G.R. No. 173594 ; February 6, 2008
SILKAIR (SINGAPORE) PTE, LTD., petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, respondent.

FACTS

Petitioner Silkair, an international air carrier, filed an application for refund of excise taxes it claimed to have paid on jet fuel purchases from Petron Corporation for the period January to June 2000. The Commissioner of Internal Revenue (CIR) denied the claim, arguing that Silkair failed to prove direct purchase from a domestic oil company and that the excise tax, being a manufacturer’s tax, was Petron’s direct liability. The Court of Tax Appeals (CTA) Second Division denied Silkair’s petition, ruling that the statutory taxpayer was Petron, the manufacturer. The CTA held that any excise tax burden shifted to Silkair became part of the purchase price, not a tax proper, thus only Petron could claim a refund.
Silkair’s motion for reconsideration was denied. Its counsel of record, JGLaw, received notice of the denial on October 3, 2005. On October 13, 2005, JGLaw filed a notice of withdrawal with Silkair’s conformity. On the same date, the Bengzon Law Firm, which had prematurely entered its appearance on September 12, 2005, filed a motion requesting an official copy of the denial resolution, which it received on October 14, 2005. Silkair, through new counsel, subsequently filed a petition for review with the CTA En Banc.

ISSUE

The primary issue is whether Silkair is the proper party to claim a refund of excise taxes on jet fuel. A procedural issue is whether its petition to the CTA En Banc was timely filed.

RULING

The Supreme Court ruled in favor of Silkair on the substantive issue. The legal logic is anchored on the nature of excise taxes and the principle of statutory exemption. While Section 130 of the 1997 National Internal Revenue Code imposes the excise tax on the manufacturer (Petron), the tax is indirect and its economic burden can be passed on to the buyer. Crucially, international carriers are exempt from taxes on fuel under Article 4(2) of the Air Transport Agreement between the Philippines and Singapore. This exemption is implemented by Section 135 of the NIRC. The Court, citing Commissioner of Internal Revenue v. Philippine Airlines, Inc., held that the exemption inures to the benefit of the international carrier as the ultimate consumer. Therefore, Silkair, upon proof of direct purchase and payment of the tax-included price, is the proper party to claim the refund. The statutory liability of Petron does not negate Silkair’s right to recover the tax burden it bore pursuant to an international agreement and domestic law.
On the procedural issue, the Court found the petition timely. The period to appeal commenced from October 14, 2005, when the Bengzon Law Firm, properly substituting JGLaw after the latter’s withdrawal with client conformity, received the resolution. The earlier notice to JGLaw did not bind Silkair after the substitution was effected.