April 2012 Philippine Supreme Court Decisions on Tax Law

National Internal Revenue Code; excise tax on petroleum products; sales to international carriers; claim for refund. The exemption from excise tax payment on petroleum products under Section 135 (a) of the National Internal Revenue Code (NIRC) is conferred on international carriers who purchased the same for their use or consumption outside the Philippines. Section 135 (a) in relation to the other provisions on excise tax and from the nature of indirect taxation, may only be construed as prohibiting the manufacturers-sellers of petroleum products from passing on the tax to international carriers by incorporating previously paid excise taxes into the selling price.  Considering that the excise taxes attaches to petroleum products “as soon as they are in existence as such,” there can be no outright exemption from the payment of excise tax on petroleum products sold to international carriers. The sole basis of taxpayer-manufacturer’s claim for refund is the express grant of excise tax exemption in favor of international carriers under Section 135 (a) for the latter’s purchases of locally manufactured petroleum products.  Pursuant to ruling of the Court in Philippine Acetylene, a tax exemption being enjoyed by the buyer cannot be the basis of a claim for tax exemption by the manufacturer or seller of the goods for any tax due to it as the manufacturer or seller.   The excise tax imposed on petroleum products under Section 148 is the direct liability of the manufacturer who cannot thus invoke the excise tax exemption granted to its buyers who are international carriers. An excise tax is a tax on the manufacturer and not on the purchaser, and there being no express grant under the NIRC of exemption from payment of excise tax to local manufacturers of petroleum products sold to international carriers, and  absent any provision in the NIRC authorizing the refund or crediting of such excise taxes paid, Section 135 (a) should be construed as prohibiting the shifting of the burden  of the excise tax to the international carriers who buys petroleum products from the local manufacturers.  Said provision thus merely allows the international carriers to purchase petroleum products without the excise tax component as an added cost in the price fixed by the manufacturers or distributors/sellers.  Consequently, the oil companies which sold such petroleum products to international carriers are not entitled to a refund of excise taxes previously paid on the goods.Commissioner of Internal Revenue vs. Pilipinas Shell Petroleum Corporation, G.R. No. 188497, April 25, 2012.

(Caren thanks Ma. Luisa D. Manalaysay for assisting in the preparation of this post.)

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