Commissioner of Internal Revenue v. Philippine Associated Smelting and Refining Corporation
REITERATIONFacts
The Antecedents: Respondent Philippine Associated Smelting and Refining Corporation (PASAR), a domestic corporation engaged in processing, smelting, refining, and exporting copper products, is a registered Zone Export Enterprise with the Export Processing Zone Authority (EPZA). PASAR utilizes petroleum products in its manufacturing processes, purchasing them from local distributors like Petron, which import these products and pay the corresponding excise taxes. These taxes are then passed on to PASAR. During the period of January to October 2005, Petron passed on excise taxes totaling P11,687,467.62 to PASAR for petroleum products purchased by the latter. Procedural History: In December 2006, PASAR filed a claim for refund or tax credit with the Regional Director of Region XIV, which was denied. PASAR then filed a petition for review with the Court of Tax Appeals (CTA) Second Division. The petitioner, Commissioner of Internal Revenue, moved to preliminarily resolve whether PASAR was the proper party to seek a refund. The CTA Second Division dismissed PASAR's petition, which was affirmed upon denial of PASAR's motion for reconsideration. PASAR appealed to the CTA En Banc, which set aside the Second Division's resolutions and remanded the case for determination of the refund amount. The CTA En Banc denied the Commissioner's subsequent motion for reconsideration. The Petition: The Commissioner of Internal Revenue filed the instant petition for review under Rule 45 of the Revised Rules of Court, seeking to reverse the CTA En Banc's decision. The petition raises several grounds, including lack of jurisdiction over the subject matter, misapplication of prior Supreme Court rulings in Commissioner of Customs v. Philippine Phosphate Fertilizer Corp. and Philippine Phosphate Fertilizer Corporation v. Commissioner of Internal Revenue, that PASAR is not the proper party to claim a tax credit/refund, and that the specific taxes sought to be refunded do not form part of PASAR's export products. The Commissioner argues that the CTA's appellate jurisdiction is limited to decisions of the Commissioner of Internal Revenue, not denials by a Regional Director, and that the prior cases are distinguishable. The Commissioner also contends that the statutory taxpayer, Petron, is the proper party to seek a refund for indirect taxes, and that PASAR's purchased petroleum products are not exempt from excise taxes under Section 17 of P.D. No. 66.
Issue(s)
Whether or not PASAR is the proper party to claim the tax credit/refund on the excise taxes paid on the petroleum products purchased from Petron.
Ruling
WHEREFORE, the petition is DENIED for lack of merit. Accordingly, the Decision dated November 12, 2008 and its Resolution dated January 30, 2009 of the Court of Tax Appeals En Banc in CTA E.B. Case No. 351 are hereby AFFIRMED in toto.
Ratio Decidendi
On the Issue of Whether or not PASAR is the proper party to claim the tax credit/refund on the excise taxes paid on the petroleum products purchased from Petron: The Supreme Court ruled that PASAR is the proper party to claim the refund. The Court rejected the petitioner's reliance on the general rule that only the statutory taxpayer may claim a refund. Citing Philippine Airlines, Inc. v. Commissioner of Internal Revenue, the Court distinguished between exemptions for direct taxes versus indirect taxes. If the law confers an exemption from both direct and indirect taxes, a claimant is entitled to a refund even if it only bears the economic burden. Section 17 of P.D. No. 66 explicitly states that supplies used "directly or indirectly" by registered enterprises shall not be subject to internal revenue laws. This specific provision grants PASAR an exemption that covers the indirect excise taxes passed on by Petron. Therefore, PASAR, having borne the cost, possesses the legal personality to file the claim.
Main Doctrine
Under Section 17 of Presidential Decree No. 66, merchandise and supplies brought into the Export Processing Zone to be used 'whether directly or indirectly' in the registered activity are not subject to customs and internal revenue laws. This broad exemption covers both customs duties and internal revenue taxes, including excise taxes passed on to the registered enterprise. Consequently, an EPZA-registered enterprise that bears the economic burden of these indirect taxes is the proper party to file a claim for refund, distinguishing it from cases where the exemption is limited to direct taxes.