Chevron Philippines v. Commissioner of Internal Revenue
REVERSALFacts
The Antecedents: Chevron Philippines, Inc. (Chevron) sold and delivered petroleum products to the Clark Development Corporation (CDC) between August and December 2007. Chevron did not pass on the excise taxes it paid on the importation of these petroleum products to CDC, which is an entity legally exempt from direct and indirect taxes. Consequently, Chevron filed an administrative claim for a tax refund or credit of P6,542,400.00 on June 26, 2009. Procedural History: As the Commissioner of Internal Revenue (CIR) did not act on its claim, Chevron elevated its case to the Court of Tax Appeals (CTA) on June 29, 2009. The CTA First Division denied Chevron's claim on July 31, 2012, and its subsequent motion for reconsideration. The CTA En Banc affirmed this decision on September 30, 2013, holding that Section 135(c) of the National Internal Revenue Code (NIRC) did not explicitly exempt Chevron as the seller. Chevron's motion for reconsideration with the CTA En Banc was also denied. The Supreme Court's Second Division initially denied Chevron's petition for review on certiorari on March 19, 2014, for failure to show reversible error. The Petition: Chevron filed a Motion for Reconsideration with the Supreme Court, arguing that its claim should be granted because the Court's earlier ruling in Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corporation, which formed the basis for the CTA's denial, had been reversed on reconsideration. Chevron contended that the excise taxes paid were illegal and erroneous upon sale to the tax-exempt CDC, and thus refundable or creditable under Section 204 of the NIRC, as the exemption under Section 135(c) of the NIRC should be construed in favor of the petroleum products themselves.
Issue(s)
Whether Chevron was entitled to a tax refund or tax credit for the excise taxes paid on the importation of petroleum products sold to Clark Development Corporation (CDC) in 2007.
Ruling
The Court GRANTS petitioner Chevron Philippines, Inc.'s Motion for Reconsideration. It DIRECTS the respondent Commissioner of Internal Revenue to refund the excise taxes in the amount of P6,542,400.00 paid on the petroleum products sold to Clark Development Corporation in the period from August 2007 to December 2007, or to issue a tax credit certificate of that amount to Chevron Philippines, Inc.
Ratio Decidendi
On the entitlement to tax refund or credit for excise taxes paid on petroleum products sold to exempt entities: Chevron was entitled to the tax refund or tax credit for the excise taxes it paid on the importation of petroleum products that were subsequently sold to Clark Development Corporation (CDC). The Court clarified that excise tax is essentially a tax on property. Therefore, any exemption granted under Section 135 of the National Internal Revenue Code (NIRC) must be construed in favor of the property itself, which in this case are the petroleum products. Since CDC is an entity exempt by law from direct and indirect taxes under Section 24 of Republic Act No. 7916, as amended, the petroleum products sold to it were also exempt from excise tax. Although Chevron, as the importer and statutory taxpayer, was initially liable for and paid the excise taxes upon importation, these payments became illegal and erroneous upon the sale of the petroleum products to CDC. Section 204 of the NIRC explicitly allows for the credit or refund of taxes erroneously or illegally received. The Court distinguished this from cases where the statutory taxpayer is not entitled to a refund if they pass on the tax burden. However, in this instance, Chevron did not pass on the excise taxes to CDC, which was legally exempt from such indirect taxes. Therefore, Chevron, as the statutory taxpayer who bore the economic burden of the tax, was entitled to claim the refund or credit.
Main Doctrine
Excise taxes paid on petroleum products sold to entities exempt from direct and indirect taxes are illegal and erroneous and should be credited or refunded to the statutory taxpayer who paid them, as the exemption must be construed in favor of the property itself.