The Court of Tax Appeals (CTA) has ordered the Bureau of Internal Revenue (BIR) to refund P19.99 million or issue tax credits to Petron Corporation (Petron) for the firm’s erroneously paid excise taxes in the importation of alkylate in 2014 and 2015.
In its full court decision written by Associate Justice Lanee S. Cui David and promulgated on July 7, 2023, the CTA granted Petron’s petition against the Sept. 16, 2021 ruling of the tax court’s third division.
“All told, the Court En Banc (full court) finds that petitioner (Petron) was able to substantiate its claim for refund or issuance of a tax credit certificate,” the CTA ruled.
The dispositive portion of the decision stated:
“Wherefore, premises considered, the instant Petition for Review is granted. The Decision dated Sept. 16, 2021, and the Resolution dated March 31, 2022, of the Court's Third Division in CTA Case No. 9512 are revesed and set aside.
“Accordingly, respondent (BIR) is ordered to refund or issue tax credit certificate in favor of petitioner in the amount of Nineteen Million Nine Hundred Ninety-Seven Thousand Twenty-Eight Pesos (P19,997,028), representing excise taxes erroneously paid for its importation of alkylate under Import Entry & Internal Revenue Declaration No. 00379406065. So ordered.”
Ruling in favor of Petron, the CTA cited the Supreme Court’s (SC) March 30, 2023 decision which “categorically declared that alkylate does not fall under the category of ‘other similar products of distillation.’"
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.”
The CTA said that the SC’s decision granted Petron’s petition for review in a similar case and ordered the BIR to refund or issue tax credits for P219.1 million to the oil firm for the erroneously levied and paid excise taxes for the importation of alkylate in 2012.
In its decision, the SC ruled:
“To reiterate, alkylate is not among the articles covered by Section 148 (e) of the 1997 NIRC (National Internal Revenue Code), 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 be resolved in petitioner's (Petron) 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.”
The CTA said: “With the evidence presented, and as recently ruled by the Supreme Court in the Petron case involving herein petitioner, there is no reason why alkylate should be treated the same as naphtha and ‘other similar products of distillation’ to subject it to excise taxes.”
The Bureau of Customs started in 2012 the implementation of the BIR’s letter that mandated the imposition of excise taxes on the importation of alkylate.