Case Summary (G.R. No. 211303)
Petitioner
PSPC imported 28,578,673 liters of Jet A‑1 fuel (paid excise P3.67/liter; total P104,883,730.27) and purchased locally 3,192,012 liters from Chevron (Chevron had paid excise which it passed on to PSPC). PSPC sold 24,974,294 liters to various international carriers (Feb 27–Apr 9, 2006). PSPC filed a claim for refund/tax credit with the BIR (Feb 15, 2007) for P91,655,658.98 and, after BIR inaction, filed a petition with the CTA (Feb 15, 2008).
Respondent and Government Position
The CIR (through OSG) defended the denial of refund, arguing that (a) Section 135 of the National Internal Revenue Code (NIRC) should not be read as conferring an exemption to importers/manufacturers; (b) PSPC was not entitled to refund for excise taxes lawfully payable upon importation under Sections 131–148 of the NIRC; and (c) prior decisions (including earlier Pilipinas Shell rulings) did not mandate PSPC’s requested relief in the circumstances or were distinguishable.
Key Dates and Procedural Posture
- PSPC’s BIR claim: Feb 15, 2007. Petition to CTA: Feb 15, 2008.
- CTA Third Division denied refund (Decision Sept. 7, 2012); denial of reconsideration (Nov. 12, 2012).
- CTA En Banc affirmed (Decision Sept. 9, 2013; reconsideration denied Feb. 3, 2014).
- Supreme Court revisited related prior holdings (2014 resolution) and, after full briefing and internal assignment, the present matter was decided by the Court (opinion delivered by Justice Perlas‑Bernabe, with full bench participation). Applicable constitutional framework: 1987 Constitution (decision date is post‑1990; the 1987 Constitution governs).
Applicable Law and Regulations
- 1987 Philippine Constitution (governing legal framework).
- National Internal Revenue Code (NIRC), as amended by RA 8424 (Tax Reform Act of 1997): Sections discussed include 129 (scope of excise taxes), 131 (payment of excise taxes on imported articles), 135 (petroleum products sold to international carriers and exempt entities), 148 (excise attachment to petroleum products), 204 and 229 (refund/credit remedies).
- BIR issuances and implementing rules, notably Revenue Regulation No. 3‑2008 and related revenue rulings and memoranda concerning procedures and requirements for product replenishment and refund under Section 135.
- Controlling and relevant jurisprudence: Silkair decisions, earlier Commissioner of Internal Revenue v. Pilipinas Shell decisions (2012, 2014, 2016), Chevron Phils., Inc. v. CIR (2015), and other cited cases addressing excise taxes and refund entitlement.
Factual Matrix
PSPC paid excise taxes on both (a) Jet A‑1 fuel it imported directly and (b) Jet A‑1 fuel it purchased from Chevron (the latter having excise taxes already paid by Chevron and passed on to PSPC through the purchase price). PSPC sold a total of 24,974,294 liters to international carriers during the relevant period and sought refund/credit of excise taxes it had previously paid, asserting that Section 135 renders those sales excise‑exempt and therefore prior payments were erroneously or illegally collected.
Issue Presented
Whether PSPC is entitled to a refund or tax credit for excise taxes it paid on Jet A‑1 fuel sold to international carriers for consumption/use outside the Philippines during the period February–April 2006.
Supreme Court Holding (Majority)
The petition is partly meritorious. The Court held that:
- Section 135 must be read in light of the nature of excise taxes (tax on certain goods/articles, accruing upon manufacture or importation) and the distinction between statutory taxpayer (legal incidence) and the economic burden (which can be passed on).
- Section 135 constitutes an impersonal exemption in respect of the petroleum product itself (i.e., the exemption attaches to the petroleum when sold to enumerated entities), rather than a personal exemption conferred directly on the buyer alone.
- Consequently, where the statutory taxpayer (manufacturer/importer) paid excise taxes upon importation/manufacture and subsequently sold the petroleum to international carriers (as enumerated in Section 135), previously paid excise taxes become erroneously or illegally collected and are subject to refund or tax credit under Sections 204 and 229 of the NIRC.
- However, PSPC is not entitled to refund for excise taxes that it merely paid as a purchaser because those amounts represented Chevron’s excise liability passed on as part of the purchase price; PSPC, as purchaser, did not become the statutory taxpayer with legal incidence of the excise for those liters purchased from Chevron.
- The Supreme Court therefore set aside the CTA decisions and remanded the case to the CTA to make factual findings on the composition of the 24,974,294 liters sold to international carriers (i.e., quantities sourced from PSPC’s own imports versus quantities sourced from Chevron) and to compute the refundable amount accordingly.
Reasoning — Statutory and Doctrinal Foundations
- Nature of excise taxes: The Court reiterated that under the NIRC excise taxes are taxes on specified goods (property), not taxes on persons or on the mere exercise of a privilege; liability ordinarily attaches upon manufacture or importation.
- Distinction between legal incidence and economic burden: The statutory taxpayer (manufacturer/importer) bears legal incidence and must remit the tax even if the economic burden is contractually passed on to buyers. Passing‑on does not change the statutory taxpayer for the purpose of exemptions and refunds.
- Characterization of Section 135: The statutory text—“Petroleum products sold to the following are exempt from excise tax”—refers to the petroleum products as the object of the exemption; the enumerated persons identify the disposition making the exemption operative. This textual reading supports an impersonal exemption attaching to the product once sold to an eligible buyer.
- Conditional taxability and Section 131 interplay: The NIRC contemplates that certain imported or manufactured articles may initially be taxable but become exempt upon sale to enumerated entities; similarly Section 131 treats some tax‑free importations as becoming taxable if subsequently sold to non‑exempt persons. The Court used this structure to explain that exemption may crystallize upon sale to the specified entities.
- Stare decisis and precedent: The majority acknowledged stare decisis and applied prior pronouncements (notably the 2014 Pilipinas Shell Resolution and subsequent Chevron jurisprudence) where facts and legal questions were substantially similar. The Court also explained conceptual distinctions between the 2014 and later cases and clarified foundational principles to address dissenting arguments.
Relief Ordered and Remand Instructions
- The CTA decisions (Third Division and En Banc) are set aside in part.
- The case is remanded to the CTA for factual findings and disposition limited to:
a) If the 24,974,294 liters sold to international carriers were entirely comprised of PSPC’s imported fuel, then PSPC may be refunded the excise taxes it paid on those imports (subject to proof);
b) If the liters sold were a mix of PSPC’s imports and Chevron‑supplied fuel, PSPC may be refunded only for the excise taxes it actually paid on the portion that was its imports (again, subject to proof); PSPC cannot claim refund for taxes originally paid by Chevron and passed on to PSPC as purchase cost;
c) Any portion not duly proven as attributable to PSPC’s own imported fuel shall be denied refund.
Concurring and Dissenting Views — Overview
- Concurring (Justice Caguioa, Justice Inting, and others in part): Agreed with remand and with the view that manufacturer/importer is proper claimant when statutory taxpayer paid excise
Case Syllabus (G.R. No. 211303)
Case Caption and Decision
- En Banc decision of the Supreme Court, G.R. No. 211303, dated June 15, 2021.
- Ponente: Justice Perlas-Bernabe.
- Disposition: Petition partly granted; CTA-En Banc Decision dated September 9, 2013 and Resolution dated February 3, 2014 in CTA EB No. 960, and CTA-Third Division Decision dated September 7, 2012 and Resolution dated November 12, 2012 in CTA Case No. 7731 set aside; case remanded to the Court of Tax Appeals for factual determinations consistent with the Supreme Court’s instructions.
- Vote and concurrence/dissent summary: Chief Justice Gesmundo, and Justices Hernando, Carandang, M. Lopez, Gaerlan, and Rosario concur with the ponencia. Justice Leonen dissents (separate opinion). Justice Caguioa files a concurring opinion. Justice Lazaro-Javier dissents. Justice Inting files a separate concurring opinion. Justice Zalameda dissents. Justice Delos Santos joins Justice Leonen’s dissent. Justice J. Lopez joins Justice Zalameda’s dissent.
Procedural Posture
- PSPC filed a claim for refund/tax credit with BIR-LTAID II on February 15, 2007; alleged erroneously or illegally collected excise taxes totaling P91,655,658.98.
- Due to BIR inaction, PSPC filed Petition for Review with the Court of Tax Appeals on February 15, 2008 (CTA Case No. 7731).
- CTA-Third Division denied PSPC’s claim in Decision dated September 7, 2012; Motion for Reconsideration denied in Resolution dated November 12, 2012.
- PSPC elevated case to CTA-En Banc (CTA EB No. 960); CTA-En Banc denied petition in Decision dated September 9, 2013 and denied reconsideration in Resolution dated February 3, 2014.
- Meanwhile, this Court (Supreme Court) reconsidered its own earlier 2012 Pilipinas Shell Decision in a Resolution dated February 19, 2014 (2014 Pilipinas Shell Resolution).
- PSPC filed the present petition to the Supreme Court (filed April 3, 2014) invoking the 2014 Pilipinas Shell Resolution and the doctrine of stare decisis.
- OSG filed Comment for the Commissioner of Internal Revenue (September 18, 2014); PSPC filed Reply (March 2, 2017).
- Case initially raffled to a Third Division member (March 10, 2014); elevated to Court En Banc on December 7, 2020 and accepted January 5, 2021 due to possible need to revisit doctrines; assigned to present ponente June 15, 2021.
Facts (established from the record)
- Nature of petitioner: Pilipinas Shell Petroleum Corporation (PSPC) is engaged in manufacture, processing, treatment, refinement, and sale of petroleum products, including Jet A-1 fuel.
- Imports and local purchases (February–March 2006):
- PSPC imported 28,578,673 liters of Jet A-1 through Tabangao refinery, Batangas, and paid excise taxes at P3.67 per liter, totaling P104,883,730.27.
- PSPC purchased locally from Chevron Philippines, Inc. 3,192,012 liters of Jet A-1; Chevron had paid excise taxes upon importation and passed those tax costs on to PSPC as part of the purchase price.
- Sales to international carriers:
- Between February 27 and April 9, 2006, PSPC sold a total of 24,974,294 liters of Jet A-1 to various international carriers for consumption outside the Philippines.
- Refund claim:
- PSPC claimed refund or tax credit for excise taxes allegedly erroneously or illegally collected in the amount of P91,655,658.98.
- Evidentiary gap:
- Record did not clearly show the composition of the 24,974,294 liters sold to international carriers by source (i.e., how much came from PSPC’s imports versus Chevron purchases).
Principal Issue Presented to the Court
- Whether PSPC is entitled to a claim for refund in respect of excise taxes it paid on Jet A-1 fuel that it subsequently sold to international carriers from February 27 to April 9, 2006.
Ultimate Holding
- The petition is partly meritorious: PSPC is entitled, under the Court’s interpretation of the Tax Code and consistent jurisprudence, to refund of excise taxes it paid on its own imported Jet A-1 fuel that was subsequently sold to international carriers, provided PSPC proves the portion covered; but PSPC is not entitled to refund for excise taxes merely passed on to it as purchaser from Chevron because PSPC was not the statutory taxpayer in respect of those taxes.
- The CTA decisions (Third Division and En Banc) are set aside and the case remanded to the CTA for factual determinations as specified by the Supreme Court.
Core Legal Doctrines and Concepts Applied
- Doctrine of stare decisis:
- The Court recognizes stare decisis et non quieta movere: precedent promotes certainty and stability; absent strong reasons, similar facts and legal questions should follow precedent.
- The Court applied stare decisis to follow the 2014 Pilipinas Shell Resolution and related jurisprudence where facts, parties and issues are substantially identical.
- Nature of excise taxes:
- Excise taxes under the Tax Code are taxes on specified goods/articles (property tax character) and attach upon manufacture or importation; they may be specific or ad valorem.
- Excise taxes are indirect taxes: statutory liability (tax incidence) lies with manufacturer/importer, but the economic burden may be passed on (tax burden) to purchasers by contractual pricing practices.
- Distinction emphasized: tax incidence (statutory taxpayer liable to remit) is not the same as tax burden (economic cost possibly passed on to buyer).
- Tax exemption taxonomy:
- Personal vs. impersonal exemptions:
- Personal exemption: granted to a person.
- Impersonal exemption: granted to a class of property or to the product itself, regardless of owner.
- Section 135’s wording and nature of excise taxes favor an impersonal exemption in favor of the petroleum product (i.e., the article becomes tax-exempt upon qualifying sale).
- Personal vs. impersonal exemptions:
- Exemption operative moment and conditional taxability:
- For excise taxes, the product’s tax status is conditional and may be determined by subsequent disposition (e.g., sale to Section 135 enumerated entities can render the product exempt).
- Section 131 illustrates conditional taxability: tax-free importation by exempt entities may become taxable if the exempt import is subsequently sold/transferred to non-exempt parties.
- Refund mechanisms:
- Sections 204 and 229 (and implementing regulations) permit recovery of taxes erroneously or illegally collected; the statutory taxpayer who paid the tax is the proper party to claim refund/credit within statutory timeframes.
- Administrative guidance and practice:
- Revenue Regulation No. 3-2008 and earlier BIR rulings and revenue memoranda set out procedures, requisites and mechanisms (e.g., product replenishment, marking payments subject to later refund) to process refund/credit claims for excise taxes on petroleum products sold to international carriers or exempt entities.
Statutory Provisions and Regulatory Materials Emphasized
- Section 135 (Petroleum Products Sold to International Carriers and Exempt Entities or Agencies) — operative language: “Petroleum products sold to the following are exempt from excise tax: (a) International carriers ... on their use or consumption outside the Philippines ... (b) Exempt entities or agencies covered by tax treaties ... (c) Entities which are by law exempt from direct and indirect taxes.”
- Section 129 (Goods Subject to Excise Taxes) — defines excise taxes as applying to goods manufactured/produced in the Philippines for domestic sale/consumption or to imports.
- Section 131 (Payment of Excise Taxes on Imported Articles) — identifies persons liable (owner/importer) and establishes conditionality where tax-free imports later sold to non-exempt persons become taxable.
- Section 148 — lists petroleum products to which excise taxes attach as soon as they come into existence (e.g., aviation turbojet fuel).
- Sections 204 and 229 — refund/credit provisions; recovery of erroneously or illegally collected internal revenue taxes; claims, time limits and procedures.
- Revenue Regulation No. 3-2008 — prescribes procedures, product replenishment, transitory provisions and disallowances applicable to claims involving mixed inventories.
Court’s Reasoning — Majority (Ponencia)
- Stare decisis and applicability:
- The Court treated the 2014 Pilipinas Shell Resolution and the 2015 Chevron decision as controlling precedent because of identity of parties, facts, issues and legal questions; therefore PSPC’s petition should be granted in light of settled doctrine.
- Interpretation of Section 1