Philippines Airlines, Inc. vs. Commissioner of Internal Revenue

DECISION

ANGELES, J.:

The case at bar assails the Decision 1 dated May 30, 2023 2 (assailed Decision) and Resolution3 dated October 4, 20234 (assailed Resolution), both issued by the Court of Ta}{ Appeals (CTA) Special First (1st) Division (Court in Division) in CTA Case No. 10311. In its Petition for Reviews, petitioner Philippine Airlines, Inc. prays for the reversal of the denial of its claim for refund or application for ta}{ credit certificate in the amount of PhP20,059,948-44, representing e}{cise ta}{es on importations of liquor and tobacco that were paid under protest on August 3, 2019.

CTA EB No. 2811 (C.T.A. Case No. 10311)

FACTS

Petitioner Philippine Airlines, Inc. (PAL) is a corporation duly organized and existing under the laws of the Republic of the Philippines with registered address at PNB Financial Center, President Diosdado P. Macapagal Ave., CCP Complex, 1307, Pasay City.6 Respondent is the duly appointed Commissioner of Internal Revenue of the Bureau of Internal Revenue (BIR), a government agency tasked with the assessment and collection of all national internal revenue taxes, fees, and charges, including excise taxes paid on liquor and tobacco products under Sections 142 and 145 of the National Internal Revenue Code (NIRC) of 1997, as amended.? On June 11, 1987, petitioner was granted a franchise to operate air transport services domestically and internationally by virtue of Presidential Decree (PD) No. 1590, otherwise known as "An Act Granting a New Franchise to Philippine Airlines, Inc. to Establish, Operate, and Maintain Air-Transport Services in the Philippines and Other Countries". a Section 13 thereof granted petitioner an exemption from the payment of all taxes, duties and other fees, and charges of any kind or nature on all importations of commissary and catering supplies, among others, and imported articles, supplies or materials for use in its transport and non-transport operations.9 For the period beginning August 2014 until February 2018, petitioner imported various kinds of liquor and tobacco as part of its in-flight and commissary supplies.

The Bureau of Customs (BOC) demanded in separate letters the payment of excise taxes that amounted to a total of PhP20,059,948-44 for petitioner's importation of liquor and tobacco products. The following is a summary of the demands:

6 EB Docket, p. 2.

'EB Docket, p. 52.

Date Ofthe letter February 27, 2018 March 2, 2018 March 2, 2018 Aoril13, 2018 Apri113, 2018 Aoril13, 2018 Mav 24,2018 Mav 24,2018 May 24,2018 s Div Docket, Vol. III, p. 1836.

9 PD No. 1590, Section 13.

Amount demanded (PhP) 2,030,645.28 1,583,077.91 1,453,430.94 1,754,759·73 1,973,623.38 2,376,473·57 1, 783,716.24 3,219,267.24 1,927,120.50

CTA EB No. 2811 (C.T.A. Case No. 10311)

On August 3, 2018, petitioner paid under protest the taxes on its importations of liquor and tobacco products in the total amount of PhP20,059,948-44, which was documented as follows:

BOC Official Receipt Number

Amount paid (PhP) 01893415719 13,129,844-46 01893415720 6,930,103-98 On July 30, 2020, petitioner filed with the BIR a letter to request for the refund or the issuance of a tax credit certificate for the amount of PhP20,059,948-44, representing excise taxes allegedly illegally assessed, levied upon, and paid by petitioner under protest on its importation ofliquor and tobacco products that constituted part of its commissary and catering supplies.

On August 3, 2020, petitioner filed a Petition for Review with the Court of Tax Appeals (CTA).

During trial, petitioner offered the testimonies of (¹) Mr. Jonathan R. Castillo Lee 10 , the Manager for petitioner's Company Materials Handling Division, (²) Mr. Ruel Ryan 0. Julian 11 , the Manager for petitioner's Tax Services Division, and (³) Ms. Cheryl V. Capinpin12, the Manager of petitioner's In-flight Materials Purchasing Division.

Respondent opted not to present evidence.'3 After filing of their respective memorandums 14, the Court in Division rendered the assailed Decision on May 30, 2023, as follows:

WHEREFORE, in light of the foregoing considerations, the present Petition for Review is DENIED for lack of merit.

WHEREFORE, petitioner's Motion for Reconsideration (Re: Decision dated 30 May 2023) is DENIED for lack of merit.

ISSUE

Petitioner assigns the following error upon the Court in Division: Whether the Court in Division erred in dismissing the Petition for Review on the ground that petitioner failed '' Div Docket, Vol. IV, pp. 2877- 2900.

>7 Div Docket, Vol. IV, p. 2922.

18 EB Docket, pp. 1 - 42.

'' EB Docket, p. 94.

CTA EB No. 2811 (C.T.A. Case No. 10311) to establish that its importations were not locally available in reasonable quantity, quality, or price20

RULING OF THE COURT

The Petition for Review before the Court En Bane was timely filed.

Petitioner received a copy of the assailed Resolution on October 9, 2023. 21 Petitioner, thus, had fifteen (15) days from such receipt or until October 24, 2023 to avail of the remedies provided by law. 22 On October 24, 2023, petitioner timely filed the instant Petition for Review. 23 Petitioner failed to prove that the imported products were not locally available in reasonable quantity, quality, or price.

To enjoy the tax privilege under Section 13 of PD No. 1590, petitioner must show compliance with the following: SEC. 13.

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

(a) The basic corporate income tax based on the grantee's annual net taxable income computed in accordance with the provisions of the National Internal Revenue Code; or 20 EB Docket, p. 7.

"EB Docket, p. 6.

"Revised Rules of the Court of Tax Appeals (RRCTA), Rule 8, Section 3(b) reads as follows:

Procedure in Civil Cases

Sec. 3· Who may appeal; period to file petition.

XXX

XXX

XXX

(b) A party adversely affected by a decision or resolution of a Division of the Court on a motion for reconsideration or new trial may appeal to the Court by filing before it a petition for review within fifteen days from receipt of a copy of the questioned decision or resolution. Upon proper motion and the payment of the full amount of the docket and other lawful fees and deposit for costs before the expiration ofthe reglementary period herein fixed, the Court may grant an additional period not exceeding fifteen days from the expiration of the original period within which to file the petition for review.

'' EB Docket, p. 1.

CTA EB No. 2811 (C.T.A. Case No. 10311)

)(--------------------------------------------------}( (b) A franchise tax of two per cent (2%) of the gross revenues derived by the grantee from all sources, without distinction as to transport or non[-]transport operations; provided, that with respect to international air-transport service, only the gross passenger, mail, and freight revenues from its outgoing flights shall be subject to this tax.

The tax paid by the grantee under either of the above alternatives shall be in lieu of all other taxes, duties, royalties, registration, license, and other fees and charges of any kind, nature, or description, imposed, levied, established, assessed, or collected by any municipal, city, provincial, or national authority or government agency, now or in the future, including but not limited to the following:

(2) All taxes, including compensating taxes, duties, charges, royalties, or fees due on all importations by the grantee of aircraft, engines, equipment, machinery, spare parts, accessories, commissary and catering supplies, aviation gas, fuel, and oil, whether refined or in crude form and other articles, supplies, or materials; provided, that such articles or supplies or materials are imported for the use of the grantee in its transport and transport operations and other activities incidental thereto and are not locally available in reasonable quantity, quality, or price (Emphasis supplied) In summary, petitioner must prove the following conditions:

1. Payment of the corporate income tax;

2. The articles, materials, or supplies are imported for the use of the franchisee in its transport or non-transport operations and other incidental activities; and

3. The imported articles, materials, or supplies are not locally available in reasonable quantity, quality, or price.

CTA EB No. 2811 (C.T.A. Case No. 10311)

The Court in Division found that petitioner successfully proved the first and second conditions. It, however, found that petitioner failed to prove compliance with the third condition. Petitioner prays for the refund of excise taxes paid on importations consisting of (i) liquor and (ii) tobacco products. As correctly observed by the Court in Division, petitioner failed to adduce any evidence regarding the price of tobacco products in the local market.z⁴ While Ms. Capinpin testified on the importations by PAL of tobacco products, petitioner failed to present any evidence to prove that the subject tobacco products were not available in reasonable quantity, quality, or price.

Regarding its importation of alcohol products and its allegation that the imported alcohol products were not locally available in reasonable quantity, quality, or price, petitioner offered the following pieces of evidence: (1) the Judicial Affidavit of Ms. Cheryl V. Capinpin2s, petitioner's Manager for In-flight Materials Purchasing Division; (2) the 2014 and 2015 Price Lists of Absolute Sales Corporation26; (3) 2013, 2014, 2015,2016, 2017, and 2018 of Future Trade International Travel Retail27; (4) 2014, 2015, 2016, 2017, and 2018 Price Lists of Minivan Enterprise 28 ; (5) 2016 and 2017 Price Lists of AB Heineken Phils., Inc. 29; and (6) BIR's Price List per Revenue Memorandum Circular (RMC) No. 90-2012.3° After a review of the records of the case and petitioner's arguments, the Court En Bane finds no reason to disturb the findings of the Court in Division. The Court En Bane agrees that the evidence presented by petitioner is not sufficient to prove that the subject products are not available locally in reasonable quantity, quality, or price. The Court is not convinced that the price lists represent the local market price for the entire country.

It is a basic rule in evidence that each party must prove its affirmative allegations.31 In civil cases, such as the present tax refund case, the party having the burden of proof must establish its case by preponderance of evidence. Section 1, Rule 133 of the 2019 Revised 24 Div Docket, Vol. IV, pp. 2847- 2848.

'' Div Docket, Vol. II, pp. 1313- 1325; Vol. III, pp. 1912- 1914. ' 6 Div Docket, Vol. III, pp. 2411- 2416. "Div Docket, Vol. III, pp. 2417-2467.

28 Div Docket, Vol. III, pp. 2468- 2472. "Div Docket, Vol. III, pp. 2473- 2477.

3° Div Docket, Vol. III, pp. 2473- 2477· 3' Commissioner of Internal Revenue v. Traders Royal Bank, G.R. No, 167134, March 18,2015.

CTA EB No. 2811 (C.T.A. Case No. 10311)

Rules on Evidence discusses the manner how preponderance of evidence is determined, to wit:

Section

1.

Preponderance of evidence, how determined. - In civil cases, the party having the burden of proof must establish his or her case by a preponderance of evidence. In determining where the preponderance or superior weight of evidence on the issues involved lies, the court may consider all facts and circumstances of the case, the witnesses' manner of testifying, their intelligence, their means and opportunity of knowing the facts to which they are testifying, the nature of the facts to which they testify, the probability or improbability of their testimony, their interest or want of interest, and also their personal credibility so far as the same may legitimately appear upon the trial. The court may also consider the number of witnesses, though the preponderance is not necessarily with the greater number. (Emphasis supplied) It is the burden of petitioner to present evidence to prove its entitlement to tax refund. Petitioner highlights that it compared the price of the imported products with the price lists provided by approximately four (4) local suppliers. It insists that the quotations from such suppliers are sufficient to prove its case. The argument, however, fails to convince as this Court and the Court in Division looked into the quality of the evidence presented and not simply on the quantity of evidence.

It is a well-settled rule in tax refund cases that the taxpayer has the burden to prove by sufficient and competent evidence its entitlement to a claim for refund.3 2 The mere fact that respondent did not present any evidence or to refute the evidence presented by the petitioner does not ipso facto entitle petitioner to a tax refund. It is not the duty of the government to disprove a taxpayer's claim for refund. Rather, the burden of establishing the factual basis of a claim for refund rests on the taxpayer.33 ''Philippine Geothermal, Inc. v. Commissioner of Internal Revenue, G.R. No. 154028, July 29, 2005.

CTA EB No. 2811 (C.T.A. Case No. 10311)

Ms. Capinpin revealed in her testimony the manner how the price lists were obtained. The following are relevant portions of her Judicial Affidavit, which served as her direct testimony: 8.

Q: Why do you say that importing the said catering and commissary supplies are cheaper and reasonably priced than purchasing them locally?

A: I have compared the local prices and the importation costs for the alcohol products. Upon comparison of these prices, it is easily determinable that importing these products are way cheaper than purchasing them locally.

9.

Q: How do you compare the local prices and importation costs?

A: I have prepared a Table of Comparison to show the complete comparison of prices for the alcohol products imported by PAL for the period August 2014 to February 2018. 34 (Emphasis supplied) Her testimony was subjected to cross-examination, wherein it was revealed that there were other local suppliers of the products from whom they failed to secure price quotations. Relevant portions of which are as follows:

ATIY. BABARAN:

Q

Now, aside from Minivan and AB Heineken did you make any requests from other suppliers of alcohol products?

MS. CAPINPIN:

A

Yes I did, Ma'am. Unfortunately, the suppliers did not respond to the requests and did not submit the Price List that we requested. ATIY. BABARAN:

Q

May I know, Ma'am, what are these stores?

CTA EB No. 2811 (C.T.A. Case No. 10311)

MS. CAPINPIN:

A

We particularly requested from Duty Free Philippines, from Philippine Wine Merchants, but unfortunately we did not receive any response.

ATIY. BABARAN:

Q

Was it done through a letter and you made the request, you signed the same or any other from your staff? Any other person?

MS. CAPINPIN

A

I made a request through phone for the Philippine Wine Merchants.

ATIY. BABARAN:

Q

So, it is only through phone, it's not a formal request?

MS. CAPINPIN

A

Yes

ATIY. BABARAN:

Q

What about from Duty Free?

MS. CAPINPIN

A

From Duty Free Philippines, we made a written request, however, they did not respond.3s (Emphasis supplied) The answers of Ms. Capinpin in her direct and cross examination necessitated clarificatory questions from the Court in Division regarding the manner the price lists were obtained. It was noteworthy that there were instances when petitioner informally requested for price quotations. Upon further inquiry, Ms. Capinpin's answers revealed that there was no effort on the part of the petitioner to make an actual purchase that would allow local suppliers to match the price of the imported products. There was also no genuine effort to inquire on the possibility of securing prices that were competitive with the price of the imported products. The following are the relevant portions of Ms. Capinpin's testimony, to wit:

CTA EB No. 2811 (C.T.A. Case No. 10311)

JUSTICE DEL ROSARIO:

Yes.

Just a few clarificatory questions.

Ms. Capinpin, follow-up on the cross-examination conducted by the respondent. Did I understand you correctly that the basis of the prices you mentioned in your Judicial Affidavit are all based on queries without actual purchase of the products? They are just based on queries? MS. CAPINPIN:

A

Yes, your Honors.

JUSTICE DEL ROSARIO:

Comparison from what is being sent to you, which is not under oath at that time and which is just listed, but there's actually no negotiations ever conducted between Philippine Airlines, as well as the supposed suppliers? MS. CAPINPIN:

A

There was no negotiation at that time, your Honors, because we have seen it, the prices from the local suppliers were already very high and as compared to the imported (inaudible).

JUSTICE DEL ROSARIO:

I'm sure you are aware that the listed price is always different from the actual purchase of any commodity by a buyer, is it not?

MS. CAPINPIN:

A

Yes, your Honors.

JUSTICE DEL ROSARIO

So, ordinarily, even if you look into online sales when there is an actual bulk purchase the price is always

CTA EB No. 2811 (C.T.A. Case No. 10311) different from what is listed. That is an ordinary practice oftrade. You are aware of that? MS. CAPINPIN

A

Yes, your Honors, I am aware ofthat.

JUSTICE DEL ROSARIO:

. . . . . . So there has been no instance in writing wherein you already indicated in your letter to the supplier that you are willing to purchase several beverages if they are willing to pay or to sell at a price that you already have in mind, which is lower tha[n] the imported product? MS. CAPINPIN:

A:

Your Honors, we do send e-mails to negotiate and asked them to give the best price.

JUSTICE DEL ROSARIO:

Only the best price?

MS. CAPINPIN:

A

The best price.

JUSTICE DEL ROSARIO:

But you never give them a pnce lower tha[n] the imported cost?

MS. CAPINPIN:

A

No, your Honors. We don't mention any price to them. We just give them the liberty to propose to us the best price,36 (Emphasis supplied) Evidence to be believed must not only proceed from the mouth of a credible witness, it must be credible in itself - such that common experience and observation of mankind can approve as probable under the circumstances. 37 By petitioner's own admission, it had been importing the same products over the years and had been applying for the refund of excise taxes imposed on similar products.38 Considering

CTA EB No. 2811 (C.T.A. Case No. 10311) that petitioner has been importing the same products, the clarificatory questions of Honorable Presiding Justice Del Rosario are relevant to shed light on the manner the price lists were obtained and the efforts exerted by petitioner to determine the availability of the subject products in the local market.

The observations of the Court in Division regarding the testimony of petitioner's witness must be accorded respect since it had first-hand account on the manner she testified in court and her demeanor during trial. As aptly observed by Honorable Presiding Justice Del Rosario, the lack of genuine effort to secure competitive pricing from local suppliers reveals that the practice of petitioner to request quotations from local suppliers were merely pro-forma. Honorable Presiding Justice Del Rosario made the following observation:

JUSTICE DEL ROSARIO:

The point is, I'm asking you there is already a specific price because [you have] already made all these transactions in the past. So, if it is just a pro-forma practice that you get the list but certainly you already know that the price is only going to be used for the purpose of the request but there is already in your mind a pre-determination to purchase from abroad.

That's why the Court would like to ascertain whether you are doing the right thing because there are certain government interests here, there are tax impositions. So, in fairness to you and in fairness to the government, that's why the question is like that ..... .

JUSTICE DEL ROSARIO:

Anyway, more or less the Court understands now why you have been making the importations. Only, you are making the importations because you get hold of a price list from sources. From sources wherein in the past you have already determined that the prices are always higher. And, since in the past the prices are always higher[,] you never dared to write them in writing to lower the price so that you will be able to purchase locally.39 (Emphasis supplied)

CTA EB No. 2811 (C.T.A. Case No. 10311)

From the testimony of petitioner's witness, it is observed that there is lack of diligent effort on the part of petitioner to study the availability of local products and the reasonableness of their prices from other local suppliers. The witness' testimony and other pieces of evidence presented by petitioner does not convince the Court that the imported products were not locally available in reasonable quantity, quality, or price at the time of importation. It is doubtful that petitioner's Table of Comparison and its presented price lists represent the local market prices for the subject products. It cannot be concluded that the comparison made by petitioner is sufficient to entitle it to a tax refund.

Moreover, not all prices of the imported products were compared with the prices offered by local suppliers. A perusal of the Table of Comparison reveals that it had eighty (So) entries of imported alcohol but only forty five (45) entries were compared with the prices from local suppliers.4° Petitioner failed to explain why it failed to do so. This further supports the finding that petitioner failed to exert diligent effort to study the availability oflocal products and the reasonableness of prices from local suppliers.

Petitioner cites previous similar cases wherein the Court ruled favorably upon petitioner after it presented pricelists from one or two suppliers. The Supreme Court has previously held that CTA Decisions do not constitute precedents and do not bind this Court nor the public.41 Every case is evaluated and decided based on the evidence presented.

It has been consistently held that actions for tax refund, as in the instant case, are in the nature of a claim for exemption and the law is construed strictissimi juris against the taxpayer. Similarly, pieces of evidence presented entitling a taxpayer to an exemption is also strictly scrutinized and duly proven. In Paseo Realty & Development Corporation v. Court of Appeals, et al., the Supreme Court ruled: Taxation is a destructive power which interferes with the personal and property rights of the people and takes from them a portion of their property for their support of the government. And since taxes are what we pay for civilized society, or are the lifeblood of the nation, the law frowns against exemptions from taxation and statutes granting tax exemptions are thus construed 4o Div Docket, Vol. III, pp. 2409- 2410. ''San Roque Power Corporation v. Commissioner of Internal Revenue, G.R. No. 203249, July 23, 2018.

CTA EB No. 2811 (C.T.A. Case No. 10311) strictissimi juris against the taxpayer and liberally in favor of the taxing authority. A claim of refund or exemption from tax payments must be clearly shown and be based on language in the law too plain to be mistaken. Elsewise stated, taxation is the rule, exemption therefrom is the exception.42 (Emphasis supplied) All told, petitioner has not presented any argument that convinces this Court to reverse or modify the findings of the Court in Division that denied petitioner's claim for refund. For having failed to present sufficient and convincing evidence to prove that the imported subject products were not locally available in reasonable quantity, quality, or price at the time of importation, petitioner failed to fulfill all conditions to be entitled to the tax exemption granted under Section 13 of PD No. 1590. Consequently, the Court finds no erroneous or illegal excise taxes to be refunded in favor of petitioner.

WHEREFORE, the instant Petition for Review is DENIED for lack of merit. The Decision dated May 30, 2023 and Resolution dated October 4, 2023 in CTA Case No. 10311 are AFFIRMED.

WE CONCUR:

HENRY itGELES

Associate Justice

0

Presiding Justice

~.~ -l'--- (With due respect, please see Concurring and Dissenting Opinion) MA. BELEN M. RINGPIS-LIBAN

Associate Justice

'' Paseo Realty & Development Corporation v. Court of Appeals, G.R. No. 119286, October 13, 2004.

CTA EB No. 2811 (C.T.A. Case No. 10311)

~' T-./,t.-• ~~A---­ CATHERINE T. MANAHAN

Associate Justice

r ~~f. ~

-F~·~~

(I reiterate mfconcurrmg and Dissenting Opinion in the challenged Decision) MARIAN IVY F. REYES-FAJARDO

Associate Justice

(With due respect, I join ~!:t!l~e Ma. Belen M. Ringpis-Liban's

Concurring and Dissenting Opinion)

LANEE S. CUI-DAVID

Associate Justice

~-~··~ (With due respec ssoc't&.te Justic Ma. B en M. Ringpis-Liban in h rring and Dissenting_ pinion) CORAZON G. FE

- LORES

Associate Justice

CTA EB No. 2811 (C.T.A. Case No. 10311)

CERTIFICATION

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

0

Presiding Justice

REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

ENBANC

PHILIPPINE AIRLINES, INC., Petitioner, -versus-

COMMISSIONER OF INTERNAL

REVENUE, Respondent.

Present:

Del Rosario, P.J., Ringpis-Liban, Manahan, Bacorro-Villena, Modesto-San Pedro, Reyes-Fajardo, Cui-David, Ferrer-Flores, and Angeles,JL

Promulgated:

X--------------------------------------------------------------------------- --------------------X

CONCURRING AND DISSENTING OPINION

RINGPIS-LIBAN,.L;

I concur with the ponencia of Associate Justice Henry S. Angeles insofar as it ruled that petitioner failed to prove that the tobacco products it imported were not locally available in reasonable quantity, quality, or price at the time of importation in order for the same to enjoy the tax exemption privileges under Presidential Decree (PD) No. 1590, as amended. However, I dissent insofar as the imported alcohol products are concerned for the reasons stated below. The present case is not the first time this Court is confronted with the question of sufficiency of evidence for purposes of establishing that petitioner's imported articles are not locally available in reasonable quantity, quality, or price. Enumerated below are the cases, albeit covering different taxable periods, wherein this Court ruled that petitioner was able to sufficiently r/

CONCURRING AND DISSENTING OPINION

CTA EB No. 2811 (CTA Case No. 10311)

Page 2 of 6

establish that its imported articles are not locally available in reasonable quantity, quality, or price on the basis of local prices reflected in the price lists submitted bv two (2) suppliers or, in some cases, even from only one (1) supplier, to wit:

Case Number

CTA

Case

Nos.

7677, 7685 & 7746

(Dated

,\pril 25, 2013) as affirmed in CTA EB Nos. 954 &

1046 (Dated October

14, 2014)

CTA

Case

Nos.

7665 & 7713 (Dated

April 17, 2012) as affirmed in CTA EB Nos. 920 & 922

Evidence Presented

1. Judicial Affidavit of Mr. Victor Santos, PAL's Assistant Vice President in charge of the

Catering and In-flight Sub-

department;

2.

Philippine Wine Merchants'

Price List for 2005 and 2006;

3.

lvlonthly Philippine Dealing Systems rates for the year 2005- 2006.

1. Testimony of 1\Ir. Andy Li, P,-\L's Vice-President for

Corporate Logistics and

Services Department;

(Dated September 9,

2. Letter addressed to Atty. Oscar 2013).

C. Ventanilla, Jr. containing a tabulation of comparison of the cost of importing the subject articles and the cost of purchasing them locally, invoices issued to PAL for its purchase of the subject articles;

CTA Case No. 8153 (Dated January 17, 2013) as affirmed in CTA. EB Nos. 1029,

I 031 & 1032 (Dated

April 30, 2014)

3. Price List for 2005 of Duty-

Free Philippines

corresponding to the same articles subject of this claim for refund.

1. Judicial Affid.,·it of 1\lr. Victor Santos, PAL's Assistant Yice President in charge of the Catering and In-flight 1\laterials

and Purchasing Sub-

department;

2. Philippine Wine Merchants' Price List dated January 11, 2007;

3. Table of Comparison Between

Cost of Importing and Cost of

Locallv Purchasing Commissary

Ruling

The claim for refund was partially granted as the petitioner was able to discharge such burden of proof as regards the portions that were duly substantiated.

The claim for refund was granted because petitioner was able to discharge the burden of proof to allow refund of erroneously paid exc1se tax on Its importations of cotnmissary and catering supplies for July 2005 to February 2006.

The claim for refund was partially granted as the e\·idence presented corresponding to the excise tax payments on wines and liquors fully complied with the conditions imposed by PD 1590 as amended.

The claim for refund on the excise taxes on cigarettes was denied for failure to present a price

CONCURRING AND DISSENTING OPINION

CTA EB No. 2811 (CTA Case No. 10311)

Page 3 of 6

Case Number

CTA Case No. 8236

(Dated

December

18, 2013) as affirmed m CTA EB No.

1162 & 1167 (Dated

January 7, 2016)

CTA

No.

8184

(Dated

~larch 25, 2014 affu:med m CTA EB No. 1216,

1217 & 1221 (Dated

1\lay 27, 2016) CTA EB No. 1347

(CTA

Case

No.

8340)

August

30, 2017

Evidence Presented

and Catering Supplies;

4.

l'vlonthly PDS rates for the year 2007-2008, 2008-2009, and 2009-2010.

1. Judicial Affidavit of Ms. Cheryl Capinpin, P /\L's ~lanager of

In-flight Materials Purchasing

Division;

2. Philippine Wine Merchants' Price List for 2008;

3.

Table of Comparison Between

Cost of Importing and Cost of

Locally Purchasing Commissary

and Catering Supplies;

4.

Monthly Philippine Dealing

System (PDS) Rates for fiscal years 2008, 2009 and 201 0;

5.

Letters of Ms. Marianne C.

1.

2.

3.

1.

2.

Raymundo, P /\L's Vice-

President for Financial Services

with the subject "Booking Rates" for the months of January, July, September, and October 2008.

Affidavit of ~Is. Cheryl Capinpin, PAL's Manager of

In-flight Materials Purchasing

Di\·ision;

Philippine Wine Merchants'

Price List for 2008;

Table of Comparison of prices of commissary articles as those imported by PAL and locally available articles.

Judicial /\ffidm·it of ~Is. Cheryl V. Capinpin, P,\L's In-flight ~laterials Purchasing Division,

Catering & In-flight Materials

Purchasing Sub-Department

Manager;

Philippine Wine Merchants'

(PWM) Price List for the

years 2007, 2008 and 2009;

Ruling

list of local suppliers.

The claim for refund was partially granted insofar as the erroneously paid excise tax on its importation of wines and liquor for its catering and commissar::

supplies for international consmnptwn.

The claim for refund was partially granted because the petitioner has complied with the requirements prescribed under its franchise for exemption from payment of excise taxes on its importation of commissary and catering supplies, specifically the imported liquors used for its inflight consumption.

The Court En Bane

re\·ersed the Court in Division's ruling. It partially granted the Petition for review and remanded the case to the

Court in Division as the

petitioner has sufficiently established that the alcohol products it imported were ;»/

CONCURRING AND DISSENTING OPINION

CTA EB No. 2811 (CTA Case No. 10311)

Page 4 of 6

Case Number

Evidence Presented

3. Future Trade International Price List dated April 8, 2009;

4. Table of Comparison between

Cost of Importing and Cost of

Locally Purchasing

Commissary and Catering

Supplies;

5. Sales invoices issued by foreign suppliers;

6. Letter of 1\fs. 1\farianne C. Raytnundo, petitioner's Vice

President for Financial

Services with the subject "Booking Rates-August 2007";

7.

Monthly Philippine Dealing

System (PDS) rates for the years 2000 to 2010.

CTA EB No. 1363

1. Judicial Affidavit of Ms. Cheryl

(CTA

Case

No.

Capinpin, PAL's Manager for 8198) February 13,

In-flight Materials Purchasing

2018 Division, Catering & In-flight

Materials Purchasing Sub-

Deparunent;

2. Philippine Wine Merchant Price List;

3. Sales im·oices issued to petitioner for its purchase of the subject articles;

4.

t.lonthly Philippine Dealing System Rates (2007 to 2010);

5.

2008 Booking Rates for the

Month of May;

6. Letters of Ms. Marianne C. Raymundo, petitionct

1S Vice

President- Financial SetYices

re: Booking Rates for the months of January, t.larch, and April2008;

7. Table of Comparison. CTA EB No. 1648

1. Judicial Affidavit of t.!s. Cheryl

(CTA

Case

No.

Capinpin, PAL's 1\fanager for

Ruling

not a\·ailable in reasonable quantity, quality, or price in the local market.

The Court En Bane

reversed the Court in Division's ruling. It partially granted the

Petition for Review and

remanded the case to the

Court in Division as the

petitioner has sufficiently established that the liquors it imported were not available in reasonable quantity, quality, or price in the local market.

The Court En Bane denied the claim insofar as the imported cigarettes are concerned as the Court did not give credence to the witness' uncorroborated testimony.

The Court partially granted the claim for refund and

CONCURRING AND DISSENTING OPINION

CTA EB No. 2811 (CTA Case No. 10311)

Page 5 of 6

Case Number

Evidence Presented

8708 & 8770)

In-flight and Commissary

October 18, 2018 1\la terials Purchasing Division,

Corporate Logistics and

Services Department;

2. Philippine Wine Merchants

("PWM") Price Lists for the

years 2006, 2008, 2009, 2010, 2011, and 2012;

3. Future Trade International ("FTI") Price Lists dated April 8, 2009, October 1, 2010 and for the years 2006 to 2013;

4.

2010 BIR Price Survey;

5.

Report of the Court-

commissioned Independent

Certified Public Accountant

("!CPA") CTA EB No. 1484

1. Judicial Affidavit of Ms. Cheryl

(CTA

Case

No.

Capinpin (petitioner's Manager 8362) April 10,2018 for In-flight ~laterials Purchasing Division);

2. Philippine Wine Merchants

(PWM) Price List for the

years 2007, 2008, and 2009;

3. Future Trade International

Travel Retail Price List as of

Feb 2009;

4. Affida,·it of Gilbert l\l. Galedo \vho testified to the canvassed list of 2009 retail prices of imported wines and cigarettes taken from the rack of Duty- Free Philippines;

5. Table of Comparison between

Cost of Importing and Cost of

Locally Purchasing

Commissary and Catering

Supplies;

6.

l\lonthly Philippine Dealing System (PDS) rates for the years 2007 to 2010.

Ruling

allowed the refund of erroneously paid excise tax on PAL's importation in the years 2006, 2008 to 2012 of assorted liquor, wine and cigarettes constituting its co1nnllssary and catering supplies for international flight consumption.

The Court En Bam· is convinced that petitioner has sufficiently established that the alcohol and tobacco products it imported were not available in either reasonable quantity or price in the local market.

The Court En Bane

remanded the case to the Court in Di,~ision for a complete determination of petitioner's refund claim.

CONCURRING AND DISSENTING OPINION

CTA EB No. 2811 (CTA Case No. 10311)

Page 6 of 6

In congtuence with the rulings in the foregoing cases, I believe that the pieces of evidence presented by petitioner, particularly the price lists obtained from four ( 4) local suppliers namely: (1) Absolute Sales Corporation; (2) Future Trade International Travel Retail; (3) i\Iinivan Enterprise; and (4) ,\B 1-lcineken Phils., Inc. together with the judicial affidavit of its witness and the BIR's Price List per Revenue i\Iemorandum Circular No. 90-2012, are sufficient for the Court in Division to evaluate the prices of the subject alcohol products imported by petitioner vis-a-vis their prices in the local market and to determine whether there is compliance with 3'd condition required by PD No. 1590, as amended.

\'\lith respect to the importation of tobacco products, I agree that the testimony of petitioner's witness, J\Is. Cheryl V. Capinpin, standing alone and without any corroborating evidence through which the Court can verify the truth of such statements, is not sufficient for purposes of establishing that the imported tobacco products are not locally available in reasonable quantitY, CjUa!it:y, or price.

_\ll told, I vote to PARTIALLY GRANT the Petition for Review and to REMAND the case to the Court in Division for the determination of refundable amount with respect to the imported akoho! prodmls of the petitioner. _, '---- MA. BELEN M. RINGPIS-LIBAN

Associate Justice

"'

REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

Quezon City

ENBANC

PHILIPPINE AIRLINES, INC., Petitioner, -versus-

COMMISSIONER

OF

INTERNAL

REVENUE, Respondent.

CTA EB No. 28n (CTA Case No. 10311)

Present:

DEL ROSARIO, £.1_, RINGPIS-LIBAN, MANAHAN, BACORRO-VILLENA, MODESTO-SAN PEDRO, REYES-FAJARDO, CUI-DAVID, FERRER-FLORES, and ANGELES, Jl.

X - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

CONCURRING OPINION

BACORRO-VILLENA, L.:

I concur with the ponencia of my esteemed colleague, Associate Justice Henry S. Angeles, in denying petitioner Philippine Airlines, Inc.'s (petitioner's/PAL's) claim for refund of excise taxes paid on imported tobacco and alcohol products. I also agree with the ponencia's disquisition that the submitted price lists should not be accorded evidentiary weight since it was established during the hearing that petitioner, in conducting its price survey, merely engaged in a pro-forma inquiry without any genuine intent to actually study the availability of local products in terms of quantity and/or quality and/or the reasonableness of their prices from other local suppliers. Consequently, this renders the price lists insufficient to satisfy the crucial requirement of showing that the locally available articles are either , inadequate in quantity, or is of subpar quality, or is severely overpricedJ compared to its imported variant.

CONCURRING OPINION

CTA EB No. 2811 [CTA Case No. 10311) Philippine Airlines, Inc. v. Commissioner of Internal Revenue

I submit this Concurring Opinion to further bolster the conclusion reached in the ponencia.

Section 13(2) of Presidential Decree No. 1590 reads: SEC. 13. In consideration of the franchise and rights hereby granted, the grantee shall pay to the Philippine Government during the life of this franchise whichever of subsections (a) and (b) hereunder will result in a lower tax:

The tax paid by the grantee under either of the above alternatives shall be in lieu of all other taxes, duties, royalties, registration, license, and other fees and charges of any kind, nature, or description, imposed, levied, established, assessed, or collected by any municipal, city, provincial, or national authority or government agency, now or in the future, including but not limited to the following:

(2) All taxes, including compensating taxes, duties, charges, royalties, or fees due on all importations by the grantee of aircraft, engines, equipment, machinery, spare parts, accessories, commissary and catering supplies, aviation gas, fuel, and oil, whether refined or in crude form and other articles, supplies, or materials; provided, that such articles or supplies or materials are imported for the use of the grantee in its transport and nontransport operations and other activities incidental thereto and are not locally available in reasonable quantity, quality, or price.

The foregoing provision requires the concurrence of three (3) requisites before petitioner's importations may be considered tax-exempt, to wit-

1. Petitioner paid its corporate income tax covering the period when the subject importations were made;

2. The articles, supplies, or materials are imported for petitioner's use in its transport and non-transport operations and other activities incidental thereto; and 3· The imported articles, supplies, or materials are not locally available in reasonable quantity, quality, or price.';Ji' Commissioner of lnlernaf Revenue and Commissioner of Customs v. Philippine Airlines, Inc., G.R. Nos. 245330-31. 01 April2024.

CONCURRING OPINION

CTA EB No. 2811 (CTA Case No. 10311) Philippine Airlines, Inc. v. Commissioner of Internal Revenue

As to the 3'd condition, the Supreme Court in Commissioner of Internal Revenue and Commissioner of Customs v. Philippine Airlines, Inc. 2 , ruled that such qualification for exemption is in the alternative, and not cumulative. Simply stated, petitioner only needs to prove that the locally available article is either insufficient in quantity, or is of subpar quality, or is severely overpriced compared to its imported variant. Here, petitioner focuses on the price of the locally available tobacco and alcohol products and asseverates that the same are overpriced compared to their imported variants by submitting: (1) the Judicial Affidavit of Ms. Cheryl V. Capinpin3, petitioner's Manager for In-flight Materials Purchasing Division; (2) the 2014 and 2015 Price Lists of Absolute Sales Corporation4;

(3) 2013, 2014, 2015, 2016, 2017, and 2018 of Future Trade International Travel Retail 5; (4) 2014, 2015, 2016, 2017, and 2018 Price Lists of Minivan Enterprise6 ;

(5) 2016 and 2017 Price Lists of AB Heineken Phils., Inc. 7; and (6) BIR's Price List per Revenue Memorandum Circular (RMC) No. 90-2012. 8 I find petitioner's pieces of evidence insufficient to prove that the locally available tobacco and alcohol products are overpriced compared to their imported variants.

Firstly, considering that RMC No. 90-20129 was based on the 2010 BIR price survey of alcohol products, no valid comparison can be made between the prices of petitioner's wines and liquors that were imported from August 2014 to February 2018 and that of the said price survey that was done in 2010. Common sense dictates that the quantity, quality or price oflocally available alcohol or tobacco products will fluctuate over time; thus, the contents of the RMC No. 90-2012 pursuant to the price survey conducted in 2010 (which predates the subject importations) should not be given weight. Secondly, a meticulous examination of petitioner's Table of Comparison [for] Alcohol10 reveals that, although petitioner submitted price lists from four (4) merchants (Absolute Sales Corporation, Future Trade International Travel Retail, Minivan Enterprise and AB Heineken Phils., Inc.) not all of these merchants provided their respective retail prices for each , alcohol product. In fact, on a per-product basis, only two (2) alcohol productJ. I d.

Division Docket. Volume II, pp. 1313-1325: Volume Ill. pp. 1912-1914. ld., Volume III. pp. 2411-2416.

ld .. pp. 2417-2467.

ld., pp. 2468-2472.

!d .. pp. 2473-2477.

Revised Tax Rates of Alcohol and Tobacco Products Under Republic Act No. 10351. "An Act Restructuring the Excise Tax on Alcohol and Tohacco Products by Amending Sections 141. 142. 143. 144. 145. 8. 131 and 288 of Republic Act No. 8424. Otherwise Known as the National Internal Revenue Code of 1997. as Amended by Republic Act No. 9334. and for Other Purposes". I d.

lCt Exhibit ··P-12", Division Docket. Volume Ill. p. 2409.

CONCURRING OPINION

CTA EB No. 2811 (CTA Case No. 10311) Philippine Airlines, Inc. v. Commissioner of Internal Revenue

- Beringer California Chardonnay and Rawson Private Release Shiraz Cabernet, appear in the price list sourced from two (2) suppliers - Minivan Enterprise and Future Trade International Travel Retail. The remaining alcohol products are supported either by pricing data derived solely from a single supplier, or exclusively from RMC No. 90-2012 or from a combination of both sources.

Lastly, petitioner submitted no corroborating evidence to prove that the price lists from Absolute Sales Corporation, Future Trade International and Minivan Enterprise and AB Heineken Phils., Inc. represent the local market prices for the subject alcohol products from August 2014 to February 2018 vis-a-vis the totality oflocal suppliers who are engaged in selling similar products in the same period.

En totale, petitioner failed to sufficiently establish that the cost of importing the said tobacco and alcohol products is lower than purchasing them locally.

All told, I vote to DENY the Petition for Review for lack of merit.