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EXXONMOBIL PETROLEUM v. CIR

FACTS:

The petitioner, Exxonmobil (Exxon), is a distributor and vendor of petroleum products. The Commissioner of Internal Revenue (CIR) issued Revenue Memorandum Circular No. 49-93, clarifying that international carriers who operate flights to and from the Philippines are exempt from excise taxes on aviation fuel sold to them.

Exxon claimed that it should not be liable for the excise taxes paid on Jet A-1 fuel sold to international carriers. Exxon filed a petition before the Court of Tax Appeals (CTA) seeking a refund of the excise taxes paid. The CTA First Division dismissed the petition, ruling that the exemption was a result of a bilateral agreement and only the CIR can determine the coverage of this exemption.

Exxon filed a motion for reconsideration, but it was denied. Exxon then filed a petition for review with the CTA En Banc, which upheld the ruling of the First Division. Aggrieved, Exxon filed a petition for review with the Supreme Court.

Exxon is a distributor and vendor of petroleum products to international carriers registered in foreign countries that have bilateral agreements with the Philippines. The manufacturers, Caltex and Petron, passed on the excise taxes they paid to Exxon as part of the purchase price. Exxon claims that it is the proper party to claim a tax refund for the excise taxes paid. It argues that the exemption granted under Section 135 of the National Internal Revenue Code applies to the petroleum products themselves, and not the seller or buyer. Thus, it contends that the exemption will still apply even if the products were sold by either the manufacturer or the distributor.

The issue is whether Exxon can claim a refund of the excise taxes paid.

ISSUES:

  1. If the party statutorily liable for the tax is different from the party who bears the burden of such tax, who is entitled to claim a refund of the tax paid?

  2. Whether the proper party to seek a refund of an indirect tax is the statutory taxpayer.

  3. Whether the additional amount billed to the purchaser for a tax is considered a part of the price.

  4. Whether or not the petitioner is entitled to a refund or tax credit for the excise taxes it paid on Jet A-1 fuel sold to international carriers.

RULING:

  1. The proper party to claim a refund of an indirect tax is the statutory taxpayer or the person on whom the tax is imposed by law and who paid the same, even if he shifts the burden thereof to another. It does not matter that an additional amount is billed as tax to the purchaser. The purchaser does not pay the tax, but rather pays the seller more for the goods because of the seller's obligation. Therefore, the burden of the tax falls on the purchaser. As petitioner is not the statutory taxpayer, it is not entitled to claim a refund of excise taxes paid.

  2. The proper party to seek a refund of an indirect tax is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same even if he shifts the burden thereof to another. Therefore, it is the statutory taxpayer, not the purchaser, who is entitled to claim a refund of the tax.

  3. The additional amount billed to the purchaser for a tax is not considered a tax but part of the price which the purchaser has to pay to obtain the article.

  4. The petition is denied. The Supreme Court ruled that the petitioner is not entitled to a refund or tax credit for the excise taxes paid on Jet A-1 fuel sold to international carriers. The Court found that the petitioner failed to comply with the requirements for claiming a tax refund or credit under Section 229 of the National Internal Revenue Code.

PRINCIPLES:

  • Excise taxes are imposed on specific goods manufactured or produced in the Philippines for domestic sale or consumption, or for any other disposition, as well as on imported goods.

  • Petroleum products sold to international carriers and exempt entities or agencies are exempt from excise tax under Section 135 of the NIRC.

  • Indirect taxes are demanded from or paid by one person to someone else. The liability for payment of the tax may fall on one person, but the burden thereof can be shifted or passed on to another person.

  • The burden of a tax can be shifted to another person, but the liability to pay the tax remains with the statutory taxpayer.

  • The statutory taxpayer, or the person on whom the tax is imposed by law and who paid the same, is the proper party to claim a refund of an indirect tax, even if the burden of the tax has been shifted to another person.

  • The determination of who is the taxpayer is crucial in claims for refund because only the taxpayer has the legal personality to seek a refund in case of erroneous payment of taxes.

  • The burden of a sales tax may be shifted to the purchaser, but the additional amount billed to the purchaser is not considered a tax but part of the price.

  • The proper party to seek a refund of an indirect tax is the statutory taxpayer, even if the burden of the tax is shifted to another person.

  • A sales tax imposed on a manufacturer or producer is not considered a tax on the purchaser.

  • There is no unilateral amendment of existing bilateral agreements of the Philippines with other countries by holding that only petroleum products purchased directly from manufacturers or producers are exempt from excise taxes.

  • The right of international carriers to invoke the exemption from excise taxes granted by the law has not been affected or restricted.

  • The law-making body is presumed to have enacted a later law with knowledge of all other laws involving the same subject matter.

  • Compliance with the requirements for claiming a refund or tax credit under the National Internal Revenue Code is necessary to be entitled to such refund or tax credit.