The Supreme Court has reversed the 2020 decision of the Court of Tax Appeals ordering the Bureau of Internal Revenue (BIR) to refund or issue tax credits for P219.153 million to oil giant Petron Corp. in connection with the excise taxes paid by the latter for the importation of alkylate in 2012 that the justices said were “erroneously levied and collected.”
The 18-page ruling promulgated on March 20, 2023 and made public on April 20, granted the petition for review of Petron on the July 22, 2020 and February 18, 2021 resolutions of the CTA dismissing its bid for a refund.
“Accordingly, respondent Commissioner of Internal Revenue is ordered to refund or issue a tax credit certificate in the total amount of P219, 153, 851 representing the erroneously paid excise taxes on its importation of alkylate,” the ruling penned by Associate Justice Ramon Paul Hernando and concurred by Chief Justice Alexander Gesmundo and Associate Justices Rodil Zalameda and Ricardo Rosario.
The case started on July 18, 2012 when the Bureau of Customs (BOC) issued a circular that implemented the June 29, 2012 letter of the BIR stating that “alkylate, which is a product of distillation similar to that of naphtha, is subject to excise tax” under the 1997 National Internal Revenue Code (NIRC).
Thus, the alkylate imported by Petron – between July 22, 2012 and Nov. 6, 2012 – were subjected to excise taxes collected by BIR through the BOC.
Petron then filed a claim for refund with BIR arguing that the excise taxes were wrongfully levied but the former did not act on the claim.
This prompted the oil giant to elevate the case to the CTA.
However, the tax court’s Special Second Division junked Petron’s plea, ruling that alkylate is similar to naphtha, which is also a product of distillation, and thus, subject to excise tax under the NIRC. Petron then brought the case to the attention of the CTA en banc but the latter also rejected the corporation’s plea.
The oil giant then elevated the case to the SC which ruled in its favor.
In its ruling, the High Court said Petron does not seek to be exempted from paying excise taxes on its alkylate importations but rather its plea for tax refund was anchored on the absence of a law that imposes excise tax on alkylate.
“Hence, the CTA Special Second Division erroneously applied the doctrine of strict interpretation in construing tax exemption since petitioner is not asking to be exempt from excise tax.To be precise, petitioner prays for the refund of excise taxes erroneously assessed and illegally collected from it on the ground that there is no law that authorizes such exaction,” the SC said.
