SUMMARY OF SIGNIFICANT SC DECISIONS (April 2012) -digested by Atty. Eveart O. Pomarin 1.

The oil companies are not exempt from the payment of excise tax on petroleum products manufactured and sold by them to international carriers. The taxpayer filed with the Large Taxpayers Audit & Investigation Division II of the (BIR) the several formal claims for refund or tax credit for various years. It filed petitions for review since no action was taken by the BIR on its claims. The CTAs First Division ruled that the taxpayer is entitled to the refund of excise taxes in the reduced amount. It relied on a previous ruling rendered by the CTA En Banc in a previous case involving the same taxpayer, where the CTA also granted the taxpayers claim for refund on the basis of excise tax exemption for petroleum products sold to international carriers of foreign registry for their use or consumption outside the Philippines. On appeal, the CTA En Banc upheld the ruling of the First Division. The Supreme Court held that both the earlier amendment in the 1977 Tax Code and the present Sec. 135 of the 1997 NIRC did not exempt the oil companies from the payment of excise tax on petroleum products manufactured and sold by them to international carriers. Because 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 Code authorizing the refund or crediting of such excise taxes paid, the Court holds that Sec. 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. The Supreme Court pointed out that the taxpayers failure to make a distinction on the exemption under Sections 134 and 135 of the Tax Code, apparently led it to mistakenly assume that the tax exemption under Sec. 135 (a) attaches to the goods themselves such that the excise tax should not have been paid in the first place. The exemption found in Sec. 134 makes reference to the nature and quality of the goods manufactured (domestic denatured alcohol) without regard to the tax status of the buyer of the said goods while Sec. 135 deals with the tax treatment of a specified article (petroleum products) in relation to its buyer or consumer. Further, it held that Sec. 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
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price. In other words, the taxpayer cannot shift the tax burden to international carriers who are allowed to purchase its petroleum products without having to pay the added cost of the excise tax. Furthermore, 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 then of the taxpayers claim for refund is the express grant of excise tax exemption in favor of international carriers under Sec. 135 (a) for their purchases of locally manufactured petroleum products. Citing its ruling in Philippine Acetylene, it held that 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 Sec. 148 is the direct liability of the manufacturer who cannot thus invoke the excise tax exemption granted to its buyers who are international carriers. SUMMARY OF SIGNIFICANT SC DECISIONS (June 2012) -digested by Atty. Eveart O. Pomarin 2. Failure to print the word zero-rated on the VAT invoices or official receipts is fatal in claims for a refund or credit of input VAT on zero-rated sales, even if the claims were made prior to the effectivity of R.A. 9337. Taxpayer contends that RR 7-95 constitutes undue expansion of the scope of the legislation it seeks to implement on the ground that the statutory requirement for imprinting the phrase zero-rated on VAT official receipts appears only in Republic Act No. 9337. This law took effect on 1 July 2005, or long after petitioner had filed its claim for a refund. However, the Supreme Court held that in a claim for tax refund or tax credit, the applicant must prove not only entitlement to the grant of the claim under substantive law. It must also show satisfaction of all the documentary and evidentiary requirements for an administrative claim for a refund or tax credit. Hence, the mere fact that taxpayers application for zero-rating has been approved by the CIR does not, by itself, justify the grant of a refund or tax credit. The taxpayer claiming the refund must further comply with the invoicing and accounting requirements mandated by the NIRC, as well as by revenue regulations implementing them. It further held that RR 7-95 proceeds from the rule-making authority granted to the Secretary of Finance by the NIRC for the efficient enforcement of the same Tax Code and its amendments. It cited the cases of Panasonic Communications Imaging Corporation of the Philippines v. Commissioner of Internal Revenue, G.R. No. 178090, 8 February 2010, were it was ruled that this provision is reasonable and is in accord with the efficient collection of VAT from the covered sales of goods and services and Kepco Philippines Corporation v. Commissioner of Internal Revenue, G.R. No. 179961, 31 January 2011 where it was ruled that the subsequent incorporation of Section 4.108-1 of RR 7-95 in Section 113 (B) (2) (c) of R.A. 9337 actually confirmed the validity of the imprinting requirement on VAT invoices or official receipts a case falling under the principle of legislative approval of administrative interpretation by reenactment. (Western Mindanao Power Corporation v. Commissioner of Internal Revenue, G. R. No. 181136, June 13, 2012.)

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