Philippine Airlines, Inc. vs. Commissioner of Internal Revenue and Commissioner of Customs

DECISION

COTANGCO-MANALASTAS, J. :

This resolves the instant Petition for Review filed by petitioner Philippine Airlines, Inc. (PAL) to seek the refund of the total amount of Pl 0,889,672.72 specific taxes paid, which were erroneously collected from petitioner.

THE FACTS

Petitioner PAL is a domestic corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with registered address at PNB Financial Center, President Diosdado P. Macapagal Ave nue, CCP Complex, Pasay City, Metro Manila.l {-

CTi\ CASE NO. 7935

On the other hand, respondent Commissioner of Internal Revenue (CIR) is the government agency in charge of the assessment and collection of all national internal revenue taxes, fees, charges, including excise taxes paid on distilled spirits, wines, fermented liquors, cigars and cigarelles under Sections 141, 142, 143, and 145, respectively, of the National Internal Revenue Code (NIRC) of 1997, as amended. She holds office at the Bureau of Internal Revenue (SIR) National Office Building, Agham Road, Diliman, Quezon City.2 Likewise named as respondent is the Commissioner of Customs (COC), who is the Commissioner of the Bureau of Customs (SOC), which is the government agency in charge of the assessment and collection of customs duties and other lawful revenues from imported articles, including excise taxes imposed on distilled spirits, wines, fermented liquors, cigars and cigarettes under Sections 141, 142, 143 and 145, respectively, of the NIRC of 1997, as amended, on the basis of the delegated authority of respondent CIR, through an Authority to Release Imported Goods (SIR Form No.

1918) duly issued by respondent CIR addressed to respondent COC in accordance with Section 12(a) of the NIRC, as amended.3 On cJune 11, 1978, petitioner was granted a franchise to establish, operate, and maintain air transport services within the{-

Philippines and other countries by Presidential Decree No. 1590 (PO 1590). 4 On January 1, 2005, Republic Act No. 9334 (RA 9334), took effect. Section 6 of RA 9334 provides: "Section 131. Payment of Excise Taxes on Imported Articles.- (A) Person Liable. - Excise taxes on imported articles shall be paid by the owner or importer to the Customs Officers, conformably with the regulations of the Department of finance and before the release of such articles from the customs house, or by the person who is found in possession of articles which are exempt from excise taxes other than those legally entitled to exemption. In the case of tax-free articles brought or imported into the Philippines by persons, entities, or agencies exempt from tax which are subsequently sold , transferred or exchanged in the Philippines to non -exempt persons or entities, the purchasers or recipients shaJI be considered the importers thereof, and shall be liable for he duty and internal revenue lax due on such importation . The provision of any special or general law to the contrary notwithstanding, the importation of cigars and cigarettes, distilled spirits, fermented liquors and wines into the Philippines, even if destined for tax and duty-free shops, shall be subject to all applicable taxes, duties, charges, including excise taxes due thereon. This shall apply to cigars and cigarettes, distilled spirits, fermented liquors and wines brought directly into the duly chartered or legislated freeports of the Subic Special Economic and Freeport Zone , created under Republic Act No. 7227; the Cagayan Special Economic Zone and Freeport, created under Republic Act No. 7922 ; and the Zamboanga City Special Economic Zone , created under Republic Act No. 7903, and such other freeporls as may hereafter be established or created by law: Provided, further, That importations of cigars and cigarettes, distilled spirits, fermented liquors and wines made directly by a government-owned and operated duty-free shop, like the Duly-Free Philippines (DFP) , shall be exempted from all applicable duties only: Provided, still further, That such articles directly imported by a government-owned and operated duty-free shop, like the Duty-Free Philippines, shall be labeled 'duty-free' and 'not for resale': Provided, finally, That the removal and transfer of tax and duty-free/--

goods, products, machinery, equipment and other similar articles other than cigars and cigarettes, distilled spirits, fermented liquors and wines, from one freeport to another freeport, shall not be deemed an introduction into the Philippine customs territory."

On February 3, 2005, then BIR Commissioner Guillermo Parayno wrote then BOC Commissioner George M. Jereos, calling allenlion to Section 6 of RA 9334 and the failure of the BOC to collect excise tax "on all importations destined for Duty Free Philippines (DFP) and the Freeport zones such as the Subic Bay Freeport Zone". Furthermore, in said lellcr, the BI R requested the BOC that the excise taxes due on the imported alcohol and tobacco products brought to the DFP and the Freeport zones be immediately collected.5 On February 4, 2005, then Commissioner George M. ,Jereos issued a Memorandum lo the BOC officers and personnel directing them to "effect collection of excise tax due on imported alcohol and tobacco products, even if destined to Duly Free Philippines and lo Freeport zones."6 On March 1, 2005, the new BOC Commissioner Alberto D. Lina issued Customs Memorandum Order No. 13-2005 (CMO 13-2005), which provided for the "Immediate Collection at the Port of Discharge of Duties, Taxes and Other Charges, Including Excise Tax Due on All Importations of Alcohol and Tobacco Products Destined for Duty Free/-

Shops and Free-Port Zones pursuant to RA No. 9334 and BIR Revenue Regulations No. 13-2004."7

Paragraph

IV

of

CMO

13-2005, subtitled "Operational Provisions", required the accomplishment of consumption entries, instead of the previously required warehouse entries, as a requisite for the clearance of imported cigarettes and liquors, to wit:8 "In lieu of the warehousing entry required under Customs Administrative Order No.

l-97 and Customs Memorandum Order Nos. 17-97 and 17-97 A, aJl shipments of cigar and cigarettes, distilled spirits, wines and liquors destined for duty-free shops and free-port zones shall be covered by consumption entries filed at the Port of Discharge following the procedures for cargo clearance under CAO Nos. 2-95 and 5-2001, CMO Nos. 3-2000 and 3-2001 and other existing customs rules and regulations." On April 4, 2005, petitioner wrote a letter to Atty. Felipe Bartolome, District Collector of Customs, Manila International

Container

Port,

Bureau

of Customs, Manila, requesting the immediate release of its shipment alleging that the articles imported are for its commissary supplies; which are exempt from all taxes under Section 13 of PO 1590.9 Petitioner's April 4, 2005 letter was endorsed lo the Legal Service of the BOC, which responded to its request for release of the imported cigarettes by issuing a Memorandum on April 25, 2005 addressed to COC Commissioner Alberto D. Lina. The April 25, 2005 Memorandum simply expressed that petitioner is "liable for the payment of excise lax on all their importation of the subject articles,{-

even under the old a nd prev1ous Section 131 of the NIRC of 1977 ; subject howeve r to duly drawback a nd / or lax refund , if a pplicable" . Considering that the subsequent importations of wine, liquor a nd cigarclles for pe titioner's commissa ry supplies were a lso withheld release from the customs ports pending pay ment of taxes , duties , a nd fees with dange r of s poila ge a nd possible loss while in storage;1o a nd considering further the a lleged fa ilure of the COC lo la ke forma l action on the April 25 , 2005 recomme nda tion of the SOC's Legal Service, petitioner pa id unde r protest the excise taxes due on the fol lowing importa tions, deta iled a s follows :

Import

Articles

Date of

A TRIG

Amount

Entry

Arrival

No.

Due

No.

3722

Mild Seven

March 29, 74453 p 500 ,000.00

Cigarette

2006 (Exh. S) (Exh . J) 3724 Chi vas March 13, 71\1\82 390 ,096.00

Real

2006 (Exh . T) .

Whisky

(Exh . K) -

West King

April 14, 74828 250 ,000.00 3990

Size

2006 (Exh . L) (Exh . U)

Cigarettes

1--·

Davidoff

November 30 ,

7445 1

175,000.00 14309

Lights

2005 (Exh . V) (Exh . M 143 13

Camus XO

December 15, 71\1\1\ 5 20 ,563 .20

Superieur

2005 (Exh .

(Exh . W)

N)

143 14

Piper

December 10,

7454 4

393, 120 .00

Heidsieck

2005 (Exh .

(Exh . X) (0) 143 17

Vin

De December 15, 74420 180 ,972.00

Table

2005 (Exh . P) (Exh . Y) 8alnc

Vin

De

Table

Rouge

3729

Salem

M

April 5, 2006 74829 750,000.00

King

(Exh . 88) (Exh .

Cigarette

GG)

3730

Carlos I

March 27, 71\ 9 15 860,267.52 2006 (Exh .

(Exh .

CC)

HH)

IO Pa r. 15 , Petition for Review, docket , p. 6.

CT/\ CASE NO. 7935

3732 4056 14302 !'1303 14305 14 306 143 10 ----- 14 307 10346

Royal

Salute

Whisky, Ballar1tine

Scotch

Whiskey,

Carlos

l

Brandy and Martel

VSOP

Cognac

Mild Seven

Lights

Cigarettes

Remy

Martin XO

Remy

Martin

VSOP

Piper

Heidsieck

J & B rare

JW

Black

Label

Jack

Daniels,

Regal

Whisky, cutty sark, royal salute, fin1andia vodka

J

&

B

Rare;

JW

Black

Label

Ch i vas

Regal

Whisky

-- Win ston

Red

Ki ng Size;

Win ston

Lights

King Size;

Mild Seven

Davidoff

Classic

Lights

March 3 1, 7'¹ 860 6'1 8,889.92 2006 (Exh . P ~ (Exh . II) 7) April 19, 74874 500 ,000.00 2006 (Exh .

(Exh .

LL)

QQ)

October 29 , Exh. RR 745,355. 52 2005 (Exh . MM) October 22, 7'1 589 653,728 .32 2005 (Exh .

(Exh .

NN)

SS)

November ! 9, 74455 1,069,95 !.68 2005 (Exh .

(Exh

W)

CCC)

November 28 , 74546 653,728 .32 2005 (Exh .

(Exh

WW)

DOD)

November 2, 74547 610 ,500.24 2005 (Exh .

(Exh .

XX)

EEE)

November ! 1, 74586 2, 187 ,500.00 2005 (Exh .

(Exh

YY)

FFF)

September 20 ,

5828 1

300 ,000.00 2005 (Exh . ZZ)

(Exh

'--

GGG)

On April 22, 2008, peti tioner simultaneou s ly filed be fore responden t CIR three (3) written cla ims for refund 11 of excise taxes/-

a lleged to ha ve been erroneously pa id on <June 25 , 2007 12, July 10, 2007 13, July 20, 20071 4, a nd July 30, 2007 15 . However, respondent

CIR

fa iled to act on the sa id administra tive claims for refund .

He nce, petitioner filed the insta nt Petition for Review on June 24, 2009.

Respondent CIR filed her Answer and interposed the following Specia l a nd Affirma tive De fenses:

"4 . Pctilioncr's aJlcged clai m for refund is s ubject to a dminislrativc investiga tion/ examina tion by the Bureau;

5.

The amounl of P10 ,889,672.7 2 being cla imed by pctilioncr as specific taxes allegedly paid on June 2 5, 2007 , July 11 , 2007 (a nd) July 20, 2007 and July 30, 2007 was nol properly documented;

6 .

In a n aclion for refund , the burden of proof is on Lhe Laxpayer Lo csla blish its righl Lo refund , and fa ilure to suslain

Lhe

burden 1s fa ta l

Lo

the claim for refund/ credit;

7 .

Claims for refund a re construed slrictly againsl the cla ima nl for Lhc sam e pa rla ke Lhe na ture of exemption from Laxalion (Commissioner of Internal Revenue us. Ledesma, 31 SCRA 95) and su ch , Lhcy a re looked upon wilh disfavor. Western Minolco Corp. us. Commissioner of Internal Re venue, 12 4 SCRA 12 11)."1 6 On the other ha nd , responden t COC filed his Comment 17 on August 10, 2009 .

Therea fte r, a Notice of Pre-Tria l Conference wa s issued by the Court on August 12, 2009, selling the case for pre-tria l conference on(-

August 28, 2009.

Accordingly, Petitioner's Pre-Trial Briefl8 was filed on August 24, 2009; while Respondent's Pre-Trial Briefl 9 was filed on September 3, 2009.

On November 20, 2009, the parties filed their Joint Stipulation of Facts and Issues20, which the Court approved in a Resolution 21 dated November 26, 2009.

In the same Resolution, the pre-trial was considered terminated.

During trial, petitioner presented and formally offered its documentary and testimonial evidence, and in the Resolutions dated November 10, 2011 22 and ,January 26, 2012 23, Exhibits "8" to "WWW-3" were admilled as part of petitioner's documentary evidence. On the other hand , respondents' counsels manifested that they will not be presenting evidence.

Thus, the parties were granted thirty (30) days from March 7, 2012, or until April 6, 2012 to submit their memoranda.21 On April 2, 201225 and April 10, 201226, the Memoranda for respondent CIR and respondent COC were filed, respectively.

Petitioner's Memorandum was filed through registered mail on May 4, { 18 Docket, pp. 217-226.

19 Docket, pp. 234-240.

2o Docket, pp. 260-266.

21 Docket, p. 268.

22 Docket, pp. 897-899.

23 Docket, pp. 912 -913.

24 Resolution dated March 23,2012, docket, p. 917. 2" Docket, pp. 918-929.

CTA CASE NO . 7935

2012.27 Thereafter, the case was submillcd for decision on May 15, 2012. 28

ISSUES

The parties submitted the following tssucs for this Court's disposition:

"1. Whether or not the Commissioner of Customs is merely an agent of the Commissioner of Internal Revenue deputized to collect internal revenue taxes on imported goods, and therefore, did not mcur any liability from the collection of the taxes due;

2. Whether or not petitioner's franchise, Presidential Decree No. 1590, has been amended by Republic Act No. 9334 in so far as petitioner's exemption from the payment of specific taxes on all its importations of cigarettes, liquor, and wine for its catering and commissary supplies for international consumption, is concerned;

3. Whether or not petitioner's importations of liquors and cigarettes form part of its commissary supplies for international Oights;

4. Whether or not PAL ts entitled to a refund of the following specific taxes:

(1) Php 1,909,751.20 paid under protest 25 June 2007;

(²) Php 2,259,157.44 paid under protest on 11 July 2007;

(³) Php 1,899,083.84 paid under protest on 20 July 2007;and

(⁴) Php 4,821,680.24 paid under protest on 30 July 2007; or a total amount Php 10,889,672.72

5. Whether or not the specific taxes subject of petitioner's claim for refund have actually been paid.29? n Docket, pp. 966-995.

2.8 Resolution dated May 15,2012, docket, p. 997. J.9 Docket, pp. 264-265.

THERUUNGOFTHECOURT

As regards the first issue, respondent COC avers that it merely acted for and in behalf of the CIR in assessing and collecting excise lax on imported articles. And where the COC acted on matters within the scope of his authority, he did not acquire any right or incurred any liability from the collection or the taxes due. On this matter, Section 2 of Rule 3 of the Revised Rules of Court cxplicilly provides that every action must be prosecuted and defended in the name of the real party in interest. Relevanlly, in the case of Walter Ascona Lee, et al. vs. Han. Manuel Romillo, Jr., et al. 30, the High Court said: "A real party in interest-plaintiff is one who has a legal right while a real party in interest-defendant is one who has a correlative legal obligation whose act or omission violates the legal rights of the former ."

(Emphasis

supplied) In this case, it may be observed that the kind of lax subject of the instant Petition for Review is excise lax which is imposed under Title VI of the NIRC.

Being an internal revenue lax, the power to collect excise taxes is vested on the CIR. As for respondent COC, he was the one who collected from petitioner the excise taxes as the constituted agent of the CIR. Accordingly, both the CIR and the COC arc real parties in interest-defendants in this case. Nevertheless, il can be noted that the COC may be named as a defendant in this case /--- 3o G.R. No. L-60937, May 28, 1988.

CT/\ CASE NO . 7935 on ly in his capacity as the constituted agent of the CIR m accordance with Section 12(a ) of the NI RC of 1997, as amended. Now as to the determination of whether petitioner complied with the procedures governing the proper filing of administrative claims for refund, the Court found relevant the provisions of Sections 204 and 229 of the NIRC of 1997, as amended, which provides for the procedure govern ing the refund or recovery of erroneously collected internal revenue taxes. The pertinent portion of Sections 204 and 229 of the NIRC of 1997, as amended reads: "SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. -The Commissioner may-

XXX

XXX

XXX

"(C) Credit or refund taxes erroneously or illegally received or pen alties 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 stamped 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."

"SEC.229. Recovery of Tax Erroneously or fllegally Collected. - No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected withou t 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 (__

CTA CAS E NO . 7935 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." (Emphas is supplied) Records of this ca se would show tha t petitioner on differen t da tes pa id its excise taxes for its importa tion of commissary a nd ca tering supplies and fi led the corresponding administra tive a nd judicia l cla ims for refund for such taxes pa id , deta iled a s follows:

Import

Total

Official

Date of

Date of

Date of

Last Day

Entry

Amount Paid

Receipt

Payment

Filing

Filing

for No.

No.

the the

Filing

Ad minis

Judicial

the trative

Claim

Judicial

Claim

Claim

3722 Pl ,909 ,75 1.20 140945962 June 25, April 22, June 24, June 24, 3724 (Exh. R) 2007 2008 2009 2009 3990 14309 143 13 143 14 143 17 3729 2,259, 157.44 14 1165787 July 11, April 22, June 24, July 10, 3730 (Exh . FF) 2007 2008 2009 2009 3732 --- 11056 1,899,083.84 14 1733426 July 20, April 22, June 24, July 20, 14302 (Exh . PP) 2007 2008 2009 2009* 14303 14305 4 ,82 1,680.24 14 1820445 July 30, April 22, June 24, July 29, 14306 (Exh . 888) 2007 2008 2009 2009 14310 14307 10346 - *,July 19 , 2009 1s a Sunday Perusa l of above ta ble would show th a t both the administrative and judicia l claims for refund were filed within the two-year prescriptive pe riod provided by la w. Now, the Court sha ll proceed with the resolu tion of the remaining issues submillcd for this Court's disposition. {

CT/\ CASE NO. 7935

Petitioner avers that RA 9334 did not amend petitioner's franchise insofar as its exemption from payment of excise tax on the wmes and cigarettes imported by petitioner for international consumption is concerned. Accordingly, petitioner believes that it can still enjoy the exemption granted under its charter and is thus entitled to a refund of the excise tax it allegedly paid on its importation of the subject articles for international consumption However, both respondent CIR and COC claim otherwise. Respondent CIR alleges that a close reading of the third paragraph of Section 131 of the National Internal Revenue Code, as amended by RA 9334, reveals the unmistakable intent of Congress to withdraw exemptions granted to petitioner under Section 6 of PO 1590.

First, Section 6 of RA 9334 employs the clear and all- cncompassmg phrase "The provision of any special or general law to the contrary notwithstanding."

RA 9334 therefore repeals any inconsistent provision whether contained in general or special statues like PO 1590, which is petitioner's franchise. Second, Section 6 of RA 9334 mandates the collection of excise taxes on all importations of cigars, cigarettes and liquor without distinction. Said provision contains no proviso exempting petitioner's importation of said wmes and tobacco products for its commissary and catering supplies. Respondent COC likewise avers that a special statute, as the term is generally understood, is one which relates particular things of a class or to a particular portion or section of the statute only. Tax j,-

Laws lreal of a special subject, i.e. taxes. As such, tax laws are special laws.

And a perusal of RA 9334 reveals that it treats of only one subject - tax, or specifically, excise lax. The oft-repeated rule is clear - on a specific matter, the special law shall prevail over the general law, which shall be resorted to only to supply deficiencies in the former.

In the instant case, RA 9334 is the special and later law that governs the imposition of excise taxes on alcoholic and tobacco products.

Section 1 3 of RA 9334, in no uncertain terms, revoked petitioner's exemption under PO 1590 when it categorically required the payment of the applicable taxes, duties, charges, including excise taxes on all importation of cigars and cigarettes, distilled spirits, fermented liquors, and wines into the Philippines, even if destined for lax and duty-free shops.

Furthermore, respondent COC alleges that Congress intended lo subject the importations of cigars and cigarelles, distilled spirits, fermented liquors, and wines into the Philippines to taxes and duties, including excise taxes. The statement "the provision of any special or general law lo the contrary notwithstanding", couched with the repealing clause of the statute, strongly manifests the intent of Congress to amend any special or general law inconsistent with it, like PO 1590. For clearly, the exemption granted lo petitioner under the former enactment is inconsistent and irreconcilable with the more recent law- RA 9334. ~

D ~ CISION

CT/\ CASE NO . 7935

Page 16 of 30

On the 1ssue of whether or not Section 6 of RA 9 334 re pealed the exe mption granted to petitioner under PO 1590, the Court cites Section 6 of RA 9334, to wit:

"Section 6. Seclion 131 of lhe Nationa l Internal Revenue Code of 1997, as amended , is h ereby amended to read as follows :

Scclion 13 1. Payment of Excise Taxes on Imported Articles. - (A) Person Liable . - Excise laxes on imported a rticles sha ll be paid by lhe owner or importer lo lhe Customs Officers, conforma bly wilh lhe regula tions of lhe De pa rtment of fin a nce and before lhe release of su ch articles from lhe customshouse , or by the person who is found in possession of articles which are exempt from excise laxes other than those legally entitled to exemption. In the case of lax-free articles brough t or imported into lhe Philippines by persons, entilies, or agen cies exempt from lax which are subsequenlly sold , transferred or exchanged in lhe Philippines to non -exempl persons or cnlilies , the purchasers or recipients shall be considered lhe importers thereof, a nd shall be liable for the duty and internal revenue tax due on such importa tion . The provision of any special or general law to the contrary notwithstanding, lhc importa tion of cigars and cigar ettes , distilled spirils, fermented liquors and wines inlo lhe Philippines, even if destined for lax a nd duty-free shops, shall be subject to all a pplicable taxes , duties , ch a rges , including excise taxes due thereon. This shall a pply to cigars a nd cigarettes , distilled spirits, fermented liquors and wines brou ghl directly inlo lhe duly chartered or legisla ted freeporls of lhe Subic Special Economic a nd Freeport Zone, crealed under Republic Acl No. 7227; lhe Cagayan Special Economic Zone and Freeport, crealed under Republic Act No. 7922 ; and lhe Zamboanga Cily Special Economic Zone, created under Republic Acl No. 7903, and such olher frceporls a s m ay hereafter be esta blished or crea ted by law: Provided, fu rther, Tha l imporlalions of cigars and cigarelles, distilled spirils, fermented liquors and wines ma de directly by a government-owned and opera ted duly-free shop, like lhe Duly-Free Philippines (DFP) , shall be exempted from all a pplicable du lies only: Provided, s till fu rther, Tha l s u ch articles direclly imported by a government-ow ned and opera ted duly-free shop, like lhe Duly-Free Philippines , shaJl be la beled 'duly-free' and 'nol for resa le' : Provided , fin a lly, Thal lhc removal and lransfer of tax and duty-free /-- goods, products, machinery, equipment and other similar articles other than cigars and cigarettes, distilled spirits, fermented liquors and wines, from one freeport to another freeport, shall not be deemed an introduction into the Philippine customs territory." (Emphasis supplied) There is nothing in the above-quoted provision which would show that the exemptions granted lo petitioner under PO 1590 are a lready repealed.

It is true that Section 6 of RA 9334 slates the all-encompassing phrase "the provision of any special or general law to the contrary notwithstanding". However, such phrase cannot be considered as an express repeal of the exemptions granted under petitioner's franchise because it fails to specifically identify PO 1590 as one of the acts intended to be repealed.

As laws are presumed to be passed with deliberation and with knowledge of all existing ones on the subject, it is logical to conclude that in passing a statute, it is not intended to interfere with or abrogate a former law relating to the same subject matter, unless the repugnancy between the two 1s not only irreconcilable but a lso clear and convincing as a result of the language used, or unless the latter Act fully embraces the subject matter of the earlier.

It is a cardinal rule in statutory construction that implied repeals arc disfavored and will not be so declared unless the intent of the legislators is manifest.31 Thus, all doubts must be exerted m order to harmonize and give effect to all laws on the subject.32 /--

In this case, the Court finds no repugnancy between the provisions of PO 1590 and Section 131 of the Nl RC of 1997, as amended by RA 9334.

In fact, Section 131 actually recognized the existence of entities that are legally entitled to exemption, such as herein petitioner. The pertinent portion of Section 131 reads: "Section 131. Payment of Excise Taxes on Imported Articles. - (A) Person Liable. - Excise taxes on imported articles shall be paid by the owner or importer to the Customs Officers, conformably with the regulations of the Department of finance and before the release of such articles from the customshouse, or by the person who is found in possession of articles which are exempt from excise taxes other than those legally entitled to ex emption ." (Emphasis supplied) Since no irreconcilable repugnancy exist between the provisions of PO 1590 and RA 9334, the same should be interpreted in harmony with one another in order to give effect to all laws on the subject. In this regard, the rules of statutory construction dictate that on a specific mallcr, the special law shall prevail over the general law, which shall be resorted to only to supply deficiencies in the former. In addition, where there are two statutes, the earlier special and the later general - the terms of the general broad enough to include the matter provided for in the special - the fact that one is special and the other is general creates a presumption that the special is to be considered as remaining an exception to the general, one as a general law of the land, the other as the law of a particular case.33 {-

Lel il be noted lhal PO 1590 is a special Jaw which governs the franchise of petitioner. Significanlly, in the case of Commissioner of Internal Revenue us. Central Luzon Drug Corporation34, the High Court classified the Tax Code as a general law, the pertinent portion of which reads:

"Sixth and last, RA 7432 is a special law that should prevail over the Tax Code -- a general law. 'x x x IT]he rule is that on a specific matter the speciaJ law shaJl prevail over the generaJ law, which shall be resorted to only to supply deficiencies in the former.' In addition, 'lwlhere there are two statu Les, the earlier speciaJ and the later gene raJ -- the terms of the generaJ broad enough to include the matter provided for in the special -- the fact that one is speciaJ and the other is genera] creates a presumption that the speciaJ is to be considered as remaining an exception to the gencraJ, one as a general law of Lhe land, the other as the law of a particular case. ' 'It is a canon of statu Lory construction that a later statute, general in its terms and not expressly repealing a prior speciaJ statute, will ordinarily not affect the speciaJ provisions of such earlier statute." (Emphasis supplied) Accordingly, between the provisions of PO 1590, which, among others, specifically provides for petitioner's lax exemption on its importation of commissary supplies for international consumption, as against the provisions of the NlRC of 1997, as amended by RA 9334, which is a general law, the former necessarily prevails. In view of respondent's failure to show the clear intent of the legislature to repeal lhc exemption granted to petitioner under PO 1590, the Court shall now proceed in determining whether petitioner JS entitled to be refunded of the amount claimed on the basis of the exemptions granted under its charter. ~

The Court finds relevant the pertinent portions of Section 13 of PO 1590, which read:

"Section 13. In consideration of the franchise and rights hereby granted, the grantee shall pay to the Philippine Government during the life of this franchise whichever of subsections (a) and (b) hereunder will result in a lower tax:

(a) The basic corporate income lax based on the grantee's annual nel taxable income computed in accordance with the provisions of the National Internal Revenue Code; or

(b) A franchise tax of two per cent (2%) of the gross revenues derived by the grantee from all sources, without distinction as lo transport or nontransport operations; provided, lhal with respect lo international ajr-transporl service, only the gross passenger, mill!, and freight revenues from its outgoing fli ghts shall be subject to this tax. The tax paid by the grantee under either of the above alternatives shall be in lieu of all other taxes, duties, royalties, registration, license, and other fees and charges of any kind, nature, or description, imposed, levied, established, assessed, or collected by any municipal, city, provincial, or national authority or government agency, now or in the future , including but not limited to the following:

XXX

XXX

XXX

2. All taxes , including compensating taxes, duties, charges, royalties, or fees due on all importations by the grantee of ajrcraft, engines, equipment, machinery, spare parts, accessories, commissary and catering supplies , aviation gas, fuel , and oil, whether refined or in crude form and other articles, supplies, or materials; provided, that such articles or supplies or materials are imported for the use of the grantee in its transport and transport operations and other activities incidental thereto and are not locally available in reasonable quantity, quality, or price ;" (Emphasis supplied) In other words, petitioner may be exempted from paymg all taxes, including compensating taxes, duties, charges, royalties, or fees due on all importations by petitioner of commissary and catering /- supplies and other articles, supplies, or materials upon payment under either of the above-mentioned alternatives, provided that: 1.

Such articles, supplies or materials are imported for the use of the grantee in ils transport and non-transport operations and other activities incidental lherelo; and 2.

They are nol locally available m reasonable quantity, quality or price.

Let il be noted that Section 22 of RA 9337, which took effect on July 1, 2005, abolished lhe franchise lax provided under petitioner's charter and subjected petitioner to corporate income tax and VAT. Nevertheless, lhe same Section provides that petitioner shall otherwise remain exempt from any taxes, duties, royalties, registration, license, and other fees and charges, as may be provided by their respective franchise agreement.

Section 22 of RA 9337 reads:

"SEC. 22. Franchises of Domestic Airlines. - The provisions of P.O. No. 1590 on the franchise tax of Philippine Airlines, Inc., R.A. No. 7151 on lhe franchise lax of Cebu Air, Inc., R.A.

No. 7583 on the franchise tax of Aboitiz Air Transport Corporation, R.A. No. 7909 on the franchise tax of Pacific Airways Corporation, R.A. No. 8339 on the franchise tax of Air Philippines, or any other franchise agreement or law pertaining to a domestic airline lo the contrary notwithstanding:

(A) The franchise lax is abolished;

(B) The franchisee shall be liable to the corporate income lax; /r

(C) The franchisee shall register for value- added tax under Section 236, and to account under Title IV of the National

Internal

Revenue

Code

of 1997, as amended , for value-added lax on its saJe of goods, property or services and its lease of property; and

(D) The

franchisee shall otherwise rem a m exempt from a ny taxes, duties, royalties, registration , license, and other fees and charges, a s may be provided by their respective fra nchise agreement."

Conseque ntly, petitioner is only left with one option, which is to pay its basic corporate income tax, the payment of which shall be in lieu of all taxes with the exception of VAT, subject to certain conditions as may be provided under petitioner's charter. To substantiate its claim, petitioner presented its Annual Income Tax Return 35 for the fiscal year ended Ma rch 31, 2008, showing lha l il filed its Income Tax Return for fiscal year 2008. Petitioner likewise presented its Certificate of VAT Rcgislralion 36 and its VAT Return for the fourth quarter of fiscal year e nded Ma rch 31, 2008 lo prove that il accounted for the value-a dded lax on its sales of goods, prope rty or se rvices and its lease of property for the fiscal year 2008.37 As regards its payment of the exctsc lax on imported a rticles claimed for refund, petitioner submitted copies of Informa l Import Declaration Entries, Officia l Receipts issued

by the Bureau of J-

35 Exhibits "000", "000- 1", "000-2", "000-3", and "000-4". 36 Exhibit "PPP".

37 Exhibi t "RRR".

Customs, and the Authority lo Release Imported Goods, the contents of which a re detailed as follows:

Import

Articles

Date of

A TRIG

Amount

Total Amount

Official

Date of

Entry

Arrival

No.

Due

Paid

Receipt

Payment

No.

No.

3722

Mild

March 29 , 744 53 p 500 ,000.00 P1 ,909,751.20 14094 5962 June 25,

Seven

2006 (Exh . S) (Exh . R) 2007

Cigarette

(Exh . J) ---- 372tl

Chivas

March 13

74 482 390 ,096. 00

Real

2006 (Exh . T)

Whisky

(Exh . K) -

West King

April 14 , 74 828 250 ,000.00 3990

Size

2006 (Exh .

(Exh . U)

Cigarettes

L)

Davidoff

November

744 5 1 175,000.00 14309

Lights

30,2005 (Exh. V) (Exh . M 143 13

Carnus

December

744t1 5 20 ,563.20 xo 15,2005 (Exh . W)

Superieur

(Exh . N) 143 14

Piper

December

7454tl 393, 120.00

Heidsieck

10 ,2005 (Exh . X) (Exh. (0)

1431 7

Vin

De

December

7tlt120 180,972.00

Table

15 , 2005 (Exh . Y)

Balnc

(Exh . P)

Vin

De

Table

Rouge

3729 - -- -- - -----

Salem

M

April 5, 74829 750 ,000.00 2,259,157.44 141165787 J uly 11 ,

King

2006 (Exh .

(Exh .

(Exh . FF) 2007

Cigarette

BB)

GG)

3730

Carlos I

M arch 27,

7491 5

860 ,267.52 2006 (Exh .

(Exh .

CC)

HH)

3732

Royal

March 3 1, 74860 648,889.92

Salute

2006 (Exh .

(Exh . II) Whisky, p 7)

Ballantine

Scotch

Whiskey,

Carlos

I

Brandy

and

Martel

VSOP

----

Cognac

1--- -- t1056

Mild

April 19, 74874 500 ,000.00 1,899,083.84 141733426 Ju ly 20 ,

Seven

2006 (Exh.

(Exh .

(Exh . PP) 2007

Lights

LL)

QQ)

Cigarettes

-----f--::· 14302

Remy

October 29 , Exh. RR 7t1 5,355 .52

Martin XO

2005

Remy

(Exh. MM)

Martin

VSOP

Piper

Heidsieck

14 303 J & B rare October 22 , 74589 -- 653,728.32

JW Black

2005 (Exh.

(Exh .

Label

NN)

SS)

14305

Jack

November

741J55

1,069,951 .68 4,821,680.24 14182044 5 July 30, Daniels, 19,2005

(Exh

(Exh . 888) 2007

Regal

(Exh. W)

CCC)

Whisky, cutty sark, royal salute, fin landia vodka 14306

J

& 8

November

74546 653,728.32 Rare; JW 28,2005

(Exh

Black

(Exh . WW)

ODD)

Label

143 10 Chi vas

November

74547 610,500.24

Regal

2,2005 (Exh .

Whisky

(Exh . XX)

EEE)

14307

Winston

November

74586 2, 187,500.00

Red

King

11 ,2005

(Exh

Size;

(Exh . YY)

FFF)

Winston

Lights

King Size ;

Mild

Seven

10346

Davidoff

September

58281 300,000 .00

Classic

20 , 2005

(Exh

Lights

(Exh . ZZ)

GGG)

An examination of the records would show that the amount of the excise lax lia bi lity subject of the insta nt claim for refund as stated in the letters submitted lo Silveria Salazar, Chie f of the Collection Division in the BOC NAIA Customhouse38 a nd in th e above-mentioned Authority lo Release Imported Goods actu a lly correspond to the a mount of taxes which petitioner paid for the release of the subject imported a rticles, a s evidenced by the a bove-staled Official Receipts issued by the Burea u of Customs.

Thus, petitioner was able lo substantiate its paym ent of the lola! amount of excise tax subject of the insta nt c la im for refund.

Anent the question of whether or not the subject imported a rticles were imported for the use of petitioner in its transport a nd non -tra nsport operations a nd other activities incidenta l thereto, a/.-- 38 Exhibi ts "Q", "EE", "00", "AJ\1\", and "AAA- 1 ".

perusa l of the Authority to Release Imported Goods issued by the CIR would show that the subject imported a rticles will be used exclus ively for interna tional in-night consumption. Now, a s to the requirement tha t the subject imported a rticles a rc not locally a va ila ble in reasona ble qua ntity, qua lity or pnce, respondent CIR a rgued th a t petitioner fa iled to prove the sa me. According to respondent CIR, no independe n t a nd credible evidence wa s presented to prove this ma tte r. ll is highly self-serving for peti tioner's very own employee to certify tha t the imported products arc not locally a vailable in rea sona ble qua ntity, qua lity a nd price. Furthermore, the study on prices is not comprehensive in na ture. For its part, petitioner presented th e testimony of Mr. Victor Sa ntos, the Assista nt Vice President in cha rge of th e Ca tering a nd In- night Sub-de partment of petitioner PAL. In his Judicia l Affidavit39, Mr. Sa ntos stated that PAL imported a lcoholic products because the importa tion of said products is cheaper tha n buying them locally, a nd in the case of cigarettes , there a re no local supplie rs or dealers big enough to supply the va nous foreign bra nds of cigare ttes PAL is importing, a nd if ever the re a re, the selling pnces of those local dealers would d e finitely be higher tha n PAL's cost of importing the ciga re ttes .

This is furth er supported by a ta bulation ma de by Mr. Sa ntos compa ring the cost of importing the subject a rticles a nd the~ 39 Exhibit "WWW".

DI~C ISION

CT/\ CASE NO. 7935

Page 26 of 30

cost of purcha sing them locally40, the invoices issued to PAL for its purcha se of the subject a rlicles4 1, the Price List for 2005 of Duty Free Philippincs 4 2 a nd the 2005 4 3 and 2006 44 Price List issued by the Philippine Wine Me rcha nts corresponding lo the sa m e a rticles subject of this cla im for refund.

Upon exa mina tion of the items on the tabula tion ma d e by Mr. Santos, il can be noticed tha t the 2005 Price List of Duty Free Philippines 4 5 fa iled to provide the prices for the a rticles Mild Seven Cigarette, West King Size Cigarettes , Davidoff Lights, Piper Heidsieck, Sa le m M King Ciga rcllc, Winston Red King S ize, Winston Lights King Size, Davidoff Cla ssic Ligh ts, Ca rlos I, Rcmy Ma rlin XO , Remy Ma rti n VSOP, ,J&B Ra re, ,JW Black La bel a nd Cully Sa rk. Nevertheless, the local prices for Ca rlos I, Rcmy Ma rtin XO , Re my Ma rtin VSOP, J&B l~ a re, JW Blac k La bel, J ack Da niels a nd Cully Sa rk a re re neclcd m the 20051 6 a nd 2006 47 Phi lippine Wine Mercha nts' price list. As to the importa tion of the foregoing bra nds of cigare ttes , Mr. Sa ntos admillcd th a t the cost of locally buying the sam e product for the sa me year cannot be esta blished since no price the reof is a va ila ble for Duly Free Philippines in 2005 a s we ll as in the Philippine Wine Mercha nts Price Lists, whic h conta in only th e prices for wines. Mr./- 40 Sxhibi t "WWW-2".

41 Exh ibits "J -2", "L-2", "M-2", "N-2", "P-2", "BB-2", "LL-2", "NN-2", "WW-2", "YY-2" and "ZZ-2".

4 2 Exh ibit ''TlT'.

4 3 Exh ibit "UUU".

44 Exhibit "VW".

45 Exhibit '"lTl"'.

46 l:.xhibit "UUU".

47 Exhibi t "VW".

Santos likewise added that if ever there a re loca l suppliers of the cigarettes involved, its selling price would definitely be higher than the importation cost of PAL of sa id cigarettes; which is exempt from duties a nd taxes under its fra nchise inasm uch as loca l su ppliers will have to pay excise taxes and customs duties. 48 However, other than the testimony of the said witness, there is nothing in the evidence presented by petitioner which would support a conclusion that the subject cigarettes a re not locally availa ble in reasonable quantity, qua lity or price. Also, the Court observes that petitione r fa iled to present the sales invoices or official receipts for its purchase or importation of the followin g articles from which the local prices can be compa red: -

Import

Articles

Entry No.

3724

Chivas Real Whisky

14314

Piper Heidsieck

- ----- ------ 3730

Carlos I

3732 Royal Salute Whisky, Balla ntine Scotch Whiskey, Carlos I

Brandy and Martel VSOP Cognac

- 14302

Remy Martin XO

r~emy Marlin VSOP 1----- -

Piper Heidsieck

14305 J ack Daniels, Regal Whisky,

Cully

Sark, Royal Salute, Finlandia Vodka -- 14310

Chivas Regal Whisky

In this regard, it must be noted that the Court may not consider the comparison made by petitioner between the Unit Costs of the a rticles a s per In formal Import Decla ration Entry No. a nd the local j

prices of th e sa me a rticles considering that, a s per the tes timony of Mr. Sa ntos, the said Un it Costs a rc mere ly the va lu a tions given by the Bureau of Customs from which they a ssessed a nd collected the excise lax due49 a nd thus, a re not the actua l cost or price of the subject imported a rticles.

Accordingly, ou l of lhe importations subjec t of lhe instan t Petition for Review, only the payment of excise lax on the following importa tions, wh ich wa s sufficiently supported by invoices , Bureau of Customs Officia l Receipts, Authori ty lo Release Imported Good s a nd other documenta ry evide nce, may be refunded :

Import

Articles

Date of

A TRIG

Amount Due

Official

Date of

Entry

Arrival

No.

Receipt

Payment

No.

No.

14313

Camus

December

74445 P20,563.20 140945962 June 25, xo 15,2005 (Exh . W) (Exh . R) 2007

Superieur

(Exh . N) 14317

Yin

De

December

74420 180,972.00

Table

15, 2005 (Exh . Y)

Balnc

(Exh . P)

Yin

De

Table

~3 0 3

Rouge

---

J

&

B

October

74589 653,728.32 141733426 July 20, rare 22,2005 (Exh . SS) (Exh . PP) 2007

JW Black

(Exh . NN)

Label

14306 -- - --

J

&

B

November

74546 653,728.32 141820445 July 30, Rare; JW 28, 2005

(Exh

(Exh . BBB) 2007

Black

(Exh . WW)

DOD)

Label

TOTAL

Pl ,508 ,991.84 It is lruc tha t a claima nt ha s the burde n of proof to esta blis h the factua l ba s is of his or her cla im for ta x c redit or refund. 50 Tax refunds arc in the nature of lax exe mptions. As such, they a re regarded a s de rogation of sovereign a u thority a nd lo be con s trued /,- 49 Exhibi t "WWW" 5° Citibank, N.A. us . Court of Appeals and the Commissioner of Internal Revenue, G. R. No. 107434, October 10, 1997.

strictissimi juris against the person or entity claiming the refund. 5 1 However, petitioner was able to discharge such burden of proof as regards the duly substantiated portion of its excise tax paid on the subject importations.

Hence, the instant claim for tax refund of petitioner's erroneously paid excise tax should be granted but only in the amount of Pl,508,991.84.

WHEREFORE, premises considered, the instant Petition for Review is hereby PARTIALLY GRANTED.

Accordingly, respondents are ORDERED to REFUND in favor of petitioner the amount of ONE

MILLION FIVE HUNDRED EIGHT THOUSAND NINE HUNDRED

NINETY-ONE PESOS AND 84/100 (P1,508,991.84), representing petitioner's erroneously paid excise tax on June 25, 2007, July 20, 2007, and July 30, 2007.

WE CONCUR:

#/.-v;:L~- AMELIA R. COTANGCO- MANALASTAS

Associate Justice

(Retired)

OLGA PALANCA-ENRIQUEZ

Associate Justice

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 lhe Court's Division .

stice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution a nd the Division Chairperson's Attesta tion , il is he reby certified tha t the conclusions in the a bove Decision were reached in consulta tion before th e case wa s a ssigned to the wriler of lhe opinion of lhe Court. ~~;4 C . ~~-;,L;.r~· JUANITO C. CASTANEDA:, JR.

Acting Presiding Justice