The Court of Appeals last month granted the two separate petitions of Fortune Tobacco on the P644.7 and P35.6 million excise tax the company claimed were erroneously or illegally collected by the government starting Feb. 1, 2000 to Dec. 31, 2001, and Jan. 1 to Jan. 31, 2000.
Presiding Judge Ernesto Acosta ruled that Fortune Tobacco had overpaid the specific taxes due on its volume of removals for the company’s Champion, Salem, Camel and Winston brands for February 2000 to December 2001 in the total amount of P644,775,615.
"The court finds the petition meritorious and in accordance with law," the court said. "Respondent is hereby ordered to refund to petitioner the amount of P644,735,615 representing erroneously paid excise taxes for the period Feb. 1, 2000 to Dec. 31, 2001.
Prior to Jan. 1, 1997, Fortune’s cigarette brands were subject to ad valorem tax pursuant to then Section 142 of the Tax code. However, on Jan. 1, 1997, Republic Act 8240 took effect whereby a shift from ad valorem to specific tax was made and subjecting the said brands to specific tax.
The Act increased the excise tax on cigars and cigarettes by 12 percent.
The Department of Finance then issued Revenue Regulations 17-99 stipulating the applicable tax rates on cigars and cigarettes. The directive provided that the new specific tax rate for any existing brand of cigars, cigarettes packed by machine, distilled spirits, wines and fermented liquor shall not be lower than excise tax that was actually being paid prior to Jan. 1, 2000.
Fortune Tobacco argued that Revenue Regulations 17-99 was an illegal extension for an indefinite period of time of the three-year transitory provisions of RA 8240. According to petitioner, the three-year period within which it is to be operative reckoned from Jan. 1, 1997, the date when RA 8240 took effect, expired on Dec. 31, 1999 and effective Jan. 1, 2000, the correct base of the 12-percent increase were the rates prescribed under Section 145 of the Tax Code.
The company maintained that there was nothing under the provisions of Section 145 which authorized the BIR to impose "that the new specific tax rate for any existing brand of cigar, cigarettes packed by machine shall not be lower than the excise tax that is actually being paid prior to Jan. 1, 2000."
The court said Fortune Tobacco said specific taxes, which were higher than the rates prescribed by Section 145.
However, the BIR contended that the amount being claimed by petitioner as overpaid excise tax for the month of Jan. 1, 2000 to Dec. 31, 2001 was not properly documented.
The court’s findings on Fortune Tobacco’s petition for a P35.6-million refund were similar to P644.7-million case.
"While we may agree with the respondent that administrative agencies in the excise of their rule-making power can formulate rules and regulations in order to achieve the policies laid down by Congress, the same does not hold true in the present case. The BIR, in using Revenue Regulations 17-99, went beyond the legal parameters that defined the boundaries of its authority," the court ruled.