Ginebra San Miguel, Inc. vs. Commissioner of Internal Revenue

AMENDED DECISION

RINGPIS-LIBAN, J:

Before this Court is petitioner's Motion for Reconsideration flied on September 02, 2020, with respondent's Opposition (Re: Motion for Reconsideration) flied through registered mail on October 08, 2020, and received by the Court on October 16, 2020. On July 28, 2020, this Court rendered a Decision denying petitioner's claim for refund of erroneously assessed excise taxes on removals of its distilled spirits or finished products, the dispositive portion of which reads as follows: "WHEREFORE, in light of the foregoing, the instant Petition for Review is DENIED for insufficiency of evidence.

2. Partially supported

Proof Liters

Excise Tax

c. Supported by supplier's sales invoice for alcohol purchases, supplier's official receipts for payment of 7,861,125.77 Php115,401,326.23 reimbursement of excise tax and bill of lading but with missing IEIRD, SAD and SSDT.

d. Supported by supplier's sales invoice for alcohol purchases, bill of lading but with missing IEIRD, 7,070,303.31 103,792,052.60 SAD and SSDT.

/,/ Exhibit No. "P-6.a", electronic exhibit.

e. Supported by supplier's billing statements for reimbursement of excise taxes and supplier's official receipt for payment of reimbursement of excise tax but with missing excise tax returns for alcohol products (BIR Form No. 2200-A) and payment confirmation.

Sub-total

Comnoundf>d Alcohol 5.Supporting documents not available for verification** 124,327.74 Php 1 ,825,131.17 15,055,756.81 221,018,510.00 744,997.01 10,936,556.14 As to the 744,997.01 proof liters with equivalent excise taxes of Php10,936,556.14, these shall remain disallowed since petitioner did not present supporting documents to prove otherwise. With regard to the partially supported raw alcohol inventory, since these are composed of the different sources of raw materials (i.e., local importer, molasses tolling and importations), the Court finds that the lack of Import Entry Internal Revenue Declarations ("IEIRDs"), Single Administrative Documents ("SADs"), and Statements of Settlement of Duties and Taxes ("SSDTs") are only relevant to importations. As such, based on Annex 11 of the ICPA Supplemental Report, the remaining partially supported proof liters of 15,055,756.81 are broken down as follows:

PARTIALLY SUPPORTED

I. RAW ALCOHOL

PROOF LITER

EXCISE TAX

(PL)

1.

Damortis, La Union A. Molasses tolling

Sub-total

- - 2.

Sta. Barbara A. Molasses tolling B. Local Importer C. Importation 67,357.49 988,808.01

Sub-total

67,357.49 988,808.01 3.

EPSBPI-Cauayan

A. Molasses tolling

Sub-total

- - 4.

SNFI-Polo Brewery

A. Molasses tolling B. Local Importer C. Importation

Sub-total

- - 5.

Cabuyao Plant

A. Molasses tolling B. Local Importer C. Importation 127,080.08 1,865,535.62

Sub-total

127,080.08 1,865,535.62

/V

6. HBO-Makiling A. Molasses tolling | |

7. BBTI-Bauan , A. Molasses tolling | B. Local Importer

Sub-total

8. SBTI-Calaca A.LocalImporter | B. Importation 6,875,865.73 100,937,708.98 Sub-total 6,875,865.73 100,937,708.98

9. Lucena | A. Molasses tolling B. Local Importer C. Importation

10. Cotta A. Molasses tolling B. Local Importer C. Importation

11. EPSBPI-Ligao A. Molasses tolling B. Importation

12. Tabangao A. Molasses tolling

13. Mandanue A. Molasses tolling 124,327.74 1,825,131.17 B. Importation Po Sub-total 124,327.74 1,825,131.17

14. Ouano | A. Molasses tolling

15. DBI A. Local Importer 7,861,125.77 115,401,326.23 B.Importation | Sub-total 7,861,125.77 115,401,326.23 SUB-TOTAL (RAW ALCOHOL) 15,055,756.81 221,018,510.00 II. COMPOUNDED ALCOHOL *

1. Sta. Barbara Plant

2. EPSBPI-Cauayan

3. SNFI-Polo Brewery

4. Cabuyao Plant

5. HBO-Makiling

6. Lucena Plant

7.

EPSBPI-Ligao

8.

Mandaue Plant

SUB-TOTAL (COMPOUNDED ALCOHOL)

GRAND TOTAL

- - 15,055,756.81 221,018,510.00 From the foregoing, with the exception of raw materials in Mandaue and DBI Plants, all the rest of the partially supported raw materials are importations that require IEIRDs, SADs and SSDTs in order to prove receipt of goods and payment of corresponding excise taxes. Meanwhile, Mandaue and DBI Plant's purchases from local importers of 124,327.74 and 7,861,125.77 proof liters of raw alcohol with paid excise taxes of Php1,825,131.17 and Php115,401,326.23, respectively, are found to be properly supported.

However, it needs to be emphasized that petitioner's claim is the excise tax paid upon removal of Finished Goods that were produced using the above raw materials inventory. Therefore, the excise taxes on finished goods related to the disallowed raw materials of 7,070,303.30 proof liters (15,055,756.81 proof liters less 124,327.74 and 7,861,125.77 proof liters) shall therefore be disallowed.

Also, in Part V of petitioner's Motion, petitioner pointed out that the assailed Decision stated that the differences between the "total amount of goods transferred to packing" and "the finished goods that are subject of the present claim" based on tables which it had prepared, "were not explained by petitioner". For this reason, petitioner claims that the differences noted by the Court are due to the fact that in the tables prepared by the Court, the respective beginning inventory balances for raw alcohol and compounded alcohol of the plants in question were not included. These balances are reflected in the Annexes utilized by the Court. If these inventory balances are included in the tables, the alleged differences noted by the Court will be accounted for or reconciled.

The Court finds petitioner's explanation tenable. Notably, in the assailed Decision, the Court compared the utilization of raw alcohol into the production of finished goods, the Court traced the proof liters of "Alcohol Received" per Annex 5 of the ICP A Report representing the raw alcohol that each plant received from one or several depots, to "Alcohol Utilized" found in Annex 6. The following table was made to ascertain that the raw alcohol from the 2012 ending inventory of depots that were subsequently transferred to plants for compounding, tolling and packing in 2013 are the same raw alcohol that went into the finished goods produced during the period of claim (i.e., January 01,2013 to May 31, 2013): v ,.

Alcohol Received from Plant

Alcohol Utilized

Reconciliation

Annex

5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8

TOTAL

Beginning

Inventory of Raw

Actual

Location

Proof Liters

Annex

Location

Proof Liters

Difference

and

Production

Compounded

Alcohol Within

Difference the Plant

Cabuyao Plant

11,864,136 6.1

Cabuyao Plant

13,521,440 (1,657,304) 1,657,304 Mandaue, Cebu 2,364,744 6.2 Mandauc, Ccbu 3,537,680 (1,172,936) 1,172,936 Sta. Barbara, 11,819,766 6.3 Sta. Barbara, 14,301,758 2,481,992

Pangasinan

Pangasinan

(2,481,992) Calamba, Laguna 6,091,250 6.4 Calamba, 6,362,202 (270,952) 270,952

Laguna

Polo Brewery, • 6.5 Polo Brewery, 28,168 (28,168)

Valenzuela

Valenzuela

Cauayan, Isabcla 4,467,960 6.6 Cauayan, 4,637,077 (169,117) 169,117

Isabela

I .igao, Albay 1,842,750 6.7 Ligao, Albay 2,242,458.00 (399,708) 399,708 J .ucena City " 38,450,606

TOTAL

44,630,783 (6,180,177) This plottl did t~ol n:cril't mu• ok:ohollmt alnatf.y twnpoulldtd alroboL "'*No loiiJ'!f' imimltd sim~ 1 -tttt!ltl Plant dol'S 1101 producr FG. In the Motion, petitioner elucidated that the differences noted by the Court are from the beginning inventory balances for raw alcohol and the compounded alcohol of petitioner's plants were not included. Thus, the resulting actual production difference based on the above table shows that the alcohol received from the Plants are also the Alcohol Utilized by petitioner in producing its finished goods for the given period of January 1, 2013 to May 31, 2013.

Moreover, in Part VI of the Motion, petitioner brings up the ruling of the Court that "petitioner has the responsibility to show the utilization of the raw material alcohol into the production of finished goods by way of showing how many units of raw alcohol is required to produce one unit of finished goods." Petitioner states that there is a procedure to determine how many units of raw alcohol is required to produce one unit of finished goods, to wit: Divide proof liters ("PL") by the number of cases to arrive at the PL per case, and to find the alcohol per unit of finished goods, divide the PL per case by the number of units/bottles per case. The resulting quotients after performing the above procedure are in fact consistent with the PL declared in the respective bottle labels and case box cartons of GSMI, which had been approved by and registered with the BIR. However, upon scrutiny, the Court notes that the number of bottles per case was not provided by petitioner. The number of bottles per case can neither be assumed nor ascertained for other products of spirits or liquor. Nonetheless, petitioner points out that during the audit, examination and verification, the ICP A considered this procedure when he matched the proof

/Y'

- - -

EXHIBIT

P-20-9-H

liters of the tax-paid alcohol with the corresponding proof liters of the alcohol produced/transferred for packing. In Part VII of the Motion, petitioner explains that the segregation of finished goods between those produced by raw alcohol purchased before the effectivity of Republic Act ("RA") No. 10351 2 and those produced by alcohol purchased after is shown in Annex 6 of the ICP A Report. Petitioner states that it is essential to follow the tracing of the composition of the outstanding balance of the alcohol inventory of a particular manufacturing plant prior to the receipt of the alcohol volume in question. Petitioner claims that in the assailed Decision, the Court provided the following example, a portion of Annex 6.3, to show why it was unable to ascertain the basis of the segregation of finished goods, to wit:

FINISHED

GOODS

PRODUCED

FINISHED

FINISHED GOODS PRODUCED

FROM2012

GOODS

YEAR-END

INVENTORY

PRODUCED

FROM 2013

AND

ALCOHOL

JANUARYB,

PURCHASES

2013TO

AFTER

FEBRUARY

RA10351**

ETRD

ETRD

PRODUCT

NO.

15, 2013

(PL)

DATE

EXHIBIT

DESCRIP

OF

GL

PL

ALCOHOL

DATE

NO.

TION

CASES

PURCHASES

(PL)

2/5/

P-12-1304

2/5/2013 432905

GSM

22,725 190,893 152,714 105,214 47,500 2013

Round

Petitioner explains that in the above example, it is shown that prior to the receipts of the 41,580 PL of alcohol from the Damortis (La Union) depot, the Sta. Barbara Plant already had an outstanding balance of 130,870 PL of alcohol, with origin and other details as follows: Berbacs Chemical Inc., 1/17/13, 11,550 (PL]; Berbacs Chemical Inc., 1/18/13, 47,500; Damortis La Union, 1/18/[13], 35910; and Damortis, La Union, 1/21/13, 35,910. The outstanding balance can be traced back using the preceding lines on page 3 of Annex 6.3. It will be noted that the ICP A indicated an asterisk ("*") to specific lines to emphasize that this outstanding balance of alcohol represents alcohol purchased in 2013 after RA No. 10351 took effect. Perforce, petitioner's explanations can be seen in the replication of the same portion of Annex 6.3: /v 2 "AN ACT RESTRUCTURING THE EXCISE TAX ON ALCOHOL AND TOBACCO PRODUCTS BY AMENDING SECTIONS 141, 142, 143, 144, 145, 8, 131 AND 288 OF REPUBLIC ACT NO. 8424. OTHERWISE KNOWN AS THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED BY REPUBLIC ACT NO. 9334, AND FOR OTHER PURPOSES", approved on December 19, 2012.

TOTAL

PL

152,714

DATE

1/15/2013 1/15/2013 1/15/2013 1/17/2013 1/18/2013 1/18/2013 1/21/201.1 1/21/2013

FINISHED GOODS PRODUCED

ALCOHOL

UTILIZED

NO.

PRODUCT

ORIGIN

PL

DESCRIPTION

OF

GL

PL

CASES

Damortis, 35,910

La Union

Damortis, 35,910

La Union

Damort:is, 34,020

GSM Frasco

La Union

14,188 119,181 95,345

Bcrbacs

CSM

Chemical, 45,600

Frasguito

7,753 65,122 52,098 Inc.

Berbacs

Chemical, 47,500 • Inc.

Damortis, 35,910 •

La Union

Damortis, 35,910

La Union

Damortis, 41,580

GSM Round

22,725 190,893 152,714

La Union

FINISHED

GOODS

PRODUCED

FINISHED

FROM2012

GOODS

YEAR-END

PRODUCED

INVENTORY

FROM2013

AND

ALCOHOL

BALANCE

JANUARY8,

PURCHASES

(PL)

2013TO

AFTER

FEBRUARY

RA10351**

15,2013

(PL)

ALCOHOL

PURCHASES

(PL)

43,462 79,372 18,047 95,345 11,550 6,498 45,600 59,050 94,960 130,870 19,735 105,214 47,500 Moreover, petitioner also points out that in the assailed Decision, the Court cannot ascertain the segregation made by the ICPA of the 152,714 proof liters of finished goods into 105,214 proof liters of finished goods produced from purchases of alcohol before RA No. 10351, and 47,500 proof liters of finished goods from purchases of alcohol after RA No. 10351. Petitioner posits that the method utilized by the ICP A is based on a prorating method, as may be deduced or gleaned from a portion of the ICP A Report (Table 3, at page 13; footnotes, at page 16, where the same method was used.) Petitioner argues that the method of prorating utilized by the ICP A is an accepted method, is mathematically and logically sound, and is a logical consequence of the FIFO method which the ICPA employed. This Court agrees.

As discussed earlier, "Alcohol Received" plus the beginning balances of both raw and compounded alcohol is equal to the "Alcohol Utilized". Therefore, looking into Annex 6.1 as an example, we find that this represents the movement of raw alcohol upon receipt to conversion into finished goods, to wit:

ALCOHOL

FINISHED GOODS PRODUCED

FINISHED

FINISHED

UTILIZED

GOODS

PRODUCED

GOODS

FROM2012

PRODUCED

YEAR-END

FROM2013

EXHIBIT

ALCOHOL

TOTAL

PL

95,345 5~098 152,714

PRODUCT

BALANCE

INVENTORY

PL

REFERENC

PL

PURCHASES

TOTALPL

DESCRIPTION

(PL)

AND JANUARY 8,

E

AFTER

2013 TO

RA 10351**

FEBRUARY 15,

(PL)

2013 ALCOHOL

/)/ erA CASE NOS. 8953 & 8954

- 45,360 '

P-12-1180

(~SM Round 350ml 46,408 wrap around 48,008

P-12-1180

GSM Blue 350ml x 24 48,340

P-12-11H1

GSM Round 350ml wrap around

P-12-1181

GSM Blue 350ml x 24 48,370 47,250 • 45,360 • 45,360

P-12-1182

GSM Round 350ml wrap around 47,250

PURCHASES

(PL)

105,651 139,065 12,994 93,705 45,360 1,814 59,188 1,814 107,354 85,025 22,329 85,025 11,726 10,603 11,726 58,973 106,223 151,583 188,339 8,604 95,729 92,610 55,854 It can be gleaned above that the running balance column increases and decreases upon utilization of raw alcohol and upon determination of finished goods, respectively. This is where the FIFO method can be observed. Thus, when raw alcohol is utilized in production that is marked by an asterisk ("*") (see PL column under Alcohol Utilized), the corresponding Finished Goods is subsequently segregated under the "Finished Goods Produced From 2013 Alcohol Purchases After RA 10351** (PL)" column in the same volume of proof liters. Also, when raw alcohol with an "*" successively enters production, the corresponding finished goods are summed up and are exclusively found under the aforementioned column (i.e., 47,250 plus 45,360 equals 92,610). On the other hand, if we look at the second example below, whenever raw alcohol with an "*" and raw alcohol without the asterisk (i.e., tax-paid raw alcohol) intermittently enters production, that is when the segregation or prorating into either columns of Finished Goods produced before or Finished Goods produced after RA 10351 takes place. This is an illustration of what petitioner has previously referred to as the "logical consequence of using the FIFO method", to wit:

ALCOHOL

FINISHED

UTILIZED

FINISHED GOODS PRODUCED

GOODS

PRODUCED

FINISHED

FROM2012

GOODS

YEAR-END

PRODUCED

INVENTOR

FROM2013

YAND

ALCOHOL

139,065 1,814 85,025 11,726 - 188,339

EXHIBIT

JANUARYS,

PRODUCT

BALANCE

PURCHASES

TOTAL

PL

REFERENC

PL

DESCRIPTION

(PL)

2013TO

PL

E

FEBRUARY

AFTER

15, 2013

RA 10351**

ALCOHOL

(PL)

PURCHASES

(PL)

47,250 ' 52,996 47,250 '

P-12-1467

GSM Fco 700ml 92,857 7,389 92,857 92,857 47,250 • 54,639 -

/Y'

AMENDED DEGSION

47,250 '

P-12-1468

GSM Fqt 350m!

95,733 6,156 95,733 44,888 51,044 45,360 '

P-12-1469

GSM Fqt 350m!

77,549 18,855 44,888 32,662 45,266

P-12-1470

GSM Fqt 350m!

63,457 663 45,266 18,192 47,250 ' 47,913 45,171

P-12-1471

GSM Fqt 350m!

67,529 25,555 20,279 47,250 46,967

P-12-1472

GSM l'qt 350m!

37,585 34,937 37,585 It can also be noted in the above table that when the tax-paid raw alcohol (i.e., raw alcohol without the asterisk) is mixed with raw alcohol purchased after RA 10351 (t~e., raw alcohol with the asterisk), these also go direcdy under the column "Finished Goods Produced From 2012 Year-End Inventory And January 8, 2013 to February 15, 2013 Alcohol Purchases (PL)". Likewise, it was observed that the mixed raw alcohol purchases were only present in Cabuyao Plant (Annex 6.1), Sta. Barbara Plant (Annex 6.3), and Calamba Laguna Plant (HBO) (Annex 6.4). The rest of the Plants, summarized under Annexes 6.2, 6.5, 6.6 and 6.7, utilized the tax-paid raw alcohol fully, before introducing raw alcohol purchased after RA 10351 into production of Finished Goods.

Lasdy, as to petitioner's additional assertion in its prayer that the Court further considers the ICP A's recommendation to include the additional amount ofPhp842,115,503.15 in its claim for refund, pertaining to: 1.

Excise taxes on finished goods, in the amount of Php302,473,746.06 and with a total proof liters of 10,621,947 apparendy not included in the claim for refund but which should have been part thereof, as the finished goods were produced exclusively from the 2012 year-end inventories and alcohol purchases from period January 8, 2013 to February 15, 2013; and 2.

Excise taxes on ethyl alcohol in the amount of Php114,842,431.59 and with a total proof liters of 4,063,500, apparendy not included in the claim for refund but which should have been part thereof, as the alcohol was already in transit during petitioner's 2012 year-end inventory count and was reflected in the January 2013 Official Registry Book.

Such relief cannot be granted by this Court. /~ 95,733 77,549 63,457 - 67,529 37,585

CfA CASE NOS. 8953 & 8954

It is well-setded that courts cannot grant a relief not prayed for in the pleadings or in excess of what is being sought by a party to a case.3 The rationale for the rule was explained in Development Bank of the Philippines v. Teston,4 to wit:

"Due process considerations justify this requirement. It is improper to enter an order which exceeds the scope of relief sought by the pleadings, absent notice which affords the opposing party an opportunity to be heard with respect to the proposed relief.

The fundamental purpose of the requirement that allegations of a complaint must provide the measure of recovery is to prevent surprise to the defendant." For the same reason, this protection against surprises granted to defendants should also be available to petitioners. Verily, both parties to a suit are entided to due process against unforeseen and arbitrary judgments. The very essence of due process is "the sporting idea of fair play" which forbids the grant of relief on matters where a party to the suit was not given an opportunity to be heard. 5

WHEREFORE, premises considered, petitioner's

Motion

for Reconsideration is PARTIALLY GRANTED. Accordingly, the dispositive portion of the Decision dated July 28, 2020, is hereby AMENDED to read as follows:

3 4 5 "WHEREFORE, in light of the foregoing, the instant Petition for Review is PARTIALLY GRANTED. Accordingly, that petitioner is en tided to a refund of its erroneously and excessively paid excise taxes for its finished goods removals from January 1, 2013 to May 31, 2013 that were produced using tax-paid raw materials, in the modified amount of THREE HUNDRED

NINETEEN MILLION SEVEN HUNDRED FIFTY-

FIVE THOUSAND THREE HUNDRED TWENTY

PESOS

AND

EIGHTY-TWO

CENTAVOS

(Php319,755,320.82), computed as follows:

Proof Liters

Excise tax on finished goods claimed by the

Petitioner

Diona v. Balangue, G.R. No. 173559, January 17, 2013. G.R. No. 174966, February 14, 2008. 25,375,105 Cherith A. Bucal v. Manny P. Bucal, G.R. No. 206957, June 17, 2015.

Excise Tax Amount

Php 715,258,843.38 ,.¥" Less: Excise tax claimed by the Petitioner on finished goods that were produced from ethyl alcohol after RA 10351.

(see Table 2 on page 12) Ethyl alcohol and equivalent excise tax amount not included in the December 31, 2012 inventory under the Petition for review but reflected in the ORB. (see Table 3 on page 13)

Compounded

ethyl alcohol inventories and equivalent excise tax amount wherein the Petitioner has difficulty in identifying the related purchase documents. These were used to produce fmished goods for the periods.

January 1, 2013 to May 31, 2013.

As adjusted per ICPA report (Exhibit P-6, p. 16) Less: Not properly supported raw materials on importation per this Court's verification

Refundable Excise Taxes

5,808,619 164,548,611.59 4,063,500 114,842,431.59 391,639 • 11,068,474.19 15,111,347 Php 424,799,326.01 ' 105,044,005.19 3,716,799.65 11,394,547.35 Php319,755,320.82 • Computed as: 744,997.10 alcohol proof liters divided by total alcohol proof liters of 57,426,118.60 (see table on page 8, Exhibit P-6) then multiplied by the comspondingproof liters produ"d using HFO method based on movements in ORB of 30,188,433 (see Table 1 page 12, Exhibit P-6). b Computed as: 0110,936,556.14 divided by the total exdse tax paid ofP843,015,420.98 (see table on page 8, Exhibit P-6) then multiplied by the comsponding exdse tax of the finished goods produ"d using FIFO method based on movements in ORB ofP853,183,977.34 (see Table 1 page 12, Exhibit P-6). c Computed as: 7,070,303.30 al,~hol proof liters divided by total al,~hol proof liters of 57,426,118.60 (see table on page 8, Exhibit P-6) then multiplied by the mmspondingproof liters produced using HFO method based on movements in ORB of 30,188,433 (see Table 1 page 12, Exhibit P-6). d Computed as: Php/03,792,052.60 divided by the total exdse tax paid ofi1843,015,420.98 (see table on page 8, Exhibit P-6) then multiplied by the mmsponding ex1ise tax of the finished goods produced using FIFO method based on movements in ORB ofP853,183,977.34 (see Table 1 page 12, Exhibit P-6).

WE CONCUR:

~- /~ /<...___ MA. BELEN M. RINGPIS-LIBAN

Associate Justice

ERL~P.UY

Associate Justice

i b d

MARIA RoWENA MO:iJES lJ-~AN PEDRO

ATTESTATION

I attest that the conclusions in the above amended decision were reached in consultation before the cases were assigned to the writer of the opinion of the Court.

ERL~P.UY

Associate Justice

Chairperson

CERTIFICATION

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

Presiding Justice