EXC: instances where the law clearly grants the party to which the economic burden of

[41] PAL v. CIR

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
G.R. No. 198759. July 1, 2013| Who shoulders tax burden; statutory taxpayer | Sha taxpayer under the law.

Petitioner: PHILIPPINE AIRLINES, INC., petitioner In the case at bar, PAL may claim refund on excise tax passed to it even though it is not
the statutory taxpayer because it falls under the exception.
Respondents: COMMISSIONER OF INTERNAL REVENUE

Recit-Ready: Caltex sold to PAL fuel for its domestic operations. For such transaction,
Caltex filed with the BIR it excise tax returns. PAL received the billing invoice of which FACTS:
the total amount includes the related excise tax paid for by Caltex (basically Caltex was
passing on to PAL the amount it paid to the govt ). Thus, PAL sought a tax refund before the
CIR on the ground that its opertating franchise conferred upon it tax exemptions on its 1. Caltex sold 804,370 liters of imported Jet A-1 fuel to PAL for the latter’s
domestic operations.
purchase of aviation gas, fuel, oil including those passed on to it by the seller. This was
denied by the CTA and the CTA en banc. Hence, this petition. 2. Consequently, Caltex electronically filed with the Bureau of Internal Revenue
(BIR) its Excise Tax Returns for Petroleum Products.
The issue is WON PAL has the legal personality to file a claim for refund of the 3. PAL received from Caltex an Aviation Billing Invoice for the purchased aviation
passed on excise taxes. (YES) fuel in the amount of US$313,949.54, reflecting the amount of US$52,669.33
as the related excise taxes on the transaction.
PAL may claim the refund of the passed on excise taxes by Caltex. In view of PAL’s 4. PAL, through a letter-request addressed to Commissioner of Internal Revenue
payment of either the basic corporate income tax or franchise tax, whichever is lower, (CIR), sought a refund of the excise taxes passed on to it by Caltex.
PAL is exempt from paying: (a) taxes directly due from or imposable upon it as the a. It hinged its tax refund claim on its operating franchise which
purchaser of the subject petroleum products; and (b) the cost of the taxes billed or passed conferred upon it certain tax exemption privileges on its purchase
on to it by the seller, producer, manufacturer, or importer of the said products either as and/or importation of aviation gas, fuel and oil, including those which
part of the purchase price or by mutual agreement or other arrangement (this is based are passed on to it by the seller and/or importer thereof.
on PAL’s charter). Therefore, given the foregoing direct and indirect tax exemptions b. Further, PAL asserted that it had the legal personality to file the
under its franchise, PAL is endowed with the legal standing to file the subject tax refund aforesaid tax refund claim
claim, notwithstanding the fact that it is not the statutory taxpayer as contemplated by 5. Due to the CIR’s inaction, PAL filed a Petition for Review with the Court of Tax
law. Appeals (CTA).
a. CTA: Relying on Silkair Pte. Ltd. v. CIR, the CTA Second Division
Section 204(c) of the NIRC states that it is the statutory taxpayer which has the legal denied PAL’s petition on the ground that only a statutory taxpayer
personality to file a claim for refund. Accordingly, in cases involving excise tax may seek a refund of the excise taxes it paid. Even if the tax burden
exemptions on petroleum products, the Court has consistently held that it is the statutory was shifted to PAL, the latter cannot be deemed a statutory taxpayer.
taxpayer who is entitled to claim a tax refund based thereon and not the party who merely 6. CTA En Banc: Affirmed the ruling of the CTA
bears its economic burden. 7. PAL filed a motion for reconsideration which was denied. Hence, the instant
petition.
However, such 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 ISSUES: WON PAL has the legal personality to file a claim for refund of the
indirect taxes. In which case, the latter must be allowed to claim a tax refund even if it is passed on excise taxes. (YES)
not considered as the statutory taxpayer under the law.

RATIO:
Doctrine:
GR: it is the statutory taxpayer which has the legal personality to file a claim for refund
PAL may claim the refund of the passed on excise taxes by Caltex.
As provided in its charter, PAL’s payment of either the basic corporate income tax or (IMPT) However, such rule should NOT apply to instances where the law clearly
franchise tax, whichever is lower, shall be in lieu of all other taxes, duties, royalties, grants the party to which the economic burden of the tax is shifted an exemption
registration, license, and other fees and charges, except only real property tax. The from both direct and indirect taxes. In which case, the latter must be allowed to
phrase “in lieu of all other taxes” includes but is not limited to taxes that are “directly claim a tax refund even if it is not considered as the statutory taxpayer under the
due from or imposable upon the purchaser or the seller, producer, manufacturer, or law.
importer of said petroleum products but are billed or passed on the grantee either as
part of the price or cost thereof or by mutual agreement or other arrangement”(also based WHEREFORE, the petition is hereby GRANTED. The May 9, 2011 Decision and
on the charter). In other words, in view of PAL’s payment of either the basic corporate September 16, 2011 Resolution of the Court of Tax Appeals En Banc in CTA EB Case
income tax or franchise tax, whichever is lower, PAL is exempt from paying: (a) taxes No. 588 are ANNULLED and SET ASIDE. Respondent Commissioner of Internal
directly due from or imposable upon it as the purchaser of the subject petroleum Revenue is hereby ORDERED to refund or issue a tax credit certificate in favor of the
products; and (b) the cost of the taxes billed or passed on to it by the seller, producer, petitioner Philippine Airlines, Inc. in the amount of P2,952,037.90.
manufacturer, or importer of the said products either as part of the purchase price or
by mutual agreement or other arrangement. Therefore, given the foregoing direct
and indirect tax exemptions under its franchise, PAL is endowed with the legal
standing to file the subject tax refund claim, notwithstanding the fact that it is
not the statutory taxpayer as contemplated by law.

[ Discussion on the concept of excise tax

Under Section 129 of the National Internal Revenue Code (NIRC), excise taxes are
imposed on two kinds of goods, namely: (a) goods manufactured or produced in the
Philippines for domestic sales or consumption or for any other disposition; and (b)
things imported.

With respect to the first kind of goods, the taxpayer obligated to file the return and pay
the excise taxes due thereon is the manufacturer/producer. On the other hand, with
respect to the second kind of goods, the taxpayer obligated to file the return and pay
the excise taxes due thereon is the owner or importer, unless the imported articles are
exempt from excise taxes and the person found to be in possession of the same is
other than those legally entitled to such tax exemption. ]

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. To this end, the purchaser does not
really pay the tax; rather, he only pays the seller more for the goods because of the
latter’s obligation to the government as the statutory taxpayer.

Section 204(c) 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, 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.