Tax court grants oil firm’s P85-M refund

The Court of Tax Appeals (CTA) has partially granted the petition of Shell Pilipinas Corp. (SPC) for a refund of about P85.5 million in excise taxes “illegally or erroneously collected” from the oil giant in 2020 for the sale of its bunker fuel to a tax-exempt entity.

But of the original amount the company is seeking, the tax court reduced the refund to P84.97 million, representing 14.84 million liters of fuel oil imported, locally manufactured and sold to Pioneer Float Glass Manufacturing Inc., a Philippine Economic Zone Authority-registered company, from January to June 2020.

The court, in a 24-page decision on April 16, noted that the documentary evidence for the sale and deliveries of the remaining 90,000 liters of fuel oil worth P540,000 was denied for being “blurred or unreadable.”

The oil company sought refund or tax credit certificates through two separate administrative claims it filed with the Bureau of Internal Revenue (BIR) in March 2021.

The BIR, as a respondent in the petition for review brought before the CTA, refuted the claim of SPC, saying that only tax-exempt buyers, and not sellers, can invoke Section 135 of the National Internal Revenue Code or the Tax Code.

Under this provision, tax exemptions are granted to petroleum products sold to entities “which are by law exempt from direct and indirect taxes.”

Not for buyers

But the court disagreed with the BIR’s argument, citing the very provision that the tax agency pointed to: “The said section … should thus be construed as an exemption in favor of the petroleum products on which the excise tax was levied in the first place.”

It added: “The exemption cannot be granted to the buyers—that is, the entities that are by law exempt from direct and indirect taxes—because they are not under any legal duty to pay the excise tax.”

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This makes the excise taxes paid by SPC “erroneously or illegally collected taxes that are proper subject of a claim for refund or credit” under the Tax Code, the court said.

The CTA, however, stressed that the SPC was able to “sufficiently prove” through substantiated documents that it had erroneously paid the excise taxes only in the amount of P84,972,000, representing 14.84 million liters of bunker fuel.

It then ordered the BIR to refund or issue a tax credit certificate in the reduced amount for the fuel sold and delivered to an ecozone-declared company.