The Court of Tax Appeals (CTA) has granted P3.1 million out of the P5.5 million refund sought by the Philippine Airlines, Inc. (PAL) for the excise taxes the firm paid for imported wines, liquors and cigarettes in 2009 for consumption in its international flights.

In its Oct. 5, 2023 decision, the CTA's second division said the P3.1 million refund represents only the excice taxes which were erronously collected by the Bureau of Customs (BOC) and paid by PAL for imported wines and liquors. 

Case records showed that in 2011, PAL sought a refund of the P5.5 million it paid as excise taxes for imported wines, liquors, and cigarettes.  PAL said that it is exempt from the payment under Presidential Decree No. 1590, its franchise law.  The refund claim was denied.

Later, PAL elevated the issue before the CTA as a full court. In 2017, the CTA, as a full court, granted partially PAL's appeal and remanded the case to the court's third division to determine the amount of refund.

The Bureau of Internal Revenue (BIR) elevated the issue before Supreme Court (SC) which, in its 2018 resolution, declared that the CTA as a full court did not commit any reversible error "to grant PAL's claim only to the extent of the refund of taxes paid on imported liquors, because its evidence only established that the cost of importing alcohol for its commissary and catering supplies is lower than purchasing them locally."

The SC remanded the case to the CTA for the reception of evidence on the refund for excise taxes on importation of wines and liquor products.

In its decision, the CTA said that three requisites must be complied for PAL to be exempt from taxes for the importation of liquor, wine, and cigarettes.

The tax court said the firsr requisite is that PAL paid its corporate income tax and VAT (value added tax)  liabilities for the subject period of importation, while the second is that the imported articles, supplies or materials are intended to be used in its transport and non-transport operations and other incidental activities. 

The CTA said the third requisite is that imported articles, supplies, or materials are not locally available in reasonable quantity, quality, or price.

It cited the PAL's testimony that the products it imported were not available in reasonable quantity, quality, or price in the local market.  PAL also presented a table of comparison between Cost of Importing and Cost of Locally Purchasing Commissary and Catering Supplies, and sales invoices issued by foreign suppliers, among other things.

The CTA said that these pieces of evidence remain unrebutted as both the BIR and the BOC failed to present any controverting evidence.

"In fine, petitioner complied with the third requisite, but only to the extent of the imported wine and liquor products that are supported by evidence showing that the cost per botde of importing the same is lower than purchasing them locally, and, thus, should be exempt from excise tax," the CTA said. 

In the 21-page decision was written by Associate Justice Ma. Belen M. Ringpis-Liban with the concurrence of Associate Justices Maria Rowena Modesto-San Pedro and Corazon G. Ferrer-Flores, the CTA ruled:

"Verily, the excise tax in the amount of P3,133,270.14 constitutes erroneously paid excise tax which is refundable pursuant to Sections 204 and 229(C)  of NIRC (National Internal Revenue Code) of 1997, as amended. 

"Wherefore,  in view of the foregoing, petitioner's claim for refund is partially granted. Accordingly, the Decision dated Feb. 17, 2015 of this Court in Division is amended to read as follows: Wherefore, in light of the foregoing considerations, the Petition for Review is partially granted. Accordingly, respondent (BIR) is directed to refund petitioner (PAL) the amount of P3,133,270.14, representing the latter's erroneously paid excise tax on its importations of wine and liquor products for its international flight consumption. So ordered."