Court of Tax Appeals · Second Division

Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue

CTA Case No. 6554 November 28, 2006

REPUBLIC OF THE PHILIPPINES

Court of Tax Appeals

QUEZON CITY

SECOND DIVISION

PILIPINAS SHELL PETROLEUM

CORPORATION,

Petitioner, C.T.A. CASE NO. 6554

Members:

- Versus - CASTANEDA, JR., Chairperson

UY, and

PALANCA-ENRIQUEZ, JJ.

COMMISSIONER OF INTERNAL Promulgated:

Revenwe Respondent. NOV 28 2006 ~

fe eee eee ee ee eee \ Loe eee x

DECISION

CASTANEDA, JR., J.

This is a Petition for Review seeking the refund/tax credit of the amount of FORTY NINE MILLION FIFTY EIGHT THOUSAND SEVEN HUNDRED THIRTY THREE PESOS and 09/100 (P49,058, 733.09) allegedly representing excise taxes paid by petitioner on its sales and deliveries of petroleum products to various international carriers for their use or consumption outside the Philippines, covering the period November 2000 to March 2001.

Petitioner is a corporation duly organized and existing under the laws of the Philippines with office address at Shell House, 156 Valero Street, Salcedo Village, 1227 Makati City. It is engaged, among others, in the

DLCISION

C.T.A. CASE NO. 6354

Page 2 of 21

business of processing, treating and refining petroleum products for the purpose of producing marketable products and by-products and subsequent sale thereof.

Respondent, on the other hand, is the duly appointed Commissioner of Internal Revenue, holding office at the BIR National Office Building located at Agham Rd., Diliman, Quezon City.

During the period November 2000 to March 2001, petitioner allegedly sold and delivered petroleum products to various international carriers of Philippine or foreign registry for their use or consumption outside the Philippines. Except for those delivered at the port of Zamboanga, the petroleum products sold and delivered by petitioner to the international carriers were sourced by petitioner from its tax-paid inventories stored at its various depots and installations.

As regards the petroleum products delivered by petitioner at the port of Zamboanga, it allegedly “borrowed’ tax-paid petroleum products from Petron Corporation pursuant to a “loan or borrow” agreement between them. Excise taxes previously paid by Petron Corporation on the “borrowed” petroleum products were allegedly billed/passed on by Petron Corporation to petitioner. Petitioner, in turn, sold and delivered these “borrowed” petroleum products to various international carriers docked at the port of Zamboanga, net of excise taxes.

Petitioner avers that for the total volume of petroleum products sold and delivered by it to various international carriers, for their use and consumption outside the Philippines, covering the period November 2000 to

March 2001, it paid the corresponding excise taxes in the total amount of P49,058, 733.09, computed as follows:

Volume Specific

Month Product in Liters Tax Rate Amount

November 2000 Gas Oil 3,833,260 1.63 P 6,248,213.80 Fuel Oil 332,305 0.30 99,691.50 December 2000 Gas Oil 4,561,620 1.63 7,435,440.60 Fuel Oil 1,144,330 0.30 343,299.00 January 2001 Gas Oil 7,539,836 1.63 12,289,932.68 Fuel Oil 1,981,805 0.30 594,541.50 February 2001 Gas Oil 5,277,586 1.63 8,602,465.18 Fuel Oil 2,194,118 0.30 658,235.40 March 2001 Gas Oil 7,425,161 1.63 12,103,012.43 Fue! Oil 2,279,670 0.30 683,901.00 TOTAL P_49,058,733.09 On June 5, 2001 and September 5, 2001, petitioner filed two separate formal claims for refund or tax credit with the Large Taxpayers Audit & Investigation Division Il of the Bureau of Internal Revenue, seeking the recovery of excise taxes paid on its sales and deliveries of petroleum products to international carriers during the periods November to December 2000 and January to March 2001, in the amounts P14,126,644.90 and P34,932,088.19, respectively or a total of P49,058,733.09."

There being no action on the part of the respondent on its claims and to toil the running of the statutory period of two (2) years within which to file a judicial claim for refund, petitioner filed the instant Petition for Review on October 25, 2002.

On December 11, 2002, respondent, by counsel, filed an Answer raising the following Special and Affirmative Defenses:

6. Petitioner failed to demonstrate that the tax subject of the case at bar was erroneously or illegally collected:

7. Taxes paid and collected are presumed to have been made in accordance with law and regulations, hence, not refundable, ‘ Pars. 4 & 5, Joint Stipulation of Facts and Issues

DECISION

C.T.A, CASE NO. 6554

Page 4 of 2]

8. In an action for tax refund/credit, the burden of proof is on the taxpayer to establish its right to refund and failure to adduce sufficient proof is fatal to the action for tax refund/credit;

9. It is incumbent upon the petitioner to show that it has complied with the provisions of Section 204 in relation to Section 229 of the Tax Code, as amended; and 10.Claims for refund are construed strictly against the claimant for the same partakes [of] the nature of exemption from taxation (Commissioner of Internal Revenue vs. Ledesma, No. L-13509, January 30, 1970, 31 SCRA 95) and as such, they are looked upon with disfavor (Western Minolco Corp. vs. Commissioner of Internal Revenue, 124 SCRA 121).

Petitioner presented evidence to buttress its case while respondent's counsel manifested that this case has no report of investigation.”

On May 11, 2006, with petitioner's submission of Memorandum on April 12, 2006, and respondent's failure to file his Memorandum within the period granted, the case was considered submitted for Decision.

The parties mutually agreed to limit the issues to be resolved by this Court, as follows:

1. Whether or not petitioner has complied with the requirements under section 229 of the National Internal Revenue Code of 1997 for the recovery of internal revenue taxes that have been erroneously, wrongfully, illegally or excessively assessed or collected;

2. Whether or not the country of registry of the various international vessels that purchased petroleum products from petitioner during the period from November 2000 to March 2001 exempts from excise or similar taxes petroleum products sold to Philippine vessels:

3. Whether or not the petroleum products sold and delivered by petitioner to various international carriers during the period from November 2000 to March 2001 for the latter's use or

? Records, p. 232

consumption outside the Philippines are exempt from excise tax; and

4. Whether or not petitioner is entitled to the recovery of excise taxes it paid on petroleum products sold and delivered by petitioner to various international carriers for their use or consumption outside the Philippines.

Petitioner alleges that under Section 135 of the 1997 National Internal Revenue Code (NIRC), petroleum products sold to international carriers (whether of Philippine or foreign registry) are exempt from excise taxes provided that: (a) the petroleum products are consumed outside the Philippines; and (b) in the case of foreign international carriers, their country of registry exempt from excise or similar taxes petroleum products sold to Philippine carriers. To quote:

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

Petitioner contends that with respect to the foreign international carriers, their respective country of registry exempts from excise or similar taxes petroleum products sold to Philippine carriers. Therefore, the petroleum products sold and delivered by petitioner to these various international carriers, for their use or consumption outside the Philippines, are exempt from excise taxes pursuant to Section 135 above. In relation thereto, Section 130(A)(2) provides:

SEC. 130. Filing of Return and Payment of Excise Tax on Domestic Products. — (A) | Persons Liable to File a Return, Filing of Return on Removal and Payment of Tax. —

(1) Xxx

(2) Time for Filing of Return and Payment of the Tax. — Unless otherwise specifically allowed, the return shall be filed and the excise tax paid by the manufacturer or producer before removal of domestic products from place of production. Provided, That the excise tax on locally manufactured petroleum products and indigenous petroleum levied under Sections 148 and 151(A)(4), respectively, of this Title shall be paid within ten (10) days from the date of removal of such products for the period from January 1, 1998 to June 30, 1998; within five (5) days from the date of removal of such products for the period from July 1, 1998 to December 31, 1998; and, before removal from the place of production of such products from January 1, 1999 and _ thereafter. xxx

(Emphasis Supplied)

Thus, petitioner posits that for the petroleum products it sold and delivered to various international carriers of Philippine or foreign registry for their use and consumption outside the Philippines for the period November 2000 to March 2001, it paid the excise taxes due thereon upon removal thereof from its place of production save for the petroleum products delivered by petitioner at the port of Zamboanga which were paid by Petron Corporation to the BIR upon removal thereof from the place of production. Petitioner, however, claims that Petron Corporation shifted or passed-on to it the excise tax component of the “borrowed” petroleum products. Petitioner asseverates that “borrowed” petroleum products emanated from a “Loan or Borrrow" Arrangement.® The Court finds partial merit in petitioner's claim.

With respect to the first issue submitted to the Court for resolution, Section 229 of the National Internal Revenue Code provides:

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 shail 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.

In the present case, the administrative claims for refund were made on June 5, 2001 and September 5, 2001, while the judicial claim was filed on October 25, 2002. On the other hand, Section 130(A)(2) of the 1997 NIRC requires that payments of excise taxes on petroleum products should be made before withdrawal of the products from their place of production and the subject claim involves excise taxes paid from November 2000 to March 2001.

3 Exhibit A

C.T.A. CASE NO, 6554

A scrutiny of the records reveals that the earliest withdrawal and payment of the excise tax for deliveries made in November 2000, were made on October 26, 2000 and October 27, 2000, respectively. Hence, counting two (2) years from these dates, petitioner was able to timely file both the administrative and judicial claims for refund in compliance with Section 229 of the 1997 NIRC. Thus, We shall proceed to the other issues raised.

Being interrelated, the same shall be discussed jointly. In the case of Commissioner of Internal Revenue vs. Pilipinas Shell Petroleum Corporation, CTA EB No. 91, November 25, 2005 (CTA Case Nos. 6506 & 6559),’ it was held:

Finally, considering that Petitioner's sale of fuel oil to NPC is exempt from the payment of excise taxes, then Petitioner may rightfully recover the excise taxes it paid to PSPC (Pilipinas Shell Petroleum Corporation). And as correctly pointed out by Petitioner, since it ended up shouldering the specific tax component of the fuel oil, it is but just and reasonable to allow it to recover what it would have otherwise have passed on to NPC had it not been for NPC’s exemption from indirect taxes. ‘The view which refuses to accord exemption from indirect tax because the tax is first paid by the seller disregards realities and gives more importance to form than to substance. Equity and law always exalt substance over form’ xxx.”

While the above case deals with sale of petroleum products to tax exempt entities whose exemption from excise tax falls under Section 135(c) of the 1997 NIRC, and this case deals with fuel oi! sold to international carriers whose exemption fall under Section 135(a) of the same Code, the above pronouncement of the Court of Tax Appeals En Banc, applies by analogy since in this case, petroleum products were sold to an entity exempt from the 4 Citing Shell Philippines Petroleum Corporation (now Pilipinas Shell Petroleum Corporation) vs.

Commissioner of Internal Revenue, promulgated on July 26,2000, with entry of judgment dated November 24, 2000

C.T.A. CASE NO, 6554 payment of excise tax, and petitioner ended up shouldering the tax since it cannot pass on the excise taxes to the tax-exempt buyer. it likewise would not be amiss to cite BIR Ruling No. 051-99 which in part states:

xxx “[SJince your petroleum product withdrawals are for use by entities or agencies exempt from excise tax under Section 135 of the Tax Code of 1997, and that the petroleum products are to be delivered to the tax-exempt entities within ten (10) days (for the period January 1, 1998 to June 30, 1998); within five (5) days (for the period July 1, 1998 to December 31, 1998) from the date of removal of such products; and before removal from the place of production of such products (from January 1, 1999 and thereafter), you are allowed to claim a tax credit/refund of the excise taxes paid on petroleum products sold to tax exempt entities or agencies, subject to the two-year prescriptive period under Section 229 of the Tax Code of 1997.

Furthermore, the excise taxes paid on_ petroleum products sold and physically delivered to tax-exempt entities beyond ten (10) days (for the period January 1, 1998 to June 30, 1998), five (5) days (for the period July 1, 1998 to Dec. 31, 1998) after date of refinery withdrawal shall be recovered by you by filing claims for tax credit/refund with the Appellate Division, this Bureau. xxx” As correctly pointed out by petitioner Section 135(a) of the 1997 NIRC is quite clear. Among those exempted from excise taxes on petroleum products are those sold to international carriers of Philippine or foreign registry for their use or consumption outside the Philippines. Under Section 135, there are three requirements for a valid claim of exemption:

First, that the petroleum products are used and consumed outside the Philippines by international carriers of Philippine or foreign registry;

Second, that the that such petroleum products be stored in a bonded storage tank and disposed of in accordance with the rules and regulations prescribed by the Secretary of Finance, upon recommendation of Commissioner, and

C.T.A. CASE NO. 0554

Third, that the country of said international carrier exempts from similar taxes petroleum products sold to Philippine Carriers.

in this case, the commissioned Independent Certified Public Accountant of Joaquin Cunanan & Co., Mr. Jose Tayag, Jr., in his final report dated October 19, 2004, made the following findings:

“Based on the results of our examination of the Company’s accounting and related records, including the relevant documents that support the Company's claims for tax refund or credit with respect to specific taxes imposed under Section 130 (A)(2) of the NIRC, we are of the opinion that the Company is entitled to a refund of P41,985,139.49 representing excise taxes paid on petroleum sold to international vessels for use or consumption outside the Philippines. We believe that the amount of P7,073,593.60 is not refundable. We verified that:

e The Company paid the excise taxes of P49,058,733.09 on its withdrawal of petroleum products of 28,637,463 liters of gas oil and 7,932,228 liters of fuel oil for the period November 2000 to March 2001 which were subsequently solid to international carriers, net of the related excise taxes. This means that the Company did not pass onto these international carriers the cost of excise taxes it paid upon withdrawal.

We have classified the excise tax payments of P49 058,733.09 based on the results of our examination as follows:

a. With complete documents and, therefore, refundable (P41,985, 139.49) - Of the amount refundable of P41,985,139.49, the amount of P39,305,419.49 (Annex C) represents excise taxes on petroleum products sold _ to international vessels which were sourced from the Company's own tax-paid inventories;

- Of the amount refundable of P41,985,139.49, the amount of P2,679,720 (Annex F) represents excise taxes on petroleum products sold to international vessels which were borrowed from Petron’s tax-paid inventories;

Page If of 21

b. With incomplete documents or exceptions and, therefore, not refundable (P7,073,593.60) Excise taxes of P7,073,593.60 (Annex D) broken down as follows:

As of October 19, 2004, the Company failed to furnish some documents for us to complete our verification on the excise tax claims amounting to P1,451,937.15 having a total volume of 607,905 liters of gas oil and 1,536,840 liters of fuel oil.

The Company failed to provide DFA certification on several countries granting excise tax exemption to Philippine-registered vessels on their purchase of petroleum products while docked in foreign ports. Total claims for deliveries to countries without reciprocity agreement amount to P4,941,196.77 having a total volume of 2,629,449 liters of gas oil and 2,183,983 liters of fuel oil.

Pursuant to Maritime Industry Authority Memorandum

Circular No. 166, Philippine-Registered domestic ships may be allowed to temporarily engage in international voyages provided that the company obtains a special permit. Excise taxes on deliveries of petroleum products to domestic ships without special permit amount to P681,459.68 having a total volume of 402,736 liters of gas oil and 80,000 liters of fuel oil.

Total amount of excise tax payment with incomplete documents or with exceptions amounted to P7,073,593.60.

We have seen the related documents where deliveries of petroleum products to international carriers at the port of Zamboanga were sourced from Petron. Total excise taxes paid to Petron on its deliveries (November 2000 to March 2001) to the Company is P2,679,720 representing 1,644,000 liters of gas oil. xxx The certified true copy of the bunkering permit [Exhibit ‘W-1’ to ‘W-75'] of each international carrier that we inspected to establish its nationality were obtained by the Company from Bureau of Customs.

Page 12 of 21]

e Based on the reconciliation of advance payments and excise taxes due xxx, we noted the following inconsistencies which do not affect the amount refundable: xxx The inconsistencies noted xxx do not affect the amount of the claim because the beginning and ending balances of the advance payment are sufficient to cover the inconsistencies thus noted.

After effecting the exclusion on excise tax claims amounting to P7,073,593.60 due to unavailability of certain documents (original or duplicate original copies), deliveries to countries without reciprocity agreement, and deliveries to domestic vessels without special permit to ply international route, it is our opinion that the Company is entitled to a refund of P41,985,139.49 representing excise taxes paid on petroleum products sold to international vessels for their use or consumption outside the Philippines.

Our conclusion relates only to the Company's claims for tax refund or credit and does not extend to other components of the Company's financial statements.

This final report is solely in connection with the tax case involving claims for specific tax refund or credit filed by the Company now pending with the CTA (CTA Case No. 6554) and should not be used for any other purpose.” (References

Omitted)

As verified by the Independent Certified Public Account, petitioner is entitled to a refund in the total amount P41,985,139.49, broken down as follows:

P39,305,419.49 (representing excise taxes on petroleum products sold to international! carriers which were sourced from the Company’s own tax-paid inventories); and P2,679,720.00 (representing excise taxes on petroleum products sold to international carriers which were borrowed from Petron’ tax-paid inventories).

In its Memorandum, petitioner prayed that judgment be rendered declaring its entitlement to a refund or tax credit in the amount of

> Exhibit U

C.1.A, CASE NO. 6554

P41,985,139.49 and ordering respondent to grant a refund or tax credit in the same amount. It is noteworthy that petitioner's prayer with respect to the amount of refund already considers the report of the commissioned independent CPA. Moreover, petitioner justified its claim in the amount of P2,679,720.00 in this manner:

1. Considering that petitioner does not have a depot or installation in Zamboanga for the storage of tax-paid petroleum products, petitioner ‘borrowed’ petroleum products from Petron Corporation, pursuant to an ‘Agreement for Rationalized Operations of Bulk Fuel Storage Plant’ entered into by petitioner and Petron Corporation. Petitioner, in turn, sold and delivered the ‘borrowed’ petroleum products to international vessels docked at the port of Zamboanga, net of excise taxes. The petroleum products ‘borrowed by petitioner from Petron Corporation were later on replaced/repaid by petitioner with petroleum products of the same kind.

2. The petroleum products ‘loaned’ by Petron Corporation to petitioner for the period December 2000 to March 2001 for delivery to tax-exempt international carriers of Philippine or foreign registry were sourced by Petron Corporation from its tax-paid inventories, meaning the excise taxes due thereon had already been paid by Petron Corporation to the BIR upon removal thereof from the place of production.

3. Inasmuch as petitioner would later on replace/repay the ‘borrowed’ petroleum products, Petron Corporation only billed petitioner the excise tax component pertaining to the petroleum products ‘borrowed’. In other words, Petron Corporation shifted or passed-on to petitioner the excise tax component of the ‘borrowed’ petroleum products as and when the same were ‘loaned’ by Petron Corporation to petitioner.

4. However, the amounts billed by petitioner for the sale and delivery of the ‘borrowed’ petroleum products to various international vessels docketed at the port of Zamboanga, during the period December 2000 to March 2001, were net of excise taxes. Thus, petitioner ultimately had to bear the excise tax component of the ‘borrowed’ petroleum products sold and delivered at the port of Zamboanga.” ® ® Memorandum for Petitioner, Records, pages 237 - 238

Notwithstanding the above explanation, the claimed amount of P2,679,720.00 representing excise taxes on petroleum products sold to international carriers which were borrowed from Petron Corporation’s tax-paid inventories is disallowed. Section 130(A)(2) and Section 204 of the National Internal Revenue Code of 1997 read:

SEC 130. Filing of Return and Payment of Excise Tax on Domestic Products. — (A) Persons Liable to File a Return, Filing of Return on Removal and Payment of Tax. —

(1) XXX

(2) Time for Filing of Return and Payment of the Tax. — Unless otherwise specifically allowed, the return shall be filed and the excise tax paid by the manufacturer or producer before removal of domestic products from place of production: xxx SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. — The Commissioner may —

(A) Xxx

(B) xxx (C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided, however, That a return filed showing an overpayment shall be considered as a written claim for credit or refund.

Clearly, petitioner in this case is not the proper party to claim for the refund of the amount of P2,679,720.00 representing excise taxes on petroleum products sold to international carriers which were borrowed from Petron Corporation’s tax-paid inventories. There was no erroneously or

C.T.A, CASE NO. 6554 illegally collected excise tax because the taxes were indeed due and demandable at the time the petroleum products were withdrawn from their place of production. Petron Corporation, as the taxpayer statutorily liable to pay the excise taxes thereon, merely paid what was demandable from it.

In addition, petitioner did not pay and remit the tax to the Bureau of Internal Revenue. And since the excise taxes were paid by Petron Corporation, petitioner cannot seek for the refund thereof because it is not the taxpayer entitled the remedy provided by law in Section 204 of the National Internal Revenue Code of 1997. As held in the case Commissioner of Internal Revenue vs. Silkair (Singapore) PTE. LTD.,’ ‘the right to claim for the refund of excise taxes paid on petroleum products lies with Petron Corporation who paid and remitted the excise tax to the BIR at the point of removal of the petroleum products from the refinery and not respondent xxx, to whom the tax burden was merely passed on’.

However, this Court finds petitioner entitled to the refund/tax credit of the amount of P39,305,419.49 representing excise taxes paid on the petroleum products it sold to international carriers of foreign or Philippine registry for consumption outside the Philippines. The amount of P39,305,419.49 representing excise taxes on petroleum products sold ta international carriers were sourced from the Company’s own. tax-paid inventories [which according to the commissioned independent CPA was substantiated by documentary evidence, such as Bunkering Permit (Exhibits W-1 to 75); Receipts for Marine Bunker Fuel (Exhibits X-1 to X-96): Sales ” CTA EB Case No. 25 (CTA Case No. 5996), Resolution, December 5, 2005

C.T.A, CASE NO. 6354

Invoices (Exhibits BB-1 to BB-82): Billing details (Exhibits Y-1 to Y-82); Pricing details (Exhibits Z-1 to Z-82); Official Receipts (Exhibits AA-1 to AA-62)].

After a careful review of the conclusion reached by the commissioned independent CPA® with reference to the documentary evidence offered by petitioner, We find that:

(1) Petitioner made advance payments of excise taxes from November 2000 to March 2001 in the total amount of P826,000,000.00,° summarized as follows:

Exhibit Date Amount

T-4-3 October 27, 2000 P 122,000,000.00 T-13-3 November 16, 2000 26,000,000.00 T-5-3 November 24, 2000 4,000,000.00 T-28-3 December 21, 2000 67,000,000.00 T-25-3 December 15, 2000 129,000,000.00 T-22-3 December 12, 2000 26,000,000.00 T-40-3 January 16, 2001 28,000,000.00 T-44-3 January 23, 2001 16,000,000.00 T-45-3 January 24, 2001 23,000,000.00 T-50-3 January 31, 2001 21,000,000.00 T-53-3 February 6, 2001 34,000,000.00 T-64-3 February 23, 2001 101,000,000.00 T-80-3 March 21, 2001 40,500,000.00 T-68-3 March 1, 2001 44,000,000.00 T-72-3 March 7, 2001 56,500,000.00 T-76-3 March 13, 2001 58,000,000.00 T-77-3 March 14, 2001 30,000,000.00

Total Advance Payments

P_826,000,000.00

(2) Petitioner made several withdrawals of gas and fuel oils from its refinery evidenced by Withdrawal Certificates'® during the period from November 2000 to March 2001 for total volume in liters of 218,458,032 and 51,418,644, respectively. The related excise taxes of P356,081,702.16 and P12,425,593.20 of the said withdrawn petroleum products were already paid as evidenced by Daily Products

8 Exhibit U * Annex B, commissioned independent CPA report (Exhibit U); Exhibits T-4-3, T-13-3, T-5-3, T-28-3, T- 25-3, T-22-3, T-40-3, T-44-3, T-45-3, T-50-3, T-53-3, T-64-3, T-80-3, T-68-3, T-72-3, T-76-3, T-77-3

19 Exhibits V-1 to V-54

C.T.A. CASE NO, 6554

Deliveries Report,'' Daily Removals and Excise Tax Due to Petroleum Products’? Excise Tax Returns’? in relation to Payment Form (BIR Form No. 0605) for advance payment of excise tax.'* Details of withdrawals of gas and fuels oils and their corresponding excise tax dues are shown below:

Withdrawal of Gas O!

Withdrawal

Exhibits Certificate No.

V-1 50287

V-2 50366

V-3 50392

V-4 50454

V-5 50489

V-6 50689

V-7 50670

V-8 50659

V-9 50582

V-10 50560

V-12 50784

V-15 50802

V-18 50844

V-20 50891

V-21 50920

V-23 50929

V-25 §2257

V-27 52288

V-32 60346

V-36 60380

V-37 60412

V-40 60427

V-42 60643

V-43 60443

V-47 60602

V-49 60611

V-50 60490

TOTAL

Withdrawal of Fue} Oil

Withdrawal

Exhibits Certificate No.

V-11 50524

V-13 50732

1! Exhibits T-1-2 to T-27-2

12 Exhibits T-1-1 to T-27-21

13 Exhibits T-1 to T-27

14 Exhibits T-4-3 to T-80-3

Date

10/26/2000 11/5/2000 11/12/2000 11/15/2000 11/23/2000 12/20/2000 12/14/2000 12/11/2000 12/5/2000 11/29/2000 12/30/2000 1/4/2001 1/15/2001 1/22/2001 1/22/2001 1/23/2001 1/30/2001 2/5/2001 2/18/2001 2/22/2001 2/22/2001 2/25/2001 3/20/2001 2/28/2001 3/12/2001 3/13/2001 3/11/2001

Date

11/29/2000 1/4/2001

Volume

12,097,104 10,583,242 5,779,858 12,954,579 8,092,005 8,956,585 7,378,925 11,278,834 9,665,348 8,862,172 9,638,712 10,396,608 7,210,329 3,413,397 7,329,969 4,846,226 7,340,480 1,612,109 8,912,686 4,580,398 14,466,020 7,324,349 4,948,132 12,821,766 8,977,354 4,799,209 4,191,636 218,458,032

Volume

2,107,380 4,092,062

Exhibits

T-1; T-1-1 & T-1-2 T-2; T-2-1 & T-2-2 T-3; T-3-1 & T-3-2 T-4; T-4-1 & T-4-2 T-5; T-8-1 & T-5-2 T-6; T-6-1 & T-6-2 T-7; T-7-1 & T-7-2 T-8; T-8-1 & T-8-2 T-9; T-9-1 & T-9-2 T-10; T-10-1 & T-10-2 T-11; T-11-1 & T-11-2 T-12; T-12-1 & T-12-2 T-13; T-13-1 & T-13-2 T-14; 1-14-14 & T-14-2 T-14; T-14-1 & T-14-2 T-15; T-15-1 & T-15-2 T-16; T-16-1 & T-16-2 T-17; T-17-1 & T-17-2 T-18; T-18-1 & T-18-2 T-20; T-20-1 & T-20-2 T-20; T-20-1 & T-20-2 JT-21; T-21-1 & T-21-2 T-22; T-22-1 & T-22-2 T-23; T-23-1 & T-23-2 T-25; T-25-1 & T-25-2 T-26; T-26-1 & T-26-2 T-27; T-27-1 & T-27-2

Exhibits

T-10; T-10-1 & T-10-2 T-12; T-12-1 & T-12-2 at

P

Excise Tax

P1.63 per liter

of Gas Oil

19,718,279.52 17,250,684.46 9,421,168.54 21,111,073.77 13,189,968.15 14,599,233.55 12,027,647.75 18,384,499.42 15,754,517.24 14,445,340.36 15,711,100.56 16,946 ,471.04 11,752,836.27 5,563,837.114 11,947,849.47 7 899,348.38 11,964,982.40 2,627 ,737.67 14,527,678.18 7,466,048.74 23,579,612.60 11,938,688.87 8,065,455.16 20,899,478.58 14,633,087.02 7,822,710.67 6,832,366.68 P356,081,702.16

Excise Tax

P0.30 per titer

of Fuel Oil

632,214.00 327,618.60

C.T.A, CASE NO. 6554

V-14

V-16

V-17

V-19

V-22

V-24

V-26

V-28

V-29

V-31

V-34

V-35

V-38

V-39

V-41

V-44

V-45

V-46

V-48

V-51

TOTAL

TOTAL EXCISE TAX ON WITHDRAWALS OF GAS AND FUEL OIL 8,507,295.36

Pp

50733 50873 50874 50874 50892 503896 50964 50978 60370 60369 60369 60347 60379 60379 60378 60391 60392 60564 60454 60474 60475 60495 60492 1/4/2001 1/15/2001 1/15/2001 1/15/2001 1/22/2001 1/23/2001 1/30/2001 2/5/2001 2/18/2001 2/18/2001 2/18/2001 2/18/2001 2/21/2001 2/21/2001 2/21/2001 2/25/2001 2/25/2001 3/20/2001 2/28/2001 3/6/2001 3/6/2001 3/12/2001 3/11/2001 2,050,081 1,512,420 1,900,512 1,921,976 2,085,070 1,144,621 1,527,360 2,117,592 1,869,278 989,742 535,658 4,739,427 736,147 4,133,147 1,515,977 11,255,363 2,812,299 1,506,693 1,858,642 1,079,171 1,518,664 1,293,595 1,115,767 54,418,644 T-12; T-12-1 & T-12-2 T-13; T-13-1 & T-13-2 T-13; T-13-1 & T-13-2 T-13; T-13-1 & T-13-2 T-14; T-14-1 & T-14-2 T-15; T-15-1 & T-15-2 T-16; T-16-1 & T-16-2 T-17; T-17-1 & T-17-2 T-18; T-18-1 & T-18-2 T-18; T-18-1 & T-18-2 T-18; T-18-1 & T-18-2 T-18; T-18-1 & T-18-2 T-19; T-19-1 & T-19-2 T-19; T-19-1 & T-19-2 T-19; T-19-1 & T-19-2 1-24; T-21-1 & T-21-2 T-21; T-21-1 & T-21-2 T-22; T-22-1 & T-22-2 T-23; T-23-1 & T-23-2 T-24; T-24-1 & T-24-2 T-24; T-24-1 & T-24-2 T-25; T-25-1 & T-25-2 T-27; T-27-1 & T-27-2 615,024.30 453,726.00 570,153.60 576,592.80 625,521.00 343,386.30 458,208.00 635,277.60 560,783.40 296,922.60 160,697.40 421,828.10 220,844.10 339,944.10 454,793.10 376,608.90 843,689.70 452,007.90 557,592.60 323,751.30 455,599.20 388,078.50 334,730.10 P12,425,593.20 = Thus, from November 2000 to March 2001, petitioner's total advance payments of excise tax amounting to P826,000,000.00 is greater than the excise tax due of P368,507,295.36 for the said withdrawn petroleum products. © Indeed, during November 2000 to March 2001, petitioner sold and delivered a total of 23,353,373 liters of gas oil and 4,131,405 liters of fuel oil to various tax-exempt international carriers of Philippine or foreign registry, net of the related excise taxes.

The said sales and deliveries to tax-exempt international carriers are duly supported by Bunkering Permit, showing among

5 See Annex B, commissioned independent CPA report (Exhibit U) in relation to the pertinent documentary evidence referred therein.

CVPA, CASE NO, 6554 others the nationality of the vessel;'® Receipts for Marine Banker Fuel;’” Sales Invoices;'® Billing details;'® Pricing details;*° Official Receipts;*" in relation to the Certification issued by the Department of Foreign Affairs®* listing therein the name of the countries that grant tax exemption to Philippine- registered carriers. Further, the petroleum products which were sold to various tax-exempt international carriers of Philippine or foreign registry were used or consumed outside the Philippines.2° (see Annex A of this Report) IN VIEW OF ALL THE FOREGOING, petitioner's claim is hereby GRANTED in the reduced amount of P39,305,419.49, computed as follows:

Volume {in Liters) Gas Oil Fuel Oil

Month Gas Oil Fuel Oil @ P1.63/Liter @P0.30/Liter Total November 2000 3,701,260 0 P 6,033,053.80 P 0.00 P 6,033,054 December 2000 3,577,410 639,580 §,831,178.30 191,874.00 6,023,052 January 2001 5,704,597 1,341,055 9,298,493.11 402,316.50 9,700,810 February 2001 3,992,120 192,090 6,507,155.60 57,627.00 6,564,783 March 2001 6,377,986 1,958,680 _10,396,117.18 587,604.00 10,983,721 Total 23,353,373 4,131,405 P38,065,997,99 P1,239,421,50 P39,305,419.49 Accordingly, respondent is hereby ORDERED to REFUND or to ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the amount of

THIRTY NINE MILLION THREE HUNDRED FIVE THOUSAND FOUR

HUNDRED NINETEEN & 49/100 PESOS (P39,305,419.49) representing excise taxes paid by petitioner on petroleum products sold to international

16 Exhibits W-1 to W-75

7 Exhibits X-1 to X-96

18 Exhibits BB-1 to BB-82

19 Exhibits Y-1 to Y-82

°° Exhibits Z-1 to Z-82

21 Exhibits AA-1 to AA-62

22 Exhibit S

23 Exhibits L to L-9

C.T.A. CASE NO, 6554 carriers which were sourced from its own tax-paid inventories.

SO ORDERED.

Ber wh , sapeke < Barry 4

Associate Justice

WE CONCUR:

e ER itfba Py Y bez bubs ax ENRIQUEZ

Associate Jestice Associate Justice

ATTESTATION

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

ANITO'C. CASTANEDA, R.

Associate Justice

Chairperson

CERTIFICATION

| hereby certify that the decision was reached after due consultation with the members of the Division of the Court of Tax Appeals in accordance with Section 13, Article VIll of the Constitution.

ERNESTO D. ACOSTA

Presiding Justice

Month

November 2000

Sub-total

December 2000

Sub-total

January 2001

Sub-total

February 2001

Vessel

FoxHound

Million T

MT Angela

MT Demetrius

MT Golden Alpha

MT Kuotai

Royal Progress

Foxhound

Golden Zebra

Ho Feng No. 8 Ho Feng No. 8

Isla Bohol

MT Golden Ace

MT Kuotai

MT Liberty

MV Royal Progress

Norella

Pacific Dragon

Silver Star

Sunny Hawk

Angelo Amate

Asian Star

Ginga Falcon

Golden Ace

Golden Alpha

Heunga Star

Helios

National Honor

Pacific Dragon

Pacific Ocean

Spring Orca

Sun Treasure

Sunny Hawk

Sunrise Ivy

TBN VI

Ten Hiro

Fair Iris

Fair Irts

Global Falcon

Golden Ace

Golden Alpha

Country of

Registry

Philippines

Panama

Philippines

Panama

Philippines

Panama

Philippines

Malaysia

Panama

Italy

Panama

Greece

Panama

Hongkon

Panama

Greece

Panama

Bunkering

Permit No. Exhibit 1850 1694 1728 1833 1762 1790 1848 1752 1809 1702 1850 1928 1954 1954 1971} 197} 1892 1960 1899 1946 1940 1867 1867 1936 1916 1882 0122 0122 0064 0064 0114 0113 0066 0098 0029 0072 0062 0062 0105 0035 0035 0138 0059 0071 0031 0074 0013 0037 0016 0156 0156 0156 0204 0223 0217

W-l

W-2

W-3

W-4

W-5

W-6

W-7

W-8

W-9

W-10

W-!l

W-12

W-13

w-l4

W-l4

W-15

W-16

W-17

W-18

W-19

W-20

W-21

W-22

W-23

W-24

W-25

W-26

W-27

W-28

W-29

W-32

W-33

W-35

W-37

W-38

W-39

W-40

W-41

W-42

W-43

W-44

W-45

W-46

W-47

W-48

W-49

W-50

RMBF *

No.

5906 5645 5904 5648 5650 5902 5905 5903 5649 5646 5907 5924 5929 5928 5933 5934 5912 5932 5918 5927 5925 5913 5915 5930 5919 5911 5965 5962 5955 5957 5966 5961 5953 5959 5946 5951 5948 5950 5960 5970 5972 5971 5947 5969 5942 5954 5937 5943 5938 4175 4176 4177 5984 5989 5988

X-1

X-2

X-4

X-5

X-6

X-7

X-8

X-9

X-10

X-11

X-12

X-13

X-14

X-15

X-16

X-17

X-18

X-19

X-20

X-21

X-22

X-23

X-24

X-25

X-26

X-27

X-28

X-29

X-30

X-31

X-32

X-33

X-34

X-35

X-38

X-39

X-43

X-44

X-48

X-49

X-50

X-51

X-52

X-53

X-54

X-55

X-56

X-57

X-58

X-59

X-60

X-61

X-62

X-63

X-64

Invoice

Exhibit Number

910916792 910908281 910916199 910916797 910916201 910916203 910916794 910916200 910916204 910890500 910952544 910953646 910953584 910953584 910954246 910954245 910950713 910954243 910950690 910953568 910953594 910947070 910947064 910954244 910952565 910950720 911024640 911024640 910991168 910984460 910992001 910990282 910985002 910991345 910984435 910984454 910990160 910990083 910991950 910984452 911023091 911025729 910984991 910091870 910985010 910984973 910984962 910984981 910984441 911024290 911024290 911024290 911024725 911024733 911024730

Exhibit

BB-1

BB-2

BB-3

BB-4

BB-5

BB-6

BB-7

BB-8

BB-9

BB-10

BB-11

BB-12

BB-13

BB-14

BB-15

BB-16

BB-17

BB-18

BB-19

BB-20

BB-21

BB-22

BB-23

BB-24

BB-25

BB-26

BB-27

BB-28

BB-29

BB-30

BB-31

BB-32

BB-35

BB-36

BB-38

BB-39

BB-41

BB-42

BB-43

BB-44

BB-45

BB-46

BB-47

BB-48

BB-49

BB-50

BB-51

BB-52

BB-53

BB-54

BB-55

ANNEX "A"

Volume in Liters

Gas Oil

48,100 54,110 541,120 541,120 541,120 541,120 300,620 541,120 541,120 51,740 3,701,260 541,120 60,130 36,070 541,120 541,120 541,120 42,090 192,400 541,120 541,120 3,577,410 42,087 541,120 541,120 541,120 541,120 36,070 84,170 58,920 72,150 541,120 541,120 541,120 541,120 541,120 541,120 5,704,597 20,000 16,000 12,000 541,120 541,120 541,120

Fuel Oil

253,010 32,160 107,850 48,240 96,480 101,840 639,580 210,840 316,265 139,360 248,700 65,980 101,840 128,640 129,430 1,341,055

Month

Sub-total

March 2001

TOTAL

Sub-total

Vessel

Isla Bohol

Janesia Asphalt

Mt Angela

Mt Ginga Falcon

Mt Sunny Hawk

Mt Sunrise lvy

MV Ace Eagle

Yong An

Asian Star

Cinta

Golden Zebra

Liberty Sun

Maple Galaxy

Mt Excelsior

Mt Golden Alpha

Mt Kuo Tai

Mt Spring Bay

Mt Sun Vry

Pacific Dragon

Rotterdam VI

Sea Crane

Spring Orca

Sunny Hawk

Sunrise Ivy

* Receipt for Marine Bunker Fuel

Country of

Registry

Philippines

Panaina

Panama

Netherlands

Panama

Bunkering

Permit No. Exhibit 0202 0182 0179 0114 0170 0159 0201 0224 0224 0224 0847 0847 0847 0367 0367 0367 0869 0842 0371 0258 0834 0806 0826 0808 0253 0253 0281 0391 0358 0295 0270

W-51

W-52

W-54

W-55

W-56

W-57

W-58

W-59

W-60

W-61

W-62

W-63

W-64

W-65

W-66

W-67

W-68

W-69

W-70

W-71

W-72

W-73

W-74

W-75

RMBE *

No.

5993 5983 5982 5981 5978 5973 5986 1554 1556 1555 5668 5672 5669 5664 5661 5663 5666 5657 5667 5997 5656 5651 5655 5654 5652 5653 6000 5673 5658 5999 5998

X-65

X-66

X-68

X-69

X-70

X-71

X-72

X-73

X-74

X-75

X-76

X-77

X-78

X-79

X-80

X-8]

X-82

X-83

X-84

X-85

X-86

X-87

X-88

X-89

X-90

X-91

X-92

X-93

X-94

X-95

X-96

Invoice

Exhibit Number

911062093 911026065 911024726 911024721 911024713 911024712 911026286 911026083 911026083 911026083 911065160 911065160 911065160 911064699 911064699 911065054 911063368 911063216 911064928 911063156 911063197 911063175 911063191 911063180 911062099 911062110 911063077 911098602 911063366 911063172 911063168

Exhibit

BB-56

BB-57

BB-59

BB-60

BB-61

BB-62

BB-63

BB-64

BB-65

BB-66

BB-67

BB-68

BB-69

BB-70

BB-71

BB-72

BB-73

BB-74

BB-75

BB-76

BB-77

BB-78

BB-79

BB-80

BB-81

BB-82

Volume in Liters

Gas Oi)

36,080 541,120 541,120 541,120 541,120 96,200 24,000 3,992,120 102,210 48,100 90,186 541,120 541,120 541,120 541,120 541,120 541,120 541,120 84,170 101,000 541,120 541,120 541,120 541,120 6,377,986 23,353,373

Fuel Oil

60,090 32,000 100,000 192,090 168,680 643,180 214,400 74,850 857,570 1,958,680 4,131,405