TAX DEPARTMENT

TAX DIGEST

The proper party to question or seek a refund of the tax is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same even when he shifts the burden thereof to another. Facts: Silkair (Singapore) Pte, Ltd (herein petitioner)., a foreign corporation duly licensed to do business in the Philippines, filed an administrative claim for refund for excise taxes paid by Petron Corporation (Petron) in the amount of P5,007,043.39. Petitioner contends that in the course of its operations, they purchased aviation fuel from Petron from July 1, 1998 to December 31, 1998 thereby paying the excise taxes thereon. Petitioners claimed that under Section 135 (a) and (b) of the 1997 Tax Code they are exempt from paying excise taxes. Petitioner also invoked Article 4(2) of the Air Transport Agreement between the government of the Philippines and the Government of the republic of Singapore agreeing that fuel, lubricants, spare parts, regular equipment and aircraft stores introduced into or taken on board aircraft shall be exempt from the same customs duties, inspection fees and other duties or taxes imposed in the territory of the other Contracting party. The Court of Appeals affirm the denial by Court of Tax Appeals ruling that although the petitioner is exempt from paying excise taxes on petroleum products by virtue of Section 135 (b) of the 1997 Tax Code, they are not the proper party to seek the refund of the excise taxes paid. A Motion for Reconsideration was denied hence this appeal. Petitioner further contends that they are the proper party to claim refund being the entity granted the exemption under the Air Transport Agreement. . Issue: Is the petitioner entitled to a tax refund Ruling: Excise taxes, which apply to articles manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition and to things imported into the Philippines, is basically an indirect tax. While the tax is directly levied upon the manufacturer/importer upon removal of the taxable goods from its place of production or from the customs custody, the tax, in reality, is actually passed on to the end consumer as part of the transfer value or selling price of the goods, sold, bartered or exchanged. In early cases, we have ruled that for indirect taxes (such as valued-added tax or VAT), the proper party to question or seek a refund of the tax is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same even when he shifts the burden thereof to another. (Silkair (Singapore) Pte. Ltd vs Comissioner of Internal Revenue, G.R. No. 166482, January 25, 2012)

Customs officer must first assess and determine the classification of the imported article before tariff may be imposed.

Facts: The Commissioner of Customs issued CM 27-2003 classifying wheat as (1)

importer or consignee; (2) country of origin; and (3) port of discharge and depending on these factors, wheat would be classified further as either food grade with a tariff rate of 3% or feed grade with a tariff rate of 7%. The regulation also provides for an exclusive list of corporations, ports of discharge, commodity descriptions and countries of origin. On December 19, 2003, the respondent filed a Petition for Declaratory Relief with the Regional Trial Court of Las Pinas contending the following: (1) the regulation was issued without following the mandate of the Revised Administrative Code, (2) that the regulation classified them to be a feed grade supplier without prior assessment and examination, (3) the equal protection clause of the Constitution was violated when the regulation treated the non-flour millers differently from flour millers for no reason at all, and (4) the retroactive application of the regulation is confiscatory. The petitioners thereafter filed a motion to dismiss contending that: (1) the RTC does not have jurisdiction of the subject matter, (2) an action for declaratory relief was improper, (3) CM 27-2003 was an internal administrative rule and not legislative in nature; and (4) the claims of the respondent were speculative and premature. On March 10, 2005, the Regional Trial Court rendered a decision ruling in favour of the respondent. It held that the jurisdiction is properly held because the subject matter is quasi-legislative in nature. It also held that the petition for declaratory relief was proper remedy and that the respondent was the proper party to file it. On matters relating to the validity of the regulation, the court held that the regulation is invalid because the basic requirements of hearing and publication were not complied with. The petitioners then appealed to Court of Appeals but it was, however, dismissed. Hence, this petition for review on certiorari under Rule 45 assailing the decision of the Court of Appeals. Issue: Was the issuance of CMO 27-2003 within the powers of the Commissioner of Customs? Held: The provision mandates that the customs officer must first assess and determine the classification of the imported article before tariff may be imposed. Unfortunately, CMO 23-2007 has already classified the article even before the customs officer had the chance to examine it. In effect, petitioner Commissioner of Customs diminished the powers granted by the Tariff and Customs Code with regard to wheat importation when it no longer required the customs officers prior examination and assessment of the proper classification of the wheat. It is well-settled that rules and regulations, which are the product of a delegated power to create new and additional legal provisions that have the effect of law, should be within the scope of the statutory authority granted by the legislature to the administrative agency. It is required that the regulation be germane to the objects and purposes of the law; and that it be not in contradiction to, but in conformity with, the standards prescribed by law. (Commissioner of Customs and the District Collector of the Port of Subic vs Hypermix Feeds Corporation, G.R. No 179579, February 1, 2012)

In case of the inaction of the CIR on the protested assessment, the taxpayer has two options, and these options are mutually exclusive and resort to one bars the application of the other. Facts: An assessment notice was issued on March 27, 1998 by the Commissioner of Internal Revenue against Lascona Land Co. Inc (Lascona) for their alleged deficiency income tax for the year 1993 in the amount of P753,266,56. Lascona subsequently filed a letter of protest on April 20, 1998, bur was later on denied by Norberto Odulio, the officer-in-charge, Regional Director, Bureau of Internal Revenue, Revenue Region No. 8, Makati City. His denial was based on Section 228 of the Tax Code. Lascona appealed to the CTA argung that the Regional Director erred in ruling that the failure to appeal to the CTA within thirty (30) days from the lapse of teh 180-day period rendered the assessment final and executor. The CTA nullified the subject assessment in its decision on January 4, 2000. A motion for reconsideration by the CIR was denied, thus prompting them to appeal to the Court of Appeals. The CA set aside the Decision of the CTA and further declared that the subject Assessment Notice as final and executor.

Issue: Did the Court of Appeals Err in holding the assessment notice as final, executor, and demandable? Held: In RCBC v. CIR1, the Court has held that in case the Commissioner failed to act on the disputed assessment within the 180-day period from date of submission of documents, a taxpayer can either: (1) file a petition for review with the Court of Tax Appeals within 30 days after the expiration of the 180-day period; or (2) await the final decision of the Commissioner on the disputed assessments and appeal such final decision to the Court of Tax Appeals within 30 days after receipt of a copy of such decision. It must be emphasized, however, that in case of the inaction of the CIR on the protested assessment, while we reiterate the taxpayer has two options, either: (1) file a petition for review with the CTA within 30 days after the expiration of the 180-day period; or (2) await the final decision of the Commissioner on the disputed assessment and appeal such final decision to the CTA within 30 days after the receipt of a copy of such decision, these options are mutually exclusive and resort to one bars the application of the other. (Lascona Land Co. Inco. vs Comissioner of Internal Revenue, G.R. No. 171251, March 5, 2012)

Tax Credit Certificates are valid and effective from their issuance and are not subject to a post-audit as a suspensive condition for their validity

Facts: For the taxable years of 1995 to 1998, Petron Corporation (herein respondent) had been using Tax Credit Certificates (TCCs) assigned by them by several BOIregistered entities in payment of its excise taxes. The transfers and assignment of the TCCs where approved by the Department of Finances One Stop Shop Inter-Agency Tax Credit and Duty Drawback Center (DOF Center), composed of representatives from the appropriate government agencies. The Commissioner of Internal Revenue (herein petitioner) acceptance of the TCCs as payment of
1

G.R. No. 168498, April 24, 2007, 522 SCRA 144

the respondents excise tax were continuously approved by the DOF as well as the BIRs Collection Program Division through its surrender and subsequent issuance by the Assistant Commissioner of the Collection Service of the BIR of the Tax Debit Memos (TDMs). However on January 30, 2002, petitioner issued an assessment against petitioner for deficiency excise taxes for the taxable years 1995 to 1998. The deficiency excise taxes was based on the ground that the TCCs utilized by the petitioner have been cancelled by the DOF for having fraudulently issued and transferred. The respondent filed a protest letter to the Assessment but was adversely decided upon by the BIR by serving a Warrant of Distraint and/or Levy upon them. The Court of Tax Appeal- second division denied the petition of the respondent and ordered it to pay the deficiency taxes together with interest and surcharge. The CTA En banc thereafter promulgated a decision which reveres and set aside the decision of the CTA-second division. Hence, this petition by the Commissioner of Internal Revenue. Issue: Are Tax Credit Certificates subject to a post-audit as a suspensive condition for their validity?

Held: TCCs are valid and effective from their issuance and are not subject to a postaudit as a suspensive condition for their validity. Our ruling in Petron finds guidance from our earlier ruling in Shell, which categorically states that a TCC is valid and effective upon its issuance and is not subject to a post-audit. The implication on the instant case of the said earlier ruling is that Petron has the right to rely on the validity and effectivity of the TCCs that were assigned to it. In finally determining their effectivity in the settlement of respondents excise tax liabilities, the validity of those TCCs should not depend on the results of the DOFs post-audit findings.

(Commisioner of Internal Revenue Vs. Petron Corporation, G.R. No. 185568, March 21, 2012)