FIRST DIVISION

[G.R. No. 188497. February 19, 2014.]

COMMISSIONER OF INTERNAL REVENUE , petitioner, vs . PILIPINAS

SHELL PETROLEUM CORPORATION , respondent.

RESOLUTION

VILLARAMA, JR. , J : p

For resolution are the Motion for Reconsideration dated May 22, 2012 and Supplemental
Motion for Reconsideration dated December 12, 2012 led by Pilipinas Shell Petroleum
Corporation (respondent). As directed, the Solicitor General on behalf of petitioner
Commissioner of Internal Revenue filed their Comment, to which respondent filed its Reply.
In our Decision promulgated on April 25, 2012, we ruled that the Court of Tax Appeals
(CTA) erred in granting respondent's claim for tax refund because the latter failed to
establish a tax exemption in its favor under Section 135 (a) of the National Internal
Revenue Code of 1997 (NIRC).
WHEREFORE, the petition for review on certiorari is GRANTED. The Decision dated
March 25, 2009 and Resolution dated June 24, 2009 of the Court of Tax Appeals
En Banc in CTA EB No. 415 are hereby REVERSED and SET ASIDE. The claims for
tax refund or credit led by respondent Pilipinas Shell Petroleum Corporation are
DENIED for lack of basis.
No pronouncement as to costs.

SO ORDERED. 1 DHTCaI

Respondent argues that a plain reading of Section 135 of the NIRC reveals that it is the
petroleum products sold to international carriers which are exempt from excise tax for
which reason no excise taxes are deemed to have been due in the rst place. It points out
that excise tax being an indirect tax, Section 135 in relation to Section 148 should be
interpreted as referring to a tax exemption from the point of production and removal from
the place of production considering that it is only at that point that an excise tax is
imposed. The situation is unlike the value-added tax (VAT) which is imposed at every point
of turnover — from production to wholesale, to retail and to end-consumer. Respondent
thus concludes that exemption could only refer to the imposition of the tax on the
statutory seller, in this case the respondent. This is because when a tax paid by the
statutory seller is passed on to the buyer it is no longer in the nature of a tax but an added
cost to the purchase price of the product sold.
Respondent also contends that our ruling that Section 135 only prohibits local petroleum
manufacturers like respondent from shifting the burden of excise tax to international
carriers has adverse economic impact as it severely curtails the domestic oil industry.
Requiring local petroleum manufacturers to absorb the tax burden in the sale of its
products to international carriers is contrary to the State's policy of "protecting gasoline
dealers and distributors from unfair and onerous trade conditions," and places them at a
competitive disadvantage since foreign oil producers, particularly those whose
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 governments with which we have entered into bilateral service agreements, are not subject
to excise tax for the same transaction. Respondent fears this could lead to cessation of
supply of petroleum products to international carriers, retrenchment of employees of
domestic manufacturers/producers to prevent further losses, or worse, shutting down of
their production of jet A-1 fuel and aviation gas due to unpro tability of sustaining
operations. Under this scenario, participation of Filipino capital, management and labor in
the domestic oil industry is effectively diminished.EHASaD

Lastly, respondent asserts that the imposition by the Philippine Government of excise tax
on petroleum products sold to international carriers is in violation of the Chicago
Convention on International Aviation ("Chicago Convention") to which it is a signatory, as
well as other international agreements (the Republic of the Philippines' air transport
agreements with the United States of America, Netherlands, Belgium and Japan).
In his Comment, the Solicitor General underscores the statutory basis of this Court's ruling
that the exemption under Section 135 does not attach to the products. Citing Exxonmobil
Petroleum & Chemical Holdings, Inc.-Philippine Branch v. Commissioner of Internal
Revenue, 2 which held that the excise tax, when passed on to the purchaser, becomes part
of the purchase price, the Solicitor General claims this refutes respondent's theory that the
exemption attaches to the petroleum product itself and not to the purchaser for it would
have been erroneous for the seller to pay the excise tax and inequitable to pass it on to the
purchaser if the excise tax exemption attaches to the product.
As to respondent's reliance in the cases of Silkair (Singapore) Pte. Ltd. v. Commissioner of
Internal Revenue 3 and Exxonmobil Petroleum & Chemical Holdings, Inc.-Philippine Branch
v. Commissioner of Internal Revenue , 4 the Solicitor General points out that there was no
pronouncement in these cases that petroleum manufacturers selling petroleum products
to international carriers are exempt from paying excise taxes. In fact, Exxonmobil even
cited the case of Philippine Acetylene Co., Inc. v. Commissioner of Internal Revenue . 5
Further, the ruling in Maceda v. Macaraig, Jr. 6 which con rms that Section 135 does not
intend to exempt manufacturers or producers of petroleum products from the payment of
excise tax. cTAaDC

The Court will now address the principal arguments proffered by respondent: (1) Section
135 intended the tax exemption to apply to petroleum products at the point of production;
(2) Philippine Acetylene Co., Inc. v. Commissioner of Internal Revenue and Maceda v.
Macaraig, Jr. are inapplicable in the light of previous rulings of the Bureau of Internal
Revenue (BIR) and the CTA that the excise tax on petroleum products sold to international
carriers for use or consumption outside the Philippines attaches to the article when sold
to said international carriers, as it is the article which is exempt from the tax, not the
international carrier; and (3) the Decision of this Court will not only have adverse impact on
the domestic oil industry but is also in violation of international agreements on aviation.
Under Section 129 of the NIRC, excise taxes are those applied to goods manufactured or
produced in the Philippines for domestic sale or consumption or for any other disposition
and to things imported. Excise taxes as used in our Tax Code fall under two types — (1)
speci c tax which is based on weight or volume capacity and other physical unit of
measurement, and (2) ad valorem tax which is based on selling price or other speci ed
value of the goods. Aviation fuel is subject to speci c tax under Section 148 (g) which
attaches to said product "as soon as they are in existence as such."
On this point, the clari cation made by our esteemed colleague, Associate Justice Lucas
P. Bersamin regarding the traditional meaning of excise tax adopted in our Decision, is
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 well-taken. AEcTaS

The transformation undergone by the term "excise tax" from its traditional concept up to
its current de nition in our Tax Code was explained in the case of Petron Corporation v.
Tiangco, 7 as follows:
Admittedly, the proffered de nition of an excise tax as "a tax upon the
performance, carrying on, or exercise of some right, privilege, activity, calling or
occupation" derives from the compendium American Jurisprudence, popularly
referred to as Am Jur and has been cited in previous decisions of this Court,
including those cited by Petron itself. Such a de nition would not have been
inconsistent with previous incarnations of our Tax Code, such as the NIRC of
1939, as amended, or the NIRC of 1977 because in those laws the term "excise
tax" was not used at all. In contrast, the nomenclature used in those prior laws in
referring to taxes imposed on speci c articles was "speci c tax." Yet beginning
with the National Internal Revenue Code of 1986, as amended, the term "excise
taxes" was used and de ned as applicable "to goods manufactured or produced
in the Philippines . . . and to things imported." This de nition was carried over into
the present NIRC of 1997. Further, these two latest codes categorize two different
kinds of excise taxes: "speci c tax" which is imposed and based on weight or
volume capacity or any other physical unit of measurement; and "ad valorem tax"
which is imposed and based on the selling price or other speci ed value of the
goods. In other words, the meaning of "excise tax" has undergone a
transformation, morphing from the Am Jur de nition to its current
signification which is a tax on certain specified goods or articles . DACaTI

The change in perspective brought forth by the use of the term "excise tax" in a
different connotation was not lost on the departed author Jose Nolledo as he
accorded divergent treatments in his 1973 and 1994 commentaries on our tax
laws. Writing in 1973, and essentially alluding to the Am Jur de nition of "excise
tax," Nolledo observed:

Are specific taxes, taxes on property or excise taxes —

In the case of Meralco v. Trinidad ([G.R.] 16738, 1925) it was held
that speci c taxes are property taxes, a ruling which seems to be
erroneous. Specific taxes are truly excise taxes for the fact that the
value of the property taxed is taken into account will not change
the nature of the tax. It is correct to say that speci c taxes are
taxes on the privilege to import, manufacture and remove from
storage certain articles specified by law.
In contrast, after the tax code was amended to classify specific taxes as a subset
of excise taxes, Nolledo, in his 1994 commentaries, wrote:
1.  Excise taxes, as used in the Tax Code, refers to taxes
applicable to certain speci ed goods or articles manufactured or
produced in the Philippines for domestic sale or consumption or
for any other disposition and to things imported into the
Philippines. They are either specific or ad valorem.

2.  Nature of excise taxes. — They are imposed directly on

certain speci ed goods. (infra) They are, therefore, taxes on
property. (see Medina vs. City of Baguio, 91 Phil. 854.)

A tax is not excise where it does not subject directly the produce or
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 goods to tax but indirectly as an incident to, or in connection with,
the business to be taxed.

In their 2004 commentaries, De Leon and De Leon restate the Am Jur de nition of
excise tax, and observe that the term is "synonymous with 'privilege tax' and [both
terms] are often used interchangeably." At the same time, they offer a caveat that
"[e]xcise tax, as [defined by Am Jur], is not to be confused with excise tax imposed
[by the NIRC] on certain speci ed articles manufactured or produced in, or
imported into, the Philippines, 'for domestic sale or consumption or for any other
disposition.'"

It is evident that Am Jur aside, the current de nition of an excise tax is

that of a tax levied on a speci c article, rather than one "upon the
performance, carrying on, or the exercise of an activity." This current
de nition was already in place when the Code was enacted in 1991, and we can
only presume that it was what the Congress had intended as it specified that local
government units could not impose "excise taxes on articles enumerated under
the [NIRC]." This prohibition must pertain to the same kind of excise taxes as
imposed by the NIRC, and not those previously de ned "excise taxes" which were
not integrated or denominated as such in our present tax law. 8 (Emphasis
supplied.) HDCTAc

That excise tax as presently understood is a tax on property has no bearing at all on the
issue of respondent's entitlement to refund. Nor does the nature of excise tax as an
indirect tax supports respondent's postulation that the tax exemption provided in Sec. 135
attaches to the petroleum products themselves and consequently the domestic petroleum
manufacturer is not liable for the payment of excise tax at the point of production. As
already discussed in our Decision, to which Justice Bersamin concurs, "the accrual and
payment of the excise tax on the goods enumerated under Title VI of the NIRC prior to their
removal at the place of production are absolute and admit of no exception." This also
underscores the fact that the exemption from payment of excise tax is conferred on
international carriers who purchased the petroleum products of respondent.
On the basis of Philippine Acetylene, we 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 Section 148 is the direct liability of the manufacturer who
cannot thus invoke the excise tax exemption granted to its buyers who are international
carriers. And following our pronouncement in Maceda v. Macaraig, Jr. we further ruled that
Section 135 (a) should be construed as prohibiting the shifting of the burden of the excise
tax to the international carriers who buy petroleum products from the local manufacturers.
Said international carriers are thus allowed to purchase the petroleum products without
the excise tax component which otherwise would have been added to the cost or price
fixed by the local manufacturers or distributors/sellers. aTDcAH

Excise tax on aviation fuel used for international ights is practically nil as most countries
are signatories to the 1944 Chicago Convention on International Aviation (Chicago
Convention). Article 24 9 of the Convention has been interpreted to prohibit taxation of
aircraft fuel consumed for international transport. Taxation of international air travel is
presently at such low level that there has been an intensi ed debate on whether these
should be increased to " nance development rather than simply to augment national tax
revenue" considering the "cross-border environmental damage" caused by aircraft
emissions that contribute to global warming, not to mention noise pollution and
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 congestion at airports). 1 0 Mutual exemptions given under bilateral air service agreements
are seen as main legal obstacles to the imposition of indirect taxes on aviation fuel. In
response to present realities, the International Civil Aviation Organization (ICAO) has
adopted policies on charges and emission-related taxes and charges. 1 1
Section 135 (a) of the NIRC and earlier amendments to the Tax Code represent our
Governments' compliance with the Chicago Convention, its subsequent
resolutions/annexes, and the air transport agreements entered into by the Philippine
Government with various countries. The rationale for exemption of fuel from national and
local taxes was expressed by ICAO as follows:
. . . The Council in 1951 adopted a Resolution and Recommendation on the
taxation of fuel, a Resolution on the taxation of income and of aircraft, and a
Resolution on taxes related to the sale or use of international air transport (cf. Doc
7145) which were further amended and ampli ed by the policy statements in Doc
8632 published in 1966. The Resolutions and Recommendation concerned were
designed to recognize the uniqueness of civil aviation and the need to
accord tax exempt status to certain aspects of the operations of
international air transport and were adopted because multiple taxation
on the aircraft, fuel, technical supplies and the income of international
air transport, as well as taxes on its sale and use, were considered as
major obstacles to the further development of international air
transport. Non-observance of the principle of reciprocal exemption envisaged in
these policies was also seen as risking retaliatory action with adverse
repercussions on international air transport which plays a major role in the
development and expansion of international trade and travel. 1 2 THIASE

In the 6th Meeting of the Worldwide Air Transport Conference (ATCONF) held on March
18-22, 2013 at Montreal, among matters agreed upon was that "the proliferation of various
taxes and duties on air transport could have negative impact on the sustainable
development of air transport and on consumers." Con rming that ICAO's policies on
taxation remain valid, the Conference recommended that "ICAO promote more vigorously
its policies and with industry stakeholders to develop analysis and guidance to States on
the impact of taxes and other levies on air transport." 1 3 Even as said conference was
being held, on March 7, 2013, President Benigno Aquino III has signed into law Republic
Act (R.A.) No. 10378 1 4 granting tax incentives to foreign carriers which include exemption
from the 12% value-added tax (VAT) and 2.5% gross Philippine billings tax (GPBT). GPBT is
a form of income tax applied to international airlines or shipping companies. The law,
based on reciprocal grant of similar tax exemptions to Philippine carriers, is expected to
increase foreign tourist arrivals in the country. CIDTcH

Indeed, the avowed purpose of a tax exemption is always "some public bene t or interest,
which the law-making body considers su cient to offset the monetary loss entailed in the
grant of the exemption." 1 5 The exemption from excise tax of aviation fuel purchased by
international carriers for consumption outside the Philippines ful lls a treaty obligation
pursuant to which our Government supports the promotion and expansion of international
travel through avoidance of multiple taxation and ensuring the viability and safety of
international air travel. In recent years, developing economies such as ours focused more
serious attention to signi cant gains for business and tourism sectors as well. Even
without such recent incidental bene t, States had long accepted the need for international
cooperation in maintaining a capital intensive, labor intensive and fuel intensive airline
industry, and recognized the major role of international air transport in the development of
international trade and travel.
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 Under the basic international law principle of pacta sunt servanda, we have the duty to
ful ll our treaty obligations in good faith. This entails harmonization of national legislation
with treaty provisions. In this case, Sec. 135 (a) of the NIRC embodies our compliance with
our undertakings under the Chicago Convention and various bilateral air service
agreements not to impose excise tax on aviation fuel purchased by international carriers
from domestic manufacturers or suppliers. In our Decision in this case, we 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, pursuant to Article 148 and pertinent BIR regulations. Ruling
on respondent's claim for tax refund of such paid excise taxes on petroleum products sold
to tax-exempt international carriers, we found no basis in the Tax Code and jurisprudence
to grant the refund of an "erroneously or illegally paid" tax.
Justice Bersamin argues that "(T)he shifting of the tax burden by manufacturers-sellers is
a business prerogative resulting from the collective impact of market forces," and that it is
"erroneous to construe Section 135 (a) only as a prohibition against the shifting by the
manufacturers-sellers of petroleum products of the tax burden to international carriers, for
such construction will deprive the manufacturers-sellers of their business prerogative to
determine the prices at which they can sell their products." IEcaHS

We maintain that Section 135 (a), in ful llment of international agreement and practice to
exempt aviation fuel from excise tax and other impositions, prohibits the passing of the
excise tax to international carriers who buys petroleum products from local
manufacturers/sellers such as respondent. However, we agree that there is a need to
reexamine the effect of denying the domestic manufacturers/sellers' claim for refund of
the excise taxes they already paid on petroleum products sold to international carriers, and
its serious implications on our Government's commitment to the goals and objectives of
the Chicago Convention.
The Chicago Convention, which established the legal framework for international civil
aviation, did not deal comprehensively with tax matters. Article 24 (a) of the Convention
simply provides that fuel and lubricating oils on board an aircraft of a Contracting State, on
arrival in the territory of another Contracting State and retained on board on leaving the
territory of that State, shall be exempt from customs duty, inspection fees or similar
national or local duties and charges. Subsequently, the exemption of airlines from national
taxes and customs duties on spare parts and fuel has become a standard element of
bilateral air service agreements (ASAs) between individual countries.
The importance of exemption from aviation fuel tax was underscored in the following
observation made by a British author 1 6 in a paper assessing the debate on using tax to
control aviation emissions and the obstacles to introducing excise duty on aviation fuel,
thus:
Without any international agreement on taxing fuel, it is highly likely that moves
to impose duty on international ights, either at a domestic or European level,
would encourage 'tankering': carriers lling their aircraft as full as possible
whenever they landed outside the EU to avoid paying tax. Clearly this would be
entirely counterproductive. Aircraft would be travelling further than necessary to
ll up in low-tax jurisdictions; in addition they would be burning up more fuel
when carrying the extra weight of a full fuel tank.

With the prospect 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
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 tax, or of petroleum products being sold to said carriers by local manufacturers or sellers
at still high prices, the practice of "tankering" would not be discouraged. This scenario
does not augur well for the Philippines' growing economy and the booming tourism
industry. Worse, our 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 our
commitment under international agreements. TcHCDE

In view of the foregoing reasons, we nd merit in respondent's motion for reconsideration.

We therefore hold 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 Sec. 135 (a) of the NIRC.
WHEREFORE , the Court hereby resolves to:
(1)  GRANT the original and supplemental motions for reconsideration
filed by respondent Pilipinas Shell Petroleum Corporation; and
(2)  AFFIRM the Decision dated March 25, 2009 and Resolution dated
June 24, 2009 of the Court of Tax Appeals En Banc in CTA EB No.
415; and DIRECT petitioner Commissioner of Internal Revenue to
refund or to issue a tax credit certi cate to Pilipinas Shell Petroleum
Corporation in the amount of P95,014,283.00 representing the excise
taxes it paid on petroleum products sold to international carriers from
October 2001 to June 2002.
SO ORDERED .
Sereno, C.J. and Reyes, J., concur.
Leonardo-de Castro, J., I concur but joins the opinion of J. Bersamin that the excise tax
exemption applies to the product sold to international carriers and not to the latter.
Bersamin, J., please see separate opinion.

Separate Opinions
BERSAMIN , J.:

In essence, the Resolution written for the Court by my esteemed colleague, Justice Martin
S. Villarama, Jr., maintains that the exemption from payment of the excise tax under
Section 135 (a) of the National Internal Revenue Code (NIRC) is conferred on the
international carriers; and that, accordingly, and in ful llment of international agreement
and practice to exempt aviation fuel from the excise tax and other impositions, Section
135 (a) of the NIRC prohibits the passing of the excise tax to international carriers
purchasing petroleum products from local manufacturers/sellers. Hence, he nds merit in
the Motion for Reconsideration led by Pilipinas Shell Petroleum Corporation (Pilipinas
Shell), and rules that Pilipinas Shell, as the statutory taxpayer directly liable to pay the
excise tax on its petroleum products, is entitled to the refund or credit of the excise taxes
it paid on the petroleum products sold to international carriers, the latter having been
granted exemption from the payment of such taxes under Section 135 (a) of the NIRC.

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 I CONCUR in the result.
I write this separate opinion only to explain that I hold a different view on the proper
interpretation of the excise tax exemption under Section 135 (a) of the NIRC. I hold that the
excise tax exemption under Section 135 (a) of the NIRC is conferred on the petroleum
products on which the excise tax is levied in the rst place in view of its nature as a tax on
property, the liability for the payment of which is statutorily imposed on the domestic
petroleum manufacturer.
I submit the following disquisition in support of this separate opinion.
The issue raised here was whether the manufacturer was entitled to claim the refund of the
excise taxes paid on the petroleum products sold to international carriers exempt under
Section 135 (a) of the NIRC. TEcADS

We ruled in the negative, and held that the exemption from the excise tax under Section
135 (a) of the NIRC was conferred on the international carriers to whom the petroleum
products were sold. In the decision promulgated on April 25, 2012, 1 the Court granted the
petition for review on certiorari led by the Commissioner of Internal Revenue (CIR), and
disposed thusly:
WHEREFORE, the petition for review on certiorari is GRANTED. The Decision dated
March 25, 2009 and Resolution dated June 24, 2009 of the Court of Tax Appeals
En Banc in CTA EB No. 415 are hereby REVERSED and SET ASIDE. The claims for
tax refund or credit led by respondent Pilipinas Shell Petroleum Corporation are
DENIED for lack of basis.
No pronouncement as to costs.
SO ORDERED. 2

We thereby agreed with the position of the Solicitor General that Section 135 (a) of the
NIRC must be construed only as a prohibition for the manufacturer-seller of the petroleum
products from shifting the tax burden to the international carriers by incorporating the
previously-paid excise tax in the selling price. As a consequence, the manufacturer-seller
could not invoke the exemption from the excise tax granted to international carriers.
Concluding, we said: — HaTISE

Respondent's locally manufactured petroleum products are clearly subject to

excise tax under Sec. 148. Hence, its claim for tax refund may not be predicated
on Sec. 229 of the NIRC allowing a refund of erroneous or excess payment of tax.
Respondent's claim is premised on what it determined as a tax exemption
"attaching to the goods themselves," which must be based on a statute granting
tax exemption, or "the result of legislative grace." Such a claim is to be construed
strictissimi juris against the taxpayer, meaning that the claim cannot be made to
rest on vague inference. Where the rule of strict interpretation against the taxpayer
is applicable as the claim for refund partakes of the nature of an exemption, the
claimant must show that he clearly falls under the exempting statute.
The exemption from excise tax payment on petroleum products under Sec. 135
(a) is conferred on international carriers who purchased the same for their use or
consumption outside the Philippines. The only condition set by law is for these
petroleum products to be stored in a bonded storage tank and may be disposed
of only in accordance with the rules and regulations to be prescribed by the
Secretary of Finance, upon recommendation of the Commissioner. 3
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 xxx xxx xxx
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 xed 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. 4 AcHaTE

In its Motion for Reconsideration led on May 23, 2012, Pilipinas Shell principally contends
that the Court has erred in its interpretation of Section 135 (a) of the 1997 NIRC; that
Section 135 (a) of the NIRC categorically exempts from the excise tax the petroleum
products sold to international carriers of Philippine or foreign registry for their use or
consumption outside the Philippines; 5 that no excise tax should be imposed on the
petroleum products, whether in the hands of the quali ed international carriers or in the
hands of the manufacturer-seller; 6 that although it is the manufacturer, producer or
importer who is generally liable for the excise tax when the goods or articles are subject to
the excise tax, no tax should accordingly be collected from the manufacturer, producer or
importer in instances when the goods or articles themselves are not subject to the excise
tax; 7 and that as a consequence any excise tax paid in advance on products that are
exempt under the law should be considered erroneously paid and subject of refund. 8
Pilipinas Shell further contends that the Court's decision, which effectively prohibits
petroleum manufacturers from passing on the burden of the excise tax, defeats the
rationale behind the grant of the exemption; 9 and that without the bene t of a refund or
the ability to pass on the burden of the excise tax to the international carriers, the excise
tax will constitute an additional production cost that ultimately increases the selling price
of the petroleum products. 1 0
The CIR counters that the decision has clearly set forth that the excise tax exemption under
Section 135 (a) of the NIRC does not attach to the products; that Pilipinas Shell's reliance
on the Silkair rulings is misplaced considering that the Court made no pronouncement
therein that the manufacturers selling petroleum products to international carriers were
exempt from paying the taxes; that the rulings that are more appropriate are those in
Philippine Acetylene Co., Inc. v. Commissioner of Internal Revenue 1 1 and Maceda v.
Macaraig, Jr. , 1 2 whereby the Court con rmed the obvious intent of Section 135 of the
NIRC to grant the excise tax exemption to the international carriers or agencies as the
buyers of petroleum products; and that this intention is further supported by the
requirement that the petroleum manufacturer must pay the excise tax in advance without
regard to whether or not the petroleum purchaser is quali ed for exemption under Section
135 of the NIRC. IDEHCa

In its Supplemental Motion for Reconsideration, Pilipinas Shell reiterates that what is being
exempted under Section 135 of the NIRC is the petroleum product that is sold to
international carriers; that the exemption is not given to the producer or the buyer but to
the product itself considering that the excise taxes, according to the NIRC, are taxes
applicable to certain speci c goods or articles for domestic sale or consumption or for
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 any other disposition, whether manufactured in or imported into the Philippines; that the
excise tax that is passed on to the buyer is no longer in the nature of a tax but of an added
cost to the purchase price of the product sold; that what is contemplated under Section
135 of the NIRC is an exemption from the excise tax, not an exemption from the burden to
shoulder the tax; and that inasmuch as the exemption can refer only to the imposition of
the tax on the statutory seller, like Pilipinas Shell, a contrary interpretation renders Section
135 of the NIRC nugatory because the NIRC does not impose the excise tax on subsequent
holders of the product like the international carriers.
As I earlier said, I agree to GRANT Pilipinas Shell's motions for reconsideration.
Excise tax is essentially a tax
on goods, products or articles
Taxes are classi ed, according to subject matter or object, into three groups, to wit: (1)
personal, capitation or poll taxes; (2) property taxes; and (3) excise or license taxes.
Personal, capitation or poll taxes are xed amounts imposed upon residents or persons of
a certain class without regard to their property or business, an example of which is the
basic community tax. 1 3 Property taxes are assessed on property or things of a certain
class, whether real or personal, in proportion to their value or other reasonable method of
apportionment, such as the real estate tax. 1 4 Excise or license taxes are imposed upon
the performance of an act, the enjoyment of a privilege, or the engaging in an occupation,
profession or business. 1 5 Income tax, value-added tax, estate and donor's tax fall under
the third group. SIcEHC

Excise tax, as a classi cation of tax according to object, must not be confused with the
excise tax under Title VI of the NIRC. The term "excise tax" under Title VI of the 1997 NIRC
derives its de nition from the 1986 NIRC, 1 6 and relates to taxes applied to goods
manufactured or produced in the Philippines for domestic sale or consumption or for any
other disposition and to things imported. 1 7 In contrast, an excise tax that is imposed
directly on certain speci ed goods — goods manufactured or produced in the Philippines,
or things imported — is undoubtedly a tax on property. 1 8
The payment of excise taxes is the direct
liability of the manufacturer or producer
The production, manufacture or importation of the goods belonging to any of the
categories enumerated in Title VI of the NIRC (i.e., alcohol products, tobacco products,
petroleum products, automobiles and non-essential goods, mineral products) are not the
sole determinants for the proper levy of the excise tax. It is further required that the goods
be manufactured, produced or imported for domestic sale, consumption or any other
disposition. 1 9 The accrual of the tax liability is, therefore, contingent on the production,
manufacture or importation of the taxable goods and the intention of the manufacturer,
producer or importer to have the goods locally sold or consumed or disposed in any other
manner. This is the reason why the accrual and liability for the payment of the excise tax
are imposed directly on the manufacturer or producer of the taxable goods, 2 0 and arise
before the removal of the goods from the place of their production. 2 1
The manufacturer's or producer's direct liability to pay the excise taxes similarly operates
although the goods produced or manufactured within the country are intended for export
and are "actually exported without returning to the Philippines, whether so exported in their
original state or as ingredients or parts of any manufactured goods or products." This is
implied from the grant of a tax credit or refund to the manufacturer or producer by Section
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 130 (4) (D) of the NIRC, thereby presupposing that the excise tax corresponding to the
goods exported were previously paid. Section 130 (4) (D) reads:
xxx xxx xxx
(D)  Credit for Excise Tax on Goods Actually Exported. — When goods locally
produced or manufactured are removed and actually exported without
returning to the Philippines, whether so exported in their original state or as
ingredients or parts of any manufactured goods or products, any excise
tax paid thereon shall be credited or refunded upon submission of
the proof of actual exportation and upon receipt of the
corresponding foreign exchange payment : Provided, That the excise
tax on mineral products, except coal and coke, imposed under Section 151
shall not be creditable or refundable even if the mineral products are
actually exported. (Emphasis supplied.)

Simply stated, the accrual and payment of the excise tax under Title VI of the NIRC
materially rest on the fact of actual production, manufacture or importation of the taxable
goods in the Philippines and on their presumed or intended domestic sale, consumption or
disposition. Considering that the excise tax attaches to the goods upon the accrual of the
manufacturer's direct liability for its payment, the subsequent sale, consumption or other
disposition of the goods becomes relevant only to determine whether any exemption or
tax relief may be granted thereafter. DEScaT

The actual sale, consumption or disposition

of the taxable goods confirms the proper tax
treatment of goods previously subjected
to the excise tax
Conformably with the foregoing discussion, the accrual and payment of the excise tax on
the goods enumerated under Title VI of the NIRC prior to their removal from the place of
production are absolute and admit of no exception. As earlier mentioned, even locally
manufactured goods intended for export cannot escape the imposition and payment of
the excise tax, subject to a future claim for tax credit or refund once proof of actual
exportation has been submitted to the Commissioner of Internal Revenue (CIR). 2 2 Verily, it
is the actual sale, consumption or disposition of the taxable goods that con rms the
proper tax treatment of goods previously subjected to the excise tax. If any of the goods
enumerated under Title VI of the NIRC are manufactured or produced in the Philippines and
eventually sold, consumed, or disposed of in any other manner domestically, therefore,
there can be no claim for any tax relief inasmuch as the excise tax was properly levied and
collected from the manufacturer-seller.
Here, the point of interest is the proper tax treatment of the petroleum products sold by
Pilipinas Shell to various international carriers. An international carrier is engaged in
international transportation or contract of carriage between places in different territorial
jurisdictions. 2 3
Pertinent is Section 135 (a) of the NIRC, which provides:
SEC. 135.  Petroleum Products Sold to International Carriers and
Exempt Entities or Agencies. — Petroleum products sold to the following are
exempt from excise tax:

(a)   International carriers of Philippine or foreign registry on their use or

consumption outside the Philippines: Provided, That the petroleum products sold
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 to these international carriers shall be stored in a bonded storage tank and may
be disposed of only in accordance with the rules and regulations to be prescribed
by the Secretary of Finance, upon recommendation of the Commissioner; . . . cHITCS

xxx xxx xxx

As the taxpayer statutorily and directly liable for the accrual and payment of the excise tax
on the petroleum products it manufactured and it intended for future domestic sale or
consumption, Pilipinas Shell paid the corresponding excise taxes prior to the removal of
the goods from the place of production. However, upon the sale of the petroleum
products to the international carriers, the goods became exempt from the
excise tax by the express provision of Section 135 (a) of the NIRC. In the latter
instance, the fact of sale to the international carriers of the petroleum products
previously subjected to the excise tax confirms the proper tax treatment of the
goods as exempt from the excise tax .
It is worthy to note that Section 135 (a) of the NIRC is a product of the 1944 Convention of
International Civil Aviation, otherwise known as the Chicago Convention, of which the
Philippines is a Member State. Article 24 (a) of the Chicago Convention provides —
Article 24

Customs duty
(a)  Aircraft on a ight to, from, or across the territory of another contracting
State shall be admitted temporarily free of duty, subject to the customs
regulations of the State. Fuel , lubricating oils, spare parts, regular
equipment and aircraft stores on board an aircraft of a contracting
State, on arrival in the territory of another contracting State and
retained on board on leaving the territory of that State shall be
exempt from customs duty, inspection fees or similar national or local
duties and charges . This exemption shall not apply to any quantities or
articles unloaded, except in accordance with the customs regulations of
the State, which may require that they shall be kept under customs
supervision. . . . (Bold emphasis supplied.)
IScaAE

This provision was extended by the ICAO Council in its 1999 Resolution, which stated that
"fuel . . . taken on board for consumption" by an aircraft from a contracting state in the
territory of another contracting State departing for the territory of any other State must be
exempt from all customs or other duties. The Resolution broadly interpreted the scope of
the Article 24 prohibition to include "import, export, excise , sales, consumption and
internal duties and taxes of all kinds levied upon . . . fuel ." 2 4
Given the nature of the excise tax on petroleum products as a tax on property, the tax
exemption espoused by Article 24 (a) of the Chicago Convention, as now embodied in
Section 135 (a) of the NIRC, is clearly conferred on the aviation fuel or petroleum product
on-board international carriers. Consequently, the manufacturer's or producer's sale of the
petroleum products to international carriers for their use or consumption outside the
Philippines operates to bring the tax exemption of the petroleum products into full force
and effect.
Pilipinas Shell, the statutory taxpayer, is
the proper party to claim the refund of
the excise taxes paid on petroleum
products sold to international carriers
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 The excise taxes are of the nature of indirect taxes, the liability for the payment of which
may fall on a person other than whoever actually bears the burden of the tax. 2 5 HETDAa

In Commissioner of Internal Revenue v. Philippine Long Distance Telephone Company , 26

the Court has discussed the nature of indirect taxes in the following manner:
[I]ndirect taxes are those that are demanded, in the rst instance, from, or are paid
by, one person in the expectation and intention that he can shift the burden to
someone else. Stated elsewise, indirect taxes are taxes wherein the liability for the
payment of the tax falls on one person but the burden thereof can be shifted or
passed on to another person, such as when the tax is imposed upon goods before
reaching the consumer who ultimately pays for it. When the seller passes on
the tax to his buyer, he, in effect, shifts the tax burden, not the liability
to pay it, to the purchaser, as part of the price of goods sold or services
rendered . 2 7

In another ruling, the Court has observed:

Accordingly, the party liable for the tax can shift the burden to another, as part of
the purchase price of the goods or services. Although the manufacturer/seller is
the one who is statutorily liable for the tax, it is the buyer who actually shoulders
or bears the burden of the tax, albeit not in the nature of a tax, but part of the
purchase price or the cost of the goods or services sold. 2 8

Accordingly, the option of shifting the burden to pay the excise tax rests on the statutory
taxpayer, which is the manufacturer or producer in the case of the excise taxes imposed on
the petroleum products. Regardless of who shoulders the burden of tax payment, however,
the Court has ruled as early as in the 1960s that the proper party to question or to seek a
refund of an indirect tax is the statutory taxpayer, the person on whom the tax is imposed
by law and who paid the same, even if he shifts the burden thereof to another. 2 9 The Court
has explained: CIcEHS

In Philippine Acetylene Co., Inc. v. Commissioner of Internal Revenue , the Court

held that the sales tax is imposed on the manufacturer or producer and not on the
purchaser, "except probably in a very remote and inconsequential sense."
Discussing the "passing on" of the sales tax to the purchaser, the Court therein
cited Justice Oliver Wendell Holmes' opinion in Lash's Products v. United States
wherein he said:

"The phrase 'passed the tax on' is inaccurate, as obviously the tax
is laid and remains on the manufacturer and on him alone. The
purchaser does not really pay the tax. He pays or may pay the
seller more for the goods because of the seller's obligation, but
that is all. . . . The price is the sum total paid for the goods. The
amount added because of the tax is paid to get the goods and for
nothing else. Therefore it is part of the price . . . ."
Proceeding from this discussion, the Court went on to state:

It may indeed be that the economic burden of the tax nally falls
on the purchaser; when it does the tax becomes a part of the price
which the purchaser must pay. It does not matter that an
additional amount is billed as tax to the purchaser. . . . The effect
is still the same, namely, that the purchaser does not pay the tax.
He pays or may pay the seller more for the goods because of the
seller's obligation, but that is all and the amount added because of
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 the tax is paid to get the goods and for nothing else.

But the tax burden may not even be shifted to the purchaser at all.
A decision to absorb the burden of the tax is largely a matter of
economics. Then it can no longer be contended that a sales tax is
a tax on the purchaser. 3 0ECcDAH

The Silkair rulings involving the excise taxes on the petroleum products sold to
international carriers rmly hold that the proper party to claim the refund of excise taxes
paid is the manufacturer-seller.
In the February 2008 Silkair ruling, 3 1 the Court declared:
The proper party to question, or seek a refund of, an indirect tax is the statutory
taxpayer, the person on whom the tax is imposed by law and who paid the same
even if he shifts the burden thereof to another. Section 130 (A) (2) of the NIRC
provides that "[u]nless otherwise speci cally allowed, the return shall be led and
the excise tax paid by the manufacturer or producer before removal of domestic
products from place of production." Thus, Petron Corporation, not Silkair, is the
statutory taxpayer which is entitled to claim a refund based on Section 135 of the
NIRC of 1997 and Article 4(2) of the Air Transport Agreement between RP and
Singapore.
Even if Petron Corporation passed on to Silkair the burden of the tax, the
additional amount billed to Silkair for jet fuel is not a tax but part of the price
which Silkair had to pay as a purchaser.

In the November 2008 Silkair ruling, 3 2 the Court reiterated:

Section 129 of the NIRC provides that excise taxes refer to taxes imposed on
speci ed goods manufactured or produced in the Philippines for domestic sale or
consumption or for any other disposition and to things imported. The excise taxes
are collected from manufacturers or producers before removal of the domestic
products from the place of production. Although excise taxes can be considered
as taxes on production, they are really taxes on property as they are imposed on
certain specified goods. HIaAED

Section 148(g) of the NIRC provides that there shall be collected on aviation jet
fuel an excise tax of P3.67 per liter of volume capacity. Since the tax imposed is
based on volume capacity, the tax is referred to as "speci c tax." However, excise
tax, whether classi ed as speci c or ad valorem tax, is basically an indirect tax
imposed on the consumption of a speci ed list of goods or products. The tax is
directly levied on the manufacturer upon removal of the taxable goods from the
place of production but in reality, the tax is passed on to the end consumer as
part of the selling price of the goods sold.
xxx xxx xxx

When Petron removes its petroleum products from its re nery in Limay, Bataan, it
pays the excise tax due on the petroleum products thus removed. Petron, as
manufacturer or producer, is the person liable for the payment of the excise tax as
shown in the Excise Tax Returns led with the BIR. Stated otherwise, Petron is the
taxpayer that is primarily, directly and legally liable for the payment of the excise
taxes. However, since an excise tax is an indirect tax, Petron can transfer to its
customers the amount of the excise tax paid by treating it as part of the cost of
the goods and tacking it on to the selling price.
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 As correctly observed by the CTA, this Court held in Philippine Acetylene Co., Inc.
v. Commissioner of Internal Revenue:
It may indeed be that the economic burden of the tax nally falls
on the purchaser; when it does the tax becomes part of the price
which the purchaser must pay. aSATHE

Even if the consumers or purchasers ultimately pay for the tax, they are not
considered the taxpayers. The fact that Petron, on whom the excise tax is
imposed, can shift the tax burden to its purchasers does not make the latter the
taxpayers and the former the withholding agent.
Petitioner, as the purchaser and end-consumer, ultimately bears the tax burden,
but this does not transform petitioner's status into a statutory taxpayer.

In the refund of indirect taxes, the statutory taxpayer is the proper party
who can claim the refund.
Section 204(c) of the NIRC provides:

Sec. 204.  Authority of the Commissioner to Compromise,

Abate, and Refund or Credit Taxes. — The Commissioner may —
xxx xxx xxx

(b)  Credit or refund taxes erroneously or illegally received or

penalties imposed without authority, refund the value of internal
revenue stamps when they are returned in good condition by the
purchaser, and, in his discretion, redeem or change unused stamps
that have been rendered un t for use and refund their value upon
proof of destruction. No credit or refund of taxes or penalties
shall be allowed unless the taxpayer les in writing with
the Commissioner a claim for credit or refund within two (2)
years after the payment of the tax or penalty: Provided, however,
That a return led showing an overpayment shall be considered
as a written claim for credit or refund. (Emphasis and
underscoring supplied) IaTSED

The person entitled to claim a tax refund is the statutory taxpayer. Section 22(N)
of the NIRC de nes a taxpayer as "any person subject to tax." In Commissioner of
Internal Revenue v. Procter and Gamble Phil. Mfg. Corp., the Court ruled that:
A "person liable for tax" has been held to be a "person subject to
tax" and properly considered a "taxpayer." The terms "liable for
tax" and "subject to tax" both connote a legal obligation or duty to
pay a tax.

The excise tax is due from the manufacturers of the petroleum products and is
paid upon removal of the products from their re neries. Even before the aviation
jet fuel is purchased from Petron, the excise tax is already paid by Petron. Petron,
being the manufacturer, is the "person subject to tax." In this case, Petron, which
paid the excise tax upon removal of the products from its Bataan re nery, is the
"person liable for tax." Petitioner is neither a "person liable for tax" nor "a person
subject to tax." There is also no legal duty on the part of petitioner to pay the
excise tax; hence, petitioner cannot be considered the taxpayer.
Even if the tax is shifted by Petron to its customers and even if the tax is billed as
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 a separate item in the aviation delivery receipts and invoices issued to its
customers, Petron remains the taxpayer because the excise tax is imposed
directly on Petron as the manufacturer. Hence, Petron, as the statutory taxpayer, is
the proper party that can claim the refund of the excise taxes paid to the BIR. 3 3
DISHEA

It is noteworthy that the foregoing pronouncements were applied in two more Silkair
cases 3 4 involving the same parties and the same cause of action but pertaining to
different periods of taxation.
The shifting of the tax burden by manufacturers-sellers is a business prerogative resulting
from the collective impact of market forces. Such forces include government impositions
like the excise tax. Hence, the additional amount billed to the purchaser as part of the price
the purchaser pays for the goods acquired cannot be solely attributed to the effect of the
tax liability imposed on the manufacture-seller. It is erroneous to construe Section 135 (a)
only as a prohibition against the shifting by the manufacturers-sellers of petroleum
products of the tax burden to international carriers, for such construction will deprive the
manufacturers-sellers of their business prerogative to determine the prices at which they
can sell their products.
Section 135 (a) of the NIRC cannot be further construed as granting the excise tax
exemption to the international carrier to whom the petroleum products are sold
considering that the international carrier has not been subjected to excise tax at the
outset. To reiterate, the excise tax is levied on the petroleum products because it is a tax
on property. Levy is the act of imposition by the Legislature such as by its enactment of a
law. 3 5 The law enacted here is the NIRC whereby the excise tax is imposed on the
petroleum products, the liability for the payment of which is further statutorily imposed on
the domestic petroleum manufacturer. Accordingly, the exemption must be allowed to the
petroleum products because it is on them that the tax is imposed. The tax status of an
international carrier to whom the petroleum products are sold is not based on
exemption; rather, it is based on the absence of a law imposing the excise tax
on it . This further supports the position that the burden passed on by the domestic
petroleum manufacturer is not anymore in the nature of a tax — although resulting from the
previously-paid excise tax — but as an additional cost component in the selling price.
Consequently, the purchaser of the petroleum products to whom the burden of the excise
tax has been shifted, not being the statutory taxpayer, cannot claim a refund of the excise
tax paid by the manufacturer or producer. cEHITA

Applying the foregoing, the Court concludes that: (1) the exemption under Section 135 (a)
of the NIRC is conferred on the petroleum products on which the excise tax was levied in
the rst place; (2) Pilipinas Shell, being the manufacturer or producer of petroleum
products, was the statutory taxpayer of the excise tax imposed on the petroleum
products; (3) as the statutory taxpayer, Pilipinas Shell's liability to pay the excise tax
accrued as soon as the petroleum products came into existence, and Pilipinas Shell
accordingly paid its excise tax liability prior to its sale or disposition of the taxable goods
to third parties, a fact not disputed by the CIR; and (3) Pilipinas Shell's sale of the
petroleum products to international carriers for their use or consumption outside the
Philippines con rmed the proper tax treatment of the subject goods as exempt from the
excise tax.
Under the circumstances, therefore, Pilipinas Shell erroneously paid the excise taxes on its
petroleum products sold to international carriers, and was entitled to claim the refund of
the excise taxes paid in accordance with prevailing jurisprudence and Section 204 (C) of
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 the NIRC, viz.:
Section 204.  Authority of the Commissioner to Compromise, Abate and
Refund or Credit Taxes. — The Commissioner may — . . .
xxx xxx xxx
(C)   Credit or refund taxes erroneously or illegally received or penalties
imposed without authority, refund the value of internal revenue stamps when they
are returned in good condition by the purchaser, and, in his discretion, redeem or
change unused stamps that have been rendered un t for use and refund their
value upon proof of destruction. No credit or refund of taxes or penalties shall be
allowed unless the taxpayer les in writing with the Commissioner a claim for
credit or refund within two (2) years after payment of the tax or penalty: Provided,
however, That a return led showing an overpayment shall be considered as a
written claim for credit or refund.
DSTCIa

IN VIEW OF THE FOREGOING, I VOTE TO GRANT the Motion for Reconsideration and
Supplemental Motion for Reconsideration of Pilipinas Shell Petroleum Corporation and,
accordingly:
(a)  TO AFFIRM the decision dated March 25, 2009 and resolution dated June 24,
2009 of the Court of Tax Appeals En Banc in CTA EB No. 415; and
(b)  TO DIRECT petitioner Commissioner of Internal Revenue to refund or to issue a
tax credit certi cate to Pilipinas Shell Petroleum Corporation in the amount of
P95,014,283.00 representing the excise taxes it paid on the petroleum products sold to
international carriers in the period from October 2001 to June 2002. SACTIH

Footnotes

1.Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corporation, G.R. No. 188497,
April 25, 2012, 671 SCRA 241, 264.

2.G.R. No. 180909, January 19, 2011, 640 SCRA 203.

3.G.R. No. 166482, January 25, 2012, 664 SCRA 33.

4.Supra note 2.

5.No. L-19707, August 17, 1967, 20 SCRA 1056.

6.G.R. No. 88291, June 8, 1993, 223 SCRA 217.

7.G.R. No. 158881, April 16, 2008, 551 SCRA 484.

8.Id. at 492-493.
9.Art. 24. Customs Duty. —

(a) Aircraft on a flight to, from, or across the territory of another contracting State shall be
admitted temporarily free of duty, subject to the customs regulations of the State. Fuel,
lubricating oils, spare parts, regular equipment and aircraft stores on board an aircraft of
a contracting State, on arrival in the territory of another contracting State and retained on
board on leaving the territory of that State shall be exempt from customs duty,
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 inspection fees or similar national or local duties and charges. This exemption shall not
apply to any quantities or articles unloaded, except in accordance with the customs
regulations of the State, which may require that they shall be kept under customs
supervision.

xxx xxx xxx

10.See "Indirect Taxes on International Aviation" by Michael Keen and Jon Strand, IMF Working
Paper published in May 2006, sourced from Internet —
http://www.imf.org/external/pubs/ft/wp/2006/wp06124.pdf.
11.Set out in the Statements by the Council to Contracting States for Airports and Air
Navigation Services (Doc 9082) and Council Resolution on environmental charges
adopted in December 1996.

12.ICAO's Policies on Taxation in the Field of International Air Transport (Document 8632-
C/968), Introduction, Second Edition, January 1994. Sourced from Internet —
http://www.icao.int/publications/Documents/8632_2ed_en.pdf.
13.Outcome of the Sixth Worldwide Air Transport Conference, Item 2.6, accessed at —
http://www.icao.int/Meetings/a38/Documents/WP/wp056_rev1_en.pdf.
14.AN ACT RECOGNIZING THE PRINCIPLE OF RECIPROCITY AS BASIS FOR THE GRANT OF
INCOME TAX EXEMPTIONS TO INTERNATIONAL CARRIERS AND RATIONALIZING
OTHER TAXES IMPOSED THEREON BY AMENDING SECTIONS 28 (A) (3) (a), 109, 118
AND 236 OF THE NATIONAL INTERNAL REVENUE CODE (NIRC), AS AMENDED, AND
FOR OTHER PURPOSES (Approved on *

15.Commissioner of Internal Revenue, et al. v. Botelho Shipping Corp., et al., 126 Phil. 846, 851.
16.Antony Seely, Taxing Aviation Fuel (Standard Note SN00523, last updated 02 October 2012),
House of Commons Library, accessed at www.parliament.uk/briefing-
paper/SN00523.pdf.
BERSAMIN, J.:
1.671 SCRA 241.

2.Id. at 264.

3.Id. at 255-256.
4.Id. at 263.

5.Rollo, p. 356.
6.Id. at 360.

7.Id. at 364.

8.Id. at 366.
9.Id. at 375.

10.Id.
11.No. L-19707, August 17, 1967, 20 SCRA 1056.

12.G.R. No. 88291, June 8, 1993, 223 SCRA 217.

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 13.Vitug and Acosta, Tax Law and Jurisprudence, Third Edition (2006), p. 26.

14.Id.
15.Id.

16.Petron Corporation v. Tiangco, G.R. No. 158881, April 16, 2008, 551 SCRA 484, 494; see
Section 126, Presidential Decree No. 1994, establishing the National Internal Revenue
Code of 1986 (NIRC).
17.Section 129, NIRC.

18.Petron Corporation v. Tiangco, supra, citing Medina v. City of Baguio, 91 Phil. 854 (1952).
19.Section 129, NIRC.

20.Section 130 (A) (2), NIRC; Silkair (Singapore) Pte., Ltd. v. Commissioner of Internal Revenue,
G.R. No. 173594, February 6, 2008, 544 SCRA 100, 112.
21.Section 130 (A) (2), NIRC.

22.Section 130 (4) (D); Revenue Regulations No. 13-77, Section 31 (c).

23.Vilma Cruz-Silvederio, International Common Carriers and the VAT Law,

http://www.punongbayan-araullo.com/pnawebsite/pnahome.nsf/section_docs. Visited
on February 19, 2013.

24.Supra note 1, at 261, citing Prohibition Against Taxes on International Airlines, prepared by
The International Air Transport Association, citing ICAO's Policies on Taxation in the
Field of International Air Transport, ICAO Doc. 8632-C/968 (3d rd. 2000),
www.globalwarming.markey.house.gov/files/. Visited on October 5, 2012.
25.Exxonmobil Petroleum and Chemical Holdings, Inc. — Philippine Branch v. Commissioner of
Internal Revenue, G.R. No. 180909, January 19, 2011, 640 SCRA 203, 219.
26.G.R. No. 140230, December 15, 2005, 478 SCRA 61.
27.Id. at 72.

28.Exxonmobil Petroleum and Chemical Holdings, Inc. — Philippine Branch v. Commissioner of

Internal Revenue, supra note 25, at 220.
29.Id. at 222.

30.Id. at 222-223, citing Silkair (Singapore) Pte., Ltd. v. Commissioner of Internal Revenue, G.R.
No. 173594, February 6, 2008, 544 SCRA 100, 112; Vitug and Acosta, op. cit., at 317,
citing Commissioner of Internal Revenue v. American Rubber Company and Court of Tax
Appeals, 124 Phil. 1471 (1966); Cebu Portland Cement Co. v. Collector of Internal
Revenue, 134 Phil. 735 (1968).
31.Silkair (Singapore), Pte. Ltd. v. Commissioner of Internal Revenue, G.R. No. 173594, February
6, 2008, 544 SCRA 100, 112.
32.Silkair (Singapore) Pte., Ltd. v. Commissioner of Internal Revenue, G.R. Nos. 171383 and
172379, November 14, 2008, 571 SCRA 141.

33.Id. at 154-158.

34.Silkair (Singapore) Pte., Ltd. v. Commissioner of Internal Revenue, G.R. No. 184398, February
25, 2010, 613 SCRA 639, and Silkair (Singapore) Pte., Ltd. v. Commissioner of Internal
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 Revenue, G.R. No. 166482, January 25, 2012, 664 SCRA 33.
35.Vitug, and Acosta, op. cit., at 25.

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