Excise Tax Refunds: Who Can Claim for Petroleum Products Sold to International Carriers

The Supreme Court has settled a recurring question in Philippine tax law: when petroleum products are sold to international carriers free of excise tax, who has the right to claim a refund of the excise taxes already paid? In a 2011 decision, the Court ruled that only the statutory taxpayer—the manufacturer or producer—may seek such a refund, not a distributor or vendor that merely bore the economic burden of the tax.

The case involved Exxonmobil Petroleum and Chemical Holdings, Inc. – Philippine Branch, which purchased Jet A-1 fuel from Caltex Philippines and Petron Corporation, then sold it to international carriers. The excise taxes on the fuel were paid by Caltex and Petron but passed on to Exxon as part of the purchase price. Exxon later filed a claim for refund of over Php105 million in excise taxes, arguing that it was the real party in interest since it ultimately shouldered the tax burden.

The Nature of Excise Taxes

Under the National Internal Revenue Code (NIRC), excise taxes are imposed on goods manufactured or produced in the Philippines for domestic sale or consumption. The NIRC provides that the return shall be filed and the excise tax paid by the manufacturer or producer before removal of domestic products from the place of production.

Excise taxes are indirect taxes. This means the liability for payment falls on one person, but the burden can be shifted to another. When a manufacturer passes the tax on to a buyer, the amount added becomes part of the purchase price—not a separate tax paid by the buyer. As the Supreme Court explained, citing the earlier case of Philippine Acetylene Co., Inc. v. Commissioner of Internal Revenue, "the purchaser does not really pay the tax. He pays or may pay the seller more for the goods because of the seller's obligation, but that is all."

The Statutory Taxpayer Rule

The Court applied the principle established in previous cases, including Silkair (Singapore) Pte, Ltd. v. Commissioner of Internal Revenue, that 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 it, even if the burden was shifted to another.

Under the NIRC, only the taxpayer may file a written claim for refund or credit of taxes erroneously or illegally received. Since the law designates the manufacturer or producer as the party liable for excise tax, it follows that only the manufacturer or producer—not a downstream distributor—may claim a refund.

The Exemption for International Carriers

The NIRC exempts from excise tax petroleum products sold to international carriers of Philippine or foreign registry for use or consumption outside the Philippines, provided the products are stored in a bonded storage tank. The Court clarified that this exemption does not change who may claim a refund.

While the exemption attaches to the petroleum products sold to international carriers, the refund mechanism still operates through the statutory taxpayer. The international carriers themselves retain the right to invoke the exemption at the point of sale, but a distributor that purchased taxed fuel from the manufacturer cannot step into the manufacturer's shoes for refund purposes.

No Violation of International Agreements

Exxon also argued that limiting refund claims to manufacturers would violate the principle of pacta sunt servanda under the Philippines' bilateral agreements with other countries. The Court rejected this argument, noting that the right of international carriers to invoke the exemption was neither affected nor restricted. The ruling merely determines who may claim a refund from the government—it does not diminish the exemption itself.

Practical Takeaways

• Only the manufacturer or producer of petroleum products may claim a refund of excise taxes, even if the tax burden was passed on to a buyer.
• A distributor or vendor that purchased fuel from a manufacturer is not the "taxpayer" for refund purposes under the NIRC.
• When a manufacturer passes on the excise tax, the amount becomes part of the purchase price, not a separate tax paid by the buyer.
• International carriers may still invoke the exemption at the point of sale, but they cannot claim refunds of taxes already paid by the manufacturer.
• Tax refund claims are construed strictly against the claimant, so it is critical to establish the correct statutory basis and party before filing.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.