Tax court rejects Petron appeal in P219-M refund case

FILE: Court of Tax Appeals of the Philippines located at Agham Road, National Government Center, Diliman, Quezon City in Metro Manila. (Photo By Judgefloro – Own work, Public Domain)

MANILA – The Court of Tax Appeals (CTA) has denied an appeal filed by Petron Corporation seeking a refund of over PHP219.12 million in excise tax collected by the Bureau of Internal Revenue for its imported shipments in 2012 of alkylate, a blending component in gasoline.

In its 21-page decision on July 22, the tax court en banc affirmed an earlier ruling by its special second division and dismissed Petron’s claims that it should not have been asked to pay excise taxes since the intention of tax laws is to tax motor fuels only once as finished products.

Petron had argued that the imposition of excise tax on imported alkylate when the gasoline to which the alkylate had been blended is also subjected to the same excise tax is tantamount to taxing the same product twice and is highly oppressive, arbitrary and confiscatory.

Ruling otherwise, the tax court said as a product of distillation similar to that of naphtha, alkylate is subject to excise tax under tax laws.

“The right of taxation will not be surrendered, except in words to plain to be mistaken. The reason is that the State cannot strip itself of this highest attribute of sovereignty — its most essential power of taxation — by vague or ambiguous language,” the CTA said. “Since tax refunds are in the nature of tax exemptions, these are deemed to be construed against the person or entity claiming the exemption.”

Section 148(e) of the National Internal Revenue Code of 1997 states that naphtha, regular gasoline, and other similar products of distillation as well as the by-products of processing of naphtha are subject to excise tax as soon as they are produced.

Petron was claiming a refund of the excise tax it paid from September 2012 to December 2012 worth PHP148.55 million and from February to July 2013 worth PHP70.61 million.