Philippine Airlines vs. Cir

PHILIPPINE AIRLINES, INC. VS.
COMMISSIONER OF INTERNAL REVENUE

FACTS:
For the period July 24 to 28, 2004, Caltex sold 804,370 liters of imported Jet A-1 fuel to
PAL for the latters domestic operations. Consequently, on July 26, 27, 28 and 29,
2004, Caltex electronically filed with the Bureau of Internal Revenue (BIR) its Excise Tax
Returns for Petroleum Products, declaring the amounts of P1,232,798.80, P686,767.10,
P623,422.90 and P433,904.10, respectively, or a total amount of P2,975,892.90, as
excise taxes due thereon On October 29, 2004, PAL, through a letter-request dated
October 15, 2004 addressed to respondent Commissioner of Internal Revenue (CIR),
sought a refund of the excise taxes passed on to it by Caltex. It hinged its tax refund
claim on its operating franchise, i.e., Presidential Decree No. 1590
issued on June 11, 1978 (PALs franchise), which conferred upon it certain tax
exemption privileges on its purchase and/or importation of aviation gas, fuel and oil,
including those which are passed on to it by the seller and/or importer thereof. Further,
PAL asserted that it had the legal personality to file the aforesaid tax refund claim.
Due to the CIRs inaction, PAL filed a Petition for Review with the CTA on July 25,
2006.
In its Answer, the CIR averred that since the excise taxes were paid by Caltex, PAL had
no cause of action. The CTA Second Division denied PAL s petition on the ground that
only a statutory taxpayer (referring to Caltex in this case) may seek a refund of the
excise taxes it paid. It added that even if the tax burden was shifted to PAL, the latter
cannot be deemed a statutory taxpayer. It further ruled that PAL s claim for refund
should be denied altogether on account of Letter of Instruction No. 1483 (LOI 1483)
which already withdrew the tax exemption privileges previously granted to PAL on its
purchase of domestic petroleum products, of which the transaction between PAL and
Caltex was characterized. PAL moved for reconsideration, but the same was denied in a
Resolution dated January 14, 2010, prompting it to elevate the matter to the CTA
En Banc , which affirmed the ruling of the CTA 2ndDivision.
Aggrieved, PAL filed a motion for reconsideration which was, however, denied in a
Resolution dated September 16, 2011, hence, the instant petition.
ISSUES:
1. Whether or not PAL has the legal personality to file a claim for refund of the passed
on excise taxes;
2. Whether or not the sale of imported aviation fuel by Caltex to PAL is covered by LOI
1483 which withdrew the tax exemption privileges of PAL on its purchases of domestic
petroleum products for use in its domestic operations; and
3. Whether or not PAL has sufficiently proved its entitlement to refund.
HELD:
The court held that the petition is meritorious. PALs legal personality to file a claim for
refund of excise taxes.
The Court ruled it had the legal personality to file a claim for refund Section 204(c) of
the NIRC states that it is the statutory taxpayer which has the legal personality to file a
claim for refund. Accordingly, in cases involving excise tax exemptions on petroleum
products under Section 135 of the NIRC, the Court has consistently held that it is the
statutory taxpayer who is entitled to claim a tax refund based thereon and not the party
who merely bears its economic burden.
Coverage of LOI 1483. LOI 1483 amended PALs franchise by withdrawing the tax
exemption privilege granted to PAL on its purchase of domestic petroleum products for
use in its domestic operations. In this case, records disclose that Caltex imported
aviation fuel from abroad and merely re-sold the same to PAL, tacking the amount of
excise taxes it paid or would be liable to pay to the government on to the purchase
price. Evidently, the said petroleum products are in the nature of things imported and
thus, beyond the coverage of LOI 1483 as previously discussed. As such, considering
the subsistence of PALs tax exemption privileges over the imported goods subject of
this case, PAL is allowed to claim a tax refund on the excise taxes imposed and due
thereon.
PALs entitlement to refund. It is hornbook principle that the Court is not a trier of facts
and often, remands cases to the lower courts for the determination of questions of such
character. However, when the trial court had already received all the evidence of the
parties, the Court may resolve the case on the merits instead of remanding them in the
interest of expediency and to better serve the ends of justice. Applying these principles,
the Court finds that the evidence on record shows that PAL was able to sufficiently
prove its entitlement to the subject tax refund. Thus, finding that PAL has sufficiently
proved its entitlement to a tax refund of the excise taxes subject of this case, the Court
hereby grants its petition and consequently, annuls the assailed CTA resolutions

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PHILIPPINE AIRLINES, INC. VS.

COMMISSIONER OF INTERNAL REVENUE

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