CTA orders refund, tax credit for Shell Pilipinas

THE Court of Tax Appeals (CTA) has partially granted the refund claims of Shell Pilipinas Corp. totaling P134.94 million in excise taxes, and ordered the Bureau of Internal Revenue (BIR) to issue a refund or a tax credit certificate.

In a 39-page decision promulgated on April 21, the CTA Special First Division ruled on three consolidated petitions involving excise taxes Shell paid on imported bunker fuel oil later sold and delivered to Pioneer Float Glass Manufacturing, Inc. (PFGMI) between January and September 2021.

Shell Pilipinas, which shifted from refining to importing petroleum products in August 2020 through its Tabangao Import Facility, originally sought a total refund of P135.54 million.

The company argued that because PFGMI is a Philippine Economic Zone Authority (PEZA)-registered entity operating within the Asahi Special Economic Zone, its purchases of raw materials and supplies are exempt from internal revenue taxes under Republic Act No. 7916 and Section 135 of the National Internal Revenue Code (NIRC).

The commissioner of internal revenue opposed the claim, saying Shell, as the importer, is the statutory taxpayer liable for excise taxes at the point of importation.

The commissioner also argued that tax exemptions must be strictly construed against the taxpayer and apply only to buyers, not to sellers or importers.

“Excise tax on petroleum products is essentially a tax on property, the direct liability for which pertains to the statutory taxpayer (i.e., manufacturer, producer or importer),” the tax court said in the ruling penned by Associate Justice Jean Marie A. Bacorro-Villena.

The court said the tax-exempt status of petroleum products is determined upon sale to entities covered under Section 135 of the NIRC.

“Considering that the status of the petroleum products as tax-exempt solidifies upon the sale to any of the entities enumerated under Section 135 [of the NIRC], any excise taxes which were previously paid thereon would then be considered as ‘erroneously or illegally collected’ and, therefore, subject to refund,” it added.

The CTA partially granted the claim after it excluded about 100,000 liters of fuel deliveries due to missing PEZA Form No. 8105 documentation or discrepancies between declared volumes and Shell’s internal records.

“Substantial justice dictates that the government should not keep money that does not belong to it,” the court said, noting that Shell had established its entitlement to the refund. — Erika Mae P. Sinaking