G.R. Nos. 171383 & 172379 November 14, 2008
SILKAIR (SINGAPORE) PTE. LTD., petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, respondent.

FACTS

Petitioner Silkair (Singapore) Pte. Ltd. is a foreign corporation and an international carrier operating routes between Singapore and the Philippines. From January 1 to December 31, 1999, it purchased aviation jet fuel from Petron Corporation for use in its international flights. The invoices included an amount of P3.67 per liter as excise tax, which was paid by Silkair through its sister company. Contending it was exempt from excise tax under Section 135 of the 1997 National Internal Revenue Code (NIRC) and Article 4 of the Air Transport Agreement between the Philippines and Singapore, Silkair filed claims for refund with the Commissioner of Internal Revenue for two periods: P4,239,374.81 (January to June 1999) and P4,831,224.70 (July to December 1999). The Commissioner denied the claims. The Court of Tax Appeals En Banc affirmed the denial, ruling that the excise tax is an indirect tax where the statutory liability remains with the manufacturer/seller (Petron), not the purchaser (Silkair), and therefore only Petron could claim a refund. Silkair appealed, arguing that holding only Petron could claim the refund would negate its tax exemption, a personal privilege, and render the exemption useless.

ISSUE

Whether petitioner Silkair (Singapore) Pte. Ltd., as an international carrier and purchaser of aviation jet fuel, is the proper party to claim a refund or tax credit for excise taxes it paid but from which it is statutorily exempt.

RULING

No. The Supreme Court denied the petitions and affirmed the decisions of the Court of Tax Appeals. The excise tax on petroleum products under the NIRC is an indirect tax. The liability for its payment is imposed by law on the manufacturer or producer (Petron). While the economic burden of the tax can be shifted to the buyer (Silkair) as part of the purchase price, the statutory liability to remit the tax to the government remains with the manufacturer. Consequently, the claim for refund of erroneously or illegally collected tax must be filed by the statutory taxpayer who paid the tax and is directly liable for it—in this case, Petron. Silkair, as the purchaser to whom the tax burden was passed on, is not the taxpayer and therefore not the proper party to claim the refund. The tax exemption granted to international carriers under Section 135 of the NIRC and the Air Agreement is not rendered inutile, as the proper procedure is for the exempt buyer to secure the tax exemption certificate from the Commissioner, which it then presents to the seller/manufacturer so that the latter will not include the tax in the selling price. Since Silkair did not follow this procedure and Petron paid the excise tax, any claim for refund belongs to Petron.