The Supreme Court (SC) has reversed the 2020 decision of the Court of Tax Appeals (CTA) as it ordered the Bureau of Internal Revenue (BIR) to refund or issue tax credits for P219.1 million to Petron Corporation for the erroneously levied and paid excise taxes for the importation of alkylate in 2012.
The ruling was contained in a decision written by Justice Ramon Paul L. Hernando and made public on Thursday, April 20. It granted the appeal filed by Petron.
Google says “alkylate is a gasoline blending stock that is produced by the acid-catalyzed reactions of olefins with normal hydrocarbons to yield higher boiling and higher octane.”
Case records show that Petron imported alkylate between July 22, 2012 to Nov. 6, 2012.
On July 18, 2012, the Bureau of Customs (BOC) issued a circular that implemented the June 29, 2012 letter of the BIR which states that “alkylate, which is a product of distillation similar to that of naphtha, is subject to excise tax under Section 148(e) of the National Internal Revenue Code (NlRC) of 1997, as amended."
Thus, the alkylate imported by Petron were subjected to excise taxes of P219,153,851 which were collected by the BIR through the BOC.
Thereafter, Petron filed administrative claims for refund with the BIR. It said the excise taxes were erroneously, wrongfully, illegally and excessively imposed and collected by BIR.
When the BIR did not act on the claims for refund, Petron filed with the CTA petitions for review. However, CTA’s special second division denied the petitions with a ruling that alkylate is similar to naphtha, which is also a product of distillation, and thus, subject to excise tax under Section 148 (e) of the NIRC.
The CTA as a full court affirmed the ruling of its special second division. Among other things, it rejected Petron’s claim of double taxation as it held that the tax imposed on the importation of alkylate is different from the tax imposed on the production of gasoline in the country for domestic sale or consumption.
With the denial of its motion for reconsideration, Petron elevated its case to the SC.
In reversing the CTA as a full court and granting Petron’s petition, the SC said: “Petitioner (Petron) does not seek to be exempt from excise taxes on its alkylate importations. Instead, petitioner anchors its claim for tax refund on the absence of a law that imposes excise tax on alkylate.”
The SC also said:
“Petitioner’s entitlement to a tax refund is not based on the existence of a tax exemption clause in its favor but premised on its claim that alkylate is not subject to excise tax under Article 148 (e) of the 1997 NIRC, as amended.
“Thus, the CTA Special Second Division erroneously applied the doctrine of strict construction against the taxpayer in this case.
“Verily, since petitioner's claim for tax refund is not in the nature of a tax exemption, it is not burdened to prove that the legislature intended to exempt it from tax clearly and distinctly, contrary to the CTA Special Second Division's ratiocination.
“To reiterate, alkylate is not among the articles covered by Section 148 (e) of the 1997 NIRC, as amended. Thus, in the absence of a law expressly and unambiguously imposing excise tax on alkylate, the appropriate rule to be applied is the strict interpretation in the imposition of taxes such that the statute must be construed most strongly against the government and in favor of the taxpayer.
“Simply put, insofar as excise tax is concerned, non-taxability is the rule, while taxability is the exception. Verily, since alkylate is not categorically covered by Section 148 (e) of the 1997 NIRC, as amended, the doubt should beresolved in petitioner's favor. As burdens, taxes should not be unduly exacted nor assumed beyond the plain meaning of the tax laws.
“As aptly pointed out by petitioner, alkylate is exclusively intended for use solely as a raw material or blending component in the manufacture of unleaded premium gasoline. Alkylate has no use as a product by itself as it does not possess the necessary volatility to run a vehicle's engine.
“Considering the intended purpose and nature of alkylate, it certainly cannot be placed under the same category as naphtha and regular gasoline.
“Consequently, the payment of excise taxes by petitioner upon its importation of alkylate is deemed illegal and erroneous in the absence of a specific provision of law that distinctly and categorically imposes tax thereon.
“For this Court to subject alkylate to excise tax, the authority should be reasonably founded on the language of the statute. That language is wanting in this case. ‘In the scheme of judicial tax administration, the need for certainty a d predictability in the implementation of tax laws is crucial.’
“To reiterate, administrative interpretations cannot go beyond or be inconsistent with the terms and provisions of the law it seeks to interpret or implement.
“All told, the Court finds that the CTA En Banc erred in denying petitioner's claim for tax refund or credit. To be clear, alkylate does not fall under the category of ‘other similar products of distillation’ as contemplated in Section 148 (e) of the 1997 NIRC, as amended.
“Wherefore, the Court grants the instant Petition for Review on Certiorari, and reverses and sets aside the July 22, 2020 Decision and the Feb.18, 2021 Resolution of the Court of Tax Appeals En Banc in CTA EB No. 2072.
“Accordingly, respondent Commissioner of Internal Revenue is Ordered to refund or issue a tax credit certificate in favor of petitioner Petron Corporation in the total amount of'P219,153,851, representing the erroneously paid excise taxes on its importation of alkylate covered by Import Entry and Internal Revenue Declaration Nos. 122844547, 122773043, 124315222, 125253615, and 125644382. So ordered.”