Petron Corporation vs. Commissioner of Internal Revenue

DECI S IO N

M ODESTO-SAN PEDRO, J.:

The Case

The instant consolidated cases involve a claim for refund or issuance of Tax Credit Certificate ("TCC") of petitioner's alleged erroneously paid excise tax arising from the sale and delivery of its imported Jet A-1 fuel to various international carriers and tax-exempt entities for the taxable period from 23 December 2015 to 31 December 2016 in the amount of Three Hundred Sixty Five Million One Hundred Sixty Eight Thousand Eight Hundred Ninety Seven and 54/100 Pesos (Php365, 168,897.54), 1 and from the sale and delivery of its locally manufactured Jet A-1 fuel and unleaded gasoline fuel to various international carriers and tax-exempt entities for the taxable period from 1 January 2016 to 31 December 2016 in the amount ofThirty Two Million One Hundred Twenty Seven Thousand Six Hundred Thirty Three and 61100 Pesos (Php32,127,633.06),2 or in the aggregate amount of Three Hundred Ninety Seven Million Two Hundred Ninety Six Thousand Five Hundred Thirty and 601100 (Php397 ,296,530.60)."' See Statement of the Case, Pre-Trial Order, Court of Tax Appeals ("CTA") Case No. 9738, Records, Vol. 3, p. 1476.

See Statement of the Case, Pre-Trial Order, CT A Case No. 9741 , Records, Vol. 2, p. I 040.

The Parties

Petitioner is a corporation duly registered with the Securities and Exchange Commission with Company Registration No. 31171. It is also duly registered with the Bureau of Internal Revenue ("BIR") with BIR Certificate of Registration No. OCN 8RC0000559947 and Taxpayer's Identification Number 000-168-801-000.3 Respondent, Commissioner of Internal Revenue ("CIR"), is sued in his official capacity with the power to perform the duties of his office, including, among others, the duty to act on and approve claims for refund or issuance of TCC, as provided by law, particularly the National Internal Revenue Code of 1997, as amended ("NIRC''). 4

The Facts

Petitioner's main business is to manufacture, import, and sell petroleum products which include Jet A-1 Fuel and unleaded gasoline fuel. 5 In light of this, petitioner operates the Petron Bataan Refinery ("PBR") where crude oil is processed into a full range of petroleum products, which include Jet A-1 fuel and unleaded gasoline fuel. In certain instances, petitioner imports Jet A- 1 fuel when its local production is insufficient to supply the projected demand for the said fuel type.6 Petitioner pays excise taxes on the imported Jet A-1 fuel upon their importation and before removal or release from the custody of the Bureau of Customs ("BOC") at Port Limay, Bataan, at the rate ofP3.67 per liter pursuant to Section 148(g) of the NIRC.7 After importation, the imported Jet A-1 fuel is then transferred to the PBR for storage, after which it is withdrawn and delivered to petitioner's various depots for eventual sale and delivery to various customers, including international carriers and tax-exempt entities.8 Petitioner also pays excise taxes on the locally produced Jet A-1 fuel and unleaded gasoline fuels before their removal from PBR, at the rate of P3.67 per liter for Jet A-1 fuel and P4.35 per liter for unleaded gasoline fuel,/ 4 6 8 See Statement of facts and Issue, Pre-Trial Order. CTA Case No. 9741, Records, Vol. 2, p. 1041. See Statement of Facts and Issue, Pre-Trial Order, CTA Case No. 9741, Records, Vol. 2, p. 1041; See also Statement of facts and Issue, Pre-Trial Order, CTA Case No. 9738, Records, Vol. 3, p. 1477. See Amended Articles of Incorporation, Exhibits "P-2-Imported" and "P-2"; Commingling Permit No. (P)-028-0 1-15-12537, dated 12 January 2015, with validity until 31 December 2015, and Commingling Permit No. (P)-028-01-16-15847, dated 22 January 2016, with validity until 31 December 2016, Exhibits "P-5-Imported", "P-5", "P-202-Imported" to "P-202-2-Imported" and "P-383" to "P-383-2"; Bureau of Customs Certificate of Accreditation, valid until II July 2017, Exhibit "P-6-Imported". See petitioner's Memorandum, Records, CTA Case No. 9738 consolidated with CTA Case No. 9741, Vol. 8, p. 2963.

Ibid.

Ibid.

pursuant to Sections 148(g) and 148(j) of the NJRC. 9 The locally produced Jet A-1 fuel is transferred from the PBR to petitioner's various depots for eventual sale and delivery to various customers, including international carriers and tax-exempt entities. Similarly, the locally produced unleaded gasoline fuel are transferred from the PBR to petitioner's various depots for eventual sale and delivery to various tax-exempt entities. 10 From 23 December 2015 to 31 December 2016, petitioner imported Jet A-1 fuel as a finished product. Pursuant to Section 13l(A) in relation to Section 148(g) of the NIRC, petitioner paid to the BOC the corresponding taxes and fees, including excise taxes. 11 Also, from 1 January 2016 to 3 1 December 2016, petitioner locally produced Jet A-1 fuel and unleaded gasoline fuel as finished products. Hence, pursuant to Section 130(A)(2) in relation to Section 148(g) and Section 148(j) of the NIRC, petitioner paid to the BIR the corresponding excise taxes. 12 A total ofNinety Nine Million Five Hundred One Thousand Sixty Two (99,501,062) liters of the above-mentioned imported Jet A-1 fuel, for which petitioner paid excise taxes in the amount of Three Hundred Sixty Five Million One Hundred Sixty Eight Thousand Eight Hundred Ninety Seven and 54/100 Pesos (Php365,168,897.54), were sold to various: (1) international carriers of both Philippine and foreign registry for their use and consumption outside the Philippines; (2) international carriers of foreign registry whose countries of registry exempt Philippine carriers from similar taxes; and (3) tax-exempt entities or agencies covered by tax treaties, conventions, and other international agreements for their use or consumption. 13 Further, a total of Seven Million Seven Hundred Twenty Eight Thousand Seven Hundred Sixty Eight (7,728,768) liters of the above- mentioned locally produced Jet A-1 fuel for which petitioner paid excise taxes in the amount of Twenty Eight Million Three Hundred Sixty Four Thousand Five Hundred Seventy Eight and 56/100 Pesos (Php28, 364, 578.56) were sold to various: (1) international carriers of both Philippine and foreign registry for their use and consumption outside the Philippines; (2) international carriers of foreign registry whose countries of registry exempt Philippine carriers from similar taxes; and (3) tax exempt entities or agencieycovered by tax treaties, conventions and other international agreements. 1}--' 9 Ibid.

10 Ibid.

II

Ibid.

" !d., pp. 2963-2964.

IJ

!d., p. 2964.

Finally, a total of Eight Hundred Sixty Five Thousand Seventy (865,070) liters of locally produced unleaded gasoline fuel, for which petitioner paid excise taxes in the amount of Three Million Seven Hundred Sixty Three Thousand Fifty Four and 50/100 Pesos (Php3,763,054.50) were sold to various tax exempt entities or agencies covered by tax treaties, conventions and other international agreements for their use or consumption. 15 Petitioner then filed its application for refund or issuance ofTCC in the total amount of Three Hundred Sixty Five Million One Hundred Sixty Eight Thousand Eight Hundred Ninety Seven and 54/100 Pesos (1"365,168,897.54) representing erroneously paid excise tax on imported Jet A-1 fuel on 20 November 2017 with the Large Taxpayer Excise Audit Division 11. 16 On the other hand, petitioner filed its application for refund or issuance of TCC in the total amount of Thirty-Two Million One Hundred Twenty- Seven thousand Six Hundred Thirty-Three and 6/100 Pesos (1"32,127,633.06) representing erroneously paid excise tax on locally manufactured Jet A-1 fuel and unleaded gasoline fuel on 24 November 2017 with the Large Taxpayer Excise Audit Division II. 17 Due to respondent's inaction on said administrative claims, petitioner filed Petitions for Review before the Court of Tax Appeals ("CTA"), as follows: 18 a.

The judicial claim for refund pertaining to the excise tax on imported Jet A-1 fuel was filed on 20 December 2017. The case was docketed as CTA Case No. 9738 and was raffled to this Court's Third Division. 19 b.

The judicial claim pertaining to the excise tax on locally manufactured Jet A-1 fuel and unleaded gasoline fuel was filed on 20 December 2017. The case was docketed as CTA Case No. 9741 and was raffled to the Court's First Division.20 Proceedings under CTA Case No. 9738 On).3 February 2018, respondent filed his Answer in CTA Case No. 9738.2!Y' 15 16 17 18 19 20 21 Ibid.

!d., p. 2965.

!d., p. 2966.

Ibid.

Ibid.

!d., p. 2967.

Records, CTA Case No. 9738, Vol. I, pp. 128-137.

Pre-Trial then ensued on 16 October 2018. 22 A Pre-Trial Order was subsequently issued by the Court on 17 January 2019.23 During trial proper, petitioner presented the testimonies of the following witnesses:

a. Ma. Clarissa C. Arguelles- Tax Manager/4

b. Michael F. Manzano- Commercial Services Manager;25

c. Leon G. Pausing II- Industrial Trade Head, and previously, Selling Systems, Training and Development National Manager and National Account Sales Manager;26

d. Allan V. Peczon - Area Sales Manager - Mindanao, Industrial Trade, and previously, Area Sales Manager - Key Accounts, Industrial Trade;27

e. Allan James T. Tenorio- Terminal Manager, Joint Oil Companies

Aviation Fuel Storage Plant ("JOCASP") I Ninoy Aquino

International Airport ("NAIA");28

f. Richard L. Wong- Terminal Manager, Iloilo Depot;29 and

g. Marissa U. Viray- Operations Finance Manager.30 Petitioner also engaged the services of a Court-commissioned Independent Certified Public Accountant ("ICP A"), Ms. Madonna Mia S. Dayego,31 who submitted an ICPA Report summarizing her findings on the voluminous documents presented by petitioner for CT A Case No. 9738.32 On 27 November 2019, petitioner filed a Motion to Consolidate CTA Case No. 9738 with CTA Case No. 9741.33 In a Resolution, dated 5 February 2020, the latter case, then pending before the Court's First Division, w~~ / consolidated with CTA Case No. 9738, which bears a lower docket number.3j...;' 22 23 24 25 26 27 28 29 30 31 12 33 14 /d., Vol. 2, pp. 563-568.

/d., Vol. 3, pp. 1475-1484.

Exhibit "P-170", /d., Vols. 2-3, pp.748-1366; Hearing, dated 15 October 2019, /d., Vol. 4, pp. 1485- 1488; Supplemental Judicial Affidavit, Exhibit "P-180", !d. Vol. 4, pp. 1881-1920; Hearing, dated 15 September 2020, /d., Vol. 4, pp. 1922-1926. Exhibit "P-171 ",/d., Vol. 2, pp. 515-562; Hearing, dated 15 October 2019, /d., Vol. 4, pp. 1485-1488. Exhibit "P-172", /d., Vol. I, pp. 223-494; Hearing, dated 15 October 2019, /d., Vol. 4, pp. 1789-1791. Exhibit "P-173", /d., Vol. 2, pp. 666-717; Hearing, dated II April 2019, /d., Vol. 4, pp. 1593-1595. Exhibit "P-174", !d., pp. 718-747; Hearing, dated 14 May 2019, /d., Vol. 4, pp. 1686-1693. Exhibit "P-176", /d., Vol. 3, pp. 1367-1399; Hearing, dated 14 May 2019, !d. Vol. 4, pp. 1686-1693. Exhibit "P-175", /d., Vol. 2, pp. 570-665; Supplemental Judicial Affidavit, Exhibit "P-179", ld, Vol. 4, pp. 1573-1585; Hearing, dated II April2019, /d., Vol. 4, pp. 1593-1595. ld, Vol. 3, pp. 1486-1488.

Exhibit "P-200", ld, Vol. 4, pp. 1506-1571; Exhibit "P-178", /d., Vol. 4, pp. 1608-1679; Supplemental Judicial Affidavit, Exhibit "P-179", /d., Vol. 4, pp. 1746-1762; Hearing, dated 15 October 2019, !d., Vol. 4, pp. 1789-1791.

!d., Vol. 4, pp. 1814-1823.

Records, CTA Case Nos. 9738 & 9741, Vol. 4, pp. 1833-1835.

Proceedings under CTA Case No. 9741 On 21 February 2018, respondent filed his Answer in CTA Case No. 9741.35 On 28 March 2019, Pre-Trial ensued for the instant case/6 and a Pre- Trial Order was then issued by this Court's First Division on 17 May 2019.37 During trial proper, petitioner presented the testimonies of the following witnesses:

a. Ma. Clarissa C. Arguelles- Tax Manager;38

b. Leon G. Pausing II- Industrial Trade Head, and previously, Selling Systems, Training and Development National Manager and National Account Sales Manager;39

c. Allan V. Peczon - Area Sales Manager - Mindanao, Industrial Trade, and previously, Area Sales Manager - Key Accounts, Industrial Trade; 40

d. Allan James T. Tenorio- Terminal Manager, JOCASP I NAIA; 41

e. Richard L. Wong- Terminal Manager, Iloilo Depot;42 and

f. Marissa U. Viray- Operations Finance Manager.43 Petitioner once again engaged the services of Court-commissioned ICPA Dayego,44 who submitted an ICPA Report summarizing her findings on the voluminous documents presented by petitioner.45 On 27 November 2019, petitioner filed a Motion to Consolidate CTA Case No. 9741 CTA Case Np. 9738,46 which was granted in a Resolution, dated 3 December 2019.4:.,./ 35 36 37 38 39 40 41 42 43 44 45 46 47 Records,CTACaseNo.9741, Vol.l,pp.I03-III.-137. !d .. Vol. 2, pp. 1004-1009.

!d., pp. I 039-1053.

Exhibit "P-201", !d.. Vol. I, pp.270-887; Hearing, dated 30 July 2019, /d., Vol. 2, pp. 1122-1129. Exhibit "P-203", /d., Vol. I, pp.l42-167; Hearing, dated 20 August 2019, /d., Vol.2, pp. 1132-1136. Exhibit "P-202", /d., Vol. I, pp.239-269; Hearing, dated 20 August 2019, /d., Vol. 2, pp. 1132-1136. Exhibit "P-204", /d., Vol. I, pp.l68-205; Hearing, dated 8 October 2019, /d., Vol. 2, pp. 1180-1183. Exhibit "P-206", /d., Vol. I, pp.206-238; Hearing, dated 5 November 2019, !d.. Vol. 2, pp. 1185-1186. Exhibit "P-205", /d., Vol. 2, pp. 889-986; Hearing, dated 8 October 2019, /d., Vol. 2, pp. 1180-1183. !d., Vol. 2, pp. 1125-1129.

!d.. Vol.2, pp. 1157-1172; Exhibit "P-207", !d.. Vol. 2, pp. 1197-1300. !d.. Vol. 2, pp. 1301-1309.

!d. Vol. 2, pp. 1310-1311.

Proceedings after consolidation On 15 October 2020, petitioner submitted a consolidated ICPA Report to assist the Court in properly resolving the two (2) refund cases which had been consolidated.48 Likewise, petitioner submitted a Judicial Affidavit of its witness, I CPA Dayego, summarizing her findings on the consolidated ICPA Report.49 On 3 November 2020, the ICPA was placed on the witness stand for cross-examination in relation to her testimony on the consolidated ICPA Report.50 On 24 February 2021, petitioner filed its Formal Offer ofEvidence,5 I to which respondent did not interpose any objection. 52 Thus, in a Resolution, dated 14 October 2021, this Court admitted all of petitioner's Exhibits.53 Respondent then manifested that he would no longer present any evidence for the instant consolidated case. 54 On 23 June 2022, petitioner filed its Memorandum55 while respondent filed none. 56 With no memorandum filed by respondent, the case was submitted for Decision on 2 August 2022.57 48 49 50

5I

53 54 55 56 57 Hence, this Decision.

The Issues

The issues submitted for this Court's resolution are: Whether petitioner is entitled to the refund or issuance of TCC in the amount of Three Hundred Sixty Five Million One Hundred Sixty Eight Thousand Eight Hundred Ninety Seven and 54/100 Pesos (P365,168,897.54) representing excise tax paid for/ its importation of Jet A-1 fuel which were subsequently sold and Exhibit "P-I 89-imported'', Records, CTA Case Nos. 9738 & 974 I, Vols. 4-5. pp. I 929-2085. Exhibit "P-I 90-imported", id., Vol. 5 pp. 2 I 73-2346. Hearing, dated 3 November 2020, id., Vol. 5, pp. 2367-2369. !d., Vols. 6-8, pp. 2445-3814 ld, Vol. 8, pp. 3816-3820.

!d., pp. 2950-295 I.

/d., pp. 2954-2957.

ld, pp. 2960-3035.

See Records Verification Report, dated 21 July 2022, id., p. 3037. /d., p. 3039.

delivered to vanous international earners and to tax-exempt entities;58 and Whether or not petitioner is entitled to the refund or issuance of TCC in the amount of Thirty-Two Million One Hundred Twenty-Seven thousand Six Hundred Thirty-Three and 6/100 Pesos (P32,127,633.06) representing excise tax paid for its local production of Jet A-1 fuel and unleaded gasoline fuel during the period 1 January 2016 to 31 December 2016 which were sold and delivered to various international carriers and to tax-exempt entities. 59

Arguments of the Parties

Petitioner's Arguments60

Petitioner raises the following major arguments to prove that it is entitled to a refund of erroneously paid excise tax on its imported Jet A-1 fuel, and locally manufactured Jet A-1 fuel and unleaded gasoline fuel: First, both the administrative and judicial claims for refund or issuance ofTCC were timely filed;

Second, the imported and locally produced tax-paid Jet A-1 fuel and unleaded gasoline fuel sold and delivered to various international carriers and to tax-exempt entities are exempt from excise tax under Section 135(a) and 135(b) of the NIRC, and any excise tax paid on their removal was erroneously paid; and Third, petitioner has satisfied the requirements, under Sections 204(c) and 229 of the NIRC, to be entitled to a refund of erroneously or illegally collected taxes.

Respondent's Arguments61

In refutation, respondent alleged that petitioner is not entitled to the refund sought because Section 135 of the NIRC only provides a tax exemption in favor of the buyer of petroleum products named in said / provision. What the said provision prohibits is the passing by the importer ov/ 58 59 60 61 See Issues, Pre-Trial Order, Records. CTA Case No. 9738, Vol. 3, p. !477. See Issues, Pre-Trial Order, Records, CTA Case No. 974!, Vol. 2, p. I 041. Memorandum, Records, CTA Case Nos. 9738 & 974!, Vol. 8., pp. 2984-3033. Answer, Records, CTA Case No. 9738, Vol. I, pp. 129-134; Answer, Records, CTA Case No. 9741, Vol. l,pp. 104-109.

manufacturer of petroleum products of the burden of excise tax to the buyers of petroleum products specifically made exempt under said provision. Simply put, excise tax is still due from the importer or manufacturer of petroleum products but it cannot be passed on to the buyers and users specifically made exempt by Section 135 of the NIRC. Claims for refund of excise tax is authorized only under Section 130 (D) of the NIRC, which pertain to exports of locally manufactured products, and not under Section 135 of the NIRC.

The Ruling of the Court

This Court PARTIALLY GRANTS the consolidated Petitions for Review.

Requisites for claiming refund of erroneously paid taxes.

The provisions that govern the present claim for refund of erroneously paid excise tax are Sections 204 and 229 of the NIRC, which read: "SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes.- The Commissioner may - (A)xxx

XXX

XXX

(8) XXX

XXX

XXX

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

"SEC. 229. Recovery of Tax Erroneously or Illegally Collected.- no suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, of any sum alleged to have been excessively or in any manner wrongfully collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; /

DECISIOJ\

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 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."

(Emphasis and underscoring, Ours.)

Based on the foregoing provisions, a taxpayer-applicant must comply with the following requisites to successfully obtain a tax refund/credit for erroneously paid taxes from this Court:

I. There must be an erroneous or illegal collection of tax or penalty collected without authority, or sum excessively or wrongfully collected;

2. A prior administrative claim for refund had been filed before the CIR within two (2) years after the payment of tax or penalty; and

3. A suit or proceeding had been instituted before this Court within two

(2) years from the date of payment of tax or penalty. It must be emphasized that cases filed before this Court are litigated de novo;62 parties are expected to litigate and prove every minute aspect of their case anew by presenting, formally offering, and submitting to the Court all evidence required for the successful prosecution of its claim.63 Consequently, petitioner must competently establish its claim for refund or tax credit following the foregoing requisites.

Petitioner timely filed both its administrative and judicial claims for refund.

As the first requisite for claiming refund of erroneously paid taxes requires a lengthy discussion, this Court shall first determine whether petitioner complied with the second and third requisites/ 62 63 Commissioner of Internal Revenue v. Univation Motor Philippines. Inc .• G.R. No. 231581, 10 April 2019.

!d.; Philippine Airlines, Inc. v. Commissioner of Internal Revenue, G.R. No. 206079-80 and 206309, 17 January 20 18.

Page II of48

Excise tax on importation of goods are paid by the owner or importer before the release of such goods from the custody of the BOC. Section 131 (A) of the NIRC provides:

"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 Custom 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.

XXX

XXX

XXX''

(Emphasis, Ours.)

On the other hand, the excise tax on locally manufactured products are paid by the manufacturer or producer before the removal of such products from the place of production. Section 130 (A) (2) of the NIRC provides, to wit:

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

XXX

XXX

XXX

(2) Time for Filing of Return and Payment of the Tax. - Unless otherwise specifically allowed, the return shall be filed and the excise tax paid by the manufacturer or producer before removal of domestic products from place of production: Provided, That the excise tax on locally manufactured petroleum products and indigenous petroleum levied under Sections 148 and 15l(A)(4), respectively, ofthis Title shall be paid within ten (I 0) days from the date of removal of such products for the period from January l, 1998 to June 30, 1998; within five (5) days from the date of removal of such products for the period from July I, 1998 to December 31, 1998; and, before removal from the place of production of such products from January 1, 1999 and thereafter: Provided, further, That the excise tax on nonmetallic mineral or mineral products, or quarry resources shall be due and payable upon removal of such products from the locality where mined or extracted, but with respect to the excise tax on locally produced or extracted metallic mineral or mineral products, the person liable shall file a return and pay the tax within fifteen (15) days after the end of the calendar quarter when such products were removed subject to such conditions as may be prescribed by rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner. For this purpose, the taxpayer shall file a bond in an amount which approximates the amount of excise tax due on the removals for the said quarter. The foregoing rules notwithstanding, for imported mineral or mineral products, whether metallic or nonmetallic, the excise tax ;lue thereon shall be paid before their removal from customs custody."~ (Emphasis, Ours.)

In the case at bar, for petitioner's importation of Jet A-1 fuel, its payment of duties and taxes for its imported petroleum products are done through the BOC's e2m system and are supported by importation documents consisting of Statement of Settlement Duties and Taxes, Single Administrative Documents,64 Bill of Lading ("BL"), Commercial Invoices, Customs Payment Receipts ("CPR"), BOC Certifications for Entry I Certificate of Payment ("BOC Certifications"), Authority to Release Imported Goods ("A TRIG"), and Reports of Survey, among others.65 The payment is done before the petroleum products are allowed leave the BOC's custody. For the locally manufactured Jet A-1 fuel and unleaded gasoline fuel, petitioner uses two (2) modes for paying the excise tax due on each removal of said goods from the PBR. The first is through an application for payment made through the BIR's Electronic Filing and Payment System ("eFPS") as shown by the Excise Tax Returns or BIR Forms 2200-P ("ETR") with attached Summary of Removals.66 The second is through the Product Replenishment Scheme as evidenced by Product Replenishment Certificates ("PRC"), Claims for Product Replenishment and Lists oflnvoices.67 In either case, the payment of the excise tax due on the locally manufactured Jet A-1 fuel is done before petroleum products are removed from the PBR. The subject period of the claim for the refund of excise tax pertaining to the importation of Jet A-1 fuel is from 23 December 2015 to 31 December 2016. During this period, the earliest importation made by petitioner of Jet A- I fuel was on 24 December 2015. The excise tax due for this importation was paid on 23 December 2015.68 From said date, petitioner had until 23 December 2017 within which to file its administrative and judicial claim for refund.

Considering that petitioner filed its administrative claims for refund on 24 November 2017,69 the administrative claim was timely filed. The same can similarly be said of the judicial claim, since the Petition for Review, docketed as CTA Case No. 9738, appealing the CIR's inaction on the administrative claim was filed on 20 December 2017.7V 64 65 66 67 68 69 70 Exhibits ··P-8-imported", "P-9-imported", "P-11-imported", "P-12-imported", "P-13-imported", "P-14- imported", "P-IS-imported", "P-16-imported", "P-17-imported" and "P-18-imported." Exhibits "P-7-imported" to "P-18-7-1-imported" and "P-203-imported" to "P-204-70-imported". Exhibits "P-6" to "P-7-1".

Exhibits "P-10" to "P-75-2".

Judicial Affidavit of Ma. Clarissa C. Arguelles, Exhibit "P-170-imported"; Consolidated I CPA Report, Exhibit "P-189-imported".

Exhibits "P-19-imported", "P-20-imported", "P-21-imported", "P-22-imported" and "P-201 "; Judicial Affidavit of Ma. Clarissa C. Arguelles, Exhibit "P-170-imported" CTA Case No. 9738, Records, Vol. I, p. 10.

On the other hand, the subject period of the claim for the refund of excise tax pertaining to the local production of Jet A-I fuel and unleaded gasoline fuel is from 1 January 2016 to 31 December 20 I 6. During this period, the earliest removal of locally manufactured Jet A-1 fuel and unleaded gasoline fuel from the PBR to petitioner's depots was on I January 2016. The earliest payment of excise tax subject of said claim for refund was also made on this date. 71 Consequently, for this claim for refund, petitioner had until I January 2018 within which to file both the administrative and judicial claim for refund.

As petitioner filed its administrative claim for refund on 24 November 2017,72 the same was timely filed. Likewise, when petitioner filed a Petition for Review, docketed as CTA Case No. 9741, on 22 December 201773 to appeal the CIR's inaction of such administrative claim, it timely filed its judicial claim for refund.

Both administrative claims were filed ahead of their corresponding judicial claims. Given the foregoing, petitioner complied with the second and third requisites for claiming refund of erroneously paid taxes as provided above.

Now, this Court shall tackle the issue of whether there was an erroneous payment of excise tax in the case at bar. This Court rules in the affirmative. Excise tax on imported and locally manufactured petroleum products is erroneously paid if the said products are sold to international carriers and tax-exempt entities.

71 73 Section 135 ofthe NIRCprovides, as follows: "SEC. 135. Petroleum Products Sold to International Carriers and Exempt Entities or Agencies. - Petroleum products sold to the following are exempt from excise tax:

(a) International carriers of Philippine or foreign registry on their use or consumption outside the Philippines: Provided, That the petroleum products sold to these international carriers shall be stored in a bonded storage tank and may be disposed of only in accordance with the rules and regulations to be prescribed by t~ Secretary of Finance, upon recommendation of the Commissioner; / Judicial Affidavit of Ma. Clarissa C. Arguelles, Exhibit "P-170-imported"; Consolidated !CPA Report, Exhibit "P-I 89-imported".

Exhibits "P-8" and "P-9"; Judicial Affidavit of Ma. Clarissa C. Arguelles, Exhibit "P-I 70-imported". CTA Case No. 9741, Records, Vol. I, p. 10.

(b) Exempt entities or agencies covered by tax treaties, conventions and other international agreements for their use of consumption: Provided, however, That the country of said foreign international carrier or exempt entities or agencies exempts from similar taxes petroleum products sold to Philippine carriers, entities or agencies; and

(c) Entities which are by law exempt from direct and indirect taxes." The exemption from excise tax provided by this provision arises if a petroleum product is sold to: a) an international carrier; orb) an exempt entity pursuant to law, treaty, convention, or other international agreement, provided that the country of a foreign international carrier or exempt entity or agency similarly exempts Philippine international carriers, entities, or agencies from similar taxes for petroleum products sold to the latter. Further, this provision has been interpreted by the Supreme Court to extend in favor of manufacturers and importers of petroleum products if the same has been sold to international carriers and tax-exempt entities, as in Commissioner of Internal Revenue v.

Pilipinas Shell Petroleum

Corporation:74

74 "Indeed, the avowed purpose of a tax exemption is always 'some public benefit or interest, which the law-making body considers sufficient to offset the monetary loss entailed in the grant of the exemption.' The exemption from excise tax of aviation fuel purchased by international carriers for consumption outside the Philippines fulfills a treaty obligation pursuant to which our Government supports the promotion and expansion of international travel through avoidance of multiple taxation and ensuring the viability and safety of international air travel. In recent years, developing economies such as ours focused more serious attention to significant gains for business and tourism sectors as well. Even without such recent incidental benefit, States had long accepted the need for international cooperation in maintaining a capital intensive, labor intensive and fuel intensive airline industry, and recognized the major role of international air transport in the development of international trade and travel. Under the basic international law principle of pacta sunt servanda, we have the duty to fulfill our treaty obligations in good faith. This entails harmonization of national legislation with treaty provisions. In this case, Sec. 13S(a) of the NIRC embodies our compliance with our undertakings under the Chicago Convention and various bilateral air service agreements not to impose excise tax on aviation fuel purchased by international carriers from domestic manufacturers or suppliers. In our Decision in this case, we interpreted Section 135 (a) as prohibiting domestic manufacturer or producer to pass on to international carriers the excise tax it had paid on petroleum products upon their removal from the place of production, pursuant to Article 148 and pertinent BIR regulations. Ruling on respondent's claim for tax refund of such paid excise taxes on / petroleum products sold to tax-exempt international carriers, we found nor G.R. No. 188497, 19 February 2014.

Pagel5of48

basis in the Tax Code and jurisprudence to grant the refund of an 'erroneously or illegally paid' tax.

Justice Bersamin argues that '(T)he shifting of the tax burden by manufacturers-sellers is a business prerogative resulting from the collective impact of market forces,' and that it is 'erroneous to construe Section 135(a) only as a prohibition against the shifting by the manufacturers-sellers of petroleum products of the tax burden to international carriers, for such construction will deprive the manufacturers-sellers of their business prerogative to determine the prices at which they can sell their products.' We maintain that Section 135 (a), in fulfillment of international agreement and practice to exempt aviation fuel from excise tax and other impositions, prohibits the passing of the excise tax to international carriers who buys petroleum products from local manufacturers/sellers such as respondent. However, we agree that there is a need to reexamine the effect of denying the domestic manufacturers/sellers' claim for refund of the excise taxes they already paid on petroleum products sold to international carriers, and its serious implications on our Government's commitment to the goals and objectives of the Chicago Convention.

The Chicago Convention, which established the legal framework for international civil aviation, did not deal comprehensively with tax matters. Article 24 (a) of the Convention simply provides that fuel and lubricating oils on board an aircraft of a Contracting State, on arrival in the territory of another Contracting State and retained on board on leaving the territory of that State, shall be exempt from customs duty, inspection fees or similar national or local duties and charges. Subsequently, the exemption of airlines from national taxes and customs duties on spare parts and fuel has become a standard element of bilateral air service agreements (ASAs) between individual countries.

The importance of exemption from aviation fuel tax was underscored in the following observation made by a British author in a paper assessing the debate on using tax to control aviation emissions and the obstacles to introducing excise duty on aviation fuel, thus: Without any international agreement on taxing fuel, it is highly likely that moves to impose duty on international flights, either at a domestic or European level, would encourage 'tankering': carriers filling their aircraft as full as possible whenever they landed outside the EU to avoid paying tax. Clearly this would be entirely counterproductive. Aircraft would be travelling further than necessary to fill up in low-tax jurisdictions; in addition they would be burning up more fuel when carrying the extra weight of a full fuel tank.

With the prospect of declining sales of aviation jet fuel sales to international carriers on account of major domestic oil companies' unwillingness to shoulder the burden of excise tax, or of petroleum products being sold to said carriers by local manufacturers or sellers at still high prices , the practice of 'tankering' would not be discouraged. This scenario does not augur well for the Philippines' growing economy and the booming tourism industry. Worse, our Government would be risking retaliatory action under several bilateral agreements with various countries.

Evidently, / construction of the tax exemption provision in question should give.,/""" primary consideration to its broad implications on our commitment under international agreements.

In view of the foregoing reasons, we find merit in respondent's motion for reconsideration. We therefore hold that respondent, as the statutory taxpayer who is directly liable to pay the excise tax on its petroleum products, is entitled to a refund or credit of the excise taxes it paid for petroleum products sold to international carriers, the latter having been granted exemption from the payment of said excise tax under Sec. 135 (a) ofthe NIRC."

(Emphasis and underscoring, Ours,) Additionally, in Chevron Philippines, Inc. v. Commissioner of Internal Revenue,75 the Supreme Court ruled, to wit: 75 "Excise tax on petroleum products is essentially a tax on property, the direct liability for which pertains to the statutory taxpayer (i.e., manufacturer, producer or importer). Any excise tax paid by the statutory taxpayer on petroleum products sold to any of the entities or agencies named in Section 135 of the National Internal Revenue Code (NIRC) exempt from excise tax is deemed illegal or erroneous, and should be credited or refunded to the payor pursuant to Section 204 of the NIRC. This is because the exemption granted under Section 135 of the NIRC must be construed in favor of the property itself, that is, the petroleum products.

XXX

XXX

XXX

Pilipinas Shell concerns the manufacturer's entitlement to refund or credit of the excise taxes paid on the petroleum products sold to international carriers exempt from excise taxes under Section 135(a) of the NIRC. However, the issue raised here is whether the importer (i.e., Chevron) was entitled to the refund or credit of the excise taxes it paid on petroleum products sold to CDC, a tax-exempt entity under Section 135( c) of the NIRC.

Notwithstanding that the claims for refund or credit of excise taxes were premised on different subsections of Section 135 of the NIRC, the basic tax principle applicable was the same in both cases - that excise tax is a tax on property; hence, the exemption from the excise tax expressly granted under Section 135 of the NIRC must be construed in favor of the petroleum products on which the excise tax was initially imposed. Accordingly, the excise taxes that Chevron paid on its importation of petroleum products subsequently sold to CDC were illegal and erroneous, and should be credited or re!Jinded to Chevron in accordance with Section 204 of the NIRC. /

XXX

XXX

XXX

G.R. No. 210836, I September2015.

Pagel7of48

Pursuant to Section 135(c), supra, petroleum products sold to entities that are by law exempt from direct and indirect taxes are exempt from excise tax. The phrase which are by law exempt from direct and indirect taxes describes the entities to whom the petroleum products must be sold in order to render the exemption operative. Section 135(c) should thus be construed as an exemption in favor of the petroleum products on which the excise tax was levied in the first place. The exemption cannot be granted to the buyers - that is, the entities that are by law exempt from direct and indirect taxes- because they are not under any legal duty to pay the excise tax. CDC was created to be the implementing and operating arm of the Bases Conversion and Development Authority to manage the Clark Special Economic Zone (CSEZ). As a duly-registered enterprise in the CSEZ, CDC has been exempt from paying direct and indirect taxes pursuant to Section 24 of Republic Act No. 7916 (The Special Economic Zone Act of 1995), in relation to Section 15 of Republic Act No. 9400 (Amending Republic Act No. 7227, otherwise known as the Bases Conversion Development Act of 1992).

Inasmuch as its liability for the payment of the excise taxes accrued immediately upon importation and prior to the removal of the petroleum products from the customshouse, Chevron was bound to pay, and actually paid such taxes. But the status of the petroleum products as exempt from the excise taxes would be confirmed only upon their sale to CDC in 2007 (or, for that matter, to any of the other entities or agencies listed in Section 135 of the NIRC). Before then, Chevron did not have any legal basis to claim the tax refund or the tax credit as to the petroleum products.

Consequently, the payment of the excise taxes by Chevron upon its importation of petroleum products was deemed illegal and erroneous upon the sale of the petroleum products to CDC." (Emphasis, Ours.)

Thus, for petitioner to successfully comply with the first requisite for claiming refund of erroneously paid excise tax under Section 135 of the NIRC, it must prove that it actually paid excise tax on petroleum products which it locally manufactured or importej.- and subsequently sold to international carriers or tax-exempt entities/

Pagel8of48

Petitioner erroneouslv paid excise tax on its locally manufactured Jet A-1 fuel and unleaded gasoline fuel sold to international carriers and tax-exempt entities.

A summary of the excise tax paid by petitiOner on its locally manufactured Jet A-I fuel and unleaded gasoline fuel sold to international carriers and tax-exempt entities, which is the subject matter of the present claim was provided in the consolidated ICPA Report, viz.:76

Month of Sale/

Delivery

January 2016

February 2016

March 2016

April2016

May 2016

June 2016

July 2016

August 2016

September 2016

October 20 16

November2016

December 2016

January 2017

February 2017

March 2017

Total

Jet A-1 Fuel

Amount

Volume

(Excise Tax Rate

(In Liters)

[1>3.67] x Liters) 859,804 !>3, 155,480.68 876,590 3,217,085.30 751,502 2,758,012.34 186,904 685,937.68 3,389,788 12,440,521.96 1,235,949 4,535,932.83 29,313 107,578.71 58,892 216,133.64 18,706 68,651.02 51,851 190,293.17 82,678 303,428.26 100,156 367,572.52 52,116 191,265.72 19,816 72,724.72 14,703 53,960.01 7,728,768 P28,364,578.56(a)

Unleaded Gasoline Fuel

Volume

(In Liters)

68,000 63,500 90,570 98,100 54,300 91,800 46,300 74,100 76,000 64,000 62,100 76,300 865,070

Amount

(Excise Tax Rate

[1>4.35] x Liters) !>295,800.00 276,225.00 393,979.50 426,735.00 236,205.00 399,330.00 201,405.00 322,335.00 330,600.00 278,400.00 270,135.00 331,905.00 !>3, 763,054.50(b) Total excise taxes paid (a)+ (b) 1!32,127,633.06 The excise taxes due on locally manufactured Jet A-1 and unleaded gasoline fuels sold to international carriers and tax-exempt entities for the period 1 January 2016 to 31 December 2016 were duly paid.

To reiterate, petitioner employs two (2) modes of payment in settling the excise tax due from each removal of locally manufactured products from the PBR: a) through an application for payment made through the BIR's eFPS / as shown by the ETR;77 and b) through the Product Replenishment Scheme.Y 76 77 78 Consolidated I CPA Report, Exhibit "P-189". Exhibits "P-6" to "P-7-1 ".

Exhibits "P-I 0" to "P-75-2".

DECISIOI>

In either case, the payment of excise tax is made before removal of the petroleum products from the PBR.

Based on the requirements of various depots, petitioner's Distribution Group ("DG") sends a summary of estimated daily volume of fuel product requirements for the following two (2) to five (5) days to the Refinery Accounting Section ("RAS"). Based on the DG's figures, petitioner's RAS then calculates the estimated excise tax payable for finished petroleum products for the next two (2) to five (5) days or for the same period, which is then forwarded to petitioner's Stock Accounting Section ("SAS"). These fuel products, which include the Jet A-1 fuel and the unleaded gasoline fuel, are then scheduled for removal within the next two (2) to five (5) days.79 Based on the submitted estimated excise tax payable by the RAS, the SAS finalizes the amount of the excise tax due and provides an allowance in the computation of the excise tax due, which is normally around Five Million Pesos (Php5,000,000.00) per day. The SAS then files the application of payment of excise tax due through the eFPS in accordance with the actual product removals from the PBR. The SAS compares the submitted estimated computation versus the excess payments reported under "Balance Carried Over from Previous Return" (i.e., Item 17 of the ETR) in the ETR and ensures sufficiency of the excess payments to cover the estimated excise tax due per computation for the next two (2) to five (5) days.80 In instances where the actual balance of excess payments reflected in the ETR is deemed insufficient to cover the amount of excise tax required to be maintained based on the computation made, petitioner, through its SAS, makes an advance deposit to the BIR through eFPS.81 Petitioner also applies the Tax Subsidy Availment Certificate ("TSAC")82 obtained from its sales to the Armed Forces of the Philippines Commissary and Exchange Service ("AFPCES") as payment of excise tax in lieu of cash. 83 With respect to the Product Replenishment Scheme, petitioner operates various depots which serve as storage of locally manufactured Jet A-1 fuel prior to sale and delivery to various customers. Some of these depots are / registered as PRC locations, where majority of petitioner's sales and..../ 79 80 81 82 83 Consolidated !CPA Report, Exhibit "P-189-imported". Ibid.

Ibid.

Exhibits "P-384" to "P-384-13".

Summary of TSAC for the period 18 September 2015 to I April 2016, Exhibit No. "P-384": Consolidated !CPA Report, Exhibit "P-189-imported".

DECISIOI'i

deliveries of locally manufactured Jet A-1 fuel are made to international air carriers.84 If Jet A-1 fuel is sourced from locally manufactured stocks from PRC locations, where majority of its sales and deliveries of locally manufactured Jet A-1 fuel are made to international air carriers, petitioner utilizes its PRC I BIR Form No. 2298, which is being amortized as payment through the Product Replenishment Debit Memo ("PRDM") I BIR Form No. 2331 as tax credits for payment of excise tax due on the removals of locally manufactured Jet A- 1 fuel which are to be sold to international air carriers. 85 As examined by the ICPA and as thoroughly verified by this Court, petitioner reported and paid the corresponding excise taxes on the removals from the PBR based on the ETRs, which include the subject matter of the instant claim,86 as follows:

Particulars

Unleaded

Jet A-I Fuel

Gasoline Fuel

Total volume of removals per Withdrawal Certificate 187.075.340 70,655.918 ("WC") (Kilo Liters ("KL") at air)

Multiply by: Equivalent Excise Tax Rate per Liter

3.67 4.35 Amount of Excise Tax that should have been paid Actual amount of excise tax due and paid on PBR removals

Difference

1'686.566,497.80 1'307.353.243.30 The difference is accounted for as follows: 87

Particulars

I.

Removals of Jet A-1 fuel paid thru

Volume in Liters

Equivalent

Excise Tax

Total

1'993. 919.741.1 () 3.502.1 02,821.83 (1'2.508.183.080. 73 I

Remarks

PRDM/PRC (marked as Exhibit No. P-257) 177,311,211 650,732,144.37 No effect on the claim.

2.

Payment of excise tax on unleaded gasoline fuel not related to the claim (724,698,534) (3,152,438,622.90) No effect on the claim 3.

Payment of excise tax on other excisable petroleum products ( 170,579,752) (6,476,602.20) No effect on the claim.

(717,967,075) (1'2,508,183,080.73) This proves that the excise taxes due on locally manufactured Jet A-1 and unleaded gasoline fuels sold to international carriers and tax-exempt / entities for the period 1 January 2016 to 31 December 2016 were duly paiV 84 85 86 87 Memorandum, Records, CTA Case Nos. 9738 & 9741, Vol. 8 .. p. 2990; Consolidated !CPA Report, Exhibit "P-189-imported".

Ibid.

Consolidated !CPA Report, Exhibit "P-189-imported." Ibid.

The volumes and amount of locally manufactured Jet A-1 fuel and unleaded gasoline fuel manufactured and removed from the PBR to petitioner's depots then subsequently transferred to another depot, into-plane facilities ("ITPs''), and refuellers are accurate and properly supported.

From the PBR, the locally manufactured Jet A-1 fuel and the unleaded gasoline fuel are then transferred to petitioner's depots spread across the Philippines. The same is transferred from said depots to other depots, ITPs, and refuellers prior to the fuel being delivered and sold to end customers.88 An ITP, to clarifY, is a storage facility owned by petitioner from which petroleum products are withdrawn, while a refueller is a third party contractor engaged by petitioner owning refuelling trucks with a dispensing system for the delivery of petroleum products to customers.89 The !CPA's thorough tracing, as verified by this Court, shows that the locally manufactured Jet A-1 fuel removed from the PBR tallies with the volume received by the respective depots:90 Per Depot's Liquidation Statement ( .. LS")

Per Depots' Official

PerWC

Receipts

Register Books ( .. ORB .. )

Volume

Net Volume to

Received by

Exhibit

Withdrawals fGross Volume

In-transit

be Received

Exhibit

Depots

Difference

Depots

SL Harbor

Navotas

Pal a wan

Mactan

Iloilo

Davao

Zamboanga

DM1NC!ark

Total

88 89 ~)

Ibid

Ibid

!hid No.

P-271

P-272

P-273

P-274

P-275

P-276

P-277

P-380

from PBR

Received

14 1.506.110 141.506,110 1.440.301 1.440,301 2.910.702 2.910.702 28,045,341 28,045,341 7.788,149 7,788,149 2.393.997 2.393.997 2.790.740 2,790,740 200.000 - 187.075,340 186,875,340

Gain (Loss)

(a) No.

(b)

(a) - (b) (305,539) 141,200,571

P-278

141,200.571 - - (3.661) 1.436,640

P-279

1,436,640 - 8.127 2.918.829

P-280

2.918,829 - 89,588 28.134.929

P-281

28.134,929 (284,668) 7.503.481

P-282

7,503.481 - (17.686) 2.376.311

P-283

2.376.311 - (18.441) 2.772.299

P-284

2,772,299 - - -

P-380

200.000 (200,000) (532.280) 186.343.060 186,543,060 (200,000)

Similarly, the locally manufactured unleaded base gasoline fuel removed from the PBR tallies with the volume received by the respective depots, viz. :91

Per SAP-

Product

Movements

by

Movement

Per Schedule of Receipts and Removals

Type

PerWC

("SRR")

("PMMT"

Difference

Withdrawals pross Volume

In-transit

Net Volume to

Volume

Exhibit

from PBR

Received

Gain (Loss)

be Received

Received

g)~(d-e)

Depot

No.

(a) (b) (c) (d)~ (b +c) (e) (f)~(a-b)

SL Harbor Depot

Unleaded (Base)

Gasoline Fuel

P-366

46,421,637 46,421,637 (108.724 46,312,833 46,312.833 -

Unleaded (Blaze)

(99,654)

Gasoline Fuel

P-367

24,234,281 24.234,281 24.134,627 24,134,627 -

Total

70,655,918 70.655,918 (208.378) 70,447,460 70,447,460 - As duly noted by the ICPA, the "in-transit gain or loss" pertains to the effect of the variations of the volume of locally-manufactured petroleum products (such as Jet A-1 fuel and Unleaded Gasoline fuel) due to several factors such as temperature, density of the product at the time of soundings, sea condition (for vessel figures), equipment used for the measurements, and others.92 To reiterate, the petroleum products received by the depots from the PBR is then be transferred further to other depots, ITPs, and refuellers of petitioner. Locally manufactured Jet A-1 fuel undergoes this procedure before its eventual sale and delivery to international carriers and tax-exempt entities. On the other hand, the unleaded gasoline fuel volume received by SL Harbor depot from PBR is delivered directly to customers, including tax-exempt entities.93 To determine the actual movements for locally manufactured Jet A-1 fuel, the ICPA reviewed the relevant ORBs, LSs, and SAP-PMMTs from the depots, ITPs, and refuellers. As duly verified by this Court, the results of the comparison revealed the following:94 Comparison of depots LS -Issuances with ORB Issuances- Jet A-1 fuel:

Depots

91 Ibid.

92 Ibid.

93 Ibid.

94 Ibid.

Exhibit

No.

Per Depot LS - Issuances

(Volume in Liters)

Per ORB- Issuances

(Volume in Liters)

- - -

SL Harbor

P-292

Navotas

P-293

Pal a wan

P-294

Mactan

P-295

Iloilo

P-296

Davao

P-297

Zamboanga

P-298

DM1A/Ciark

P-381

Total

Not Related to

Subject to

Not Subject

Related to

Claim

Claim to Claim

Total

Claim

141 ,200,571 140,155,743 1,044,828 141,200,571 71,365,243 1,436,640 1,436,640 1,436,640 2,603,360 2,918,829 280,910 2,637,919 2,918,829 52,456 22,214,913 5,920,016 28,134,929 28,134,929 2,140,840 7,255,150 248,331 7,503,481 7,503,481 1,066,519 2,157,074 219,237 2,376,311 2,376,311 277,689 910,000 1,862,299 2,772,299 2,772,299 21,222 200,000 166,949 32,961 200,000 174,577,379 II ,965,591 186,543,060 186,543,060 77,527,329 Comparison of depots LS -

Issuances with SAP-PMMT -

Issuances and

depot/ITP/Refueller LS- Receipts (Volume in Liters)- Jet A-I fuel:

Details of Issuances per LS and SAP-

PMMT

Per SAP

Per Depot LS -

PMMT-

Per

Issuances

Issuances

Depots/ITPs/

Direct

Not Related

Total Issuances- Depots Exhibit

Subject to

Exhibit

Related to

Refueller LS Delivery to to Claim to Depots/ITPs/Refuelle

No.

Claim

No.

Claim

-Receipts

Customers

SL Harbor depot to:

456,000

Laoag ITP

P-299

456,000 456,000 135,575,342 JOCASP!NAIA depot P-300 139,699,743 139,699,743 140,155,743

P-262

140,155,743 136,031 ,342 4,124,401

Navotas to

JOCASP!NAIA depot P-301 1,436,640

P-263

I ,436,640 1,436,640 Palawan depot to

Customers

P-348

280,910

P-264

280,910 280,910 Mactan depot to

Customers

P-349

22,214,913

P-265

22,214,913 - 22,214,913 Iloilo depot to:

Iloilo ITP

P-302

580,000 580,000 580,000

Kalibo ITP

P-303

6,655,150 6,655,150 6,655,150 20,000

Bacolod ITP

P-304

20,000 20,000 7,255,150 7,255,150

P-266

7,255,150

(Forwarded)

(Brought forward) Davao depot to Davao 2,157,074

ITP

P-305

2,157,074

P-267

2,157,074 Zamboanga depot to 910,000 Zamboanga refueller

P-306

910,000

P-268

910,000 DMIA/Ciark depot to

Customers

P-381

166,949

P-379

166,949 166,949 174,577,379 174,577,379 147,790,206 22,662,772

Details of issuances per LS and SAP-

PMMT

Per SAP

Per Depot LS

PMMT-

Per

Issuances

Issuances

Depots/ITPs/

Direct

Not Related

Total Issuances- Depots Exhibit

Subject to

Exhibit

Related to

Refueller LS Delivery to to Claim to Depots/ ITPs/Refuelle

No.

Claim

No.

Claim

-Receipts

Customers

The volumes which are not related to the claim pertain either to other shipments oflocally produced Jet A-1 fuel that were not claimed by petitioner or to imported Jet A-1 fuel that was recorded in the PMMT.95 For the movements oflocally manufactured unleaded gasoline fuel, the ICP A reviewed the relevant ORBs, SRRs, and SAP-PMMTs from SL Harbor depot. As duly verified by this Court, the result of such comparison revealed the following:96 Comparison of Depot's PMMT with SRR and ORBs- R92 Base Gasoline, R88 Gasoline

and R87 Gasoline·

Volume (in Liters)

Per ORB (Exhibit Nos. P-368 and

Per PMMT

Per

P-368-1 to P-368-12)

SRR

E-10

Unleaded

(Unleaded

(Exhibit

(Base)

Gasoline

Removals

Nos. P-366

E-98

Gasoline

Fuel-

(Direct

Exhibit and P-366-1

(Fuel

Without

Finished

4,124,401

Deliveries)

No.

Volume to P-366-12)

Bioethanol)

E-98

Goods)

Difference

R92

R88

R87

Total

P-361

P-362

P-363

630,000 3,600 5,400 639,000 630,000 3,600 5,400 639,000 70,000 400 600 71,000 630,000 3,600 5,400 639,000

Comp ·

anson o fD ' PMMT . h SRR d 0 e ot s

Wit

an RBs- Bl aze 100 E uro:

Per PMMT

Exhibit

Removals

No.

Volume

X I 00

P-364

170,000

D210 XIOO

P-365

56,070

Total

226,070

Volume (in Liters)

Per SRR

(Exhibit Nos.

P-367 and P-367-1 to P-367-12)

170,000 56,070 226,070

Per ORB

(Exhibit Nos. P-369

and P-369-1 to

P-369-12)

170,000 56,070 226,070 700,000 4,000 6,000 710,000

Difference

This proves that the volumes and amounts of locally manufactured Jet A-1 fuel and unleaded gasoline fuel manufactured and removed from the PBR / to petitioner's depots then subsequently transferred to other depots, ITPs, and/ 95 96 Ibid.

Ibid; Exhibits "'P-370" and "P-371".

refuellers are accurate and properly supported except for the variances noted, which are summarized at the end of this Decision. The locally manufactured Jet A-1 fuel and unleaded gasoline fuel manufactured were sold and delivered to various air carriers of Philippine or foreign registry for the latter's use or consumption outside the Philippines and to alleged tax- exempt entities.

As observed by the ICP A and verified by this Court, for the sales of locally manufactured Jet A-1 fuel to international carriers and tax-exempt entities, petitioner prepares and generates the sales invoices ("Sis") in its SAP- Computerized Accounting System, in accordance with the commercial terms and orders stated in the respective contracts executed between petitioner and the airline companies and the tax-exempt entities.97 All Sis involving sales of locally manufactured tax-paid Jet A-1 fuel to international air carriers, on their use or consumption outside the Philippines, and tax-exempt entities and sales of locally manufactured unleaded gasoline fuel to tax-exempt entities, shall carry a "No Excise Tax Billed" notation, while an invoice involving the sale of locally manufactured tax-paid Jet A-1 fuel to air carriers for domestic flights does not carry such notation. The summary of Aviation Delivery Receipts ("ADRs) and SAP-generated Delivery Notes ("DN") covering the period billable to the airline companies and tax-exempt entities form an integral part of the SI as proof that the volumes oflocally manufactured Jet A-1 fuel and unleaded gasoline fuel were delivered to the international air carriers and tax-exempt entities, and the volumes oflocally manufactured unleaded gasoline fuel were delivered to tax- exempt entities.98 For the JOCASP/NAIA depot, the DN generated by the SAP pertaining to the sale of locally manufactured Jet A-1 fuel by the JOCASP/NAIA depot to tax-exempt entities triggers the creation of the SI for such direct deliveries.99 Further, petitioner schedules deliveries of locally manufactured Jet A- 1 fuel to air carriers based on its agreements with the respective airline companies and tax-exempt entities. Petitioner's representative prepares the ADR during the discharge of the locally manufactured Jet A-1 fuel from the / tank trucks to the air carrier and tax-exempt entities. The ADR is then signed/ 97 98 99 Consolidated !CPA Report. Exhibit "P-189-imported."

Ibid

Ibid

by the airline and tax-exempt representative to certify that the volume and correct grade of fuel has been delivered. The ADR also specifies the flight number, origin, and destination of the air carrier. 100 Moreover, petitioner prepares the LS indicating the disposition of the Jet A-1 fuel received. The LS shows the source of the Jet A-1 fuel, whether it was sourced from importations or local production, and the actual locations where the Jet A-1 fuel were delivered, either international or domestic deliveries or to tax-exempt entities. The international deliveries pertain to Jet A-1 fuel that will be delivered to air carriers flying international flights (i.e. whether the air carrier is of Philippine registry or of foreign registry), while domestic deliveries pertain to Jet A-1 fuel that will be delivered to air carriers flying domestic flights. 101 A review of the LS showed the following: 102 LS Movements- Receipts and Issuances (Volume in Liters)- Jet A-1 Fuel:

Per LS- Issuances

Per I.S- Receipts

For Depots/

For Direct

Exhibit

1TPs/

Delivery to

Related to

Not Related

No.

Dcpots/ITPs/ Refueller Exhibit No.

Refuellers

Customers

Total

Claim to Claim

P-299-1 to

166,599

P-308 Laoag 1TP

P-299-24

456,000 - 456.000 289,401

P-300-1 to

21.735.264

Total

456.000

P-309

OCASP/NA1A Depot

P-300-91

135,575.342 - 135.575.342 113,840.078 135.575.34?

905,189

P-310

OCASP/NAIA Depot

P-301-1

1,436,640 - 1,436.640 531,451 1.436.64

Palawan Depot

P-273-1 to

2.918.82

P-287

P-273-6

- 2,918,829 2,918.829 280.910 2,637.919 jMactan Depot

P-274-1 to

28.134.92

P-288

P-274-16

- 28.134.929 28,134,929 22,214,913 5.920.016

Iloilo ITP

P-302-1 to

580.00

P-311

P-302-7

580,000 - 580.000 353,830 226.170 ~a1ibo ITP

P-303-1 to

6.655.15

P-312

P-303-7

6,655,150 - 6.655.150 6,147,644 507,506

P-313 Bacolod 1TP

P-304-1

20.000 - 20.000 754 19,246 20,00

P-305-1 to

1.675.065

P-314 Pavao ITP

P-305-2

2.157.074 - 2.157.074 482,009 2.157.07

P-306-1 to

741.921 P-315 tlamboanga Refueller

P-306-3

910,000 - 910,000 168.079 910.00 161.428

P-381 PMIA/Ciark Depot

P-380-1

- - - 5,521 166.94 179,010.913

Total

147.790.206 31.053.758 178.843,964 144.314,590 34,696.323 On the other hand, a comparison of the !;J and the ADR of the depots, ITPs and refuellers revealed the following: 103 100 Ibid.

101 Ibid.

102 Ibid.

103

Ibid

Comparison of depots, ITPs and Refueller's LS- Issuances vs ADR (Volume in Liters)-

Jet A-1 Fuel·

Per ADR (Related to Claim)

Sold to

International

Deliveries of

Air Carriers

Locally

With

Sold to

Manufactured

International

Sold to

International

Per

Jet A-1 Fuel

Destination/ International Air Carriers

Depots/ITPs/ Through LS

Sold to Tax-

Air Carriers From Out-

Exhibit

~efueller LS

Not Related to

Exempt

With Local

of-Period No.

Point of Sale

Issuances

Claim

Entities

Destination

Claim

Total

P-317 Laoag ITP

289,40 I 289,401 4,838 294,239

P-318 JOCASP/NAIA

Depot

113,840,078 110,144,118 3,674,980 20,980 107,427 113,947,505

P-319 JOCASP/NAIA

Depot

531,451 531,451 531,451

P-320 Palawan Depot

280,910 89,847 191,063 280,910

P-321 Mactan Depot

22,214,913 19,625,945 2,524,919 64,049 87,677 22,302,590

P-322 Iloilo ITP

353,830 334,806 19,024 353,830

P-323 Kalibo ITP

6,147,644 6,123,780 19,559 4,305 6,147,644

P-324 Bacolod ITP

754 754 754

P-325 Davao ITP

482,009 467,268 14,741 482,009

Zamboanga

P-326

Refueller

168,079 168,079 168,079

DMIA/Clark

P-382

DeQOt

5,521 5,521 5,521

Total

144,314,590 136,785,764 7,433,971 94,855 199,942 144,514,532 Sales/Deliveries to International Air Carriers with Local Destinations and Out-of-Period

L'ff

ti h

Y

2015

J

A I F

I

I mgs rom t e ear - et - ue:

Equivalent

Excise Tax

Volume in

at 1'3.67 per

Item

Exhibit No.

Point of Sale

Liters

Liter

Sales/Deliveries to International Air Carriers with Local Destination:

P-318

JOCASP/NAIA Depot

20,980 1'76,996.60

P-321

Mactan Depot

64,049 235,059.83

P-323

Kalibo Depot

4,305 15,799.35

P-382

DMIA/Ciark DeQot

5,521 20,262.07

Table 12

94,855 348.117.85 Out-of-Period Liftings from the Year 2015:

P-317

Laoag ITP

4,838 17,755.46

P-318

JOCASP/NAIA Depot

I 07,427 394,257.09

P-321

Mactan DeQot

87,677 321,774.59

Table 3113

199.942 733,787.14 Total downward adjustments 294,797 1'1,081,904.99 For the sales of locally manufactured unleaded gasoline fuel delivered directly by the SL Harbor depot, the ICPA traced the deliveries of the same to / tax-exempt entities using the supporting ORBs, SRRs, and DNs, as follows~

DECISIOI'

ORB Issuances vs. DN Volume in Liters -Unleaded Gasoline Fuel:

Exhibit

Exhibit

No.

Particulars

Exhibit Nos.

Per ORB

Nos.

Unleaded (Base)

P-370-1 to P-

P-372-1 to

P-372

Gasoline Fuel

370-12 710,000

P-372-12

Unleaded (Blaze)

P-371-1 to P-

P-372-1 to

P-373

Gasoline Fuel

371-12 226,070

P-372-12

Total

936,070

Difference

710,000 226,070 936,070 From the foregoing, locally manufactured Jet A-1 fuel and unleaded gasoline fuel manufactured were sold and delivered to various air carriers of Philippine or foreign registry for the latter's use or consumption outside the Philippines and to alleged tax-exempt entities except for certain variances noted by the ICPA, which are summarized at the end of this Decision. The locally manufactured petroleum products were billed and collected net of excise tax.

The deliveries of locally manufactured Jet A-I fuel and unleaded gasoline fuel were billed and collected without any excise tax. In arriving at this conclusion, this Court compared the details per ADRs or DNs of the depots, ITPs, and refueller to the corresponding Sis billed to airline companies. The details of the Sis were then traced to the pricing conditions in petitioner's SAP. The tracing resulted in the following: 104

Depot/ITPs/Refueller

Laoag lTP 104 Ibid.

Exhibit Nos.

ADRs

Sis

P-317-1 to P-317-74

P-327-1 to P-327-74

SAP-Pricing

Conditions

P-327-75 to P-327-148

This Court then found that petitioner's Sis show the volume in liters, while the invoice amount is in US dollars (USD) for Jet A-1 fuel and Philippine peso (PHP) for unleaded gasoline fuel. The volume of locally manufactured Jet A-1 fuel in liters is converted into US barrels multiplied by the contract price per US barrel to arrive at the billable amount in US dollars. 105 Furthermore, the face of the Sis for locally manufactured Jet A-1 fuel and unleaded gasoline fuel bears the note "No excise tax billed". Thus, petitioner's Sis tied up with the SAP pricing condition where no excise tax was charged to international carriers and tax-exempt entities are as follows: 106

ADR vs SI- Jet A-1 Fuel·

Exhibit

No.

Point of Sale

Laoag ITP

P-327

P-328 JOCASPINAIA Depot

P-329

JOCASP/NAIA Depot

P-330

Palawan Depot

P-331

Mactan Depot

P-332

Iloilo ITP

105 Ibid.

106 Ibid.

ADR

Exhibit

I Volume

Nos.

I (In Liters)

P-317-1 to

P-317-74

289,401

P-318-1 to

P-318-199

3,674,980

P-319-1 to

P-319-42

531,451

P-320-1 to

P-320-60

191.063

P-321-1 to

P-321-207

2,524,919

P-322-1 to

P-322-2

19.024

Sl

Volume (In Liters)

Exhibit

Related to INot Related I

Equivalent

Nos.

Claim to Claim

Total

USD Amount

P-327-1 to

P-327-74

289,401 10,003 299,404 US$171.204.13

P-328-1 to

P-328-44

3,674,980 28.293,163 31,968.143 11,844,965.10

P-329-1 to

P-329-5

531,451 4.682.022 5.213,473 1.891,680.11

P-330-1 to

P-330-60

191,063 191,063 68.57342

P-331-1 to

P-331-44

2,524,919 7,679,666 10.204,585 4,450,984.66

P-332-1 to

12,5321;/

P-332-2

19,024 19,024

DECISI0:-1

P-333

Kalibo ITP

P-323-1 to

P-333-I to

P-323-5

19,559

P-333-5

19.559 19,559 10,147.66

P-334

Bacolod ITP

P-324-1 to

P-324-2

754

P-334-1

754 12,592 13,346 6.637.02

P-335

Davao ITP

P-325-1 to

P-335-1 to

P-325-3

14,741

P-335-3

14,741 14,741 7.243.09

P-336

Zamboanga Refueller

P-326-1 to

P-336-1 to

P-326-88

168,079 P-336-88 168,079 168,079 66,560.76

Total

7,433,971 7,433.971 40,677,446 48.11 1.417 US$18,530,528.05

ON vs SI

Unleaded Gasoline Fuel·

-

DN

Sl

Volume

Volume

(In

Equivalent

Exhibit No.

Particulars

Exhibit No.

Inn Liters\

Exhibit No.

Liters)

PHP Amount

P-374

Base Gasohne

P-372-1 to P-372-41

710,000 P-374-1 to P-374-41 710,000 !'24.478.187.60

P-375

Blaze Gasoline

P-373-1 to P-373-34

226,070 P-375-1 to P-375-34 226.070 7.468.324.25

Total

936.070 936.070 !'3 1.946.51 1.85 SI vs. SAP Pncm~ c d' .

J

on ttlon- etA-! Fue:

Sl

SAP Pricin Condition

Exhibit

Exhibit

1

USD

I

I Duty

Total USD

I

Equivalent

No.

Point of Sale

No.

Amount

Exhibit No.

US$ Amount Rate*

Amount

PHPAmount

Laoag ITP

P-327-1 to

P-327-75 to

P-327

P-327-74

171.204.13

P-327-148

171,204.13 uss- US$171.204.13 !'8.174.444.05

P-328 JOCASPINAIA P-328-1 to

P-328-45 to

Del:!ot

P-328-44

11.844.965.10

P-328-88

11.844,965.10 11.844.965.10 549,664.737.42

P-329 JOCASPINAIA P-329-1 to

P-329-6 to

De rot

P-329-5

1,891,680.11

P-329-10

1,891.680.11 1.891,680.11 87,635.864.45

P-330 Palawan Depot

P-330-1 to

P-330-61 to

P-330-60

68.573.42

P-330-120

68.573.42 68,573.42 3.206,499.47

P-331 Mactan Depot

P-331-1 to

P-331-45 to

P-331-44

4.450.984.66

P-331-88

4.450.984.66 4,450.984.66 207.729.010.25

P-332 Iloilo ITP

P-332-1 to

P-332-3 to

P-332-2

12,532.10

P-332-4

12,532.10 12.532.10 588,626.44

P-333 Kalibo ITP

P-333-1 to

P-333-6 to

P-333-5

10.147.66

P-333-10

10,147.66 10.147.66 485.748.34

P-334 Bacolod ITP

P-334-1

6.637.02

P-334-2

6.637.02 6.637.02 315.517.29

P-335 Davao ITP

P-335-1 to

P-335-4 to

P-335-3

7,243.09

P-335-6

7.243.09 7.243.09 350.286.02

P-336 Zamboanga

P-336-1 to

P-336-89 to

Rcfueller

P-336-88

66.560.76 P-336-176 66.560.76 66.560.76 3,237.241.39

Total

18.530,528.05 18.530.528.05 uss- US$18.530.528.05 !'861.387,975.12 * Duty rate pertains to excise tax billed to customers. SI vs. SAP Pricing Condition- Unleaded Gasoline Fuel

Sl

SAP Pricing Condition

Exhibit

Exhibit I

Exhibit

I

I Dutv I

Total PHP

No.

Particulars

No.

PHP Amount

No.

PHP Amount

Rate*

Amount

Unleaded (Base)

P-374-1 to

P-374-42 to

P-374

Gasoline Fuel

P-374-41

1'24.478.187.60

P-374-82

1'24.478,187.60 jL 1'24.478,187.60

Unleaded (Blaze)

P-375-1 to

P-375-35 to

P-375

Gasoline Fuel

P-375-34

7.468,324.25

P-375-68

7.468.324.25 7.468.324.25

Total

!'31,946.511.85 !'31.946,511.85 jL 1'31.946,511.85 * Duty rate pertains to excise tax billed to customers. Collections of SAP-generated Sis are made through inward remittances by petitioner's customers. An inward remittance of a customer normally covers payment of several invoices. However, the airline company and tax- / exempt entities do not provide details of the invoices against which thV' collection would be applied. As such, petitioner applies the collection on the outstanding invoices on a first-in, first-out basis. 107 The amount of collections as per

SAP

clearing, inward remittances/bank advices, Official Receipts ("ORs"), and bank certifications reconciles with the amount billed to international carriers and tax-exempt entities. This proves that petitioner has not collected any excise tax from its customers, as shown below: 108 SI vs. SAP Clearing and Inward Remittance/Bank Certification/OR- Jet A-1 Fuel:

Exhibit

Amount

Amount

Particulars

No.

(in USD)

(in PHP)

P-327 to

Per SI:

P-336

US$18,530,528.05 P861,387,975.12

Per Books (General Ledger")

("GL"):

P-347-1 to

Per SAP Clearing

P-347-112

US$18,530,528.05 P861,387,975.12 Per Collection documents:

Inward Remittance/

P-347-113 to

Bank Certifications

P-347-227

12,003,208.57 558,728,005.60

P-347-228 to

Official Receirts

P-347-246

6,527,319.48 302,659,969.52 US$18,530,528.05 P861,387,975.12 SI vs. SAP Clearing and Inward Remittance/Bank Certification/OR - Unleaded Gasoline

Fuel:

Particulars

Per SI:

Per Books (GL):

Per SAP Clearing

Per Collection documents:

Per Official Recei ts 107

Ibid

108

Ibid

Exhibit

No.

P-374 to P-375

P-378-1 to

P-378-22

P-378-23 to

P-378-53

Amount

(in PHP)

P31 ,946,511.85 P31 ,946,511.85 P31,946,511.85

Petitioner erroneouslv oaid excise tax on its imported Jet A-1 fuel sold to international carriers and tax- exempt entities.

Importations of Jet A-1 fuel were made during the period 23 December 2015 to 31 December 2016.

Petitioner imported Jet-A-1 fuels, as evidenced by a Import Entry and Internal Revenue Declaration ("IEIRD"), 109 and submitted a Load port Survey Report ("LSR")110 to the BOC within the period from 23 December 2015 to 31 December 2016. Petitioner paid the initial taxes and duties based on a tentative liquidation at the time of arrival. The tentative liquidation for purposes of paying the said taxes and duties is based on the product and quantity reported in the BL 111 and the estimated price of the commodity at the time of payment. 112 The paid taxes and duties are supported by CPR, 1 13 which is acknowledged and signed by the head of the BOC office in the Port of Limay. 114 After payment of taxes and duties based on the tentative liquidation, the Jet A-1 fuel was released from the BOC's custody and delivered for storage at the PBRY5 After release from the BOC, petitioner hired an independent surveyor to determine the volume of imported Jet A-1 fuels on board the vessel, which was compared with the volume of imported Jet A-1 fuels received and stored at the storage tanks in the PBR. The surveyor's Certificate of Independent Survey ("CIS")116 certifies the completion of the arrival of the vessel carrying the imported Jet A-1 fuels at Limay, Bataan and the discharge or withdrawals of said fuels from the vessel to the PBR's storage tanks. 117 Volumes varied depending on when the fuel was gauged are indicated in the CIS. Petitioner explained that the variations of volumes from the BL versus the actual volume per CIS are due to several factors such as temperature, density of the product at the time of soundings, sea condition ( fo/ cargo vessel's figures), equipment used for the measurements, and others. The volume per CIS as the actual volume of imported Jet A-1 fuels was used a 109 Exhibits. "P-204- I -imported .. to "P-204-12-imported". 110 Supplemental Judicial Affidavit of Ms. Dayego dated October 20, 2020 marked as Exhibit "P-190- imported".

111 Exhibits. "P-203-11-imported" to "P-203-22-imported". 112 Supplemental Judicial Affidavit of Ms. Dayego dated October 20, 2020 marked as Exhibit "P-190- imported".

113 Exhibits. "P-204-13-imported" to "P-204-36-imported". 114 Supplemental Judicial Affidavit of Ms. Dayego dated October 20, 2020 marked as Exhibit "P-190- imported".

115 Ibid.

116 Exhibits. "P-203- I -imported .. to "P-203- I 0-imported". 117 Supplemental Judicial Affidavit of Ms. Dayego dated October 20, 2020 marked as Exhibit "P-190- imported".

DECISIO~

the basis for recording in the petitioner's PBR- Official Register Book (PBR - ORB)118 signed by the Revenue Officer on Premise (ROOP) and in the GL 119 of the petitioner's SAP-Computerized Accounting System (SAP) and in computing the final tax assessments by the BOC. 120 As soon as the price has been finalized and the vendor's Commercial Invoice ("CI")121 becomes available, petitioner files an application for ATRIG122 with the BIR. 123 When the BL, CI, ATRIG, CIS, and marine risk insurance policy are available, petitioner submits these to the BOC for final assessment. 124 Due to various factors affecting the volume of the imported Jet A-1 fuels, the actual volume of imported Jet A-1 fuels per CIS may be higher or lower than the volume per the BL that was used for the tentative liquidation and the initial payment of taxes and duties. For instances when the actual volume of imported Jet A-1 fuels per CIS is higher than the volume per BL, petitioner pays the additional duties and taxes as supported by the CPR, 125 which is acknowledged and signed by the head of BOC's office in Port of Limay. 126 After the date of final payment, petitioner requests for the BOC Certification127 to summarize all payments made to the BOC in relation to the importation. 128 On the other hand, where the volume per the CIS is lower than the volume per the BL, petitioner absorbed the equivalent losses for the overpaid taxes because this will not be reflected in the IEIRD nor refunded by the BOC to the petitioner. 129 After release from the BOC, the imported Jet A-1 fuels at the PBR are stored and commingled with locally manufactured Jet A-1 fuels as allowed by/ the Commingling Permit Nos. ELTRD (P)-028-01-15-12537130 and ELTRD 118 Exhibits. "P-205-11-imported" to "P-205-15-imported"'. 119 Exhibits. "P-211-1-imported", "P-211-1-1-imported" to "P-211-1-102-imported". 120 Supplemental Judicial Affidavit of Ms. Dayego dated October 20, 2020 marked as Exhibit "P-190- imported".

121 Exhibits. "P-203-1-imported" to "P-203-1 0-imported". 122 Exhibits. "P-204-49-imported" to "P-204-60-imported". 123 Supplemental Judicial Affidavit of Ms. Dayego dated October 20, 2020 marked as Exhibit "P-190- imported".

124

Ibid

125 Exhibits. "P-204-13-imported" to "P-204-36-imported". 126 Supplemental Judicial Affidavit of Ms. Dayego dated October 20, 2020 marked as Exhibit "P-190- imported".

127 Exhibits. "P-204-37-imported" to "P-204-48-imported". 128 Supplemental Judicial Affidavit of Ms. Dayego dated October 20, 2020 marked as Exhibit "P-190- imported".

129

Ibid

(P)-028-01-16-15847131 which are valid from 1 January 2015 until 31 December 2015 and 1 January 2016 until 31 December 2016, respectively. 132 The movement of imported Jet A-1 fuels is documented by a Cargo Intake Certificate ("CIC"), 133 which is based on the volume shown in the CIS as KL at air. 134 The CIC is a SAP-generated internal control document prepared at the PBR and supports the recording of the transaction in the PBR- ORB and in the GL.

Per the ICPA Report, petitioner's importations for the period 23 December 23,2015 to 31 December 2016 are as follows:

Summa

of Im ortations for the eriod 23 December 2015 to 31 December 2016:

Importation'/

Amonntof

Vessel Name

Arrival Date'

Date of Pa ment

Excise Tax Paid

Intan Glory

December 24-27, 2015 December 23,2015 3 12,265,200 45,013,284.00 and March 30, 20164

Maluku Palm

December 29, 2015 to December 29, 2015 3 and 12,826,889 47,074,682.63 January 1, 2016 March 7, 2016 4

Ocean Lynx

January 15-17,2016 January 14, 2016 3 10,827,974 39,738,664.58 and May 23, 2016 4

Songa Diamond

February 8-11,2016 February 10, 2016 3 13,228,124 48,547,215.08 and May 30, 2016 4 Everhard Schulte April2-4, 2016 Aprill,2016 3 and 18,533,294 68,017,188.98 June 30,2016 4 Ardmore Capella April9-13, 2016 April 8, 2016 3 and 12,818,819 47,045,065.73 July 25,2016 4

Rio Daytona

April 22-24, 2016 April21, 2016 3 and July 12,738,576 46,750,573.92 25,2016 4 Au lac Diamond April28-30, 2016 May 16,2016 3 and 12,197,188 44,763,679.96 July 25,2016 4

Aulae Diamond

May 7-9, 2016 May 16,2016 3 and 12,462,699 45,738,105.33 September 20, 2016 4

Aulae Jupiter

May 9-12,2016 May 16,2016 3 and 12,874,308 47,248,710.36 Se tember 7, 2016 4

Total

130,773,071 1"479,937,170.57 1 We noted that there were no importations from May 13. 2016 up to December 31. 2016. 2 Arrival date is considered the last day when the imported Jet A·l fuel werefoJJy discharged/rom the vessel to the Petitioner's storage tanks in Bataan Refinery (PBR).

131 J Date when the duties and taxes have been paid based on tentative liquidation. ~ Date when the duties and taxes have been paid based on final assessment. Exhibit "P-202-2-imported".

Upon tracing the Petitioner's importations with the vendors' Cis135 and the related BLs136 for the period from 23 December 2015 to 31 December 2016, it was verified that the total volume of the ten (10) importations per the vendors' Cis ties up with the total volume per BLs as follows: 137

Cis vs BLs:

~~----------------------------------------,---~~--------

Volume

Per Cis

Per BLs

Difference

Particulars

(In Barrels)

815,180.000 815,180.000 This shows that importations of Jet A-1 fuel were indeed made during the period 23 December 2015 to 31 December 2016. Petitioner paid the corresponding excise tax on the importation of Jet A-1 fuel.

Upon tracing the details of the vendor's Cls138 to the corresponding IEIRDs, 139 CPRs,l 40 BOC Certifications, 141 BIR ATRIG,I 42 and CIS,I43 the ICPA verified that petitioner reported and paid the corresponding duties and taxes on these importations, with a total volume of 130,773,071 liters, and corresponding excise tax ofPhp481, 164,216.00, as shown in the Summary of Comparison of Cis with IEIRDs, CPRs, BOC Certifications, BIR A TRIG and CIS for the period from December 2015 to September 2016,1 44 summarized as follows:

Cis vs IEIRD, CPR, BOC Certifications, A TRIG and CIS:

Particulars

Total volume per CIS- 815,180.000 Barrels (KL at air) Multiply by: Equivalent liters per KL Total volume per CIS (liters at air) Multiply by: Equivalent excise tax per liter Amount of excise tax that should have been paid Actual amount of excise tax paid 135 Exhibits. "P-203-1-imported" to "P-203-1 0-imported". 116 Exhibits. "P-203-11-imported" to "P-203-22-imported".

Amounts

130,773.071 1,000 130,773,071 !>3.67 !>479,937,170.57 481 '164,216.00 111,227,045.43 137 Supplemental Judicial Affidavit of Ms. Dayego dated October 20, 2020 marked as Exhibit "P-190- imported"; Exhibit "P-203-imported".

138 Exhibits. "P-203-1-imported" to "P-203-1 0-imported". 139 Exhibits. "P-204-1-imported" to "P-204-12-imported". 140 Exhibits. "P-204-13-imported" to "P-204-36-imported". 141 Exhibits. "P-204-37-imported" to "P-204-48-imported". 142 Exhibits. "P-204-49-imported" to "P-204-60-imported". 141 Exhibits. "P-204-61-imported" to "P-204-70-imported". 144 Exhibit "P-204-imported".

DECISJO:-.

Petitioner explained that the overpayment pertains to the net effect of the movement in volume of the imported Jet A-1 fuels. There are instances where the volume of imported Jet A-1 fuels per CIS is lower than the volume per BL resulting to a loss, representing the overpayment of taxes paid, on the part of petitioner. However, the difference has no effect on petitioner's claim for refund since the claim is based on the amount of excise tax that "should have been paid" by petitioner, which, in this case, is less than what had actually been paid. 145 The CIS 146 was also compared with the CIC 147 and the volume received as shown in the monthly PBR-ORBs148 submitted by petitioner to the BIR to confirm that the volume used by petitioner as a basis for the payment of duties and taxes matches with the volume recorded in the PBR- ORB. Further, petitioner records each transaction to its GL-SAP system which generates a PMMT report where all transfers, whether receipts, issuances, or returns, are recorded among the PBR, Ex-PBR (i.e., SAP temporary account for in-transit inventories) depots, ITPs, and refuellers. 149 These were compared against the volume reflected in the monthly PBR -ORBs. The result of such verification is that the volume of imported Jet A- I fuels per CIS matches with the volume of imported Jet A-1 received and recorded in the CIC, as well as in the SAP-PMMT and PBR-ORB signed by the Revenue Officer on the Premise ("ROOP"), as shown in the Summary of Comparison of Certificates of Independent Survey with Cargo Intake Certificates, Petron Bataan Refinery's Jet A-1 Fuels SAP Product Movements by Movement Type- Receipts and Petron Bataan Refinery- Official Register Books Signed by Revenue Officer on Premise for the Period December 2015 to June 2016,150 summarized as follows:

CIS vs CIC, SAP PMMT- Receipts and PBR- ORB - Receipts

Particulars

Total volume per CIS (KL at air) Multiply by: Equivalent liters per KL Total volume per liter at air:

CIS

CIC, SAP PMMT- Receipts and PBR- ORB- Receipts 145 Consolidated !CPA Report, Exhibit "189-imported". 146 Exhibits "P-204-61-imported" to "P-204-70-imported". 147 Exhibits "P-205-1-imported" to "P-205-1 0-imported". 148 Exhibits "P-205-11-imported" to "P-205-15-imported".

Volume

!30,773,071 1,000 130,773,071 130,773,071/

Difference

Likewise, the invoices claimed under the Product Replenishment Scheme for the period January to August 2016I5I were not reported in the claim for tax refund or issuance ofTCC.152 This proves that the excise tax due on the importation of Jet A-1 fuel was actually paid by petitioner.

The volumes and amount imported Jet A-1 fuel removed from the PBR to petitioner's depots then subsequently transferred to another depot, JTPs and refuellers, are accurate and properly supported.

From the PBR, the imported Jet A-1 fuel is then transferred to petitioner's depots spread across the Philippines. Subsequently, the same is transferred from the said depots to other depots, ITPs, and refuellers prior to the same being delivered and sold to end customers. I 53 As shown above, petitioner operates various depots where its petroleum products are stored before delivery to various airline companies. Upon receipt of imported Jet A-1 fuels by the PBR, petitioner schedules delivery to the depots through cargo vessels depending on the latter's inventory requirements. Imported Jet A-1 fuels are directly transferred from the PBR to the depots. I 54 Each transfer or delivery of imported Jet A-1 fuels and by the PBR is supported by a Cargo Outturn Certificate ("COC"Y55 if the transfer was made through a cargo vessel or a Stock Transfer Out- Delive9.: / Note ("STO-DN"Y56 if the transfer was made through tank trucks, and WC. 1Y 151 Exhibits "P-208-imported".

152 Supplemental Judicial Affidavit of Ms. Day ego, dated 20 October 2020, Exhibit No. "P-190-imported.": Exhibits "P-208-imported", "P-20 !-imported", "P-209-imported", "P-21 0-imported". 153 Ibid.

154 Ibid.

155 Exhibits "P-206-6-imported" to "P-206-91-imported". 156 Exhibts "P-307-1-1 to P-307-1-962", "P-307-2-1 to P-307-2-1621", "P-307-3-1 to P-307-3-1859", "P- 307-4-1 to P-307-4-153", P-307-5-1 to P-307-5-390", "P-307-6-1 to P-307-6-319", "P-307-7-1 to P- 307-7-58", "P-307-9-1 to P-307-9-238", "P-307-10-1 to P-307-10-363", "P-307-11-1 to P-307-11-366" and "P-307-12-1 to P-307-12-328".

Upon receipt and recording ofthe imported Jet A-1 fuels from the PBR, a Jet A-1 LS 158 is used to account for the movement of every shipment or receipt of petroleum products (inventories) and their corresponding deliveries to another depot (i.e. inter-facility transfers) or to air carriers (i.e. sale ). 159 The LS is prepared by the depots upon transfer or sale of a particular shipment of the imported Jet A-1 fuels, which is normally within one to two days from the receipt of the inventories. WC, COC, and ere numbers are indicated in the LS. The CrC reference number in the LS is the same as that of the COC. 160 The receipt of the cargo by the depot is recorded in the GL through the PMMT by accepting the transfer initially recorded by the PBR based on the COC reference number. 161 Once accepted by the depot, the GL-SAP, through the PMMT, also generates the ere reference number. Then, the movement of the imported Jet A-1 fuels is generated from the SAP system using the PMMT report, which is then used by the depot in its daily preparation of LSs. 162 Upon verification, this Court found that the volume of imported Jet A- 1 fuel delivered from the PBR to the depots matches with the COC and the WC submitted to the BrR and, thus, were sourced from importation of Jet A- 1 fuel during the period from 23 December 2015 to 31 December 2016: 163

PRB-ORB- Issuances vs SAP-Generated PBR-ORB- Issuances:

Particulars

Total Issuances:

Per PBR-ORB

Per COC by PBR:

Davao Depot

Iloilo Depot

Navotas Depot

Rosario Depot

SL Harbor Center Depot

Mactan Depot

Palawan Depot

Volume (In Liters)

5,215,805 4,156,186 25,193,526 2,346,865 83,073,993 136,469,568 13,398,674 / 450,034/

Zamboanga Depot

Others

Difference

2,062,324 572,161 SAP-Generated PBR-ORB- Issuances vs De ots' COC and WC:

Particulars

Per SAP-Generated PBR-ORB- lssuances 164

Per COC and WC 165

Difference

136,469,568

Volume

(lu Liters) 136,469,568 136,469,568 Moreover, a comparison166 of the WCs from the PBR167 with the WC reference number indicated in the LS of the depots,l68 and a summary of the related receipts and issuances for the said depots from petitioner's PMMT report, 169 as well as the journal entry print-outs of Jet A-1 fuels170 will show that the volume of imported Jet A-1 fuel delivered by the PBR matches with the volume received by the respective depots: PBR- Issuances er WC vs Depots- Receipts per LS and ORB (Volume in Liters):

Per ORB

Volume received by depots

PerWC

Per LS

Gross

Not Related to

Depots

Exhibit Withdrawals

volume In-transit !Net volume to

Exhibit Related to

Claim

No.

from PBR received gain (loss) be received Difference 1 No.

Claim

P-221-

Davao

Imported

5.215.805 5.215.805 (166,371) 5,049.434 -

P-229

5.049.434 17

P-222-

Iloilo

Imported

2,917.230 2.917.230 (25.4 75) 2,891.755 -

P-230

2.891.755 1,230.402

P-223-

Navotas

Imported

25.193.526 25.193.526 (20.436) 25,173.090 -

P-231

25.173.090 (1,610)

P-224-

Rosario

Imported

2.346.865 2.346,865 (18,045) 2,328,820 -

P-232

2.328.820 24.401

P-225-

Imported

(114.091)

SL Harbor

81,597,239 81,597.239 81,483.148 -

P-233

81.483.148 20.866.325

P-226-

Mac tan

Imported

13,398,674 13,558,003 (37,310) 13,520,693 ( 159.329) P-234 13,520.693 1.125.123 164 165 166 167 168 169 170 Exhibit "P-206-imported".

Exhibits "P-206-imported" and "P-207-imported". Exhibits "P-221-imported to P-228-imported". Exhibits "P-207-1-imported to P-207-86-imported". Exhibits "P-221-1-imported to P-221-5-imported", "P-222-1-imported to P-222-4-imported", "P-223- 1-imported to P-223-20-imported", "P-224-21-imported to P-224-2-imported", "P-225-1-imported to P-225-55-imported", "P-226-1-imported to P-226-8-imported", "P-227-1-imported", and "P-228-1- imported to P-228-3-imported".

Exhibits "P-229-imported to P-236-imported". Exhibits "P-213-1-1-imported to P-213-1-5-imported", "P-214-1-1-imported to P-214-1-4-imported", "P-215-1-1-imported to P-215-1-22-imported", "P-216-1-1-imported to P-216-1-2-imported", "P-217- 1-1-imported to P-217-1-55-imported", "P-218-1-1-imported to P-218-1-8-imported", "P-217-1-1- imported to P-217-1-55-imported", "P-218-1-1-imported to P-218-1-8-imported", P-219-1-1- imported", "P-220-1-1-imported to P-220-1-3-imported".

Per ORB

Volume received by depots

PerWC

PerLS

Gross

Not Related to

Depots

Exhibit Withdrawals

volume In-transit Net volume to

Exhibit Related to

Claim

No.

from PBR received gain (loss) be received Difference 1 No.

Claim

P-227-

Palawan

Imported

450.034 450.034 (5.576) 444.458

- P-235

444.458 -

P-228-

Zamboanga Imported

2.062.324 2.062.324 I 1.027 2.073,351 -

P-236

2.073.351 -

Total

133,181,697 133,341,026 (376,277 132,964,74 (159,329 132,964,741 23,244,658 To reiterate, in-transit gain or loss pertains to the effect of the variations of the volume of imported Jet A-1 fuels due to several factors. 171 For the transfer of imported Jet A-1 fuel from a depot to other depots, ITPs, and refuellers, a comparison was made between the volume of imported Jet A-1 fuel delivered by the respective depots with the volume received by other depots, ITPs and refueller by obtaining the latter's corresponding LSs. 172 The comparison revealed that the volume of the imported Jet A-1 fuels delivered by the depots differs from the volume actually received by the respective ITPs and refueller, as provided below: Comparison of Depots LS Issuances with SAP PMMT- Issuances and Depot/ITP/ Refueller LS

Receipts (Volume in Liters)

Per SAP

Total Issuances-

Per Depot LS PMMT-

Per

Depots

-Issuances

Issuances

Depots/IT Psi

Direct to Depots/

Exhibit

Subject to

Related to

Refueller LS- Delivery to

ITPs/Refueller

No.

Claim

Claim

~ifference

Receipts

Customers

Davao depot to Davao

P-253-

4,345,110

ITP

Imported

4,345,110 4,345,110 Iloilo depot to:

lloi1o lTP

P-254-

Imported

300,000 300,000 300,000 Mactan depot

P-254-5-

Imported

40,000 40,000 40,000

Kalibo ITP

P-255-

lm~orted 2,441,755 2,411,755 30,000 2,471,755 2,781,755 2,751,755 30,000 2,811,755 SL Harbor depot to:

171 172

P-256-

80,832,471 JOCASP/NAIA depot Imported 80,832,471 80,832,471

P-257-

38,000

Laoag ITP

Imported

38,000 38,000 (_ 80,870,471 80,870,471 80,870,471 7 Consolidated I CPA Report, Exhibit P-189-imported. Exhibits "P-253-1-imported to P-253-5-imported", "P-254-1-imported to P-254-4-imported", "P-254- 5-1-imported", "P-255-1-imported to P-255-4-imported", "P-256-1-imported to P-256-55-imported", "P-258-1-imported to P-258-20-imported" and "P-259-1-imported to P-259-2-imported", "P-257-1- imported to P-257-2-imported", "P-260-1-imported to P-260-3-imported".

Difference

(30,000) (30,000)

Navotas depot to

P-258-

JOCASP/NAIA depot Imported 24,893,090 24,893,090 Rosario depot to JOCASP/NAIA depot

P-259-

Imported

80,000 80,000 Mactan depot to

P-294-

Customers

Imported

10,138,509 10,138,509 Palawan depot to

P-295-

Customers

Imported

10,658 10,658 Zamboanga depot to

P-260-

Zamboanga refueller

Imported

1,719,555 1,719,555

Total

124,839,148 124,809,148 24,893,090 80,000 10,138,509 10,658 1,719,555 30,000 114,719,981 10,149,167 Thus, the volumes and amounts of imported Jet A-1 fuel removed from the PBR to petitioner's depots then subsequently transferred to other depots, ITPs, and refuellers are accurate and properly supported, aside from those noted variances which are summarized at the end of this Decision. The imported Jet A-1 fuel was sold and delivered to various air carriers of Philippine or foreign registry for the latter's use or consumption outside the Philippines and to alleged tax-exempt entities.

To reiterate, petitioner prepares and generates the Sis under its SAP,173 in accordance with the commercial terms and orders stated in the respective contracts executed between the Petitioner and the airline companies. The summary of ADRs174 covering the period billable to the airline companies forms an integral part of the SI as proof that the volumes of imported Jet A-1 fuels were delivered to the air carriers. All Sis involving sales of imported tax-paid Jet A-1 to air carriers of Philippine or foreign registry on their use or consumption outside the Philippines and to tax-exempt entities shall carry a "No Excise Tax Billed" notation, while an invoice involving the sale of imported tax-paid Jet A-1 fuels to air carriers for domestic flights does not carry such notation_l75 (30,000) Furthermore, the amounts per SI for sale of imported Jet A-I fuels to international air carriers on their use or consumption outside the Philippines / and to tax-exempt entities are dollar-denominated and translated to Philippine_...........

peso using the prescribed rates by petitioner, which are in accordance with the contract and adjusted at end of the month in the SAP based on Philippine Dealing System rate. 176 Petitioner also prepares the LS indicating the disposition of the Jet A-1 fuels received.177 The LS shows the source of the Jet A-1 fuel, whether it came from importations or local production, and where the Jet A-1 fuels were delivered, either international or domestic deliveries. 178 Thus, based on the LS, it was determined that the Jet A-1 fuel delivered to international air carriers on their use or consumption outside the Philippines and to tax-exempt entities were sourced from importations for the period from 23 December 2015 to 31 December 2016. The following table summarizes the LS movements for the receipts and issuances of imported Jet A-1 fuel: 179 LS Movements- Recei ts and Issuances (Volume in Liters): Per

Per LS- Issuances

Depots/ITPs/

Direct

Depots/ITPs/ Exhibit

Refueller LS Delivery to

Subject to

Not Subject

Total

Refueller

No.

-Receipts

Customers

Claim to Claim

P-262-

2,702,601

Davao ITP

Imported

4,345, II 0 I ,642,509 4,345,110

P-263-

144,944

Iloilo ITP

Imported

300,000 155,056 300,000

P-263-1-

Mactan depot

Imported

40,000 40,000 40,000

Kalibo ITP

P-264-

2,471,755

Imported

2,471,755 2,344,015 127,740

JOCASP/NAIA

depot

P-265-

I 05,805,561

Imported

I 05,805,561 84,963,216 20,842,345

Laoag ITP

P-266-

38,000

Imported

38,000 29,360 8,640 Mactan depot

P-242-

10,138,509

Imported

- 10,138,509 10,138,509 Palawan depot

P-243-

I 0,658

Imported

10,658 10,658

Zamboanga

P-267-

1,552,661 refueller

Imported

1,719,555 166,894 1,719,555 124,869,148

Total

114,719,981 10,149,167 99,490,217 25,378,931 Thus, the imported Jet A-1 fuel was sold and delivered to various air carriers of Philippine or foreign registry for the latter's use or consumption / outside the Philippines and to alleged tax-exempt entities, except for certain/ 176 Consolidated I CPA Report, Exhibit "P-189-imported"; Judicial Affidavit ofMa. Clarissa C. Arguelles, dated 25 October 2018, Exhibit "P-170-imported". 177 Judicial Affidavit of Allan James T. Tenorio, dated 25 October 2018, Exhibit "P-174-imported". 178

Ibid

CT A Case Nos. 9738 & 97 41 variances noted by the ICPA and which is summarized at the end of this Decision.

The imported Jet A-I fuel was billed and collected net of excise tax.

The deliveries of imported Jet A-1 fuel were billed and collected from alleged international carriers and tax-exempt entities without any excise tax. In arriving at this conclusion, this Court compared the details per ADRs of the depots, ITPs and refueller to the corresponding Sis billed to airline companies. After which, the details of the Sis are traced to the pricing conditions in petitioner's SAP. The tracing resulted in the following table: 180 Further, petitioner's SI tied up with the SAP pncmg conditions, showing that it did ngrcharge any excise tax to international carriers and tax- exempt entities:fl!l/.

ADR vs SI·

Exhibit No.

Point of Sale

P-277-lmported Davao ITP P-278-lmported Iloilo lTP P-279-lmported Kalibo lTP P-280-lmported JOCASP/NAlA

Depot

P-281-lmported Laoag lTP P-282-lmported Mactan Depot P-283-lmported Palawan Depot P-284-lmported Zamboanga

Refueller

Total

ADR

Volume

(In Liters)

1,494,475 155,056 2,328,608 84,974,058 29,360 10,178,509 10,658 166,894 99,337,618

SI

SAP P. .

C d'.

VS.

ncmg on Ilion:

Sl

Exhibit No.

Point of Sale

USD Amount

P-277-lmported Davao ITP US$746,430.67 P-278-lmported Iloilo ITP 108,926.64 P-279-lmported Kalibo ITP 2, 184,136.70 P-280-lmported JOC ASP/

NAJA

Depot

80,588,823.93 P-281-lmported Laoag ITP 16,836.16 P-282-1 mported Mactan

Depot

I 0,355,665.81 P-283-lmported Palawan

Depot

5,334.64 P-284-lmported Zamboanga

Refueller

59,734.96

Total

US$94,065,889.51

Sl

Volume (In Liters)

Related to Not Related I

Equivalent

Claim to Claim

Total

USD Amount

1,494,475 251,122 1,745,597 US$746,430.67 155,056 95,334 250,390 108,926.64 2,328,608 2,545,837 4,874,445 2, 184, 136.70 84,974,058 142,580,521 227,554,579 80,588,823.93 29,360 3,556 32,916 16,836.16 10,178,509 16,633,021 26,811,530 10,355,665.81 10,658 10,658 5,334.64 166,894 166,894 59,734.96 99,337,618 162,109,391 261,447,009 US$94,065,889.51

SAP Prici~ Condition

Duty I Total USD

Equivalent

USD Amount

Rate*

Amount

Peso Amount

US$746,430.67 US$ - US$746,430.67 1'35,028,291.61 108,926.64 108,926.64 5,087,546.48 2, 184,136.70 2,184,136.70 I 02,316,146.54 80,588,823.93 80,588,823.93 3,773,033,688.44 16,836.16 16,836.16 791,893.70 10,355,665.81 10,355,665.81 486,509,800.33 5,334.64 5,334.64 250,503.33 59,734.96 59,734.96 2,782,216.59 US$94,065,889.51 US$ - US$94,065,889.51 1'4,405,800,087.02 • Duty rate pertains to excise tax billed to customers. To reiterate, collections of SAP-generated Sis are made through inward remittances by petitioner's customers, which normally cover the payment of several invoices. However, for the airline company and tax-exempt entities that do not provide details of the invoices against which the collection would be applied, petitioner applies the collection on the outstanding invoices on a first-in, first-out basis.182 A verification of the amount of collection per SAP clearing, inward remittances/bank advices, ORs, and bank certifications will show that these reconcile with the amount billed to the airline compa~ies d tax-exempt entities and proves that petitioner has not collected any ex se tax from its customers.183 The same is proven by the following table· 182 Consolidated I CPA Report, Exhibit "P-189-imported"; Judicial Affidavit of Allan V. Peczon, dated 25 October 2018, Exhibit "P-173-imported".

183

Ibid

SI vs. SAP Clearing and Inward Remittance/Bank Certification/OR:

Particulars

Per SI

Per Collection documents:

Per SAP Clearing

Per Inward Remittance/Bank

Certifications/OR

Petitioner

adduced competent evidence showing that the buyers of its petroleum products are international carriers and tax- exempt entities.

Amount

_{in USD)

US$94,065,889.51 94,065,889.51 94,065,889.51

Amount

(in Peso)

P4,405,800,087.02 4,405,800,087.02 4,405,800,087.02 To repeat, one of the instances where Section 135 of the NIRC grants an exemption from excise tax on petroleum products is if the buyer of the petroleum product is an international carrier whose country similarly exempts Philippine international carriers.

In the case at bar, petitioner presented the various Air Services Agreements which the Philippines has with the countries of registry of all the international carriers which it transacted with for the sale of Jet A- I fue1. 184 A perusal of said Agreements reveals that the countries of registry similarly provide an exemption from excise tax on the petroleum products sold to international carriers of Philippine registry. Thus, any sale of petroleum products to these international carriers are likewise exempt from excise tax. With respect to the sale of Jet A-1 fuel and unleaded gasoline fuel to alleged tax-exempt entities, petitioner presented evidence185 showing that the entities which purchased such petroleum products are indeed exempt from excise tax on petroleum products.

Following this, petitioner has indeed proven that it sold petroleum products to international carriers and tax-exempt entities. It i,s thus entitled to the refund sought pertaining to erroneously paid excise,{ax on petroleum products as provided under Section 185 of the NIRC.Y

Petitioner's refund claim must be reduced due to certain unexplained variances noted by the ICPA.

In the course of her audit and inspection of petitioner's voluminous documents submitted in support of the present refund claim, the ICPA noted certain variances which petitioner failed to explain. This Court is thus constrained to deduct these unexplained variances from the total amount which can be refunded or credited in favor of petitioner. The variances are summarized, as follows: 186 CTA Case No. 9738 CTA Case No. 9741

Consolidated

Jet A-I Fuel

Jet A-1 Fuel

Unleaded Gasoline Fuel

Amount

Amount

Amount

Volume

(At 1'3.67 per

Volume

(At 1'3.67 per

Volume

(At 1'4.35 per

Total

Particulars

(In Liters)

Liter)

I (In Liters)

Liter)

I (In Liters)

Liter)

Amounts

Amount of Claim Per Schedule of

Excise Tax Paid/ Petition for

Review

99,501,062 1'365. I 68,897.54 7,728,768 1'28,364.578.56 865,070 1'3,763,054.50 1'397,296,530.60 Less downward adjustments:

Not traced to WC- Mactan de rot 159,329 584,737.43

NA

NA

NA

NA

584.737.43 Not traced to SAP PMMT-

Issuances- Kalibo ITP

30.000 I 10, !00.00

NA

NA

NA

NA

I 10.100.00 Not traced to Iloilo LS-

Issuances- Kalibo ITP

30,000 I 10,100.00

NA

NA

NA

NA

I 10,100.00 Sales/Deliveries to local destinations:

Davao ITP

148,034 543,284.78

NA

NA

NA

NA

543,284.78 Kalibo !TP I 5,407 56,543.69

NA

NA

NA

NA

56.543.69 Sales/Deliveries sourced from importation not subject to claim:

JOCASP/NAIA de~ot 10,842 39,790.14

NA

NA

NA

NA

39,790.14

Difference of Sales/Deliveries per Schedule of Claim and

Actual LS- Issuance;

Davao ITP

3 I 1.01

NA

NA

NA

NA

I 1.0 I PBR Removals from 2015 considered as out of ~eriod

NA

NA

199,942 733,787.14 733.787.14

NA

NA

199,942 733.787.14 733.787.14

(Fomardedj

(Balance forwarded) Sales/Deliveries to domestic air carriers \Vith local destination:

JOCASP/NAIA de~ot

NA

NA

20,980 76,996.60 76.996.60 Mactan de~ot

NA

NA

64,049 235,059.83 235,059.83

Kalibo ITP

NA

NA

4,305 I 5,799.35 15,799.35 DMIA/Clark deeot

NA

NA

5.521 20,262.07 20.262.07 94,855 348, I I 7.85 348, I I 7.85 Total downward adjustments 393,615 1,444,567.05 294,797 1,081.904.99 2.526.472.04

Total

99,107,447 1'363, 724,330.49 7,433,971 1'27,282,673.57 865,070 1'3, 763,054.50 1'394,770,058.5~

CTA Case Nos. 9738 & 974 I

Accordingly, petitioner's refund claim is granted up to the following amounts:

CTA

Case No.

9738 9741

Particulars

Claim for refund or issuance of TCC pertaining to imported tax-paid Jet A-1 fuel Claim for refund or issuance of TCC pertaining to locally manufactured tax-paid Jet A-1 and unleaded gasoline fuels

Total

Amount

1'363,724,330.49 31,045,728.07 P394, 770,058.56

WHEREFORE, the consolidated Petitions for Review filed by petitioner Petron Corporation are hereby PARTIALLY GRANTED. Respondent is ORDERED to refund or issue a tax credit certificate in favor of petitioner in the reduced amount of Three Hundred Ninety Four Million Seven Hundred Seventy Thousand Fifty Eight and 56/100 Pesos (Php394,770,058.56) representing erroneously paid excise tax on petroleum products sold to international carriers and tax-exempt entities.

I CONCUR:

/-' -~;1tyfA 1 ~"'

MARIA ROWENA MODESTO-SAN PEDRO

Associate Justice

--'"" --- MA. BELEN M. RINGPIS-LIBAN

Associate Justice

DECISIOI'>

ATTESTATION

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

Pv. ~ _.,_ <...___ MA. BELEN M. RINGPIS-LIBAN

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 Decision were reached in consultation before the cases were assigned to the writer of the opinion of the Court.

Presiding Justice