Diageo v. Commissioner of Internal Revenue
REITERATIONFacts
The Antecedents: Petitioner Diageo Philippines, Inc. (Diageo) purchased raw alcohol from its supplier, which had already paid the excise taxes thereon. Diageo used this raw alcohol to manufacture liquor products that it subsequently exported. Diageo then filed claims for tax refund/credit with the Bureau of Internal Revenue (BIR) for the excise taxes paid by its supplier, invoking Section 130(D) of the National Internal Revenue Code of 1997 (Tax Code). Procedural History: The Commissioner of Internal Revenue (CIR) questioned Diageo's legal personality to file the claim, arguing that Diageo was not the one that paid the excise taxes. The Court of Tax Appeals (CTA) Second Division dismissed Diageo's petition, ruling that Diageo was not the real party in interest as the liability for the excise tax remained with the manufacturer or seller. The CTA En Banc affirmed this ruling, holding that the right to a refund or tax credit is available only to persons primarily and legally liable to pay such taxes, and Diageo failed to prove it actually paid the excise taxes as the manufacturer-exporter. The Petition: Diageo filed a petition for review, contending that it was a real party in interest entitled to the refund or tax credit because Section 130(D) applies to every exporter who complies with the conditions of proof of exportation and receipt of foreign exchange payment, not just manufacturers/producers-exporters.
Issue(s)
Whether Diageo has the legal personality to file a claim for refund or tax credit for the excise taxes paid by its supplier on the raw alcohol it purchased and used in the manufacture of its exported goods. Whether Section 130(D) of the Tax Code grants the tax privilege to every exporter, regardless of whether they were the ones who paid the excise tax on the raw materials used.
Ruling
The petition is without merit. The assailed CTA En Banc Decision is affirmed.
Ratio Decidendi
On the issue of legal personality to claim refund/tax credit for excise taxes on exported goods: The Court held that excise taxes are indirect taxes. While the burden of the tax may be passed on to the purchaser, the liability to pay the tax remains with the statutory taxpayer, which is the person on whom the tax is imposed by law and who paid the same. In this case, Diageo's supplier, who imported the raw alcohol and paid the excise taxes, is the statutory taxpayer. Section 130(D) of the Tax Code states that "any excise tax paid thereon shall be credited or refunded." This requires that the claimant be the same person who paid the excise tax. The Court reiterated its ruling in Silkair (Singapore) Pte, Ltd. v. Commissioner of Internal Revenue that the proper party to question or seek a refund of an indirect tax is the statutory taxpayer. Therefore, Diageo, not being the statutory taxpayer, does not have the legal personality to claim the refund or tax credit. On the interpretation of Section 130(D) of the Tax Code: The Court clarified that Section 130(D) does not grant the tax privilege to any exporter irrespective of who paid the excise tax. The provision requires that "any excise tax paid thereon shall be credited or refunded." This phrase necessitates that the claimant must be the one who actually paid the excise tax. While Diageo purchased the raw alcohol and exported the manufactured products, it did not pay the excise tax on the raw alcohol itself; its supplier did. The excise taxes included in the purchase price of the raw alcohol were no longer in the nature of a tax but had become part of the cost of goods sold. Unlike the Value Added Tax (VAT) law, which has provisions for tax credit for subsequent purchasers, the Tax Code does not provide a similar mechanism for excise taxes, allowing non-statutory taxpayers like Diageo to claim a refund or credit. Statutes granting tax exemptions are strictly construed against the taxpayer, and Diageo failed to meet the burden of proof to be covered by the exemption under Section 130(D).
Main Doctrine
The statutory taxpayer, i.e., the person on whom the excise tax is imposed by law and who paid the same, is the proper party to claim a refund or tax credit for excise taxes paid on goods actually exported, even if the burden of the tax has been shifted to another person.