THE Supreme Court (SC) has upheld a decision of the Court of Tax Appeals (CTA) ordering the Bureau of Internal Revenue (BIR) to refund to the Philippine Airlines (PAL) the amount of more than P2 million representing its erroneously paid excise tax in 2008.
In its decision, the SC’s Second Division denied the petition for review on certiorari filed by the BIR as it affirmed the assailed decision and resolution of the CTA en banc, dated April 30, 2014 and December 16, 2014, respectively.
Presidential Decree (PD) 1590, or An Act Granting a New Franchise to Philippine Airlines Inc. to Establish, Operate and Maintain Air Transport Services in the Philippines and Other Countries” vis-a-vis Republic Act (RA) 9334, or An Act Increasing the Excise Tax Rates Imposed on Alcohol and Tobacco Products, Amending for the Purpose Sections 131, 141, 142, 145 and 228 of the National Internal Revenue Code of 1997.”
It was enacted on June 11, 1978, while RA 9334 took effect on January 1, 2005.
Prior to the effectivity of RA 9334, RA 8424, or the Tax Reform Act of 1997, was enacted and took effect on January 1, 1998, thereby amending the National Internal Revenue Code (NIRC).
Provision of any special or general law to the contrary notwithstanding, the importation of cigars and cigarettes, distilled spirits and wines into the Philippines, even if destined for tax and duty free shops, shall be subject to all applicable taxes, duties and charges, including excise taxes due thereon.
Thereafter, PAL’s importations of alcohol and tobacco products, which were intended for use in its commissary supplies during international flights, were subjected to excise taxes.
For these imported articles, which arrived in Manila between October 3, 2007 and December 22, 2007, PAL was assessed excise taxes amounting to a total of P6,329,735.21.
But the airline company claimed that it erroneously paid excise tax worth P2,094,985.21 on September 5, 2008.
On March 5, 2009, PAL filed an administrative claim for refund of the above excise taxes it paid with the Bureau of Internal Revenue (BIR) contending that it is entitled to tax privileges under Section 13 of PD 1590.
The CTA Second Division found that PAL was able to sufficiently prove its exemption from the payment of excise taxes pertaining to its importation of alcoholic products and since it already paid the disputed excise taxes on the subject importation, it is entitled to refund.
The tax court, however, ruled that with respect to its subject importation of tobacco products, PAL failed to discharge its burden of proving that such products were not locally available in reasonable quantity, quality or price, in accordance with the requirements of the law.
Thus, it is not entitled to refund for the excise taxes paid on such importation.
The parties filed separate motions for reconsideration but these were all denied by the CTA Second Division in its resolution dated June 4, 2013.
On April 30, 2014, the CTA en banc rendered a decision dismissing the consolidated petitions and affirming in toto the assailed decision of the CTA Second Division, as well as their respective motions for reconsideration, until the case reached the High Court.
In junking BIR’s petition, the SC held that the franchise of PAL remains “the governing law on its exemption from taxes.”
“Its payment of either basic corporate income tax or franchise tax – whichever is lower – shall be in lieu of all other taxes, duties, royalties, registrations, licenses and other fees and charges, except only real property tax,” it said. JOMAR CANLAS