Commissioner of Internal Revenue vs. San Miguel Brewery Inc.

DECISION

REYES-FAJARDO, J.:

For action is the Petition for Review filed by the Commissioner of Internal Revenue (CIR), challenging the Decision¹ dated July 5, 2023 and the Resolution2 dated October 9, 2023 in CTA Case No. 10223, whereby the Special Second Division of the Court (Court in Division) partially granted San Miguel Brewery, Inc.'s claim for refund of erroneously paid or illegally collected excise taxes on the removal of its beer products from its brewery plants for the period covering January 1, 2018 to December 31, 2018, to the extent of P146,874,555.07. 2 Rollo, pp. 46-75.

Id. at pp. 77-80.

CTA EB No. 2834 (CTA Case No. 10223)

PARTIES

Petitioner heads the Bureau of Internal Revenue (BIR), with office address at the BIR National Office Building, Agham Road, Diliman, Quezon City, Metro Manila.3 On the other hand, respondent is a corporation duly organized and existing under the laws of the Republic of the Philippines, with principal address at 40 San Miguel Avenue, Mandaluyong City, Metro Manila.4 It is engaged in the business of, among others, manufacture, sale, and distribution of fermented and malt-based beverages.5 3 4

FACTS

On December 21, 2012, Republic Act (RA) No. 10351,6 took effect. Section 3 of said law, amended, among others, Section 143 of the National Internal Revenue Code of 1997 (NIRC), as amended, to read:

SEC. 3. Section 143 of the National Internal Revenue Code of 1997, as amended by Republic Act No. 9334, is hereby further amended to read as follows:

SEC. 143. Fermented Liquors. - There shall be levied, assessed, and collected an excise tax on beer, lager beer, ale, porter and other fermented liquors except tuba, basi, tapuy and similar fermented liquors in accordance with the following schedule:

Effective on January 1, 2013

(a) If the net retail price (excluding the excise tax and the value-added tax) per liter of volume capacity is Fifty pesos and sixty centavos (P50.60) or less, the tax shall be Fifteen pesos (P15.00) per liter; and Par. 2, Stipulation of Facts, Pre-Trial Order dated January 11,2021, Docket, p. 273. Par. 1, Stipulation of Facts, Pre-Trial Order dated January 11, 2021, Docket, p. 272. Par. 4, Stipulation of Facts, Pre-Trial Order dated January 11,2021, Docket, p. 273. An Act Restruchuing the Excise Tax on Alcohol and Tobacco Products by Amending Sections 141,142, 143,144,145, 8,131 And 288 of Republic Act No. 8424, Otherwise Known as the National Internal Revenue Code of 1997, As Amended by Republic Act No. 9334, and for other Purposes. Approved On December 19, 2012.

CTA EB No. 2834 (CTA Case No. 10223)

(b) If the net retail price (excluding the excise tax and the value-added tax) per liter of volume capacity is more than Fifty pesos and sixty centavos (P50.60), the tax shall be Twenty pesos (P20.00) per liter.

Effective on January 1, 2014

(a) If the net retail price (excluding the excise tax and the value-added tax) per liter of volume capacity is Fifty pesos and sixty centavos (PhP50.60) or less, the tax shall be Seventeen pesos (PhP17.00) per liter; and

(b) If the net retail price (excluding the excise tax and the value-added tax) per liter of volume capacity is more than Fifty pesos and sixty centavos (PhP50.60), the tax shall be Twenty-one pesos (PhP21.00) per liter.

Effective on January 1, 2015

(a) If the net retail price (excluding the excise tax and the value-added tax) per liter of volume capacity is Fifty pesos and sixty centavos (PhP50.60) or less, the tax shall be Nineteen pesos (PhP19.00) per liter; and

(b) If the net retail price (excluding the excise tax and the value-added tax) per liter of volume capacity is more than Fifty pesos and sixty centavos (PhP50.60), the tax shall be Twenty-two pesos (PhP22.00) per liter.

Effective on January 1, 2016

(a) If the net retail price (excluding the excise tax and the value-added tax) per liter of volume capacity is Fifty pesos and sixty centavos (PhP50.60) or less, the tax shall be Twenty-one pesos (PhP21.00) per liter; and (b) If the net retail price (excluding the excise tax and the value- added tax) per liter of volume capacity is more than Fifty pesos and sixty centavos (PhP50.60), the tax shall be Twenty-three pesos (PhP23.00) per liter.

Effective on January 1, 2017, the tax on all fermented liquors shall be Twenty-three pesos and fifty centavos (P23.50) per liter. The rates of tax ituposed under this Section shall be increased by four percent (4%) every year thereafter effective on January 1, 2018, through

CTA EB No. 2834 (CTA Case No. 10223) revenue regulations issued by the Secretary of Finance. However, in case of fermented liquors affected by the 'no downward reclassification' provision prescribed under this Section, the four percent (4%) increase shall apply to their respective applicable tax rates.

Any downward reclassification of present categories, for tax purposes, of fermented liquors duly registered at the time of the effectivity of this Act which will reduce the tax imposed herein, or the payment thereof, shall be prohibited. The proper tax classification of fermented liquors, whether registered before or after the effectivity of this Act, shall be determined every two (2) years from the date of effectivity of this Act. All fermented liquors existing in the market at the time of the effectivity of this Act shall be classified according to the net retail prices and the tax rates provided above based on the latest price survey of the fermented liquors conducted by the Bureau of Internal Revenue .... 7 To implement the provisions of RA No. 10351, then Secretary of Finance (SOF) Cesar V. Purisima, upon recommendation of then CIR Kim 5. Jacinto-Henares, issued Revenue Regulations (RR) No. 17-12.8 Section 5 thereof provides:

7 ' 9 SEC. 5. Downward Reclassification of Fermented Liquors. - Any downward reclassification of any fermented liquor product that is duly registered with the BIR at the time of effectivity of the Act which will reduce the tax imposed herein, or the payment thereof, shall be prohibited. Starting January 1, 2014, the applicable tax rate shall be increase[ d] by four percent (4%) annually: Provided, however, it shall not be lower than the rates prescribed under Section 3 of these Regulations9 Boldfacing supplied.

SUBJECT: Prescribing the Implem.enting Guidelines on the Revised Tax Rates on Alcohol and Tobacco Products Pursuant to the Provisions of Republic Act No. 10351 and to Clarify Certain Provisions of Existing Revenue Regulations, December 21, 2012. Boldfacing supplied.

CTA EB No. 2834 (CTA Case No. 10223)

On December 27, 2012, Revenue Memorandum Circular (RMC) No. 90-201210 was issued to provide the initial classifications of alcohol products, among others, effective January 1, 2013.11 10

II

18 19 20 21 22 23 36 37 38 39 40 41 42 43 44 45 46 47 SUBJECT: Revised Tax Rates of Alcohol and Tobacco Products Under Republic Act No. 10351, "An Act Restructuring the Excise Tax on Alcohol and Tobacco Products by Amending Sections 141, 142, 143, 144, 145, 8, 131 and 288 of Republic Act No. 8424, Otherwise Known as the National Internal Revenue Code of 1997, as Amended by Republic Act No. 9334, and for Other Purposes" Annex" A-1" of RMC No. 90-2012 provides: LIST OF BRANDS OF LOCALLY MANUFACTURED FERMENTED LIQUORS

As of December 2012

I. List of Brands Based on 2010 BIR Price Survey

NET

RETAIL

Applicable

BRAND

CONTENT

PRICE

Excise Tax

NAME/Product

TYPE OF

PER TYPE OF

(Based on

Rate Per Liter

Description

PACKAGING

PACKAGING

2010 BIR

(Effective

(in milliliter)

Price

January 1,

Survey)

2013)

Per Liter

A. NRP is P50.60 per liter and below ...

San Miguel Pale Pilsen

bottle 1000 32.73 15.49

San Miguel Pale Pilsen

(embossed label marking) bottle 320 45.48 15.49

Coors Light Beer

bottle 330 43.18 20.57

San Mig Light

bottle 330 47.99 20.57

The Original Coors

bottle 330 32.36 20.57

The Silver Bullet

Coorslight

bottle 330 45.21 20.57 B. NRP is more than P50.60 ...

Colt Ice

bottle 330 60.37 20.57

Coors Light Beer

can 330 56.03 20.57

Red Horse

can 330 56.61 20.57

San Mig Cerveza

Negra

bottle 320 66.39 20.57

San Mig Light

can 330 61.51 20.57

San Mig Strong Ice

bottle 330 62.66 20.57

San Mig Strong Ice

non- returnable bottle 330 65.10 20.57

San Mig Strong Ice

can 330 70.36 20.57

San Miguel

Oktoberfest Beer

bottle 330 74.75 20.57

San Miguel Pale Pilsen

can 330 60.05 20.57

San Miguel Premium

All Malt Beer

bottle 330 91.73 20.57

San Miguel Premium

All Malt Beer

can 330 100.30 20.57

CTA EB No. 2834 (CTA Case No. 10223)

In the implementation of Annex" A-1" of RMC No. 90-2012, and Section 5 of RR No. 17-2012, for the period from January 1, 2018 to December 31, 2018, the Bureau of Internal Revenue (BIR) required respondent to pay excise taxes on its beer products upon removal thereof from its brewery plants at the rate of 1'25.03 per liter. On October 17, 2019, respondent filed with the BIR Excise Large Taxpayers Audit Division I, an Application for Tax Credits/Refunds (BIR Form No. 1914), and a letter dated October 14,2019,12 claiming for the refund or credit in the amount of 1'146,874,562.00, representing 48 49 50 51 7 14 15 16 17 18 19 20 12

San Miguel Premium

non-

All Malt Beer

returnable bottle 330 104.73 20.57

Super Dry

can 330 69.90 20.57

The Original Coors

can 330 54.00 20.57

The Silver Bullet

Coors light can 330 57.05 20.57 II. List of Brands (not included in 2010 BIR Price Survey and introduced in the market before effectivity of R.A. No. 10351) Based on Latest Suggested Net Retail Price Per Sworn Statement Submitted by the Manufacturer or Importer

NET

RETAIL

PRICE

Applicable

CONTENT

(Based on

Excise Tax

BRAND

TYPE OF

PER TYPE OF

Latest

Rate Per Liter

NAME/Product

PACKAGING

PACKAGING

Suggested

(Effective

Description

(in mill iii ter)

Net Retail

January 1,

Price Per

Sworn

2013)

Statement)

Per Liter

A. NRP is P50.60 per liter and below ...

Beer Pale Pilsen

I

can

I

330

4848 1

20.57 B. NRP is more than P50.60 ...

Carlsberg

can 330 78.79 20.57

San Mig Zero

bottle 330 60.58 20.57

San Miguel Flavored

Beer-Apple

bottle 330 75.76 20.57

San Miguel Flavored

Beer-Lemon

bottle 330 75.76 20.57

San Miguel Magnum

Beer Strong Lager

bottle 330 55.18 20.57

Stag

can 330 68.18 20.57

The Original Coors

bottle 1000 55.00 20.57 Exhibit "P-3" (Annex "C," Petition for Review), Docket, pp. 71 to 80.

CTA EB No. 2834 (CTA Case No. 10223) excise taxes erroneously or illegally collected on the removal of its various beer products13 from January 1, 2018 to December 31, 2018, or the difference in the tax rates per liter under RA No. 10351. On December 11, 2019, respondent filed a Petition for Review before the Court in Division. It sought the refund in the amount of P146,874,562.00, representing its alleged erroneously paid excise taxes for the period of January 1, 2018 to December 31, 2018. On July 5, 2023, the Court in Division rendered the challenged Decision, the dispositive portion of which reads: 13

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

For being contrary to Section 143 of the NIRC of 1997, as amended by RA No. 10351, the following portions of Annex" A-1" of RMC No. 90-2012, prescribing the applicable excise tax rates per liter of fermented liquors, are declared invalid, and have no force and effect, viz.:

Annex" A~l" LIST OF BRANDS OF LOCALLY MANUFACTURED FERMENTED LIQUORS

As of December 2012

I. List of Brands Based on 2010 BIR Price Survey

BRAND

TYPE OF

CONTENT PER

NET RETAIL

Applicable

NAME/

PACKAGING

TYPE OF

PRICE

Excise Tax Rate

Product

PACKAGING

(Based on 2010

Per Liter

Description

(in milliliter)

BIR Price

(Effective

Survey)

january 1, 2013)

Per Liter

A. NRP is P50.60 per liter and below ...

...

18

San Miguel Pale

bottle 1000 32.73 15.49

Pilsen

19

San Miguel Pale

bottle 320 45.48 15.49

Pilsen

(embossed label marking) 20

Coors Light Beer

bottle 330 43.18 20.57 Among its products are "San Mig Light" in bottle, in can, and in kegs, and its "Other Beer Products", namely, "Pale Pilsen" in can, "San Mig Zero" in bottle, San Mig Zero" in carton, "Premium All-Malt" in bottle, "Premium All-Malt" in carton, "Super Dry" in can, ''Red Horse" in can, "San Miguel Flavored Beer-Apple" in bottle, and "San Miguel Flavored Beer- Lemon" in bottle. (Par. 6), Petition for Review, Docket, p.12.

CTA EB No. 2834 (CTA Case No. 10223)

21

San Mig Light

bottle 22

The Original

bottle

Coors

23

The Silver Bullet

bottle Coors light B. NRP is more than P50.60 ...

...

36

Colt Ice

bottle 37

Coors Light Beer

can 38

Red Horse

can 39

San Mig

bottle

Cerveza Negra

40

San Mig Light

can •41

San Mig Strong

bottle

Ice

42

San Mig Strong

non-returnable

Ice

bottle 43

San Mig Strong

can

Ice

44

San Miguel

bottle

Oktoberfest Beer

45

San Miguel Pale

can

Pilsen

46

San Miguel

bottle

Premium All

Malt Beer

47

San Miguel

can

Premium All

Malt Beer

48

San Miguel

non-returnable

Premium All

bottle

Malt Beer

49

Super Dry

can 50

The Original

can

Coors

51

The Silver Bullet

can Coors light 330 47.99 20.57 330 32.36 20.57 330 45.21 20.57 . ..

330 60.37 20.57 330 56.03 20.57 330 56.61 20.57 320 66.39 20.57 330 61.51 20.57 330 62.66 20.57 330 65.10 20.57 330 70.36 20.57 330 74.75 20.57 330 60.05 20.57 330 91.73 20.57 330 100.30 20.57 330 104.73 20.57 330 69.90 20.57 330 54.00 20.57 330 57.05 20.57 II. List of Brands (not included in the 2010 BIR Price Survey and introduced in the market before the effectivity of R.A. No. 10351) Based on the Latest Suggested Net Retail Price Per Sworn

Statement Submitted by the Manufacturer or Importer

BRAND

TYPE OF

CONTENT PER

NET RETAIL

Applicable

.

NAME/

PACKAGING

TYPE OF

PRICE

Excise Tax Rate

Product

PACKAGING

(Based on Latest

Per Liter

Description

(in milliliter)

Suggested Net

(Effective

Retail Price Per

january 1, 2013)

Sworn

Statement)

Per Liter

A. NRP is P50.60 per liter and below 7

Beer Pale Pilsen

Can

330 48.48 120.57

CTA EB No. 2834 (CTA Case No. 10223)

B. NRP is more than P50.60 14 15 16 17 18 19 20 ...

...

...

Carlsberg

can 330 78.79 20.57

San Mig Zero

bottle 330 60.58 20.57

San Miguel

bottle 330 75.76 20.57

Flavored Beer-

Apple

San Miguel

bottle 330 75.76 20.57

Flavored Beer-

Lemon

San Miguel

bottle 330 55.18 20.57

Magnum Beer

Strong Lager

Stag

can 330 68.18 20.57

The Original

bottle 1000 55.00 20.57

Coors

Also, the proviso in Section 5 of RR No. 17-2012, which states that "[s]tarting January 1, 2014, the applicable tax rate shall be increase[d] by four percent (4%) annually" is likewise declared as invalid and has no force and effect of law. Lastly, respondent is ORDERED TO REFUND or ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the amount of P146,874,555.07, without legal interest, representing erroneously, excessively, and/ or illegally collected excise taxes due on the removals of "San Mig Light" in can, in bottle and kegs, "San Miguel Premium All Malt Beer," in bottle and in can, "San Miguel Pale Pilsen" in can, "Super Dry" in can, "Red Horse" in can, "San Mig Zero" in bottle, "San Miguel Flavored Beer-Apple" in bottle, and "San Miguel Flavored-Lemon" in bottle for the period covering January 1, 2018 to December 31, 2018.

Motion

for Reconsideration, the dispositive portion of which reads: 14

WHEREFORE, respondent's Motion for Reconsideration [Decision dated 5 July 2023] is DENIED for lack of merit. Docket, pp. 534-565.

CTA EB No. 2834 (CTA Case No. 10223)

ISSUES

I.

Did the Court in Division correctly exercise jurisdiction over respondent's judicial claim?

II.

Did the Court in Division err in ruling that respondent is entitled to a refund or credit of the overpayment of excise taxes erroneously or illegally collected on its beer products upon removal thereof from its brewery plants for the period from January 1, 2018 to December 31, 2018 in the amount of !'146,874,555.07?

ARGUMENTS

Petitioner argues that the Court in Division erred in assuming jurisdiction over the case because the ultimate relief sought by respondent was the nullification of RMC No. 90-2012 and RR No. 17- 2012.

He explains that under Section 1, Article VIII of the 1987 Philippine Constitution, it is the courts of general jurisdiction and not the Court of Tax Appeals (CTA) which have the authority to determine the validity of BIR issuances.

15 16 17 18 19 Rollo, pp. 77-80.

Rollo, p. 6.

Id. at pp. 7-45.

Id. at pp. 82-111.

Id. at p. 112.

CTA EB No. 2834 (CTA Case No. 10223)

Petitioner also asserts that respondent in seeking the nullification of said BIR issuances failed to exhaust administrative remedies pursuant to Section 4 of the NIRC, as amended. Petitioner further maintains that respondent is not entitled to a refund, on the following basis: (1) he was deprived the opportunity to review respondent's claim before seeking judicial relief; and (2) there was no reclassification of San Miguel Light (SML) because it has always been classified as a variant of an existing brand. In sum, petitioner concludes that the Court in Division erred in partially granting respondent's claim for refund of the excise taxes paid on its beer products upon removal from its brewery plants for the year 2018.

On the other hand, respondent echoes the conclusion reached by the Court in Division that it has jurisdiction to rule on the validity of administrative issuances of the CIR, i.e., the provisions of RMC No. 90- 2012 and RR No. 17-2912, both as a direct challenge and in connection with respondent's claim for refund or credit. Respondent counters that the rule on exhaustion of administrative remedies is not applicable in this case because there is an urgent need for judicial intervention. To conclude, respondent states that the Court in Division did not err in partially granting its claim for refund because: (1) both its administrative and judicial claims were filed within the two-year prescriptive period in accordance with Section 204 (C) and 229 of the NIRC, as amended; and (2) respondent did not challenge the findings and recommendation of the Independent Certified Public Accountant (ICP A) commissioned by the Court in Division to conduct an audit, examination and verification on the documents supporting respondent's claim for refund.

CTA EB No. 2834 (CTA Case No. 10223)

RULING

The Petition for Review is denied.

The Court En Bane finds that the arguments put forward by petitioner in his Petition for Review are the very same flawed contentions he advanced in his Motion for Reconsideration (Re: Decision dated 5 July 2023), all of which have already been passed upon, and found wanting by the Court in Division in the challenged Decision and Resolution. In any event, the Court En Bane shall again discuss the salient points in the challenged Decision and Resolution. Respondent complied with the two-year period prescribed for the filing of a claim for refund or tax credit under Section 204 (C) and 229 in relation to Section 130 (A)

(2) of the NIRC, as amended. Section 7(a)(2) of Republic Act (RA) No. 1125,2° as amended by RA No. 9282, in relation to Section 3(a)(2), Rule 4 of the Revised Rules of the Court of Tax Appeals (RRCTA)21 clothes the Court with jurisdiction over the inaction of respondent involving refund of internal revenue taxes, among others. Internal revenue taxes 20 Sec. 7. Jurisdiction. -The CTA shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

2. Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relations thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code provides a specific period of action, in which case the inaction shall be deemed a denial; (Boldfacing supplied) 21 SEC. 3. Cases within the jurisdiction of the Court in Division. - The Court in Division shall exercise:

(a) Exclusive original over or appellate jurisdiction to review by appeal the following:

(2) Inaction by the Conunissioner of Internal Revenue in cases involvino disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws, administered by the Bureau of Internal Revenue ... (Boldfacing supplied)

CTA EB No. 2834 (CTA Case No. 10223) erroneously or illegally collected, may be subject of refund as recognized in Sections 20422 and 22923 of the NIRC, as amended. For excise tax on domestic products in general, the return is filed and the excise tax is paid by the manufacturer or producer before removal of the products from the place of production. Hence, the date of payment of excise tax on domestic products depends on the date of actual removal of the taxable domestic products from the place of production. 24 Relevantly, Commissioner of Internal Revenue v. Carrier Air Conditioning Philippines, Inc. (Carrier)25 explained that the law merely provides two years for a taxpayer to file both the administrative and judicial claims, with the former required to be filed first: 22 23 24 25 Consequently, from the plain language of the law, it does not matter how far apart the administrative and judicial claims were filed, or whether the Commissioner of Internal Revenue was actually able to rule on the administrative claim, so long as both claims were filed within the two- year prescriptive period.

SEC. 204. Authorih; of the Commissioner to Compromise, Abate and Refund or Credit Taxes. - The Commissioner may- (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. (Boldfacing supplied) SEC. 229. Recouen; 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, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any 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. Commissioner of Internal Revenue v. San Miguel Corp., G.R. Nos. 180740 and 180910, November 11,2019.

G.R. No. 226592, July 27, 2021.

CTA EB No. 2834 (CIA Case No. 10223)

Here, the reckoning point for the two (2)-year period is January 2, 2018, the earliest date of the removal of the beer products from their place of production. In turn, respondent had until January 2, 2020 to file its administrative and judicial claims. Thus, the Court En Bane affirms the Court in Division's ruling that respondent's filing of its administrative claim on October 17, 2019 and judicial claim on December 11, 2019, was timely filed.

The CTA has jurisdiction to rule on the validity of BIR issuances, such as RMC No. 90-2012 and RR No. 17-2012.

The Court En Bane is one with the Court in Division that it had jurisdiction over respondent's judicial claim for refund, which included a challenge on the validity RMC No. 90-2012 and RR No. 17- 2012.

Banco De Oro, et al. v. Republic of the Phils., et al., (Banco De Oro)26 definitely settled the previous conflicting jurisprudence on the jurisdiction of the CTA to pass upon the validity of a tax law or regulation. Banco De Oro overturned the doctrine in British American Tobacco v. Camacho, et a/.27 that jurisdiction over challenges to the validity of tax law or regulation lies with the regional trial court. Banco De Oro categorically declared that the CTA has undoubted jurisdiction to pass upon the constitutionality or validity of a tax law or regulation through a direct challenge or when raised by the taxpayer as a defense in disputing or contesting an assessment or claiming a refund, to wit: 26 27 Section 7, as amended, grants the Court of Tax Appeals the exclusive jurisdiction to resolve all tax-related issues: The Court of Tax Appeals has undoubted jurisdiction to pass upon the constitutionality or validity of a tax law or regulation when raised by the taxpayer as a defense in disputing or G.R. No. 198756 (Resolution), August 16, 2016 G.R. No. 163583, August 20, 2008.

CTA EB No. 2834 (CIA Case No. 10223) contesting an assessment or claiming a refund. It is only in the lawful exercise of its power to pass upon all matters brought before it, as sanctioned by Section 7 of Republic Act No.l125, as amended.

This Court, however, declares that the Court of Tax Appeals may likewise take cognizance of cases directly challenging the constitutionality or validity of a tax law or regulation or administrative issuance (revenue orders, revenue memorandum circulars, rulings).

Section 7 of Republic Act No. 1125, as amended, is explicit that, except for local taxes, appeals from the decisions of quasi-judicial agencies (Commissioner of Internal Revenue, Commissioner of Customs, Secretary of Finance, Central Board of Assessment Appeals, Secretary of Trade and Industry) on tax-related problems must be brought exclusively to the Court of Tax Appeals. In other words, within the judicial system, the law intends the Court of Tax Appeals to have exclusive jurisdiction to resolve all tax problems. Petitions for writs of certiorari against the acts and omissions of the said quasi-judicial agencies should, thus, be filed before the Court of Tax Appeals.

Republic Act No. 9282, a special and later law than Batas Pambansa Big. 129 provides an exception to the original jurisdiction of the Regional Trial Courts over actions questioning the constitutionality or validity of tax laws or regulations. Except for local tax cases, actions directly challenging the constitutionality or validity of a tax law or regulation or administrative issuance may be filed directly before the Court of Tax Appeals ... 2s The pronouncement in Banco De Oro that it is the CTA, and not the regional trial courts, that has the jurisdiction to rule on the validity of revenue issuances by the CIR was reiterated in succeeding cases,29 and most recently in Manila Peninsula Hotel, Inc. v. Commissioner of Internal Revenue, (Manila Peninsula).3° 28 29 30 Boldfacing supplied.

Commissioner of Internal Revenue v. Court of Tax Appeals (First Division), G.R. Nos. 210501, 211294 & 212490, March 15, 2021; St. Mary's Academy of Caloocan City. Inc. v. Han. Kim Jacinto 5. Henares, G.R. No. 230138, January 13, 2021; Bureau of Internal Revenue v. First£- Bank Tower Condominium Corp., G.R. Nos. 215801 & 218924, January 15, 2020; and Steel Corporation of the Philippines, v. Bureau of Customs (BOC), et al., G.R. No. 220502, February 12,2018.

G.R. No. 229338, April17, 2024.

CTA EB No. 2834 (CTA Case No. 10223)

Consistent with Banco De Oro, the Court in Division has the authority to pass upon the validity of RMC No. 90-2012 and RR No. 17-2012 in connection with respondent's claim for refund or credit premised on Sections 20431 and 22932 of the NIRC, as amended. The collection of excise taxes at the rate of P25.03 per liter on respondent's beer products is contrary to Section 143 of the NIRC, as amended.

Section 5 of RR No. 17-2012 increased the excise tax rate by 4% annually starting January 1, 2014. This contravenes Section 143 of the NIRC, as amended by RA No. 10351, which states that the increase by 4% shall be effective only on January 1, 2018. Annex" A-1" of RMC No. 90-2012 also imposed excise tax rates of either f'15.49 or P20.57 per liter effective January 1, 2013, regardless of whether the net retail price per liter of volume capacity of the fermented liquor is below or more than f'50.60 per liter. 31 32 SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. - The Commissioner may - (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. (Boldfacing supplied) SEC. 229. Recoven; 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, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payn1ent 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.

CTA EB No. 2834 (CTA Case No. 10223)

The Court En Bane agrees with the Court in Division that the imposition of excise taxes at the rate of P25.03 per liter on petitioner's beer products during the period from January 1, 2018 to December 31, 2018 based on RR No.17-2012 and RMC No. 90-2012 is contrary to law. Consider the following presentation:

Excise Tax Rate per liter Excise Tax Rate per liter on locally on locally manufactured manufactured fermented liquors fermented liquors under Section 143 of the under RR No.l7-2012 NIRC, as amended by and RMC No. 90-2012

Period

RA No.10351 that was collected

January

1, 2013 to 1"15.00 per liter in case 1"20.57 December 31, 2013 the net retail price per liter of volume capacity of the fermented liquor is 1"50.60 or less; or 1"20.00 per liter in case the net retail price per liter of volume capacity of the fermented liquor is more than 1"50.60

January

1, 2014 to 1"17.00 per liter in case 1"21.39 December 31, 2014 the net retail price per liter of volume capacity of the fermented liquor is 1"50.60 or less; or 1"21.00 per liter in case the net retail price per liter of volume capacity of the fermented liquor is more than 1"50.60.

January

1, 2015 to 1"19.00 per liter in case 1"22.25 December 31, 2015 the net retail price per liter of volume capacity of the fermented liquor is 1"50.60 or less; or

CTA EB No. 2834 (CTA Case No. 10223)

January

1, 2016 to 1'21.00 per liter in case 1'23.14 December 31,2016 the net retail price per liter of volume capacity of the fermented liquor is 1'50.60 or less; or 1'23.00 per liter in case the net retail price per liter of volume capacity of the fermented liquor is more than 1'50.60.

January

1, 2017 to 1'23.50 per liter !>24.07 December 31, 2017 regardless of the net retail price per liter of volume capacity of the fermented liquor

January

1, 2018 to 1'24.44 (the excise tax !>25.03 December 31, 2018 shall be increased by 4% every year thereafter) In Manila Peninsula,33 the Supreme Court declared as invalid item 11 of RMC No. 46-2008 and RMC No. 31-2011 for expanding and adding requirements not found in the plain language of Section 108(B)(4) of the NIRC, as amended by Republic Act No. 9337: 33 It is a well-settled doctrine that the rule-making power of administrative agencies cannot be extended to amend or expand statutory requirements or to embrace matters not originally encompassed by the law. As the Court held in Secretan; of Finance Purisima, et al. v. Rep. Lazatin, et al.: RR 2-2012 is unconstitutional.

According to the respondents, the power to enact, amend, or repeal laws belong exclusively to Congress. In passing RR 2-2012, petitioners illegally amended the law - a power solely vested on the Legislature. We agree with the respondents.

The power of the petitioners to interpret tax laws is not absolute. The rule is that regulations may not enlarge, alter, restrict, or otherwise go beyond the provisions of the law they administer; G.R. No. 229338, April17, 2024.

administrators and implementors cannot engraft additional requirements not contemplated by the legislature.34 Similar to Manila Peninsula, the SOF and petitioner engaged in law-making when they imposed excise tax rates contrary to Section 143 of the NIRC, as amended. For this reason, the Court En Bane holds that the Court in Division was correct in declaring portions of Annex "A-1" of RMC No. 90-2012 and the proviso in Section 5 of RR No. 17- 2012 which states that "[s]tarting January 1, 2014, the applicable tax rate shall be increase[ d] by four percent (4%) annually" null and void for being contrary to and inconsistent with Section 143 of the NIRC, as amended by RA No. 10351.

The Court in Division correctly ruled that respondent is entitled to a partial refund of the erroneously paid excise taxes.

Based on the findings and conclusions of Mr. George V. Villaruz, the Court-commissioned ICP A complemented by the Court in Division's own determination, the Court in Division correctly found thatthe removal of 248,939,935.60 liters of respondent's beer products for the year 2018 should have been subjected to an excise tax rate of only !'24.44 per liter as prescribed under Section 143 of the NIRC, as amended by RA No. 10351, instead of !'25.03 per liter. This P0.59 discrepancy per liter resulted m an erroneous overpayment of excise taxes m the amount of !'146,874,555.07.35 34 35 Boldfacing supplied. Citations omitted.

Tax Rate Per

Liter

Excise Tax Paid per Return

1"25.03 Less: Excise Tax Due under 1"24.44

Section 143 of the NIRC of

1997, as amended by RA No.

10351 Erroneously, excessively 1"0.59 and/ or illegally collected

Excise Tax

Subject Beer

Amount

Removals

(In Liters)

248,939,935.60 1"6,230,966,581.13 1"6,084,092,026.06 1"146,87 4,555. 07 CTA EB No. 2834 (CTA Case No. 10223) Precisely, the Court in Division is correct in partially granting respondent's refund or tax credit representing erroneously, excessively, and/ or illegally collected excise taxes due on the removals of "San Mig Light" in can, in bottle and kegs, "San Miguel Premium All Malt Beer," in bottle and in can, "San Miguel Pale Pilsen" in can, "Super Dry" in can, "Red Horse" in can, "San Mig Zero" in bottle, "San Miguel Flavored Beer-Apple" in bottle, and "San Miguel Flavored-Lemon" in bottle for the period covering January 1, 2018 to December 31, 2018, to the extent of P146,874,555.97. To conclude, "[a]lthough the burden of proof to establish entitlement to a refund is on the taxpayer-claimant, the Court has consistently held that once the minimum statutory requirements have been complied with, the claimant should be considered to have successfully discharged their burden to prove its entitlement to the refund. After the claimant has successfully established a prima facie right to the refund by complying with the requirements laid down by law, the burden is shifted to the opposing party, i.e., the BIR, to disprove such claim."36

WHEREFORE,

the Petition for

Review, filed by the Commissioner of Internal Revenue on December 14, 2023 in CT A EB No. 2834, is DENIED, for lack of merit. The Decision dated July 5, 2023 and the Resolution dated October 9, 2023 in CTA Case No. 10223 are AFFIRMED.

FCij~

MARIAN IV~ F. REfES-FAJARDO

Associate Justice

WE CONCUR:

36

Presiding Justice

Chevron Holdings, Inc. (Formerly Caltex Asia Limited) v. Commissioner of Internal Revenue, G.R. No. 215159, july 5, 2022. Citations omitted.

CTA EB No. 2834 (CTA Case No. 10223)

~h"'- M~BELEN M. RINGPIS-LIBAN

Associate Justice

c~;{-~~A"if~N --_

Associate Justice

AA.~JAbn LANtf'~~tUI-~AVID

Associate Justice

c~J &f£R~ORES

Associate Justice

HENRY ~NGELES

Associate Justice

CERTIFICATION

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

Presiding Justice