The Court of Tax Appeals (CTA) has ordered the Bureau of Internal Revenue (BIR) to refund or issue tax credits amounting to P43.9 million to Petron Corporation for the erroneously collected excise taxes on the firm’s importation of more than 9.7 million liters of alkylate in 2016 and 2017.
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.”
In granting the petition of Petron, the CTA said: "The pieces of evidence for petitioner (Petron), including the testimony of an expert, which respondent (BIR) failed or did not even attempt to rebut, clearly established that alkylate is not a product of distillation; hence, not subject to excise tax.”
The tax court’s decision was written by Associate Justice Jean Marie A. Bacorro-Villena with the concurrence of Associate Justice Lanee S. Cui-David.
In October 2016 and January 2017, Petron imported 9,774,282 liters of alkylate. The Bureau of Customs (BOC) imposed excise tax of P4.35 per liter or a total of P43,912.370 for the total importation.
The collection of the excise taxes was based on 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."
On Oct. 8, 2018, Petron filed an administrative claim for the excise taxes paid on the importations of alkylate. Since the BIR did not act on the claim, Petron filed a petition before the CTA which granted the firm’s claim.
Last April, the Supreme Court (SC) reversed the 2020 CTA decision as it ordered the BIR to refund or issue tax credits for P219.1 million to Petron for the latter’s excise taxes paid for the importation of alkylate between July 22, 2012 to Nov. 6, 2012.
The SC said:
“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 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.”