Myline Cordial

Silkair (Singapore) Pte. Ltd. vs. Commissioner of Internal Revenue
G.R. No. 173594, February 06, 2008

FACTS:
Silkair applied for the refund of P4,567,450.79 excise taxes with the BIR it had paid on its purchases of jet fuel from Petron Corporation from January to June 2000. It based its claim for refund or tax credit on the tax exemption provided for by Section 135 (b) of the NIRC of 1997 and Article 4(2) of the Air Transport Agreement between RP and Singapore.

Section 135 (b) of the NIRC of 1997: petroleum products sold to exempt entities or agencies covered by tax treaties, conventions, and other international agreements for their use and consumption: Provided, however, That the country of said foreign international carrier or exempt entities or agencies exempts from similar taxes petroleum products sold to Philippine carriers, entities or agencies.

Article 4(2) Air Transport Agreement between the Government of the Republic of the Philippines and the Government of the Republic of Singapore:
Fuel, lubricants, spare parts, regular equipment and aircraft stores introduced into, or taken on board aircraft in the territory of one Contracting party by, or on behalf of, a designated airline of the other Contracting Party and intended solely for use in the operation of the agreed services shall, with the exception of charges corresponding to the service performed, be exempt from the same customs duties, inspection fees and other duties or taxes imposed in the territories of the first Contracting Party , even when these supplies are to be used on the parts of the journey performed over the territory of the Contracting Party in which they are introduced into or taken on board. The materials referred to above may be required to be kept under customs supervision and control.

As of December 26, 2001, BIR had not acted on the application so Silkair filed a Petition for Review before the CTA.

CIR contended that petitioner failed to prove that the sale of the petroleum products was directly made from a domestic oil company to the international carrier. The excise tax on petroleum products is the direct liability of the manufacturer/producer, and when added to the cost of the goods sold to the buyer, it is no longer a tax but part of the price which the buyer has to pay to obtain the article.

CTA 2nd Division’s decision: Denied Silkair’s petition on the ground that as the excise tax was imposed on Petron Corporation as the manufacturer of petroleum products, any claim for refund should be filed by the latter; and where the burden of tax is shifted to the purchaser, the amount passed on to it is no longer a tax but becomes an added cost of the goods purchased. Also denied Motion for Reconsideration.

CTA En Banc’s decision on Petition for Review: dismissed Silkair’s petition for review for having been filed out of time. In a Separate Concurring Opinion, CTA Associate Justice Castañeda posited that Silkair is not the proper party to claim the tax refund. Motion for Reconsideration was also denied.

ISSUES:
1. Who is the proper party to claim for the refund in the case of exemption from excise tax?
2. Is Silkair exempted from paying indirect taxes?
3. Whether or not the petition for review was timely filed.

RULING:
1. The proper party to question, or 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. Section 130 (A) (2) of the NIRC provides that “[u]nless otherwise specifically allowed, the return shall be filed and the excise tax paid by the manufacturer or producer before removal of domestic products from place of production.” Thus, Petron Corporation, not Silkair, is the statutory taxpayer which is entitled to claim a refund based on Section 135 of the NIRC of 1997 and Article 4(2) of the Air Transport Agreement between RP and Singapore. Even if Petron Corporation passed on to Silkair the burden of the tax, the additional amount billed to Silkair for jet fuel is not a tax but part of the price which Silkair had to pay as a purchaser.

2. No. An exemption from “all taxes” excludes indirect taxes, unless the exempting statute expressly stipulates the exemption. The exemption granted under Section 135 (b) of the NIRC of 1997 and Article 4(2) of the Air Transport Agreement between RP and Singapore cannot, without a clear showing of legislative intent, be construed as including indirect taxes. Statutes granting tax exemptions must be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority, and if an exemption is found to exist, it must not be enlarged by construction.

3. No. While Silkair claims it dismissed JGLaw as its counsel as early as August 24, 2005, the same was communicated to the CTA only on October 13, 2005. Thus, JGLaw was still Silkair’s counsel of record as of October 3, 2005 when a copy of the September 22, 2005 resolution of the CTA Second Division was served on it. The service upon JGLaw on October 3, 2005 of the September 22, 2005 resolution of CTA Second Division was, therefore, for all legal intents and purposes, service to Silkair, and the CTA correctly reckoned the period of appeal from such date.

NOTES:
An exemption from “all taxes” excludes indirect taxes, unless the exempting statute, like NPC’s charter, is so couched as to include indirect tax from the exemption. – Maceda vs. Macaraig, Jr

Full text: Silkair vs. CIR G.R. No. 173594, February 06, 2008