The Court of Tax Appeals (CTA) has ordered the Bureau of Internal Revenue (BIR) to refund or issue tax credit certificate for P146.87 million to San Miguel Brewery, Inc. (SMB) “representing erroneously, excessively or illegally collected excise taxes” on the firm’s beer products in 2018.
The order was contained in the decision handed down on July 5, 2023 by the CTA’s second division and written by Associate Justice Lanee S. Cui-David with the concurrence of Associate Justice Jean Marie A. Bacorro-Villena.
The dispositive portion of the decision:
“Respondent (BIR) is ordered to refund or issue a Tax Credit Certificate in favor of petitioner (SMB) 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 Jan. 1, 2018 to Dec. 31, 2018.”
The decision granted partially the petition filed by SMB on Dec. 11, 2019 against the BIR commissioner.
SMB told CTA that the excise tax rate of P25.03 per liter imposed on its beer products from Jan. 1 to Dec. 31, 2018 contradicts the provisions of the 11th paragraph of Section 143 of the National Internal Revenue Code (NIRC) of 1997, as amended by Republic Act No. 10351, the Sin Tax Reform Law.
It said the tax rate is not valid because the previous tax rates of P20.57, P21.39, P22.25, P23.14, and P24.07 from which it was derived was based on Revenue Memorandum Circular (RMC) No. 90-2012 and Revenue Regulations (RR) No. 17-2012.
It pointed out the two issuances are directly contradictory to and inconsistent with the provisions of the relevant paragraphs of Section 143 of the NIRC.
It said that Section 143 of the NIRC provides that if the net retail price per liter of volume capacity is P50.60 or less, the tax should be P15 per liter, and if the net retail price per is more than P50.60, then the tax should be P20 per liter as of Jan. 1, 2013. It also said that effective Jan. 1, 2017, the tax on all fermented liquors should be P23.50.
The BIR sought the dismissal of the case. It said that “assuming that the Court (CTA) may take cognizance of cases involving validity or constitutionality of BIR issuances, the Court should dismiss the instant petition due to petitioner's non-exhaustion of administrative remedies,”
It also said that SMB “is not entitled to a tax refund because there was no erroneous or illegal collection of excise taxes; and claims for refund are construed strictly against the taxpayer and in favor of the government.”
The CTA sided with SMB and said the pertinent provisions of RMC No. 90-2012 and RR No. 17-2012 are indeed invalid for being contrary to Section 143 of the NIRC, as amended by RA 10351.
"Courts will not countenance administrative issuances that override, instead of remaining consistent and in harmony with the law they seek to apply and implement," the CTA said.
“In sum, petitioner has duly established that the removals of the subject beer products for the year 2018 in the total of 248,939,935.60 liters should have been subjected to an excise tax rate of only P24.44 per liter under Section 143 of the NIRC of 1997, as amended by RA No. 10351, as opposed to P25.03 per liter imposed by respondent. Thus, the 'P0.59 per liter difference in tax rates was erroneously, excessively and/ or illegally collected on the subject beer removals of 248,939,935.60 liters amounting to P146,874,555.07,” it said.
Under the rules, the decision can still be appealed to the CTA as a full court.