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refund claim. The payment of the excise The statutory taxpayer can transfer to its customers
taxes, being in the nature of indirect taxes, the value of the excise taxes it paid or would be liable
remained to be the direct liability of Caltex. to pay to the government by treating it as part of the
SUMMARY: PAL, after purchasing imported fuel from Caltex, While the tax burden may have been cost of the goods and tacking it on to the selling price.
filed for refund of excise taxes on the fuel. CIR opposed, shifted to PAL, the liability passed on to it This shifting process, “passing on,” is largely a
arguing mainly that Caltex, as the seller of the fuel, was the should not be treated as a tax but a part of contractual affair between the parties.
statutory taxpayer entitled to claim for a refund or tax credit the purchase price which PAL had to pay to Even if the purchaser effectively pays the value of the
and not the buyer PAL. Court held in PAL’s favor. PAL can claim obtain the goods. tax, the manufacturer/producer (for domestic goods)
for a refund or credit of the excise taxes even if it is not the 2. PAL’s claim for refund should be denied altogether on or the owner or importer (for imported goods) are
statutory taxpayer. Though generally indirect taxes like excise account of LOI 1483 which already withdrew the tax still regarded as the statutory taxpayers under the
taxes are paid by the seller (although the purchaser bears the exemption privileges previously granted to PAL on its law. The purchaser does not really pay the tax; rather,
burden of the tax in the form of the added cost in the purchase purchase of domestic petroleum products, of which he only pays the seller more for the goods because of
price), the purchaser may claim for a refund/credit if it is the transaction between PAL and Caltex was the latter’s obligation to the government as the
exempted from paying both direct and indirect taxes. Being characterized. statutory taxpayer.
exempted from both direct and indirect taxes by its charter,
PAL is also exempted from absorbing indirect tax. Thus, PAL is ISSUE: Does PAL have the legal personality to file a claim for Section 204(c) of the NIRC states that it is the statutory
endowed with legal standing to file for a refund/credit refund of the passed on excise taxes? YES. taxpayer which has the legal personality to file a claim for
notwithstanding the fact that it is not the statutory taxpayer. refund. Accordingly, in cases involving excise tax exemptions
PAL may be reimbursed the part of the purchase price which CIR’s position: PAL has no personality to file the subject tax on petroleum products under Section 135, the Court has
corresponded to the excise tax. Also, the LOI allegedly refund claim because it is not the statutory taxpayer. As basis, it consistently held that it is the statutory taxpayer who is
withdrawing PAL’s exemptions only refer to exemptions on relies on the Silkair ruling which enunciates that the proper entitled to claim a tax refund based thereon and not the party
domestic products and not on imported fuel. party to question, or to seek a refund of an indirect tax, is the who merely bears its economic burden.
statutory taxpayer, or the person on whom the tax is imposed by In the Silkair case, Silkair Singapore filed a claim for
NATURE: Petition for review on certiorari law and who paid the same, even if the burden to pay such was tax refund based on Sec. 135(b) of the NIRC as well as
shifted to another. Article 4(2) of the Air Transport Agreement between
FACTS: the Philippines and Singapore.
PAL’s position: Silkair doctrine is inapplicable, asserting The Court denied Silkair Singapore’s refund claim
Caltex sold 804,370 liters of imported Jet A-1 fuel to PAL for that PAL has the legal personality to file the subject tax since the tax exemptions under both provisions were
the its domestic operations. Consequently, Caltex filed with the refund claim on account of its tax exemption privileges conferred on the statutory taxpayer, and not the party
BIR its Excise Tax Returns for Petroleum Products, declaring under its legislative franchise which covers both direct who merely bears its economic burden. It was the
P2,975,892.90 as excise taxes due thereon. and indirect taxes. In support thereof, it cites the case Petron Corporation (the statutory taxpayer) which
of Maceda v. Macaraig, Jr. was entitled to invoke the applicable tax exemptions
PAL received from Caltex an Aviation Billing Invoice for the and not Silkair Singapore which merely shouldered
purchased aviation fuel reflecting the amount of related excise Court agrees with PAL. Under Sec. 129 of the NIRC, excise the economic burden of the tax.
taxes on the transaction. This was confirmed by Caltex in a taxes are imposed on 2 kinds of goods, namely: As explained in Silkair: The proper party to
Certification where it indicated that the excise taxes it paid on (a) goods manufactured or produced in the Philippines for question, or seek a refund of, an indirect tax is the
the imported petroleum products amounted to P2,952,037.90, domestic sales or consumption or for any other disposition; statutory taxpayer, the person on whom the tax is
the excise tax payment was passed on by it to PAL, and Caltex and imposed by law and who paid the same even if he
did not file any claim for the refund of the excise tax with the (b) things imported. shifts the burden thereof to another. Section
BIR. 130(A)(2) of the NIRC provides that “unless
For (a), Sec. 130 states that the taxpayer obligated to file the otherwise specifically allowed, the return shall be
PAL, through a letter-request addressed to the Commissioner return and pay the excise taxes due thereon is the filed and the excise tax paid by the manufacturer or
of Internal Revenue (CIR), sought a refund of the excise taxes manufacturer/producer. On the other hand, with respect to (b), producer before removal of domestic products from
passed on to it by Caltex. It hinged its tax refund claim on its Sec. 131 states that the taxpayer obligated to file the return place of production.” Thus, Petron Corporation, not
operating franchise (Presidential Decree No. 15907) which and pay the excise taxes due thereon is the owner or importer, Silkair, is the statutory taxpayer which is entitled to
conferred upon it certain tax exemption privileges on its unless the imported articles are exempt from excise taxes and claim a refund based on Section 135 of the NIRC of
purchase and/or importation of aviation gas, fuel and oil, the person found to be in possession of the same is other than 1997 and the Air Transport Agreement between RP
including those which are passed on to it by the seller those legally entitled to such tax exemption. and Singapore. Even if Petron Corporation passed on
and/or importer thereof. Due to the CIR’s inaction, PAL filed a to Silkair the burden of the tax, the additional amount
Petition for Review with the CTA. While the NIRC mandates the foregoing persons to pay the billed to Silkair for jet fuel is not a tax but part of the
applicable excise taxes directly to the government, they may, price which Silkair had to pay as a purchaser.
CTA Second Division, and eventually the CTA En Banc on however, shift the economic burden of such payments to
appeal, denied PAL’s petition on the grounds that: someone else – usually the purchaser of the goods – since However, the abovementioned rule should not apply to
1. Only Caltex may seek a refund of the excise taxes it excise taxes are considered as a kind of indirect tax. instances where the law clearly grants the party to which
paid (Silkair Singapore Pte. Ltd. v. CIR). Indirect taxes are those which are demanded from the economic burden of the tax is shifted an exemption
a. It was Caltex, the statutory taxpayer, which one person with the expectation and intention that he from both direct and indirect taxes. In which case, the
had the personality to file the subject can shift the economic burden to someone else. latter must be allowed to claim a tax refund even if it is not
considered as the statutory taxpayer under the law. This is both direct and indirect taxes on its purchase of petroleum
the peculiar circumstance which differentiates the Maceda case Based on these cases, the propriety of a tax refund claim is products. In view of PAL’s payment of either the basic
from Silkair. hinged on the kind of exemption which forms its basis. If corporate income tax or franchise tax, whichever is lower, PAL
In Maceda, the Court upheld the NPC’s claim for a tax the law confers an exemption from both direct or indirect is exempt from paying: (a) taxes directly due from or
refund since its own charter specifically granted it an taxes, a claimant is entitled to a tax refund even if it only imposable upon it as the purchaser of the subject petroleum
exemption from both direct and indirect taxes: bears the economic burden of the applicable tax. On the products; and (b) the cost of the taxes billed or passed on to it
“The oil companies which supply bunker fuel oil to other hand, if the exemption conferred only applies to direct by the seller, producer, manufacturer, or importer of the said
NPC have to pay the taxes imposed upon said bunker taxes, then the statutory taxpayer is regarded as the proper products either as part of the purchase price or by mutual
fuel oil sold to NPC. By the very nature of indirect party to file the refund claim. agreement or other arrangement. Therefore, given the
taxation, the economic burden of such taxation is foregoing direct and indirect tax exemptions under its
expected to be passed on through the channels of In this case, PAL’s franchise1 grants it an exemption from franchise, PAL is endowed with the legal standing to file
commerce to the user or consumer of the goods the subject tax refund claim, notwithstanding the fact that
sold. Because, however, the NPC has been it is not the statutory taxpayer as contemplated by law.
exempted from both direct and indirect taxation, 1 SEC. 13. In consideration of the franchise and rights
the NPC must be held exempted from absorbing ISSUE: Is the sale of imported aviation fuel by Caltex to PAL
the economic burden of indirect taxation. This hereby granted, the grantee [PAL] shall pay to the covered by LOI 1483 which withdrew the tax exemption
means, on the one hand, that the oil companies which Philippine Government during the life of this franchise privileges of PAL on its purchases of domestic petroleum
wish to sell to NPC absorb all or part of the economic whichever of subsections (a) and (b) hereunder will products for use in its domestic operations? NO.
burden of the taxes previously paid to BIR, which they
result in a lower tax:
could shift to NPC if NPC did not enjoy exemption LOI 1483 amended PAL’s franchise by withdrawing the tax
from indirect taxes. This means also, on the other exemption privilege granted to PAL on its purchase of domestic
hand, that the NPC may refuse to pay the part of the (a) The basic corporate income tax based on the petroleum products for use in its domestic operations. It
"normal" purchase price of bunker fuel oil which grantee's annual net taxable income computed in pertinently provides: xxx the tax-exemption privilege
represents all or part of the taxes previously paid by granted to PAL on its purchase of domestic petroleum
accordance with the provisions of the National products for use in its domestic operations is hereby
the oil companies to BIR. If NPC nonetheless
purchases such oil from the oil companies — Internal Revenue Code; or withdrawn.
because to do so may be more convenient and (b) A franchise tax of 2% of the gross revenues
ultimately less costly for NPC than NPC itself derived by the grantee from all sources, without On this score, the CIR contends that the purchase of the aviation
importing and hauling and storing the oil from fuel imported by Caltex is a “purchase of domestic petroleum
overseas — NPC is entitled to be reimbursed by distinction as to transport or nontransport operations; products” because the same was not purchased abroad by PAL.
the BIR for that part of the buying price of NPC provided, that with respect to international air-
which verifiably represents the tax already paid transport service, only the gross passenger, mail, and
by the oil company-vendor to the BIR.” freight revenues from its outgoing flights shall be of the price or cost thereof or by mutual
The Court discussed the Maceda ruling in Silkair.
Silkair Singapore invoked the Maceda case to support subject to this tax. agreement or other arrangement; provided, that all
its claim for tax credit or refund, because in the such purchases by, sales or deliveries of aviation gas,
Maceda case, the Court held in favor of the tax The tax paid by the grantee under either of the above fuel, and oil to the grantee shall be for exclusive use
credit/refund by virtue of NPC’s exemption from alternatives shall be in lieu of all other taxes, duties, in its transport and nontransport operations and other
indirect taxes.
royalties, registration, license, and other fees and activities incidental thereto;
o However, the court held that the correct
lesson of Maceda is that an exemption charges of any kind, nature, or description, imposed,
from "all taxes" excludes indirect levied, established, assessed, or collected by any 2. All taxes, including compensating taxes, duties,
taxes, unless the exempting statute, like municipal, city, provincial, or national authority or charges, royalties, or fees due on all importations by
NPC’s charter, is so couched as to
include indirect tax from the exemption.
government agency, now or in the future, including the grantee of aircraft, engines, equipment,
The exemption granted under Section but not limited to the following: machinery, spare parts, accessories, commissary and
135(b) of the NIRC of 1997 and Article 4(2) catering supplies, aviation gas, fuel, and oil,
of the Air Transport Agreement between 1. All taxes, duties, charges, royalties, or fees due on
RP and Singapore cannot, without a clear
whether refined or in crude form and other articles,
showing of legislative intent, be construed local purchases by the grantee of aviation gas, fuel, supplies, or materials; provided, that such articles or
as including indirect taxes. Statutes and oil, whether refined or in crude form, and whether supplies or materials are imported for the use of the
granting tax exemptions must be such taxes, duties, charges, royalties, or fees grantee in its transport and transport operations
construed in strictissimi juris against the are directly due from or imposable upon the
taxpayer and liberally in favor of the taxing and other activities incidental thereto and are not
authority, and if an exemption is found to purchaser or the seller, producer, manufacturer, locally available in reasonable quantity, quality, or
exist, it must not be enlarged by or importer of said petroleum products but price; xxx
construction. are billed or passed on the grantee either as part
The Court disagrees. (b) PAL’s tax exemption on its direct excise tax liability when it and the Central Bank promptly transferred to the petitioner’s
imports the goods itself (the third kind of tax privilege). Both account in the Philippines the corresponding amount in
Based on Sec. 13 of PAL’s franchise, PAL’s tax exemption textual and contextual analyses lead to this conclusion: Philippine pesos. In 1988, respondent CIR ordered an
privileges on all taxes on aviation gas, fuel and oil may be investigation to be made on BPI’s sale of foreign currency. As a
classified into 3 kinds: (1) Examining its phraseology, the word “domestic,” which result thereof, the CIR issued a pre-assessment notice
means “of or relating to one’s own country”43 or “an article of informing BPI that in accordance with Section 195 (now
(a) all taxes due on PAL’s local purchase of aviation gas, fuel domestic manufacture,” clearly pertains to goods Section 182) of the NIRC, BPI was liable for documentary
and oil; manufactured or produced in the Philippines for domestic stamp tax at the rate of P 0.30 per P Total tax liability was
(b) all taxes directly due from or imposable upon the purchaser sales or consumption or for any other disposition as opposed assessed at P 200.00 on all foreign exchange sold to the Central
or the seller, producer, manufacturer, or importer of aviation to things imported. In other words, by sheer divergence of Bank. 3,016,316.06, which consists of a documentary stamp tax
gas, fuel and oil but are billed or passed on to PAL; and meaning, the term “domestic petroleum products” could not liability of P2,412,812.85, a 25% surcharge of P 603,203.21,
(c) all taxes due on all importations by PAL of aviation gas, fuel, refer to goods which are imported. and a compromise penalty of P 300.00.
and oil.
(2) Examining its context, certain “whereas clauses” in LOI
Issue: Whether or not the transactions covered is a bill of
Viewed within the context of excise taxes, it may be observed 1483 disclose that it intended to divest PAL from the tax
exchange liable for DST.
that the first kind of tax privilege would be irrelevant to PAL privilege tackled in a Department of Finance Ruling: its tax
since it is not liable for excise taxes on locally exemption on aviation gas, fuel and oil which are manufactured
manufactured/produced goods for domestic sale or other or produced in the Philippines for domestic sales. Held: Yes. A definition of a “bill of exchange” is provided by
disposition; based on Section 130 of the NIRC, it is the Consequently, if LOI 1483 was intended to withdraw the Section 39 of Regulations No. 26, the rules governing
manufacturer or producer, i.e., the local refinery, which is foregoing tax exemption, then the term “purchase of domestic documentary taxes promulgated by the Bureau of Internal
regarded as the statutory taxpayer of the excise taxes due on petroleum products for use in its domestic operations” as Revenue (BIR) in 1924:
the same. used in LOI 1483 could only refer to “goods manufactured or
produced in the Philippines for domestic sales or
On the contrary, when the economic burden of the applicable consumption or for any other disposition,” and not to “things
Sec. 39. Definition of “bill of exchange”. The term bill of
excise taxes is passed on to PAL, it may assert 2 tax exemptions imported.” In this respect, it cannot be gainsaid that PAL’s tax
exchange denotes checks, drafts, and all other kinds of orders
under the second kind of tax privilege namely, PAL’s exemption privileges concerning imported goods remain
for the payment of money, payable at sight, or on demand or
exemptions on (a) passed on excise tax costs due from the beyond the scope of LOI 1483 and thus, continue to
after a specific period after sight or from a stated date.
seller, manufacturer/producer in case of locally manufactured/ subsist.
produced goods for domestic sale (first tax exemption under
the second kind of tax privilege); and In this case, records disclose that Caltex imported aviation
(b) passed on excise tax costs due from the importer in case of fuel from abroad and merely re-sold the same to PAL, Section 126 of The Negotiable Instruments Law (Act No. 2031)
imported aviation gas, fuel and oil (second tax exemption tacking the amount of excise taxes it paid or would be reiterates that it is an “order for the payment of money” and
under the second kind of tax privilege). liable to pay to the government on to the purchase price. specifies the particular requisites that make it negotiable.
Evidently, the said petroleum products are in the nature of
The second kind of tax privilege should, in turn, be “things imported” and thus, beyond the coverage of LOI
distinguished from the third kind of tax privilege which 1483 as previously discussed. As such, considering the
Sec. 126. Bill of exchange defined. – A bill of exchange is an
applies when PAL itself acts as the importer of the subsistence of PAL’s tax exemption privileges over the
unconditional order in writing addressed by one person to
foregoing petroleum products. PAL here is not merely imported goods subject of this case, PAL is allowed to claim a
another, signed by the person giving it, requiring the person to
regarded as the party to whom the economic burden of the tax refund on the excise taxes imposed and due thereon.
whom it is addressed to pay on demand or at fixed or
excise taxes is shifted to but rather, it stands as the determinable future time a sum certain in money to order or to
statutory taxpayer directly liable to the government for DISPOSITION: Petition granted. CTA annulled and set aside.
bearer.
the same. Commissioner of Internal Revenue ordered to refund or issue a
tax credit certificate in favor of Philippine Airlines, Inc. in the
In view of the foregoing, the Court observes that the phrase amount of P2,952,037.90.
“purchase of domestic petroleum products for use in its Section 129 of the same law classifies bills of exchange as
domestic operations” – which characterizes the tax privilege BANK OF THE PHILIPPINES VS CIR inland and foreign, the distinction is laid down by where the
LOI 1483 withdrew – refers only to PAL’s tax exemptions on bills are drawn and paid. Thus, a “foreign bill of exchange” may
passed on excise tax costs due from the seller, be drawn outside the Philippines, payable outside the
Facts: From 28 February 1986 to 8 October 1986, petitioner Philippines, or both drawn and payable outside of the
manufacturer/producer of locally manufactured/ produced
Bank of the Philippine Islands (BPI) sold to the Central Bank of Philippines.
goods for domestic sale and does not, in any way, pertain to
the Philippines (now Bangko Sentral ng Pilipinas) U.S. dollars
any of PAL’s tax privileges concerning imported goods, may
for P 1,608,541,900.00. BPI instructed, by cable, its
it be:
correspondent bank in New York to transfer U.S. dollars
(a) PAL’s tax exemption on excise tax costs which are merely Sec. 129. Inland and foreign bills of exchange. — An inland
deposited in BPI’s account therein to the Federal Reserve Bank
passed on to it by the importer when it buys imported goods bill of exchange is a bill which is, or on its face purports to be,
in New York for credit to the Central Bank’s account therein.
from the latter (the second tax exemption under the second both drawn and payable within the Philippines. Any other bill
Thereafter, the Federal Reserve Bank sent to the Central Bank
kind of tax privilege); or is a foreign bill.
confirmation that such funds had been credited to its account
A bill of exchange and a letter of credit may differ as to their Whether or not the BIR may add a requirement– prior mortgage, pledge, exchange, operate, or otherwise dispose of
negotiability, and as to who owns the funds used for the application for an ITAD ruling – that is not found in the income all properties of every kind, nature and description. Previously,
payment at the time payment is made. However, in both bills of tax treaties signed by the Philippines before a taxpayer can petitioner did business under the name of Sinophil Corporation
exchange and letters of credit, a person orders another to pay avail of preferential tax rates under said treaties. until the Securities and Exchange Commission (SEC) approved
money to a third person. the amendment of its Articles of Incorporation, changing its
name to Premium Leisure Corp. on September 5, 2014.2
HELD:
Respondent is the duly appointed Commissioner of the Bureau
Section 195 (now Section 182) of the NIRC covers foreign bills
NO. The Court held that the obligation to comply with a tax of Internal Revenue (BIR) empowered to perform the duties of
of exchange, letters of credit, and orders of payment for money,
treaty must take precedence over the objective of RMO No. 1- his office, including, among others, to act on and approve
drawn in Philippines, but payable outside the Philippines.
2000. Bearing in mind the rationale of tax treaties, the period claims for refund or tax credit as provided by law. He holds
From this enumeration, two common elements need to be
of application for the availment of tax treaty relief as required office at the BIR National Office Building, Agham Road, Diliman,
present: (1) drawing the instrument or ordering a drawee,
by RMO No. 1-2000 should not operate to divest entitlement to Quezon City.
within the Philippines; and (2) ordering that drawee to pay
the relief as it would constitute a violation of the duty required
another person a specified amount of money outside the Petitioner is the registered holder of 74,027,418 shares of the
by good faith in complying with a tax treaty. The denial of the
Philippines. What is being taxed is the facility that allows a capital stock of BBCC.3 On January 27, 2005, the Securities and
availment of tax relief for the failure of a taxpayer to apply
party to draw the draft or make the order to pay within the Exchange Commission approved BBCC’s Amended Articles of
within the prescribed period under the administrative
Philippines and have the payment made in another country.
issuance would impair the value of the tax treaty. At most, the Incorporation4, wherein Article IV thereof was amended to
application for a tax treaty relief from the BIR should merely shorten the term of BBCC’s existence only until January 31,
CBK POWER CO. LTD. VS CIR operate to confirm the entitlement of the taxpayer to the relief. 2004.
Facts: