Shell loses P3-B tax case

MANILA, Philippines - The Court of Tax Appeals has ordered Pilipinas Shell Petroleum Corp. (PSPC) to pay more than P3.5 billion in excise tax for the importation of raw gasoline materials for the years 2006 to 2009.

In a 42-page decision penned by Associate Justice Caesar Casanova, the full CTA ruled to modify an earlier resolution of its third division that stopped the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) from collecting billions worth of excise tax from PSPC.

The case stemmed from a petition filed by the PSPC in 2009 asking for the nullification of a demand letter of then BIR commissioner Joel Tan-Torres.

Torres demanded payment of over P7.3 billion in excise and value added tax (VAT) from PSPC over its importation of Catalytic Cracked Gasoline (CCG) and Light Catalytic Cracked Gasoline (LCCG) for the years 2004 to 2009.

CCG and LCCG are used as intermediate or raw gasoline products used as blending components to produce gasoline in compliance with the Clean Air Act.

PSPC argued that the materials are not subject to excise tax as these are not finished products and are not intended for domestic sale.

The CTA third division, in a 2012 ruling, initially sided with PSPC and stopped the BIR and the BOC from collecting the taxes.

However, in its recent ruling on the appeal filed by the government, the CTA modified the initial ruling and ordered the PSPC to pay the taxes for importations made from 2006 to 2009.

The CTA decision agreed with government lawyers when it argued that the act of importation is enough to qualify the materials for taxation under pertinent laws.

“Excise tax is an indirect tax applicable to certain specified goods or articles manufactured or produced in the Philippines for domestic sales or consumption, and to things imported,” stressed the tax court.

It noted that the materials – although raw and used as blending components – were still consumed to produce the final product.

“Even supposing that the imported CCG and LCCG were not consumed or used or sold domestically, the importation would naturally fall under the phrase for any other disposition, and therefore, still excisable,” added the ruling.

But instead of paying the entire P7.3 billion demand of the government, the CTA only ordered PSPC to pay the undue excise taxes and VAT for the years 2006 to 2009.

The full court sustained the ruling of the third division saying it has complied with the required documentary requirements that exempted it from paying the assessed excise taxes for years 2004 and 2005.

The exemption was based on Republic Act 9480, which granted amnesty on all unpaid internal revenue taxes for 2005 and prior years.

Records showed that the BIR is demanding total payment of P3.5 billion in excise taxes and VAT from PSPC for the years 2006 to 2008.