G.R. No. 211303 - Separate Concurring Opinion

G.R. No. 211303, June 15, 2021,
♦ Decision, Perlas-Bernabe, [J]
♦ Dissenting Opinion, Leonen, [J]
♦ Concurring Opinion, Caguioa, [J]
♦ Dissenting Opinion, Lazaro-Javier, [J]
♦ Separate Concurring Opinion, Inting, [J]
♦ Dissenting Opinion, Zalameda, [J]

PILIPINAS SHELL PETROLEUM CORPORATION, PETITIONER, VS. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

It is well within the Court's power of judicial review to revisit and reevaluate doctrines and principles previously established in jurisprudence. On occasion, We modify or reverse past rulings to reflect a more accurate interpretation of laws, more reasonable and just appreciation of the antecedent facts, or, ultimately, case law that better transcends the test of time.

While there have been many instances prior where the Court aptly chose to abandon long settled jurisprudence, there is no reason for Us to do so in the present case.

In the case at bar, the ponencia sets aside the denial of the Court of Tax Appeals (CTA) on Shell's application for refund or issuance of tax credit certificate (TCT) for excise taxes paid o" Jet A-1 fuel sold to international carriers amounting to P91,655 658.98. Relying on Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corp. (2012 Pilipinas Shell Case),1 the tax court held that Pilipinas Shell Petroleum Corporation (Shell), a manufacturer or importer of petroleum products, is not entitled to the exemption tinder Section 135(a) of the Tax Reform Act of 1997 (Tax Code).2

I join in the ponencia in partially granting the present petition. Our ruling is in consonance with the Court's earlier pronouncements in Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corp. (2014 Pilipinas Shell Resolution),3 and Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corp. (2016 Pilipinas Shell Case).4

It is settled that "the essence of a tax exemption is the immunity or freedom from a change or burden to which others are subjected. It is a waiver of the government's right to collect the amounts that would have been collectible under our tax laws."5 Thus, when the law speaks of a tax exemption, it must be understood as a grant in favor of the person liable to pay the tax.

Excise tax liability attaches to the petroleum product itself "as soon as they are in existence."6 The relevant Tax Code provisions that determine the person liable therefor are as follows.

Based on these provisions, the incidence of tax on petroleum products is the excisable article's coming into existence,8 that is, when fuel is manufactured or imported. As the party who brought the article into existence, the manufacturer/importer shall be liable for the excise tax arising therefrom.

Aside from the duty of filing the tax return and payment of the correct amount of tax, the law and applicable tax regulations also require the manufacturer/importer to keep/preserve records and documents,9 provide metering devices,10 properly label and package the articles,11 maintain bonded warehouses,12 and post a bond in relation to the fuel's production/importation and subsequent disposition.13 Stated differently, the manufacturer/importer not only pays the excise tax but also assumes the risk of assessment and penalty associated with compliance with strict administrative requirements.14

As the party statutorily liable to pay the tax and required to comply with administrative tax regulations on fuel production/importation, the manufacturer/importer is entitled to avail himself of the exemption under Section 135 of the Tax Code, viz.:

While Section 135 speaks of the subsequent sale of manufactured/imported fuel to international carriers and tax-exempt entities/agencies, the sale cannot be construed as a transfer of the benefit of exemption.

That the manufacturer/importer charges a higher price in selling fuel does not alter his status as the statutory taxpayer. Verily, at the point of sale, the burden of taxation shifts to the end-consumer. However, the shift—a fundamental characteristic of indirect taxes—does not remove the incidence of taxation from the point of product ion/importation.

To be sure, the law does not impose excise taxes on the 1 of imported fuel. Unlike value added tax (VAT) on the sale of goods/properties,15 excise tax is levied not on the subsequent sale, transfer, disposition, or transfer of the petroleum product. Rather, it is an exaction directly resulting from the production and importation of fuel, attaching to the article itself. Section 135(a) refers to the subsequent sale to an international carrier, not as a separate taxable transaction, but rather a resolutory condition, which, once fulfilled, extinguishes the liability to pay the excise tax. In turn, it entitles the manufacturer/importer to exemption from excise tax due on the fuel manufactured/imported.

Consequently, the amount passed on to the end-consumer is the selling price of fuel, not the excise tax itself.16 He shall record the purchase price, which includes the excise tax, wholly as an expense. Again, this is different from the VAT system, wherein the VAT-registered purchaser generally records the VAT passed on oy the seller as input VAT, an asset.

Besides, the act of setting a price to include mark-up is a common and sound business strategy17 to allow the manufacturer/importer-seller: (1) to defray costs of inventory, including excise taxes paid; and, obviously, (2) to earn a profit.

Certainly, a tax immunity would lose its meaning if we insist that it is available only to a person who, in the first place, has no obligation to pay the tax due on the subject article/transaction. It can only be enjoyed in its truest sense by the person who is liable for the tax and wishes to be immune from therefrom.18

Notably, Revenue Regulations No. (RR) 3-200819 explains the manner by which the exemption under Section 135 may be availed of, to wit:

As a general rule, all withdrawals of excisable articles from their place of production must be subject to excise tax. The grant of an outright tax exemption is discouraged because it deprives the Bureau of Internal Revenue (BIR) the opportunity to evaluate thoroughly the factual and legal bases of the tax relief sought. It is for these reasons that remedies after payment of the tax is more favored by the government because this option will give more protection to revenue collections without diminishing the impact of the tax relief to which the taxpayers are entitled. These remedies may either come in the form of: (1) a claim for excise tax credit/refund pursuant to Sec ions 204 and 229 of the NIRC; or (2) a product replenishment, the mechanics of which is provided in these regulations.

This "refund mechanism" allows the subsequent filing of a claim/refund under the presumption that the correct excise tax had been previously paid. A subsequent refund/credit is clearly for the benefit of the party who previously paid the excise tax on fuel—the manufacturer/importer. It could not have been granted in favor of an end-consumer because, not having paid any tax, nothing can be refunded to him.

For purposes of facilitating the processing of subsequent claims for product replenishments, tax credit or refund where the above inventory of under-bond articles was removed for direct exportation or sale/delivery to international carriers or to tax-exempt entity/agency, the payment of the excise tax due on the said inventory of under-bond articles shall be made using BIR Form No. 0605 with the phrase "NOTE: THIS EXCISE TAX PAYMENT IS SUBJECT TO SUBSEQUENT PRODUCT REPLENISHMENT, TAX CREDIT OR REFUND" clearly printed on the face of the said form. (Emphasis supplied.)

In other words, once the excise tax is paid, the manufacturer/importer's return is marked to indicate that the payment therein is subject to refund/credit. This is an express recognition of the manufacturer/importer's entitlement to a refund under Section 135(a) for excise taxes paid on fuel sold to international carriers.

That the manufacturer/importer, not the international carrier-purchaser, is the proper party to claim the refund under Section 135(a) was precisely the ruling in the Silkair (Singapore) PTE. Ltd. v. Commissioner of Internal Revenue (Silkair).20 The Court relied on Silkair in the subsequent Pilipinas Shell and Chevron cases. The Court's consistency in these rulings cannot be solely attributed to stare decisis. I humbly submit that choosing to uphold and recognize this long line of jurisprudence as good case law is not "blindly adhering to precedent" inasmuch as these cases are founded on a sound and holistic interpretation of applicable statutes, rules, and regulations. Thus, We need not disturb them.

In sum, as the statutory taxpayer of excise taxes due on imported fuel/petroleum products, the importer may avail himself of the exemption under Section 135(a), provided the following requisites concur: first, the claimant produced/imported fuel.21 Second, he stored the fuel in internal-revenue bonded storage tank.22 Third, he paid the corresponding excise tax23 due on the fuel.24 Fourth, he sold the fuel to "[i]nternational carriers of Philippine or foreign registry on their use or consumption outside the Philippines."25 Fifth, he labeled or packaged the fuel sold in accordance with regulatory requirements.26 Sixth, if his sales to international carriers consist of both manufactured and imported fuel, he shall file separate claims for each type of excisable article.27

Parenthetically, I observe that the assailed CTA rulings were promulgated at a time when the 2012 Pilipinas Shell Case was still prevailing. Significantly, the Court reconsidered this ruling in the 2014 Pilipinas Shell Resolution. Since then, the tax court abandoned its former view and consistently applied the 2014 Pilipinas Shell Resolution in its decisions thereafter, as may be observed from its rulings subject of the 2016 Pilipinas Shell Case and Chevron Case. Remanding the present case to the CTA is only proper to ensure that the natters are dealt upon according to prevailing jurisprudence.