G.R. No. 123713 - Heirs of Vencilao, Sr. vs. Court of Appeals

ExxonMobil Petroleum and Chemical Holdings, Inc. – Philippine Branch (Exxon) is a foreign corporation duly organized under the laws of Delaware, USA, and is authorized to do business in the Philippines through its Philippine branch.
The branch’s principal office is located at 17/F The Orient Square, Emerald Avenue, Ortigas Center, Pasig City.

Exxon is engaged in the business of selling petroleum products, catering to both domestic and international carriers.
In the course of its operations, Exxon purchased Jet A-1 fuel and other petroleum products from Caltex Philippines, Inc. and Petron Corporation.
Although the excise taxes on these products were paid and remitted by Caltex and Petron, such taxes were effectively passed on to Exxon as part of the purchase price.

Between November 2001 and June 2002, Exxon sold 28,635,841 liters of Jet A-1 fuel to international carriers, thereby transacting fuel sales that were exempt from excise taxes amounting to Php105,093,536.47.
Exxon filed administrative claims for refund with the Bureau of Internal Revenue (BIR) for the total excise tax value paid.
On October 30, 2003, Exxon petitioned for review with the Court of Tax Appeals (CTA) claiming a refund or tax credit in the amount of Php105,093,536.47 on the ground that the excise taxes were erroneously passed on.
On June 24, 2004, Exxon and the Commissioner of Internal Revenue (CIR) submitted a Joint Stipulation of Facts and Issues, listing fourteen issues including the proper party to claim refund.
During prosecution of evidence, the CIR filed a motion (January 28, 2005) seeking first to resolve whether Exxon was the proper party to claim a refund—which Exxon opposed on March 15, 2005.
The CTA First Division initially issued a resolution on July 27, 2005 upholding the CIR’s position and dismissing Exxon’s refund claim; this was later reaffirmed on July 27, 2006 when Exxon’s motion for reconsideration was denied.
Exxon then elevated the case to the CTA En Banc by filing a petition for review against both the July 27, 2005 and July 27, 2006 resolutions.

Whether the assailed CTA decisions and resolution wrongly prohibited Exxon, as the distributor and vendor of petroleum products to international carriers (registered in countries with existing bilateral agreements with the Philippines), from claiming a refund of the excise taxes paid.

This issue centers on the interpretation of statutory provisions regarding refund claims when the tax burden is passed on to the purchaser despite the tax being an indirect tax.

Whether the CTA erred in affirming the dismissal of Exxon’s refund claim by accepting the CIR’s “motion to resolve first the issue of whether or not Exxon is the proper party to ask for a refund”

Exxon contends that the CIR’s motion to resolve the issue is essentially a motion to dismiss, improperly filed out of time, and should have been denied outright by CTA.
The propriety of holding a preliminary hearing on special and affirmative defenses after the filing of the answer is at the crux of this issue.