PETRON CORPORATION v. COMMISSIONER OF INTERNAL REVENUE (CONSOLIDATED WITH CTA CASE NO. 9741)

REPUBLIC OF THE PHILIPPINES Court of Tax Appeals QUEZON CITY Special Third Division PETRON CORPORATION, CTA CASE NOS. 9738 & 9741 Petitioner, Members: -versus- RINGPIS-LIBAN, Chairperson, and MODESTO-SAN PEDRO, JJ COMMISSIONER OF Promulgated: INTERNAL REVENUE, Respondent. AUG 0 1 2023 X ----------------------------------------------------------------z:::;:::;;;;;______;3_"_~-:::T;-~-�-~:---------------- X DECI S IO N M ODESTO-SAN PEDRO, J.: The Case The instant consolidated cases involve a claim for refund or issuance of Tax Credit Certificate ("TCC") of petitioner's alleged erroneously paid excise tax arising from the sale and delivery of its imported Jet A-1 fuel to various international carriers and tax-exempt entities for the taxable period from 23 December 2015 to 31 December 2016 in the amount of Three Hundred Sixty Five Million One Hundred Sixty Eight Thousand Eight Hundred Ninety Seven and 54/100 Pesos (Php365 ,168,897.54),1 and from the sale and delivery of its locally manufactured Jet A-1 fuel and unleaded gasoline fuel to various international carriers and tax-exempt entities for the taxable period from 1 January 2016 to 31 December 2016 in the amount ofThirty Two Million One Hundred Twenty Seven Thousand Six Hundred Thirty Three and 61100 Pesos (Php32,127,633.06),2 or in the aggregate amount of Three Hundred Ninety Seven Million Two Hundred Ninety Six Thousand Five Hundred Thirty and 601100 (Php397,296,530.60)."' See Statement of the Case, Pre-Trial Order, Court of Tax Appeals ("CTA") Case No. 9738, Records, Vol. 3, p. 1476. See Statement of the Case, Pre-Trial Order, CTA Case No. 9741 , Records, Vol. 2, p. I040.

DECISION CTA Case Nos. 9738 & 9741 Page 2 of48 The Parties Petitioner is a corporation duly registered with the Securities and Exchange Commission with Company Registration No. 31171. It is also duly registered with the Bureau of Internal Revenue ("BIR") with BIR Certificate of Registration No. OCN 8RC0000559947 and Taxpayer's Identification Number 000-168-801-000.3 Respondent, Commissioner of Internal Revenue ("CIR"), is sued in his official capacity with the power to perform the duties of his office, including, among others, the duty to act on and approve claims for refund or issuance of TCC, as provided by law, particularly the National Internal Revenue Code of1997, as amended ("NIRC''). 4 The Facts Petitioner's main business is to manufacture, import, and sell petroleum products which include Jet A-1 Fuel and unleaded gasoline fuel.5 In light of this, petitioner operates the Petron Bataan Refinery ("PBR") where crude oil is processed into a full range of petroleum products, which include Jet A-1 fuel and unleaded gasoline fuel. In certain instances, petitioner imports Jet A- 1 fuel when its local production is insufficient to supply the projected demand for the said fuel type.6 Petitioner pays excise taxes on the imported Jet A-1 fuel upon their importation and before removal or release from the custody of the Bureau of Customs ("BOC") at Port Limay, Bataan, at the rate ofP3.67 per liter pursuant to Section 148(g) ofthe NIRC.7 After importation, the imported Jet A-1 fuel is then transferred to the PBR for storage, after which it is withdrawn and delivered to petitioner's various depots for eventual sale and delivery to various customers, including international carriers and tax-exempt entities.8 Petitioner also pays excise taxes on the locally produced Jet A-1 fuel and unleaded gasoline fuels before their removal from PBR, at the rate of P3.67 per liter for Jet A-1 fuel and P4.35 per liter for unleaded gasoline fuel,/ See Statement of facts and Issue, Pre-Trial Order. CTA Case No. 9741, Records, Vol. 2, p. 1041. 4 See Statement of Facts and Issue, Pre-Trial Order, CTA Case No. 9741, Records, Vol. 2, p. 1041; See also Statement of facts and Issue, Pre-Trial Order, CTA Case No. 9738, Records, Vol. 3, p. 1477. See Amended Articles of Incorporation, Exhibits "P-2-Imported" and "P-2"; Commingling Permit No. (P)-028-0 1-15-12537, dated 12 January 2015, with validity until 31 December 2015, and Commingling Permit No. (P)-028-01-16-15847, dated 22 January 2016, with validity until 31 December 2016, Exhibits "P-5-Imported", "P-5", "P-202-Imported" to "P-202-2-Imported" and "P-383" to "P-383-2"; Bureau of Customs Certificate of Accreditation, valid until II July 2017, Exhibit "P-6-Imported". 6 See petitioner's Memorandum, Records, CTA Case No. 9738 consolidated with CTA Case No. 9741, Vol. 8, p. 2963. Ibid. 8 Ibid.

DECISION CTA Case Nos. 9738 & 9741 pursuant to Sections 148(g) and 148(j) of the NJRC.9 The locally produced Jet A-1 fuel is transferred from the PBR to petitioner's various depots for eventual sale and delivery to various customers, including international carriers and tax-exempt entities. Similarly, the locally produced unleaded gasoline fuel are transferred from the PBR to petitioner's various depots for eventual sale and delivery to various tax-exempt entities. 10 From 23 December 2015 to 31 December 2016, petitioner imported Jet A-1 fuel as a finished product. Pursuant to Section 13l(A) in relation to Section 148(g) of the NIRC, petitioner paid to the BOC the corresponding taxes and fees, including excise taxes. 11 Also, from 1 January 2016 to 31 December 2016, petitioner locally produced Jet A-1 fuel and unleaded gasoline fuel as finished products. Hence, pursuant to Section 130(A)(2) in relation to Section 148(g) and Section 148(j) of the NIRC, petitioner paid to the BIR the corresponding excise taxes. 12 A total ofNinety Nine Million Five Hundred One Thousand Sixty Two (99,501,062) liters of the above-mentioned imported Jet A-1 fuel, for which petitioner paid excise taxes in the amount of Three Hundred Sixty Five Million One Hundred Sixty Eight Thousand Eight Hundred Ninety Seven and 54/100 Pesos (Php365,168,897.54), were sold to various: (1) international carriers of both Philippine and foreign registry for their use and consumption outside the Philippines; (2) international carriers of foreign registry whose countries of registry exempt Philippine carriers from similar taxes; and (3) tax-exempt entities or agencies covered by tax treaties, conventions, and other international agreements for their use or consumption. 13 Further, a total of Seven Million Seven Hundred Twenty Eight Thousand Seven Hundred Sixty Eight (7,728,768) liters of the above- mentioned locally produced Jet A-1 fuel for which petitioner paid excise taxes in the amount of Twenty Eight Million Three Hundred Sixty Four Thousand Five Hundred Seventy Eight and 56/100 Pesos (Php28, 364, 578.56) were sold to various: (1) international carriers of both Philippine and foreign registry for their use and consumption outside the Philippines; (2) international carriers of foreign registry whose countries of registry exempt Philippine carriers from similar taxes; and (3) tax exempt entities or agencieycovered by tax treaties, conventions and other international agreements. 1}--' 9 Ibid. 10 Ibid. II Ibid. " !d., pp. 2963-2964. IJ !d., p. 2964. 14 Ibid.

DECISION CTA Case Nos. 9738 & 9741 Finally, a total of Eight Hundred Sixty Five Thousand Seventy (865,070) liters of locally produced unleaded gasoline fuel, for which petitioner paid excise taxes in the amount of Three Million Seven Hundred Sixty Three Thousand Fifty Four and 50/100 Pesos (Php3,763,054.50) were sold to various tax exempt entities or agencies covered by tax treaties, conventions and other international agreements for their use or consumption. 15 Petitioner then filed its application for refund or issuance ofTCC in the total amount of Three Hundred Sixty Five Million One Hundred Sixty Eight Thousand Eight Hundred Ninety Seven and 54/100 Pesos (1"365,168,897.54) representing erroneously paid excise tax on imported Jet A-1 fuel on 20 November 2017 with the Large Taxpayer Excise Audit Division 11. 16 On the other hand, petitioner filed its application for refund or issuance of TCC in the total amount of Thirty-Two Million One Hundred Twenty- Seven thousand Six Hundred Thirty-Three and 6/100 Pesos (1"32,127,633.06) representing erroneously paid excise tax on locally manufactured Jet A-1 fuel and unleaded gasoline fuel on 24 November 2017 with the Large Taxpayer Excise Audit Division II. 17 Due to respondent's inaction on said administrative claims, petitioner filed Petitions for Review before the Court of Tax Appeals ("CTA"), as follows: 18 a. The judicial claim for refund pertaining to the excise tax on imported Jet A-1 fuel was filed on 20 December 2017. The case was docketed as CTA Case No. 9738 and was raffled to this Court's Third Division.19 b. The judicial claim pertaining to the excise tax on locally manufactured Jet A-1 fuel and unleaded gasoline fuel was filed on 20 December 2017. The case was docketed as CTA Case No. 9741 and was raffled to the Court's First Division.20 Proceedings under CTA Case No. 9738 On).3 February 2018, respondent filed his Answer in CTA Case No. 9738.2!Y' 15 Ibid. 16 !d., p. 2965. 17 !d., p. 2966. 18 Ibid. 19 Ibid. 20 !d., p. 2967. 21 Records, CTA Case No. 9738, Vol. I, pp. 128-137.

DECISION CTA Case Nos. 9738 & 9741 Page 5 of48 Pre-Trial then ensued on 16 October 2018.22 A Pre-Trial Order was subsequently issued by the Court on 17 January 2019.23 During trial proper, petitioner presented the testimonies of the following witnesses: a. Ma. Clarissa C. Arguelles- Tax Manager/4 b. Michael F. Manzano- Commercial Services Manager;25 c. Leon G. Pausing II- Industrial Trade Head, and previously, Selling Systems, Training and Development National Manager and National Account Sales Manager;26 d. Allan V. Peczon - Area Sales Manager - Mindanao, Industrial Trade, and previously, Area Sales Manager - Key Accounts, Industrial Trade;27 e. Allan James T. Tenorio- Terminal Manager, Joint Oil Companies Aviation Fuel Storage Plant ("JOCASP") I Ninoy Aquino International Airport ("NAIA");28 f. Richard L. Wong- Terminal Manager, Iloilo Depot;29 and g. Marissa U. Viray- Operations Finance Manager.30 Petitioner also engaged the services of a Court-commissioned Independent Certified Public Accountant ("ICPA"), Ms. Madonna Mia S. Dayego,31 who submitted an ICPA Report summarizing her findings on the voluminous documents presented by petitioner for CTA Case No. 9738.32 On 27 November 2019, petitioner filed a Motion to Consolidate CTA Case No. 9738 with CTA Case No. 9741.33 In a Resolution, dated 5 February 2020, the latter case, then pending before the Court's First Division, w~~ / consolidated with CTA Case No. 9738, which bears a lower docket number.3j...;' 22 /d., Vol. 2, pp. 563-568. 23 /d., Vol. 3, pp. 1475-1484. 24 Exhibit "P-170", /d., Vols. 2-3, pp.748-1366; Hearing, dated 15 October 2019, /d., Vol. 4, pp. 1485- 1488; Supplemental Judicial Affidavit, Exhibit "P-180", !d. Vol. 4, pp. 1881-1920; Hearing, dated 15 September 2020, /d., Vol. 4, pp. 1922-1926. 25 Exhibit "P-171 ",/d., Vol. 2, pp. 515-562; Hearing, dated 15 October 2019, /d., Vol. 4, pp. 1485-1488. 26 Exhibit "P-172", /d., Vol. I, pp. 223-494; Hearing, dated 15 October 2019, /d., Vol. 4, pp. 1789-1791. 27 Exhibit "P-173", /d., Vol. 2, pp. 666-717; Hearing, dated II April 2019, /d., Vol. 4, pp. 1593-1595. 28 Exhibit "P-174", !d., pp. 718-747; Hearing, dated 14 May 2019, /d., Vol. 4, pp. 1686-1693. 29 Exhibit "P-176", /d., Vol. 3, pp. 1367-1399; Hearing, dated 14 May 2019, !d. Vol. 4, pp. 1686-1693. 30 Exhibit "P-175", /d., Vol. 2, pp. 570-665; Supplemental Judicial Affidavit, Exhibit "P-179", ld, Vol. 4, pp. 1573-1585; Hearing, dated II April2019, /d., Vol. 4, pp. 1593-1595. 31 ld, Vol. 3, pp. 1486-1488. 12 Exhibit "P-200", ld, Vol. 4, pp. 1506-1571; Exhibit "P-178", /d., Vol. 4, pp. 1608-1679; Supplemental Judicial Affidavit, Exhibit "P-179", /d., Vol. 4, pp. 1746-1762; Hearing, dated 15 October 2019, !d., Vol. 4, pp. 1789-1791. 33 !d., Vol. 4, pp. 1814-1823. 14 Records, CTA Case Nos. 9738 & 9741, Vol. 4, pp. 1833-1835.

DECISION CTA Case Nos. 9738 & 9741 Proceedings under CTA Case No. 9741 On 21 February 2018, respondent filed his Answer in CTA Case No. 9741.35 On 28 March 2019, Pre-Trial ensued for the instant case/6 and a Pre- Trial Order was then issued by this Court's First Division on 17 May 2019.37 During trial proper, petitioner presented the testimonies of the following witnesses: a. Ma. Clarissa C. Arguelles- Tax Manager;38 b. Leon G. Pausing II- Industrial Trade Head, and previously, Selling Systems, Training and Development National Manager and National Account Sales Manager;39 c. Allan V. Peczon - Area Sales Manager - Mindanao, Industrial Trade, and previously, Area Sales Manager - Key Accounts, Industrial Trade; 40 d. Allan James T. Tenorio- Terminal Manager, JOCASP I NAIA; 41 e. Richard L. Wong- Terminal Manager, Iloilo Depot;42 and f. Marissa U. Viray- Operations Finance Manager.43 Petitioner once again engaged the services of Court-commissioned ICPA Dayego,44 who submitted an ICPA Report summarizing her findings on the voluminous documents presented by petitioner.45 On 27 November 2019, petitioner filed a Motion to Consolidate CTA Case No. 9741 CTA Case Np. 9738,46 which was granted in a Resolution, dated 3 December 2019.4:.,./ 35 Records,CTACaseNo.9741, Vol.l,pp.I03-III.-137. 36 !d.. Vol. 2, pp. 1004-1009. 37 !d., pp. I039-1053. 38 Exhibit "P-201", !d.. Vol. I, pp.270-887; Hearing, dated 30 July 2019, /d., Vol. 2, pp. 1122-1129. 39 Exhibit "P-203", /d., Vol. I, pp.l42-167; Hearing, dated 20 August 2019, /d., Vol.2, pp. 1132-1136. 40 Exhibit "P-202", /d., Vol. I, pp.239-269; Hearing, dated 20 August 2019, /d., Vol. 2, pp. 1132-1136. 41 Exhibit "P-204", /d., Vol. I, pp.l68-205; Hearing, dated 8 October 2019, /d., Vol. 2, pp. 1180-1183. 42 Exhibit "P-206", /d., Vol. I, pp.206-238; Hearing, dated 5 November 2019, !d.. Vol. 2, pp. 1185-1186. 43 Exhibit "P-205", /d., Vol. 2, pp. 889-986; Hearing, dated 8 October 2019, /d., Vol. 2, pp. 1180-1183. 44 !d., Vol. 2, pp. 1125-1129. 45 !d.. Vol.2, pp. 1157-1172; Exhibit "P-207", !d.. Vol. 2, pp. 1197-1300. 46 !d.. Vol. 2, pp. 1301-1309. 47 !d. Vol. 2, pp. 1310-1311.

DECISION CTA Case Nos. 9738 & 9741 Proceedings after consolidation On 15 October 2020, petitioner submitted a consolidated ICPA Report to assist the Court in properly resolving the two (2) refund cases which had been consolidated.48 Likewise, petitioner submitted a Judicial Affidavit of its witness, ICPA Dayego, summarizing her findings on the consolidated ICPA Report.49 On 3 November 2020, the ICPA was placed on the witness stand for cross-examination in relation to her testimony on the consolidated ICPA Report. 50 On 24 February 2021, petitioner filed its Formal Offer ofEvidence,5 I to which respondent did not interpose any objection.52 Thus, in a Resolution, dated 14 October 2021, this Court admitted all of petitioner's Exhibits.53 Respondent then manifested that he would no longer present any evidence for the instant consolidated case.54 On 23 June 2022, petitioner filed its Memorandum55 while respondent filed none.56 With no memorandum filed by respondent, the case was submitted for Decision on 2 August 2022.57 Hence, this Decision. The Issues The issues submitted for this Court's resolution are: Whether petitioner is entitled to the refund or issuance of TCC in the amount of Three Hundred Sixty Five Million One Hundred Sixty Eight Thousand Eight Hundred Ninety Seven and 54/100 Pesos (P365,168,897.54) representing excise tax paid f o r / its importation of Jet A-1 fuel which were subsequently sold and 48 Exhibit "P-I 89-imported'', Records, CTA Case Nos. 9738 & 974 I, Vols. 4-5. pp. I929-2085. 49 Exhibit "P-I 90-imported", id., Vol. 5 pp. 2 I73-2346. 50 Hearing, dated 3 November 2020, id., Vol. 5, pp. 2367-2369. 5I !d., Vols. 6-8, pp. 2445-3814 ld, Vol. 8, pp. 3816-3820. 53 !d., pp. 2950-295 I. 54 /d., pp. 2954-2957. 55 ld, pp. 2960-3035. 56 See Records Verification Report, dated 21 July 2022, id., p. 3037. 57 /d., p. 3039.

DECISION CT A Case Nos. 9738 & 9741 Page 8 of48 delivered to vanous international earners and to tax-exempt entities;58 and Whether or not petitioner is entitled to the refund or issuance of TCC in the amount of Thirty-Two Million One Hundred Twenty-Seven thousand Six Hundred Thirty-Three and 6/100 Pesos (P32,127,633.06) representing excise tax paid for its local production ofJet A-1 fuel and unleaded gasoline fuel during the period 1 January 2016 to 31 December 2016 which were sold and delivered to various international carriers and to tax-exempt entities. 59 Arguments of the Parties Petitioner's Arguments60 Petitioner raises the following major arguments to prove that it is entitled to a refund of erroneously paid excise tax on its imported Jet A-1 fuel, and locally manufactured Jet A-1 fuel and unleaded gasoline fuel: First, both the administrative and judicial claims for refund or issuance ofTCC were timely filed; Second, the imported and locally produced tax-paid Jet A-1 fuel and unleaded gasoline fuel sold and delivered to various international carriers and to tax-exempt entities are exempt from excise tax under Section 135(a) and 135(b) ofthe NIRC, and any excise tax paid on their removal was erroneously paid; and Third, petitioner has satisfied the requirements, under Sections 204(c) and 229 of the NIRC, to be entitled to a refund of erroneously or illegally collected taxes. Respondent's Arguments61 In refutation, respondent alleged that petitioner is not entitled to the refund sought because Section 135 of the NIRC only provides a tax exemption in favor of the buyer of petroleum products named in said / provision. What the said provision prohibits is the passing by the importer ov/ 58 See Issues, Pre-Trial Order, Records. CTA Case No. 9738, Vol. 3, p. !477. 59 See Issues, Pre-Trial Order, Records, CTA Case No. 974!, Vol. 2, p. I041. 60 Memorandum, Records, CTA Case Nos. 9738 & 974!, Vol. 8., pp. 2984-3033. 61 Answer, Records, CTA Case No. 9738, Vol. I, pp. 129-134; Answer, Records, CTA Case No. 9741, Vol. l,pp. 104-109.

DECISION CTA Case Nos. 9738 & 9741 Page 9 of48 manufacturer of petroleum products of the burden of excise tax to the buyers ofpetroleum products specifically made exempt under said provision. Simply put, excise tax is still due from the importer or manufacturer of petroleum products but it cannot be passed on to the buyers and users specifically made exempt by Section 135 of the NIRC. Claims for refund of excise tax is authorized only under Section 130 (D) ofthe NIRC, which pertain to exports of locally manufactured products, and not under Section 135 ofthe NIRC. The Ruling of the Court This Court PARTIALLY GRANTS the consolidated Petitions for Review. Requisites for claiming refund of erroneously paid taxes. The provisions that govern the present claim for refund of erroneously paid excise tax are Sections 204 and 229 ofthe NIRC, which read: "SEC. 204. Authority ofthe Commissioner to Compromise, Abate and Refund or Credit Taxes.- The Commissioner may - (A)xxx XXX XXX (8) XXX XXX XXX (C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided, however, That a return filed showing an overpayment shall be considered as a written claim for credit or refund." (Emphasis and underscoring, Ours.) "SEC. 229. Recovery of Tax Erroneously or Illegally Collected.- no suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, of any sum alleged to have been excessively or in any manner wrongfully collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; /

DECISIOJ\ CT A Case Nos. 9738 & 9741 Page 10 of48 but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid." (Emphasis and underscoring, Ours.) Based on the foregoing provisions, a taxpayer-applicant must comply with the following requisites to successfully obtain a tax refund/credit for erroneously paid taxes from this Court: I. There must be an erroneous or illegal collection of tax or penalty collected without authority, or sum excessively or wrongfully collected; 2. A prior administrative claim for refund had been filed before the CIR within two (2) years after the payment of tax or penalty; and 3. A suit or proceeding had been instituted before this Court within two (2) years from the date of payment of tax or penalty. It must be emphasized that cases filed before this Court are litigated de novo;62 parties are expected to litigate and prove every minute aspect of their case anew by presenting, formally offering, and submitting to the Court all evidence required for the successful prosecution of its claim.63 Consequently, petitioner must competently establish its claim for refund or tax credit following the foregoing requisites. Petitioner timely filed both its administrative and judicial claims for refund. As the first requisite for claiming refund of erroneously paid taxes requires a lengthy discussion, this Court shall first determine whether petitioner complied with the second and third requisites/ 62 Commissioner of Internal Revenue v. Univation Motor Philippines. Inc.� G.R. No. 231581, 10 April 2019. 63 !d.; Philippine Airlines, Inc. v. Commissioner of Internal Revenue, G.R. No. 206079-80 and 206309, 17 January 20 18.

DECISION CTA Case Nos. 9738 & 9741 Page II of48 Excise tax on importation of goods are paid by the owner or importer before the release of such goods from the custody of the BOC. Section 131 (A) ofthe NIRC provides: "SEC. 131. Payment of Excise Taxes on Imported Articles.- (A) Persons Liable. - Excise taxes on imported articles shall be paid by the owner or importer to the Custom Officers, conformably with the regulations of the Department of Finance and before the release of such articles from the customs house, or by the person who is found in possession of articles which are exempt from excise taxes other than those legally entitled to exemption. XXX XXX XXX'' (Emphasis, Ours.) On the other hand, the excise tax on locally manufactured products are paid by the manufacturer or producer before the removal of such products from the place of production. Section 130 (A) (2) of the NIRC provides, to wit: "SEC. 130. Filing of Return and Payment of Excise Tax on Domestic Products.- (A) Persons Liable to File a Return, Filing of Return on Removal and Payment of Tax.- XXX XXX XXX (2) Time for Filing of Return and Payment of the Tax. - Unless 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: Provided, That the excise tax on locally manufactured petroleum products and indigenous petroleum levied under Sections 148 and 15l(A)(4), respectively, ofthis Title shall be paid within ten (I 0) days from the date of removal of such products for the period from January l, 1998 to June 30, 1998; within five (5) days from the date of removal of such products for the period from July I, 1998 to December 31, 1998; and, before removal from the place of production of such products from January 1, 1999 and thereafter: Provided, further, That the excise tax on nonmetallic mineral or mineral products, or quarry resources shall be due and payable upon removal of such products from the locality where mined or extracted, but with respect to the excise tax on locally produced or extracted metallic mineral or mineral products, the person liable shall file a return and pay the tax within fifteen (15) days after the end of the calendar quarter when such products were removed subject to such conditions as may be prescribed by rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner. For this purpose, the taxpayer shall file a bond in an amount which approximates the amount of excise tax due on the removals for the said quarter. The foregoing rules notwithstanding, for imported mineral or mineral products, whether metallic or nonmetallic, the excise tax ;lue thereon shall be paid before their removal from customs custody."~

DECISION CT A Case Nos. 9738 & 9741 (Emphasis, Ours.) In the case at bar, for petitioner's importation of Jet A-1 fuel, its payment of duties and taxes for its imported petroleum products are done through the BOC's e2m system and are supported by importation documents consisting of Statement of Settlement Duties and Taxes, Single Administrative Documents,64 Bill of Lading ("BL"), Commercial Invoices, Customs Payment Receipts ("CPR"), BOC Certifications for Entry I Certificate ofPayment ("BOC Certifications"), Authority to Release Imported Goods ("ATRIG"), and Reports of Survey, among others.65 The payment is done before the petroleum products are allowed leave the BOC's custody. For the locally manufactured Jet A-1 fuel and unleaded gasoline fuel, petitioner uses two (2) modes for paying the excise tax due on each removal of said goods from the PBR. The first is through an application for payment made through the BIR's Electronic Filing and Payment System ("eFPS") as shown by the Excise Tax Returns or BIR Forms 2200-P ("ETR") with attached Summary of Removals.66 The second is through the Product Replenishment Scheme as evidenced by Product Replenishment Certificates ("PRC"), Claims for Product Replenishment and Lists oflnvoices.67 In either case, the payment of the excise tax due on the locally manufactured Jet A-1 fuel is done before petroleum products are removed from the PBR. The subject period of the claim for the refund of excise tax pertaining to the importation of Jet A-1 fuel is from 23 December 2015 to 31 December 2016. During this period, the earliest importation made by petitioner of Jet A- I fuel was on 24 December 2015. The excise tax due for this importation was paid on 23 December 2015.68 From said date, petitioner had until 23 December 2017 within which to file its administrative and judicial claim for refund. Considering that petitioner filed its administrative claims for refund on 24 November 2017,69 the administrative claim was timely filed. The same can similarly be said of the judicial claim, since the Petition for Review, docketed V as CTA Case No. 9738, appealing the CIR's inaction on the administrative claim was filed on 20 December 2017.7 64 Exhibits ��P-8-imported", "P-9-imported", "P-11-imported", "P-12-imported", "P-13-imported", "P-14- imported", "P-IS-imported", "P-16-imported", "P-17-imported" and "P-18-imported." 65 Exhibits "P-7-imported" to "P-18-7-1-imported" and "P-203-imported" to "P-204-70-imported". 66 Exhibits "P-6" to "P-7-1". 67 Exhibits "P-10" to "P-75-2". 68 Judicial Affidavit of Ma. Clarissa C. Arguelles, Exhibit "P-170-imported"; Consolidated ICPA Report, Exhibit "P-189-imported". 69 Exhibits "P-19-imported", "P-20-imported", "P-21-imported", "P-22-imported" and "P-201 "; Judicial Affidavit of Ma. Clarissa C. Arguelles, Exhibit "P-170-imported" 70 CTA Case No. 9738, Records, Vol. I, p. 10.

DECISION CTA Case Nos. 9738 & 9741 Page 13 of48 On the other hand, the subject period of the claim for the refund of excise tax pertaining to the local production of Jet A-I fuel and unleaded gasoline fuel is from 1 January 2016 to 31 December 20 I6. During this period, the earliest removal of locally manufactured Jet A-1 fuel and unleaded gasoline fuel from the PBR to petitioner's depots was on I January 2016. The earliest payment of excise tax subject of said claim for refund was also made on this date. 71 Consequently, for this claim for refund, petitioner had until I January 2018 within which to file both the administrative and judicial claim for refund. As petitioner filed its administrative claim for refund on 24 November 2017,72 the same was timely filed. Likewise, when petitioner filed a Petition for Review, docketed as CTA Case No. 9741, on 22 December 201773 to appeal the CIR's inaction of such administrative claim, it timely filed its judicial claim for refund. Both administrative claims were filed ahead of their corresponding judicial claims. Given the foregoing, petitioner complied with the second and third requisites for claiming refund of erroneously paid taxes as provided above. Now, this Court shall tackle the issue ofwhether there was an erroneous payment of excise tax in the case at bar. This Court rules in the affirmative. Excise tax on imported and locally manufactured petroleum products is erroneously paid if the said products are sold to international carriers and tax-exempt entities. Section 135 ofthe NIRCprovides, as follows: "SEC. 135. Petroleum Products Sold to International Carriers and Exempt Entities or Agencies. - Petroleum products sold to the following are exempt from excise tax: (a) International carriers of Philippine or foreign registry on their use or consumption outside the Philippines: Provided, That the petroleum products sold to these international carriers shall be stored in a bonded storage tank and may be disposed of only in accordance with the rules and regulations to be prescribed by t~ Secretary of Finance, upon recommendation of the Commissioner; / 71 Judicial Affidavit of Ma. Clarissa C. Arguelles, Exhibit "P-170-imported"; Consolidated !CPA Report, Exhibit "P-I 89-imported". Exhibits "P-8" and "P-9"; Judicial Affidavit of Ma. Clarissa C. Arguelles, Exhibit "P-I 70-imported". 73 CTA Case No. 9741, Records, Vol. I, p. 10.

DECISION CTA Case Nos. 9738 & 9741 Page 14 of48 (b) Exempt entities or agencies covered by tax treaties, conventions and other international agreements for their use of 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; and (c) Entities which are by law exempt from direct and indirect taxes." The exemption from excise tax provided by this provision arises if a petroleum product is sold to: a) an international carrier; orb) an exempt entity pursuant to law, treaty, convention, or other international agreement, provided that the country of a foreign international carrier or exempt entity or agency similarly exempts Philippine international carriers, entities, or agencies from similar taxes for petroleum products sold to the latter. Further, this provision has been interpreted by the Supreme Court to extend in favor of manufacturers and importers of petroleum products if the same has been sold to international carriers and tax-exempt entities, as in Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corporation: 74 "Indeed, the avowed purpose of a tax exemption is always 'some public benefit or interest, which the law-making body considers sufficient to offset the monetary loss entailed in the grant of the exemption.' The exemption from excise tax of aviation fuel purchased by international carriers for consumption outside the Philippines fulfills a treaty obligation pursuant to which our Government supports the promotion and expansion of international travel through avoidance of multiple taxation and ensuring the viability and safety of international air travel. In recent years, developing economies such as ours focused more serious attention to significant gains for business and tourism sectors as well. Even without such recent incidental benefit, States had long accepted the need for international cooperation in maintaining a capital intensive, labor intensive and fuel intensive airline industry, and recognized the major role of international air transport in the development of international trade and travel. Under the basic international law principle of pacta sunt servanda, we have the duty to fulfill our treaty obligations in good faith. This entails harmonization of national legislation with treaty provisions. In this case, Sec. 13S(a) of the NIRC embodies our compliance with our undertakings under the Chicago Convention and various bilateral air service agreements not to impose excise tax on aviation fuel purchased by international carriers from domestic manufacturers or suppliers. In our Decision in this case, we interpreted Section 135 (a) as prohibiting domestic manufacturer or producer to pass on to international carriers the excise tax it had paid on petroleum products upon their removal from the place of production, pursuant to Article 148 and pertinent BIR regulations. Ruling on respondent's claim for tax refund of such paid excise taxes on / petroleum products sold to tax-exempt international carriers, we found nor 74 G.R. No. 188497, 19 February 2014.

DECISION CTA Case Nos. 9738 & 9741 Pagel5of48 basis in the Tax Code and jurisprudence to grant the refund of an 'erroneously or illegally paid' tax. Justice Bersamin argues that '(T)he shifting of the tax burden by manufacturers-sellers is a business prerogative resulting from the collective impact of market forces,' and that it is 'erroneous to construe Section 135(a) only as a prohibition against the shifting by the manufacturers-sellers of petroleum products of the tax burden to international carriers, for such construction will deprive the manufacturers-sellers of their business prerogative to determine the prices at which they can sell their products.' We maintain that Section 135 (a), in fulfillment of international agreement and practice to exempt aviation fuel from excise tax and other impositions, prohibits the passing of the excise tax to international carriers who buys petroleum products from local manufacturers/sellers such as respondent. However, we agree that there is a need to reexamine the effect of denying the domestic manufacturers/sellers' claim for refund of the excise taxes they already paid on petroleum products sold to international carriers, and its serious implications on our Government's commitment to the goals and objectives of the Chicago Convention. The Chicago Convention, which established the legal framework for international civil aviation, did not deal comprehensively with tax matters. Article 24 (a) of the Convention simply provides that fuel and lubricating oils on board an aircraft of a Contracting State, on arrival in the territory of another Contracting State and retained on board on leaving the territory of that State, shall be exempt from customs duty, inspection fees or similar national or local duties and charges. Subsequently, the exemption of airlines from national taxes and customs duties on spare parts and fuel has become a standard element of bilateral air service agreements (ASAs) between individual countries. The importance of exemption from aviation fuel tax was underscored in the following observation made by a British author in a paper assessing the debate on using tax to control aviation emissions and the obstacles to introducing excise duty on aviation fuel, thus: Without any international agreement on taxing fuel, it is highly likely that moves to impose duty on international flights, either at a domestic or European level, would encourage 'tankering': carriers filling their aircraft as full as possible whenever they landed outside the EU to avoid paying tax. Clearly this would be entirely counterproductive. Aircraft would be travelling further than necessary to fill up in low-tax jurisdictions; in addition they would be burning up more fuel when carrying the extra weight of a full fuel tank. With the prospect of declining sales of aviation jet fuel sales to international carriers on account of major domestic oil companies' unwillingness to shoulder the burden of excise tax, or of petroleum products being sold to said carriers by local manufacturers or sellers at still high prices , the practice of 'tankering' would not be discouraged. This scenario does not augur well for the Philippines' growing economy and the booming tourism industry. Worse, our Government would be risking retaliatory action under several bilateral agreements with various countries. Evidently, / construction of the tax exemption provision in question should give.,/"""

DECISION CTA Case Nos. 9738 & 9741 primary consideration to its broad implications on our commitment under international agreements. In view of the foregoing reasons, we find merit in respondent's motion for reconsideration. We therefore hold that respondent, as the statutory taxpayer who is directly liable to pay the excise tax on its petroleum products, is entitled to a refund or credit of the excise taxes it paid for petroleum products sold to international carriers, the latter having been granted exemption from the payment of said excise tax under Sec. 135 (a) ofthe NIRC." (Emphasis and underscoring, Ours,) Additionally, in Chevron Philippines, Inc. v. Commissioner of Internal Revenue,75 the Supreme Court ruled, to wit: "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). Any excise tax paid by the statutory taxpayer on petroleum products sold to any of the entities or agencies named in Section 135 of the National Internal Revenue Code (NIRC) exempt from excise tax is deemed illegal or erroneous, and should be credited or refunded to the payor pursuant to Section 204 of the NIRC. This is because the exemption granted under Section 135 of the NIRC must be construed in favor of the property itself, that is, the petroleum products. XXX XXX XXX Pilipinas Shell concerns the manufacturer's entitlement to refund or credit of the excise taxes paid on the petroleum products sold to international carriers exempt from excise taxes under Section 135(a) of the NIRC. However, the issue raised here is whether the importer (i.e., Chevron) was entitled to the refund or credit of the excise taxes it paid on petroleum products sold to CDC, a tax-exempt entity under Section 135(c) of the NIRC. Notwithstanding that the claims for refund or credit of excise taxes were premised on different subsections of Section 135 of the NIRC, the basic tax principle applicable was the same in both cases - that excise tax is a tax on property; hence, the exemption from the excise tax expressly granted under Section 135 of the NIRC must be construed in favor of the petroleum products on which the excise tax was initially imposed. Accordingly, the excise taxes that Chevron paid on its importation of petroleum products subsequently sold to CDC were illegal and erroneous, and should be credited or re!Jinded to Chevron in accordance with Section 204 of the NIRC. / XXX XXX XXX 75 G.R. No. 210836, I September2015.

DECISION CTA Case Nos. 9738 & 9741 Pagel7of48 Pursuant to Section 135(c), supra, petroleum products sold to entities that are by law exempt from direct and indirect taxes are exempt from excise tax. The phrase which are by law exempt from direct and indirect taxes describes the entities to whom the petroleum products must be sold in order to render the exemption operative. Section 135(c) should thus be construed as an exemption in favor of the petroleum products on which the excise tax was levied in the first place. The exemption cannot be granted to the buyers - that is, the entities that are by law exempt from direct and indirect taxes- because they are not under any legal duty to pay the excise tax. CDC was created to be the implementing and operating arm of the Bases Conversion and Development Authority to manage the Clark Special Economic Zone (CSEZ). As a duly-registered enterprise in the CSEZ, CDC has been exempt from paying direct and indirect taxes pursuant to Section 24 of Republic Act No. 7916 (The Special Economic Zone Act of 1995), in relation to Section 15 of Republic Act No. 9400 (Amending Republic Act No. 7227, otherwise known as the Bases Conversion Development Act of 1992). Inasmuch as its liability for the payment of the excise taxes accrued immediately upon importation and prior to the removal of the petroleum products from the customshouse, Chevron was bound to pay, and actually paid such taxes. But the status of the petroleum products as exempt from the excise taxes would be confirmed only upon their sale to CDC in 2007 (or, for that matter, to any of the other entities or agencies listed in Section 135 of the NIRC). Before then, Chevron did not have any legal basis to claim the tax refund or the tax credit as to the petroleum products. Consequently, the payment of the excise taxes by Chevron upon its importation of petroleum products was deemed illegal and erroneous upon the sale of the petroleum products to CDC." (Emphasis, Ours.) Thus, for petitioner to successfully comply with the first requisite for claiming refund of erroneously paid excise tax under Section 135 of the NIRC, it must prove that it actually paid excise tax on petroleum products which it locally manufactured or importej.- and subsequently sold to international carriers or tax-exempt entities/

DECISION CTA Case Nos. 9738 & 9741 Pagel8of48 Petitioner erroneouslv paid excise tax on its locally manufactured Jet A-1 fuel and unleaded gasoline fuel sold to international carriers and tax-exempt entities. A summary of the excise tax paid by petitiOner on its locally manufactured Jet A-I fuel and unleaded gasoline fuel sold to international carriers and tax-exempt entities, which is the subject matter of the present claim was provided in the consolidated ICPA Report, viz.:76 Jet A-1 Fuel Unleaded Gasoline Fuel Amount Amount Month of Sale/ Volume (Excise Tax Rate Volume (Excise Tax Rate Delivery (In Liters) [1>3.67] x Liters) (In Liters) [1>4.35] x Liters) January 2016 February 2016 859,804 !>3, 155,480.68 68,000 !>295,800.00 March 2016 876,590 3,217,085.30 63,500 276,225.00 April2016 751,502 2,758,012.34 90,570 393,979.50 May 2016 186,904 685,937.68 98,100 426,735.00 June 2016 3,389,788 12,440,521.96 54,300 236,205.00 July 2016 1,235,949 4,535,932.83 91,800 399,330.00 August 2016 107,578.71 46,300 201,405.00 September 2016 29,313 216,133.64 74,100 322,335.00 October 20 16 58,892 68,651.02 76,000 330,600.00 November2016 18,706 190,293.17 64,000 278,400.00 December 2016 51,851 303,428.26 62,100 270,135.00 January 2017 82,678 367,572.52 76,300 331,905.00 February 2017 100,156 191,265.72 March 2017 52,116 72,724.72 !>3, 763,054.50(b) 19,816 53,960.01 Total 14,703 1!32,127,633.06 7,728,768 P28,364,578.56(a) 865,070 Total excise taxes paid (a)+ (b) The excise taxes due on locally manufactured Jet A-1 and unleaded gasoline fuels sold to international carriers and tax-exempt entities for the period 1 January 2016 to 31 December 2016 were duly paid. To reiterate, petitioner employs two (2) modes of payment in settling the excise tax due from each removal of locally manufactured products from the PBR: a) through an application for payment made through the BIR's eFPS / as shown by the ETR;77 and b) through the Product Replenishment Scheme.Y 76 Consolidated ICPA Report, Exhibit "P-189". 77 Exhibits "P-6" to "P-7-1 ". 78 Exhibits "P-I 0" to "P-75-2".

DECISIOI> CTA Case Nos. 9738 & 9741 Page 19of48 In either case, the payment of excise tax is made before removal of the petroleum products from the PBR. Based on the requirements of various depots, petitioner's Distribution Group ("DG") sends a summary of estimated daily volume of fuel product requirements for the following two (2) to five (5) days to the Refinery Accounting Section ("RAS"). Based on the DG's figures, petitioner's RAS then calculates the estimated excise tax payable for finished petroleum products for the next two (2) to five (5) days or for the same period, which is then forwarded to petitioner's Stock Accounting Section ("SAS"). These fuel products, which include the Jet A-1 fuel and the unleaded gasoline fuel, are then scheduled for removal within the next two (2) to five (5) days.79 Based on the submitted estimated excise tax payable by the RAS, the SAS finalizes the amount of the excise tax due and provides an allowance in the computation of the excise tax due, which is normally around Five Million Pesos (Php5,000,000.00) per day. The SAS then files the application of payment of excise tax due through the eFPS in accordance with the actual product removals from the PBR. The SAS compares the submitted estimated computation versus the excess payments reported under "Balance Carried Over from Previous Return" (i.e., Item 17 of the ETR) in the ETR and ensures sufficiency of the excess payments to cover the estimated excise tax due per computation for the next two (2) to five (5) days.80 In instances where the actual balance of excess payments reflected in the ETR is deemed insufficient to cover the amount of excise tax required to be maintained based on the computation made, petitioner, through its SAS, makes an advance deposit to the BIR through eFPS.81 Petitioner also applies the Tax Subsidy Availment Certificate ("TSAC")82 obtained from its sales to the Armed Forces of the Philippines Commissary and Exchange Service ("AFPCES") as payment of excise tax in lieu of cash.83 With respect to the Product Replenishment Scheme, petitioner operates various depots which serve as storage of locally manufactured Jet A-1 fuel prior to sale and delivery to various customers. Some of these depots are / registered as PRC locations, where majority of petitioner's sales and..../ 79 Consolidated !CPA Report, Exhibit "P-189-imported". 80 Ibid. 81 Ibid. 82 Exhibits "P-384" to "P-384-13". 83 Summary of TSAC for the period 18 September 2015 to I April 2016, Exhibit No. "P-384": Consolidated !CPA Report, Exhibit "P-189-imported".

DECISIOI'i CTA Case Nos. 9738 & 9741 Page 20 of48 deliveries of locally manufactured Jet A-1 fuel are made to international air carriers.84 If Jet A-1 fuel is sourced from locally manufactured stocks from PRC locations, where majority of its sales and deliveries of locally manufactured Jet A-1 fuel are made to international air carriers, petitioner utilizes its PRC I BIR Form No. 2298, which is being amortized as payment through the Product Replenishment Debit Memo ("PRDM") I BIR Form No. 2331 as tax credits for payment of excise tax due on the removals of locally manufactured Jet A- 1 fuel which are to be sold to international air carriers.85 As examined by the ICPA and as thoroughly verified by this Court, petitioner reported and paid the corresponding excise taxes on the removals from the PBR based on the ETRs, which include the subject matter of the instant claim,86 as follows: Particulars Unleaded Total Gasoline Fuel Total volume of removals per Withdrawal Certificate Jet A-I Fuel ("WC") (Kilo Liters ("KL") at air) 187.075.340 70,655.918 Multiply by: Equivalent Excise Tax Rate per Liter 3.67 4.35 Amount of Excise Tax that should have been paid 1'686.566,497.80 1'307.353.243.30 1'993. 919.741.1 () Actual amount of excise tax due and paid on PBR 3.502.1 02,821.83 removals (1'2.508.183.080. 73 I Difference The difference is accounted for as follows:87 Particulars Volume Equivalent Remarks in Liters Excise Tax I. Removals of Jet A-1 fuel paid thru PRDM/PRC (marked as Exhibit No. P-257) 177,311,211 650,732,144.37 No effect on the claim. 2. Payment of excise tax on unleaded gasoline (724,698,534) (3,152,438,622.90) No effect on the claim fuel not related to the claim ( 170,579,752) (6,476,602.20) No effect on the claim. 3. Payment of excise tax on other excisable petroleum products (717,967,075) (1'2,508,183,080.73) This proves that the excise taxes due on locally manufactured Jet A-1 and unleaded gasoline fuels sold to international carriers and tax-exempt / entities for the period 1 January 2016 to 31 December 2016 were duly paiV 84 Memorandum, Records, CTA Case Nos. 9738 & 9741, Vol. 8.. p. 2990; Consolidated !CPA Report, Exhibit "P-189-imported". 85 Ibid. 86 Consolidated !CPA Report, Exhibit "P-189-imported." 87 Ibid.

DECISION CT A Case Nos. 9738 & 9741 Page 21 of48 The volumes and amount of locally manufactured Jet A-1 fuel and unleaded gasoline fuel manufactured and removedfrom the PBR to petitioner's depots then subsequently transferred to another depot, into-plane facilities ("ITPs''), and refuellers are accurate and properly supported. From the PBR, the locally manufactured Jet A-1 fuel and the unleaded gasoline fuel are then transferred to petitioner's depots spread across the Philippines. The same is transferred from said depots to other depots, ITPs, and refuellers prior to the fuel being delivered and sold to end customers.88 An ITP, to clarifY, is a storage facility owned by petitioner from which petroleum products are withdrawn, while a refueller is a third party contractor engaged by petitioner owning refuelling trucks with a dispensing system for the delivery of petroleum products to customers.89 The !CPA's thorough tracing, as verified by this Court, shows that the locally manufactured Jet A-1 fuel removed from the PBR tallies with the volume received by the respective depots:90 Per Depot's Liquidation Statement (..LS") Per Depots' Official PerWC Receipts Register Books (..ORB..) Volume Net Volume to Received by Depots Exhibit Withdrawals fGross Volume In-transit be Received Exhibit (b) Difference No. (a) - (b) Depots P-271 from PBR Received Gain (Loss) (a) No. - SL Harbor P-272 - Navotas 14 1.506.110 141.506,110 (305,539) 141,200,571 P-278 141,200.571 - Pal awan P-273 Mactan P-274 1.440.301 1.440,301 (3.661) 1.436,640 P-279 1,436,640 - Iloilo 2.910.702 2.910.702 8.127 2.918.829 P-280 2.918,829 Davao P-275 28,045,341 28.134.929 P-281 28.134,929 - Zamboanga P-276 28,045,341 7,788,149 89,588 7.503.481 P-282 7,503.481 DM1NC!ark (284,668) - Total 7.788,149 2.393.997 2.393.997 (17.686) 2.376.311 P-283 2.376.311 P-277 2.790.740 2,790,740 (18.441) 2.772.299 P-284 2,772,299 - P-380 200.000 - - - P-380 200.000 (200,000) 187.075,340 186,875,340 (532.280) 186.343.060 186,543,060 (200,000) 88 Ibid 89 Ibid ~) !hid

DECISION CTA Case Nos. 9738 & 9741 Page 22 of48 Similarly, the locally manufactured unleaded base gasoline fuel removed from the PBR tallies with the volume received by the respective depots, viz. :91 Per SAP- Product Movements by PerWC Per Schedule of Receipts and Removals Movement Difference Type ("SRR") ("PMMT" Withdrawals pross Volume In-transit Net Volume to Volume Exhibit from PBR Received Gain (Loss) be Received Received g)~(d-e) Depot No. (a) (b) (c) (d)~ (b +c) (e) (f)~(a-b) SL Harbor Depot Unleaded (Base) - Gasoline Fuel P-366 46,421,637 46,421,637 (108.724 46,312,833 46,312.833 - Unleaded (Blaze) (99,654) - Gasoline Fuel P-367 24,234,281 24.234,281 24.134,627 24,134,627 - - Total 70,655,918 70.655,918 (208.378) 70,447,460 70,447,460 - As duly noted by the ICPA, the "in-transit gain or loss" pertains to the effect of the variations of the volume of locally-manufactured petroleum products (such as Jet A-1 fuel and Unleaded Gasoline fuel) due to several factors such as temperature, density of the product at the time of soundings, sea condition (for vessel figures), equipment used for the measurements, and others.92 To reiterate, the petroleum products received by the depots from the PBR is then be transferred further to other depots, ITPs, and refuellers of petitioner. Locally manufactured Jet A-1 fuel undergoes this procedure before its eventual sale and delivery to international carriers and tax-exempt entities. On the other hand, the unleaded gasoline fuel volume received by SL Harbor depot from PBR is delivered directly to customers, including tax-exempt entities.93 To determine the actual movements for locally manufactured Jet A-1 fuel, the ICPA reviewed the relevant ORBs, LSs, and SAP-PMMTs from the depots, ITPs, and refuellers. As duly verified by this Court, the results of the comparison revealed the following: 94 Comparison of depots LS -Issuances with ORB Issuances- Jet A-1 fuel: Exhibit Per Depot LS - Issuances Per ORB- Issuances No. (Volume in Liters) (Volume in Liters) Depots 91 Ibid. 92 Ibid. 93 Ibid. 94 Ibid.

DECISION CT A Case Nos. 9738 & 9741 Page 23 of48 Subject to Not Subject Related to Not Related to Claim Claim Claim to Claim Total 141 ,200,571 71,365,243 SL Harbor P-292 140,155,743 1,044,828 141,200,571 1,436,640 2,603,360 Navotas P-293 1,436,640 1,436,640 2,918,829 52,456 Pal awan P-294 280,910 2,637,919 2,918,829 2,140,840 Mactan P-295 22,214,913 5,920,016 28,134,929 28,134,929 1,066,519 Iloilo P-296 7,503,481 Davao P-297 7,255,150 248,331 7,503,481 2,376,311 277,689 Zamboanga P-298 2,157,074 219,237 2,376,311 2,772,299 21,222 1,862,299 2,772,299 200,000 DM1A/Ciark P-381 910,000 32,961 200,000 Total 166,949 174,577,379 II ,965,591 186,543,060 186,543,060 77,527,329 Comparison of depots LS - Issuances with SAP-PMMT - Issuances and depot/ITP/Refueller LS- Receipts (Volume in Liters)- Jet A-I fuel: Total Issuances- Depots Exhibit Per Depot LS - Exhibit Per SAP Details of Issuances per LS and SAP- to Depots/ITPs/Refuelle No. Issuances No. PMMT- PMMT Subject to Issuances Claim Related to Per Depots/ITPs/ Direct Not Related Claim Refueller LS Delivery to to Claim -Receipts Customers SL Harbor depot to: Laoag ITP P-299 456,000 456,000 456,000 135,575,342 JOCASP!NAIA depot P-300 139,699,743 139,699,743 136,031 ,342 140,155,743 P-262 140,155,743 4,124,401 Navotas to P-301 1,436,640 P-263 I ,436,640 1,436,640 JOCASP!NAIA depot P-348 280,910 P-264 280,910 280,910 P-349 Palawan depot to P-302 22,214,913 P-265 22,214,913 - 22,214,913 Customers P-303 580,000 580,000 580,000 Mactan depot to 6,655,150 6,655,150 6,655,150 Customers 20,000 20,000 20,000 Iloilo depot to: Iloilo ITP 7,255,150 P-266 7,255,150 7,255,150 Kalibo ITP Bacolod ITP P-304 (Forwarded) (Brought forward) P-305 2,157,074 P-267 2,157,074 2,157,074 Davao depot to Davao P-306 910,000 P-268 910,000 910,000 P-381 ITP 166,949 P-379 166,949 166,949 Zamboanga depot to 174,577,379 Zamboanga refueller DMIA/Ciark depot to Customers 174,577,379 147,790,206 22,662,772

DECISION CTA Case Nos. 9738 & 9741 Page 24 of48 Per Depot LS Per SAP Details of issuances per LS and SAP- PMMT- PMMT Issuances Issuances Related to Per Total Issuances- Depots Exhibit Subject to Exhibit Depots/ITPs/ Direct Not Related No. Claim Refueller LS Delivery to to Claim to Depots/ ITPs/Refuelle No. Claim -Receipts Customers 4,124,401 The volumes which are not related to the claim pertain either to other shipments oflocally produced Jet A-1 fuel that were not claimed by petitioner or to imported Jet A-1 fuel that was recorded in the PMMT.95 For the movements oflocally manufactured unleaded gasoline fuel, the ICPA reviewed the relevant ORBs, SRRs, and SAP-PMMTs from SL Harbor depot. As duly verified by this Court, the result of such comparison revealed the following: 96 Comparison of Depot's PMMT with SRR and ORBs- R92 Base Gasoline, R88 Gasoline and R87 Gasoline� Volume (in Liters) Per ORB (Exhibit Nos. P-368 and Per PMMT P-368-1 to P-368-12) Per E-10 SRR Unleaded (Unleaded (Exhibit (Base) Gasoline Removals Nos. P-366 (Direct E-98 Gasoline Fuel- Deliveries) Exhibit and P-366-1 (Fuel Without Finished R92 R88 No. Volume to P-366-12) Bioethanol) E-98 Goods) Difference R87 Total P-361 630,000 630,000 70,000 630,000 700,000 P-362 3,600 3,600 400 3,600 4,000 P-363 5,400 5,400 600 5,400 6,000 639,000 639,000 71,000 639,000 710,000 Compan�son ofDe ot' s PMMT W.ith SRR and 0 RBs- Blaze 100 Euro: Volume (in Liters) Per PMMT Per SRR Per ORB Exhibit (Exhibit Nos. (Exhibit Nos. P-369 No. P-367 and P-367-1 and P-369-1 to Removals Volume to P-367-12) P-369-12) Difference X I 00 D210 XIOO P-364 170,000 170,000 170,000 Total P-365 56,070 56,070 56,070 226,070 226,070 226,070 This proves that the volumes and amounts of locally manufactured Jet A-1 fuel and unleaded gasoline fuel manufactured and removed from the PBR / to petitioner's depots then subsequently transferred to other depots, ITPs, and/ 95 Ibid. 96 Ibid; Exhibits "'P-370" and "P-371".

DECISION CTA Case Nos. 9738 & 9741 refuellers are accurate and properly supported except for the variances noted, which are summarized at the end of this Decision. The locally manufactured Jet A-1 fuel and unleaded gasoline fuel manufactured were sold and delivered to various air carriers of Philippine or foreign registry for the latter's use or consumption outside the Philippines and to alleged tax- exempt entities. As observed by the ICPA and verified by this Court, for the sales of locally manufactured Jet A-1 fuel to international carriers and tax-exempt entities, petitioner prepares and generates the sales invoices ("Sis") in its SAP- Computerized Accounting System, in accordance with the commercial terms and orders stated in the respective contracts executed between petitioner and the airline companies and the tax-exempt entities.97 All Sis involving sales of locally manufactured tax-paid Jet A-1 fuel to international air carriers, on their use or consumption outside the Philippines, and tax-exempt entities and sales of locally manufactured unleaded gasoline fuel to tax-exempt entities, shall carry a "No Excise Tax Billed" notation, while an invoice involving the sale of locally manufactured tax-paid Jet A-1 fuel to air carriers for domestic flights does not carry such notation. The summary of Aviation Delivery Receipts ("ADRs) and SAP-generated Delivery Notes ("DN") covering the period billable to the airline companies and tax-exempt entities form an integral part of the SI as proof that the volumes oflocally manufactured Jet A-1 fuel and unleaded gasoline fuel were delivered to the international air carriers and tax-exempt entities, and the volumes oflocally manufactured unleaded gasoline fuel were delivered to tax- exempt entities.98 For the JOCASP/NAIA depot, the DN generated by the SAP pertaining to the sale of locally manufactured Jet A-1 fuel by the JOCASP/NAIA depot to tax-exempt entities triggers the creation of the SI for such direct deliveries.99 Further, petitioner schedules deliveries of locally manufactured Jet A- 1 fuel to air carriers based on its agreements with the respective airline companies and tax-exempt entities. Petitioner's representative prepares the ADR during the discharge of the locally manufactured Jet A-1 fuel from the / tank trucks to the air carrier and tax-exempt entities. The ADR is then signed/ 97 Consolidated !CPA Report. Exhibit "P-189-imported." 98 Ibid 99 Ibid

DECISION CTA Case Nos. 9738 & 9741 by the airline and tax-exempt representative to certify that the volume and correct grade of fuel has been delivered. The ADR also specifies the flight number, origin, and destination of the air carrier. 100 Moreover, petitioner prepares the LS indicating the disposition of the Jet A-1 fuel received. The LS shows the source of the Jet A-1 fuel, whether it was sourced from importations or local production, and the actual locations where the Jet A-1 fuel were delivered, either international or domestic deliveries or to tax-exempt entities. The international deliveries pertain to Jet A-1 fuel that will be delivered to air carriers flying international flights (i.e. whether the air carrier is of Philippine registry or of foreign registry), while domestic deliveries pertain to Jet A-1 fuel that will be delivered to air carriers flying domestic flights. 101 A review of the LS showed the following: 102 LS Movements- Receipts and Issuances (Volume in Liters)- Jet A-1 Fuel: Per LS- Issuances Per I.S- Receipts For Depots/ For Direct Exhibit 1TPs/ Delivery to Related to Not Related Total No. Dcpots/ITPs/ Refueller Exhibit No. Refuellers Customers Total Claim to Claim P-308 Laoag 1TP P-299-1 to 456,000 - 456.000 289,401 166,599 456.000 P-309 OCASP/NA1A Depot P-299-24 135,575.342 21.735.264 135.575.34? P-300-1 to P-300-91 - 135.575.342 113,840.078 P-310 OCASP/NAIA Depot P-301-1 1,436,640 - 1,436.640 531,451 905,189 1.436.64 2.918.82 Palawan Depot P-273-1 to - 2,918,829 2,918.829 280.910 2,637.919 28.134.92 P-287 P-273-6 5.920.016 - 28.134.929 28,134,929 22,214,913 580.00 jMactan Depot P-274-1 to 226.170 6.655.15 P-288 P-274-16 507,506 20,00 Iloilo ITP P-302-1 to 580,000 - 580.000 353,830 19,246 P-311 P-302-7 1.675.065 2.157.07 6,655,150 - 6.655.150 6,147,644 910.00 ~a1ibo ITP P-303-1 to 20.000 741.921 P-312 P-303-7 P-313 Bacolod 1TP P-304-1 - 20.000 754 P-305-1 to P-314 Pavao ITP P-305-2 2.157.074 - 2.157.074 482,009 P-306-1 to P-315 tlamboanga Refueller P-306-3 910,000 - 910,000 168.079 161.428 P-381 PMIA/Ciark Depot P-380-1 - - - 5,521 166.94 Total 179,010.913 147.790.206 31.053.758 178.843,964 144.314,590 34,696.323 !;J On the other hand, a comparison of the and the ADR of the depots, ITPs and refuellers revealed the following: 103 100 Ibid. 101 Ibid. 102 Ibid. 103 Ibid

DECISION CTA Case Nos. 9738 & 9741 Page 27 of48 Comparison of depots, ITPs and Refueller's LS- Issuances vs ADR (Volume in Liters)- Jet A-1 Fuel� Per ADR (Related to Claim) Sold to International Deliveries of Air Carriers Locally With Sold to Manufactured International Sold to International Per Jet A-1 Fuel Destination/ International Air Carriers Depots/ITPs/ Through LS Sold to Tax- Air Carriers From Out- ~efueller LS Not Related to Exhibit Exempt With Local of-Period No. Point of Sale Issuances Claim Entities Destination Claim Total 294,239 P-317 Laoag ITP 289,40 I 110,144,118 289,401 20,980 4,838 P-318 JOCASP/NAIA 107,427 113,947,505 113,840,078 89,847 3,674,980 Depot 19,625,945 64,049 87,677 531,451 P-319 JOCASP/NAIA 531,451 531,451 4,305 280,910 280,910 334,806 191,063 22,302,590 Depot 22,214,913 6,123,780 2,524,919 353,830 P-320 Palawan Depot 353,830 6,147,644 P-321 Mactan Depot 6,147,644 467,268 19,024 P-322 Iloilo ITP 19,559 754 P-323 Kalibo ITP 754 482,009 P-324 Bacolod ITP 482,009 754 P-325 Davao ITP 14,741 168,079 168,079 Zamboanga 168,079 5,521 P-326 Refueller 5,521 5,521 DMIA/Clark P-382 DeQOt Total 144,314,590 136,785,764 7,433,971 94,855 199,942 144,514,532 Sales/Deliveries to International Air Carriers with Local Destinations and Out-of-Period LI'ffmgs tirom t h e Y ear 2015 - Jet A -I F ueI: Equivalent Excise Tax Volume in at 1'3.67 per Item Exhibit No. Point of Sale Liters Liter Sales/Deliveries to International Air Carriers with Local Destination: P-318 JOCASP/NAIA Depot 20,980 1'76,996.60 235,059.83 P-321 Mactan Depot 64,049 15,799.35 P-323 Kalibo Depot 4,305 20,262.07 P-382 DMIA/Ciark DeQot 5,521 Table 12 94,855 348.117.85 Out-of-Period Liftings from the Year 2015: P-317 Laoag ITP 4,838 17,755.46 P-318 JOCASP/NAIA Depot I 07,427 394,257.09 P-321 Mactan DeQot 87,677 321,774.59 Table 3113 199.942 733,787.14 Total downward adjustments 294,797 1'1,081,904.99 For the sales of locally manufactured unleaded gasoline fuel delivered directly by the SL Harbor depot, the ICPA traced the deliveries of the same to / tax-exempt entities using the supporting ORBs, SRRs, and DNs, as follows~

DECISIOI' CTA Case Nos. 9738 & 9741 Page 28 of48 ORB Issuances vs. DN Volume in Liters -Unleaded Gasoline Fuel: Exhibit Exhibit No. Particulars Exhibit Nos. Per ORB Nos. Difference Unleaded (Base) P-370-1 to P- P-372-1 to P-372 Gasoline Fuel 370-12 710,000 P-372-12 710,000 226,070 Unleaded (Blaze) P-371-1 to P- P-372-1 to P-373 Gasoline Fuel 371-12 226,070 P-372-12 Total 936,070 936,070 From the foregoing, locally manufactured Jet A-1 fuel and unleaded gasoline fuel manufactured were sold and delivered to various air carriers of Philippine or foreign registry for the latter's use or consumption outside the Philippines and to alleged tax-exempt entities except for certain variances noted by the ICPA, which are summarized at the end of this Decision. The locally manufactured petroleum products were billed and collected net ofexcise tax. The deliveries of locally manufactured Jet A-I fuel and unleaded gasoline fuel were billed and collected without any excise tax. In arriving at this conclusion, this Court compared the details per ADRs or DNs of the depots, ITPs, and refueller to the corresponding Sis billed to airline companies. The details of the Sis were then traced to the pricing conditions in petitioner's SAP. The tracing resulted in the following: 104 Exhibit Nos. Depot/ITPs/Refueller ADRs Sis SAP-Pricing Laoag lTP P-317-1 to P-317-74 P-327-1 to P-327-74 Conditions P-327-75 to P-327-148 104 Ibid.

DECISION CTA Case Nos. 9738 & 9741 This Court then found that petitioner's Sis show the volume in liters, while the invoice amount is in US dollars (USD) for Jet A-1 fuel and Philippine peso (PHP) for unleaded gasoline fuel. The volume of locally manufactured Jet A-1 fuel in liters is converted into US barrels multiplied by the contract price per US barrel to arrive at the billable amount in US dollars. 105 Furthermore, the face of the Sis for locally manufactured Jet A-1 fuel and unleaded gasoline fuel bears the note "No excise tax billed". Thus, petitioner's Sis tied up with the SAP pricing condition where no excise tax was charged to international carriers and tax-exempt entities are as follows: 106 ADR vs SI- Jet A-1 Fuel� Sl Volume (In Liters) ADR Exhibit Point of Sale I Exhibit I Volume Exhibit Related to INot Related I Total Equivalent No. Nos. (In Liters) Nos. Claim to Claim USD Amount Laoag ITP P-317-1 to P-327-1 to 289,401 10,003 299,404 US$171.204.13 P-327 P-317-74 289,401 P-327-74 P-328 JOCASPINAIA Depot P-318-1 to P-318-199 P-328-1 to P-319-1 to 3,674,980 P-328-44 3,674,980 28.293,163 31,968.143 11,844,965.10 P-319-42 P-329 JOCASP/NAIA Depot P-320-1 to P-329-1 to P-320-60 531,451 P-329-5 P-321-1 to 531,451 4.682.022 5.213,473 1.891,680.11 P-321-207 P-330-1 to P-330 Palawan Depot P-322-1 to 191.063 P-330-60 P-322-2 P-331-1 to 191,063 191,063 68.57342 2,524,919 P-331-44 P-331 Mactan Depot P-332-1 to 19.024 P-332-2 2,524,919 7,679,666 10.204,585 4,450,984.66 P-332 Iloilo ITP 19,024 19,024 12,5321;/ 105 Ibid. 106 Ibid.

DECISI0:-1 CTA Case Nos. 9738 & 9741 Page 30 of48 P-333 Kalibo ITP P-323-1 to P-333-I to 19.559 19,559 10,147.66 P-334 Bacolod ITP P-323-5 19,559 P-333-5 P-335 Davao ITP 754 12,592 13,346 6.637.02 P-336 Zamboanga Refueller P-324-1 to 754 P-334-1 P-324-2 P-335-1 to 14,741 14,741 7.243.09 P-325-1 to 14,741 P-335-3 168,079 168,079 66,560.76 P-325-3 P-336-1 to P-326-1 to 168,079 P-336-88 P-326-88 Total 7,433,971 7,433.971 40,677,446 48.11 1.417 US$18,530,528.05 ON vs SI - Unleaded Gasoline Fuel� DN Sl Volume Volume Equivalent (In PHP Amount Exhibit No. Particulars Exhibit No. Inn Liters\ Exhibit No. Liters) !'24.478.187.60 P-374 Base Gasohne P-375 Blaze Gasoline P-372-1 to P-372-41 710,000 P-374-1 to P-374-41 710,000 7.468.324.25 P-373-1 to P-373-34 226,070 P-375-1 to P-375-34 226.070 Total 936.070 936.070 !'3 1.946.51 1.85 SI vs. SAP Pncm~ cond'tt.lon- JetA-! Fue: Sl I SAP Pricin Condition Exhibit Exhibit 1 USD I Duty Total USD Equivalent No. Point of Sale PHPAmount Laoag ITP No. Amount Exhibit No. US$ Amount Rate* Amount I P-327 !'8.174.444.05 P-328 JOCASPINAIA P-327-1 to P-327-75 to 171,204.13 uss- US$171.204.13 549,664.737.42 Del:!ot P-327-74 171.204.13 P-327-148 11.844.965.10 P-329 JOCASPINAIA P-328-1 to 11.844,965.10 1.891,680.11 87,635.864.45 Derot P-328-44 P-328-45 to 1,891.680.11 68,573.42 3.206,499.47 P-330 Palawan Depot 11.844.965.10 P-328-88 68.573.42 4,450.984.66 207.729.010.25 P-329-1 to 4.450.984.66 12.532.10 P-331 Mactan Depot P-329-5 P-329-6 to 12,532.10 10.147.66 588,626.44 1,891,680.11 P-329-10 10,147.66 6.637.02 485.748.34 P-332 Iloilo ITP P-330-1 to 6.637.02 7.243.09 315.517.29 P-330-60 P-330-61 to 7.243.09 66.560.76 350.286.02 P-333 Kalibo ITP P-331-1 to 68.573.42 P-330-120 66.560.76 3,237.241.39 P-331-44 P-334 Bacolod ITP P-332-1 to P-331-45 to P-335 Davao ITP P-332-2 4.450.984.66 P-331-88 P-333-1 to P-336 Zamboanga P-333-5 P-332-3 to Rcfueller 12,532.10 P-332-4 P-334-1 P-333-6 to P-335-1 to 10.147.66 P-333-10 P-335-3 6.637.02 P-334-2 P-336-1 to P-335-4 to P-336-88 7,243.09 P-335-6 P-336-89 to 66.560.76 P-336-176 Total 18.530,528.05 uss- 18.530.528.05 US$18.530.528.05 !'861.387,975.12 * Duty rate pertains to excise tax billed to customers. SI vs. SAP Pricing Condition- Unleaded Gasoline Fuel Sl SAP Pricing Condition Exhibit Exhibit I Exhibit I Dutv I Total PHP No. Particulars No. PHP Amount No. I PHP Amount Rate* Amount Unleaded (Base) P-374-1 to P-374-42 to 1'24.478,187.60 jL 1'24.478,187.60 P-374 Gasoline Fuel P-374-41 1'24.478.187.60 P-374-82 7.468.324.25 7.468.324.25 P-375-1 to Unleaded (Blaze) P-375-34 P-375-35 to P-375 Gasoline Fuel 7.468,324.25 P-375-68 Total !'31,946.511.85 !'31.946,511.85 jL 1'31.946,511.85 * Duty rate pertains to excise tax billed to customers. Collections of SAP-generated Sis are made through inward remittances by petitioner's customers. An inward remittance of a customer normally covers payment of several invoices. However, the airline company and tax- / exempt entities do not provide details of the invoices against which thV'

DECISION CTA Case Nos. 9738 & 9741 Page31of48 collection would be applied. As such, petitioner applies the collection on the outstanding invoices on a first-in, first-out basis. 107 The amount of collections as per SAP clearing, inward remittances/bank advices, Official Receipts ("ORs"), and bank certifications reconciles with the amount billed to international carriers and tax-exempt entities. This proves that petitioner has not collected any excise tax from its customers, as shown below: 108 SI vs. SAP Clearing and Inward Remittance/Bank Certification/OR- Jet A-1 Fuel: Particulars Exhibit Amount Amount No. (in USD) (in PHP) Per SI: Per Books (General Ledger") P-327 to US$18,530,528.05 P861,387,975.12 P-336 ("GL"): P-347-1 to Per SAP Clearing P-347-112 US$18,530,528.05 P861,387,975.12 Per Collection documents: P-347-113 to 12,003,208.57 558,728,005.60 Inward Remittance/ P-347-227 6,527,319.48 302,659,969.52 Bank Certifications P-347-228 to Official Receirts P-347-246 US$18,530,528.05 P861,387,975.12 SI vs. SAP Clearing and Inward Remittance/Bank Certification/OR - Unleaded Gasoline Fuel: Particulars Exhibit Amount Per SI: No. (in PHP) Per Books (GL): P31 ,946,511.85 P-374 to P-375 Per SAP Clearing P31 ,946,511.85 Per Collection documents: P-378-1 to P-378-22 P31,946,511.85 Per Official Recei ts P-378-23 to P-378-53 107 Ibid 108 Ibid

DECISION CTA Case Nos. 9738 & 9741 Petitioner erroneouslv oaid excise tax on its imported Jet A-1 fuel sold to international carriers and tax- exempt entities. Importations of Jet A-1 fuel were made during the period 23 December 2015 to 31 December 2016. Petitioner imported Jet-A-1 fuels, as evidenced by a Import Entry and Internal Revenue Declaration ("IEIRD"), 109 and submitted a Loadport Survey Report ("LSR")110 to the BOC within the period from 23 December 2015 to 31 December 2016. Petitioner paid the initial taxes and duties based on a tentative liquidation at the time of arrival. The tentative liquidation for purposes of paying the said taxes and duties is based on the product and quantity reported in the BL111 and the estimated price of the commodity at the time of payment. 112 The paid taxes and duties are supported by CPR, 113 which is acknowledged and signed by the head of the BOC office in the Port of Limay. 114 After payment oftaxes and duties based on the tentative liquidation, the Jet A-1 fuel was released from the BOC's custody and delivered for storage at the PBRY5 After release from the BOC, petitioner hired an independent surveyor to determine the volume of imported Jet A-1 fuels on board the vessel, which was compared with the volume of imported Jet A-1 fuels received and stored at the storage tanks in the PBR. The surveyor's Certificate of Independent Survey ("CIS")116 certifies the completion of the arrival of the vessel carrying the imported Jet A-1 fuels at Limay, Bataan and the discharge or withdrawals of said fuels from the vessel to the PBR's storage tanks. 117 Volumes varied depending on when the fuel was gauged are indicated in the CIS. Petitioner explained that the variations of volumes from the BL versus the actual volume per CIS are due to several factors such as temperature, density ofthe product at the time of soundings, sea condition (f o / cargo vessel's figures), equipment used for the measurements, and others. The volume per CIS as the actual volume of imported Jet A-1 fuels was used a 109 Exhibits. "P-204- I-imported.. to "P-204-12-imported". 110 Supplemental Judicial Affidavit of Ms. Dayego dated October 20, 2020 marked as Exhibit "P-190- imported". 111 Exhibits. "P-203-11-imported" to "P-203-22-imported". 112 Supplemental Judicial Affidavit of Ms. Dayego dated October 20, 2020 marked as Exhibit "P-190- imported". 113 Exhibits. "P-204-13-imported" to "P-204-36-imported". 114 Supplemental Judicial Affidavit of Ms. Dayego dated October 20, 2020 marked as Exhibit "P-190- imported". 115 Ibid. 116 Exhibits. "P-203- I-imported.. to "P-203- I0-imported". 117 Supplemental Judicial Affidavit of Ms. Dayego dated October 20, 2020 marked as Exhibit "P-190- imported".

DECISIO~ CTA Case Nos. 9738 & 9741 Page 33 of48 the basis for recording in the petitioner's PBR- Official Register Book (PBR - ORB)118 signed by the Revenue Officer on Premise (ROOP) and in the GL 119 of the petitioner's SAP-Computerized Accounting System (SAP) and in computing the final tax assessments by the BOC. 120 As soon as the price has been finalized and the vendor's Commercial Invoice ("CI")121 becomes available, petitioner files an application for ATRIG122 with the BIR.123 When the BL, CI, ATRIG, CIS, and marine risk insurance policy are available, petitioner submits these to the BOC for final assessment. 124 Due to various factors affecting the volume of the imported Jet A-1 fuels, the actual volume of imported Jet A-1 fuels per CIS may be higher or lower than the volume per the BL that was used for the tentative liquidation and the initial payment of taxes and duties. For instances when the actual volume of imported Jet A-1 fuels per CIS is higher than the volume per BL, petitioner pays the additional duties and taxes as supported by the CPR,125 which is acknowledged and signed by the head of BOC's office in Port of Limay. 126 After the date of final payment, petitioner requests for the BOC Certification127 to summarize all payments made to the BOC in relation to the importation. 128 On the other hand, where the volume per the CIS is lower than the volume per the BL, petitioner absorbed the equivalent losses for the overpaid taxes because this will not be reflected in the IEIRD nor refunded by the BOC to the petitioner. 129 After release from the BOC, the imported Jet A-1 fuels at the PBR are stored and commingled with locally manufactured Jet A-1 fuels as allowed b y / the Commingling Permit Nos. ELTRD (P)-028-01-15-12537130 and ELTRD 118 Exhibits. "P-205-11-imported" to "P-205-15-imported"'. 119 Exhibits. "P-211-1-imported", "P-211-1-1-imported" to "P-211-1-102-imported". 120 Supplemental Judicial Affidavit of Ms. Dayego dated October 20, 2020 marked as Exhibit "P-190- imported". 121 Exhibits. "P-203-1-imported" to "P-203-1 0-imported". 122 Exhibits. "P-204-49-imported" to "P-204-60-imported". 123 Supplemental Judicial Affidavit of Ms. Dayego dated October 20, 2020 marked as Exhibit "P-190- imported". 124 Ibid 125 Exhibits. "P-204-13-imported" to "P-204-36-imported". 126 Supplemental Judicial Affidavit of Ms. Dayego dated October 20, 2020 marked as Exhibit "P-190- imported". 127 Exhibits. "P-204-37-imported" to "P-204-48-imported". 128 Supplemental Judicial Affidavit of Ms. Dayego dated October 20, 2020 marked as Exhibit "P-190- imported". 129 Ibid 130 Exhibit "P-202-1-imported".

DECISION CTA Case Nos. 9738 & 9741 Page 34 of48 (P)-028-01-16-15847131 which are valid from 1 January 2015 until 31 December 2015 and 1 January 2016 until 31 December 2016, respectively. 132 The movement of imported Jet A-1 fuels is documented by a Cargo Intake Certificate ("CIC"), 133 which is based on the volume shown in the CIS as KL at air. 134 The CIC is a SAP-generated internal control document prepared at the PBR and supports the recording of the transaction in the PBR- ORB and in the GL. Per the ICPA Report, petitioner's importations for the period 23 December 23,2015 to 31 December 2016 are as follows: Summa of Im ortations for the eriod 23 December 2015 to 31 December 2016: Importation'/ Amonntof Vessel Name Arrival Date' Date of Pa ment Excise Tax Paid Intan Glory December 24-27, 2015 December 23,2015 3 12,265,200 45,013,284.00 and March 30, 20164 Maluku Palm December 29, 2015 to December 29, 2015 3 and 12,826,889 47,074,682.63 January 1, 2016 March 7, 2016 4 Ocean Lynx January 15-17,2016 January 14, 2016 3 10,827,974 39,738,664.58 and May 23, 2016 4 Songa Diamond February 8-11,2016 February 10, 2016 3 13,228,124 48,547,215.08 and May 30, 2016 4 Everhard Schulte April2-4, 2016 Aprill,2016 3 and 18,533,294 68,017,188.98 June 30,2016 4 Ardmore Capella April9-13, 2016 April 8, 2016 3 and 12,818,819 47,045,065.73 July 25,2016 4 Rio Daytona April 22-24, 2016 April21, 2016 3 and July 12,738,576 46,750,573.92 25,2016 4 Au lac Diamond April28-30, 2016 May 16,2016 3 and 12,197,188 44,763,679.96 July 25,2016 4 Aulae Diamond May 7-9, 2016 May 16,2016 3 and 12,462,699 45,738,105.33 September 20, 2016 4 Aulae Jupiter May 9-12,2016 May 16,2016 3 and 12,874,308 47,248,710.36 Se tember 7, 2016 4 Total 130,773,071 1"479,937,170.57 1 We noted that there were no importationsfrom May 13. 2016 up to December 31. 2016. 2 Arrival date is considered the last day when the importedJet A�l fuel werefoJJy discharged/rom the vessel to the Petitioner's storage tanks in Bataan Refinery (PBR). J Date when the duties and taxes have been paid based on tentative liquidation. ~ Date when the duties and taxes have been paid based on final assessment. 131 Exhibit "P-202-2-imported". 132 Supplemental Judicial Affidavit of Ms. Dayego dated October 20, 2020 marked as Exhibit "P-190- imported". 133 Exhibits. "P-205-1-imported" to "P-205-10-imported". 134 Supplemental Judicial Affidavit of Ms. Dayego dated October 20, 2020 marked as Exhibit "P-190- imported".

DECISION CT A Case Nos. 9738 & 9741 Upon tracing the Petitioner's importations with the vendors' Cis135 and the related BLs136 for the period from 23 December 2015 to 31 December 2016, it was verified that the total volume of the ten (10) importations per the vendors' Cis ties up with the total volume per BLs as follows: 137 Cis vs BLs: ~~----------------------------------------,---~~-------- Volume Particulars (In Barrels) Per Cis 815,180.000 Per BLs 815,180.000 Difference This shows that importations of Jet A-1 fuel were indeed made during the period 23 December 2015 to 31 December 2016. Petitioner paid the corresponding excise tax on the importation of Jet A-1 fuel. Upon tracing the details of the vendor's Cls138 to the corresponding IEIRDs, 139 CPRs,l40 BOC Certifications,141 BIR ATRIG,I 42 and CIS,I43 the ICPA verified that petitioner reported and paid the corresponding duties and taxes on these importations, with a total volume of 130,773,071 liters, and corresponding excise tax ofPhp481, 164,216.00, as shown in the Summary of Comparison of Cis with IEIRDs, CPRs, BOC Certifications, BIR ATRIG and CIS for the period from December 2015 to September 2016,144 summarized as follows: Cis vs IEIRD, CPR, BOC Certifications, ATRIG and CIS: Amounts Particulars 130,773.071 1,000 Total volume per CIS- 815,180.000 Barrels (KL at air) 130,773,071 Multiply by: Equivalent liters per KL !>3.67 Total volume per CIS (liters at air) Multiply by: Equivalent excise tax per liter !>479,937,170.57 Amount of excise tax that should have been paid 481 '164,216.00 Actual amount of excise tax paid 111,227,045.43 135 Exhibits. "P-203-1-imported" to "P-203-1 0-imported". 116 Exhibits. "P-203-11-imported" to "P-203-22-imported". 137 Supplemental Judicial Affidavit of Ms. Dayego dated October 20, 2020 marked as Exhibit "P-190- imported"; Exhibit "P-203-imported". 138 Exhibits. "P-203-1-imported" to "P-203-1 0-imported". 139 Exhibits. "P-204-1-imported" to "P-204-12-imported". 140 Exhibits. "P-204-13-imported" to "P-204-36-imported". 141 Exhibits. "P-204-37-imported" to "P-204-48-imported". 142 Exhibits. "P-204-49-imported" to "P-204-60-imported". 141 Exhibits. "P-204-61-imported" to "P-204-70-imported". 144 Exhibit "P-204-imported".

DECISJO:-. CTA Case Nos. 9738 & 9741 Page 36 of48 Petitioner explained that the overpayment pertains to the net effect of the movement in volume of the imported Jet A-1 fuels. There are instances where the volume of imported Jet A-1 fuels per CIS is lower than the volume per BL resulting to a loss, representing the overpayment of taxes paid, on the part of petitioner. However, the difference has no effect on petitioner's claim for refund since the claim is based on the amount of excise tax that "should have been paid" by petitioner, which, in this case, is less than what had actually been paid. 145 The CIS 146 was also compared with the CIC 147 and the volume received as shown in the monthly PBR-ORBs148 submitted by petitioner to the BIR to confirm that the volume used by petitioner as a basis for the payment of duties and taxes matches with the volume recorded in the PBR- ORB. Further, petitioner records each transaction to its GL-SAP system which generates a PMMT report where all transfers, whether receipts, issuances, or returns, are recorded among the PBR, Ex-PBR (i.e., SAP temporary account for in-transit inventories) depots, ITPs, and refuellers. 149 These were compared against the volume reflected in the monthly PBR -ORBs. The result of such verification is that the volume of imported Jet A- I fuels per CIS matches with the volume of imported Jet A-1 received and recorded in the CIC, as well as in the SAP-PMMT and PBR-ORB signed by the Revenue Officer on the Premise ("ROOP"), as shown in the Summary of Comparison of Certificates of Independent Survey with Cargo Intake Certificates, Petron Bataan Refinery's Jet A-1 Fuels SAP Product Movements by Movement Type- Receipts and Petron Bataan Refinery- Official Register Books Signed by Revenue Officer on Premise for the Period December 2015 to June 2016,150 summarized as follows: CIS vs CIC, SAP PMMT- Receipts and PBR- ORB - Receipts Volume Particulars !30,773,071 1,000 Total volume per CIS (KL at air) 130,773,071 Multiply by: Equivalent liters per KL 130,773,071/ Total volume per liter at air: CIS CIC, SAP PMMT- Receipts and PBR- ORB- Receipts 145 Consolidated !CPA Report, Exhibit "189-imported". 146 Exhibits "P-204-61-imported" to "P-204-70-imported". 147 Exhibits "P-205-1-imported" to "P-205-1 0-imported". 148 Exhibits "P-205-11-imported" to "P-205-15-imported". 149 Exhibits "P-211-1-imported", "P-211-1-1-imported to P-211-1-102-imported" for PBR; Exhibits "P- 212-1-imported", "P-212-1-1-imported to P-212-1-187-imported" for Ex-PBR. 150 Exhibit No. "P-205-imported."

DECISION CT A Case Nos. 9738 & 9741 Difference Likewise, the invoices claimed under the Product Replenishment Scheme for the period January to August 2016I5I were not reported in the claim for tax refund or issuance ofTCC.152 This proves that the excise tax due on the importation of Jet A-1 fuel was actually paid by petitioner. The volumes and amount imported Jet A-1 fuel removed from the PBR to petitioner's depots then subsequently transferred to another depot, JTPs and refuellers, are accurate and properly supported. From the PBR, the imported Jet A-1 fuel is then transferred to petitioner's depots spread across the Philippines. Subsequently, the same is transferred from the said depots to other depots, ITPs, and refuellers prior to the same being delivered and sold to end customers. I53 As shown above, petitioner operates various depots where its petroleum products are stored before delivery to various airline companies. Upon receipt of imported Jet A-1 fuels by the PBR, petitioner schedules delivery to the depots through cargo vessels depending on the latter's inventory requirements. Imported Jet A-1 fuels are directly transferred from the PBR to the depots. I54 Each transfer or delivery of imported Jet A-1 fuels and by the PBR is supported by a Cargo Outturn Certificate ("COC"Y55 if the transfer was made through a cargo vessel or a Stock Transfer Out- Delive9.: / Y Note ("STO-DN"Y56 ifthe transfer was made through tank trucks, and WC. 1 151 Exhibits "P-208-imported". 152 Supplemental Judicial Affidavit ofMs. Dayego, dated 20 October 2020, Exhibit No. "P-190-imported.": Exhibits "P-208-imported", "P-20 !-imported", "P-209-imported", "P-21 0-imported". 153 Ibid. 154 Ibid. 155 Exhibits "P-206-6-imported" to "P-206-91-imported". 156 Exhibts "P-307-1-1 to P-307-1-962", "P-307-2-1 to P-307-2-1621", "P-307-3-1 to P-307-3-1859", "P- 307-4-1 to P-307-4-153", P-307-5-1 to P-307-5-390", "P-307-6-1 to P-307-6-319", "P-307-7-1 to P- 307-7-58", "P-307-9-1 to P-307-9-238", "P-307-10-1 to P-307-10-363", "P-307-11-1 to P-307-11-366" and "P-307-12-1 to P-307-12-328". 157 Exhibits "P-207-1-imported to P-207-86-imported".

DECISION CTA Case Nos. 9738 & 9741 Upon receipt and recording ofthe imported Jet A-1 fuels from the PBR, a Jet A-1 LS 158 is used to account for the movement of every shipment or receipt of petroleum products (inventories) and their corresponding deliveries to another depot (i.e. inter-facility transfers) or to air carriers (i.e. sale). 159 The LS is prepared by the depots upon transfer or sale of a particular shipment of the imported Jet A-1 fuels, which is normally within one to two days from the receipt of the inventories. WC, COC, and ere numbers are indicated in the LS. The CrC reference number in the LS is the same as that of the COC. 160 The receipt of the cargo by the depot is recorded in the GL through the PMMT by accepting the transfer initially recorded by the PBR based on the COC reference number. 161 Once accepted by the depot, the GL-SAP, through the PMMT, also generates the ere reference number. Then, the movement of the imported Jet A-1 fuels is generated from the SAP system using the PMMT report, which is then used by the depot in its daily preparation of LSs. 162 Upon verification, this Court found that the volume of imported Jet A- 1 fuel delivered from the PBR to the depots matches with the COC and the WC submitted to the BrR and, thus, were sourced from importation of Jet A- 1 fuel during the period from 23 December 2015 to 31 December 2016: 163 PRB-ORB- Issuances vs SAP-Generated PBR-ORB- Issuances: Particulars Volume (In Liters) Total Issuances: 136,469,568 Per PBR-ORB Per COC by PBR: Davao Depot 5,215,805 Iloilo Depot Navotas Depot 4,156,186 Rosario Depot 25,193,526 SL Harbor Center Depot 2,346,865 83,073,993 Mactan Depot 13,398,674 / Palawan Depot 450,034/ 158 Exhibits "P-221-1-imported to P-221-5-imported", "P-222-1-imported to P-222-4-imported", P-223-1- imported to P-223-20-imported", "P-224-1-imported to P-224-2-imported", "P-225-1-imported to P- 225-55-imported", "P-226-1-imported to P-226-8-imported", "P-227-1-imported", and "P-228-1- imported to P-228-3-imported". 159 Supplemental Judicial Affidavit of Ma. Clarissa C. Arguelles, dated I0 September 2020, Exhibit "P- 190-imported". 160 Ibid. 161 Ibid. 162 Ibid. 163 Supplemental Judicial Affidavit of Ms. Dayego, dated 20 October 2020, Exhibit "P-190-imported".

DECISION 2,062,324 136,469,568 CTA Case Nos. 9738 & 9741 572,161 Page 39 of48 Zamboanga Depot Others Difference SAP-Generated PBR-ORB- Issuances vs De ots' COC and WC: Volume (lu Liters) Particulars Per SAP-Generated PBR-ORB- lssuances 164 136,469,568 Per COC and WC 165 136,469,568 Difference Moreover, a comparison166 of the WCs from the PBR167 with the WC reference number indicated in the LS of the depots,l68 and a summary of the related receipts and issuances for the said depots from petitioner's PMMT report,169 as well as the journal entry print-outs of Jet A-1 fuels170 will show that the volume of imported Jet A-1 fuel delivered by the PBR matches with the volume received by the respective depots: PBR- Issuances er WC vs Depots- Receipts per LS and ORB (Volume in Liters): Per ORB Volume received by depots PerWC Per LS Gross Not Related to volume Depots Exhibit Withdrawals received In-transit !Net volume to Exhibit Related to Claim No. from PBR gain (loss) be received Difference1 No. Claim P-221- Davao Imported 5.215.805 5.215.805 (166,371) 5,049.434 - P-229 5.049.434 17 P-222- Iloilo Imported 2,917.230 2.917.230 (25.475) 2,891.755 - P-230 2.891.755 1,230.402 P-223- Navotas Imported 25.193.526 25.193.526 (20.436) 25,173.090 - P-231 25.173.090 (1,610) P-224- Rosario Imported 2.346.865 2.346,865 (18,045) 2,328,820 - P-232 2.328.820 24.401 P-225- Imported (114.091) 81,483.148 - P-233 81.483.148 20.866.325 SL Harbor 81,597,239 81,597.239 P-226- Mactan Imported 13,398,674 13,558,003 (37,310) 13,520,693 ( 159.329) P-234 13,520.693 1.125.123 164 Exhibit "P-206-imported". 165 Exhibits "P-206-imported" and "P-207-imported". 166 Exhibits "P-221-imported to P-228-imported". 167 Exhibits "P-207-1-imported to P-207-86-imported". 168 Exhibits "P-221-1-imported to P-221-5-imported", "P-222-1-imported to P-222-4-imported", "P-223- 1-imported to P-223-20-imported", "P-224-21-imported to P-224-2-imported", "P-225-1-imported to P-225-55-imported", "P-226-1-imported to P-226-8-imported", "P-227-1-imported", and "P-228-1- imported to P-228-3-imported". 169 Exhibits "P-229-imported to P-236-imported". 170 Exhibits "P-213-1-1-imported to P-213-1-5-imported", "P-214-1-1-imported to P-214-1-4-imported", "P-215-1-1-imported to P-215-1-22-imported", "P-216-1-1-imported to P-216-1-2-imported", "P-217- 1-1-imported to P-217-1-55-imported", "P-218-1-1-imported to P-218-1-8-imported", "P-217-1-1- imported to P-217-1-55-imported", "P-218-1-1-imported to P-218-1-8-imported", P-219-1-1- imported", "P-220-1-1-imported to P-220-1-3-imported".

DECISION CTA Case Nos. 9738 & 9741 Per ORB Volume received by depots PerWC PerLS Gross Not Related to volume Depots Exhibit Withdrawals received In-transit Net volume to Exhibit Related to Claim No. from PBR gain (loss) be received Difference 1 No. Claim P-227- Palawan Imported 450.034 450.034 (5.576) 444.458 - P-235 444.458 - P-228- Zamboanga Imported 2.062.324 2.062.324 I 1.027 2.073,351 - P-236 2.073.351 - Total 133,181,697 133,341,026 (376,277 132,964,74 (159,329 132,964,741 23,244,658 To reiterate, in-transit gain or loss pertains to the effect of the variations of the volume of imported Jet A-1 fuels due to several factors. 171 For the transfer of imported Jet A-1 fuel from a depot to other depots, ITPs, and refuellers, a comparison was made between the volume of imported Jet A-1 fuel delivered by the respective depots with the volume received by other depots, ITPs and refueller by obtaining the latter's corresponding LSs. 172 The comparison revealed that the volume of the imported Jet A-1 fuels delivered by the depots differs from the volume actually received by the respective ITPs and refueller, as provided below: Comparison of Depots LS Issuances with SAP PMMT- Issuances and Depot/ITP/ Refueller LS Receipts (Volume in Liters) Per SAP Total Issuances- Per Depot LS PMMT- Per Depots -Issuances Issuances Depots/ITPsi Direct to Depots/ Exhibit Subject to Related to Refueller LS- Delivery to Difference ITPs/Refueller No. Claim Claim ~ifference Receipts Customers Davao depot to Davao P-253- 4,345,110 ITP Imported 4,345,110 4,345,110 Iloilo depot to: P-254- 300,000 300,000 300,000 lloi1o lTP Imported 40,000 Mactan depot P-254-5- 40,000 40,000 2,471,755 Kalibo ITP Imported 2,811,755 2,441,755 2,411,755 30,000 (30,000) SL Harbor depot to: P-255- 30,000 (30,000) lm~orted 2,781,755 2,751,755 P-256- 80,832,471 JOCASP/NAIA depot Imported 80,832,471 80,832,471 38,000 P-257- 7 (_ Laoag ITP Imported 38,000 38,000 80,870,471 80,870,471 80,870,471 171 Consolidated ICPA Report, Exhibit P-189-imported. 172 Exhibits "P-253-1-imported to P-253-5-imported", "P-254-1-imported to P-254-4-imported", "P-254- 5-1-imported", "P-255-1-imported to P-255-4-imported", "P-256-1-imported to P-256-55-imported", "P-258-1-imported to P-258-20-imported" and "P-259-1-imported to P-259-2-imported", "P-257-1- imported to P-257-2-imported", "P-260-1-imported to P-260-3-imported".

DECISION CTA Case Nos. 9738 & 9741 Page41of48 Navotas depot to P-258- 24,893,090 JOCASP/NAIA depot Imported 24,893,090 24,893,090 Rosario depot to JOCASP/NAIA depot P-259- Imported 80,000 80,000 80,000 Mactan depot to P-294- 10,138,509 10,138,509 10,138,509 Customers Imported Palawan depot to P-295- 10,658 10,658 10,658 Customers Imported Zamboanga depot to P-260- 1,719,555 Zamboanga refueller Imported 1,719,555 1,719,555 (30,000) Total 124,839,148 124,809,148 30,000 114,719,981 10,149,167 Thus, the volumes and amounts of imported Jet A-1 fuel removed from the PBR to petitioner's depots then subsequently transferred to other depots, ITPs, and refuellers are accurate and properly supported, aside from those noted variances which are summarized at the end of this Decision. The imported Jet A-1 fuel was sold and delivered to various air carriers of Philippine or foreign registry for the latter's use or consumption outside the Philippines and to alleged tax-exempt entities. To reiterate, petitioner prepares and generates the Sis under its SAP,173 in accordance with the commercial terms and orders stated in the respective contracts executed between the Petitioner and the airline companies. The summary of ADRs174 covering the period billable to the airline companies forms an integral part of the SI as proof that the volumes of imported Jet A-1 fuels were delivered to the air carriers. All Sis involving sales of imported tax-paid Jet A-1 to air carriers of Philippine or foreign registry on their use or consumption outside the Philippines and to tax-exempt entities shall carry a "No Excise Tax Billed" notation, while an invoice involving the sale of imported tax-paid Jet A-1 fuels to air carriers for domestic flights does not carry such notation_l75 Furthermore, the amounts per SI for sale of imported Jet A-I fuels to international air carriers on their use or consumption outside the Philippines / and to tax-exempt entities are dollar-denominated and translated to Philippine_........... 173 Exhibits "P-277-1-imported to P-277-57-imported", "P-278-1-imported to P-278-6-imported", "P-279- 1-imported to P-279-36-imported", "P-280-1-imported to P-280-144-imported", "P-281-1-imported to P-281-8-imported", "P-282-1-imported to P-282-92-imported"', "P-283-1-imported to P-283-3- imported", "P-284-1-imported to P-284-82-imported."' 174 Exhibits "P-269-1-imported to P-269-216-imported"', "P-270-1-imported to P-270-20-imported"', "P- 271-1-imported to P-271-250-imported", "P-272-1-imported to P-272-3070-imported", "P-273-1- imported to P-273-8-imported", "P-274-1-imported to P-274-805-imported", "P-275-1-imported to P- 275-3-imported", "P-276-imported to P-276-93-imported". 175 Supplemental Judicial Affidavit of Ms. Dayego, dated 20 October 2020, Exhibit "P-190-imported".

DECISION CTA Case Nos. 9738 & 9741 peso using the prescribed rates by petitioner, which are in accordance with the contract and adjusted at end of the month in the SAP based on Philippine Dealing System rate. 176 Petitioner also prepares the LS indicating the disposition of the Jet A-1 fuels received.177 The LS shows the source ofthe Jet A-1 fuel, whether it came from importations or local production, and where the Jet A-1 fuels were delivered, either international or domestic deliveries. 178 Thus, based on the LS, it was determined that the Jet A-1 fuel delivered to international air carriers on their use or consumption outside the Philippines and to tax-exempt entities were sourced from importations for the period from 23 December 2015 to 31 December 2016. The following table summarizes the LS movements for the receipts and issuances of imported Jet A-1 fuel: 179 LS Movements- Recei ts and Issuances (Volume in Liters): Per Per LS- Issuances Depots/ITPs/ Direct Depots/ITPs/ Exhibit Refueller LS Delivery to Subject to Not Subject Total Refueller No. -Receipts Customers Claim to Claim Davao ITP P-262- 4,345, II 0 I ,642,509 2,702,601 4,345,110 Iloilo ITP Imported 300,000 155,056 144,944 300,000 P-263- Imported P-263-1- Mactan depot Imported 40,000 40,000 40,000 2,471,755 2,344,015 2,471,755 Kalibo ITP P-264- Imported 127,740 JOCASP/NAIA depot P-265- I 05,805,561 20,842,345 Imported I 05,805,561 84,963,216 38,000 29,360 38,000 Laoag ITP P-266- - 10,138,509 8,640 10,658 10,138,509 Imported 10,658 10,138,509 1,719,555 Mactan depot P-242- 166,894 I 0,658 Imported 1,552,661 1,719,555 Palawan depot P-243- Imported Zamboanga P-267- refueller Imported Total 124,869,148 114,719,981 10,149,167 99,490,217 25,378,931 Thus, the imported Jet A-1 fuel was sold and delivered to various air carriers of Philippine or foreign registry for the latter's use or consumption / outside the Philippines and to alleged tax-exempt entities, except for certain/ 176 Consolidated ICPA Report, Exhibit "P-189-imported"; Judicial Affidavit ofMa. Clarissa C. Arguelles, dated 25 October 2018, Exhibit "P-170-imported". 177 Judicial Affidavit of Allan James T. Tenorio, dated 25 October 2018, Exhibit "P-174-imported". 178 Ibid 179 Consolidated !CPA Report, Exhibit "P-189-imported"; Judicial Affidavit of Mr. Pausing, dated 15 October 2018, Exhibit "P-190-imported"; Judicial Affidavit of Allan V. Peczon, dated 25 October 2018, Exhibit "P-173-imported".

DECISION CT A Case Nos. 9738 & 97 41 variances noted by the ICPA and which is summarized at the end of this Decision. The imported Jet A-I fuel was billed and collected net ofexcise tax. The deliveries of imported Jet A-1 fuel were billed and collected from alleged international carriers and tax-exempt entities without any excise tax. In arriving at this conclusion, this Court compared the details per ADRs of the depots, ITPs and refueller to the corresponding Sis billed to airline companies. After which, the details of the Sis are traced to the pricing conditions in petitioner's SAP. The tracing resulted in the following table: 180 Further, petitioner's SI tied up with the SAP pncmg conditions, showing that it did ngrcharge any excise tax to international carriers and tax- exempt entities:fl!l/. 180 Ibid. 181 Ibid.

DECISION CTA Case Nos. 9738 & 9741 ADR vs SI� Sl ADR Volume (In Liters) Exhibit No. Point of Sale Volume I Related to Not Related Equivalent (In Liters) Claim to Claim USD Amount P-277-lmported Davao ITP Total P-278-lmported Iloilo lTP US$746,430.67 P-279-lmported Kalibo lTP 1,494,475 1,494,475 251,122 1,745,597 108,926.64 P-280-lmported JOCASP/NAlA 155,056 155,056 95,334 250,390 2, 184, 136.70 Depot 2,328,608 2,328,608 2,545,837 4,874,445 P-281-lmported Laoag lTP P-282-lmported Mactan Depot 84,974,058 84,974,058 142,580,521 227,554,579 80,588,823.93 P-283-lmported Palawan Depot 29,360 29,360 3,556 32,916 16,836.16 P-284-lmported Zamboanga 10,178,509 10,178,509 16,633,021 26,811,530 10,355,665.81 Refueller 10,658 10,658 10,658 5,334.64 Total 166,894 166,894 166,894 59,734.96 99,337,618 99,337,618 162,109,391 261,447,009 US$94,065,889.51 SI VS. SAP Pn.cm. g CondI'l.ion: Sl SAP Prici~ Condition Exhibit No. Point of Sale USD Amount I Duty Total USD Equivalent US$746,430.67 Peso Amount P-277-lmported Davao ITP 108,926.64 USD Amount Rate* Amount P-278-lmported Iloilo ITP 2, 184,136.70 US$746,430.67 US$ - 1'35,028,291.61 P-279-lmported Kalibo ITP 108,926.64 US$746,430.67 5,087,546.48 P-280-lmported JOCASP/ 80,588,823.93 2, 184,136.70 108,926.64 16,836.16 I 02,316,146.54 NAJA 80,588,823.93 2,184,136.70 I 0,355,665.81 16,836.16 Depot 80,588,823.93 3,773,033,688.44 P-281-lmported Laoag ITP 5,334.64 10,355,665.81 P-282-1 mported Mactan 16,836.16 791,893.70 59,734.96 5,334.64 Depot 10,355,665.81 486,509,800.33 P-283-lmported Palawan 59,734.96 5,334.64 250,503.33 Depot P-284-lmported Zamboanga 59,734.96 2,782,216.59 Refueller Total US$94,065,889.51 US$94,065,889.51 US$ - US$94,065,889.51 1'4,405,800,087.02 � Duty rate pertains to excise tax billed to customers. To reiterate, collections of SAP-generated Sis are made through inward remittances by petitioner's customers, which normally cover the payment of several invoices. However, for the airline company and tax-exempt entities that do not provide details of the invoices against which the collection would be applied, petitioner applies the collection on the outstanding invoices on a first-in, first-out basis. 182 A verification of the amount of collection per SAP clearing, inward remittances/bank advices, ORs, and bank certifications will show that these reconcile with the amount billed to the airline compa~iesd tax-exempt entities and proves that petitioner has not collected any ex se tax from its customers.183 The same is proven by the following table� 182 Consolidated ICPA Report, Exhibit "P-189-imported"; Judicial Affidavit of Allan V. Peczon, dated 25 October 2018, Exhibit "P-173-imported". 183 Ibid

DECISION CTA Case Nos. 9738 & 9741 SI vs. SAP Clearing and Inward Remittance/Bank Certification/OR: Particulars Amount Amount Per SI _{in USD) (in Peso) US$94,065,889.51 P4,405,800,087.02 Per Collection documents: Per SAP Clearing 94,065,889.51 4,405,800,087.02 Per Inward Remittance/Bank Certifications/OR 94,065,889.51 4,405,800,087.02 Petitioner adduced competent evidence showing that the buyers of its petroleum products are international carriers and tax- exempt entities. To repeat, one of the instances where Section 135 ofthe NIRC grants an exemption from excise tax on petroleum products is if the buyer of the petroleum product is an international carrier whose country similarly exempts Philippine international carriers. In the case at bar, petitioner presented the various Air Services Agreements which the Philippines has with the countries of registry of all the international carriers which it transacted with for the sale of Jet A- I fue1. 184 A perusal of said Agreements reveals that the countries of registry similarly provide an exemption from excise tax on the petroleum products sold to international carriers of Philippine registry. Thus, any sale of petroleum products to these international carriers are likewise exempt from excise tax. With respect to the sale of Jet A-1 fuel and unleaded gasoline fuel to alleged tax-exempt entities, petitioner presented evidence185 showing that the entities which purchased such petroleum products are indeed exempt from excise tax on petroleum products. Following this, petitioner has indeed proven that it sold petroleum products to international carriers and tax-exempt entities. It i,s thus entitled to the refund sought pertaining to erroneously paid excise,{ax on petroleum products as provided under Section 185 ofthe NIRC.Y 184 Exhibit '"P-38-imported" to '"P-57-imported", also marked as Exhibits '"P-134" to '"P-141" and '"P-155": Supplemental Judicial Affidavit of Ma. Clarissa C. 190-imported". Arguelles, dated I0 September 2020, Exhibit '"P- 185 Exhibits '"P-105-imported" to "P-109-imported", including sub-markings. and ''P-95" to "P-100".

DECISION CTA Case Nos. 9738 & 9741 Page 46 of48 Petitioner's refund claim must be reduced due to certain unexplained variances noted by the ICPA. swccduoeohmrncitscuamthimrnaaIecrininnavznetaetsdhrdbies,aeutnoacbscromeeduffsoierutsldtnleweuoddcwheotidisfcn:thohh1s8ereu6psrpceerpateuoiudtdrinitoitetenoxdeafprntlihdanfeianifipnealervdsedposervectanootritifoarenpnexefcoptueilnftsaidoipnfnerc.oetliarmtT.iimohTnti,hhseteerhC'esvtooaIvutrCaoiralPtlnuAacmismenisnoothouateuurnedsst CTA Case No. 9738 CTA Case No. 9741 Jet A-I Fuel Jet A-1 Fuel Unleaded Gasoline Fuel Consolidated Volume Amount Amount Amount Total (In Liters) (At 1'3.67 per (At 1'4.35 per Amounts Particulars Volume I (At 1'3.67 per Volume 1'397,296,530.60 Amount of Claim Per Schedule of Liter) Liter) (In Liters) Liter) Excise Tax Paid/ Petition for I(In Liters) 584.737.43 Review I 10.100.00 99,501,062 1'365. I68,897.54 7,728,768 1'28,364.578.56 865,070 1'3,763,054.50 I 10,100.00 Less downward adjustments: Not traced to WC- Mactan 159,329 584,737.43 NA NA NA NA de rot 30.000 I 10, !00.00 NA NA NA NA Not traced to SAP PMMT- 30,000 I 10,100.00 NA NA NA NA Issuances- Kalibo ITP Not traced to Iloilo LS- Issuances- Kalibo ITP Sales/Deliveries to local destinations: Davao ITP Kalibo !TP 148,034 543,284.78 NA NA NA NA 543,284.78 Sales/Deliveries sourced from I 5,407 56,543.69 NA NA 56.543.69 NA NA 39,790.14 importation not subject to I 1.0 I claim: 733.787.14 733.787.14 JOCASP/NAIA de~ot 10,842 39,790.14 NA NA NA NA Difference of Sales/Deliveries per Schedule of Claim and Actual LS- Issuance; Davao ITP 3 I 1.01 NA NA NA NA PBR Removals from 2015 considered as out of ~eriod NA NA 199,942 733,787.14 NA NA 199,942 733.787.14 (Fomardedj (Balance forwarded) Sales/Deliveries to domestic NA NA 20,980 76,996.60 76.996.60 air carriers \Vith local NA NA 64,049 235,059.83 235,059.83 destination: NA NA JOCASP/NAIA de~ot NA NA 4,305 I 5,799.35 15,799.35 Mactan de~ot 5.521 20,262.07 20.262.07 Kalibo ITP 393,615 1,444,567.05 348, I I 7.85 DMIA/Clark deeot 94,855 348, I I 7.85 2.526.472.04 Total downward adjustments 294,797 1,081.904.99 1'3,763,054.50 1'394,770,058.5~ Total 99,107,447 1'363,724,330.49 7,433,971 1'27,282,673.57 865,070 186 Consolidated ICPA Report, Exhibit "P-189-imported".

DECISION CTA Case Nos. 9738 & 974 I Accordingly, petitioner's refund claim is granted up to the following amounts: CTA Particulars Amount Case No. Claim for refund or issuance of TCC pertaining to 1'363,724,330.49 9738 imported tax-paid Jet A-1 fuel Claim for refund or issuance of TCC pertaining to 31,045,728.07 9741 P394,770,058.56 locally manufactured tax-paid Jet A-1 and unleaded gasoline fuels Total WHEREFORE, the consolidated Petitions for Review filed by petitioner Petron Corporation are hereby PARTIALLY GRANTED. Respondent is ORDERED to refund or issue a tax credit certificate in favor of petitioner in the reduced amount of Three Hundred Ninety Four Million Seven Hundred Seventy Thousand Fifty Eight and 56/100 Pesos (Php394,770,058.56) representing erroneously paid excise tax on petroleum products sold to international carriers and tax-exempt entities. SO ORDERED. /-' -~;1tyfA 1~"' MARIA ROWENA MODESTO-SAN PEDRO Associate Justice I CONCUR: -----'"" MA. BELEN M. RINGPIS-LIBAN Associate Justice

DECISIOI'> CTA Case Nos. 9738 & 9741 Page 48 of48 ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the cases were assigned to the writer of the opinion of the Court's Division. Pv. ~ _.,_ <...___ MA. BELEN M. RINGPIS-LIBAN Associate Justice Chairperson CERTIFICATION Pursuant to Article VIII, Section 13 ofthe Constitution and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the cases were assigned to the writer of the opinion of the Court. Presiding Justice