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    Pal vs. Cir

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    Karla Bee
    This case involves Philippine Air Lines (PAL) seeking a refund of excise taxes paid by Caltex on jet fuel purchased by PAL for its domestic operations. While Caltex remitted the excise taxes to the BIR as the statutory taxpayer, it passed the economic burden of the taxes to PAL by including the tax amount in the invoice. PAL argued it was entitled to claim a refund based on its franchise granting exemption from direct and indirect taxes on fuel purchases. The CTA initially denied PAL's claim on the basis that only a statutory taxpayer can seek a refund. However, the Supreme Court ruled that where a law grants exemption from both direct and indirect taxes, the party who bears the economic burden, like

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    Pal vs. Cir

    Uploaded by

    Karla Bee
    387 views2 pages
    This case involves Philippine Air Lines (PAL) seeking a refund of excise taxes paid by Caltex on jet fuel purchased by PAL for its domestic operations. While Caltex remitted the excise taxes to the BIR as the statutory taxpayer, it passed the economic burden of the taxes to PAL by including the tax amount in the invoice. PAL argued it was entitled to claim a refund based on its franchise granting exemption from direct and indirect taxes on fuel purchases. The CTA initially denied PAL's claim on the basis that only a statutory taxpayer can seek a refund. However, the Supreme Court ruled that where a law grants exemption from both direct and indirect taxes, the party who bears the economic burden, like

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    PAL v. CIR

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    This case involves Philippine Air Lines (PAL) seeking a refund of excise taxes paid by Caltex on jet fuel purchased by PAL for its domestic operations. While Caltex remitted the excise taxes to the BIR as the statutory taxpayer, it passed the economic burden of the taxes to PAL by including the tax amount in the invoice. PAL argued it was entitled to claim a refund based on its franchise granting exemption from direct and indirect taxes on fuel purchases. The CTA initially denied PAL's claim on the basis that only a statutory taxpayer can seek a refund. However, the Supreme Court ruled that where a law grants exemption from both direct and indirect taxes, the party who bears the economic burden, like

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    387 views2 pages

    Pal vs. Cir

    Uploaded by

    Karla Bee
    This case involves Philippine Air Lines (PAL) seeking a refund of excise taxes paid by Caltex on jet fuel purchased by PAL for its domestic operations. While Caltex remitted the excise taxes to the BIR as the statutory taxpayer, it passed the economic burden of the taxes to PAL by including the tax amount in the invoice. PAL argued it was entitled to claim a refund based on its franchise granting exemption from direct and indirect taxes on fuel purchases. The CTA initially denied PAL's claim on the basis that only a statutory taxpayer can seek a refund. However, the Supreme Court ruled that where a law grants exemption from both direct and indirect taxes, the party who bears the economic burden, like

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Philippine Air Lines vs.

    Commissioner of Internal Revenue


    July 1, 2013
    Perlas-Bernabe, J.
    Bahjin
    Topic: The Judicial Department Requisites of Judicial Inquiry
    Proper Party

    PAL has the legal personality to file a claim for refund of excise taxes.
    While the NIRC mandates the manufacturer/producer 1 or the
    owner/importer2 to pay the applicable excise taxes directly to the
    government, they may, however, shift the economic burden of such
    payments to someone else usually the purchaser of the goods since
    excise taxes are considered as a kind of indirect tax.

    FACTS:

    Jurisprudence states that indirect taxes are those which are demanded
    in the first instance from one person with the expectation and intention
    that he can shift the economic burden to someone else. In this regard,
    the statutory taxpayer can transfer to its customers the value of the
    excise taxes it paid or would be liable to pay to the government by
    treating it as part of the cost of the goods and tacking it on to the selling
    price. Notably, this shifting process, otherwise known as passing on, is
    largely a contractual affair between the parties. Meaning, even if the
    purchaser
    effectively
    pays
    the
    value
    of
    the
    tax,
    the
    manufacturer/producer or the owner or importer are still regarded as the
    statutory taxpayers under the law.

    In 2004, Caltex sold 804,370 liters of imported Jet A-1 fuel to PAL for
    PALs domestic operations. Caltex then filed with the BIR its Excise Tax
    Returns for Petroleum Products, declaring the amount of P5M++. Caltex
    payment to the BIR of excise taxes included the taxes related to its
    transaction with PAL.
    Thereafter, Caltex sent PAL an Aviation Billing Invoice for the purchased
    aviation fuel in the amount of US$313,949.54, reflecting the amount of
    US$52,669.33 as the related excise taxes on the fuel transactions in
    2004. PAL paid Caltex this full amount, including the amount
    corresponding to the excise taxes passed on to it by Caltex.
    PAL then sent a letter to the Commissioner of Internal Revenue seeking
    a refund of the excise taxes passed on to it by Caltex. PAL hinged its tax
    refund claim on its operating franchise (PD 1590), which conferred upon
    it certain tax exemption privileges on its purchase and/or importation of
    aviation gas, fuel and oil, including those which are passed on to it by
    the seller and/or importer thereof. Further, PAL asserted that it had the
    legal personality to file the aforesaid tax refund claim even though it
    was Caltex that actually remitted the amount to the BIR.
    Due to the CIRs inaction, PAL filed a Petition for Review with the CTA. In
    its Answer, the CIR averred that since the excise taxes were paid by
    Caltex, PAL had no cause of action.
    CTA Second Division denied PALs petition on the ground that only a
    statutory taxpayer (Caltex) may seek a refund of the excise taxes it
    paid. It added that even if the tax burden was shifted to PAL, the latter
    cannot be deemed a statutory taxpayer. The CTA en banc affirmed this
    ruling, hence the present petition for review.
    ISSUE:
    WON PAL has the legal personality to file a claim for refund of the
    passed on excise taxes. YES.
    RATIO:

    In this relation, Section 204(c)28 of the NIRC states that it is the


    statutory taxpayer which has the legal personality to file a claim for
    refund. Accordingly, in cases involving excise tax exemptions on
    petroleum products under Section 135 of the NIRC, the Court has
    consistently held that it is the statutory taxpayer who is entitled to claim
    a tax refund based thereon and not the party who merely bears its
    economic burden.
    However, the abovementioned rule should not apply to instances where
    the law clearly grants the party to which the economic burden of the tax
    is shifted an exemption from both direct and indirect taxes. In which
    case, the latter must be allowed to claim a tax refund even if it is not
    considered as the statutory taxpayer under the law. In Maceda v.
    Macaraig, the Court upheld the National Power Corporations (NPC)
    claim for a tax refund since its own charter specifically granted it an
    exemption from both direct and indirect taxes, viz:
    By the very nature of indirect taxation, the economic burden of
    such taxation is expected to be passed on through the channels
    of commerce to the user or consumer of the goods sold. Because,
    however, the NPC has been exempted from both direct and
    indirect taxation, the NPC must be held exempted from absorbing
    the economic burden of indirect taxation NPC is entitled to be

    1 Sec. 130, NIRC


    2 Sec. 131, NIRC

    reimbursed by the BIR for that part of the buying price of NPC
    which verifiably represents the tax already paid by the oil
    company-vendor to the BIR.
    The propriety of a tax refund claim is hinged on the kind of
    exemption which forms its basis. If the law confers an
    exemption from both direct or indirect taxes, a claimant is
    entitled to a tax refund even if it only bears the economic
    burden of the applicable tax. On the other hand, if the
    exemption conferred only applies to direct taxes, then the
    statutory taxpayer is regarded as the proper party to file the
    refund claim.
    In this case, PALs franchise grants it an exemption from both direct and
    indirect taxes on its purchase of petroleum products. 3

    3 Sec. 13, PD 1590

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