GR 188497; (February, 2014) (Digest)
G.R. No. 188497 , February 19, 2014
Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corporation
FACTS
Pilipinas Shell Petroleum Corporation sold petroleum products, specifically jet fuel and aviation gas, to various international carriers for their use in international flight operations. Shell paid the corresponding excise taxes on these products upon their removal from its refinery. Subsequently, Shell filed claims for tax refund or credit with the Bureau of Internal Revenue, arguing that the sales were exempt from excise tax under Section 135(a) of the National Internal Revenue Code (NIRC). The provision states that petroleum products sold to international carriers for their use or consumption outside the Philippines shall be exempt from excise tax. The Court of Tax Appeals granted Shell’s claim. The Commissioner of Internal Revenue appealed, and this Court initially reversed the CTA, prompting Shell’s motion for reconsideration.
ISSUE
Whether Section 135(a) of the NIRC exempts the manufacturer-seller, Pilipinas Shell, from the payment of excise tax on petroleum products sold to international carriers for use outside the Philippines.
RULING
The Supreme Court denied the motion for reconsideration and affirmed its prior ruling that no refund was due. The legal logic centers on the nature and incidence of the excise tax. Excise tax under the NIRC is a tax on the manufacture or production of specified goods, not on their sale. It is a direct tax levied on the manufacturer, becoming due upon removal of the goods from the place of production. Section 135(a) provides an exemption from this tax, but the Court interpreted the provision as intended to benefit the international carrier-purchaser, not the domestic manufacturer. The exemption means the international carrier should not bear the economic burden of the tax. Consequently, the manufacturer remains liable to pay the excise tax to the government upon removal of the products. The manufacturer is, however, prohibited from shifting the tax burden to the exempt international carrier by passing it on as part of the selling price. The exemption thus operates as a prohibition on shifting the tax, not an exemption from payment. Since Shell had already shifted the tax cost to the carriers (as evidenced by its inclusion in the selling price), it was not entitled to a refund, as this would constitute unjust enrichment. The Court found no legal basis to shift the statutory liability from the manufacturer to the government.