GR 188497; (April, 2012) (Digest)
G.R. No. 188497 , April 25, 2012
COMMISSIONER OF INTERNAL REVENUE vs. PILIPINAS SHELL PETROLEUM CORPORATION
FACTS
Respondent Pilipinas Shell Petroleum Corporation, a manufacturer of petroleum products, filed claims for refund of excise taxes totaling over ₱100 million. The taxes were paid on sales of jet fuel and other petroleum products to various international carriers for their use or consumption outside the Philippines during the period 2001-2002. The Commissioner of Internal Revenue did not act on the claims, prompting Shell to file petitions for review before the Court of Tax Appeals (CTA).
The CTA First Division, and later the CTA En Banc, granted the refund. The tax courts ruled that the sales were exempt from excise tax under Section 135(a) of the National Internal Revenue Code (NIRC) of 1997, which explicitly exempts from excise tax “petroleum products sold to international carriers for their use or consumption outside the Philippines.” The CTA distinguished this case from precedents cited by the Commissioner, noting the provision grants an exemption to the article itself when sold to a qualified buyer.
ISSUE
Whether the manufacturer-seller of petroleum products, having already paid the excise tax upon removal from its refinery, is entitled to a refund when those products are subsequently sold to international carriers for use outside the Philippines.
RULING
Yes, the Supreme Court affirmed the CTA’s decision and granted the refund. The Court clarified that the excise tax under the NIRC is an indirect tax levied on the manufacture of specific articles, including petroleum products. While the tax is imposed and paid by the manufacturer at the point of production (Section 148), its economic burden is intended to be passed on to the buyer. Section 135(a) provides a clear and specific exemption: the petroleum product itself is exempt from the excise tax when sold to an international carrier for use outside the country.
The legal logic is that the exemption attaches to the transaction and the article, not merely to the buyer. Since the law declares the articles exempt under that specific condition, the tax should not have been due in the first place. Consequently, the manufacturer who paid the tax under a mistaken imposition is entitled to recover it. The Court rejected the Commissioner’s argument that the exemption only prevents the manufacturer from passing the tax to the exempt buyer, holding such an interpretation would render the exemption meaningless and ignore the statutory language. The manufacturer, as the statutory taxpayer who bore the financial cost, is the proper party to claim the refund for taxes erroneously collected on exempt transactions.