94 CIR v. Shell

CIR v.
Pilipinas Shell
FACTS
 Shell is engaged in the business of processing, treating and refining petroleum for
the purpose of producing marketable products and the subsequent sale thereof.
Respondent filed several formal claims with the Large Taxpayers Audit &
Investigation Division II of the BIR on the following dates:
o On July 2002 for refund or tax credit in the total amount of P28,064,925.15,
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.
o On October 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 P41,614,827.99.
o On July 2003, a formal claim for refund or tax credit in the amount
of P30,652,890.55 covering deliveries from April to June 2002
 Respondent claims it is entitled to a tax refund because those petroleum products
it sold to international carriers are not subject to excise tax, hence the excise
taxes it paid upon withdrawal of those products were erroneously or illegally
collected and should not have been paid in the first place. Since the excise tax
exemption attached to the petroleum products themselves, the manufacturer or
producer is under no duty to pay the excise tax thereon.
 Since no action was taken by the petitioner on its claims, respondent filed petitions
for review before the CTA on September and December of 2003.
o CTA: entitled to the refund of excise taxes in the reduced amount
of P95,014,283.00. They relied on a previous ruling (Shell v. CIR) which also
granted the claim for refund. Appeal denied. MTA denied.
ISSUE + RULING
Is Shell, as manufacturer or producer of petroleum products, exempt from the payment of
excise tax on such petroleum products it sold to international carriers? NO.
 Excise taxes, as the term is used in the NIRC, refer to taxes applicable to certain
specified goods or articles manufactured or produced in the Philippines for
domestic sales or consumption or for any other disposition and to things imported
into the Philippines. These taxes are imposed in addition to the value-added tax
(VAT). As to petroleum products, Sec. 148 provides that excise taxes attach to the
following refined and manufactured mineral oils and motor fuels as soon as they
are in existence.
 Revenue Regulations 8-96 (“Excise Taxation of Petroleum Products”) which
provides: “SEC. 4. Time and Manner of Payment of Excise Tax on Petroleum
Products, Non-Metallic Minerals and Indigenous Petroleum – I. Petroleum
Products x x x x a) On locally manufactured petroleum products: The
specific tax on petroleum products locally manufactured or produced in
the Philippines shall be paid by the manufacturer, producer, owner or person having
possession of the same, and such tax shall be paid within fifteen (15) days from
date of removal from the place of production.
o Thus, if an airline company purchased jet fuel from an unregistered supplier
who could not present proof of payment of specific tax, the company is liable
to pay the specific tax on the date of purchase. Since the excise tax must be
paid upon withdrawal from the place of production, respondent cannot
anchor its claim for refund on the theory that the excise taxes due thereon
should not have been collected or paid in the first place.
 Sec. 229 of the NIRC allows the recovery of taxes erroneously or illegally
collected. An “erroneous or illegal tax” is defined as one levied without statutory
authority, or upon property not subject to taxation or by some officer having no
authority to levy the tax, or one which is some other similar respect is illegal.
o Shell’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.
 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.

94 CIR v. Shell

Uploaded by

Copyright:

Available Formats

94 CIR v. Shell

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

94 CIR v. Shell

Uploaded by

Copyright:

Available Formats

CIR v.

You might also like