G.R. No. 180402 February 10, 2016
COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. PILIPINAS SHELL PETROLEUM CORPORATION, Respondent.

FACTS

Respondent Pilipinas Shell Petroleum Corporation sold petroleum products to various international carriers for their use outside the Philippines from November 2000 to March 2001. A portion of these products was sourced from its own tax-paid inventories, while another portion was acquired from Petron Corporation under a loan agreement, with the excise taxes paid by Petron passed on to Pilipinas Shell. Pilipinas Shell subsequently filed claims for refund or tax credit totaling P49,058,733.09 for the excise taxes it paid on these sales, arguing the sales were exempt.
The Court of Tax Appeals (CTA) Second Division partially granted the claim, ordering a refund of P39,305,419.49, which represented taxes paid on sales from Pilipinas Shell’s own inventories. It disallowed the portion related to products sourced from Petron, ruling Pilipinas Shell was not the proper party to claim a refund for those taxes. The CTA en banc affirmed this decision. The Commissioner of Internal Revenue (CIR) appealed, contending the excise tax is levied on the manufacturer and cannot be refunded even when the purchaser is an exempt international carrier.

ISSUE

Whether Pilipinas Shell is entitled to a refund or tax credit for excise taxes paid on petroleum products sold to international carriers.

RULING

Yes, Pilipinas Shell is entitled to the refund. The Court resolved the issue by referencing its final ruling in a prior case with identical parties, G.R. No. 188497 . In that case, the Court initially denied a similar claim, holding that the exemption under Section 135(a) of the National Internal Revenue Code merely prevented manufacturers from passing the excise tax cost to international carriers. However, upon reconsideration, the Court reversed its initial stance.
The Court ultimately held that the excise tax exemption for petroleum products sold to international carriers applies at the point of production or manufacture. The legal logic is grounded in the principle of international comity, which underpins the exemption. To give full effect to this principle and the clear intent of the law, the excise tax must be deemed not due at all on these specific transactions. Therefore, any excise tax paid by the manufacturer on such products is erroneously or illegally collected and is subject to refund or issuance of a tax credit certificate, provided the claim is filed within the two-year prescriptive period. The CIR’s argument that the tax is a burden solely on the manufacturer, irrespective of the buyer’s exempt status, was rejected as it would nullify the exemption’s purpose.