Here are select February 2014 rulings of the Supreme Court of the Philippines on tax law:
National Internal Revenue Code; Doctrine of Exhaustion of Administrative Remedies. Taxpayer submits that the requirement to exhaust the 12-day period under Section 112 (c) of the National Internal Revenue Code prior to filing the judicial claim with the Court of Tax Appeals (CTA) is a doctrine of “exhaustion of administrative remedies” and that the non-observance of the same merely results in lack of cause of action which may be waived for failure to timely invoke the same. As the Court opined in San Roque, a petition for review that is filed with the CTA without waiting for the 120-day mandatory period renders the same void. A person committing a void act cannot claim or acquire any right from such void act. Accordingly, taxpayer’s failure to comply with the 120-day mandatory period renders its petition for review with the CTA void. It is a mere scrap of paper from which taxpayer cannot derive or acquire any right notwithstanding the supposed failure on the part of the Commissioner to raise the issue of non-compliance with the 120-day period in the proceedings before the CTA First Division. Commissioner of Internal Revenue vs. Team Sual Corporation (Formerly Mirant Sual Corporation), G.R. No. 194105. February 5, 2014
National Internal Revenue Code; excise tax; pacta sunt servanda; Section 135. Under the basic international law principle of pacta sunt servanda, the state has the duty to fulfill its treaty obligations in good faith. This entails harmonization of national legislation with treaty provisions. Section 135 (a) of the National Internal Revenue Code embodies the country’s compliance with its undertakings under the 1944 Chicago Convention on International Aviation (Chicago Convention), Article 24 (9) of which has been interpreted to prohibit taxation of aircraft fuel consumed for international transport, and various bilateral air service agreements not to impose excise tax on aviation fuel purchased by international carriers from domestic manufacturers or suppliers. In the previous decision of the Court in this case, the Court interpreted Section 135 (a) as prohibiting domestic manufacturer or producer to pass on to international carriers the excise tax it had paid on petroleum products upon their removal from the place of production. Thus, the Court found that there was no basis to refund the excise taxes paid on petroleum products sold to tax-exempt international carriers as “erroneously or illegally paid” tax. The Court maintains that Section 135 (a) prohibits the passing of the excise tax to international carriers who buys petroleum products from local manufacturers/sellers such as the respondent taxpayer. However, there is a need to reexamine the effect of denying the domestic manufactures/sellers’ claim for refund of the excise taxes they already paid on petroleum products sold to international carriers, and its serious implications on the Government’s commitment to the goals and objectives of the Chicago Convention. With the process of declining sales of aviation jet fuel sales to international carriers on account of major domestic oil companies’ unwillingness to shoulder the burden of excise tax, or of petroleum products being sold to said carriers by local manufacturers or sellers at still high prices, the practice of “tankering” (i.e., carriers filling their aircraft as full as possible whenever they landed outside a jurisdiction that imposes tax on fuel to avoid paying tax) would not be discouraged. This does not augur well for the Philippines’ growing economy and the booming tourism industry. Worse, the Government would be risking retaliatory action under several bilateral agreements with various countries. Evidently, construction of the tax exemption provision in question should give primary consideration to its broad implications on the country’s commitment under international agreements. In view of the foregoing the Court held that respondent, as the statutory taxpayer who is directly liable to pay the excise tax on its petroleum products is entitled to a refund or credit of the excise taxes it paid for petroleum products sold to international carriers, the latter having been granted exemption from the payment of said excise tax under Section 135 (a) of the NIRC. Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corporation, G.R. No. 188497. February 19, 2014.