Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue

DECISION

FERRER-FLORES, J.:

This is a remanded case for the determination of the refundable amount due to Pilipinas Shell Petroleum Corporation (PSPC/petitioner), if any, pursuant to the Supreme Court En Bane Decision dated June 15, 2021, rendered in G.R. No. 211303, entitled Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue.

ANTECEDENTS

On February 15, 2008, petitioner filed the Petition for Review with the Court ofTax Appeals (CTA), 1 docketed as CTA Case No. 7731, praying that judgment be rendered:

1. Declaring petitioner entitled to a refund of, or issuance of a tax credit certificate for the amount of P91,655,658.98, representing excise taxes paid on Jet A-1 fuel sold to tax-~ 1 Docket- Vol. 1, pp. I to 15.

.,

Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue exempt international air carriers for the period from February to April 2006; and,

2. Ordering respondent to grant petitioner a refund or tax credit in the said amount ofP91,655,658.98.

After trial, on September 7, 2012, the CT A, through its former Third Division, promulgated its Decision,2 denying PSPC's Petition for Review, as follows:

Premises considered, excise taxes paid on Jet A-1 fuel sold to international air carriers for the period covering February to April 2006, in the total amount of P91 ,655,658.98, cannot be considered erroneously or illegally paid. Petitioner, as the taxpayer statutorily liable to pay the said excise taxes, rightfully paid what was demandable from it. In sum, the Court finds petitioner not entitled to any refund or issuance of tax credit certificate of excise taxes previously paid on the said goods.

WHEREFORE, the Petition for Review is hereby DENIED for lack of merit.

CTA Case No. 773 I Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue

Respondent's Manifestation was filed on March 7, 2013, 10 while Memorandum for Petitioner was filed via registered mail on April 22, 2013 .II On September 9, 2013, the CTA En Bane rendered its Decision,I 2 the dispositive portion of which reads:

WHEREFORE, in light of the aforestated principles, the instant Petition for Review is hereby DENIED for lack of merit. The Decision promulgated on September 7, 2012 of the CTA-Third Division and its Resolution dated November 12, 2012 are hereby AFFIRMED in toto.

WHEREFORE, the petition is PARTLY GRANTED. The Decision dated September 9, 2013 and the Resolution dated February 3, 2014 rendered by the Court ofTax Appeals (CTA)-En Bane in CTA EBNo. 960, as well as the Decision dated September 7, 2012 and Resolution dated November 12, 2012 ofthe CTA-Third Division in CTA Case No. 7731 are hereby SET ASIDE. The case is hereby REMANDED to the CT A in accordance with this Decision.

Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue

Manifestation (Re: Resolution dated 27 January 2023) on February 21, 2023,29 while petitioner submitted its Manifestation on April 11, 2023.30 In the Minute Resolution dated August 14, 2023,31 the CTA Second Division noted both Manifestations and submitted the present case anew for decision in accordance with the Supreme Court Decision in G.R. No. 211303 dated June 15, 2021.

THE RULING OF THE COURT

The present Petition for Review is partly meritorious. In Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue,32 the Supreme Court En Bane held as follows: All told, the Court concludes that upon PSPC's sale of its imported petroleum products to various international carriers from February 27 to April 9, 2006, the tax exemption under Section 135 (a) of the Tax Code came into effect. Consequently, the excise taxes it previously paid on the said petroleum products became erroneously or illegally collected taxes that are proper subject of a claim for refund under Sections 204 and 229 of the same law.

The foregoing notwithstanding, the Court cannot - as of yet - declare that PSPC is entitled to the entirety of its refund claim. On this score, the observations of Associate Justices Amy C. Lazaro-Javier and Rodi1 V. Zalameda are well-taken that PSPC should not be entitled to a refund of the excise taxes pertaining to the Jet A-1 fuel it purchased from Chevron.

To expound, it must be highlighted that the 24,974,294 liters of Jet A-1 fuel sold by PSPC to international carriers subject of its present claim for tax refund came from two (2) sources: first, from direct importation, amounting to 28,578,673 liters; and second, from the local purchase from Chevron, amounting to 3,192,012 liters.

Based on the discussions above, PSPC may claim refund for the excise taxes on the Jet A-1 fuel that it imported itself, considering that it was the statutory taxpayer in that instance. However, the same is not true for the fuel purchased from Chevron. Again, the standing principle is that the 'passing on' of the tax burden is largely a contractual affair between the parties and such affair does not 29 Docket- Vol. 5, pp. 2810 to 2812.

30 Docket- Vol. 5, pp. 2814 to 2817.

' 3 1 The case was re-raftled considering that the ponente of the case, former Associate Justice Lovell R. Baustista, now deceased, and another member of the Special Third Division, former Associate Justices Olga Palanca-Enrique and Amelia Cotangco-Manalastas have all retired pursuant to Memorandum dated June 20, 2023, Docket - Vol. 5, pp. 2819 to 2821.

Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue determine the tax incidence imposed by law unless the contrary is provided. Here, when PSPC purchased Jet A-1 fuel from Chevron and paid the corresponding excise taxes due thereon as part of the purchase price, it did not operate to transform PSPC into the statutory taxpayer of the corresponding excise taxes. In reality, what PSPC paid was merely the tax burden, and hence, it cannot benefit from the tax exemption under Section 135 which operates to alleviate the tax incidence. Stated otherwise, in the case ofthe 3,192,012 liters purchased from Chevron, PSPC was merely a purchaser of the said fuel. Hence, even if it was subsequently sold to international carriers, PSPC could not invoke the exemption under Section 135 (a) because the tax incidence remained with Chevron. At the time that Chevron sold the fuel to PSPC (who is not an international carrier or any of the enumerated persons in Section 13 5), the excise taxes already became due and demandable, and PSPC's eventual sale thereof to an international carrier cannot anymore negate the accrual of the excise tax liability. That being said, the Court cannot therefore make a categorical declaration as to the precise refund amount to award PSPC given that the records do not clearly show the composition of the 24,974,294 liters of Jet A-1 fuel actually sold to international carriers. Particularly, records fail to disclose the specific amounts of coming from each source, whether directly imported by PSPC or locally purchased by Chevron. Thus, the Court deems it prudent to remand the case back to the CT A to make factual determinations (and accordingly make the corresponding dispositions) on the following:

(a) If the 24,974,294 liters of Jet A-1 fuel sold to international carriers are entirely comprised of the 28,578,673 liters imported by PSPC itself, then the entire excise taxes paid by the PSPC therefor- provided, that the same is duly proven - may be refunded.

(b) If the 24,974,294 liters of Jet A-1 fuel sold to international carriers are comprised of a mix between the 28,578,673 liters imported by PSPC, and the 3,192,012 liters purchased from Chevron, then only the excise taxes paid by PSPC for the portion corresponding to PSPC's imported Jet A-1 fuel therefor - provided, that the same is duly proven - may be refunded; conversely, PSPC cannot claim any tax refund for the passed-on costs of excise taxes paid by Chevron, which forms part of the purchase price as agreed upon by them.

(c) Failure of PSPC to duly prove that its tax refund claim, or any portion thereof, is based on the excise taxes erroneously paid/collected for the imported Jet A-1 fuel it sold to international carriers within the period of February and March 2006 will result in the denial of the refund claim corresponding to that which is not duly proven.

WHEREFORE, the petition is PARTLY GRANTED.

The Decision dated September 9, 2013 and the Resolution dated February 3, 2014 rendered by the Court ofTax Appeals (CTA)-En Bane in CTA EB No. 960, as well as the Decision dated September 7, 2012 and the Resolution dated November 12, 2012 of the CTA-Third Division in CTA Case NO. 7731 are hereby SET ASIDE. The case is hereby REMANDED to the CT A in accordance with this Decision.

IEIRD

Q

t"t

I

.

.

uan 1 y , E h"b't 1·

Date of

E h'b"t R f N

Date of Fmal

{I L"t ) ·

X I I

R

. t

X I I

e .

0.

p t n I ers ece1p aymen

COQR

Excise Taxes

Paid

,--:~s-:::r--l--- o2/ t9io6 1----·;zs-;;-·-f- 293-=o6- f--o3i2o/2oo6--l---6,s s2~827·-fT24 ,04~8-75 :o·~d L::~-i}~J=!~~~~!,f1!ff:~!~ Petitioner avers that the 24,954,25634 liters of Jet A-1 fuel sold to international air carriers were sourced from the above importation for which it paid excise taxes ofP104,883,730.27. Petitioner, thus, claims that the excise taxes paid on the 24,954,25635 liters of imported Jet A-1 fuel are erroneously paid and subject to refund.

Based on the review and examination of petitioner's claim and supporting documents by the Court-commissioned Independent Certified Public Accountant (ICPA), he found that petitioner's sales and deliveries to international air carriers of24,974,294liters of imported Jet A-1 fuel for the months of February, March and April 2006 were sourced from 22,468,22236 liters of Jet A-1 fuel directly imported by petitioner, and 2,506,07237 liters of 33 Claimed sales of24,974,294 liters less 20,038 liters without proof of delivery and/or sale. 34 /d.

35 Id.

36 The sum of22,254,509 and 213,713 liters.

37 The sum of 2,481 ,642 and 24,430 liters.

\ ';

CTA Case No. 773 I Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue imported Jet A-1 fuel locally purchased by petitioner from Chevron (Philippines) Corporation (Chevron), as summarized below:38 Table II- Summary of Sales of Jet A-1 Fuel Sourced from Importation by I Sourced from Chevron

PSPC

i

Summary

Exceptions

Exceptions

Without

I

With

Exceptions I Exceptions

Without

With

Total

Without

I

With

Exceptions

Exceptions

I (In Pesos)

j [ 1

I

[

I

I

~~~r:~:r~ •='il]I*F};Ij~~~Hlr}& i-:~~m

1 Total

!

81,674,048.03 784,326.71 I 9,107,626.14 I 89,658.10 I 90,781,674.17 I 873,984.81 I 91,655,658.98 I r ·-·- ···-····························- lc•n Ci1~~;;s ·-------·----- ·-···--- -··- ·---- ··-~------·- -------·····j r·-------··---·-··--·-·---·--··-·· ···-············-·········-·········-·····r···--·-··-------··············-·-····t !__~~~_:~ -~-~.?. - .

_ ]?.:. ?3?J.Q~ .

2oo,9o3 2,481,642 24,430 19,208,748 __ ~~?. ~~~~ .. L . ___ 1~ :~~~ ~g-~ _1 .J ~ ~p~i~_ ~22~ .J 5,527,403 12,81o 5,527,403 12,81o 1 5,540,213 · 1 !<>.~a.~ __ J 22,254,509 213,713 1 2,481,642 1 24,430 1 24,736,151 1 238,143 1 24,974,294 i Consistent with the High Court's pronouncements, the excise taxes of P9,197,284.24 paid by petitioner in relation to the 2,506,07239 1iters of Jet A- 1 fuel it locally purchased from Chevron cannot be refunded. Hence, P9,197,284.24 should be disallowed from the total amount of refund claimed. As to the excise taxes paid by petitioner in the amount of P82,458,374.7440 on the 22,468,222 liters of Jet A-1 fuel which were classified and grouped under "Sourced from Importations by PSPC", the Court-commissioned ICPA correctly noted as an exception the amount of P513,807.34, which arose from 140,002 liters of locally sourced issuances of Jet A-1 fuel which are not included in the fuel importations for which excise taxes were paid and are subject of the present refund.41 Likewise, the ICP A correctly noted as exceptions the following excise tax payments in the sum of P73,539.46 on sales of 20,038 liters of Jet A-1 fuel, for not being supported by an Aviation Service Return (ASR) and/or a

Sales Invoice:42

I

.

I A" r ,

ASR

i

Sales Invoice

J Volume in i Excise Taxes nternatJOna •r mes

I

Date

i Number I Exhibit I

Date

I Number I Exhibit

\

Liters

I

Paid

Table Ill- Sales o[Jet A-1 Fuel Not Supported byASR and/or Sales Invoice

I

ti~Ji.~H:~~~ : :~~~l~~~:: Q~~ ::~~:J···- ~~i.IL~;i.§~~~~]~J:~~~~~ .:1 :;;~¢~~:~~ :; J:~~;.;iji.!.~~~~~~~ ::l::: t+~§.~.~l~~~i ::::::~ .. : :~:1··- ---·· iH~·~ ·I···· . q~ :87~·:j~ I

L

.... ·-·---·-········--·-·····--·-·······--···-·--·········------------------- --- --·- -·--- --------·------------- T~.!I.IL.I 20,038 i 1"73,539.46 I Therefore, only the excise taxes paid amounting to P81,871,027.94 corresponding to the sales of 22,308,182 liters of Jet A-1 fuel identified as 38 Exhibit "T" attached to Exhibit "WW" (ICPA Report Binder). 39 The sum of2,481 ,642 and 24,430 liters.

40 The sum ofP81 ,674,048.03 and P784,326.71

I

41 Exhibit "T-2-2" attached to Exhibit "WW" (I CPA Report Binder); See also Exhibit "WW" (I CPA Report Binder), p. 10.

42 Exhibit "T-2-1 " attached to Exhibit "WW" (I CPA Report Binder).

.,

Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue sourced from direct importations made by petitioner and were found by the ICP A to be fully supported with complete documents, may be the proper subject of a claim for refund, viz.:

Table IV- Sales of Jet A-1 Fuel Sourced From Direct Importations

Particulars

I Volume in Liters I

Excise Taxes Paid

[A]

I

[A] * P3.67 .. _:.;~;.~;;~~: ~ 1 ~~~;;.~~~t~~~~J.;~g:~~;~~-~: - ········---[ ________ ·-·······~-~.146~ ?~~-~ .J _____ ?. ___ ~~!4?§ !~7.4]4. ..

Less:

Sales from locally-sourced Jet A-1 fuel not I

I

part of the fuel importations for which , excise taxes were paid and are subject of the I

I

I------~~T~;I.l;ft~~~f~upporting ASR -~;;-&o-;:-S~le~ --r--··-·-··----J4.Q.,00_7_]______ _ _____ S_l~_&Q.?~~:!- 1 ..

___ !!I.Y.gi.~~ -----·· ·- ··--- - -· -····--····' 20,038 !

73,539.46 ' Sales of Jet A-1 fuel to international air carriers I

I

~Q!:IJ::~~c.!Jr.:g~p~!!tigf!!!_J:: ~~~ -i .r. I;)_C_!.l~PQE!~!.!Q.'!~ ··---··-..1 22,308,182 I p 81,871 ,027.94 Petitioner sufficiently proved that it erroneously paid excise taxes on the imported Jet A-1 fuel sold to tax- exempt international air carriers but only to the extent ofP80,068,801.28.

In order for the sales of 22,308,182 liters of imported Jet A-1 to international air carriers, as determined in Table IV, to be exempted from excise tax under Section 135(a) of the National Internal Revenue Code (NIRC) of 1997, as amended, petitioner must present the following:

1. proof that the imported Jet A-1 fuel sold to international air carriers were stored in a bonded storage tank, and had been disposed of in accordance with the rules and regulations;

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

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

First requirement: Petitioner proved that the imported Jet A -1 fuel sold to international air carriers were stored in a bonded storage tank, and had been disposed of in accordance with the rules and regulations.

Petitioner complied with the first requirement. \

Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue

Petitioner's witnesses: Mr. David B. Paguia,43 Mr. Bryan Khriz L. Acosta,44 Mr. Nicasio N. Manuel,45 and Mr. Damaso G. Pastrana46 explained the process and documentation of the receipts and withdrawals of imported Jet A-1 fuel at petitioner's storage tank in Tabangao Refinery and its subsequent delivery to Pandacan installation, Joint Oil Company Aviation Storage Plant (JOCASP) and United Parcel Services (UPS) in Clark, Pampanga, for eventual sale to international air carriers. It was explained that, before the imported Jet A-1 fuel were removed from the Tabangao Refinery, the Revenue Officer On Premises (ROOP) prepared and signed the corresponding Withdrawal Certificates (WCs ). The WCs signed by the ROOP indicate the volume of Jet A-1 fuel removed, among other petroleum products, and their destination.47 Indicated in the WCs is the term "A VTUR", which is short hand for Aviation Turbo Jet Fuel or Jet A-1 fuel. If the Jet A-1 fuel to be withdrawn from the refinery is imported, the WC indicates that it is "Tax-Paid" since the excise tax on the imported Jet A-1 fuel had already been paid to the BOC upon removal thereof from customs custody. Thus, petitioner shall no longer pay excise tax upon removal of the imported Jet A -1 fuel from its refinery. 48 The receipts of imported Jet A-1 fuel at the Tabangao Refinery, as well as the withdrawals therefrom, are recorded and summarized in the Official Registry Book (ORB), which the ROOP and a representative of petitioner jointly signed.49 The imported Jet A-1 fuel withdrawn from the Tabangao Refinery are transferred via pipeline to petitioner's installation in Pandacan, Manila. The Pandacan installation serves only as intermediate storage of fuel, which are eventually transferred to either the Joint Oil Company Aviation Storage Plant (JOCASP) located at the Ninoy Aquino International Airport (NAIA), or United Parcel Services (UPS) at the Diosdado Macapagal International Airport in Clark, Pampanga. 50 The imported Jet A-1 fuel are stored in bonded storage tanks in Pandacan. These bonded storage tanks are covered by a permit issued by the Bureau of Internal Revenue (BIR) allowing petitioner to maintain these 43 Exhibit "N", Docket - Vol. 2, pp. 704 to 707. 44 Exhibit "H", Docket - Vol. I, pp. 11 3 to 118. 45 Exhibit "G", Docket - Vol. 1, pp. 157 to 164. 46 Exhibit "S", Docket - Vol. 1, pp. 207 to 210. 47 Exhibit "H", Docket - Vol. I, p. 117.

48 Exhibit "H", Docket- Vol. 1, pp. 11 7 to 118. 49 TSN, October 6, 2010, pp. 14 to 16.

50 Exhibit "N", Docket- Vol. 2, p. 705.

1 ..

DECISION

CTA Case No. 773I Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue

Page II of I9

bonded storage tanks at the Pandacan installation, as well as in JOCASP Depot in NAIA, for the purpose of storing Jet A -1 fuel which will be sold to international carriers of Philippine or foreign registry for their consumption outside the Philippines. 51 Petitioner has likewise been issued by the BIR a special permit to sell and deliver tax-exempt Jet A-1 fuel to UPS in Clark, Pampanga. 52 There are instances where petitioner is allowed to withdraw locally produced Jet A -1 fuel without prepayment of taxes provided that the stocks are removed for delivery to those bonded storage tanks. In order to maximize the use of the tank capacity, petitioner has also been issued commingling permits by the BIR allowing the commingling of tax-free (e.g. , locally produced Jet A-1 fuel for delivery to tax-exempt international air carriers) and tax-paid (e.g. , imported Jet A-1 fuel) stocks in their bonded storage tanks. 53 Before the locally produced and imported Jet A-1 fuel are removed from the Pandacan Depot, another set of WCs are prepared and signed by an ROOP indicating therein the volume of Jet A-1 fuel removed, their destination, and whether the Jet A-1 fuel are "tax-free" or "tax-paid" removals. Such WCs are summarized and recorded in the ORB, which is jointly signed by petitioner's authorized representative and the ROOP. 54 The imported and locally produced Jet A-1 fuel withdrawn are delivered via lorries/tank trucks and are commingled and stored in bonded storage tanks at the JOCASP or UPS Clark to await sale and delivery to international and domestic carriers. 55 Upon receipt of Jet A-1 fuel from the Pandacan installation, JOCASP prepares an ORB and a Liquidation Report to record the receipt and the eventual withdrawal of stocks for delivery to customers. When Jet A-1 fuel are removed from JOCASP, for instance, for delivery to the customers, a WC is prepared and signed by an ROOP indicating therein the volume of Jet A-1 fuel removed, their destination, and whether the Jet A-1 fuel is "tax-exempt", such as when it is to be delivered to international air carrier for consumption outside the country, or the amount of tax due, in case it is delivered to a domestic air carrier. 56 ~ 5 1 !d.

52 fd.

53 !d.

54 Exhibit "N", Docket-Vol.I , p. 706; Exhibit "G", Docket-Vol. I, p.I62. 55 Exhibit "S", Docket - Vol. I, p. 208.

56 !d.

...

Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue

From JOCASP or UPS Clark, Jet A-1 fuel is delivered to international or domestic air carriers via specialized vehicle which pumps the Jet A-1 fuel directly into the fuselage of the air carrier. The specialized vehicle is equipped with a meter that determines the volume of Jet A-1 fuel delivered to the air carrier. 57 Upon delivery of Jet A-1 fuel, petitioner presents to the authorized representative ofthe customer/air carrier a document called "Aviation Service Return" wherein the customer acknowledges receipt of the delivery and the corresponding volume of Jet A-1 fuel.

In support of the aforementioned Judicial Affidavits, petitioner submitted, among others, documents such as Permit No. LTAD II-(P)-028-03- 06-009095 dated March 17, 2006,58 BIR Letter dated August 4, 1998 granting petitioner Permit to Maintain Bonded Storage Tanks situated at Pandacan Terminal and JOCASP Depot in NAIA,59 BIR Letter dated December 9, 2005 approving the renewal of petitioner's permit to sell and deliver Jet A-1 fuel to UPS in Clark, Pampanga,60 certified true copy of Commingling Permit No. LTADII-(P)-008-01-06-008633 dated January 23, 2006,61 certified true copy of Commingling Permit No. LTADII-(P)-008-03-06-008965 dated March 7, 2006,62 WCs,63 ORB;64 and ASRs.65 From the foregoing, the Court finds that petitioner presented sufficient proof of its compliance with the first requirement.

Second

requirement:

Petitioner

proved that the imported Jet A -1 fuel were sold to international air carriers of foreign or Philippine registry duly authorized to operate international flights.

Anent the second requirement, petitioner complied therewith. 57 !d.

58 Exhibit "1", Docket - Vol. 2, pp. 694 to 695. 59 Exhibit "1-1 ", Docket - Vol. 2, p. 696 to 698. 60 Exhibit "1-2", Docket - Vol. 2, p.699 61 Exhibit "BBB", Docket - Vol. 3, pp. 1208 to 1209. 62 Exhibit "BBB-1 ", Docket - Vol. 3, pp. 1210 to 1211. l

Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue

Petitioner presented the Certification issued by the Civil Aviation Authority of the Philippines (CAAP) dated December 5, 2008,°° which confirms the country of registration of the aircraft operators listed therein, subject of the instant claim.

Petitioner likewise presented the Certification from the Civil Aeronautics Board (CAB) dated June 29, 2009,° that shows that the international air carriers of foreign registry listed therein, to which the Jet A- 1 fuel subject of the case were sold, have been issued Foreign Air Carrier’s Permits (FACPs), which authorized them to operate international flights only, for a specific period, including, but not limited to, the years 2006 to 2009. With regard to the Philippine-registered air carriers, the Certification® from the CAB dated November 6, 2008 proves that petitioner’s customer, Philippine Airlines (PAL), a domestic airline with international operation, had been issued an FACP allowing PAL to operate scheduled international air services for the year 2006.

Summarized below are the international air carriers, with their respective countries of registration, with FACPs to operate international flights pursuant to the CAAP Certification dated December 5, 2008 and CAB Certification dated June 19, 2009:

Table V - Summary of International Air Carriers with FACPs | International Air Carrier | Aircraft Registration No. ' Country of Registration |

Ai N New G

China Airlines, Limited 18301, B 18302, B 18303, _ China (including Hong 18307, B 18501, B 18573, | Kong SAR and Macao _B 18576, B 18601, B 18605, | SAR) B 18606, B 18607, B 18608, B 18609, B 18610, B 18612, |B 18615, B 18616, B 18617, |B 18702, B 18703, B 18707, | B 18708, B 18709, B 18711, | B 18715, B 18718, B 18802, 18805, B 18806, B 18807, 18851, B-18302, B-18308, -18351, B-18501, B-18573, -18605, B-18607, B-18609, -18610, B-18615, B-18616, -18617, B-18701, B-18719, | 346, B 2366, B 236 2374, B 2391, B 2393

Airlines

A 80163, JA 8080, A 808 3125, J

Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue

__ International Air Carrier

/6. Jet Star Aisa Airways |____Pte. Ltd.

7. Korean Airlines Table V - Summary of International Air Carriers with FACPs istration No. |

Aircraft Reg

JA 8131, JA 8141, JA 8150, JA 8155, JA 8162, JA 8163, JA 8166, JA 8173, JA 8177, JA 8178, JA 8183, JA 8185, JA 8189, JA 8980, JA 8987, HL-7404, HL-7407, HL-7412, | HL-7573, HL-7600, ROKAF-006, ROKAF-05 183 | 8. Malaysian Airline |

System Berhad

9M MKG, 9M MRC, 9M MRK, 9M-MKA, 9M-MKD, 9M-MKE, 9M-MKF, 9M-MKH, 9M-MKJ, 9M-MKQ, 9M-MKS, 9M-MMA, | 9M-MMD, 9M-MMH, 9M-MMI, 9M-MMK, 9M-MML, 9M-MMM, 9M- MMN, 9M-MMO, 9M-MMQ, 9M-MMS, 9M-MMT, 9M-MMV, 9M-MMW, 9M-MMX, | 9M-MMY, 9M-MMZ, 9M-MQA, 9M-MQE, 9M-MOF, 9M-MQG, 9M-MQH, 9M-MQJ, | 9M-MQM, 9M-MOQN,

11. Thai Airways Int’! Public Co., Ltd.

12. United Parcel Service

Company

JA-8167, JA-8181, JA-8182, JA-8194 | HL-7400, HL-7402, HL-7403, HL-7434, HL-7439, HL-7449, HL-7482, HL-7483, HL-7484, HL-7487, HL-7489, HL-7490, HL-7491, HL-7492, HL-7493, HL-7494, HL-7497, HL-7498, HL-7532, HL-7533, HL-7534,

| Republic of Korea

Republic of Korea/Airforce

| Kuwait

Malaysia

| i :

t i VH-OGB, VH-OGC, VH-OGH, VH-OGM, VH-OGN, VH-OGO, | VH-OGP, VH-OGQ, VH-OGR, VH-OGS, VH-OGT, VH-OGU HS-TJA, HS-TJB, HS-TIC, HS-TID, HS-TJF, HS-TJH, | HS-TKB, HS-TKC, N 307 UP, N 323 UP, | N 462 UP, N 250 UP, N 251 UP, N 252 UP, N 255 UP, N 256 UP, _N 271 UP, N 274 UP, ' Australia

| United States

Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue

Table V— Summary of International Air Carriers with FACPs

13. Philippine Airlines | (domestic airline with international operation)

International Air Carrier

‘| 'N 277 UP, N 278 UP, N 279 UP, N 281 UP, N 301 UP, N 302 UP, N 303 UP, N 307 UP, N 308 UP, N 310 UP N 311 UP, N 312 UP, N 313 UP, N 314 UP, N 316 UP, N 317 UP, N 320 UP, N 323 UP, N 326 UP, N 329 UP, N 332 UP, N 334 UP, N 376 UP, N 446 UP, N 453 UP, N 455 UP, N 461 UP, N 462 UP, N 463 UP, N 466 UP,

| N-316

B 5053, B 5059 F-OHPM, F-OHZT, | F-DHPK, F-DHZP, | F-DHZQ, F-DHZR, F-DHZS, F-DHZT, F-OHEL, F-OHPJ, F-OHPK, F-OHPL, F-OHPM, F-OHPN, F-OHZD, F-OHZM, F-OHZN, F-OHZO, | F-OHZP, F-OHZQ, | F-OHZR, F-OHZS, F-OHZT, F-OZHO,

F-OZHS

EICVN, EICVO

| G-WWBB

| N751PR, N752PR, N753PR, N754PR RP-C 3224, RP-C 3228, RP-C 3221, RP-C 3223, RP-C 3224, RP-C 3227, RP-C 3228, RP-C 3229, RP-C 3230, RP-C 3231, RP-C 4007, RP-C 4008,

RP-C 8168

Aircraft Registration _.) * & ntry of Registration China (including Hong

| Kong SAR and Macao

| Ireland

United Kingdom

United States

Philippines

Accordingly, only the excise taxes on imported Jet A-1 fuel sold to the above airlines with valid FACP may be allowed for refund or issuance of a TCC of the erroneously paid excise taxes.

i i i i | i | i i !

•,

Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue

Third requirement: Petitioner proved that the imported Jet A -1 fuel were used or consumed outside the Philippines except for 409,070 liters of imported Jet A -1 fuel.

As to the third requirement, petitioner partially complied therewith. Petitioner submitted ASRs69 which indicate the details of the Jet A-1 fuel deliveries made by petitioner to international air carriers, including the route of the international air carriers, the origin and destination of the international air carriers named therein (whether of foreign or Philippine registry), to prove that the imported Jet A-1 fuel sold was consumed outside the Philippines.

However, the Court found that 91,723 liters of imported Jet A-1 fuel were purportedly sold to United Parcel Services with Aircraft Registration RP-C5353, but which aircraft was registered under Pacific East Asia Cargo Airlines, Inc. (Pacific), an aircraft operator with Philippine registry, and not under United Parcel Services.7° Considering that Pacific was not included in the lists with F ACP for the year 2006 per the CAB Certifications dated November 6, 2008 and June 29, 2009,71 the amount of P336,623.41 representing excise tax payments on the 91,723 liters of imported Jet A-1 fuel delivered to Pacific must be denied, viz.:

Table VI- Sales of Jet A-1 Fuel to air carrier without FACP

J

Exhibit No.

l ASR No.

I

No. of Liters I.

"CC-15"

I

151429

I

19141 ................................................................................................................. ~ ............................................................ ................................... ! ............................................................................. '. .................. .

I

"CC-20"

I

151438

I

14,410 ~ ~~- ~ I--:~~ ········==j===··················· -*.~

"CC-261 "

I

168035

I

19, ··-··················----- ................. ............. '··········--···········-·-··········-·····--···-- ················-··--· ·····!-------

1 Liters

I

91,723 , ... ivi~i!i[;!i~-d by: -E~~·i~~- t~~ ~;t~ -·· . ---- ......... ____i . . --·· ----·---.. ri-67··1 [!?~{~( :J.?.i~~!~~~~ ~·~~~~~ :!.~~ :

::=~::::::::~ ..

_I

P 336,623.41 1 Petitioner's claim shall be further reduced by P1,465,603.49 representing the excise tax payments on 399,347 liters of Jet A-1 fuel which should be disallowed for the following reasons: '\ 69 Exhibits "V-1 " to "V-925; "CC-I" to "CC-294", FOE Folders. 7° CAAP Certification dated December 5, 2008, Exhibit "JJ'', p. 9, FOE Folder.

Pilipinas Shell Petroleum Corporation vs, Commissioner of Internal Revenue

Table VII — Sales of Jet A-1 Fuel not properly supported by ASRs ICPA Summary ASR | Volume in Amount of Excise | Exhibit No. International Air Carrier Exhibit No. Liters Taxes Paid |

Number

Al] * P3.67

[ Asiana Airlines

[ene (p. 4) | China Airline “T-1” (. 5) Te [2 (p.

In fine, petitioner sufficiently proved that excise taxes in the reduced amount of P80,068,801.28 on 21,817,112 liters of Jet A-1 fuel directly imported by petitioner, and subsequently sold to tax-exempt international air carriers, were erroneously paid, and thus, refundable, pursuant to Sections 204 and 229 of the NIRC of 1997, as amended, computed as follows:

Table VIII —- Computation of Refundable Excise Taxes

, | Volume in Liters | Excise Taxes Paid | Particulars & £3.67 oe a —= Te _— ™ + i i i Excise taxes on sales of imported Jet A-1 fuel which were sourced from local purchases from | | |_Chevron (Table MJ z= 2,506,072 | ___9,197,284.24 | | Excise taxes from locally-sourced Jet A-1 fuel | not part of the fuel importations for which | excise taxes were paid and are subject of the i present refund (Table VJ _A40,002 | 513,807.34 | | Excise taxes on sales without supporting ASR | | | bee el urn and/or Sales Invoice [Table IV] | 20,038 | 73,539.46 | Excise taxes on sales to air carrier without ae Sat. fn 1723 | Excise taxes on sales not properly supported 399.347 | ______With ASRs [Table VJ wel 3,157,182 | 11,586,857.94 | 21,817,112 _P 80,068,801.04 | '•

Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue

WHEREFORE, in light of the foregoing considerations, the present Petition for Review is PARTIALLY GRANTED.

Accordingly, respondent is ORDERED TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE, in favor of petitioner, in the reduced amount ofP80,068,801.04, representing excise taxes paid by petitioner on Jet A-1 fuel sold to tax-exempt international air carriers from February to April 2006.

WE CONCUR:

c~t.'~~ES Associate Jus~ic~7~- (h.~ -1 '------· MA. BELEN M. RINGPIS-LIBAN

Associate Justice

MARlAR

ATTESTATION

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

~·~ 7'--- MA. BELEN M. RINGPIS-LIBAN

Associate Justice

Division Chairperson

:

' CTA Case No. 773 I Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue

CERTIFICATION

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

Presiding Justice