Thermaprime Well Services, Inc., v.

The CIR,
CTA Case No. 8896,
March 26, 2019

Case Digest No. 28 of Lucky O. Javellana

A claim for tax refund or credit, like a claim for tax exemption, is construed strictly
against the taxpayer. One of the conditions for a judicial claim of refund or credit under
the VAT System is compliance with the 120+ 30 day mandatory and jurisdictional
periods. Thus, strict compliance with the 120 + 30 day periods is necessary for such a
claim to prosper.
The rule that the counting of the 120-day period is to begin from the submission of the
complete documents cannot be applied in this case since it was only after the lapse of
the 120-day period when Petitioner started to submit additional supporting documents.
The subsequent dates when Petitioner submitted the said supporting documents are
already way beyond the 120 + 30 day period prescribed by law. Thus, petitioner's failure
to observe the mandatory 120+30 day periods is fatal to its claim and rendered the
Court devoid of jurisdiction.

Dohle Shipmanagement Phils. Corp. v. CIR,

CTA EB No. 1715
March 14, 2019

Case Digest No. 29 of Lucky O. Javellana

FACTS:
Petitioner contends that the Court erred in its conclusion that the complete supporting
documents in claims for refund under Section 112 (a) of the 1997 National Internal
Revenue Code (1997 NIRC), must be submitted within the two-year period. According
to petitioner, this is tantamount to imposing an additional condition that does not find
any basis under the law. Petitioner further argues, that assuming that supporting
documents should be submitted within the two-year period, it submits that the instant
case falls under the exception, i.e., that the submission of additional documents by
petitioner to the One Stop Shop-Department of Finance (OSS-DOF) was made in
response to ongoing requests for documents in the course of the latter's evaluation of
the application for tax refund.

ISSUE:
WON petitioner’s MR is meritorious

RULING:
NO. The complete supporting documents relative to claims for refund of excess
unutilized input VAT under Section 112 (A) of the 1997 NIRC must be submitted within
the two-year period provided therein. To interpret it differently would render nugatory the
two-year prescriptive period to file a claim granted by law, because after all, it is only
when the supporting documents are submitted that the claim for refund is deemed
"officially received".

It is a condition inherent in the nature of the claim and the time limit prescribed by law to
submit the complete supporting documents within the two-year period, thus it is
erroneous on the part of petitioner to assert that such is an additional condition that
does not find any basis in law. It must be noted that it is within the two-year period that
the law gives the taxpayer the right to determine when the documents are complete to
support his application. The exception to this rule is when the revenue officers find the
supporting documents submitted by taxpayer (within the two-year period) to be
insufficient to complete their evaluation.

Hedcor Sibulan, Inc. v. CIR,

CTA EB No. 1689
March 13, 2019

Case Digest No. 30 of Lucky O. Javellana

THE DATE OF THE SUBMISSION OF THE ADDITIONAL SUPPORTING

DOCUMENTS FOR REFUND MUST BE WITHIN THE 2-YEAR PRESCRIPTIVE
PERIOD. INACTION, WHICH IS TANTAMOUNT TO DENIAL, BY THE CIR IN CASES
INVOLVING REFUND ARISES AFTER THE LAPSE OF THE 120 DAY PERIOD. The
receipt of a “Letter” issued by the CIR is not the decision contemplated by the law. In
addition, the charter of the CTA expressly provides that if the commissioner fails to
decide within the 120-day period, such action shall be deemed a denial and can take
the claim for refund to the CTA for review. There is no option on the part of the taxpayer
to wait the decision after the lapse of 120-day period.
 Maxima Machineries, Inc. v. CIR,
CTA Case No. 9358
March 11, 2019

Case Digest No. 31 of Lucky O. Javellana

IN CLAIMING EXCESS OR UNUTILIZED INPUT VAT FROM ZERO-RATED

TRANSACTIONS, IT IS THE EXCESS OVER THE OUTPUT VAT WHICH SHOULD BE
REFUNDED TO THE TAXPAYER OR CREDITED AGAINST OTHER INTERNAL
REVENUE TAXES. Hence, it is important for the taxpayer to prove that it has enough
prior year's excess input vat credits to cover its output vat liability for the current taxable
year.

Hinatuan Mining Corporation v. CIR,

CTA Case No. 9287
March 6, 2019

Case Digest No. 32 of Lucky O. Javellana

FACTS:

In the present case, records show that petitioner was issued a Certification47 by the
BOI attesting to the fact that petitioner is a BOI registered entity with 100°/o exports.
Under Section 3.4 of RMO No. 9-00, said Certification shall serve as authority for the
local suppliers of petitioner to avail of the benefits of zero-rating on their sales to
petitioner covering the period January 1, 2014 to December 31, 2014.

On the basis of said Certification, no output tax should be shifted by the local suppliers
to petitioner. Thus, it follows that petitioner is not entitled to a refund of input VAT from
the said domestic purchases.

As held by the CTA En Bane in the case of Coral Bay Nickel Corp. vs. Commissioner of
Internal Revenue, citing the Decision of the CTA Second Division, petitioner's recourse
is not against the government but against the seller who shifted to it the output VAT, to
wit:

"To allow petitioner a refund or issuance of tax credit certificate of input VAT on its
domestic purchases of goods and services, where there is no right to demand it against
the government, since its purchases are zero-rated, would unduly enrich petitioner at
the expense of the government. Under the law, no one shall unjustly enrich himself at
the expense of another.”
ISSUE:
Whether or not a BOI-registered entity with 100% exports is not entitled to refund
of input VAT. Otherwise, the taxpayer would unjustly be enriched at the expense
of the government.

RULING:

Said ruling is equally true in the field of taxation, particularly in cases involving claims for
refunds. In instances when petitioner paid input VAT, notwithstanding that under the law
it is subject to VAT at zero percent rate, petitioner's recourse is not against the
government, but against the seller who shifted to it the output VAT.

Revenue Memorandum Circular No. 42-03 is clearly instructive on this matter: 'In the
meantime, the claim for input tax credit by the exporter-buyer should be denied without
prejudice to the claimant's right to seek reimbursement of the VAT paid, if any, from its
supplier.' Pursuant to Revenue Memorandum Circular No. 42- 03, petitioner's recourse
for those purchases of goods and services where it paid VAT is not a claim for refund
against the government, or the issuance of a tax credit certificate; but to seek
reimbursement of the input VAT paid from its suppliers of goods and services."

The afore-quoted ruling was affirmed by the Supreme Court in the case of Coral Bay
Nickel Corporation vs. Commissioner of Internal Revenue', holding that the proper party
to seek the tax refund or credit should be the suppliers, not Coral Bay.

China Banking Corp. v. CTA,

SC GR 146749,
June 10, 2003

Case Digest No. 33 of Lucky O. Javellana

FACTS:
Petitioner paid P12,354,933.00 as gross receipts tax on its income from interests on
loan investments, commissions, services, collection charges, foreign exchange profits
and other operating earnings during the second quarter of 1994. Citing Asian
Bank, Petitioner argued that it was not liable for the gross receipts tax - amounting
to P1,140,623.82 - on the sums withheld by the Bangko Sentral ng Pilipinas as final
withholding tax on its passive interest income in 1994.

Disputing Petitioner’s claim, the Commissioner asserted that Petitioner paid the gross
receipts tax pursuant to Section 119 (now Section 121) of the National Internal Revenue
Code ("Tax Code") and pertinent Bureau of Internal Revenue ("BIR") regulations.
Further it argued that the final withholding tax on a bank’s interest income forms part of
its gross receipts in computing the gross receipts tax. Contending that the term "gross
receipts" means the entire income or receipt, without any deduction.

The Court of Tax Appeals ruled in favor of Petitioner and held that the 20% final
withholding tax on interest income does not form part of CBC’s taxable gross receipts.

ISSUE:
a. WON the 20% final withholding tax on interest income should form part of CBC’s
gross receipts in computing the gross receipts tax on banks.
b. WON there is double taxation
RULING:

a. Yes. The concept of a withholding tax on income obviously and necessarily implies
that the amount of the tax withheld comes from the income earned by the taxpayer.
Since the amount of the tax withheld constitutes income earned by the taxpayer, then
that amount manifestly forms part of the taxpayer’s gross receipts. Because the amount
withheld belongs to the taxpayer, he can transfer its ownership to the government in
payment of his tax liability. The amount withheld indubitably comes from income of the
taxpayer, and thus forms part of his gross receipts.

Actual receipt of interest income is not limited to physical receipt. Actual receipt may
either be physical receipt or constructive receipt. When the depository bank withholds
the final tax to pay the tax liability of the lending bank, there is prior to the withholding a
constructive receipt by the lending bank of the amount withheld. From the amount
constructively received by the lending bank, the depository bank deducts the final
withholding tax and remits it to the government for the account of the lending bank.
Thus, the interest income actually received by the lending bank, both physically and
constructively, is the net interest plus the amount withheld as final tax.

b. No. There is no double taxation when Section 121 of the Tax Code imposes a gross
receipts tax on interest income that is already subjected to the 20% final withholding tax
under Section 27 of the Tax Code. The gross receipts tax is a business tax under Title V
of the Tax Code, while the final withholding tax is an income tax under Title II of the
Code. There is no double taxation if the law imposes two different taxes on the same
income, business or property.
 Republic of the Philippines v. Sunlife Assurance Company of Canada,
G.R. No. 158085,
October 14, 2005

Case Digest No. 34 of Lucky O. Javellana

FACTS:

Sun Life is a mutual life insurance company organized under the laws of Canada. It is
registered and authorized by the SEC and the Insurance Commission to engage in the
business in the Philippines as a mutual life insurance company. It made payments to
the Commissioner of Internal Revenue (CIR) P31.49M and P30M as premium tax and
DST, respectively.

However, Sunlife subsequently filed an administrative claim for tax credits with the CIR
on ground of alleged erroneous payment. This is on the strength of the ruling of the SC
in the case of CIR v. Insular Life holding that mutual life insurance companies are purely
cooperative companies and are exempt from the payment of premium tax and DST.

The CIR, among others, raised the following defenses: 1) failure of Sunlife to register
with the Cooperative Development Authority (CDA), 2) failure to prove that its ownership
was vested to its member; 3) claimed that mutual life insurance companies earn profits
on account of it being subjected to regular corporated income tax under the 1997 Tax
Code.

The CIR failed to act of the claim. The CTA ruled in favor of Sunlife. The CA upheld
CTA’s ruling. The SC affirmed.

ISSUE:

1. Is Sunlife a Cooperative?
2. Is Sunlife’s registration with the CDA a  sine qua
non requirement to be entitled to tax exemption?
3. Is Sunlife exempted from payment of tax on life insurance
premiums and documentary stamp tax?
RULING:

1. YES.

The Tax Code defines a Cooperative as an association “conducted by the members

thereof with the money collected from among themselves and solely for their own
protection and not for profit. The SC held that Sulife squarely falls within this definition.

First, it is managed by its members.

Sunlife has been mutualized or converted from a stock life insurance company to a non-
stock mutual life insurance corporation, in conformance with existing laws. Under its
bylaws, ownership has been vested in its member-policyholders who are entitled to
vote. They also elect the board of trustees, the governing body of a non-stock
corporation.

Second, it is operated with money collected from its members.

Sunlife is composed entirely of members, all premiums obviously came from them. The
member-policyholders were both the “insurers” and the “insured” who contribute via
premiums to create a fund for the payment of the said members’ indemnity and benefit
claims.

Third, it is licensed for the mutual protection of its members, not for the profit of anyone.

2. NO.

First, the Tax Code does not require registration with the CDA.

The Tax Code does not require a mutual life insurance company to register with the
CDA to enjoy exemption from both percentage and documentary stamp taxes. A
provision in Sec. of of Revenue Memorandum Circular (RMC) No. 48-91 requiring the
submission of the Certificate of Registration with the CDA cannot prevail over such lack
of requirement — 1) the said RMC does not apply to Sunlife, and 2) it is a mere
issuance directing all internal revenue officers to publicize a new tax legislation.

Second, the provisions of the Cooperative Code of the Philippines do not apply.
The Cooperative Code was an offshoot of the old law on cooperatives, PD No. 175
signed into law by Pres. Marcos. This law, provides for the registration, regulation and
supervision only of the following cooperatives: 1) barrio associations involved in the
issuance of certificates of land transfer; 2) local or primary cooperatives composed of
natural persons and/or barrio associations; 3) federations composed of cooperatives
that may or may not perform business activities; and 4) unions of cooperatives that did
not perform any business activities. Sunlife does not fall within any of the above.

Under the Cooperative Code, cooperatives registered under PD No. 175 were deemed
registered with CDA. As Sunlife was not required to register under the former, it
followed that it was not required to register under the latter.

Furthermore, only cooperatives to be formed or organized under the Cooperative Code

needed registration with the CDA. Sulife already existed before the passage of the new
law on cooperatives. It was not even required to organize under the Cooperative Code
as it did not operate to serve the same objectives under the new law—particularly on
productivity, marketing and credit extension.

The distinguishing feature of a cooperative enterprise is the mutuality of cooperation

among its member-policyholders united for that purpose. So long as Sunlife meets this
essential feature, it does not even have to use and carry the name of a cooperative to
operate its mutual life insurance business.

Even assuming that it is required to register, such non-registration cannot deprive it of

its tax exemption privilege. Exemption when granted cannot prevail over administrative
convenience.

Third, not even the Insurance Code requires registration with the CDA.

The Cooperative Code does not apply to Sunlife, which already existed as a
cooperative company engaged in mutual life insurance prior to its passage. The statutes
prevailing at the time of Sunlife’s organization and mutualization were the Insurance
Code and the Corporation Code, which imposed no registration requirement with the
CDA.

3. YES.

Having determined that Sunlilfe is a cooperative that does not have to be registered with
the CDA, the SC held that it is entitled to exemption from both premium taxes and DST.

Section 121 of the Tax Code exempts cooperative companies from the 5 percent
percentage tax on insurance premiums. Section 199 also exempts from the DST,
policies of insurance or annuities made or granted by cooperative companies.
Petition denied, assailed decision and resolution
affirmed.

CIR v. Lhuiller,
SC GR 150947,
July 15, 2003

Case Digest No. 35 of Lucky O. Javellana

FACTS:
Revenue Memorandum Orders (RMOs) were issued imposing a 5% lending
investor’s tax on pawnshop. Pursuant to this, the BIR issued an assessment
against Michel J. Lhuillier Pawnshop, Inc. (hereafter Lhuillier) demanding
payment of deficiency percentage tax. Lhuillier filed an administrative protest,
contending, inter alia, that pawnshops are different from lending investors, which
are subject to the 5% percentage tax under the specific provision of the Tax
Code. Its protest having been unacted upon, Lhuillier with the CTA which
declared the RMO’s in question null and void insofar as they classify pawnshops
as lending investors subject to 5% percentage tax.

ISSUE:
1. Are pawnshops included in the term lending investors for the purpose of
imposing the 5% percentage tax under then Section 116 of the NIRC?

2. Whether or not the RMOs in question are valid

RULING:

1. NO. While it is true that pawnshops are engaged in the business of lending money,
they are not considered “lending investors” for the purpose of imposing the 5%
percentage taxes since:
(1) prior to its amendment the NIRC, pawnshops and lending investors were
subjected to different tax treatments;
(2) Congress never intended pawnshops to be treated in the same way as
lending investors, since the amendment of the NIRC treated both tax subjects
differently’
(3) Under the maxim expressio unius est exclusio alterius, the mention of one
thing implies the exclusion of another thing not mentioned, Sec. 116 subjects to
percentage tax dealers in securities and lending investors only.
Whether or not the RMOs in question are valid
2.NO. There are two kinds of administrative issuances: the legislative rule and the
interpretative rule. A legislative rule is in the nature of subordinate legislation, designed
to implement a primary legislation by providing the details thereof. An interpretative rule,
on the other hand, is designed to provide guidelines to the law which the administrative
agency is in charge of enforcing When an administrative rule is merely interpretative in
nature, its applicability needs nothing further than its bare issuance, for it gives no real
consequence more than what the law itself has already prescribed. When, on the other
hand, the administrative rule goes beyond merely providing for the means that can
facilitate or render least cumbersome the implementation of the law but substantially
increases the burden of those governed, it behooves the agency to accord at least to
those directly affected a chance to be heard, and thereafter to be duly informed, before
that new issuance is given the force and effect of law. RMO No. 15-91 and RMC No.
43-91 cannot be viewed simply as implementing rules or corrective measures revoking
in the process the previous rulings of past Commissioners. Specifically, they would have
been amendatory provisions applicable to pawnshops. Without these disputed CIR
issuances, pawnshops would not be liable to pay the 5% percentage tax, considering
that they were not specifically included in Section 116 of the NIRC of 1977, as
amended. In so doing, the CIR did not simply interpret the law. The due observance of
the requirements of notice, hearing, and publication should not have been ignored.

First Planters Pawnshop, Inc. v CIR,

G.R. No. 174134,
July 30, 2008

Case Digest No. 36 of Lucky O. Javellana

FACTS: 
In a Pre-assessment Notice, petitioner was informed by the BIR that it has an existing
tax deficiency on its VAT and Documentary Stamp Tax (DST) liabilities for the year
2000. Petitioner protested the assessment for lack of legal and factual bases.
Petitioner subsequently received a Formal Assessment Notice, directing payment of
VAT deficiency and DST deficiency, inclusive of surcharge and interest.  Petitioner filed
a protest, which was denied by the Acting Regional Director.

Petitioner then filed a petition for review with the CTA, which upheld the deficiency
assessment.  Petitioner filed an MR which was denied.

Petitioner appealed to the CTA En Banc which denied the Petition for Review. Petitioner
sought reconsideration but this was denied by the CTA.. Hence, the present petition for
review under Rule 45 of the ROC.

The core of petitioner’s argument is that it is not a lending investor within the purview of
Section 108(A) of the NIRC, as amended, and therefore not subject to VAT.  Petitioner
also contends that a pawn ticket is not subject to DST because it is not proof of the
pledge transaction, and even assuming that it is so, still, it is not subject to tax since a
DST is levied on the document issued and not on the transaction.

ISSUE: is petitioner in this case liable for:

1. VAT
2. DST

HELD:
1. NO
The determination of petitioner’s tax liability depends on the tax treatment of a
pawnshop business. It was the CTA’s view that the services rendered by pawnshops fall
under the general definition of “sale or exchange of services” under Section 108(A) of
the Tax Code of 1997.
The Court finds that pawnshops should have been treated as non-bank financial
intermediaries from the very beginning, subject to the appropriate taxes provided by
law.
At the time of the disputed assessment, that is, for the year 2000, pawnshops were not
subject to 10% VAT under the general provision on “sale or exchange of services” as
defined under Section 108(A) of the Tax Code of 1997. Instead, due to the specific
nature of its business, pawnshops were then subject to 10% VAT under the category of
non-bank financial intermediaries, as provided in the same Section 108(A), which reads:

SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. –

(A) xx
The phrase “sale or exchange of services” means the performance of all kinds or
services in the Philippines for others for a fee, remuneration or consideration, including
x x x services of banks, non-bank financial intermediaries and finance companies;
and non-life insurance companies (except their crop insurances), including surety,
fidelity, indemnity and bonding companies..xx
Coming now to the issue at hand – Since petitioner is a non-bank financial intermediary,
it is subject to 10% VAT for the tax years 1996 to 2002; however, with the levy,
assessment and collection of VAT from non-bank financial intermediaries being
specifically deferred by law, then petitioner is not liable for VAT during these tax
years.  But with the full implementation of the VAT system on non-bank financial
intermediaries starting January 1, 2003, petitioner is liable for 10% VAT for said tax
year.  And beginning 2004 up to the present, by virtue of R.A. No. 9238, petitioner is no
longer liable for VAT but it is subject to percentage tax on gross receipts from 0% to 5
%, as the case may be.

2.YES
Applying jurisprudence, it was ruled that the subject of DST is not limited to the
document alone.  Pledge, which is an exercise of a privilege to transfer obligations,
rights or properties incident thereto, is also subject to DST, thus –
xx..  the subject of a DST is not limited to the document embodying the enumerated
transactions. A DST is an excise tax on the exercise of a right or privilege to transfer
obligations, rights or properties incident thereto… xx

Pledge is among the privileges, the exercise of which is subject to DST. A pledge may
be defined as an accessory, real and unilateral contract by virtue of which the debtor or
a third person delivers to the creditor or to a third person movable property as security
for the performance of the principal obligation, upon the fulfillment of which the thing
pledged, with all its accessions and accessories, shall be returned to the debtor or to
the third person

True, the law does not consider said ticket as an evidence of security or indebtedness.
However, for purposes of taxation, the same pawn ticket is proof of an exercise of a
taxable privilege of concluding a contract of pledge. At any rate, it is not said ticket
that creates the pawnshop’s obligation to pay DST but the exercise of the privilege to
enter into a contract of pledge. There is therefore no basis in petitioner’s assertion that a
DST is literally a tax on a document and that no tax may be imposed on a pawn ticket.
Also,  Section 195 of the NIRC unqualifiedly subjects all pledges to DST. It states
that “[o]n every x x x pledge x x x there shall be collected a documentary stamp tax x x
x.” It is clear, categorical, and needs no further interpretation or construction.
In the instant case, there is no law specifically and expressly exempting pledges
entered into by pawnshops from the payment of DST. Section 199 of the NIRC
enumerated certain documents which are not subject to stamp tax; but a pawnshop
ticket is not one of them. Hence, petitioner’s nebulous claim that it is not subject to DST
is without merit.

CIR vs. Hard Rock Café,

CTA EB No. 1960,
Oct. 1, 2019

Case Digest No. 37 of Lucky O. Javellana

FACTS: Respondent is a registered domestic corporation with principal office located in

Makati. Its main line of business of serving food and drinks to the public in connection
with the operation of restaurant and catering enterprises, including the provision of
music, disco dancing and other forms of entertainment, to buy, sell and generally deal in
souvenir goods, wares, and merchandise of any and every description related to its
restaurant and catering business, and to do and perform such other acts and things
necessary or incidental to the accomplishment of the foregoing corporate business and
objects in so far as may be allowed by applicable laws and rules and regulations."
On August 6, 2014, respondent received Letter of Authority to examine its books of
accounts and other accounting records for all internal revenue taxes for the period
January 1, 2013 to December 31, 2013. Later on, received a copy of the Preliminary
Assessment Notice (PAN) Part I &II with Details of Discrepancies for CY 2013, imposing
RMC No. 18-2010, which modifies the previous definition of the terms "night and day
clubs" and "cabarets" under Section 2 of RR No. 14-67 was issued by the CIR.

On June 5, 2015, after a month from receiving the FAN issued by the BIR, filed a
protest to the FAN and submitted supporting documents for the protest. However,
petitioner failed to act on the protest. Respondent then file a Petition for Review before
the Court in Division. During the pre-trial the Court in Division admitted respondent’s
Formal Offer of Evidence that their establishment functions are not as a night club or
cabaret. Court ruled in favor of respondent for cancelling and setting aside the alleged
deficiency percentage tax assessment of respondent for CY 2013. Petitioner filed a
petition for review.
ISSUE: Whether respondent is liable to pay amusement tax

RULING: NO. Supreme court ruled that the Court in Division correctly held that RMC's
are actually opinions of the CIR issued in connection with the implementation of the
provisions of the internal revenue law as authorized under Section 4 of the NIRC of
1997, as amended.
Administrative issuances such as RMC No. 18-2010, must be interpreted and
implemented in a manner consistent with statutes, jurisprudence and other rules and
cannot amend the law they merely seek to interpret. Hence, RMC No. 18- 2010 cannot
validly change, expand or widen the scope or meaning of the terms "cabarets" and
"night and day clubs" as defined under the NIRC of 1997, as amended, and in existing
jurisprudence. Likewise, clearly, nothing is said about customers going there for dancing
either with their own partners or with professional hostesses or dancers employed,
engaged or furnished by petitioner.

British American Tobacco v Jose Camacho et al.,

G.R. No. 163583, August 20, 2008;
motion for reconsideration, April 15, 2009

Case Digest No. 38 of Lucky O. Javellana

FACTS:
 June 2001, petitioner British American Tobacco introduced and sold Lucky Strike,
Lucky Strike Lights and Lucky Strike Menthol Lights cigarettes w/ SRP P 9.90/pack -
Initial assessed excise tax: P 8.96/pack (Sec. 145 [c])
February 17, 2003: RR 9-2003: Periodic review every 2 years or earlier of the
current net retail price of new brands and variants thereof for the purpose of the
establishing and updating their tax classification
March 11, 2003: RMO 6-2003: Guidelines and procedures in establishing current net
retail prices of new brands of cigarettes and alcohol products
August 8, 2003: RR 22-2003: Implement the revised tax classification of certain new
brands introduced in the market after January 1, 1997 based on the survey of their
current net retail prices.  This increased the excise tax to P13.44 since the average
net retail price is above P 10/pack.  This cause petitioner to file before the RTC of
Makati a petition for injunction with prayer for issuance of a Temporary Restraining
Order and/or Writ of Preliminary Injunction sought to enjoin the implementation of
Sec. 145 of the NIRC, RR No. 1-97, 9-2003, 22-2003 and 6-2003 on the ground that
they discriminate against new brands of cigarettes in violation of the equal protection
and uniformity provisions  of the Constitution 
RTC: Dismissed
While petitioner's appeal was pending, RA 9334 amending Sec. 145 of the 1997
NIRC among other took effect on January 1, 2005 which in effect increased
petitioners excise tax to P25/pack
Petitioner filed a Motion to Admit attached supplement and a supplement to the
petition for review assailing the constitutionality of RA 9334 and praying a downward
classification of Lucky Strike products at the bracket taxable at P 8.96/pack since
existing brands are still taxed based on their price as of October 1996 even though
they are equal or higher than petitioner's product price.   
Philip Morris Philippines Manufacturing Incorporated, Fortune Tobacco Corp.,
Mighty Corp. and JT International Intervened.  
Fortune Tobacco claimed that the CTA should have the exclusive appellate
jurisdiction over the decision of the BIR in tax disputes

ISSUE:

1. W/N the RTC rather than the CTA has jurisdiction.

2. W/N RA 9334 of the classification freeze provision is unconstitutional for violating
the  equal protection and uniformity provisions  of the Constitution
3. W/N RR Nos. 1-97, 9-2003, 22-2003 and RA 8243 even prior to its amendment
by RA 9334 can authorize the BIR to conduct resurvey and reclassification. 

RULING:
1. Yes. The jurisdiction of the CTA id defined in RA 1125 which confers on the CTA
jurisdiction to resolve tax disputes in general.  BUT does NOT include cases where the
constitutionality of a law or rule is challenged which is a judicial power belonging to
regular courts.

2. No. In Sison Jr. v. Ancheta, the court held that "xxx It suffices then that the laws
operate equally and uniformly on all persons under similar circumstances or that all
persons must be treated in the same manner, the conditions not being different, both in
the privileges conferred and the liabilities imposed.  If the law be looked upon in tems of
burden on charges, those that fall within a class should be treated in the same fashion,
whatever restrictions cast on some in the group equally binding on the rest. xxx"  Thus,
classification if rational in character is allowable. In Lutz v. Araneta: "it is inherent in the
power to tax that a state be free to select the subjects of taxation, and it has been
repeatedly held that 'inequalities which result from a singling out of one particular class
for taxation, or exemption infringe no constitutional limitation"  SC previously held:
"Equality and uniformity in taxation means that all taxable articles or kinds of property of
the same class shall be taxed at the same rate. The taxing power has the authority to
make reasonable and natural classifications for purposes of taxation"

Under the rational basis test, a legislative classification, to survive an equal protection
challenge, must be shown to rationally further a legitimate state interest . The
classifications must be reasonable and rest upon some ground of difference having a
fair and substantial relation to the object of the legislation

A legislative classification that is reasonable does not offend the constitutional guaranty
of the equal protection of the laws. The classification is considered valid and reasonable
provided that: (1) it rests on substantial distinctions; (2) it is germane to the purpose of
the law; (3) it applies, all things being equal, to both present and future conditions; and
(4) it applies equally to all those belonging to the same class.

Moreover, petitioner failed to clearly demonstrate the exact extent of such impact as the
price is not the only factor that affects competition.

3. NO. Unless expressly granted to the BIR, the power to reclassify cigarette brands
remains a prerogative of the legislature which cannot be usurped by the former.  These
are however modified by RA 9334.

Exxonmobil Petroleum and Chemical Holdings, Inc. Philippine Branch v

CIR,
G.R. No.180909,
January 19, 2011

Case Digest No. 39 of Lucky O. Javellana

FACTS: Petitioner Exxon,a foreign corporation duly organized and existing under the
laws of the State of Delaware, United States of America. It is authorized to do business
in the Philippines through its Philippine Branch. Exxon is engaged in the business of
selling petroleum products to domestic and international carriers. In pursuit of its
business, Exxon purchased from Caltex Philippines, Inc. (Caltex) and Petron
Corporation (Petron) Jet A-1 fuel and other petroleum products, the excise taxes on
which were paid for and remitted by both Caltex and Petron. Said taxes, however, were
passed on to Exxon which ultimately shouldered the excise taxes on the fuel and
petroleum products.

Exxon filed administrative claims for refund with the Bureau of Internal Revenue (BIR).
Exxon filed a petition for review with the CTA claiming a refund or tax of excise taxes
paid on Jet A-1 fuel and other petroleum products it sold to international carriers from
November 2001 to June 2002.
During Exxons preparation of evidence, the CIR filed a motion dated January
28,2005 to first resolve the issue of whether or not Exxon was the proper party to ask
for a refund. Exxon filed its opposition to the motion

ISSUE/S:
Whether Petroleum products sold to international carriers and exempt entities or
agencies are exempt from the coverage of excise taxes.
Whether or not petitioner is the proper party to ask for refund?

RULING: Excise taxes are imposed under Title VI of the NIRC. They apply to specific
goods manufactured or produced in the Philippines for domestic sale or consumption or
for any other disposition, and to those that are imported. In effect, these taxes are
imposed when two conditions concur: first, that the articles subject to tax belong to any
of the categories of goods enumerated in Title VI of the NIRC; and second, that said
articles are for domestic sale or consumption, excluding those that are actually
exported. There are, however, certain exemptions to the coverage of excise taxes, such
as petroleum products sold to international carriers and exempt entities or agencies.

Respondent CIR, posits that Exxon is not the proper party to seek a refund of excise
taxes paid on the petroleum products. In so arguing, the CIR states that excise taxes
are indirect taxes, the liability for payment of which falls on one person, but the burden
of payment may be shifted to another. Here, the sellers of the petroleum products or Jet
A-1 fuel subject to excise tax are Petron and Caltex, while Exxon was the buyer to
whom the burden of paying excise tax was shifted. While the impact or burden of
taxation falls on Exxon, as the tax is shifted to it as part of the purchase price, the
persons statutorily liable to pay the tax are Petron and Caltex. As Exxon is not the
taxpayer primarily liable to pay, and not exempted from paying, excise tax, it is not the
proper party to claim for the refund of excise taxes paid.
 CIR v. Pilipinas Shell Petroleum Corporation,
G.R. No.188497
April 23, 2012

Case Digest No. 40 of Lucky O. Javellana

FACTS: Respondent is engaged in the business of processing, treating and refining
petroleum for the purpose of producing marketable products and the subsequent sale
thereof. On July 18, 2002, respondent filed with the Large Taxpayers Audit &
Investigation Division II of the Bureau of Internal Revenue (BIR) a formal claim for
refund or tax credit in the total amount of P 28,064,925.15, representing excise taxes it
allegedly paid on sales and deliveries of gas and fuel oils to various international
carriers during the period October to December 2001. Subsequently, on October 21,
2002, a similar claim for refund or tax credit was filed by respondent with the BIR
covering the period January to March 2002 in the amount of P 41,614,827.99. Again,
on July 3, 2003, respondent filed another formal claim for refund or tax credit in the
amount of P30,652,890.55 covering deliveries from April to June 2002.

Since no action was taken by the petitioner on its claims, respondent filed petitions for
review before the CTA on September 19, 2003 and December 23, 2003. In its decision
on the consolidated cases, the CTA’s First Division ruled that respondent is entitled to
the refund of excise taxes in the reduced amount of P95,014,283.00. Petitioner moved
to reconsider but was denied by the CTA First Division. Petitioner thus case to the CTA
En Banc which also upheld the ruling of the First Division. Petitioner’s motion for
reconsideration was likewise denied. Hence, this petition

ISSUE: Whether oil companies which sold such petroleum products to international
carriers are not entitled to a refund of excise taxes previously paid on the goods.
RULING: 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;

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.

CIR vs Pilipinas Shell Petroleum Corp

GR 188497
Feb 19, 2014

Case Digest No. 41 of Lucky O. Javellana

FACTS:
Pilipinas Shell files a claim for refund for the excise taxes it has paid from selling
petroleum products to international carriers. It claims that Sec. 135 of the Tax Code
exempts imposition of excise tax on petroleum products from point of production until its
removal from the same. If it will apply, Pilipinas Shell says that it will greatly affect the
domestic oil industry since it gives them a burden contrary to the state’s policy
protecting the industry itself. It also asserts that the imposition of said tax is contrary to
international laws to which the PH is a signatory.

ISSUE: Whether Pilipinas Shell is entitled to a refund?

RULING:
Yes. The term "excise taxes" was used and defined as a tax on property
applicable "to goods manufactured or produced in the Philippines and to things
imported." It has two kinds: first, "specific 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 specified value of the goods. A tax is
not excise where it does not subject directly the produce or goods to tax but indirectly as
an incident to, or in connection with, the business to be taxed. As already held, 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. Further, it has been 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. There can also
be no violation of any international treaty because the avowed purpose of a tax
exemption is always "some public benefit or interest, which the law-making body
considers sufficient to offset the monetary loss entailed in the grant of the exemption."
The exemption from excise tax of aviation fuel purchased by international carriers
for consumption outside the Philippines fulfilled 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.

Justice Bersamin, however, argues that Sec. 135 should not only be construed as what
the majority declares in this case since the shifting of the tax burden by the
manufacturer-sellers is a business prerogative resulting from the collective impact of
market forces.