Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

DECISION

DEL ROSARIO, P.J.:

This is a consolidation of two (2) Petitions for Review filed by Philippine Airlines, Inc. against the Commissioner of Internal Revenue, seeking the refund of the aggregate amount of Thirty Million Ninety- Nine Thousand One Hundred and Ninety-Three Pesos and Eighty-Two Centavos (P30,099, 193.82), allegedly representing excise taxes paid for its importation of alcohol and tobacco products used as commissary supplies for its international flight covering transactions made in the years 2006, and 2008 to 2012,1 broken down as follows: CTA CASE NO.

AMOUNT OF CLAIM

8708 p 26,502,912.76 8770 p 3,596,281 .06 Total p 30,099,193.82 1 Brief Statement of the Case, Joint Stipulation of Facts and Issues ("JSFI"), CTA Docket, p. 2105.

~

Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

PARTIES Petitioner Philippine Airlines, Inc. ("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 Avenue, CCP Complex 1307, Pasay City.2 On the other hand, respondent is the Commissioner of the Bureau of Internal Revenue ("BIR"), the government agency tasked with the assessment and collection of all national internal revenue taxes, fees and charges, including excise taxes paid on wines, liquors, and cigarettes under Sections 142 and 145 of the National Internal Revenue Code of 1997, as amended ("NIRC"). The Commissioner of Internal Revenue ("CIR") holds office at the BIR National Office Building, Agham Road, Diliman, Quezon City, where papers, pleadings, notices, orders, judgments, summons and other processes may be served. 3

FACTS

On June 11, 1978, by virtue of Presidential Decree No. 1590 ("PD 1590") otherwise known as "An Act Granting a New Franchise to Philippine Airlines, Inc. to Establish, Operate and Maintain Air- Transport Services in the Philippines and Between the Philippines and Other Countries", PAL was granted a franchise to operate and maintain air transport services domestically and internationally.4 Under Section 13 of its franchise, PAL must comply with certain conditions to be entitled to exemption from the payment of specific taxes on all its importation of cigarettes, liquor, and wine for its commissary and catering supplies for international consumption. 5 On January 1, 2005, Republic Act No. 9334 ("RA 9334") otherwise known as "An Act Increasing the Excise Tax Rates Imposed on Alcohol and Tobacco Products, Amending for the Purpose Sections 131, 141, 142, 143, 144, 145 and 288 of the National Internal Revenue 2 Par. 1, Stipulation of Facts, JSFI, CTA Docket, p. 2105. 3 Par. 2, Stipulation of Facts, JSFI, CTA Docket, p. 2106. 4 Par. 3, Stipulation of Facts, JSFI, CTA Docket, p. 2106. 5 Par. 4, Stipulation of Facts, JSFI, CTA Docket, p. 2106. ~ Philippine Airlines, Inc. vs. Commissioner of Internal Revenue Code of 1997, as amended" took effect.6 Section 6 of RA 9334 provides:

"SEC. 6. Section 131 of the National Internal Revenue Code of 1997, as amended, is hereby amended to read as follows: "SEC.

131. Payment of Excise Taxes on Imported Articles.- (A) Persons Liable. - Excise taxes on imported articles shall be paid by the owner or importer to the Customs Officers, conformably with the regulations of the Department of Finance and before the release of such articles from the customshouse, or by the person who is found in possession of articles which are exempt from excise taxes other than those legally entitled to exemption. In the case of tax-free articles brought or imported into the Philippines by persons, entities, or agencies exempt from tax which are subsequently sold, transferred or exchanged in the Philippines to non-exempt persons or entities, the purchasers or recipients shall be considered the importers thereof, and shall be liable for the duty and internal revenue tax due on such importation. 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 freeports 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 Duty-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." 66 Par. 5, Stipulation of Facts, JSFI, CTA Docket, p. 2106. cr1 Philippine Airlines, Inc. vs. Commissioner of Internal Revenue Cigars and cigarettes, distilled spirits and wines within the premises of all duty-free shops which are not labelled as hereinabove required, as well as tax and duty- free articles obtained from a duty-free shop and subsequently found in a non-duty-free shop to be offered for resale shall be confiscated, and the perpetrator of such non-labelling or re-selling shall be punishable under the applicable provisions of this Code. Articles confiscated shall be disposed of in accordance with the rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioners of Customs and Internal Revenue, upon consultation with the Secretary of Tourism and the General Manager of the Philippine Tourism Authority.

The tax due on any such goods, products, machinery, equipment or other similar articles shall constitute a lien on the article itself, and such lien shall be superior to all other charges or liens, irrespective of the possessor thereof.

(B) Rate and Basis of the Excise Tax on Imported Articles. - Unless otherwise specified, imported articles shall be subject to the same rates and basis of excise taxes applicable to locally manufactured articles." On July 1, 2005, Republic Act No. 9337 ("RA 9337") otherwise known as "An Act Amending Sections 27, 28, 34, 106, 107, 108, 109, 110, 111, 112, 113, 114, 116, 117, 119, 121, 148, 151, 236, 237 and 288 of the National Internal Revenue Code of 1997, as amended, and for other purposes", expressly and specifically amended the franchise of PAL and subjected it to value-added registration and payment requirements. 7 On various dates during the years 2006, and 2008 to 2012, PAL's importations of assorted cigarettes, liquor and wines, covered by various Informal Import Declaration and Entries ("IIDE"),8 Air Waybills/Bills of Lading9 and Authority to Release Imported Goods ("ATRIG"), 10 arrived in Manila. PAL allegedly paid under protest the excise taxes on its importation of assorted liquor, wine, and cigarettes, in the amount of P30,099, 193.82, viz.: 7 Par. 6, Stipulation of Facts, JSFI, CTA Docket, p. 2106. 8 Exhibits "P-47" to "P-169" and "P-631" to "P-655". 9 Exhibits "P-170" to "P-293" and "P-656" and "P-680". 10 Exhibits "P-294" to "P-416" and "P-681" to "P-705". otl Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

DATE OF PAYMENT

OFFICIAL RECEIPT

NUMBER CTA Case No. 8708 Se_Qtember 23, 2011 01821203445 September 23, 2011 01821203423 Se_Qtember 23, 2011 01821203401 September 23, 2011 01821203388 December 9, 2011 01823441058 December 9, 2011 01823441070 December 9, 2011 01823441092 December 9, 2011 01823441036 December 29, 2011 01824011164 December 29, 2011 01824011007 December 29, 2011 01824011041 December 29, 2011 01824011063 December 29, 2011 01824011119 December 29, 2011 01824011142 December 29, 2011 01824010938 CT A Case No. 8770 March 7, 2012 01825602914 April13, 2012 01826711769 October 16, 2012 01831236149 TOTAL AMOUNT ' 879,380.41 976,037.39 1 ,436,872.69 1 ,572,300.88 2,913,490.60 1,858,869.93 3,851,455.73 1,543,708.44 2,213,166.08 1 ,030,098.94 851,018.92 681,073.31 2,259,632.96 2,221,205.44 1 2,214,601.04 959,747.90 810,564.49 1,825,968.67 .. 30,099, 193.82 On various dates, Gilda L. Cinco, the Acting Chief of the Warehousing Assessment Unit ("WAU") of the Bureau of Customs ("SOC"), forwarded to Silveria Salazar, the Chief of the Collection Division of the Ninoy Aquino International Airport ("NAIA") Customshouse, the documents covering PAL's payment of duties, taxes and other charges pursuant to Customs Memorandum Order ("CMO") No. 13-2005 and Revenue Regulation ("RR") No. 3-2006. On September 12, 2013, PAL filed with the SIR its administrative claim for refund in the amount ofP26,502,912.76, seeking the recovery of excise taxes paid under protest on its importation of alcohol and tobacco products for use in international flights covering payments made on September 23, 2011, December 9, 2011, and December 29, 2011. 11 On February 13, 2014, PAL filed with the SIR its administrative claim for refund in the amount of P3,596,281.06 for the excise taxes paid under protest on March 7, 2012, April 13, 2012 and October 16, 2012. 12 Due to the inaction of the CIR on PAL's administrative claims for refund, PAL filed Petitions for Review with this Court on September 19, 11 Exhibit "P-46", CTA Docket, p. 45. 12 Exhibit "P-630", CTA Docket, p. 7164. cr'\

Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

2013 and February 20, 2014, which were docketed as CTA Case Nos. 870813 and 8770, 14 respectively. The CIR filed his Answer on January 6, 2014 for CTA Case No. 870815 and on April21, 2014 for CTA Case No. 8770. 16 The two cases were later consolidated on July 21, 2014. 17 The CIR filed his Pre-Trial Brief on February 20, 2014, 18 while PAL filed its Consolidated Pre-Trial Brief on September 18, 2014. 19 The Pre-Trial Conference was held on September 25, 2014.20 The parties submitted a Joint Stipulation of Facts and Issues on October 27, 2014,21 which the Court approved in the Resolution promulgated on November 7, 2014.22 During trial, PAL presented the following witnesses:

1. Mr. Jonathan Castillo Lee - Manager of Company Materials Handling Division of PAL; 23

2. Mr. Emmanuel Y.

Mendoza - Court-commissioned Independent Certified Public Accountant ("ICPA");24

3. Ms. Cheryl Imelda V. Capinpin - Manager of In-flight and Commissary Materials Purchasing Division, Corporate Logistics and Services Department of PAL; 25

4. Mr. Ruel Ryan 0. Julian - Manager of Tax Services Division of PAL·26 and ' 13 Exhibit "P-417".

14 Exhibit "P-731".

15 CTA Docket, pp. 554-573. 16 CTA Docket, pp. 185-199; 203-219. 17 Resolution dated July 21,2014, CTA Docket, pp. 1730-1731. 18 Respondent's Pre-Trial Brief, CTA Docket, pp. 579-582. 19 CTA Docket, pp. 2045-2066. 20 Minutes of the Hearing dated September 25, 2014, CTA Docket, pp. 2069-2070. 21 CTA Docket, pp. 2105-2126. 22 CTA Docket, p. 2130. 23 Minutes of the Hearing dated January 20,2015, CTA Docket, pp. 2154-2156. 241d.

25 Minutes of the Hearing dated February 17, 2015, CTA Docket, pp. 2165-2169. 26 Minutes of the Hearing dated February April28, 2015, CTA Docket, pp. 2310-2315. ct1

Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

5. Mr. Gilbert M. Galedo - Senior Planning and Purchasing Specialist of In-flight Commissary Materials Purchasing Division of PAL. 27 PAL formally offered its documentary evidence on June 26, 2015. 28 The CIR filed his Comment (Re: Petitioner's Formal Offer of Evidence) on July 15, 2015.29 The Court admitted PAL's offered documentary evidence in a Resolution dated September 17, 2015. 30 During the hearing dated October 8, 2015, the CIR's counsel manifested that he would not be presenting any evidence as there is no report of investigation. 31 As directed by the Court, the CIR and PAL filed their memoranda on December 7, 201532 and December 14, 2015,33 respectively. Hence, the case was deemed submitted for decision on December 18, 2015. 34 ISSUE The sole issue submitted for the resolution of this Court is whether PAL is entitled to a refund or tax credit of excise taxes in the amount of P26,502,912.56 paid on September 23, 2011, December 9, 2011, and December 29, 2011; and in the amount of P3,596,281.06 paid on March 7, 2012, April 13, 2012 and October 16, 2012, or an aggregate amount of P30,099, 193.82, on the importation of cigarettes, liquor, and wine for its in-flight and catering supplies for international consumption.

PARTIES' ARGUMENTS

PAL contends that under its franchise pursuant to PO 1590, it is exempt from payment of excise taxes on all its importations of cigarettes, liquor, and wine for its catering and commissary supplies 271d.

28 Formal Offer of Evidence, CTA Docket, pp. 2349-2388. 29 CTA Docket, pp. 2426-2427. 3o CT A Docket, pp. 2445-2446. 31 Minutes of the Hearing dated October 8, 2015, CTA Docket, pp. 2447-2448. 32 CT A Docket, pp. 2465-2466. 33 CTA Docket, pp. 2496-2516. 34 Resolution dated December 18, 2015, CTA Docket, p. 2518. o'\

Philippine Airlines, Inc. vs. Commissioner of Internal Revenue for international consumption. 35 PAL also argues that it has exhausted all administrative and judicial remedies, and complied with the requirements for filing a claim for refund or tax credit under the provisions of the NIRC.36 PAL further claims that it has shown its compliance with the conditions laid out in PO 1590, and is thus entitled to a refund or tax credit in the total amount of P30,099, 193.82. On the other hand, the CIR insists that RA 9334 revoked the exemption granted to PAL. 37

THE COURT'S RULING

PAL's exemption from taxes granted under PD 1590 was not repealed by Section 6 of

RA 9334

The issue on PAL's tax exemption under its franchise, PO 1590, is not novel. No less than the Supreme Court has settled the same in the consolidated cases of Republic of the Philippines rep. by the Commissioner of Customs vs. Philippine Airlines, Inc. (PAL) and Commissioner of Internal Revenue vs. Philippine Airlines, Inc. (PAL)38 in this wise:

"In CIR v. PAL, the Supreme Court has already passed upon the very same issues raised by the same petitioners. The only differences are the taxable period involved and the amount of refundable tax.

We have held in that case that it is a basic principle in statutory construction that a later law, general in terms and not expressly repealing or amending a prior special law, will not ordinarily affect the special provisions of the earlier statute. A reading of the pertinent provisions of P.O. 1590 and R.A. 9334 shows that there was no express repeal of the grant of exemption: PRESIDENTIAL DECREE NO. 1590 xxxx SECTION 13. In consideration of the franchise and rights hereby granted, the grantee shall pay to the 35 Memorandum, CTA Docket, p. 2501. 36 Memorandum, CTA Docket, p. 2506. 37 Answer, CT A Docket, p. 555; Answer, CT A Case No. 8770 Docket, p. 204. 38 G.R. Nos. 209353-54 and G.R. Nos. 211733-34, July 6, 2015. cr" Philippine Airlines, Inc. vs. Commissioner of Internal Revenue 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 tax based on the grantee's annual net 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 to transport or nontransport operations; provided, that with respect to international airtransport service, only the gross passenger, mail, and freight revenues from its outgoing flights 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: xxxx

(2) All taxes, including compensating taxes, duties, charges, royalties, or fees due on all importations by the grantee of aircraft, 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 nontransport operations and other activities incidental thereto and are not locally available in reasonable quantity, quality, or price; xxxx SECTION 24. This franchise, as amended, or any section or provision hereof may only be modified, amended, or repealed expressly by a special law or decree that shall specifically modify, amend, or repeal this franchise or any section or provision thereof. (Emphasis supplied) ci\

Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

REPUBLIC ACT NO. 9334 xxxx SECTION 6. Section 131 of the National Internal Revenue Code of 1997, is amended, is hereby amended to read as follows: SEC. 131. Payment of Excise Taxes on Imported Articles.- (A) Persons Liable. - Excise taxes on imported articles shall be paid by the owner or importer to the Customs Officers, conformably with the regulations of the Department of Finance and before the release of such articles from the customs house, or by the person who is found in possession of articles which are exempt from excise taxes other than those legally entitled to exemption.

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

Philippine Airlines, Inc. vs. Commissioner of Internal Revenue 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 on introduction into the Philippine customs territory. xxxx SECTION 1 0. Repealing Clause. - All laws, decrees, ordinances, rules and regulations, executive or administrative orders, and such other presidential issuances as are inconsistent with any of the provisions of this Act are hereby repealed, amended or otherwise modified accordingly. The Court has exhaustively discussed all issues similar to those in the present case in this wise: Indeed, as things stand, PO 1590 has not been revoked by the NIRC of 1997, as amended. Or to be more precise, the tax privilege of PAL provided in Sec. 13 of PO 1590 has not been revoked by Sec. 131 of the NIRC of 1997, as amended by Sec. 6 of RA 9334. We said as much in Commissioner of Internal Revenue v. Philippine Air Lines, Inc.: That the Legislature chose not to amend or repeal [PD] 1590 even after PAL was privatized reveals the intent of the Legislature to let PAL continue to enjoy, as a private corporation, the very same rights and privileges under the terms and conditions stated in said charter. x x x To be sure, the manner to effectively repeal or at least modify any specific provision of PAL's franchise under PD 1590, as decreed in the aforequoted Sec. 24, has not been demonstrated. And as aptly held by the CTA En Bane, borrowing from the same Commissioner of Internal Revenue case: "While it is true that Sec. 6 of RA 9334 as previously quoted states that 'the provisions of any special or general law to the contrary notwithstanding.' such phrase left alone cannot be considered as an express repeal of the exemptions granted under PAL' s franchise because it fails to specifically identify PO 1590 as one of d\ Philippine Airlines, Inc. vs. Commissioner of Internal Revenue the acts intended to be repealed .... (Emphasis supplied) Noteworthy is the fact that PD 1590 is a special law, which governs the franchise of PAL. Between the provisions under PD 1590 as against the provisions under the NIRC of 1997, as amended by 9334, which is a general law, the former necessary prevails. This is in accordance with the rule that on a specific matter, the special law shall prevail over the general law, which shall be resorted 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 other general creates a presumption that the special is considered as remaining an exception to the general, one as a general law of the land and the other as remaining an exception to the general, one as a general law of the land and the other as the law of a particular case.

In other words, the franchise of PAL remains the governing law on its exemption from taxes. Its payment of either basic corporate income tax or franchise tax- whichever is lower - shall be in lieu of all other taxes, duties, royalties, registrations, licenses, and other fees and charges, except only real property tax. The phrase 'in lieu of all other taxes' includes but is not limited to taxes, duties, charges, royalties, or fees due on all importations by the grantee of the commissary and catering supplies, provided that such articles or supplies or materials are imported for the use of the grantee in its transport and nontransport operations and other activities incidental thereto and are not locally available in reasonable quantity, quality, or price.

However, upon the amendment of the 1997 NIRC, Section 22 of R.A. 9337 abolished the franchise tax and subjected PAL and similar entities to corporate income tax and value-added tax (VAT). PAL nevertheless remains exempt from taxes, duties, royalties, registrations, licenses, and other fees and charges, provided it pays corporate income tax as granted in its franchise agreement. Accordingly, PAL is left with no other option but to pay its basic corporate income tax, the payment of which shall be in lieu of all other taxes, except VAT, and subject to certain conditions provided in its charter.

In this case, the CTA found that PAL had paid basic corporate income tax for fiscal year ending 31 March 2006. Consequently, PAL may now claim exemption from taxes, duties, charges, royalties, or fees due on all importations of its commissary and catering supplies, provided it shows that 1) such articles or supplies or materials are imported for use in its transport and nontransport operations and ~

Philippine Airlines, Inc. vs. Commissioner of Internal Revenue other activities incidental thereto; and 2) they are not locally available in reasonable quantity, quality, or price." (Emphases supplied) From all the foregoing, the exemption granted to PAL under PO 1590 remains and therefore PAL may still be entitled to refund or credit of the excise taxes paid on its commissary supplies used in international flights. PAL is entitled to a partial refund of the excise taxes paid Under its franchise, particularly pursuant to Section 13 of PO 1590, as amended by RA 9337, PAL is obliged to pay the corporate income tax and the value-added tax, in lieu of all other taxes, including taxes on commissary and catering supplies, provided that such articles, supplies or materials are imported for its use in its transport and non-transport operations and other activities incidental thereto and are not locally available in reasonable quantity, quality or price. Thus, in order to be exempted from taxes, duties, charges, royalties, or fees on the importation of its commissary and catering supplies, PAL must prove the following:

1. it paid its corporate income tax and VAT liabilities for the subject period of importation;

2. the imported articles, supplies or materials are intended to be used in its transport and non-transport operations and other activities incidental thereto; and

3. the imported articles, supplies or materials are not locally available in reasonable quantity, quality or price. With regard to the first requisite, PAL submitted its Annual Income Tax Returns for the fiscal years ended March 2006, March 2007, March 2008, March 2009, March 2010, March 2011, March 2012 and March 2013 to prove payment of income tax. 39 Also, PAL proved that it is a VAT -registered entity and that it accounted and paid for the VAT on its sales/receipts as evidenced by its BIR Certificates of 39 Exhibits "P-598" to "P-610", CTA Docket, pp. 2226-2264. cf!

Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

Registration, 40 Payment Forms No. 0605,41 and VAT Returns42 for fiscal years 2006 to 2012. As to the second requisite, the imported articles were described as "lnflight Materials" under the column "Description of Articles of the IIDE documents" submitted by PAL.43 Similarly, in the ATRIGs issued by CIR addressed to the Collector of Customs, it was indicated that "the shipment to be released at the Port of Manila consisting of the above described articles, will be used exclusively for international inflight consumption."44 With reference to the third requisite, records show that the excise taxes paid by PAL on September 23, 2011, December 9, 2011, December 29, 2011, March 7, 2012, April 13, 2012 and October 16, 2012 totalling to P30,099, 193.8245 pertain to its importation in the years 2006, 2008 to 2012 of assorted liquor, wine and cigarettes constituting its commissary and catering supplies for international flight consumption, detailed as follows: Exhibit of Informal Authority to Import Release Declaration Air Waybill Imported and Entry I Bill of Goods Date of

(II DE)

Lading

(A TRIG)

Arrival Exh. Ref.

Exh. Ref.

Exh. Ref.

Description Excise Tax Paid CTA CASE NO. 8708 13-Feb-10 "P-47" "P-170" 25-Feb-10 "P-48" "P-171" 28-Feb-08 "P-49" "P-172" 07-Apr-10 "P-50" "P-173" 15-Apr-10 "P-51" "P-174" 17-Apr-10 "P-52" "P-175" 28-Apr-10 "P-53" "P-176" 04-Jun-10 "P-54" "P-177" 04-Jun-10 "P-55" "P-178" 22-Jun-10 "P-56" "P-179" 30-Jul-10 "P-57" "P-180" 11-Aug-10 "P-58" "P-181" 28-Auq-10 "P-59" "P-182" 11-Sep-10 "P-60" "P-183" 14-Sep-10 "P-61" "P-184" 40 Exhibits "P-587" to "P-589". 41 Exhibits "P-590" to "P-597". "P-294" Asahi Super Beer "P-295" Ballantines Scotch Whisky "P-296" Asahi Super Dry, Beer Sake Wine "P-297" Volupta Rosso Volupta Blanco "P-298" Camus XO Cognac Elegance "P-299" Asahi Super Dry Beer "P-300" Absolute Vodka "P-301" West Ice West Menthol Lindemans Premier Shiraz Cabernet, "P-302" Penfolds Shiraz Cabernet "P-303" Volupta Rosso "P-304" Johnnie Walker Black Label "P-305" Volupta Rosso Volupta Blanco "P-306" Ballantines Scotch Whisky 21 YO Penfolds Chardonnay, Lindemans "P-307" Premier Chardonnay "P-308" West Menthol 42 Exhibits "P-611" to "P-618", "P-740" to "P-747", and "P-784" to "P-785". 43 Exhibits "P-47'' to "P-169" and "P-631" to "P-655". 44 Exhibits "P-294" to "P-416" and "P-681" to "P-705". 45 Exhibits "P-31" to "P-45" and "P-627" to "P-629". p 4 800.60 38 211.55 7 801.74 366 840.00 12 933.14 480.06 95 233.32 353 080.00 49 981.95 183 420.00 220 153.57 366 840.00 38 211.55 35 950.32 81,480.00 ~ Philippine Airlines, Inc. vs. Commissioner of Internal Revenue 21-Aug-10 31-Aug-1 03-Sep-i 05-Sep-1 "P-62" "P-185” "P64" "p65" 0 0 0 19-Sep-10 19-Sep-10 "P-190" 24-Sep-10 30-Sep-10 01-Oct-10 peg" | "p-192" "p-193” "Dp. 70” 13-Jan-06 "p74" 01-Nov-06 12-Oct-10 12-Oct-10 16-Oct-10 23-Oct-10 - 25-Oct-10 28-Oct-10 29-Oct-10 31-Oct-10 01-Nov-10 "p-207" "P-208" 06-Nov-10 12-Nov-10 14-Nov-10 14-Nov-10 "p-209” 21-Nov-10 v.20 23-Nov-10 "P-211" 28-Nov-10 "p-212" O1-Dec-10 "p-90" "p-213" 03-Dec-10 "p-91" "p-214” 10-Dec-10 "p-92" "p-215" 11-Dec-10 "p-93” "p "P-218" 14-Dec-10 16-Dec-10 16-Dec-10 "P-219" "P-220" "p 98” "D 221” "P-222” "P-101” "P-224" "P-102” "p-225” "p-103” "P-226” 17-Dec-10 21-Dec-10 30-May-10 -216" -Jan-11 - 19 28-Jan-11 26-Jan-11 27-Jan-11 "p-309” "P-310” "P-311" "p-312" "p-313” "p-314” "p-315” "P-316” "P-317” "P-318” "p-319” "P-320” "P-321” "p-322" "p-323” "p-325” "p-326” "p-327” "P-328" "p-329” "P-330” "p-331” "p-332” "P-333” "p-334” "p-335” "P-336” "p-337” "p-338” "p-339” "p-340” "p-341” "p-342” "p-343” "p-344” "p-345” "P-346” "p-347” "p-348” "p-349” "P-350” Lindemans Premier Shiraz Cabernet Penfolds Shiraz Cabernet West Menthol Gordon's Gin Patron Silver Tequila Chivas Regal Whisky, Royal Salute Whis Camus XO Cognac Elegance Ballantines Scotch Whisky, Absolute Vodka Camus VSOP Cognac Elegance Johnnie Walker Black Label Japanese Sake Wine, Japanese Beer Vin de Table Blanc, Vin de Table Rouge Penfolds Chardonnay, Lindemans Premier Shiraz Cabernet, Penfolds Shiraz Cab Camus VSOP Cognac Eleg Asahi Super Dry Beer Volupta Rosso ance "P-77" "P-200” "P-324" Patron Silver Tequila Absolute Vodka West KS, West Ice, West Menthol Davidoff Classic, Davidoff Lights Piper Heidsieck Piper Heidsieck Penfolds Shiraz Cabernet, Lindemans Premier Volupta Blanco, Volupta Rosso Piper Heidsieck Brut Piper Heidsieck Brut Ballantines Scotch Whisky 21 YO &

17 YO

Camus XO Cognac Elegance Grappa Red Rose/ Perla Blanca Martini Dry/Sweet Vermouth Asahi Super Dry Beer Camus VSOP Cognac _ Elegance Penfolds Chardonnay White, Penfolds Shiraz Cab Red, Lindemans Chardonnay White, Lindemans Shiraz Red Royal Salute Scotch Whisky, Chivas Regal Scotch Whisky, Martell VSOP Patron Silver Tequila Johnnie Walker Black Label Ballantines Scotch Whisky 17 YO & 21 YO, Absolute Vodka West KS, Davidoff Lights Volupta Blanco Ballantines Scotch Whisky 17 YO & 21 YO, Absolute Vodka Chivas Regal Whisky, Royal Salute Whisky, Martell VSOP Cognac Penfolds Chardonna Camus VSOP, XO, Cognac Elegance 49,981.95 162,960.00 28,512.18 63,489.96 447,950.38 28,217.76 379,171.29 56,435.52 220,153.57 7,001.64 187,088.40 100,881.00 284,529.08 6,400.80 183,420.00 42,326.64 95,233.32 665,420.00 271,600.00 687,798.00 229,266.00 91,710.00 365,097.51 458,532.00 687,798.00 93,471.33 28,217.76 29,981.37 3,912.96 6,400.80 284,529.08 114,637.50 335,905.89 148,143.24 177,533.72 336,845.37 420,980.00 160,584.21 281,256.02 582,190.34 29,713.50 584,742.90

Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

Davidoff Classic/Lights, West 21-Jan-11 "P-104" "P-227" "P-351" Menthol/Ice 08-Feb-11 "P-105" "P-228" "P-352" Asahi Super Dry Ballantines Scotch Whisky 17 & 21 23-Feb-11 "P-106" "P-229" "P-353" YO Royal Salute Whisky 21 YO 25-Feb-11 "P-107'' "P-230" "P-354" Piper Hiedsieck 24-Feb-11 "P-108" "P-231" "P-355" Charles Heidsieck Penfolds Shiraz Cabernet Lindemans 12-Mar-11 "P-109" "P-232" "P-356" Premier Chardonnay Camus Grand VSOP Cognac, Camus 24-Mar-11 "P-110" "P-233" "P-357" VSOP Cognac Elegance 27-Mar-11 "P-111" "P-234" "P-358" Davidoff Lights 06-Apr-11 "P-112" "P-235" "P-359" JW Black Label Queen Adelaide Cab Sauvignon, 07-Apr-11 "P-113" "P-236" "P-360" Queen Adelaide Chardonnay 08-Apr-11 "P-114" "P-237" "P-361" Asahi Super Dry Japanese Beer 09-Apr-11 "P-115" "P-238" "P-362" Remy Martin VSOP 15-Apr-11 "P-116" "P-239" "P-363" Camus VSOP Cognac Elegance 21-Apr-11 "P-117" "P-240" "P-364" Chivas Regal Whisky 09-Sep-06 "P-118" "P-241" "P-365" Salem Lights BOS "P-242", Vin de Table Blanc, Vin de Table 19-Nov-06 "P-119" "P-243" "P-366" Rogue Ballantines Scotch Whisky 17 YO, 23-Mar-08 "P-120" "P-244" "P-367" Royal Salute Whisky, Carlos Brandy 29-Sep-09 "P-121" "P-245" "P-368" Camus Cognac VSOP Elegance Ballantines Scotch 17 YO, Absolute 09-Feb-11 "P-122" "P-246" "P-369" Vodka Queen Adelaide Cabernet 12-Feb-11 "P-123" "P-247" "P-370" Sauv/Chardonnay 15-Feb-11 "P-124" "P-248" "P-371" Patron Silver Tequila Charles Heidsieck, Remy Martin 18-Feb-11 "P-125" "P-249" "P-372" VSOP J&B Rare Scotch Whisky, Gordon's 11-Mar-11 "P-126" "P-250" "P-373" Gin 02-Mar-11 "P-127" "P-251" "P-374" Lindemans Premier Shiraz Cab. 01-Apr-11 "P-128" "P-252" "P-375" Camus Cognac XO Elegance Royal Salute Whisky 21 YO, Martell 23-Apr-11 "P-129" "P-253" "P-376" VSOP Cognac Absolute Vodka Queen Adelaide Cab Sauv, Queen 24-Apr-11 "P-130" "P-254" "P-377" Adelaide Chardonnay Penfolds Shiraz Ca, Penfolds Chardonnay, Lindemans Premier 30-Apr-11 "P-131" "P-255" "P-378" Chardonnay /Cabernet 06-May-11 "P-132" "P-256" "P-379" Absolute Vodka 28-May-11 "P-133" "P-257" "P-380" Remy Martin VSOP 28-May-11 "P-134" "P-258" "P-381" Martell VSOP Cognac Queen Adelaide Cab Sauv, Queen 02-Jun-11 "P-135" "P-259" "P-382" Adelaide Chardonnay 04-Jun-11 "P-136" "P-260" "P-383" Remy Martin VSOP Camus Cognac XO Elegance, Camus 15-Jun-11 "P-137" "P-261" "P-384" VSOP Cognac Elegance 16-Jun-11 "P-138" "P-262" "P-385" Patron Silver Tequila Chivas Regal Whisky, Ballantines 17-Jun-11 "P-139" "P-263" "P-386" Scotch Whisky, Royal Salute Whisky 18-Jun-11 "P-140" "P-264" "P-387" Asahi Super Dry Beer 20-Feb-09 "P-141" "P-265" "P-388" Carlsberg Beer 21-Feb-09 "P-142" "P-266" "P-389" Asahi Beer 27-Feb-09 "P-143" "P-267" "P-390" Carlsberg Beer 09-Mar-09 "P-144" "P-268" "P-391" Sky Grappa Alexander 566 000.00 6 911.52 283 165.40 495 216.00 861675.84 113 901.75 212 691.50 113 200.00 245 698.56 67 449.65 7 948.24 64 124.90 307 291.60 411402.24 260 600.00 160 374.60 564 943.07 78 774.58 239 987.52 37 538.05 182 851.20 688 097.06 154 277.78 34 665.75 60 950.40 353 633.54 74 283.75 146 586.60 205 701.12 64 124.90 102 218.90 91121.40 106 663.20 92 695.40 137 138.40 250 145.20 6 911.52 81457.20 6 047.58 81457.20 19,681.90 cA Philippine Airlines, Inc. vs. Commissioner of Internal Revenue 06-May-09 "P-145" "P-269" "P-392" Carlsberg Beer Asahi Super Dry Beer, Hakutsuru 19-May-09 "P-146" "P-270" "P-393" Sake Wine 19-Jun-09 "P-147" "P-271" "P-394" Carlsberg Beer 25-Dec-09 "P-148" "P-272" "P-395" Mayne Cour Red Table Wine 03-Apr-09 "P-149" "P-273" "P-396" Carlsberg Beer 09-Apr-11 "P-150" "P-274" "P-397" Volupta Blanco Volupta Rosso 15-Apr-11 "P-151" "P-275" "P-398" West KS/Menthoi/Ice West Light/Menthol/Ice, Davidoff 14-May-11 "P-152" "P-276" "P-399" Classic/Lights 02-Jun-11 "P-153" "P-277" "P-400" Gordon's Gin JW Black Label Sky Grappa Alexander Red and 23-Jun-11 "P-154" "P-278" "P-401" White 24-Jun-11 "P-155" "P-279" "P-402" Discipulus Syrah I Blanc Penfolds Chardonnay/Shiraz/Cab, Lindemans Premier 30-Jun-11 "P-156" "P-280" "P-403" Chardonnay/Premier Shiraz Cab 05-Jul-11 "P-157" "P-281" "P-404" Volupta Blanco Volupta Rosso 07-May-10 "P-158" "P-282" "P-405" Johnnie Walker Black 09-Jun-11 "P-159" "P-283" "P-406" Volupta Blanco Volupta Rosso 25-Jun-11 "P-160" "P-284" "P-407" West Ice Davidoff Classic 09-Jul-11 "P-161" "P-285" "P-408" Charles Heidsieck 19-Aug-11 "P-162" "P-286" "P-409" Asahi Super Dry Beer 29-Aug-11 "P-163" "P-287" "P-410" Martini Dry/Sweet Vermouth Chivas Regal Whisky 12YO, Ballantines Scotch Whisky 21Y0/17YO, Royal Salute Whisky 10-Jul-11 "P-164" "P-288" "P-411" 21YO Ballantines Scotch Whisky 17 & 26-Jul-11 "P-165" "P-289" "P-412" 21YO Absolute Vodka J&B Rare Scotch Whisky, JW Black 04-Aug-11 "P-166" "P-290" "P-413" Label 05-Aug-11 "P-167" "P-291" "P-414" Winston Lights Davidoff Classic Royal Salute Whisky 21YO, Chivas 12-Aug-11 "P-168" "P-292" "P-415" Regal Whisky 12YO 16-Aug-11 "P-169" "P-293" "P-416" Camus VSOP Cognac Elegance Subtotal CTA CASE NO. 8770 25-Feb-11 "P-631" "P-656" "P-681" Volupta Rosso Volupta Blanco 20-May-11 "P-632" "P-657" "P-682" Patron Silver Tequila 01-Jul-11 "P-633" "P-658" "P-683" West Menthol Davidoff Lights 14-Sep-11 "P-634" "P-659" "P-684" Sky Grappa Alexander 18-Sep-11 "P-635" "P-660" "P-685" Volupta Rosso Penfolds Shiraz Cab, Penfolds Chardonnay, Lindemans Premier 16-0ct-11 "P-636" "P-661" "P-686" Chardonnay, Lindemans Shiraz Cab 01-Nov-11 "P-637" "P-662" "P-687" Asahi Super Dry Beer 20-Nov-11 "P-638" "P-663" "P-688" Volupta Rosso Penfolds Shiraz Cab, Penfolds 09-Dec-11 "P-639" "P-664" "P-689" Chardonnay 09-Dec-11 "P-640" "P-665" "P-690" Absolute Vodka Queen Adelaide Cabernet, Queen 18-Dec-11 "P-641" "P-666" "P-691" Adelaide Chardonnay Hennessy Prive Cognac, 30-Dec-11 "P-642" "P-667" "P-692" Glenmorangie Wenjun Super 07-Jan-12 "P-643" "P-668" "P-693" Asahi Super Dry Beer 97 748.64 8,424.66 90 417.49 198 090.00 97 748.64 396 180.00 297 150.00 622 600.00 194 592.66 8 253.70 198 090.00 146 586.60 396 180.00 173,639.68 396 180.00 254 700.00 1 386 604.80 6 911.52 3,169.44 520 610.44 421 344.36 287 283.20 198,100.00 479 971.44 307 291.60 /#26,502,912.68 p 396 180.00 91425.60 268 850.00 8 888.60 118,160.68 69 331.50 6 911.52 282 278.25 69 331.50 205 701.12 148 567.50 97 774.60 6,911.52 rjl Philippine Airlines, Inc. vs. Commissioner of Internal Revenue Queen Adelaide Cabernet/Sauvignon, Queen 07-Jan-12 "P-644" "P-669" "P-694" Adelaide Chardonnay 128 758.50 14-Mar-12 "P-645" "P-670" "P-695" Camus VSOP Cognac Elegance 307 291.60 Queen Adelaide Cabernet, Queen 16-Mar-12 "P-646" "P-671" "P-696" Adelaide Chardonnay 98 945.96 24-Mar-12 "P-647" "P-672" "P-697" Charles Heidsieck Brut Reserve 49 521.60 29-Mar-12 "P-648" "P-673" "P-698" Piper Heidsieck 148 564.80 30-Mar-12 "P-649" "P-674" "P-699" J&B Rare Scotch Whisky 82,216.96 02-Apr-12 "P-650" "P-675" "P-700" Volupta Blanco 198,090.00 04-Apr-12 "P-651" "P-676" "P-701" Stolichnaya Gold 70cl 72,376.32 10-Apr-12 "P-652" "P-677" "P-702" Piper Heidsieck Brut 371 412.00 Camus Cognac XO Elegance, Patron 17-Apr-12 "P-653" "P-678" "P-703" Silver Tequila 129 519.60 Penfolds Chardonnay, Lindemans 17-Apr-12 "P-654" "P-679" "P-704" Shiraz Cab/Lindemans Chardonnay 75 472.29 19-Apr-12 "P-655" "P-680" "P-705" Johnnie Walker Black Label 163 799.04 Subtotal TOTAL I' 3,596,281.06 P30,099,193.7446 To prove that the imported articles were not locally available in reasonable quantity, quality or price, PAL submitted the Judicial Affidavit of Ms. Cheryl Capinpin47, PAL's Manager for In-flight and Commissary Materials Purchasing Division, Corporate Logistics and Services Department, Philippine Wine Merchants ("PWM") Price Lists for the years 200648, 200849, 2009s0, 201 os1, 2011s2 and 2012s3, Future Trade International ("FTI") Price Lists dated April 8, 2009s4, October 1, 201 ass and for the years 2006 to 2013s6, the 2010 BIR Price Surveys7 and the reports8 of the Court-commissioned Independent Certified Public Accountant ("ICPA").s9 It is noted that the BIR Price Survey Computation submitted by PAL was based on the 2010 Price Survey conducted and published by the BIR in its Revenue Memorandum Circular 90-2012. With respect to the document described as the Price Lists from the Philippine Wine Merchants, the same was given probative value in 46 With minimal difference of ~.08. as compared to the total claim of ~30,099, 193.82. 47 Exhibits "P-750" and "P-751". 48 Exhibit "P-418".

49 Exhibit "P-419".

50 Exhibit "P-420".

51 Exhibit "P-421".

52 Exhibit "P-422".

53 Exhibit "P-732".

54 Exhibit "P-423".

55 Exhibit "P-424".

56 Exhibit "P-425".

57 Exhibit "P-783".

58 Exhibit "P-755".

59 Mendoza, Querida & Co., through its Partner, Mr. Emmanuel Y. Mendoza. t!f\

Philippine Airlines, Inc. vs. Commissioner of Internal Revenue the earlier cases® brought by petitioner before the Court, albeit involving different taxable periods, in arriving at the conclusion that the costs of importing the articles are lower than purchasing them locally.

A perusal of the aforesaid Price Lists from PWM and FTI as well as the 2010 BIR Price Survey shows that the following imported liquor, wine and cigarette products with excise tax payment of P14,172,530.08 do not have corresponding local prices, to wit:

ATRIG Invoice Excise Tax CTA Case No. 8770 Po " " 0 n " " Volupta Rosso "P-303" "P-437" | Volupta Rosso 183,420.00 "P-306" "P-440" __| Ballantines Scotch Whisky 21 YO 38,211.55 | "p60" | "p-307" | "p-441" | Penfolds Chardonnay | 15,774.12 | "P61" "p42" | Ballantines Scotch Whisky (17 & 21 "P-68" "p-315" "P-449" YO 93,471.33 "P-315" "P-450" | Absolute Vodka 285,699.96 "P-296" "P.429" | Japanese Sake Wine 2,201.04 "P-318" "P-453" Japanese Sake Wine 2,201.04 "p.63" | "P-310" "p-444" | West Menthol 162,960.00 "p-312" "P-446" Patron Silver Tequila 63,489.96 "P-61" “P-308" "P-442" West Menthol 81,480.00 Ballantines Scotch Whisky 21 YO & 17 "P-87" "P-334" "P-469" YO 93,471.33 "P-336" "P-471" | Grappa Red Rose 14,108.88

Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

Perla Blanca 15,872.49 wpo3 | ep-sagr | spars Penfolds Chardonnay, Penfolds Shiraz | aa 6a7.s0 | "p-93" "P-340" "P-475" Cab 114,637.50 "p-95" 148,143.24 page | Ballantines Scotch Whisky 17 YO & 21 | gs ana 33, 'pLo7" "Dp, " "P-479" YO 93,471.33 P-97 P-344 "D-480" to "Pp-481" Absolute Vodka 243,374.04 W . " W u Ww i " West KS 366 660.00 P98 P-345 P-482 Davidoff Lights 54,320.00 "p-gg" "P-346" "P-483" Volupta Blanco 160,584.21 Ballantines Scotch Whisky 21 YO 41,268.50 Absolute Vodka 148,561.92 "P-102" "P-349" "P-487" Penfolds Chardonna 29,713.50 "P-104" "P-351" "P-492" Menthol/West Ice 266,000.00 "D484" Ballantines Scotch Whisky 17 YO 91,425.60

"P-100" | "P-347"

Phos aes 123,805.50 "P-109" 89,140.50 "P-111" eis "P-118" wear | epsig Queen Adelaide Cabernet "P-123" "P-370" "P-513" Sauv/Chardonna 37,538.05 182,851.20 "P-126" Gordon's Gin 30,793.62 "P-129" parm | epesaar | Queen Adelaide Cab Sauv, Queen "P-130" | "P-377" "P-523" | Adelaide Chardonna 74,283.75 P131 Penfolds Chardonna 22,780.35 "p-132" Absolute Vodka 205,701.12 npazer | mp.aeo" | wp e5eM 55,465.20 P-135 Queen Adelaide Chardonna 35,656.20 Patron Silver Tequila 137,138.40 "P-144" 19,681.90 “P-146” ‘P-393” “P-539” Japanese Sake Wine 2,377.08 "p-148" | "p-395" "p-541" | Mayne Cour Red Table Wine 198,090.00 "P-150" "p-151" | "p-398" "p-544" | West KS/Menthol/Ice 297,150.00 West Ice 113,200.00 Prisen | oP soe" | Rote 113,200.00 Davidoff Classic 84,900.00 "P-546" | Gordon’s Gin 30,793.62 of"!

Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

"P-154 "p-401" "P-548" Sky Grappa Alexander Red and White 8,253.70 "P-155 "P-402" "P-549" Discipulus Syrah / Blanc 198,090.00 — "D_An2" ip eent Penfolds Shiraz Cabernet 59,427.00 P-156 P-403 P-990 Penfolds Chardonna 22,780.35 "P-157 "P-404" "p-551" Volupta Blanco, Volupta Rosso 396,180.00 "P-159 "P-406" "P-553" Volupta Blanco, Volupta Rosso 396,180.00 "P-160 "P-407" "P-554" West Ice, Davidoff Classic 254,700.00 uD. np.a14 ND.EEQN Ballantines Scotch Whisky 21 YO 64,124.90 P-164 P-4i1 P-558 Ballantines Scotch Whisky 17 YO 109,837.70 Ballantines Scotch Whisky 17 YO 91,730.35 "P-165 "P-412" "p-559" Ballantines Scotch Whisky 21 YO 146,768.56 Absolute Vodka 182,845.44 “P-167” “P-414” “P-562” Davidoff Classic 84,900.00 Subtotal P11,760,405.23 CTA Case No. 8770 "P-631 "P-681" "P-706" Volupta Rosso, Volupta Blanco P 396,180.00 "P-632 "P-682" "P-707" Patron Silver Tequila 91,425.60 "D. "D_.cR3" "D_Jne" West Menthol 124,258.43 P-633 P-683 P-708 Davidoff Lights 144,591.57 "P-634 "P-684" "P-709" Perla Bianca Grappa Alexandre 4,444.30 "P-634 "P-684" "P-709" Red Rose Grappa Alexander 4,444.30 "P-635 "P-685" "P-710" Volupta Rosso 118,160.68 np. "Dp fceen "D744" Penfolds Shiraz Cab 24,761.25 P-636 P-686 P-7il Penfolds Chardonna 19,809.00 "P-638 "P-688" "P-713" Volupta Rosso 282,278.25 " " n . 1 Penfolds Shiraz Cabernet 24,227.60 P-639 P-689 P-714 Penfolds Chardonna 45,103.90 "P-640 "P-690" "P-715" Absolute Vodka 205,701.12 1D. "D.6Qq" "D716" Queen Adelaide Cabernet 104,162.06 P-641 P-691 P-716 Queen Adelaide Chardonna 44,405.44 Glenmorangie 18 YO 33,256.68 "P-642 | "P-692" | "P-717" 37,912.56 26,605.36 - wp-60ae | Queen Adelaide Cabernet/Sauvignon, "P-644 "P-694" "P-719" Queen Adelaide Chardonna 128,758.50 Queen Adelaide Cabernet, Queen "P-646 "P-696" "P-721" Adelaide Chardonna 98,945.96 "P-647 49,521.60 Patron Silver Tequila | - | "p-704" | "p-729" | Penfolds Chardonnay | 18,422.37 Thus, only the importation cost of the following liquor, wine and cigarette products, as computed by the ICPA, can be compared with the local prices for the same liquor, wine and cigarette products Philippine Airlines, Inc. vs. Commissioner of Internal Revenue reflected in the PWM and FTI Price Lists and BIR Price Survey Computation presented by PAL:

CTA CAS

"p47" "p-4Q” Invoice E NO. 8708 "p-294" "P-296" "p-428" "p-430" Asahi Super Beer Asahi Super Dry Camus Cognac Re Without Excise Tax Importation Cost per Bottle/Can/Pack (in PHP) per Annex E of the ICPA ort®1 29.03 22.36 30.34 37.01 Retail Price if Purchased "P-69 an 245.47 99.47 Camus Cognac "p-70" "p-71” "p-72" "Pp-73” "p.74” "P-81” "D.B2” "p.83” "p85" 360.00 4,200.00 1,003.00 360.00 20,176.20 po NE 12,933.14 480.06 | 360.00 | 23,844.60 Excise Tax Paid (in PHP 220,153.57 "P-51” | "P-298" | "P-432" | XO Elegance 1,565.52 1,800.66 Asahi Super Dry "P-52” | "P-299" | "P-433" | Beer 238.80 Lindemans "P-302" Premier Shiraz 170.98 186.27 Johnnie Walker "p-57” | "P-304" | "P-438" | Black Label 403.93 580.16 Lindemans | Premier "P-60” | "P-307" | "P-441" | Chardonnay 163.26 178.54 Lindemans Premier Shiraz "P-62” {| "P-309" | "P-443" | Cabernet 166.10 181.38 Chivas Regal 0 vo du wlio » | Whis 497.86 674.22 P-66 P-313 P-447 Royal Salute Whis! 1,958.24 2,287.45 wo-anar | Camus Cognac "P-67" | "P-314" | "P-448" | VSOP Elegance 1,538.46 1,773.61 23,844.60 1,100.00 380,933.20 6 400.00 | _ 67,017.18 4,200.00 28,217.76 "P-316" | "P-45i" | VSOP Elegance 630.67 Johnnie Walker "P-317" | "P-452" | Black Label 387.12 563.48 "p-318" | "P-453" | Asahi Super D 36.44 43.11 99,47 Vin de Table up.a10" | p.acae [Blanc 89.85 105.14 P-319 P-454 Vin de Table Rogue 89.85 105.14 "D.75” "p.322" "D. 457" "p-329" | "P-464" Brut Piper Heidsieck 21.00 27.67 99.47 Brut Lindemans "P-330" | "P-465" | Shiraz Cabernet 159.77 Piper Heidsieck "P-332" | "P-467" | Brut 866.27 61 Exhibit “P-755”.

1 1,248.38 75.06 1,984.83 275.00 Lindemans Premier Shiraz "P-320" | "P-455" | Cabernet 162.42 177.70 360.00 Camus Cognac "P-321" | "P-456" | VSOP Elegance 443.52 772.72 Asahi Super Dry Beer Piper Heidsieck 2,150.00 360.00 2,150.00 1,003.00 1,800.00 2,540.00 2,940.00 2,540.00 220,153.57 4,800.60 82,539.00 104,549.40 36,684.00 284,929.08 6,400.80 687,798.00 229,266.00 36,684.00 458,532.00 mi "P-86" "P-88" "P-90" "P-91" "P-92" "P-94" "P-96" "P-101" "P-103" "P-105" "P-106" "P-107'' "P-108" "P-109" "P-110" "P-112" "P-114" "P-115" "P-116" "P-117" "P-119" "P-120" "P-121" "P-125" Philippine Airlines, Inc. vs. Commissioner of Internal Revenue Piper Heidsieck "P-333" "P-468" Brut 866.27 1 248.38 1984.83 Camus Cognac "P-335" "P-470" XO Elegance 1,506.02 1 741.16 Martini Dry/Sweet "P-337" "P-472" Vermouth 47.68 49.72 Asahi Super Dry "P-338" "P-473" Beer 19.84 26.51 99.47 Camus Cognac "P-339" "P-474" VSOP Elegance 448.02 777.22 Royal Salute Scotch Whisky 2 020.73 2 349.94 "P-341" "P-476" Chivas Regal Scotch Whisky 491.86 656.46 Martell VSOP 612.09 941.30 Johnnie Walker "P-343" "P-478" Black Label 386.38 575.97 Chivas Regal Whisky 12 YO 499.73 690.19 "P-348" "P-486" Royal Salute Whisky 21 YO 2 146.83 2 502.38 Martell VSOP Cognac 621.88 977.42 Camus Cognac "P-488" VSOP Elegance 600.94 854.90 Camus Cognac "P-350" "P-489" XO Elegance 1 529.68 1 783.64 Camus Cognac "P-490" VSOP Elegance 455.70 811.25 Camus Cognac "P-491" VSOP Elegance 455.70 811.25 "P-352" "P-493" Asahi Super Dry 21.04 28.24 100.00 Royal Salute "P-353" "P-494" Whisky 2 107.54 2 463.08 "P-354" "P-495" Piper Hiedsieck 881.14 1 293.82 2,015.40 Charles "P-355" "P-496" Heidsieck 1 760.33 2 173.01 2 047.88 Lindemans Premier "P-356" "P-497" Chardonnay 160.62 177.12 Camus Cognac "P-357" "P-498" VSOP Elegance 451.29 806.83 Camus Cognac P-499 VSOP Elegance 600.79 854.75 "P-359" "P-501" JW Black Label 282.39 418.89 Asahi Super Dry "P-361" "P-503" Japanese Beer 21.76 28.96 100.00 Remy Martin "P-362" "P-504" VSOP 747.78 1103.32 Camus Cognac "P-363" "P-505" VSOP Elegance 461.23 816.78 Chivas Regal "P-364" "P-506" Whisky 486.07 867.01 Vin de Table Blanc, Vin de "P-366" "P-508" Table Rogue 91.49 104.59 Royal Salute "P-367" "P-509" Whisky 1924.96 2 254.17 Carlos I Brandy 413.16 742.37 Camus Cognac "P-368" "P-510" VSOP Elegance 647.70 976.91 Charles "P-372" "P-515" Heidsieck 1 773.98 2 186.66 2 047.88 Remy Martin "P-516" VSOP 752.74 1,108.29 2 150.00 2 540.00 687 798.00 4 200.00 28 217.76 430.00 400.00 3 912.96 6 400.80 1 800.00 284 529.08 6 400.00 63 489.96 1100.00 177 768.86 1 620.00 94 647.07 1 003.00 177 533.72 1100.00 411402.24 6 400.00 68 569.20 2 200.00 102 218.90 2 200.00 76 188.00 6 900.00 30 475.20 2 200.00 170 788.10 2 200.00 307 291.60 6 911.52 6 400.00 67 934.30 2 150.00 2 500.00 495 216.00 861 675.84 360.00 24 761.25 2 200.00 136 503.50 2 200.00 76 188.00 1 050.00 245 698.56 7 948.24 2 250.00 2 350.00 64 124.90 2 200.00 307 291.60 1100.00 411402.24 275.00 160 374.60 6 400.00 63 489.96 1 099.00 395 048.64 1 800.00 78 774.58 623,972.16 2/250.00 2,350.00 64,124.90 ~ "P-126" "P-127" "P-128" "P-129" "P-131" "P-133" "P-134" "P-136" "P-137" "P-139" "P-140" "P-141" "P-142" "P-143" "P-145" "P-146" "P-147" "P-149" "P-152" "P-153" "P-156" "P-158" "P-161" "P-162" "P-163" "P-164" "P-166" Philippine Airlines, Inc. vs. Commissioner of Internal Revenue J&B Rare "P-373" "P-517" Scotch Whisky 175.01 365.48 Lindemans "P-374" "P-518" Shiraz Cabernet 160.84 177.36 "P-519" to Camus Cognac "P-375" "P-520" XO Elegance 1 516.62 1 770.58 Royal Salute "P-376" "P-522" Whisky 21 YO 2 088.16 2 443.70 Martell VSOP Cognac 604.88 960.43 Lindemans Premier "P-378" "P-524" Chardonnay 159.84 176.35 Lindemans Shiraz Cabernet 159.84 176.35 Remy Martin "P-380" "P-526" VSOP 747.23 1102.77 Martell VSOP "P-381" "P-527" Cognac 608.10 963.65 Remy Martin "P-383" "P-529" VSOP 745.44 1100.98 Camus Cognac "P-384" "P-530" XO Elegance 864.16 1 118.12 Camus Cognac VSOP Elegance 1 296.24 1 550.20 Chivas Regal "P-386" "P-532" Whisky12 YO 542.08 732.54 Royal Salute Whisky 21 YO 2 312.71 2 668.25 Asahi Super Dry "P-387" "P-533" Beer 22.29 29.49 100.00 "P-388" "P-534" Carlsberg Beer 14.03 20.82 159.75 Asahi Super Dry "P-389" "P-535" Beer 43.78 50.97 100.00 "P-390" "P-536" Carlsberg Beer 15.34 22.13 159.75 "P-392" "P-538" Carlsberg Beer 15.33 22.12 159.75 Asahi Super Dry "P-393" "P-539" Beer 41.85 49.05 100.00 "P-394" "P-540" Carlsberg Beer 15.45 22.24 159.75 "P-396" "P-542" Carlsberg Beer 15.55 22.34 159.75 "P-399" "P-545" West Lights 19.33 47.63 40.88 Johnnie Walker "P-400" "P-547" Black Label 281.09 417.59 Lindemans "P-403" "P-550" Chardonnay_ 161.17 177.68 Lindemans Shiraz Cabernet 161.17 177.68 Johnnie Walker "P-405" "P-552" Black Label 409.88 600.34 Charles "P-408" "P-555" Heidsieck 1,765.86 2 178.54 2 047.88 Asahi Super Dry "P-409" "P-556" Beer 21.76 28.96 100.00 Martini Dry/Sweet "P-410" "P-557" Vermouth 51.69 53.89 Chivas Regal "P-411" "P-558" Whisky 12 YO 443.62 824.56 Royal Salute Whisky 21YO 2,010.12 2 365.67 J&B Rare "P-413" "P-560" Scotch Whi~ 169.60 360.06 Johnnie Walker "P-561" Black Label 273.44 409.93 910.50 123 484.16 360.00 34 665.75 6 900.00 60 950.40 6 400.00 68 569.20 2 200.00 102 218.90 360.00 24 761.25 360.00 39 618.00 2 250.00 2 350.00 64 124.90 2,200.00 102 218.90 2 250.00 2 350.00 106 663.20 6 900.00 54 601.40 2 200.00 38 094.00 1100.00 171 417.60 t1_400.00 29 840.30 6 911.52 81 457.20 6 047.58 81457.20 97 748.64 6 047.58 90 417.49 97 748.64 141 500.00 1 050.00 163 799.04 360.00 24 761.25 360.00 39 618.00 1 003.00 173 639.68 1 386 604.80 6 911.52 430.00 395.00 3 169.44 1100.00 239 984.64 6 400.00 106 663.20 910.50 123 484.16 1,050.00 163,799.04 c#\ "P-167" "P-168" "P-169" Subtotal Philippine Airlines, Inc. vs. Commissioner of Internal Revenue "P-414" "P-562" Winston Lights 19.00 47.30 60.23 Royal Salute "P-415" "P-563" Whisky 21 YO 2 052.73 2 408.28 Chivas Regal Whisky 12 YO 477.82 668.29 Camus Cognac "P-416" "P-564" VSOP Elegance 460.51 816.05 113 200.00 6 400.00 68 569.20 1)00.00 411 402.24 2 200.00 307 291.60 14 742,507.44 CTA CASE NO. 8770 "P-636" "P-637" "P-643" "P-645" "P-648" "P-649" "P-652" "P-653" - - Subtotal TOTAL IIDE Lindemans Premier "P-686" "P-711" Chardonnay 160.20 176.71 360.00 9 904.50 Lindemans Shiraz Cabernet 160.20 176.71 360.00 14 856.75 Asahi Super Dry "P-687" "P-712" Beer 22.24 29.44 100.00 6 911.52 Asahi Super Dry "P-693" "P-718" Beer 22.47 29.67 100.00 6,911.52 Camus VSOP Cognac "P-695" "P-720" Elegance 451.59 807.14 2 200.00 307 291.60 Piper Heidsieck "P-698" "P-723" Brut 953.71 1 366.39 2 015.40 2 150.00 2,500.00 148 564.80 J&B Rare 82 216.96 I "P-699" "P-724" Scotch Whisky 173.10 363.56 910.50 Piper Heidsieck "P-702" "P-727" Brut 946.76 1 359.44 2 015.40 371 412.00 Camus Cognac "P-703" "P-728" XO Elegance 1 712.41 1966.37 6 900.00 15 237.60 Lindemans "P-704" "P-729" Shiraz Cabernet 158.19 174.69 360.00 35 656.20 Lindemans Chardonnay 158.19 174.69 360.00 21 393.72 Johnnie Walker "P-705" "P-730" Black Label 277.60 414.10 1 050.00 163 799.04 1,184,156.21 15,926,663.65 !

Clearly, from the foregoing table, the cost of importing the above- enumerated liquor, wine and cigarette products is lower than purchasing them locally, except for the following: Cost per Bottle/Can/Pack in Retail Price if Peso per Annex E of Purchased the ICPA Re_l)_ort Domestically Without With per RR 22- Excise Excise 2003 and Excise Tax

A TRIG

Invoice Description Tax Tax

RMC 90-2012

Paid CTA CASE NO. 8708 "P-52" "P-299" "P-433" Asahi Super Dry Beer 238.80 245.47 99.47 p 480.06 "P-108" "P-355" "P-496" Charles Heidsieck 1 760.33 2 173.01 2 047.88 861 675.84 "P-125" "P-372" "P-515" Charles Heidsieck 1 773.98 2 186.66 2 047.88 623 972.16 "P-152" "P-399" "P-545" West Lights 19.33 47.63 40.88 141 500.00 "P-161" "P-408" "P-555" Charles Heidsieck 1 765.86 2 178.54 2 047.88 1 386,604.80 TOTAL P3,014,232.86 o1

Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

Thus, the Court finds that PAL has sufficiently proven its exemption from the payment of excise taxes only in the amount of P12,912,430.88, computed as follows: CTA Case CTA Case No.8708 No.8770 Total Excise Taxes Paid per Claim P26,502,912.76 p 3,596,281.06 P30,099,193.82 Less: Disallowances Excise tax on imported liquor, wine and cigarette products wherein no price comparison was presented p 11 760 405.23 p 2,412 124.85 p 14 172 530.08 Excise tax on imported liquor, wine and cigarette products where cost of importation is higher than the available local price 3,014 232.86 - 3 014,232.86 Total Disallowances p 14 774 638.09 p 2,412 124.85 p 17 186 762.94 Refundable Excise Taxes Paid P11,728,274.67 p 1,184,156.21 P12,912,430.88 Evidently, the amount ofP12,912,430.88 constitutes erroneously paid excise tax which is refundable pursuant to Sections 204 and 229(C) of the NIRC of 1997, as amended.

WHEREFORE, premises considered, the present consolidated Petitions for Review are hereby PARTIALLY GRANTED. The COMMISSIONER OF INTERNAL REVENUE is hereby ORDERED to refund in favor of PHILIPPINE AIRLINES, INC. the amount of Twelve Million Nine Hundred Twelve Thousand Four Hundred Thirty Pesos and Eighty-Eight Centavos (P12,912,430.88) representing erroneously paid excise tax on its importation in the years 2006, 2008 to 2012 of assorted liquor, wine and cigarettes constituting its commissary and catering supplies for international flight consumption.

WE CONCUR:

• ER~P.UY Associate Justice Presiding Justice ~ N. M~~CwJL,.

CIELITO N. MINDARO-GRULLA Associate Justice

Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, 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