g6,g6s,ozz.oo zo August zozo Mt. Silver Hannah c 1017284'4 26 August zozo 48,956,142 293.736,852.00 27 August zozo Mt. Jason c 1018385'5 17 September zozo 46·548,029 279,288,174·00 18 September zozo Mt. CSC Peace c 10188gg'6

29 September 2020

J1,428,zoo t88,s6g,2oo.oo

30 September 2020

Mt. Nave Atria c 101960417

13 October 2020

49,597,o58 297,582,348.oo

14 October 2020

Mt. BWYangtze c 1020)2418

04 November 2020

5o,68o,348 304,082,o88.oo o6 November 2020 Mt. MR Leo c 102098919

13 November 2020

26,786,123 160,716, 738.oo

16 November 2020

Petitioner alleges that a portion of imported and excise tax-paid ADO was subsequently sold and delivered to SPEX during the period from July to November 2020. Petitioner withdrew said ADO from the Tabangao Re_finery and delivered it to SPEX pursuant to these transactions. t 10

II

"

IJ

14 15 16 18 19 Par. 1, 1. Stipulation of Facts. Joint Stipulation of Facts and Issues (JSFI). Division Docket. Volume I. p. 507.

Exhibit "P-I-3", id .• Volume II, p. 841. Exhibit "P-2-3", id .• p. 853.

Exhibit "P-3-3". id .• p. 866.

Exhibit "P-4-3". id .• p. 878.

Exhibit "P-5-3'', id., p. 890.

Exhibit "P-6-3", id., p. 902.

Exhibit "P-7-3", id .• p. 9I2.

Exhibit "P-8-3", id .• p. 924.

Exhibit "P-9-3", id .• p. 936.

Exhibit "P-I0-3", id., p. 948.

Exhibit "P-II-3", id., p. 960.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

Since SPEX enjoys exemption from excise tax on purchases of ADO as a petroleum service contractor of the government under Service Contract No. 3820 ("SC 38"), petitioner further alleges that sales and deliveries of ADO to SPEX excluded excise taxes and were made net of such taxes. Petitioner accordingly received payment from SPEX for ADO sold net of excise taxes. Petitioner nonetheless paid excise taxes on ADO sold to SPEX.

Thus, on o8 July 2021, petitiOner filed a letter-application for refund or tax credit dated 27 May 2021 21 , together with the corresponding Application for Tax Credit/Refund (BIR Form No. 1914)22 (administrative claim), with the BIR's Excise Large Taxpayers Audit Division II (ELTAD II). Petitioner sought the recovery of excise taxes allegedly paid from July to November 2020 on ADO sold to SPEX, in the aggregate amount of'P18,9o8,37o.oo, computed as follows:

Period

Volume in

Excise Tax

Liters

Paid

July 2020

411,600 l"2,469,6oo.oo

August 2020

596,232 3·577.392.00

September 2020

646,824 3,88o,944·oo

October 2020

411,752 2,470,512.00

November 2020

1,084,987 6,509,922.00

TOTAL

3·151>395 PI8,908,J70.00

PROCEEDINGS BEFORE THE COURT

Alleging respondent's inaction on its claim for refund or issuance of a tax credit certificate (TCC), on 12 July 2022, petitioner filed its Petition for Review23, praying, among others, that judgment be rendered declaring it entitled to a refund of, or issuance of a TCC for, the aggregate amount of P18,9o8,370.oo. The amount represents the . excise taxes that petitioner paid on ADO sold to a tax-exempt entity, t 20 22 Exhibits "P-17'' (Original Computer Printout) and "P-17-1" (Certified True Copy), id., pp. 978- 998 and 999-1064, respectively.

Exhibit "P-22", id., Volume II, pp. 1074-1075. Exhibit "P-22-1", id., p. 1076.

Supra at note I.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue i.e., SPEX, from July to November 2020. The case was docketed as CTA Case No. 10914 and raffled to the Second Division.24 On 17 August 2022, the Second Division issued Summons25 to respondent directing him or her to submit an Answer within 30 days from service. Respondent received the said Summons on 25 August 2022.26 After the Second Division granted an extension of timez7, respondent filed his or her Answer. 28 There, respondent cited the following special and affirmative defenses: (1) petitioner is not entitled to the refund of the subject excise taxes paid from July to November 2020 on its imported and locally-produced ADO that were allegedly subsequently sold and delivered to a tax-exempt entity; and (2) a claim for refund of excise taxes paid is authorized only under Section 13o(D) 29 of the National Internal Revenue Code (NIRC) of 1997, as amended.

On 27 October 2022, the Second Division issued a Notice of Pre-Trial Conference3°, setting the Pre-Trial Conference on 09 March 2023. Accordingly, on o6 March 2023, petitioner filed its Pre-Trial Briefl', while respondent filed his or her Pre-Trial Briefl

2 on 09 March

2023. Meanwhile, on 27 January 2023, respondent transmitted to the Second Division the present case's BIR Records, consisting of 392 pagest 24 27 30 31 32 The Second Division is composed of Associate Justice Erlinda P. Uy (Ret.), as Chairperson, and Associate Justice Jean Marie A. Bacorro-Villena and Associate Justice Lanee S. Cui-David, as Members.

Division Docket, Volume I, p. 417.

See Summons dated 17 August 2022, id.

See Order dated 29 September 2022, id., p. 424. Filed on 20 October 2022, id., pp. 425-436. SEC. 130. Filing of Return and Payment of Excise Tax on Domestic Products.- (D) Credit for Excise Tax on Goods Actual/y Exported. - When goods locally produced or manufactured are removed and actually exported without returning to the Philippines, whether so exported in their original state or as ingredients or parts of any manufactured goods or products, any excise tax paid thereon shall be credited or refunded upon submission of the proof of actual exportation and upon receipt of the corresponding foreign exchange payment Provided, That the excise tax on mineral products, except coal and coke, imposed under Section 151 shall not be creditable or refundable even if the mineral products are actually exported. (Emphasis supplied) Division Docket, Volume I, pp. 438-439.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue in one (1) folder.33 The Second Division noted the same in the Minute Resolution dated 30 January 2023.34 At the scheduled Pre-Trial Conference on 09 March 2023, the Second Division granted the parties a thirty (3o)-day period to file their Joint Stipulation of Facts and Issues (JSFI).3s Within the extended period granted by the Second Division36, on 20 April 2023, the parties filed their JSFIY On 11 April 2023, petitiOner filed a "Motion to Avail of the Provisions of Section 5, Rule 12 of the [RRCTA]"38 (Motion for Commissioning), requesting the appointment

of Hazel

D.

Pangandian-Tabamo (Pangandian-Tabamo) of Roxas Cruz Tagle and Co., as the Independent Certified Public Accountant (ICPA). In the Resolution dated 11 May 202339, the Second Division approved the parties' JSFI, declared the pre-trial terminated, and set the possible commissioning of petitioner's ICPA and the initial presentation of petitioner's evidence on 11 July 2023 and 27 July 2023, respectively. Subsequently, on 26 May 2023, the Second Division issued a Pre-Trial Order4°, again confirming its approval of the JSFI and formally declaring the pre-trial proceedings terminated. Subsequently, in view of the reorganization of the three (3) Divisions of the Court effective 29 May 20234\ the present case was transferred to the First Division.42 In the trial that ensued thereafter, petitioner presented its _ testimonial and documentary evidence. It offered the testimonies oft )) 34 35 36

J7

38 39 40 41 See Compliance dated 27 January 2023, id., pp. 440-442. ld., p. 444.

See Minutes of the Hearing and Order, both dated 09 March 2023, id., pp. 463 and 464-465, respectively.

See Resolution dated 20 April 2023, id., p. 506. !d., pp. 507-519.

!d., pp. 472-484, with annexes.

ld., p. 521.

ld., pp. 523-529.

See Notice dated 29 May 2023, id., p. 530. The First Division is composed of Presiding Justice Roman G. Del Rosario (Ret.), as Chairperson, and Associate Justice Jean Marie A. Bacorro-Villena and Associate Justice Lanee S. Cui-David, as Members.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue the following witnesses: (1) Anna Beatriz M. Verge! DeDios (DeDios), petitioner's Import/Additives Scheduler; (2) Alfonso Paolo F. DelaCruz (Dela Cruz), petitioner's Supply Scheduler; (3) Berenice Angelique L. Flores (Flores) petitioner's Senior Tax Adviser; (4) Atty. Farida Nimfa G. Dimailig (Atty. Dimailig) petitioner's Country Tax Manager; and

(s) ICPA Pangandian-Tabamo. During the os September 2023 hearing, petitioner presented the testimonies of its witnesses, DeDios and Dela Cruz.43 De Dios' testimony was offered to prove the following: (1) the process and document flow in connection with petitioner's importation of ADO from July to November 2020, the payment of taxes thereon, the withdrawal of such imported ADO from petitioner's Tabangao Refinery, and the sale and delivery thereof to various customers, including SPEX;

(2) the circumstances relating to petitioner's importation of ADO for the period from July to November 2020; (3) payment of the corresponding customs duties, excise taxes and fees on said importations and withdrawals of ADO; (4) correlation between the arrival of ADO importations during period from July to November 2020 and the withdrawals or removals of ADO sold and delivered to SPEX during the same period; and (s) that imported ADO sold and delivered to SPEX during the period from July to November 2020 originated from importations subject of the instant refund claim.44 On cross-examination, De Dios noted that petroleum products stored in the product tanks at petitioner's Tabangao Refinery are mixed together and there is no specific designation for each importation.45 43 45 46 Petitioner did not conduct any redirect examination.46t See Minutes of the Hearing and Order, both dated 05 September 2023, Division Docket, Volume II, pp. 586-A to 586-E and 586-G to 586-J. See Judicial Affidavit of Anna Beatriz Vergel de Dios dated 09 July 2022, Exhibit "P-25'', id., Volume I, pp. 130-296, with attached exhibits. TSN dated 05 September 2023, pp. 22-23.

Id., p. 23.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

Petitioner's next witness, Dela Cruz, testified to establish the following: (1) process and documentation governing withdrawals of ADO from petitioner's Tabangao Refinery and the subsequent sale and delivery thereof to SPEX; and (2) that ADO imported through and withdrawn from the Tabangao Refinery during the period from July to November 2020 was assessed excise taxes that petitioner paid and that ADO subsequently sold and delivered to SPEX originated from imported petroleum products subject of the instant refund claim.47 On cross-examination, Dela Cruz confirmed that once petroleum products are stored in tanks, Coco Methyl Ester (CME) is thereafter added. However, when asked how he informed the Bureau of Customs (BOC) of specific petroleum products withdrawn when individual importations become commingled with other importations, he stated that he did not know.48 Petitioner did not conduct any redirect examination.49 In another hearing held on 14 September 2023, petitioner presented the testimonies of its witnesses, Flores and Atty. Dimailig.so Flores testified to prove the following: (1) petitioner's general procedure and flow of documents on the importation and withdrawals of petroleum products, particularly ADO, for sale and delivery to various customers, including SPEX, as well as the payment of excise taxes thereon; (2) its general procedure and the flow of documents on its claim for refund or tax credit of excise taxes paid on the sale and delivery of ADO to tax-exempt entities like SPEX; (3) correlation between the withdrawals or removals of ADO imported for the period from July to November 2020 through petitioner's Tabangao Refinery and the sale and delivery thereof to SPEX within the same period;

(4) ADO sold and delivered to SPEX from July to November 2020 originated from imported ADO on which taxes were paid during the same period; (s) prices of ADO billed to tax-exempt entities like SPEX _ are net of excise taxes; and (6) filing with the BIR, through the ELTADt 47 See Judicial Affidavit of Alfonso Paolo F. Dela Cruz dated 12 April 2023, Exhibit "P-26", 48 50 Division Docket, Volume I, pp. 494-504, with attached exhibits. TSN dated 05 September 2023, pp. 27-28.

I d., p. 28.

Minutes of the Hearing and Order, both dated 14 September 2023, Division Docket, Volume II, pp. 732-735 and 736-738, respectively.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

II, on o8 July 2021, of the administrative claim for refund or tax credit of excise taxes paid on ADO imported during the period from July to November 2020 and sold and delivered to SPEX during the same periodY Petitioner did not conduct any cross-examinationY As for Atty. Dimailig, she testified to the following: (1) petitioner is entitled to the instant claim for refund or tax credit of excise taxes paid on the ADO's importations and withdrawals for the period from July to November 2020, which ADO was subsequently sold to SPEX during the same period; and (2) the sale of ADO to SPEX for use in its petroleum operations in the Philippines is exempt from excise tax pursuant to Presidential Decree (PD) No. 8753, as amended, in relation to Section 13554 of the NIRC of 1997, as amended.55 Petitioner did not conduct any cross-examination. 56 On 20 October 2023,

Pangandian-Tabamo's Report57

the First Division received of even date, along with a 51 53 54 55 57 58 See Judicial Affidavit of Berenice Angelique L. Flores dated 09 July 2022, Exhibit "P-27", id., Volume I, pp. 308-366, with attached exhibits; Supplemental Judicial Affidavit of Berenice Angelique L. Flores dated 08 September 2023, Exhibit "P-27-2", id., Volume II, pp. 591-661, with attached exhibit.

TSN dated 14 September 2023, p. 11.

TilE OIL EXPLORATION AND DEVELOPMENT ACT OF 1972. 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. (Emphasis supplied) See Judicial Affidavit of Farida Nimfa G. Dimailig dated 12 July 2022, Exhibit "P-28", Division Docket, Volume I, pp. 367-414, with attached exhibits; Supplemental Judicial Affidavit of Farida Nimfa G. Dimailig dated 08 September 2023, Exhibit "P-28-2", Division Docket, Volume II, pp. 662-731, with attached exhibit.

TSN dated 14 September 2023, p. 17.

Exhibit "P-67", Division Docket, Volume II, pp. 740-776. Exhibit "P-67-2".

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue containing related exhibits and annexes. The First Division noted this submission in a Minute Resolution dated 27 October 2023.59 On o8 November 2023, petitioner presented the testimony of its last witness, ICPA Pangandian-Tabamo.60 She attested to the following: (1) performance of her functions as an officer of the Court appointed to conduct an audit examination in relation to these consolidated cases, pursuant to Section 5, Rule 12 and Rule 13 of the RRCTA; (2) as ICPA, she examined petitioner's supporting documents and summarized her findings in her ICPA Report dated 20 October 2023; (3) petitioner imported ADO from July to November 2020 and sold them to SPEX within the same period; (4) petitioner paid the excise tax for the subject ADO sold to SPEX; and (5) the subject ADO was actually sold to SPEX for the period from July to November 2020 in relation to the contract of SPEX as a service contractor of the government under SC 38.61 During cross-examination, ICPA Pangandian-Tabamo explained that Proforma Invoices serve merely as proof of purchase that initially triggered importations of ADO which, in turn, became the basis for the claim for excise tax refund. She clarified that the ADO's supplier issued these invoices. When asked about her declaration that screenshots of General Ledger (GL) postings supported the Statements of Settlement of Duties and Taxes (SSDTs), she confirmed that she personally reviewed the GL postings in the accounting system and verified that these matched descriptions reflected in printed copies by comparing them against system records. 62 Petitioner did not conduct any redirect examination.63 On 04 December 2023, after completing the presentation of its testimonial evidence, petitioner filed its Formal Offer of Evidence64 _

(FOE)

consisting of Exhibits

"P-1"

to "P-67-2", inclusive oft 59 60 61 6] 64 Division Docket, Volume II, p. 793.

See Order dated 08 November 2023, id., pp. 796-798. See Judicial Affidavit of Hazel D. Pangandian-Tabamo dated 20 October 2023, Exhibit "P-66", id., pp. 781-787.

TSN dated 08 November2023, p. 9.

!d.

Division Docket, Volume II, pp. 807-837.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue sub-markings. On 07 December 2023, respondent filed his or her Comment65 thereto.

In the Resolution dated 19 February 202466 (FOE Resolution), the First Division admitted petitioner's exhibits, except Exhibit "P-2o"67, for failure to correspond with the description in the FOE. Additionally, the Court noted that Exhibits "P-q" and "P-q-1"68 lack specific indications that they pertain to SC 38 and that Exhibits "P-29" and "P-67'' both pertain to the ICPA Report, and scheduled the initial presentation of respondent's evidence on 16 April2024. On 14

March

2024, petitioner filed a

Motion

for Reconsideration69 (MR) of the FOE Resolution70, requesting the reconsideration of the denial of, or the admission of, Exhibit "P-2o". Respondent filed his or her Comment7 1 thereto on 01 April 2024.

In the Resolution 13 June 202472, the First Division granted petitioner's MR after finding sufficient basis to confirm that the payment details in Exhibit "P-2o" relate to petitioner's sale of ADO to SPEX.

On o6 August 2024, respondent presented his or her lone witness, Revenue Officer (RO) Angelika Arugay (Arugay).73 RO Arugay testified to the following: (1) she holds the position of RO I and was then assigned to the BIR's ELTAD II; (2) her duties include the investigation or examination of all internal revenue tax cases; (3) she reviewed and evaluated petitioner's claim for refund on . imported and locally-produced ADO allegedly sold and delivered tot 65 66 67 68 69 70 71 7) !d., pp. I 092-1094.

!d., pp. 1101-1103.

Although the FOE describes this exhibit as a "Sample of reports generated through SAP showing payment details on ADO sold to SPEX," the marked document fails to show that posting date, amount, and bank order reference pertain to payments for ADO sold to SPEX, as the document contains no reference to either ADO or SPEX. Supra at note 20.

Division Docket, Volume II, pp. 1104-1107. Supra at note 66.

Division Docket, Volume II, pp. 1109-1111. !d., Volume Ill, pp. 1117-1120.

See Minutes of the Hearing and Order, both dated 06 August 2024, id., pp. 1143-1145 and 1146- 1147, respectively.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

SPEX, a tax-exempt entity, in the total amount of f'18,9o8,37o.oo;

(4) Letter of Authority (LOA) SN: eLA2o2ooooo3894 I LOA-124-2022- oooooo46 dated 01 April 202274 authorized the audit of petitioner's excise tax refund claim, and she was part of the team assigned to conduct said audit; (5) in the Memorandum Report dated 16 November 202275, his team recommended the denial of petitioner's refund claim for failure to comply with the mandatory requirements prescribed under the provisions of Section 13576 of the NIRC of 1997, as amended; and (6) Officer-In-Charge Assistant Commissioner for Large Taxpayers Service Jethro M. Sabariaga (OIC-ACIR Sabariaga) approved her team's recommendation, leading to the issuance of the Denial Letter dated 26 January 202677, which was served on petitioner through registered maiF8 on 02 February 2023.79 On cross-examination, RO Simon confirmed that the list of supporting documents enumerated under Revenue Memorandum Order (RMO) No. 19-2oo680 does not constitute an exhaustive list. She answered in the affirmative when asked to clarity if this would mean that petitioner may submit other documents to establish that petroleum products delivered to international or tax-exempt carriers were sold net of excise tax. She further attested that she examined importation documents submitted by petitioner, sales invoices issued to SPEX, and proofs of payment made by SPEX. She likewise acknowledged that ADO subject of this case was sold to and paid for by SPEX.81 Petitioner did not conduct any redirect examination.82 On 07 August 2024, respondent filed his or her FOE83, consisting of Exhibits "R-1" to "R-4", inclusive of a _sub-marking. Petitioner filed a Comment84 thereto on 12 August 2024. t 74 75 76 77 78 79 80 " 82 83 Exhibit "R-1 ", BIR Records, Folder 2, p. 375. Exhibit "R-2", id., pp. 389-398.

Supra at note 54.

Exhibit "R-3", BIR Records, Folder 2, pp. 425-426. Exhibit "R-3-1 ", id., pp. 423-424.

See Judicial Affidavit of Revenue Officer Angelika Arugay dated 12 July 2024, Exhibit "R-5", Division Docket, Volume III, pp. 1128-1137. Prescribing the Guidelines and Procedures for the Processing of Pending Claims for Tax Credit/Refund of Excise Tax paid on Petroleum Products. TSN dated 06 August 2024, pp. 8-10.

!d., p. 10.

Division Docket, Volume 111, pp. 1152-1156.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

In the Resolution dated 13 November 202485, the First Division admitted all of respondent's exhibits and granted both parties a period of 30 days from notice within which to file their respective memoranda.

In compliance with the Court's directive, on 16 December 2024, respondent filed his or her Memorandum86, while petitioner filed its Memorandum87 on 23 December 2024.

In a Minute Resolution dated 17 January 2025, the First Division considered the instant case submitted for decision.88

ISSUES

As the parties so stipulated, the sole tssue for this Court's resolution is -

WHETHER

PETITIONER

PILIPINAS

SHELL

PETROLEUM

CORPORATION IS ENTITLED TO ITS CLAIM FOR REFUND IN THE AMOUNT OF Pt8,9o8,37o.oo FOR THE ALLEGED EXCISE

TAXES PAID ON PETROLEUM PRODUCTS SOLD TO SHELL

PHILIPPINES EXPLORATION, B.V. FOR THE PERIOD FROM JULY TO NOVEMBER 2o2o8 9

ARGUMENTS

Petitioner asserts that it timely filed a claim for refund or tax credit of excise taxes erroneously, wrongfully, illegally, or excessively collected for excise taxes paid during the period from July to November . 2020, pursuant to Sections 204(C)90 and 2299' of the NIRC of 1997, ast 84 ld .• pp. 1160-1162.

ss I d., pp. 1167-1168.

86 I d., pp. 1169-1190.

s7 Id.,pp.1192-1221.

88 ld., p. 1223.

89 Par. 2, II. Stipulation of Issues, JSFI, supra at note 37, p. 508. 90 SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. ~ The Commissioner may-

(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 • '

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue amended. Petitioner further argues that it is entitled to recovery of excise taxes in amount of P18,go8a7o.oo paid during the period from July to November 2020 on ADO sold to SPEX, on grounds that:

(a) petitioner previously paid excise taxes on petroleum products (i.e., imported ADO) sold to a tax-exempt entity, particularly SPEX;

(b) petitioner sold excise tax-paid imported ADO to a tax-exempt entity free or net of excise tax; and (c) petitioner's sale of imported ADO to SPEX enjoys exemption from excise tax. Respondent, on the other hand, contends that petitioner is not entitled to the refund of excise taxes allegedly paid during the period from July to November 2020 on imported and locally produced ADO that petitioner allegedly sold and delivered to a tax-exempt entity, particularly SPEX, in amount of P18,go8,370.oo. Respondent further asserts that denial of petitioner's administrative claim for refund rests on sound factual and legal grounds. Respondent likewise maintains that the authority to grant refund of excise taxes arises only under Section 13o(D)92 of the NIRC of1997, as amended.

RULING OF THE COURT

After a careful and thorough evaluation of the parties' respective evidence and the applicable laws,_ rules and regulations, the Court finds the instant petition meritorious. t 91 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.

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 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. Supra at note 29.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

Both Sections 204(C) and 229 of the NIRC of 1997, as amended, deal with the refund of erroneously or illegally collected taxes. Particularly, Section 204(C) applies to administrative claims, while Section 229 to judicial claims.93 Section 204(C) of the NIRC of 1997, as amended, provides:

SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. - The Commissioner may - (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.94 Relative thereto, Section 229 of the NIRC of 1997, as amended, reads:

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 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 t See CBK Power Company Limited v. Commissioner of Internal Revenue, G.R. Nos. 193383-84 & 193407-08, 14 January 2015.

Emphasis supplied and italics in the original text.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue 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.9s In Commissioner of Internal Revenue v. Carrier Air Conditioning Philippines, Inc. 96, the Supreme Court ruled as follows: Sections 204 and 229 fixed the same period of two years for filing an administrative claim for refund before the Bureau of Internal Revenue and to sue before the Court of Tax Appeals. CBK Power Company explained that as long as these two acts fall within the two-year period, there is no legal impediment to the judicial claim for refund.

Consequently, from the plain language of the law, it does not matter how far apart the administrative and judicial claims were filed, or whether the Commissioner of Internal Revenue was actually able to rule on the administrative claim, so long as both claims were filed within the two-year prescriptive period. The afore-quoted provisions are clear. Within two (2) years from the date of payment of the tax or penalty, the taxpayer-claimant must first file an administrative claim with respondent before filing a judicial claim before this Court. Both claims must be filed within a two (2)-year reglementary period. Timeliness of the filing of the claim is mandatory and jurisdictional; hence, this Court cannot take cognizance of a judicial claim for refund filed either prematurely or out of time.97 Thus, so long as the judicial claim was filed within two (2) years from the date of payment of the tax or penalty, and within such period, an administrative claim was filed before filing such judicial claim, this Court has jurisdiction to entertain the latter. Moreover, the foregoing 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 U 95 Emphasis supplied and italics in the original text.

<J6

G.R. No. 226592, 27 July 2021; Citation omitted and italics in the original text. 97 Commissioner of Internal Revenue v. San Miguel Corporation, G.R. Nos. 180740 & 180910, II November2019.

Vessel

Mt. Silver Ebalina Mt. CSC Amethyst Mt. Oriental Gold

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue subject to taxation, or by some officer having no authority to levy the tax, or one which is some other similar aspect is illegaJ.98 Thus, for the subject claim for refund to prosper, petitioner must not only establish that it has timely filed its refund claim, but it must also prove that the subject excise tax paid is an "erroneous or illegal tax."

PETITIONER

TIMELY

FILED

ITS ADMINISTRATIVE AND JUDICIAL

CLAIMS.

The case records show that, from July to November 2020, petitioner imported ADO through the Tabangao Refinery and paid the corresponding excise taxes thereon, as follows: SAD No.

SAD Date

Volume Paid

Rate

Amount of

Payment Date

(in Liters)

Excise Tax

(101518299

10 July 2020

48>353.795 r'6.oo P2gO,l22,770.00

13 July 2020 100

C1ms645' 0 '

21 July 2020

48,428,434 6.00 P2go,57o,6o4.oo 24 July :w:wto~ 291,107,202,00

04 August 2020 104

Cwt6o87'03

03 August 2020

48,521,)25 6.00 20,748.oo 18 September zozo' 0 5 Pzgr,I27,950.oo 98,469.}00.00

12 August 2020107

Mt. Songa Diamond (1016551106 n August 2020 !6,413,202 6.00 9,912.00 o6 October zozo108 Mt. Everhard Schulte 99 100 101 1 o:::

I 03

104 105 106 107 108 '" 110 Pg8.479,212.oo Cwt6gst109

19 August 2020

16,160,8)7 6.oo 96.747.624-00

20 August 2020'' 0

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

p. 486. Exhibit "P·l·3", supra at note 9.

See Statement of Settlement of Duties and Taxes (SSDT) with Customs Reference No. Cl 015182, Exhibit "P-1-4". Division Docket, Volume II, p. 842. Exhibit "P-2-3", supra at note 10.

See SSDT with Customs Reference No. CIOI5645, Exhibit "P-2-4", Division Docket, Volume II,

p. 854. Exhibit "P-3-3", supra at note II; Exhibit "P-46", Page 3 of 10, USB (Exhibit "P-67-2"). See SSDT with Customs Reference No. CIOI6087, Exhibit "P-3-4", Division Docket. Volume II,

p. 867. See Official Receipt (OR) dated 18 September 2020, Exhibit "P-3-9", id., p. 874. Exhibit "P-4-3", supra at note 12; Exhibit "P-46", Page 4 of 10. USB (Exhibit "P-67-2"). See SSDT with Customs Reference No. CIOI6551, Exhibit ·'P-4-4", Division Docket, Volume II.

p. 879. See OR dated 06 October 2020, Exhibit "P-4-9". id., p. 886; Exhibit "P-47'' Page 4 of 10, USB (Exhibit "P-67-2").

Exhibit "P-5-3"", supra at note 13; Exhibit "P-46", Page 5 of 10, USB (Exhibit "P-67-2"). See SSDT with Customs Reference No. Cl 016951, Exhibit "P-5-4", Division Docket, Volume II,

p. 891. -

Vessel

Mt. Silver Hannah Mt. Jaso·n Mt. CSC Peace Mt. Nave Atria 'Mt. BW Yangtze Mt. MR Leo

Total

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

SAD No.

SAD Date

Volume Paid

Rate

Amount of

Payment Date

(in Liters)

Excise Tax

217,398.oo o6 October 2020m P96,96s,ozz.oo C1017284m 26 August zozo 48,956,142 6.00 293.736,852.00 27 August zozoliJ 279,177.474-00 18 September zozous Cm183s5u4 17 September zozo 46,548,029 6.00 110,700.00 17 November zozou6 f'279 1288,174•00 Cim88gg117

29 September 2020

}1,428,200 6.00 P188,s6g,zoo.oo 30 September zozou8 294A99as6.oo 14 October zozo'20 C1mg6o4u9

13 October 2020

49.597,058 6.00 J,o8z,ggz.oo

02 December 2020 121

P297•582,348.oo (1020524122

04 November 2020

50,680,348 6.00 PJo4,o82,o88.oo o6 November 202012l (1020989124

13 November 2020

26,786,123 6.00 P16o,716,738.oo

16 November 2020125

431,873,493 P2,591,24o,gs8.oo The following are the pertinent dates relative to petitioner's claim for refund or tax credit, viz:

Ill

112

II J

114 115 116 117 118 119 120 121 122 123 124 125 126 127

Two (2)-Year

Date of

Date of Payment

Administrative

Prescriptive Period

Claim

13 july 2020 13 july 2022 24 july 2020

24 July 2022

04 August zozo

04 August 2022

o8 July 2021'26 18 September zozo

18 September 2022

12 August zozo 12 August zozz See OR dated 06 October 2020, Exhibit "P-5-9", id., p. 898. Exhibit "P-6-3", supra at note 14.

Date of judicial

Claim

12 July 2022 127

See SSDT with Customs Reference No. CI0\7284, Exhibit "P-6-4". Division Docket, Volume II,

p. 903. Exhibit "P-7-3'", supra at note 15; Exhibit "P-46". Page 6 of I 0, USB (Exhibit "P-67-2""). See SSDT with Customs Reference No. C\018385, Exhibit "P-7-4''. Division Docket, Volume II,

p. 913. See OR dated 17 November 2020, Exhibit "P-7-9", id .• p. 920; Exhibit "P-47" Page 6 of 10, USB (Exhibit "P-67-2").

Exhibit "P-8-3". supra at note 16.

See SSDT with Customs Reference No. C I 018899. Exhibit "P-8-4", Division Docket, Volume 11,

p. 925. Exhibit "P-9-3", supra at note 17; Exhibit "P-46", Page 8 of I 0, USB (Exhibit "P-67-2"). See SSDT with Customs Reference No. CIOI9604, Exhibit "P-9-4". Division Docket. Volume II,

p. 937. See OR dated 02 December 2020, Exhibit "P-9-9". id .• p. 944. Exhibit "P-1 0-3", supra at note 18.

See SSDT with Customs Reference No. C I 020524, Exhibit "P-I 0-4", Division Docket, Volume 11,

p. 949. Exhibit "P-11-3", supra at note 19.

See SSDT with Customs Reference No. C\ 020989, Exhibit "P-11-4", Division Docket, Volume 11,

p. 961. Exhibits "P-22" to "P-22-1 ", supra at notes 21 and 22. Supra at note I.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

Two (2)-Year

Date of

Date of Payment

Administrative

Prescriptive Period

Claim

o6 October zozo o6 October 2022 zo August zozo zo August 2022 o6 October zozo o6 October zozz 27 August zozo

27 August 2022

18 September 2020

18 September 2022

17 November zozo

17 November 2022

30 September 2020

30 September 2022

14 October zozo 14 October zozz oz December zozo oz December zozz o6 November zozo o6 November zozz 16 November zozo 16 November zozz Date ofJudicial

Claim

Based on the foregoing, petitioner's earliest excise tax payment for importations made during the period from July to November 2020 occurred on 13 July 2020. Counting two (2) years therefrom, the last day for petitioner to file its administrative and judicial claims for refund fell on 13 July 2022. Accordingly, petitioner timely filed its administrative and judicial claims on o8 July 2021 and 12 July 2022, respectively.

EXCISE TAXES PAID ON IMPORTED

PETROLEUM PRODUCTS SOLD TO A

TAX-EXEMPT ENTITY, PARTICULARLY SHELL PHILIPPINES EXPLORATION, B.V. (SPEX), WERE ERRONEOUSLY OR ILLEGALLY COLLECTED.

Petitioner alleges that it sold ADO to a tax-exempt entity, specifically SPEX, which enjoys exemption from both direct and indirect taxes pursuant to Section 135(c)128 of the NIRC of 1997, as amended.

Respondent, invoking Section 135 of the NIRC of 1997, as amended, also argues that the excise tax due on the subject transactions cannot be included in the. purchase price because the buyer already holds a tax-exempt status. t 128 Supra at note 54.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

Respondent further maintains that Section 135 of the NIRC of 1997, as amended, does not grant exemption to sellers. Instead, said provision enumerates specific instances where petroleum products, when sold to international carriers and other entities listed therein, enjoy excise tax exemption. Respondent asserts that Section 135 cannot serve as a legal basis for petitioner's claim for refund and cannot be invoked by sellers such as petitioner, but only by buyers that qualify as exempt entities. Thus, respondent concludes that petitioner cannot rely on the exemption granted to such entities as a ground to recover excise taxes paid.

We cannot sustain respondent.

In relation to the afore-quoted Sections 204(C)'29 and 229'3° of the NIRC of 1997, as amended, the present claims for refund or issuance of a TCC are governed by the following provisions of the NIRC of 1997, as amended, viz:

1:29 130 SEC. 129. Goods and Services Subject to Excise Taxes. - Excise taxes apply to goods manufactured or produced in the Philippines for domestic sales or consumption or for any other disposition and to things imported as well as services performed in the Philippines. The excise tax imposed herein shall be in addition to the value-added tax imposed under Title IV.

For purposes of this Title, excise taxes herein imposed and based on weight or volume capacity or any other physical unit of measurement shall be referred to as 'specific tax' and an excise tax herein imposed and based on selling price or other specified value of the good or service performed shall be referred to as 'ad valorem tax.' 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 t Supraatp. 15.

Supra at pp. 15-16.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue exempt from excise taxes other than those legally entitled to exemption.

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 ofthe 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.'3' In Chevron Philippines, Inc.

v.

Commissioner of Internal

Revenue

13Z, the Supreme Court held that excise tax paid by the statutory taxpayer on petroleum products sold to any of the entities or agencies named in Section 135 of the NIRC of 1997, as amended, and exempt from excise tax, is deemed illegal or erroneous, to wit: 132 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 NIRCt Italics in the original text, emphasis and underscoring supplied. G.R. No. 210836, 01 September 20 15; ltalics in the original text, emphasis and underscoring supplied.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue must be construed in favor of the property itself, that is, the petroleum products.

Relevantly, as the Supreme Court clarified in Pilipinas Shell

Petroleum Corporation

v.

Commissioner of Internal Revenue'33, "[c]onsidering that the status of the petroleum products as tax-exempt solidifies upon the sale to any of the entities enumerated under Section 135 [of the NIRC of 1997, as amended], any excise taxes which were previously paid thereon would then be considered as 'erroneously or illegally collected,' and therefore, subject to refund." Moreover, the High Court explained that "the tax exemption under Section 135 [of the NIRC of 1997, as amended] 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)."

Pursuant to Section 135(c) of the NIRC of 1997, as amended'34, petroleum products sold to entities that are by law exempt from direct and indirect taxes are exempt from excise tax. The phrase "which are by law exempt from direct and indirect taxes" describes the entities to whom the petroleum products must be sold to render the exemption operative. Section 135( c) of the NIRC of 1997, as amended, should thus be construed as an exemption in favor of the petroleum products on which the excise tax was levied. The exemption cannot be granted to the buyers, i.e., the entities that are by law exempt from direct and indirect taxes, because they are not under any legal duty to pay the excise tax.'35 Clearly, upon petitioner's sale of petroleum products to entities that are by law exempt from direct and indirect taxes, the status of the sold petroleum products as tax-exempt solidifies. Consequently, the excise taxes previously paid on these petroleum products become erroneously or illegally collected taxes. These taxes are then the proper t 133 134 135 G.R. No. 211303, 15 June 2021.

Supra at p. 21.

See Chevron Philippines, inc. v. Commissioner of Internal Revenue, supra at note 132.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue subject of a claim for refund or credit under Sections 204(C)'36 and 229'37 of the NIRC of 1997, as amended.

As can be gleaned from the above disquisitions, to be entitled to a refund or the issuance of a TCC, the following must be demonstrated: (1) the entity to which the taxpayer-claimant sold the petroleum products is an entity exempt by law from both direct and indirect taxes; and, (2) the taxpayer-claimant, as the statutory taxpayer, paid the excise taxes claimed on the petroleum products sold to the exempt entity.

Section 12(a) of PO 87, or "THE OIL EXPLORATION AND DEVELOPMENT ACT OF 1972," provides that contractors operating under a service contract executed with the Government for petroleum exploration and production enjoy exemption from all taxes, except income tax, to wit:

SEC. 12. Privileges of contractor. - The provisions of any law to the contrary notwithstanding, a contract executed under this Act may provide that the Contractor shall have the following privileges:

(a) Exemption from all taxes except income tax.'J8 To establish that petitioner sold petroleum products to a tax- exempt entity, petitioner offered in evidence the SC 38'39, by and between the Government of the Republic of the Philippines and Occidental Philippines, Inc. and SPEX, which the contract identifies as Contractor.

Under SC 38, the Contractor shall have the right of exemption from all taxes except income tax, to wit: t 136

I 37

138 139 Supraatp. 15.

Supra at pp. 15-16.

Emphasis supplied.

See Exhibits "P-IT' and "P-17-1", supra at note 20.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

SECTION VI

RIGHTS AND OBLIGATIONS OF THE PARTIES

6.2 CONTRACTOR shall have the following rights: (a) Exemption from all taxes except income tax[.]'4° Petitioner further offered in evidence "Amending Agreement # 1" dated 15 July 2019'4' between SPEX and petitioner, which states that the parties entered into a purchase contract for the "Supply of Marine Gas Oil" dated 30 July 2014 identified by agreement number Ul47079· Likewise, petitioner presented a Certification'42 issued by SPEX, which states that SPEX used ADO purchased from petitioner during period from July to November 2020 for the operation of its marine vessels. Correspondingly, as a petroleum service contractor under PD 87, SPEX qualifies as an entity exempt by law from direct and indirect taxes. Thus, the excise taxes that petitioner paid to the Government, as statutory taxpayer, on petroleum products sold to SPEX constitute taxes erroneously or illegally collected and may be subject to refund in favor of petitioner.

The Court shall now determine whether petitioner has sufficiently substantiated its claim by presenting sufficient evidence to establish that: (a) the excise taxes on the imported petroleum product (i.e., ADO), which is the subject of the present claim, were duly paid; and (b) the said imported ADO were sold and delivered to a tax- exempt entity.

As a preliminary matter, and to properly appreciate the subject transactions, the Court shall first discuss the process flow and documentation involved in the importation of ADO, its removal from the Tabangao Refinery, and its subsequent sale and delivery to SPEX, a tax-exempt entity. t '" '" 142 Emphasis supplied.

Exhibit "P-62", USB (Exhibit "P-67-2").

Exhibit "P-63'', id.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

PROCESS

FLOW

OF

THE

IMPORTATION,

REMOVAL

FROM

THE

TABANGAO

REFINERY,

AND

SUBSEQUENT SALE AND DELIVERY

OF AUTOMOTIVE DIESEL OIL (ADO)

TO

SHELL

PHILIPPINES

EXPLORATION, B.V. (SPEX), A TAX- EXEMPT ENTITY.

1.

IMPORTATION

In her Judicial Affidavit'43, De Dios, petitioner's Import/ Additives Scheduler, detailed the process flow governing the importation of ADO. According to her, petitioner's process and document flow for the importation of ADO consists of the following stages: (1) requisition of goods and importation; (2) arrival and discharge of imported goods; and (3) payment of taxes and import duties.'44 De Dios further explained that the importation process for petroleum products, particularly ADO, commences when petitioner's Trading and Supply Department determines the necessity and volume requirements for importation and thereafter coordinates with regular suppliers to communicate the required volume of petroleum products to be imported.'45 Once a prospective supplier expresses willingness to meet required volume, the Trading and Supply Department commences negotiations on the price of ADO. Upon agreement on the price, petitioner places an order for the purchase of AD0.'46 De Dios added that in facilitating shipments of imported ADO, the shipper prepares a Bill of Lading (BL) and furnishes copies to both petitioner and supplier, together with other supporting documents such as the Load Port Survey Report (LPSR), among others. The supplier thereafter issues a Proforma Invoice to petitioner, indicating the quantity of ADO purchased, which petitioner submits to the BIR and the BOC.'47 Thereafter, petitioner's Trading and Supply _ · Department issues an internal advice to the Tax Department and thet 143 144 '" 146 147 Q&A Nos. II to 39, Judicial Affidavit of Anna Beatriz Verge! de Dios dated 09 July 2022, Exhibit "P-25'', supra at note 44, pp. 133-139.

Q&A No. II, Exhibit "P-25'', supra at note 44, p. 133. Q&A No. 12, id.

Q&A No. 13, Exhibit "P-25", supra at note 44, p. 134. Q&A No. 14, id.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

Finance Department of the Tabangao Refinery, informing them of the estimated time of arrival of the imported ADO at the Batangas Port. 148 De Dios detailed further that upon receipt of the internal advice and prior to the imported ADO's arrival, petitioner, through its broker, lodges the importation details, such as the name of importer, name of vessel, port of destination, terms of delivery, and quantity of ADO, and uploads the corresponding supporting documents, including the BL, LPSR, and Proforma Invoice, through the BOC's Electronic-to-Mobile (E2M) System.149 Petitioner, through its broker, thereafter generates the Single Administrative Document (SAD), which contains all information encoded through the E2M System, including the assessment of taxes and duties payable on a particular importation. 1so

Once

generated, petitioner's representative and the

BOC's

representative sign the SAD. The SAD then serves as basis for petitioner's payment of assessed taxes and duties to the BOC under a tentative liquidation.

1s 1 Moreover, based on the SAD, petitioner's Accounts Payable Team issues an internal advice to the Global Payment Team to initiate the transfer of funds to the BOC's account through Security Bank's Pass 5 System. Witness DeDios explained that Security Bank's Pass 5 System integrates with the BOC's E2M System; thus, any payment made and verified through Security Bank's Pass 5 System automatically reflects in the BOC's E2M System. 1s2 De Dios narrated further that after petitioner pays the taxes and duties under its tentative liquidation1s3 through Security Bank's Pass 5 System, the BOC generates an SSDT 154 via the BOC's E2M System.'ss.

She explained that if the importation is taxable, the BOC requirest 148 149 \50 !51 152 !53 154 !55 Q&A No. 15, id.

Q&A Nos. 16 and 17, Exhibit "P-25", supra at note 44, pp. 134-135. Q&A No. 21, Exhibit "P-25", supra at note 44, p. 135. Q&A No. 22, Exhibit "P-25'', supra at note 44, p. 136. Q&A No. 23, id.

There are times when the price of ADO at the date of issuance of Customs Invoice differs from its price at the date of arrival of the importation as will be shown in the Final Invoice issued by the supplier. Since the payment of taxes and duties as shown on the SAD is based on the tentative price shown in the Customs invoice, such payment has to be finalized by way of payment of the taxes and duties on the price differential, which is usually minimal, if there is any; Q&A No. 33, Exhibit "P-25", supra at note 44, p. 138. The SSDT names petitioner as the company that settled the taxes and duties, and provides, among others, the assessment reference number, the receipt number and date, the mode of payment, and the total amount of taxes and duties paid. The assessment reference number and total amount paid appearing in the SSDT correspond to the assessment reference number and total assessed amount in the SAD; Q&A No. 24, Exhibit "P-25'', supra at note 44, p. 136. Q&A No. 24, id.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue pet1t10ner to secure and present the BIR's Authority to Release Imported Goods (ATRIG)'56 before the BOC actually releases the SSDT to the importer or broker.1s7 Upon receipt of the internal advice, petitioner applies for an A TRIG with the BIR and submits the required supporting documents, including the BL, Customs Invoice, and SAD.1S8 According to De Dios, once the vessel arrives at a Philippine port, petitioner presents the SSDT to the port authorities, which then authorizes the discharge of imported ADO into the storage tanks at the Tabangao Refinery. Upon completion of full discharge, meaning complete transfer of the final batch of ADO into the storage tanks at the Tabangao Refinery, petitioner issues a Certificate of Quantity

Received

159 (CQR). 160After the final discharge of imported ADO from the vessel, petitioner undertakes a final liquidation of the importation by filing a "Request for Correction of Data in SAD" and attaching the Final Invoice (or Tax Invoice) 161 issued by the supplier. The date of last discharge is based on the "date received" as shown in the CQR.162 Subsequently, the BOC generates page two (2) of the SAD and manually computes the revised charges and final liquidation amount. If the computation shows an additional amount due, the BOC issues an Assessment Notice to the importer.'63 De Dios also explained that the BOC confirms the final payment of taxes and duties through issuance of an Official Receipt (OR). However, when taxes and duties paid under tentative liquidation equal or exceed amount computed during final liquidation, the BOC does not issue an Assessment Notice or OR. In such instances, the BOC issues only one (1) SSDT for the subject importation.'64t 156 157 158 159 160 161 16:!

163 164 An ATRIG constitutes permission from the BIR to withdraw the ADO from the Tabangao Refinery, but only after the importer settles the applicable taxes and duties. For taxable importations, the ADO cannot be withdrawn by petitioner without the A TRIG. If the imported article to be imported is subject to excise tax, the A TRIG shows the amount of excise taxes to be paid. Since ADO is an excisable article, the A TRIG for imported ADO indicates the amount of excise taxes to be paid thereon, Q&A No. 26, Exhibit "P-25'', supra at note 44, p. 136. Q&A No. 25, id.

Q&A No. 27, Exhibit "P-25'', supra at note 44, p. 137. The CQR indicates the quantity of the products received and their last discharge at the Tabangao Refinery. Since ADO is usually discharged over the course of several days depending on the volume, the date of last discharge is indicated as the "Date Received" in the CQR; Q&A No. 31, Exhibit "P-25'', supra at note 44, p. 137. Q&A No. 31, id.

Q&A No. 36, Exhibit "P-25'', supra at note 44, p. 138. Q&A No. 34, id.

Q&A No. 35, id.

Q&A No. 38, Exhibit "P-25'', supra at note 44, p. 139.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

11. REMOVAL FROM THE TABANGAO REFINERY Petitioner's Tax Advisor, Flores, and its Supply Scheduler, Dela Cruz, also discussed the removal of imported ADO from the Tabangao Refinery and the subsequent sale and delivery of such imported ADO to SPEX in their respective Judicial Affidavits.'65 Both Flores and Dela Cruz detailed that upon arrival of the imported ADO at the Tabangao Refinery (now called Import Facility), it is stored in the product storage tanks located therein. Petitioner then adds an additive, CME, to improve the quality of ADO before the sale and delivery to SPEX. In this case, petitioner loaded ADO onto SPEX vessels berthing at petitioner's jetty in Tabangao, Batangas.'66 According to them, petitioner thereafter records ADO's receipts, similar to other petroleum products received in the Official Register Book (ORB) of the Tabangao Refinery. Petitioner then submits the ORBs for each month to the BIR for monitoring purposes.'67 Petitioner likewise records removals of ADO from the Tabangao Refinery in same ORB.'68 Flores noted that petrtwner adopts a first-in, first-out (FIFO) method'69 in withdrawing or removing ADO from the storage tanks at the Tabangao Refinery.'7° Aside from the ORB entries, petitioner records removals of ADO in the Daily Product Deliveries Reportt 165 166 167 168 169 170 See Judicial Affidavit of Berenice Angelique L. Flores dated 09 July 2022, Exhibit "P-27", supra at note 51; Judicial Affidavit of Alfonso Paolo F. DeJa Cruz dated 12 Apri\2023, Exhibit "P-26", supra at note 4 7.

Q&A No. \2, Judicial Affidavit of Berenice Angelique L. Flores dated 09 July 2022, Exhibit "P- 27", supra at note 51, p. 311; Q&A No. II, Judicial Affidavit of Alfonso Paolo F. DeJa Cruz dated 12 Apri\2023, Exhibit "P-26", supra at note 47. Q&A No. 13, Judicial Affidavit of Berenice Angelique L. Flores dated 09 July 2022, Exhibit "P- 27", supra at note 51, p. 311.

Q&A No. 14, Judicial Affidavit of Berenice Angelique L. Flores dated 09 July 2022, Exhibit "P- 27", supra at note 51, p. 312.

According to Ms. Flores, under the FIFO method, the earliest ADOs stored in the tanks are also the first ones removed therefrom. She illustrates that if petitioner stored imported ADO in a tank on January I, then, on January 15, petitioner stored locally manufactured ADO in the same tank. When petitioner removes ADO from the storage tank, it first withdraws from the imported stock stored on January \. Petitioner must exhaust the imported ADO stored on January I before it can withdraw the locally manufactured stock stored on January 15. As a result, the ADOs remaining at the end of a certain period consist of the stocks most recently stored in a particular tank, Q&A No. 21, Judicial Affidavit of Berenice Angelique L. Flores dated 09 July 2022, Exhibit "P-27", supra at note 51, p. 314.

Q&A No. 20, id.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

(DPDR).'7' In addition, petitioner prepares a report denominated as "Daily Removals and Excise Tax Due," which reflects the removal of petroleum products, including ADO, and the corresponding excise tax due thereon.'72 Before the removal of the imported ADO from the Tabangao Refinery, petitioner prepares a Withdrawal Certificate'73 (WC), which the BIR's Revenue Officer on Premises (ROOP) and petitioner's representative sign.174

Petitioner

accompanies the withdrawal of ADO from the Tabangao Refinery for sale and delivery to SPEX with a Bulk Delivery Note'75 (BDN) and a Certificate of Bunker Deliveries (CBD).'76 Petitioner also maintains a Liquidation Report (LR)'77 that specifically monitors the ADO sold and delivered to customers, including SPEX. Through this LR, petitioner tracks the volume of ADO sold and delivered to SPEX and traces such volumes to the corresponding source importations.'78 111. SALE AND DELIVERY TO SPEX It was further detailed that once delivery of ADO to SPEX, petitioner's SAP program, which serves as its computerized accounting system, immediately captures the details and information relating to the ADO sold and delivered to SPEX. Unit prices of petroleum products and other applicable charges already reside in the SAP _ system, which automatically generates the corresponding Salest 171 172 173 174 175 176 177 178 The DPRD shows the date of removal, its shipment reference number, the Withdrawal Certificate covering the same, and the amount of excise tax paid thereon, Q&A No. 14, Judicial Affidavit of Berenice Angclique L. Flores dated 09 July 2022, Exhibit "P-27'', supra at note 51, p. 312. Q&A No. 14, id.

The WC shows the source of the ADO, its destination, the date of its withdrawal, and its volume at the time withdrawn. When the ADO withdrawn from the Tabangao Refinery is imported, it is indicated in the WC that the same is "tax-paid". This means that the ADO was drawn from imported stock and the excise tax thereon has already been paid to the BOC; Q&A No. 14, id. Q&A No. 14, id.

The BDN shows where the product comes from, the buyer, and where the product is delivered. It likewise indicates the load date, product description, and the delivered quantity. The vessel to which the ADO is loaded is likewise indicated, Q&A No. 15, id. Certificate of Bunker Deliveries shows the delivery date, the product, the name of the vessel, the corresponding WC number, and the volume delivered. It is signed by a representative of petitioner and of the vessel to which the ADO is located, Q&A No. 15, id. Among others, the Liquidation Report summarizes the excise taxes on the ADO sold and delivered to SPEX and the document under which the excise taxes were paid, which consists of the corresponding importation document if the ADO is imported. The Liquidation Report also shows the deliveries of ADO to SPEX, the WC and BDN accompanying the deliveries of ADO from the Tabangao Refinery to SPEX, the petitioner's Invoice through which petitioner bills SPEX for the ADO sold and delivered, and the payment received by petitioner from SPEX for the ADO thus sold and delivered, Q&A No. 22, Exhibit "P-27", supra at note 51, p. 314. Q&A No. 22, id.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

Invoice'79 (SI) reflecting the amount due from the customer. SAP also enables generation of various reports based on the data encoded in system.'8° Flores explained that when the sales price reflected in the SI includes the excise tax, the individual line items in the SI show an "Excise Duty Element" line, which represents the excise tax imposed on the ADO sold. Conversely, when the sales price reflected in the SI excludes the excise tax, the SI does not contain an "Excise Duty Element" line.'8' Flores further stated that petitioner retrieves the details of any SI through the SAP program by entering the corresponding SI number. Upon entry, the system displays the price components of each billed item through the "G. Standard Invoice (ZF2) Display: Item Data" screen'8\ which allows the determination of whether the sales price reflected in the SI includes the excise tax.'83 She also explained that SPEX's payments for the ADO purchased from petitioner appear on the bank statements.'84 Lastly, Flores clarified that SPEX applies 8% final withholding tax (FWT) on its payments to petitioner because petitioner qualifies as a petroleum service contractor under PD 1354.'85 To prove the withholding and remittance of tax, SPEX issues the corresponding BIR Form No. 2306, or Certificate of Final Tax Withheld at Source. Flores added that the 8% FWT constitutes full and final payment of income tax on earnings derived by petitioner from transactions with SPEX.'86

PETITIONER

DULY

PAID

EXCISE

TAXES

DUE

ON

IMPORTED

AUTOMOTIVE DIESEL OIL

(AD~

SUBJECT OF THE PRESENT CLAIM. u 179

ISO

181 182 183 184 185 186 Sales Invoice indicates, among others, the quantity, unit price, any other charges, and the total amount due for the ADO sold and delivered to SPEX. Since SPEX is an excise tax-exempt entity, the sales price does not include an excise tax component. Otherwise, the sales price would have included excise tax; Q&A No. 37, Exhibit "P-27", supra at note 51, pp. 317-318. Q&A No. 28, Exhibit "P-27", supra at note 51, p. 316. Q&A No. 39, Exhibit "P-27", supra at note 51, p. 318. The "G. Standard Invoice (ZF2) Display: Item Data" shows the details of every item billed under an invoice such as the sales price of the fuel, the excise tax, and VAT; Q&A No. 40, id. Q&A No. 40, id.

Q&A No. 43, Exhibit "P-27", supra at note 51, p. 320. IMPOSING FINAL INCOME TAX ON SUBCONTRACTORS AND ALIEN EMPLOYEES OF SERVICE CONTRACTORS AND SUBCONTRACTORS ENGAGED IN PETROLEUM OPERATIONS IN THE PHILIPPINES UNDER PRESIDENTIAL DECREE NO. 87. Q&A No. 45, Exhibit "P-27", supra at note 51, p. 321.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

Proof of payment of the subject taxes constitutes an essential requirement in refund cases because, while the collection of taxes may be found to be illegal or erroneous in theory, a taxpayer-claimant cannot recover amounts that it did not actually pay or remit to the Government.

Witness De Dios testified that eleven (n) ADO importations arrived at petitioner's Tabangao Refinery for the period from July to November 2020, detailed as follows:187 •

Vessel

SAD No.

SAD Date

Volume Paid

Amount of

Payment Date

Excise Tax

Mt. Silver Ebalina (I015I82.

10 July :zo:zo188 48·353-795 P290,122, 77o.oo 13 july 2020 Mt. CSC Amethyst

C1or5645

21 July 2020

48,428,434 :zgo,s7o,6o4.oo 24 July :zo:zo Mt. Oriental Gold Cro16o87 03 August :zo:zo 48.521,325 291,127,950.00 04 August :zo:zo Mt. Songa Diamond

C1or6551

u August :zo:zo I6,41J,202 g8,479,212,00 12 August :zo:zo Mt. Everhard Schulte C1016gst

19 August 2020

16,160,837 g6,g6s,o:z:z.oo :zo August :zo:zo Mt. Silver Hannah (1017284 26 August :zo:zo 4s,956,142 293.736,8s:z.oo 27 August :zo:zo Mt. jason

C1or8385

17 September :zo:zo 48,s4S,o:zg189 27g,:z88,174·00 18 September :zo:zo Mt. CSC Peace

C1or8899

29 September 2020

31,428,200 I88,s6g,:zoo.oo

30 September 2020

Mt. Nave Atria

C1019604

13 October 2020

49.597,058 297·582,348.00

14 October 2020

Mt BW Yangtze

(1020524

04 November 2020

50,680,348 304,o82,o88.oo o6 November 2020 Mt. MR Leo (1020989

13 November 2020

26,786,123 160,716,738.oo

16 November 2020

Total

P2,591,240,958.oo To substantiate foregoing importations, petttwner presented before this Court the following documentary evidence, all of which witness Pangandian-Tabamo, the

Court-commissioned

!CPA, examined, as follows:

19°

Documents Presented

Exhibit

Annexed to the

Description

187 188 189 100 191 192

for Importations

No.'9'

JCPA Report'9'

Billing documents based on

BL

Proforma Invoice/

"P-36"

A

volume and global pricing standards

Customs Invoice

issued by Shell International Eastern Trading Company (SIETCO).

Issued by the carrier to the shipper

BL

"P-35"

B

that detail the type, quantity and destination of the goods being Q&A No. 40, Exhibit "P-25'', supra at note 44, pp. 139-140. Corrected from I 0 June 2020 to I 0 July 2020. Order dated 05 September 2023, supra at note 43. It should be 46,548,029, Exhibit "P-46" (p. 6). USB (Exhibit "P-67-2"). See ICPA Report dated 20 October 2023, Exhibit "P-67", supra at note 57, p. 749. USB (Exhibit "P-67-2").

I d.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

Documents Presented

Exhibit

Annexed to the

Description for Importations

No.191 !CPA Report'9' carried. These serve as a shipment receipt when the carrier delivers the goods at destination.

Reports which contain the volume, consignor, and consignee details,

LPSR

"P-37'' c proforma invoice price, and destination, issued by the attending port surveyor at the load port.

Certificates, which has the same SGS Philippines, Inc.

"P-37'' c purpose as the LPSR, issued by SGS

Certificate

Philippines

as attending port surveyor.

Initial SAD

"P-4o"

E

Provide information on the details of import declaration based on BL.

Clearance

from the

BIR

once

A TRIG

"P-38"

F

tentative liquidation to

BOC

is settled.

Bank Certification

''P-41 "

G

Issued by the bank as proof of payment for initial SAD.

Initial SSDT

"P-42"

H

Proofs of payment of tentative SAD.

Initial Assessment Notice

Provide information on taxes and

(AN)

"P-39"

I

duties due for settlement on tentative liquidation.

Billing document based on actual

Final Invoice/Tax Invoice

"P-44"

A

volume received and global pricing standards issued by SIETCO.

Report which contains the actual

"P-43"

volume received by the import

CQR

B

terminal issued by the attending port surveyor.

Provide updated information on the details of import declaration based on actual volume received per CQR, if higher than the volume declared in

Final SAD

"P-46"

E

the BL. If actual volume received is lower than the volume declared in the BL, no re-computation is done and the initial/tentative

SAD

becomes the final SAD.

Final SSDT

"P-47''

H

Proofs of payment of final SAD.

Provide information on taxes and

Final Assessment Notice

"P-45 "

I

duties due for settlement on final

(FAN)

liquidation.

Issued

by the

BOC

after settlement/liquidation of the

BOCOR

"P-48"

J

additional duties and taxes for an import entry, if there was any adjustment.

Receipt generated from E2M System after settlement/liquidation of the

E2M Customs Payment

"P-49 "

J

additional duties and taxes for an

Receipt

import entry, if there was any adjustment.

—

Final

Difference ,

Second Impo

Initial

Final

Difference

Third Import

Initial

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

Based on the ICPA’s review", as verified by the Court, the excise tax totalling P2,591,240,958.00 with respect to the subject 11 ADO importations was duly paid. Documentary evidence, including BLs, CQRs, SADs, SSDTs, among others, properly supports such total payment, as summarized below:

US Barrels at Volume (Liters Excise Tax

+ at Observed

60 Farenheit at P6.00'%

Temperature)

First Importation (MT Silver Ebalina)

300,000 48,353,795 P290,122,770.00 300,000 48,353,795 2990,122,770.00 rtation (MT CSC Amethyst) 299.998 48,428,434 P290,579,604.00 299,998 48,428,434 290,570,604.00

08 July 2020

19 July 2020

“P-35", p. 195; - “P-ga", p.

“P-y"t96 197; “P-y-3"98 “P-g3”, p. 29 ation (MT Oriental Gold) 300,499 48,517,867 P291,107,202.00 [|

30 July 2020

193 Annexes A to J, id.

194 “P-35", p. 2206; - “P-4o", p. “P-42", p. “P-38”, p. “pig"207 2208, “Pia 229, “Pap. 224; "Paz.

“P-35", p. 3775 "pig"ais The ICPA noted that for the purpose of computing the excise tax, the volume in Liters at Observed (Obs) Temperature indicated in the BL was used as the excise tax base at a rate of P6.00; See ICPA Report dated 20 October 2023, Exhibit “P-67”, supra at note 57, p. 753.

195 USB (Exhibit “P-67-2”).

196 Division Docket, Volume II, p.

197 USB (Exhibit “P-67-2”).

198 Division Docket, Volume II, p.

199 USB (Exhibit “P-67-2”).

200 Division Docket, Volume II, p.

201 USB (Exhibit “P-67-2”).

202 Division Docket, Volume I], p.

203 USB (Exhibit “P-67-2”).

204 USB (Exhibit “P-67-2”).

205 USB (Exhibit “P-67-2”).

206 USB (Exhibit “P-67-2”).

Division Docket, Volume II, p.

208 USB (Exhibit “*P-67-2”).

Division Docket, Volume I], p.

210 USB (Exhibit “P-67-2”).

ca Division Docket, Volume II, p.

212 USB (Exhibit “P-67-2”).

213 Division Docket, Volume II, p.

214 USB (Exhibit ““P-67-2”).

215 USB (Exhibit “P-67-2”).

216 USB (Exhibit “P-67-2”), 217 USB (Exhibit “P-67-2”).

218 Division Docket, Volume I], p.

219 USB (Exhibit “P-67-2").

220 Division Docket, Volume I], p.

721 USB (Exhibit “P-67-2”).

838.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

Set US Barrels at

; 60 Farenheit “es

Voiume (Liters at Observed Excise Tax

Temperature) aens.o0 48,521,325 (3,458) (P20,748.00)

Fourth Importation (MT Songa

Initial 101,760 Final 101,769

Difference

Fifth Importation {MT Everhard Schulte)

Initial 100,005 Final 100,005

Difference

Sixth Impartation (MT Silver Hannah)

Initial 301,070.58 301,070.58

Diamond)

16,411,550 P98, 469,300.00 16,413,202 98,479,212,00 (1,652) (P9,912.00) 16,124,604 P96,747,624.00 16,160,837 96,965,022.00 (36,233) (P 217,398.00) 48,956,142 P293,736,852.00 48,956,142 293.736,852.00 ees Pd 10 August 2020 “P-35”, p. 424;

16 August 2020

18 August 2020

“pegtns “P-43", p.

4° “P-35", p. 65";

™p_ 6351 : P43", p. 67" |

SAD

“P-46", p. P47", p - 437 43t “P-42”, p. “P-38", p.

5745; "P-5- 576 “P-go", p. “P-g2”, p. “P-38, p.

635; "P-6- 68; "P-6- | 65; "P-6- 32583 4'355 5°57

No Final -

Row to

mow ww w ww Wot wwe we Oo De NM yy YD hw Be ON Yn =| 6 Gwe a ws

Ww

p * om hw mw Hw ty t an oe 245 246 nth wei fs iow WR Mw te

Ay

ya iy a Division Docket, Volume II, p. 867.

USB (Exhibit “P-67-2”).

Division Docket, Volume II, p. 868.

USB (Exhibit “P-67-2”).

USB (Exhibit “P-67-2”).

USB (Exhibit “P-67-2”).

USB (Exhibit “P-67-2”).

Division Docket, Volume I], p. 875.

USB (Exhibit “P-67-2”).

Division Docket, Volume Il, p. 878.

USB (Exhibit “P-67-2”).

Division Docket, Volume I, p. 879.

USB (Exhibit “P-67-2”).

Division Docket, Volume II, p. 880.

USB (Exhibit “P-67-2”).

USB (Exhibit “P-67-2”).

USB (Exhibit “P-67-2”).

USB (Exhibit “P-67-2”).

Division Docket, Votume IT, p. 887.

USB (Exhibit “P-67-2”).

Division Docket, Volume II, p. 890.

USB (Exhibit “P-67-2”).

Division Docket, Volume Il, p. 891.

USB (Exhibit “P-67-2”).

Division Docket, Volume I, p. 892.

USB (Exhibit “P-67-2”).

USB (Exhibit “P-67-2”).

USB (Exhibit “P-67-2”).

USB (Exhibit ““P-67-2”).

Division Docket, Volume II, p. 899.

USB (Exhibit “P-67-2”).

Division Docket, Volume II, p. 902.

USB (Exhibit “P-67-2”).

Division Docket, Volume II, p. 903.

USB (Exhibit “P-67-2”).

Division Docket, Volume II, p. 904.

USB (Exhibit “P-67-2”).

-

Difference

Initial

Final

Difference

Eighth Importation (MT CSC Peace)

Final

Difference

Ninth Importation (MT Nave Atria)

Initial

Final

Difference

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

US Barrels at

60 Farenheit

Excise Tax

at P6,.00'*

Volume (Liters at Observed

Temperature)

289,402.53 46,529,579 P279177,474.00 289,402.53 46,548,029 (18,450) (Puio,700.00) 195,345 195,345 308,090.71 49,083,226 P294,499,356.00 308,090.71 49,597,058 297,582,348.00 (513,832) (P3,082,992.00) 259 260 USB (Exhibit “P-67-2”).

261 Division Docket, Volume II, p. 909.

262 USB (Exhibit “P-67-2”).

263 Division Docket, Volume Il, p. 912.

264 USB (Exhibit “P-67-2”).

265 Division Docket, Volume Il, p. 913.

766 USB (Exhibit “P-67-2”).

267 Division Docket, Volume II, p. 914.

208 USB (Exhibit “P-67-2”).

269 Id.

270 Id.

271 Id.

7 Division Docket, Volume I, p. 921.

273 USB (Exhibit “P-67-2”), 274 Division Docket, Volume II, p. 924.

275 USB (Exhibit “P-67-2”).

276 Division Docket, Volume II, p. 925.

277 USB (Exhibit “P-67-2”).

278 Division Docket, Volume IT, p. 926.

279 USB (Exhibit “P-67-2”).

280 Id.

281 Id.

282 Id.

283 Division Docket, Volume II, p. 933.

284 USB (Exhibit “P-67-2”).

285 Division Docket, Volume II, p. 936.

286 USB (Exhibit “P-67-2”).

787 Division Docket, Volume II, p. 937.

288 USB (Exhibit “P-67-2”).

289 Division Docket, Volume II, p. 938.

290 USB (Exhibit “P-67-2”).

291 Id.

292 31,428,200 P188,569,200.00 31,428,200 188,569,200.00

14 September 2020

reese —

27 September 2020

12 October 2020

Exhibit No.

“P-35", p. 7";

“Piz"261 As noted by the ICPA, no final SAD was generated as the unit price per proforma invoice and volume per BL was higher than the final invoice and CQR, thus, the initial SAD became the final SAD; See ICPA Report dated 20 October 2023, Exhibit “*P-67”, supra at note 57, p. 758.

Id.

Initial

Final

Difference

Total -

Difference

Tenth Importation (MT BW Yangtze)

Eleventh Importation (MT MR

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

Volume (Liters at Observed

Temperature)

US Barrels at

60 Farenheit

Excise Tax

at P6,00'%4 314,919 50,680,348 P304,082,088.c0 | 03 November 2020 50,680,348 314,919 304,082,088.00

Leo)

26,786,123 167,144 08 November 2020 P160,716,738.00 167,144 26,786,123 160,716,738,00 2,678,233.82 431,299,868 P2,587,799,208.00 2,678 233.82 431,873,493 25§91,240,958.00 | (573.625) (F3+441,759.00) Exhibit No.

"P.4a”, p.

10795; “P-10- “P-35", p.

10793; “P-19"294 “P-35", pe 13s;

*Py1"3°5 12306; “Papp. 12308. ayy 3°87 qe “P-46", p. “P-47", p.

1o3'3 1034 The table above shows a total discrepancy of 573,625 liters between the quantity of imported ADO unloaded for delivery at the Tabangao Refinery, as indicated in the CQR, and the quantity declared in the BL.5 This discrepancy resulted in the assessment and payment of additional taxes amounting to P45,378,917.97"°, inclusive of excise tax of P3,441,750.003° 293 Id.

28 Division Docket, Volume II, p. 945.

295 USB (Exhibit “P-67-2”).

296 Division Docket, Volume II, p. 948.

297 USB (Exhibit “P-67-2”’).

298 Division Docket, Volume II, p. 949.

299 USB (Exhibit “P-67-2”).

300 Division Docket, Volume II, p. 950.

301 USB (Exhibit “P-67-2”).

302 Id.

303 Id.

304 Id.

305 Division Docket, Volume II, p. 957.

308 USB (Exhibit “P-67-2”).

307 Division Docket, Volume II, p. 960.

308 USB (Exhibit “P-67-2”).

309 Division Docket, Volume II, p. 961.

310 USB (Exhibit “P-67-2”).

311 Division Docket, Volume II, p. 962.

312 USB (Exhibit “P-67-2”).

313 Id.

314 Id.

31s See ICPA Report dated 20 October 2023, Exhibit “P-67", supra at note 57, p. 756. 316 Table II.16, ICPA Report dated 20 October 2023, Exhibit “P-67”, supra at note 57, p. 759. 317 573,625 liters at P6.00 excise tax rate.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

The ICPA found that the additional taxes of f>45,378,9I7.97 (including the excise tax of f>3A41,750.oo) were paid as evidenced by BOC ORs and E2M Customs Payment Receipts, to wit: 3'8

Amount

Amount of

Total Items

Sot

VAT

FMF

of Fees

Excise Tax

(a) (b)

Taxes

(o) (d) (e=oa+b+c+d)

First Importation (MT Silver Ebalina)

Initial

P124,035·336.7o !'2gD,J:ll.,770.00 P414,t58,m6.7o

Final

129,234.843·27

I'LOO

290,1Z2,770.00 419,357.614,27

Difference

(Ps,lgg,so6.s7l - (Pt.oo) (Ps,tgg,so7·57l

Second Importation (MT CSC Amethyst)

Initial

P123,6og,J83.81 Pzgo,s7o,6o4.oo f'414,179·987.81

Final

u .. 8,6J8,777-93 290,570,604.00 419,209,J8L93

Difference

(Ps,o29,394-12) (P5,o:zg,J94·u)

Third Importation (MT Oriental Gold)

Initial

Pn2,922,J51.15 P291,107,202.oo p 414,029.553-15

Final

127,50J,845·03 291,127,950,00 418,6JJ,795-0J

Difference

(P4,58t,493·88) (P:zo,748.oo) (!"4,602,241-88)

Fourth Importation (MT Songa Diamond)

Initial

f>42,J76,6J7·18 Pg8,469,JOO.OO 1'140,845·937·18

Final

43.820,304·36 98.479,212.00 142,299-516.36

Difference

(f"l,443o667,t8) (Pg,gu.oo) (f"l,453o579•18)

Fifth Importation (MT Everhard Schulte)

Initial

P41,581,J22.o1 !'g6.747.624.00 I'1J8,J28,g46.o1

Final

4J,08J.7J2.29 Po.o1 g6,g65,022.00 140,048.754-30

Difference

(P1,so:z,4to .. :z8) - (Po.ot) (P2t7,398.oo) (Pt,'7tg,8o8.2g)

Sixth Importation (MT Silver Hannah)

Initial

P121,246,:zgo.66 P:zgJ,7J6,8s:z.oo f'414o98J,142.66

Final

121,246,2go.oo 293.736,8s2.oo 414.983,142.66

Difference

- -

Seventh Importation (MT Jason}

Initial

Pl05,JOO,g6j.IO P2,917,10j-48 P279,177.474·oo PJ87,J95-544·S8

Final

n2,714,538.go 2,gJ8,262.18 27g,:z88,174-00 394.920,975·08

Difference

(P7,41J,s73-8o) (Pl,tj6.7o) (Pno,,oo.oo) {P7,52.5>4JO.j0)

Eighth Importation (MT CSC Peace)

Initial

1'71,747-921.71 f>1,970•J46.l0~ f>188,s6g,2oo.oo f>l62,287.467.81

Final

75.790.457·39 1,970,J46.1o I f>o.01 188,56g,zoo.oo 266,JJO,OOJ.50 318 319 Annex J, Exhibit "P-67'', USB (Exhibit "P-67-2"). Exhibit "P-48", USB (Exhibit "P-67-2").

320 3:!1 323 324 325 326 327 328 329 Exhibit "P-49", id.

Division Docket, Volume II, p. 848.

!d., p. 849.

ld., p. 860.

I d., p. 861.

Id., p. 873.

I d., p. 874.

I d., p. 886.

ld., p. 897.

Id., p. 898.

Global

Total Assessed

Amount for the

Assessment

Taxes

Declaration

Notice

(fj (g=e+f) P1,z8o.oo 1'414,159·386.70 1,280.00 419,Js8,8g4.27 (Ps,Igg,so7·57l "P-1-8"1" 1'1,280.00 1'414,181,267.81 1,280.00 419,210,661.93 (Ps,o:zg,J94·t:z) "P-2-S"l'l 1'1,280.00 P 414,0J0,8JJ.IS 1,280.00 418,6JJ,075·03 (P4,6o2,24t.88)

"P-J-8"1''

1'1,280.00 1'140,847.217.18 1,280.00 142.300,796.36 (f"IA53o579-t8) 1'1,280.00 l'IJ8,JJO,:z26.ol 1,280.00 140,0j0,034·30 (Pt,719·8o8.:zg)

"P-5-8"~'~

1'1,280.00 1'414.984.422.66 1,280.00 4'4-984.422.66 .ll" !'1,28o.oo f>J87.J96,824-58 1,280.00 394.922,2jj.08 (P7o525o4JO.j0)

"P-7-8"1J1

P1,280.00 I 1'262,288,747·8' I 1,zso.oo 1 266,JJ1,28J.50 330 The ICPA noted that for importation MT Silver Hannah, no additional excise tax was paid since it has a higher unit price and volume per initial assessment than the final assessment; See ICPA Report dated 20 October 2023, Exhibit "P-67'', supra at note 57, p. 759. 331 332 Division Docket, Volume II, p. 919.

Id., p. 920.

BOCOR

Exhibit

No.J'9/ E2M

Customs

Payment

Receipt~

"P-1-g"1" "P-2-g"J'--~ "P·J·g"J'I'

"P-4-9"1' 7

"P-s-g"l'~ "P-7-g"ll'

I

.

Sot

Difference

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

Amount

Amount of

Total Items

Global

Total Assessed

VAT

FMF

of Fees

Amount for the

(a) (b)

Excise Tax

Taxes

Taxes

(<) (d) (e=a+h+c+d) (0

Declaration

(g=e+f) (P4,o42,535·68) (Po.oi) (P4,o42,535·69) (P4,o42,535·6g)

Assessment

Notice

"P-8-S"m

Ninth Importation (MT Nave Atria)

Initial

P!l4,704,709.05 PJ,o77,202.73 P294,499·356.oo P412,281,267.78 1'1,280.00 P412,282,547-78

Final

u6,ll0.412.1] ],109,416.70 297.582,]48.oo 416,802,176.8] 1,280.00 416,8oJ,456.8]

Difference

(Pl->405 170].08) (f"32,21]-97) (P],o82,ggz.oo) (P4,sw,gog.osl (P4,52o,gog.osl "P-g-S"ns

Tenth Importation (MT BW Yangtze)

Initial

P111,go8,83J.58 I'J,177,JJ2.02 P304,o82,o88.oo P419,168,251.6o 1'1,280.00 1'419,169,531.60

Final

117,215,988.1o J,177.JJ2.02 2.00 304,082,o88.oo 424.475.410.12 1,280.00 424,476,6go.12

Difference

(Ps,Jo7,ts6.s2) (P2.00) (P5,3o7,t5B.s2) (P5,J07, 15B.sz) "P-1o-8"m

Eleventh Importation (MT MR Leo)

lnitiill P6o,Ol],158.47 !'!,679.317-72 P160,7t6,738.oo 1'222,419,214.19 1'1,280.00 1'222,420,494-19

Finill

66,om,j10.64 1,679,317-72 !'1.00 !60,716,7]8.00 n8,J97.567-36 1,280.00 228,Jg8,847·36

Difference

(Ps,97B,J52,17) (Pl.oo) (P5,978,J53·17) {Ps,g7B,JsJ.17) "P-u-8"m

Total-Initial

Pt,OJ9o456,go7·42 Plz,821 0J04,0S P2,j87,799,208.oo P],64o,on,419.47 P14,o8o.oo 1"],640,091,499·47

Total-Final

t,o81,]60,700.70 12,8;4,674·72 P4.o2 z,;gi,l40,gj8.oo J,6ss,4s6,JJ7·44 14,080.00 ],68j,4j6,J37·44

Total Difference

(P 4lo90J,79J,28) (P3J,370.67) (1"4.02) (PJ,44I,750.00) (P45,J78,gt7·97) (P45,J78,gt7,97) Based on the foregoing, petitioner duly paid total excise taxes amounting to f'2,591,240,958.oo, which corresponding importation documents properly support. Said amount includes excise taxes of f'18,9o8,370.oo paid on the ADO importations that form the subject of the present claim for refund.w To prove that the imported ADO, for which petitioner claims an exctse tax refund of PI8,9o8,37o.oo, was duly withdrawn from importations made during period from July to November 2020 - on which petitioner paid total excise taxes amounting to f'2,591,240,958.oo - petitioner submitted the following documentary evidence before this Court:

Documents

Exhibit

Annexed to the

Presented for

• Withdrawals

ORB

JJ3

334 335 336 337 338 339 340 341 343 344 No.J+Z

"P-s4"344

Jd., p. 931.

Jd., p. 932.

ld., p. 943.

!d., p. 944.

!d., p. 955.

!d., p. 956.

!d., p. 967.

!CPA Report"'

Description

I< to L

A monthly terminal report showing all the received quantity and !d., p. 968; There is a 1'1.00 difference between the additional VAT due of 1'5,978.353.17 and the amount paid as reflected in the BOC OR, which is 1'5,978,352.17. See I CPA Report dated 20 October 2023, Exhibit "P-67", supra at note 57, p. 759. USB (Exhibit "P-67-2"").

!d.

Division Docket, Volume II, pp. 788-792.

BOCOR

Exhibit

No.l'9/ E2M

Customs

Payment

ReceiptP"

"P-8-g">34 "P-g-g"H" "P-to-g"llM "1'-u-g"w• Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

Documents

Exhibit

Annexed to the

Presented for

No.34~

I CPA Report343

Description

Withdrawals

withdrawn quantity of each petroleum product prepared by the terminal onerators of petitioner.

DPDR

"P-55"

M

Daily report showing the daily oroduct from Tabanoao Refinerv.

removals of each petroleum Certificate that shows the source of the ADO, its destination, the date of its withdrawal, and its volume at the time withdrawn. The

WCs

"P-s1"

N

WC also indicates the composition of ADO 82 in volume, which is 98% Base Diesel and 2% eM E. The WC is prepared and signed by the ROOP of the BIR and a petitioner's representative. System-generated document issued by petitioner signifying proof

BDNs

"P-52"

p of delivery. The BDN shows where the product is delivered. It likewise indicates the load date, product description, the delivered auantitv, and the vessel to which the ADO is loaded. Serve as petitioner's delivery document, signed by petitioner and the vessel's authorized representatives, and issued to support the

CBDs

"P-s3"

Q

We and Delivery Note. The CBD shows the delivery date, the product, and the name of the vessel, the corresponding we number, and the volume delivered.

As the Court verified, ICPA found that n importations were duly lodged in the ORB345, and that the actual volumes recorded in the ORB and the total volumes received, as reflected in the corresponding CQR346, are identical,347 Details appear below:

Actual/CQR

Invoice/BL

(Surplus)/

Date

Product

Set

Received

Type

Barrels

Liters at Air

Barrels

Liters at Air

Loss Liters

(A)

(B)

(A-B)

First

Importation

19 July 2020

ADOBo

<99.771.36 48,266,162 JOO,OOO 48.353.795 (87,633)

(MT Silver

Ebalina)

Second

31 July 2020

245,761.06 299·998 48.428,434 (8,820,J<li)

Importation

ADOBo

19,6o8,13'l (MT esc

01 August 2020

53,960.38 8,696,839 - - 8,696,839

Amethvst)

Third

Importation

07 August 2020

ADOBo

)00,772.82 48.521,325 300,499 48,sJ7,867 3.458

(MT Oriental

Gold)

Fourth

Importation

15 August 2020

ADOBo

101,793·68 16,413,202 101,760 16,4U,55o 1,652

(MT Songa

Diamond}

Fifth

Importation

26 August 2020

ADOBo

100,295·61 J6,J60,837 100,005 16,124,604 36,233

(MT Everhard

Schulte)

Sixth

Importation

07 September 2020

ADO Bo

300,)29·97 48.512,135 301,070·58 48,956,142 (444,007)

(MT Silver

Hannah}

346 Exhibit P-43 , USB (Exhibit P-67-2 ).

Seventh

24 Seotember 2020

ADOBo

280.4'"·25 46,s48,o2o 289.402.51 46,s29,579 18,450 ·v 345 See Official Register Book (ORB), Exhibit "P-54", id., pp. 788-792. 0 " " .. "

" 347 See !CPA Report dated 20 October 2023, Exhibit "P-67", supra at note 57, p. 761.

Set

Importation

(MT jason)

Eighth

Importation

(MT esc

Peace)

Ninth

Importation

(MT Nave

Atria)

Tenth

Importation

(MTBW

Yangtze)

Eleventh

Importation

(MT MR Leo)

Total

Period

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

Date

Product

Actual/CQR

Invoice/BL

Received

Type

Liters at Air

Liters at Air

Barrels

(A)

Barrels

(B)

04 October zozo

ADOBo

194,812.15 31,384.706 195.345 JIAZ8,zoo

21 October 2020

ADOBo

307,396.26 49-597-058 3D8,ogo.7t 4g,o8J,226 10 November zozo

ADOBo

314,505·70 50,592,914 314-919 50,680,348 zo November zozo

ADOBo

166,505.14 26,722,2)8 167,144 z6,786,1z3 z,675d59·4o 431,023,578 2,678,233·83 43t,zgg,868

(Surplus)/

Loss Liters

(A-B)

(43-494) 513,832 (87,434) (63,88;)

(276,290) Petitioner subsequently unloaded and stored 2,675,359-40 barrels of imported ADO, equivalent to 431,023,578 liters at air, in designated product tanks at the Tabangao Refinery. Thereafter, in compliance with Republic Act (RA) No. 9367, otherwise known as the "Biofuels Act of 2oo6," petitioner added a locally produced additive, CME, to ADO to improve its quality prior to sale and delivery to SPEX.348 As a result of the CME addition, the final product, now referred to as "ADO B2", consisted of 2% CME and 98% original ADO (ADO Bo). Petitioner thereafter loaded finished product, ADO B2, onto various vessels for delivery to SPEX.349 A review of the ORB3so confirms movement of ADO Bo and ADO B2 during period from July to November 2020. The !CPA's examination corroborates these movements, as reflected below: Table l11.3- Movement of ADO Bo35'

ADOBo

ADOBo

ADOBo

ADOBo

ADOBo

ADOBo

Opening

Importations

Importations

Volume sent

Volume

Ending

(Taxable Year

Balance

not covered by covered by to production

Withdrawn (in

Balance

review review

of ADO B2 (in

liters) (in liters) :zo:zo)

July

348 349 350 351 (in liters)

[A]

(in liters) (in liters) liters)

[E]

[B]

[C]

[D]

23,188,533 50,832,094 87,874,295 1J1,270,601 - See !CPA Report dated 20 October 2023, Exhibit "P-67", supra at note 57, pp. 761-762. ld., p. 762.

See ORB, Exhibit "P-54", supra at note 345; USB (Exhibit "P-67-2"). See !CPA Report dated 20 October 2023, Exhibit "P-67", supra at note 57, p. 763.

[F=A+B+C-D-E]

J0,624,J:Z13~~ .

Period

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

Table III.3- Movement of ADO Bo35'

ADOBo

ADOBo

ADOBo

ADOBo

ADOBo

Opening

Importations

Importations

Volume sent

Volume

ADOBo

Ending

(Taxable Year

Balance

not covered by covered by to production

Withdrawn (in

Balance

review review

of ADO B2 (in

202.0)

August

September

October

November

Total

(in liters) liters) (in liters)

[A]

(in liters) (in liters) liters)

[E]

[F=A+B+C-D-E]

[B]

[C]

[D]

30,624,)22 - 89.792,203 100,743,280 - 19,673.245 19,673.245 - gs,o6o,164 87.749.764 4,515,565 22,468,o8o 22,468,o8o - 80,981,763 74.750,687 - 28,699.156 28,699,156 49.678.389 77,Jlj,l53 128.{32,894 - 27,259,804 100,510483 431,023,578 522,947,226 4615665 Table 111.4- Movement of ADO BvSJ

ADO B2 Volume

ADO Bo2 Volume

ADO B2 Opening

Produced from

Withdrawn for

ADO B2 Ending

Period (Taxable

Balance

ADO Bo sent to delivery to

Balance

customers, Year zozo) (in liters)

Production

(in liters)

[A]

(in liters) including SPEX

[D=A+B-C]

[B]

(in liters)

[C]

July

18,469,195 1J2,176,2n uz,6g5,243 27,950,163

August

27,950,163 102,406,240 m,6gi,S54 18,664,849

September

18,664,849 8g,120,210 84,888,J74 22,896,685

October

22,896,685 75,668,674 85,285.428 13,279.931

November

13,279.931 130,)92,018 123,315,896 20.356,o53

Total

529,763,353 527,876>495 Based on Table Ill.3, the !CPA noted that 426,so8,013354 liters of ADO Bo, out of the total 522,947,226 liters used in the production of ADO B2, originated from importations made during the period from July to November 2020.355 On the other hand, based on Table lll.4, the ICPA verified that production yielded a total of 529,763.353 liters, of which 98%, or 519,168,o85.94356 liters, consisted of ADO Bo. The ICPA likewise verified total withdrawals of 527,876.495 liters, of which 98%, or 517,3I8,96s.w357liters, consisted of ADO Bo.358 t 352 353 35 ..

355 356 357 358 There is a discrepancy of I liter; The !CPA Report indicates 30,624,322 liters, but upon recomputation, the correct volume should be 30,624.321 liters. See !CPA Report dated 20 October 2023, Exhibit "P-67''. supra at note 57, p. 764. ADO BO Importations covered by review of 431,023.578 liters less ADO BO Withdrawn not related to the claim for refund of 4,515,565 liters. See !CPA Report dated 20 October 2023. Exhibit "P-67". supra at note 57. p. 764. 98% of 529,763,353 liters.

98% of 527.876,495 liters.

See !CPA Report dated 20 October 2023. Exhibit "P-67". supra at note 57, p. 764.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

In a Letter dated 24 August 2o2o3s9, which respondent received on 03 September 2020, petitioner informed respondent of its decision to discontinue its refinery operations and shift to full importation. It should be noted that a portion of the period covered by the present claim coincided with the time prior to the cessation of petitioner's refinery operations in August 2020. Consequently, petitioner adopted the FIF0360 method for withdrawal or removal of ADO from the storage tanks at the Tabangao Refinery. As the records yield, to trace the withdrawals of ADO B2 to the corresponding importations of ADO Bo, the !CPA computed ADO Bo component representing g8% of ADO B2 opening balance and withdrawals and applied this computation against the running balance of ADO Bo using the FIFO method.36' An analysis of Annex 0362 of the !CPA Report shows that the first withdrawal of 42o,ooo liters of ADO B2, as well as the subsequent withdrawals for sale and delivery to SPEX, originated from importations made during the period from July to November 2020, as shown below:

359 360 361 362 363

Particulars

Volume

Beginning Balance

88 363 41,2 ,)44.10 Add: Importation not related to the subject claim for refund so,832,094-46

(Navig8 Strength)

Less: 98% of ADO B2 Withdrawals before the withdrawal of 42o,ooo liters for sale and delivery to SPEX July 1 to 6, 2020 22,428,163.38 July 7 to 18, 2020 44.8)6,335-74 July 19 to 27, 2020 31,946,g8o.8o

Deficit

(7,091,041.36) Exhibit "P-65", USB (Exhibit "P-67-2").

According to Ms. Flores, under the FIFO method, the earliest ADOs stored in the tanks are also the first ones removed therefrom. She illustrates that if petitioner stored imported ADO in a tank on January I, then, on January 15, petitioner stored locally manufactured ADO in the same tank. When petitioner removes ADO from the storage tank, it first withdraws from the imported stock stored on January 1. Petitioner must exhaust the imported ADO stored on January 1 before it can withdraw the locally manufactured stock stored on January 15. As a result, the ADOs remaining at the end of a certain period consist of the stocks most recently stored in a particular tank; Q&A No. 21, Exhibit"P-27", supra at note 51, p. 314. Table III.5, !CPA Report dated 20 October 2023, Exhibit "P-67", supra at note 57, pp. 766-767, in relation to Annex 0, USB (Exhibit "P-67-2"). USB (Exhibit "P-67-2").

Sum of ADO BO opening balance of23,188,533 liters and 18,099,811.\0 which represents 98% of ADO B2 opening balance of 18,469,\95 liters; Exhibit "P-54", supra at note 345, p. 788.

Taxable

Year

2020

Month

july . August

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

Particulars

Add: First Importation (MT Silver Ebalina)

Ending Balance, before the first withdrawal of 42o,ooo liters for sale and delivery to SPEX on July 27, 2020

Volume

48,266,!62 41,175,12.0.64 Based on the foregoing table above, a deficit of 7,091,041.36 liters existed before the first withdrawal of 42o,ooo liters on 27 July 2020. The first importation received on 19 July 2020 covered this deficit. As the !CPA noted, the running balance of ADO Bo prior to the first withdrawal for sale and delivery to SPEX amounted to 41,175,120.64 liters, which remained less than the total importation volume of 48,266,162 liters delivered by MT Silver Ebalina. Consequently, the first withdrawal, along with the subsequent withdrawals for sale and delivery to SPEX, originated from the importations that form subject of the present refund claim.364 On the other hand, the total available ADO B2 recorded in the ORBs from July to November 2020 amounted to 548,232,548 liters, comprising an opening balance of 18,469,195 liters and 529,763,353 liters produced during the period.365 Of this total, 537,267,897.04366 liters represented ADO Bo. Total withdrawals reflected in the monthly ORBsh corresponded with the withdrawals recorded in the DPDR368, as summarized below:

Table lll.6

ADOBo

Volume of Withdrawals of ADO 82 (in Liters)

Component in

Liters (98% of

ADO Bz)

ORB

Exhibit

DPDR

Exhibit Reference

(Annex L)

Reference

(Annex M)

122,695,243 "P-s4", p. 1 122,695·243 "P-ss", po. 1 to 4 120,241,)38.14 m,691,554 "P-s4", o. 2 m,691,554 "P-ss", oo. 5 to 7 109,457.722.92

Seotember

84,888,374 "P-54", o. 3 84,888,374 "P-ss", oo. 8 to 20 83,19o,6o6.52

October

November

Total

364 365 '" 367 368 85,285.428 "P-s4", o. 4 8s,285o428 "P-ss", pp. 21 to 28 83.579.719-44 123,'115,896 "P-54", p. 5 123,315,896 i "P-ss", oo. 29 to 44 120,849,578.o8 527,876,495 527,876,495

I

5'7•318,965.10 • 0 See !CPA Report dated 20 October 2023, Exhibit "P-67", supra at note 57, p. 768. See Table lll.4, !CPA Report dated 20 October 2023, Exhibit "P-67", supra at note 57, p. 764. 98% of 548,232,548 liters.

Annex L, USB (Exhibit "P-67-2").

Annex M, id.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

The ICPA found that, from July to November 2020, petitiOner had withdrawn a total of 527,876,495369 liters of ADO B2 for sale and delivery to its customers, including SPEX. Of this volume, 426,5o8,o13370 liters of ADO Bo originated from importations covered by the subject refund claim.37 1 From this amount, the ICPA traced 3,151,395 liters as specifically attributable to sales and deliveries to SPEX37Z, itemized as follows:373

Volume of

Date Withdrawn

Exhibit

Base Diesel

Volume of

Total Volume

Specific Tax

No.J74

(ADO Bom)

CME

(ADO Bz"6)

[A] x P6.oo

[A]

27 July 2020

"P-s1", p. 1 4n,6oo 8.400 420,000 Pz,46g,6oo.oo 27 August zozo "P-s1", p. z 596,232 12,168 6o8.400 3·577.392.0° o6 September 2020 "P-si", P· 3 45o,8oo g,zoo 460,000 2,704,800.00 n September 2020 "P-si", p. 4 98,os9 2,001 Ioo,o6o 588,354-oo

24 September 2020

"P-si", p. s 97.965 1,999 99·964 587,79o.oo

12 October 2020

"P-si'', p. 6 313,896 6.406 320,302 1,883,376.oo

16 October 2020

"P-si", P· 7 97,856 1·997 99.853 587,136.00

13 November 2020

"P-51", p. s 98.326 2,007 100,333 s89,956.oo

25 November 2020

"P-si", P· 9 539,000 11,000 sso,ooo 3,2J4,000.00 26 November zozo "P-51", p. 10 97,874 1,997 99.871 s87,244.oo 28 November zozo "P-s1", p. u 349.787 7,139 356,926 z,og8,722.oo

Total

3·151·395 64>3'4 J,215,709 Pr8,go8,370.oo Examination of the WCs shows that the ADO Bo (Base Diesel) bore the notation "Tax Paid", which indicates that excise tax on imported ADO had already been paid to the BOC. The ICPA further noted that, when ADO was intended for delivery to SPEX, the destination appeared either as "SPEX Bunkering" or simply "Bunkering."377t )69 370 371 372 373 375 376 377 Annex L, id.; See ORB, Exhibit "P-54", supra at note 345. See Table 111.3, !CPA Report dated 20 October 2023, Exhibit "P-67", supra at note 57, p. 763; Total ADO BO Importations covered by review of 431,023,578 liters less ADO BO Withdrawn without going through production of 4,515,565 liters; The 1CPA traced the withdrawal covered by WC No. 2018609486 and found that it was not among the WCs related to deliveries to SPEX (see !CPA Report dated 20 October 2023, Exhibit "P-67'', supra at note 57, p. 764). See !CPA Report dated 20 October 2023, Exhibit "P-67", supra at note 57, p. 768. Annex 0, USB (Exhibit "P·67-2").

Annex N, id.

!d.

98% of ADO B2 (Base Diesel).

Base diesel and CME.

See !CPA Report dated 20 October 2023, Exhibit "P-67", supra at note 57, p. 769.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

In sum, petitiOner successfully proved that it withdrew 431,023,578378 liters of ADO from importations made during the period of July to November 2020. Of this total volume, 3,151,395 liters were withdrawn from the Tabangao Refinery for sale and delivery to SPEX, a tax-exempt entity.

THE

IMPORTED

AUTOMOTIVE

DIESEL OIL (ADO), SUBJECT OF THE

PRESENT

REFUND

CLAIM,

WERE

SOLD AND DELIVERED TO SHELL

PHILIPPINES

EXPLORATION, B.V.

(SPEX).

Petitioner sold and delivered imported ADO to SPEX, a tax- exempt entity, pursuant to the Service Contract dated n December 1990, or SC 38379, executed between the Government of the Republic of the Philippines and Occidental Philippines, lnc. and SPEX, which contract designates SPEX as Contractor, as well as the Amending Agreement # 1 dated 15 July 2019380, and the Certification issued by SPEX.38' To establish that pet1t10ner sold and delivered excise tax-paid ADO to SPEX and that it billed and collected payment for such sales net of excise tax, petitioner presented following documentary evidence:

Documents

Exhibit

Annexed to the

Presented for Sales

No.JBz !CPA Report38'

Description

178 379 380 "' 38~ 383

and Invoicing

Billing

document generated from

"P-s6"

petitioner's

SAP

system, a

SI

R

computerized accounting system, once product has been delivered.

Screenshot of pricing details from the G. Standard Invoice (ZF2 Display)

ZFz Display

"P-s7''

T

feature of petitioner's SAP program via transaction code VFo3. ZF2 system is sorted by date of delivery.

See Table 111.3, !CPA Report dated 20 October 2023, Exhibit "P-67", supra at note 57, p. 763. See Exhibits "P-17'' and "P-17-1 ", supra at note 20. Exhibit "P-62", supra at note 141.

Exhibit "P-63", USB (Exhibit "P-67-2").

!d.

!d.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

Date

Withdrawn

Presented for Sales and Invoicing

Proof of Payments

Documents

Exhibit

No.3

Certificate of

Creditable Tax “Deg”

Withheld at Source “39

(BIR Form No, 2306)

LR “P-60”

Annexed to the

ICPA Report3®

Description

Proof of payments of the customer which are online screenshots of bank statement.

Proof of withholding of final tax on customer's payments.

A Report prepared by petitioner to support the claim documentation and submitted with supporting documents to tax authority. The LR accounts the stock movements by FIFO method from the importation of ADO Bo to sale of ADO Bz.

The ICPA verified petitioner sold and delivered 3,151,395 liters of ADO withdrawn from the Tabangao Refinery to SPEX during the period from 27 July 2020 to 28 November 2020, broken down as follows:

wc

Exhibit

No,385

Total Volume

(ADO Bz23#4)

BDN CBDN | SI Invoice

Exhibit Panipi Exhibit No.2 Amount Base diesel and CME.

USB (Exhibit “P-67-2”).

Id.

Id.

Id.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

An examination of petitioner's Sis reveals that all pertain to sales to SPEX and contain no "Excise Duty Element" line. A review of the ZF2 Display389 likewise confirms the absence of any excise tax component. Accordingly, petitioner neither billed nor collected excise tax on its sale of ADO to SPEX.39o Moreover, the ICPA found that all the

SJs39'

totaling P67,999,229.78 were supported by proof of payment, including online screenshots of bank transactions.392 The ICPA further noted that the difference ofr'5-439,938.38 represented the 8% FWf imposed pursuant to PD 1354393, considering petitioner's status as a petroleum service contractor. Results of the examination appear summarized below:

Online

ZF2

Screenshot

Amount per

SJ

Exhibit of Bank

Invoice

Online

8% FWT

Exhibit No.''•

Statement

Amount

Screenshot of

No,395

Exhibit

Bank Statement

No.J96 "P-s6", pp. 1 to 2 "P-si', p. 1 "P-sB", p. 1 1'9,369-486.oo 1'20, 755-557·81 1'1,804,831.11 "P-s6", pp. 3 to 4 "P-si', p. 2 13,190,902.92 "P-s6", pp. s to 6 "P-si', p. 3 "P-58", p. 2 9.940,830.00 9,14s.s63.6o 795,266.{0 "P-s6", pp. 7 to 8 "P-si', p. 4 "P-s8", p. 3 2,ns.s98.6o 1,946,350.71 169,247·89 "P-s6", pp. 9 tow "P-si', p. s "P-s8", p. 4 1,961,823·49 1,804,877.61 156.945·88 "P-s6", pp. n to 12 "P-s7'', p. 6 "P-s8", p. s 6,270,296.01 5,768,672·33 501,623.68 ~'P-56", pp. 13 to 14 HP-si', p. 7 "P-sB", p. 6 1,991,598.04 1,832,270.20 159.327.84 "P-s6", pp. 15 to 16 HP-si', p. s "P-s8", p. 7 1,923,634-44 1,769,743·68 153,890.76 "P-s6", pp. 17 to 18 "P-si', p. 7 "P-s8", p. 8 n,600A3S·Oo 12,610,333·44 1,o96,sso.73 "P-s6", pp. 19 to 20 "P-si', p. 8 2,106-449·17 "P-s6", pp. 21 to 22 UP-s7", p. 9 "P-s8", p. 9 7.528,176.11 6,925,922.02 602,254-09

Total

P67,999,229·78 P6z,ss9,291.4o Ps,439·938.38 In fine, petitioner sufficiently proved that excise tax amounting to P18,9o8a7o.oo397 paid on a total volume of 3,151,395398 liters of imported ADO subsequently sold to SPEX, a tax-exempt entity, t )89 Annex T, id.

390 391 See !CPA Report dated 20 October 2023, Exhibit "P-67", supra at note 57, pp. 772-774. Annex R, USB (Exhibit "P-67-2").

392 393 394 395 ~96 397 398 Annex U, id.

Supra at note 185.

USB (Exhibit "P-67-2").

!d.

!d.

3,151,395 liters (98% of 3,215,709 liters of ADO) multiplied by 1'6.00 excise tax rate. 98% of 3,215,709 liters of ADO.

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue constituted an erroneous payment and is refundable pursuant to Sections 204(C)399 and 2294oo of the NIRC of1997, as amended.

WHEREFORE, in light of the foregoing considerations, the present Petition for Review, filed by petitioner Pilipinas Shell Petroleum Corporation on 12 July 2022, is GRANTED. Accordingly, respondent is ORDERED TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the amount of PI8,9o8,J70.oo, representing petitioner's excise taxes erroneously paid on petroleum products sold to Shell Philippines Exploration, B.V. (SPEX), an entity exempt from excise tax, covering the period from July to November 2020.

I CONCUR:

399 400 Supraatp. 15.

Supra at pp. 15-16.

~~ JEAN MAI@A. BACORRO-VILLENA

Associate Justice

kwnttn~ LANEE s. CUI-DAVID

Associate Justice

Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue

ATTESTATION

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

- l;3.n..l\L A. BACORRO-VILLENA ssociate Justice

Special I

ivision Acting Chairperson

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the Special 1st Division Acting 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.

L.~ MA. BELEN M. RINGPIS-LIBAN

Presiding Justice