7/29/2019 55. Summary of Significant SC Decisions (April - June 2012)

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SUMMARY OF SIGNIFICANT SC DECISIONS (April 2012)

-digested by Atty. Eveart O. Pomarin

1. The oil companies are not exempt from the payment of excise tax onpetroleum products manufactured and sold by them to international carriers.

The taxpayer filed with the Large Taxpayers Audit & Investigation Division II of the(BIR) the several formal claims for refund or tax credit for various years. It filedpetitions for review since no action was taken by the BIR on its claims. The CTAsFirst Division ruled that the taxpayer is entitled to the refund of excise taxes in thereduced amount. It relied on a previous ruling rendered by the CTA En Bancin aprevious case involving the same taxpayer, where the CTA also granted thetaxpayers claim for refund on the basis of excise tax exemption for petroleumproducts sold to international carriers of foreign registry for their use or

consumption outside the Philippines. On appeal, the CTA En Bancupheld theruling of the First Division.

The Supreme Court held that both the earlier amendment in the 1977 Tax Code andthe present Sec. 135 of the 1997 NIRC did not exempt the oil companies from thepayment of excise tax on petroleum products manufactured and sold by them tointernational carriers.

Because an excise tax is a tax on the manufacturer and not on the purchaser, andthere being no express grant under the NIRC of exemption from payment of excisetax to local manufacturers of petroleum products sold to international carriers,and absent any provision in the Code authorizing the refund or crediting of such

excise taxes paid, the Court holds that Sec. 135 (a) should be construed asprohibiting the shifting of the burden of the excise tax to the international carrierswho buys petroleum products from the local manufacturers. Said provision thusmerely allows the international carriers to purchase petroleum products without theexcise tax component as an added cost in the price fixed by the manufacturers ordistributors/sellers. Consequently, the oil companies which sold such petroleumproducts to international carriers are not entitled to a refund of excise taxespreviously paid on the goods.

The Supreme Court pointed out that the taxpayers failure to make a distinction onthe exemption under Sections 134 and 135 of the Tax Code, apparently led it tomistakenly assume that the tax exemption under Sec. 135 (a) attaches to thegoods themselves such that the excise tax should not have been paid in the firstplace. The exemption found in Sec. 134 makes reference to the nature and qualityof the goods manufactured (domestic denatured alcohol) without regard to the taxstatus of the buyer of the said goods while Sec. 135 deals with the tax treatment ofa specified article (petroleum products) in relation to its buyer or consumer.

Further, it held that Sec. 135 (a) in relation to the other provisions on excise taxand from the nature of indirect taxation, may only be construed as prohibiting themanufacturers-sellers of petroleum products from passing on the tax tointernational carriers by incorporating previously paid excise taxes into the selling

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price. In other words, the taxpayer cannot shift the tax burden to internationalcarriers who are allowed to purchase its petroleum products without having to paythe added cost of the excise tax.

Furthermore, considering that the excise taxes attaches to petroleum products assoon as they are in existence as such, there can be no outright exemption fromthe payment of excise tax on petroleum products sold to international carriers. Thesole basis then of the taxpayers claim for refund is the express grant of excise taxexemption in favor of international carriers under Sec. 135 (a) for their purchasesof locally manufactured petroleum products.

Citing its ruling in Philippine Acetylene, it held that a tax exemption being enjoyedby the buyer cannot be the basis of a claim for tax exemption by the manufactureror seller of the goods for any tax due to it as the manufacturer or seller. Theexcise tax imposed on petroleum products under Sec. 148 is the direct liability ofthe manufacturer who cannot thus invoke the excise tax exemption granted to itsbuyers who are international carriers.

SUMMARY OF SIGNIFICANT SC DECISIONS (June 2012)-digested by Atty. Eveart O. Pomarin

2. Failure to print the word zero-rated on the VAT invoices or officialreceipts is fatal in claims for a refund or credit of input VAT on zero-ratedsales, even if the claims were made prior to the effectivity of R.A. 9337.

Taxpayer contends that RR 7-95 constitutes undue expansion of the scope of thelegislation it seeks to implement on the ground that the statutory requirement forimprinting the phrase zero-rated on VAT official receipts appears only in Republic

Act No. 9337. This law took effect on 1 July 2005, or long after petitioner had filedits claim for a refund. However, the Supreme Court held that in a claim for tax

refund or tax credit, the applicant must prove not only entitlement to the grant ofthe claim under substantive law. It must also show satisfaction of all thedocumentary and evidentiary requirements for an administrative claim for a refundor tax credit. Hence, the mere fact that taxpayers application for zero-rating hasbeen approved by the CIR does not, by itself, justify the grant of a refund or taxcredit. The taxpayer claiming the refund must further comply with the invoicing andaccounting requirements mandated by the NIRC, as well as by revenue regulationsimplementing them. It further held that RR 7-95 proceeds from the rule-makingauthority granted to the Secretary of Finance by the NIRC for the efficientenforcement of the same Tax Code and its amendments. It cited the cases ofPanasonic Communications Imaging Corporation of the Philippines v.Commissioner of Internal Revenue, G.R. No. 178090, 8 February 2010, were it

was ruled that this provision is reasonable and is in accord with the efficientcollection of VAT from the covered sales of goods and services and KepcoPhilippines Corporation v. Commissioner of Internal Revenue, G.R. No. 179961, 31January 2011 where it was ruled that the subsequent incorporation of Section4.108-1 of RR 7-95 in Section 113 (B) (2) (c) of R.A. 9337 actually confirmed thevalidity of the imprinting requirement on VAT invoices or official receipts a casefalling under the principle of legislative approval of administrative interpretation byreenactment. (Western Mindanao Power Corporation v. Commissioner ofInternal Revenue, G. R. No. 181136, June 13, 2012.)