Petron wins P44-million tax case

THE Court of Tax Appeals (CTA) has upheld Petron Corp.’s refund claim of nearly P44 million for excise taxes mistakenly paid on its importation of alkylate.

The tax tribunal en banc denied the Bureau of Internal Revenue’s (BIR) petition, citing the Supreme Court ruling in Petron Corp. v. Commissioner of Internal Revenue (G.R. No. 255961, March 20, 2023), which is now final and executory.

Alkylate is not listed as an excisable article under Section 148(e) of the National Internal Revenue Code (NIRC) nor can it be classified as “other similar products of distillation,” since it is not a direct product of distillation.

“As such, there is no other recourse but for the Court En Banc to order the refund to respondent (Petron) of the total amount of Php43,912,370.00 representing erroneously paid excise tax upon the importation by respondent of alkylate, a non-excisable item,” Justice Maria Rowena Modesto-San Pedro wrote in a 21-page ruling promulgated on Aug. 1.

The tax court quoted the Supreme Court’s decision, emphasizing that the doctrine of strict construction of tax laws in favor of the taxpayer applies, as Petron’s refund claim is based on the absence of a legal basis for the tax, not on a tax exemption.

“The Supreme Court has already ruled that alkylate is not subject to excise tax under Section 148(e) of the NIRC,” the CTA en banc added.

“The Supreme Court ruled that respondent (Petron) is entitled to a refund of excise tax it had paid in connection with its importation of alkylate on various dates from July 22, 2012, to November 6, 2012, considering that there is no law subjecting alkylate to excise tax, as Section 148(e) of the NIRC does not subject alkylate to excise tax.”

The case before the CTA en banc originated from the Bureau of Customs’ (BoC) implementation of a BIR letter dated June 29, 2012.

On July 18, 2012, the BoC issued Customs Memorandum Circular No. 164-2012 implementing the BIR letter, which stated that alkylate is subject to excise tax under Section 148(e) of the NIRC, classifying it as a “product of distillation similar to that of naphtha.”

Following this, Petron imported 9,774,282 liters of alkylate in October 2016 and January 2017. These importations were subjected to an excise tax of P4.35 per liter, totaling P43,912,370, on the basis that alkylate was a product of distillation.

Petron filed an administrative claim for a refund of these excise taxes with the BIR Excise Large Taxpayers Audit Division II on Oct. 8, 2018.

Due to the BIR’s inaction and the approaching two-year prescriptive period, Petron filed a Petition for Review with the CTA in Division on Oct. 12, 2018. — Chloe Mari A. Hufana

Petron wins P44-million tax case
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