The Tax Court of Appeal (CTA) has voided a legal opinion issued by the Internal Revenue Service (BIR) that stated that alkylate, a distillate product, was subject to excise tax under Republic Act (RA) 8424 (National Revenue Code). or NIRK).
Consequently, the CTA prohibited BIR and the Bureau of Customs (BOC) from claiming or levying excise and value added tax on the applicant Pilipinas Shell Petroleum Corp. (PSPC).
The PSPC paid BOC by mail the amount of 3.49 billion pesos that the agency demanded for lye imports between 2014 and 2020.
Prior to this, the Supreme Court (SC) issued a decision dated March 15, 2014, in which it upheld the CTA’s decision to suspend imports of PSPC alkylates from January 10 to June 2012 in the amount of 1.99 billion pesos.
The Supreme Court also ruled that KTA rightfully refused to issue an order to suspend further taxation of PSPC batch of oil additive, alkylate. He also returned to the CTA the PSPC’s motion for a temporary restraining order regarding future taxation of his shipment of alkylate.
The CTA canceled document M-059-2012 issued by the BIR on 29 June 2012 in response to a letter from the BOC requesting a formal legal opinion on whether the Batangas Port Customs Collector could collect excise taxes. on imports of PSPC alkylates.
The BIR, in document M-059-2012, has ruled that alkylate is similar to naphtha as a distillate and is therefore subject to excise tax and related value added tax (VAT).
Following this, on July 18, 2012, then BOC Commissioner Rozzano Rufino B. Biazon issued Customs Memorandum Circular (CMC) 164-2012 directing the collector to take “appropriate action” based on document M-059-2012.
As a result, on October 1, 2012, the BOC sent a letter to the PSPC demanding a refund of the missing excise taxes, including interest and penalties, in the amount of 1.99 billion pesos calculated by BIR.
This prompted the PSPC to file a motion for review with the CTA challenging the legality of document M-059-2012.
In its petition, the PSPC stated that its constitutional right to due process was violated when the BIR issued Document M-059-2012 without prior notice, hearing and publication and when the same was applied retroactively. The CTA concurred with the PSPC’s argument, noting that the SC had previously ruled that if interpretive regulation significantly increases the burden on those for whom it is, public participation and publication is required.
In other cases, the CTA has stated that the CC has ruled that without prior notice, hearing, and publication, the taxpayer will not be tax liable.
“There is no doubt that the attack on the issuance of BIR here significantly increases the burden on the taxpayer. [petitioner]therefore, it had to comply with the requirement of prior notice, hearing and publication before it could take effect,” the CTA said in a 50-page ruling written by Associate Justice Jean-Marie Bacorro-Villena.
The CTA indicated that the PSPC has been importing alkylates since May 2010, and the Imported Goods Release Authorities (Atrig) issued for said imports generally state that it is exempt from excise tax because it is not among the items listed in Title VI . NIRC 1997 and according to lab report January 21, 2009.
Thus, the CTA stated that the applicant was not responsible for the import of alkylates from May 2010 to August 2011.
“Thus, Document M-059-2012 had to comply with the requirement of prior notice, hearing and publication before applying it to the applicant’s import. As the records clearly show, the applicant was not even notified of his extradition, let alone heard before the same took effect,” the CTA said, canceling the extradition that was under attack.
“Given the omissions that constitute a violation of the applicant’s right to due process, document M-059-2012 should be ruled out as unlawful and unlawful,” he added.
In addition, the CTA stated that Document M-059-2012 also violated NIRC Section 246 and the PSPC’s right to due process when it was forced to apply retroactively.
sec. 246 states that “any repeal, modification or repeal of any rules and regulations promulgated by… the Commissioner shall not be retroactive if the repeal, change or repeal would be detrimental to taxpayers, except… the taxpayer willfully misrepresents or omits material facts from his return or any document required of him by BIR, and where the facts subsequently collected by BIR differ materially from the facts, or where the taxpayer acted in bad faith.”
Similarly, said CTA alkylate is not subject to excise tax as it is not a distillate like naphtha.
“In sum, it cannot be said that alkylate is a distillation product. Therefore, its import should not be subject to excises in the absence of a law that clearly, expressly and unequivocally imposes such a tax under the specified article.
In addition, the CTA noted that the SC recently stated in the Petron Corp. V. Commissioner of Internal Revenue that alkylate does not fall under the category of other similar products of distillation, thus not subject to excise tax.