SAN MIGUEL BREWERY INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL SECOND DIVISION SAN MIGUEL BREWERY INC., CTA CASE NO. 9513 Petitioner, Members: -versus- CASTANEDA, JR., Chairperson, and MANAHAN, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE, JUN 13 Z019/ Respondent. x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x DECISION CASTANEDA, JR., J.: THE CASE This Petition for Review filed by San Miguel Brewery Inc., seeks for the following reliefs: (1) To declare as invalid the excise tax rate of P22.25 per liter imposed by respondent on petitioner's relevant beer products; (2) To be refunded or be issued a Tax Credit Certificate in the total amount of P48,266,780.24, representing erroneous, excessive or illegal collection of excises taxes on its beer products for the period January 1, 2015 to December 31, 2015; and~

DECISION CTA Case No. 9513 (3) To declare as void pertinent portions of Revenue Memorandum Circular No. 90-2012 and Revenue Regulations No. 17-2012, respectively. THE FACTS Petitioner alleges that it is a corporation duly organized and existing under the laws of the Republic of the Philippines, with principal address at 40 San Miguel Avenue, Mandaluyong City, Metro Manila. 1 Respondent is the Commissioner of the Bureau of Internal Revenue (BIR), duly appointed to exercise the powers and perform the duties of his office including, inter alia, the power to decide disputed assessments, refunds of internal revenue taxes, fees, other charges, and penalties imposed in relation thereto, or other matters arising under the Tax Code. He holds office at the BIR National Office Building, Agham Road, Diliman, Quezon City. Petitioner alleges that it is engaged in the business of manufacture, sale and distribution of fermented and malt-based beverages, as follows: (1) San Mig Light in bottle and in can, Pale Pilsen in can, San Mig Zero in bottle, San Mig Zero in carton, San Miguel Premium All Malt in bottle, San Miguel Premium All Malt in can, San Miguel Premium All Malt in carton, Super Dry in can, Red Horse in can, San Miguel Flavored Beer-Apple in bottle and San Miguel Flavored Beer-Lemon in bottle (San Mig Light in bottle and in can and other products); and (2) San Mig Light in Keg.2 On January 1, 2013, Republic Act (RA) No. 10351 took effect and effectively amended Section 143 of the National Internal Revenue Code (NIRC) of 1997, as amended. Thus: "SEC. 143. Fermented Liquors. - There shall be levied, assessed and collected an excise tax on beer, lager beer, ale porter and other fermented liquors except r tuba, basi, tapuy and similar fermented liquors in accordance with the following schedule: 1 The Parties, Petition for Review, Docket, Vol. I, p. 13. 2 Statement of Facts, Petition for Review, Docket, Vol. I, p. 14.

DECISION CTA Case No. 9513 XXX XXX XXX Effective on January 1, 2015 (a) If the net retail price (excluding the excise tax and the value-added tax) per liter of volume capacity is Fifty pesos and sixty centavos (P50.60) or less, the tax shall be Nineteen pesos (P19.00) per liter; and (b) If the net retail price (excluding the excise tax and the value-added tax) per liter of volume capacity is more than Fifty pesos and sixty centavos (P50.60), the tax shall be Twenty-two pesos (P22.00) per liter. XXX XXX XXX The rates of tax imposed under this Section shall be increased by four percent (4%) every year thereafter effective on January 1, 2018, through revenue regulations issued by the Secretary of Finance. However, in case of fermented liquors affected by the 'no downward reclassification' provision prescribed under this Section, the four percent (4%) increase shah apply to their respective applicable tax rates. XXX XXX XXX Any downward reclassification of present categories, for tax purposes, of fermented liquors duly registered at the time of the effectivity of this Act which will reduce the tax imposed herein, or the payment thereof, shall be prohibited. XXX XXX XXX All fermented liquors existing in the market at the time of the effectivity of this Act shall be classified according to the net retail prices and the tax rates provided above based on the latest price survey of the fermented liquors conducted by the Bureau of Internal Revenue." RA No. 10351 effectively increased the excise taxes imposed on fermented liquors, as follows: 2:--

DECISION CTA Case No. 9513 Net Retail Price per liter of Volume Capacity Excise Tax (Effective Januarv 1 2015) Pl9.00 Tier 1. Less than or equal to P50.60 P22.00 Tier 2. Greater than P50.60 Meanwhile, RA No. 10351 veered from the previous classifications set forth under RA No. 9334, i.e., variants of existing brands and new brands, by simplifying the classification to two (2) tiers based on net retail price per liter of volume capacity, as illustrated above. The data on net retail price shall be based on the latest price survey under oath conducted by the BIR. Further, such proper tax classification of fermented liquors, whether registered before or after the effectivity of the said law, shall be determined every two (2) years from the date of its effectivity. It also adopted the "no downward reclassification" provision which was previously set forth under RA No. 9334, where duly registered fermented liquors at the time of the effectivity of RA No. 10351 are prohibited from making downward reclassification of their present categories, i.e., from Tier 2 to Tier 1, in order to reduce the imposable excise taxes. To implement the said law, the BIR issued Revenue Regulations (RR) No. 17-2012. Relevant to this case is its Section 5, which provides: "SEC. 5. DOWNWARD RECLASSIFICATION OF FERMENTED LIQUORS. Any downward reclassification of any fermented liquor product that is duly registered with the BIR at the time of effectivity of the Act which will reduce the tax imposed herein, or the payment thereof, shall be prohibited. Starting January 1, 2014, the applicable tax rate shall be increased by four percent (4%) annually; Provided, however, it shall not be lower than the rates prescribed under Section 3 of these regulations." Meanwhile, the BIR likewise issued Revenue Memorandum Circular (RMC) No. 90-2012. Annex A-1 of the said RMC imposed a uniform excise tax of P22.25 on petitioner's (1) San Mig Light in bottle and in can and other products and (2) San Mig Light in Keg.)k--

DECISION CfA Case No. 9513 In order for petitioner to make removals of its products, it paid the excise taxes thereon at P22.25 per liter thereof. Consequently, petitioner alleges that it wrongfully or excessively paid the total amount of P48,266,780.24, representing excise taxes on its removals from January 1, 2015 to December 31, 2015.3 Thus, on December 15, 2016,4 petitioner filed a claim for refund or issuance of tax credit dated December 14, 2016. Then, on December 28, 2016,5 petitioner filed the instant Petition due to respondent's inaction. On March 29, 2017, respondent filed his Answer.6 He essentially argued that this Court has no jurisdiction to entertain the instant Petition because petitioner is collaterally assailing the validity of RMC No. 90-2012 issued in accordance with respondent's rule making or quasi-legislative power. Further, respondent asserts that petitioner is not entitled to its present claim for refund or issuance of tax credit certificate. On April 20, 2017, respondent filed his Respondent's Pre-Trial Brief while on April 24, 2017, petitioner filed its Petitioner's Pre-Trial Brief.8 On July 6, 2017, the Court issued a Pre-Trial Order.9 During trial, petitioner presented the following witnesses: (1) Ms. Noemi L. Ronquillo10 - Manager of petitioner's Accounting and Financial Services; and (2) Mrs. Katherine 0. Constantino11 - Court- Appointed Independent Certified Public Accountant (ICPA). On the other hand, during the hearing held on May 21, 2018, respondent's counsel manifested that she will not present any witness in this case. 12 On the same date, the Court issued an Order13 requiring the parties to submit their memoranda. fl.- 3 Exhibit "P-6" and series. 4 Exhibit "P-3", which is also Annex "C" of the Petition for Review, Docket, Vol. I, pp. 55-65. 5 Petition for Review, Docket, pp. 10-37. 6 Docket, Vol. I, pp. 127-150. 7 Docket, Vol. I, pp. 247-250. 8 Docket, Vol. I, pp. 253-263. 9 Docket, Vol. I, pp. 327-330. 10 Exhibit "P-4", Judicial Affidavit of Ms. Noemi L. Ronquillo, Docket, Vol. I, pp. 158-175; Minutes of the Hearing dated May 29, 2017, Docket, Vol. I, p. 323. 11 Exhibit "P-7", Judicial Affidavit of Mrs. Katherine 0. Constantino, Docket, Vol. I, pp. 339-350; Minutes of the Hearing dated August 7, 2017, Docket, Vol. I, p. 352. 12 Minutes of the Hearing dated May 21, 2018, Docket, Vol. I, p. 445. 13 Order, Docket, Vol. I, p. 446.

DECISION CTA Case No. 9513 On June 28, 2018, petitioner filed its Memorandum for Petitioner14 while on July 20, 2018, respondent filed his Memorandum.15 Consequently, on July 30, 2018/6 the Court issued a Resolution submitting the case for decision. Hence, this Decision. THE ISSUES The Court shall resolve the following issues: (1) Whether the Court has jurisdiction over the case; (2) Whether pertinent portions of Revenue Memorandum Circular No. 90-2012 and Revenue Regulations No. 17- 2012, respectively, should be invalidated; (3) Whether the excise tax rate of P22.25 per liter imposed by respondent on petitioner's relevant beer products is erroneous, excessive or illegal; and (4) Whether petitioner is entitled to its present claim. THE RULING The Court has jurisdiction to entertain the instant Petition Respondent argues that petitioner is primarily seeking for the nullification of a provision from RMC No. 90-2012 under the guise of an alleged claim for refund, and its claim for refund is merely consequential to the said primary action. 17 Respondent's argument is incorrect. The Court of Tax Appeals is a court of special or limited jurisdiction. As such, it can only take cognizance of matters that areJc- 14 Docket, Vol. II, pp. 457-509. 15 Docket, Vol. II, pp. 510-530. 16 Docket, Vol. II, p. 532. 17 See Note 15, p. 511.

DECISION CTA Case No. 9513 clearly within its jurisdiction.18 The CTA's jurisdiction is found in RA No. 1125, as amended by RA No. 9282. Thus: "SEC. 7. Jurisdiction.- The CTA shall exercise: (a) Exclusive appellate jurisdiction to review by appeal, as herein provided: XXX XXX XXX (2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relations thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code provides a specific period of action, in which case the inaction shall be deemed a denial;" Similarly, Section 3 of Rule 4 of the Revised Rules of the Court of Tax Appeals provides: "SEC. 3. Cases within the jurisdiction of the Court in Division.- The Court in Division shall exercise: (a) Exclusive original over or appellate jurisdiction to review by appeal the following: XXX XXX XXX (2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising ?<- 18 Cathay Pacific Airways, Ltd. v. Commissioner of Internal Revenue, CTA EB No. 717, April 17, 2012.

DECISION CTA Case No. 9513 under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code or other applicable law provides a specific period for action: xxx Provided, still further, that in the case of claims for refund of taxes erroneously or illegally collected, the taxpayer must file a petition for review with the Court prior to the expiration of the two-year period under Section 229 of the National Internal Revenue Code�" I Based on the above-quoted provisions, the Court shall exercise jurisdiction over cases involving respondent's inaction in refund claims, among others. In this case, an examination of the instant Petition shows that petitioner is appealing the inaction of respondent on its refund claim. Incidentally, petitioner's claim is anchored on the ground that the imposable excise taxes are P19.00 and P22.00, respectively, and not the uniform P22.25 as per Annex A-1 of RMC No. 90-2012, in relation to Section 5 of RR No. 17-2012. In other words, there is only one main cause of action in this case, i.e., claim for refund on the ground of excessive, erroneous or illegal imposition of excise tax, which is within the jurisdiction of this Court. Meanwhile, the pronouncement of the Supreme Court in the case of The Philippine American Life and General Insurance Company v. The Secretary of Finance and the Commissioner of Internal RevenufP is instructive as to what matters may be adjudicated by this Court in cases falling within its exclusive appellate jurisdiction. The Supreme Court said: "In the recent case of City of Manila v. Grecia- Cuerdo, the Court en bane has ruled that the CTA now has the power of certiorari in cases within its appellate jurisdiction. To elucidate: XXX XXX XXX ~ 19 G.R. No. 210987, November 24, 2014.

DECISION CTA Case No. 9513 On the strength of the above constitutional provisions, it can be fairly interpreted that the oower of the CTA includes that of determining whether or not there has been grave abuse of discretion amounting to lack or excess of jurisdiction on the part of RTC in issuing an interlocutory order in cases falling within the exclusive appellate jurisdiction of the tax court. It, thus, follows that the CTA. by constitutional mandate, is vested with jurisdiction to issue writs of certiorari in these cases. XXX XXX XXX Evidently, City of Manila can be considered as a departure from Ursa/ in that in spite of there being no express grant in law, the CTA is deemed granted with powers of certiorari by implication. Moreover, City of Manila diametrically opposes British American Tobacco to the effect that it is now within the power of the CTA, through its power of certiorari, to rule on the validity of a particular administrative rule or regulation so long as it is within its appellate jurisdiction. Hence, it can now rule not only on the propriety of an assessment or tax treatment of a certain transaction, but also on the validity of the revenue regulation or revenue memorandum circular on which the said assessment is based."20 Under the above-quoted jurisprudence, this Court has the power of certiorari in cases within its appellate jurisdiction. The Supreme Court then concludes that this Court can rule not only on the propriety of an assessment or tax treatment of a certain transaction, but also on the validity of the revenue regulation or revenue memorandum circular on which the said assessment is based. While the Phi/am case involves an assessment, this Court may apply the above-quoted doctrine to cases that involve claims for refund, as in this case, the same being within its exclusive appellate jurisdiction. In other words, in order to fully adjudicate the issues ~ 20 !d., citing City ofManila v. Grecia-Cuerdo, G.R. No. 175723, February 4, 2014.

DECISION CTA case No. 9513 involved in this case, the Court is also tasked to determine whether the uniform imposition of P22.25 excise taxes on petitioner's subject beer products is correct. Considering the foregoing, the Court rules that it has jurisdiction over the present case. Annex A-1 of RMC No. 90- 2012 exceeded the rates imposed under RA No. 10351 Section 5 of RR No. 17-2012 applies only in instances of downward reclassification of fermented liquors There is no downward reclassification of petitioner's beer products in this case On this score, the Court reiterates the pertinent provision of the amendments introduced by RA No. 10351 to Section 143 of the NIRC of 1997, as follows: "Effective on January 1, 2015 (a) If the net retail price (excluding the excise tax and the value-added tax) per liter of volume capacity is Fifty pesos and sixty centavos (P50.60) or less, the tax shall be Nineteen pesos (P19.00) per liter; and (b) If the net retail price (excluding the excise tax and the value-added tax) per liter of volume capacity is more than Fifty pesos and sixty centavos (P50.60), the tax shall be Twenty-two pesos (P22.00) per liter." However, as stated earlier, the BIR issued Annex A-1 of RMC No. 90-2012, which was used as basis for the imposition of the uniform P22.25 excise tax against petitioner's beer products. Incidentally, it appears that the additional excise tax imposed by the BIR emanated from the pertinent provisions of the amendment introduced by RA No. 10351 to Section 143 of the NIRC of 1997 and ~

DECISION CTA Case No. 9513 Section 5 of RR No. 17-2012, as quoted above. Simply put, the BIR imposed an additional four percent (4%) excise tax on the said products. The "no downward reclassification" prov1s1on under RA No. 10351 and under Section 5 of RR No. 17-2012, clearly contemplate a situation where there is downward reclassification of fermented liquors for the purpose of reducing imposable taxes. Stated otherwise, when there is no downward reclassification, said provisions have no operative effect. In Commissioner of Internal Revenue v. Philippine-Aluminum Wheel~ Inc., 21 the Supreme Court reiterated the hornbook doctrine that "in case there is a discrepancy between the law and a regulation issued to implement the law, the law prevails because the rule or regulation cannot go beyond the terms and provisions of the law". In this case, the Court finds that there is no basis for imposing the additional four percent (4%) excise tax as explained above. At the time of effectivity of RA No. 10351 as well as at the time when petitioner's cause of action arose, no downward reclassification, i.e., from Tier 2 to Tier 1, of petitioner's beer products was made. Therefore, the BIR has no basis to impose additional excise taxes under Annex A-1 of RMC No. 90-2012. Furthermore, the BIR automatically imposed the automatic four percent (4%) increase mentioned in RA No. 10351 without, however, observing the parameters provided for by law, as follows: (1) Effective January 1, 2018 and every year thereafter, the tax rate may be increased through revenue regulations issued by the Secretary of Finance; or (2) In case of fermented liquors affected by the 'no downward reclassification' provision prescribed under this Section, the four percent (4%) increase shah apply to their respective applicable tax rates. Thus, it is obvious that at the time when petitioner's cause of action arose in 2015, the first (1st) parameter mentioned above was impossible to satisfy, i.e., the same is effective on January 1, 2018. On the other hand and as it was discussed eariler, respondent could not have imposed the four percent (4%) increase without factual basis, i.e., downward reclassification of the subject products to#c,. 21 G.R. No. 216161, August 9, 2017, citing National Tobacco Administration v. Commission on Audit, 370 Phil. 793 (1999).

DECISION CTA Case No. 9513 reduce the tax payable. Hence, the second (2nd) parameter imposed by law was likewise unsatisfied. Finally, it is worth mentioning that RA No. 10351 deleted the previous classifications of fermented liquors introduced by RA No. 9334, i.e., variants of existing brands and new brands. Evidently, the intent of our legislature in enacting RA No. 10351 is to simplify our taxation system, so that fermented liquors shall be classified only according to their net retail prices under Tier 1 or Tier 2, as discussed above. Thus, whether petitioner's beer products are variants of existing brands or new brands under RA No. 9334 are inconsequential in determining the applicable tax rates under RA No. 10351. In fact, RA No. 10351 explicitly states that all fermented liquors existing in the market at the time of its effectivity shall be classified according to the net retail prices and the tax rates provided based on the latest price survey of the fermented liquors conducted by the BIR. Hence, considering that petitioner's cause of action arose in 2015, downward reclassifications should be understood under the simplified context introduced by RA No. 10351, i.e., either Tier 1 or Tier 2, and should not be based on the previous classifications mentioned in RA No. 9334, i.e., variants of existing brands and new brands. Considering the foregoing, the Court finds that respondent erroneously imposed a uniform P22.25 excise tax on petitioner's beer products. Petitioner is partially entitled to its claim To proceed, the Court shall first determine the timeliness of filing of the instant claim. Sections 204(C) and 229 of the NIRC of 1997, as amended, provide: "SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes.-The Commissioner may- 1'-

DECISION CfA Case No. 9513 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 supplied) "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, 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; 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 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 supplied) With regard to excise taxes, the goods subject thereto cannot leave their place of production without paying the same. Section 130(A)(2) of the NIRC of 1997, as amended, states: ;e..--

DECISION CTA Case No. 9513 "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: xxx" (Emphasis supplied) Meanwhile, Section 11 of Revenue Regulations (RR) No. 02-97, provides thus: "SECTION 11. Time, Manner and Place of Payment.- 11. 1 For Locally produced Alcohol Products. 1) FILING OF RETURN- Any person liable to pay specific tax on locally produced alcohol products shall before removal of such products, file in triplicate a consolidated return (BIR Form 2200) and supporting attachments (BIR Form 220 1 and 2207) setting forth the registered brand names and brand codes, the total production during the return period, the quantity to be removed and the excise tax due. 2) PAYMENT OF SPECIFIC TAX a) When to Pay - Unless otherwise especially allowed, excise tax due locally manufactured or produced alcohol products shall be paid by the manufacturer before removal from the place production, or by the person who is found in possession of untaxed domestically produced alcohol products. b) Advance Payment or Deposit - Every person liable to pay specific tax who is authorized to avail of the advance payment scheme may be allowed to effect removals of exciseable articles from his place of production without prior filing ofje.-

DECISION CTA Case No. 9513 the prescribed excise tax return and supporting attachments provided he has sufficient balance of deposits with the BIR to cover full payment of the excise tax due on said removals. The prescribed excise tax return and all attachments may be filed with a duly accredited bank or duly authorized collection agents not later than the first working day of the calendar week immediately after the week of actual removals. Payment of excise tax deposits shall be made by filing in triplicate a Payment Form (BIR Form No. 0605)."(Emphasis supplied) The ICPA22 reported that petitioner paid excise taxes in advance before the actual removal of its domestic beer products from its six (6) plants, namely: 1) Polo, Valenzuela; 2) Mandaue, Cebu; 3) San Fernando, Pampanga; 4) Davao; 5) Bacolod; and 6) Sta. Rosa, Laguna.23 Thus, applying the two-year period prescribed in Section 229 of the NIRC of 1997, as amended, the same should be reckoned from the date of actual withdrawal/removal of the beer products from their place of production, as it was only at that point that the deposits were recognized as payments for excise tax. Per examination of petitioner's Excise Taxpayer's Removal Declarations (BIR Form No. 2299), Official Register Books (ORB) and Sworn Statements of the Volume Removals (SSR), the earliest removal occurred on January 3, 2015 and the latest on December 29, 2015.24 Thus, petitioner had two years beginning January 3, 2015 or until January 3, 2017 and so forth up to December 29, 2017, within which to file its administrative and judicial claims for refund. Here, petitioner's administrative claim was filed on December 15, 2016/5 while the instant Petition for Review was filed on December 28, 2016.26 Thus, both claims were timely filed. Next, the Court shall determine whether petitioner was able to substantiate its claim for refund amounting to P48,266,780.24. Jr.- 22 Katherine 0. Constantino of Constantino Guadalquiver & Co. 23 Exhibit P-5, p. 6. 24 Exhibits P-6-e to P-6-e-2356, P-6-d to P-6-d-71 and Exhibit P-5, pp. 7-9. 25 Exhibit P-3, Docket, Vol. I, pp. 193-203. 26 Docket, Vol. I, pp. 10-37.

DECISION CTA Case No. 9513 It is represented that as of December 31, 2015, the net retail price per liter of petitioner's SML and other beer products27 were as follows: PER LITER Suggested Value Net Retail Retail Price Price Added Tax (NRP) (SRP) (VAT) Excise Tax PALE PILSEN 109.09 11.69 22.25 75.15 PP Can 142.42 15.26 22.25 104.91 SUPER DRY SD Can 121.21 12.99 22.25 85.98 157.58 16.88 22.25 118.44 PREMIUM ALL MALT BEER 148.48 15.91 22.25 110.33 PAM Beer Btl PAM Beer Btl (1-W) 84.85 9.09 22.25 53.51 PAM Beer Can 115.15 12.34 22.25 80.56 SAN MIG LIGHT 75.76 8.12 22.25 45.39 SML PPL-Btl 330ml 75.76 8.12 22.25 45.39 SML Can 90.91 9.74 22.25 58.92 FLAVORED BEER 109.09 11.69 22.25 75.15 SM Apple 330ml SM Lemon 330ml 78.47 8.41 22.25 47.81 78.56 8.42 22.25 47.89 SAN MIG ZERO SM Zero 330ml SM Zero (1-W) SML Keg SML 30L Draft SML SOL Draft As evidenced by ORBs and ETRDs, the BIR assessed and collected P22.25 on all of petitioner's SML and other beer products for the said year. However, pursuant to Section 143 of the NIRC of 1997, as amended by R.A. No. 10351, excise taxes shall be assessed and collected in the amount of P19.00 per liter if the net retail price per liter is P50.60 or less, otherwise, the excise tax shall be P22.00. These rates shall be effective January 1, 2015. The BIR issued RR No. 17-2012 to implement R.A. No. 10351. Pertinent provisions are quoted hereafter for easy reference: "SEC. 12. Transitory Provisions. - Upon the effectivity of the Act, the following transitory provisions shall be strictly observed by all concerned: 'jc-- 27 Exhibit P-6-i.

DECISION CTA Case No. 9513 (a) All alcohol and tobacco products existing in the market at the time of the effectivity of this Act shall be initially classified according to the tax rates prescribed by the Act based on the 2010 price survey of these products conducted by the Bureau of Internal Revenue (BIR), subject to the prohibition against downward reclassification on fermented liquors: Provided, however, That in case of alcohol and or tobacco products that were introduced after the 2010 price survey but before the effectivity of the Act, their respective tax classification or rate shall be based on the suggested net retail price declared in latest sworn statement filed by the local manufacturer or importer, as the case may be. The Commissioner of Internal Revenue shall issue a Revenue Memorandum Circular containing the tax classifications/rates applicable to all alcohol and tobacco products existing in the market at the time of the effectivity of the Act." (Emphasis supplied) RMC No. 90-2012 provided the lists of the different brands of locally manufactured fermented liquors according to the type of packaging and content per type of packaging with their corresponding net retail price and applicable excise tax rate per liter. It should be noted, however, that SML in kegs is not included in the list. With respect to alcohol products not included in the list per RMC No. 90-2012, RMC No. 3-2013 clarified that their initial classification shall be based on the net retail price declared in the latest sworn statement filed by the manufacturer or importer, as the case may be, thus: "This Circular is, likewise, issued in order to further amend and clarify the initial tax classifications of alcohol and tobacco products published under Revenue Memorandum Circular (RMC) No. 90-2012 dated December 27, 2012, as follows: XXX XXX XXX 2. With respect to other alcohol and tobacco products that were not included in any of the Annexes of)-e..

DECISION CfA Case No. 9513 the said RMC, their respective initial tax classification or rate shall be based on the suggested net retail price declared in the latest sworn statement filed by the manufacturer and importer, as the case maybe."(Emphasis supplied) Section 7 of RR No. 17-2012 provides for the submission of the sworn statement, to wit: "SEC. 7. Submission of Sworn Statement. - Every local manufacturer or importer of alcohol and tobacco products shall a [sic] duly notarized manufacturer's or importer's sworn statement for alcohol or tobacco product showing, among others, the following information: (a) Name, address, TIN and assessment number of the manufacturer or importer; (b) Complete root name of the brand as well as the complete brand name with modifiers, if any; (c) Complete specifications of the brand detailing the specific measurements, weights, manner of packaging, etc.; (d) Name(s) of the region(s) where the brand is/are to be marketed; (e) Wholesale price per case, gross and net of VAT and excise tax; (f) Suggested retail price, gross and net of VAT and excise tax, per pack or per bottle, as the case may be; (g) Detailed production/importation costs and all other expenses incurred or to be incurred until the product is finally sold (e.g., materials, labor, overhead, selling and administrative expenses) per case; (h) Applicable rate of excise tax per unit of measure or value, as the case may be; and :;c.-

DECISION CTA Case No. 9513 (i) Corresponding excise and value-added taxes per case." (Emphasis supplied) Records show that petitioner did not submit such sworn statement. The submitted schedule of net retail price per liter28 does not constitute a sworn statement in accordance with the requirements under the rules. Consequently, the same cannot be used as basis of the net retail price of SML in kegs. For this reason, it is therefore deemed proper to deny petitioner's claim for refund with respect to excise taxes on SML in kegs. Petitioner's claim for refund is computed, thus: 29 Date Removals 2015 Payment@ San Mig Light in San Mig Light Difference January (in liters) P22.25 Bottles and Cans in Keg should Bottles and Cans and Other Beer be @P19.00 Other Beer Products Products should Kegs February be@ P22.00 Bottles and Cans Other Beer Products 11,647,817.00 '" 259,163,934.48 '" 256,251,980.16 '" 2,911,954.32 Keos 2,134,693.44 47,496,929.04 46,963,255.68 533,673.36 March 97,050.00 2,159,362.50 315,412.50 Bottles and Cans '" 1,843,950.00 Other Beer Products Keqs 11,376,138.00 253,119,059.82 250,275,025.44 2,844,034.38 April 2,012,392.80 44,775,739.80 44,272,641.60 503,098.20 Bottles and Cans 83,800.00 1,864,550.00 272,350.00 Other Beer Products 1,592,200.00 Keqs May 11,993,058.00 266,845,540.50 263,847,276.00 2,998,264.50 Bottles and Cans 2,520,912.24 56,090,297.34 55,460,069.28 630,228.06 Other Beer Products 111,430.00 2,479,317.50 362,147.50 Keqs 2,117,170.00 June Bottles and Cans 11,827,997.00 263,172,939.48 260,215,940.16 2,956,999.32 Other Beer Products 2,651,837. 76 59,003,390.16 58,340,430.72 662,959.44 Kegs 58,290.00 1,296,952.50 189,442.50 July 1,107,510.00 Bottles and Cans Other Beer Products 12,946,673.00 288,063,483.60 284,826,815.24 3,236,668.36 2,317,423.68 51,562,676.88 50,983,320.96 579,355.92 105,520.00 2,347,820.00 342,940.00 2,004,880.00 11,540,921.00 256,785,493.14 253,900,262.88 2,885,230.26 1,988,411.04 44,242,145.64 43,745,042.88 497,102.76 91,650.00 2,039,212.50 297,862.50 1,741,350.00 11,330,732.00 252,108,790.56 249,276,107.52 2,832,683 04 2,032,208.64 45,216,642.24 44,708,590.08 508,052.16 28 Exhibit P-6-i. 29 Exhibit P-5, pp. 5-6.

DECISION CTA Case No. 9513 Kegs 87,300.00 1,942,425.00 1,658,700.00 283,725.00 August Bottles and Cans 11 '119,339.00 247,405,302.54 244,625,467.68 2,779,834.86 Other Beer Products 2,436,540.48 54,213,025.68 53,603,890.56 609,135.12 Kegs 94,540.00 2,103,515.00 307,255.00 September 1'796,260.00 Bottles and Cans Other Beer Products 11,930,704.00 265,458,160.44 262,475,484.48 2,982,675.96 Kegs 2,384,664.48 53,058,784.68 52,462,618.56 596,166.12 October 80,540.00 1 '792,015.00 261,755.00 Bottles and Cans 1,530,260.00 Other Beer Products Kegs 12,712,709.00 282,857,770.87 279,679,593.67 3, 178,177.20 November 2,699,951.76 60,073,926.66 59,398,938.72 674,987.94 Bottles and Cans 95,050.00 2,114,862.50 308,912.50 Other Beer Products 1,805,950.00 Kegs December 13,684,081.00 304,470,801.36 301,049,781.12 3,421,020.24 Bottles and Cans 3,086,297.28 68,670,114.48 67,898,540.16 771,574.32 Other Beer Products 109,040.00 2,426,140.00 354,380.00 Kegs 2,071,760.00 TOTAL 16,297,594.00 362,621,462.94 358,547,064.48 2,900,920.00 4,074,398.46 3,224,453. 76 71,744,096.16 70,937,982.72 P22,170,910.00 806,113.44 152,680.00 3,397,130.00 496,210.00 P3,913,746,120.75 179,064,440.36 1"3,984,183,81 0.99 P48,266,780.24 The total claimed excise taxes on SML in kegs amounts to P3,792,392.50, computed as follows: 30 Month Removals 2015 Payment San Mig Light in Difference January (in liters) @ P22.25 Keg should be p 315 412.50 February @ P19.00 March 97 050.00 p 2,159 362.50 p 1 843 950.00 272 350.00 83 800.00 1,864 550.00 1 592 200.00 362 147.50 April 111 430.00 2 479 317.50 2 117 170.00 189 442.50 May 58 290.00 1,296 952.50 1107 510.00 342 940.00 June 105 520.00 2,347 820.00 2 004 880.00 297 862.50 July 91 650.00 2,039 212.50 1 741 350.00 283 725.00 August 87 300.00 1942 425.00 1 658 700.00 307 255.00 September 94 540.00 2,103,515.00 1 796 260.00 261 755.00 October 80 540.00 1,792 015.00 1 530 260.00 308 912.50 November 95 050.00 2 114 862.50 1805 950.00 354 380.00 December 109 040.00 2 426 140.00 2 071 760.00 496 210.00 TOTAL 152,680.00 3 397,130.00 2, 900,920.00 p 3,792,392.50 1,166,890.00 P25,963,302.50 P22,170,910.00 The ICPA examined petitioner's balance of excise tax advance payments carried from the previous return and the excise tax payments/deposits made in the year 2015, then compared the same ~ 30 Exhibit P-5, p. 6.

DECISION CfA Case No. 9513 with all the removals/application of excise taxes for the same year, to wit:31 Advance Excise Tax Payments and Excise Taxes Due per Excise Tax Return (BIR Form 2200-A) Filed through EFPS for the period from January 3, 2015 to December 29, 2015 Balance of Balance of Deposits Deposits to be Carried Over From Excise Tax Excise Tax Carried Over to Plant Location Previous Return pa}'ments[Deposits Due[ Applied Next Return Bacolod p 13,088,914.56 p 1,727,806,900.00 (P 1,701,976,925.37) p 38,918,889.19 Davao 26,817,624.41 2,619,086,000.01 (2,592, 986,607.00) 52,917,017.42 Mandaue, Cebu 31,486,691.01 6,406,035,000.01 (6,332, 104,244.80) 105,417,446.22 Polo, Valenzuela 4, 751,221.31 5,320,000,000.09 (5,214,219,485.88) 110,531,734.72 San Fernando, 37,508,286.02 8,724,494,000.00 (8,589,671,510.08) 172,330,775.93 Pampanga Sta. Rosa, Laguna 7,622,549.31 2,158,451,000.01 (2,123,248,059.07) 42,825,490.25 TOTAL p 121,275,286.62 P26,955,872,900.12 (P26,554,206,832.20) P52219411353.72 From the foregoing, petitioner had enough excise tax payments/deposits to cover for all the removals made in the year 2015. The payments made in the aggregate amount of P26,955,872,900.12 are properly supported by Excise Tax Returns (SIR Form No. 2200-A)/2 bank tax payment confirmations/3 and Official Register Books (ORB) and Sworn Statements of the Volume Removals (SSR),34 which contain information such as total volume of removals of petitioner's domestic beer products and the corresponding excise taxes due, as well as the beginning balance of excise tax deposits, total deposits paid and the ending balance thereof. A comparison of the foregoing documents reveals the following :35 Total Advance Beginning Advance Excise Tax Due Ending Excise Tax Balance Excise Tax (c) Balance Deposits Paid and (a) Deposits Total Excise Taxes 1'26,940,409,556.02 (d =a+ b -c) Due on Removals 1'121,275,282.64 (b) 26,940,409,553.23 of All Beer 121,275,286.62 1'136,738,626.74 Products for the 1'26,955,872,900.12 period from 26,955,872,900.12 136,738,632.69 lr-- January 1, 2015 to December 31, 2015 Per Monthly ORB and SSR Per Excise Tax 31 Id., pp. 7-8. 32 Exhibits P-6-a to P-6-a-2918, inclusive. 33 Exhibits P-6-b to P-6-b-716 and P-6-c to P-6-c-715. 34 Exhibits P-6-d to P-6-d-71. 35 Exhibit P-5, p. 13.

DECISION CfA Case No. 9513 Returns (BIR Form No. 2200-A Difference p {3.98)* p -p 2.79* p {5.95)* *Difference due to rounding off For the year 2015, petitioner had removals of 1,361,821,338.48 liters of all domestic beer products as supported by ORBs and SSRs, broken down as follows: 36 Exhibit Plant Total Removals of Excise Tax Amount P-6-d to P-6-d-11 Bacolod All Beer Products p 1,733,556, 108.78 P-6-d-12 to P-6-d-23 Davao {including "San Mig P-6-d-24 to P-6-d-35 Light" and "Other 2,626,992,793.14 P-6-d-36 to P-6-d-47 Cebu Beer Products") 6,432, 903,155.94 P-6-d-48 to P-6-d-59 Valenzuela 5,284,628,165.20 P-6-d-60 to P-6-d-71 Pampanga in liters 8,702,878,355.88 2,159,450,977.08 Laguna 83,973,072.24 P26,940,409,556.02 TOTAL 135,944,227.68 332,020,394.88 254,936,579.76 445,101,843.12 109,845,220.80 1,361,821,338.48 Of these removals, 179,064,441.04 liters pertain to the instant claim of SML and other beer products on which the BIR imposed a uniform rate of P22.25 instead of P19.00 and P22.00. These removals are likewise supported by the ORBs and SSRs from petitioner's six plants. 37 Exhibit Plant Total "San Mig Excise Tax P-6-d to P-6-d-11 Bacolod Light" and "Other Amount P-6-d-12 to P-6-d-23 Davao P-6-d-24 to P-6-d-35 Beer Products" p 264,732,662.70 P-6-d-36 to P-6-d-47 Cebu Removals 148,358,032.02 P-6-d-48 to P-6-d-59 Valenzuela in liters 326,319,085.62 P-6-d-60 to P-6-d-71 Pampanga 11,898,097.20 6,667,776.72 2,130,823,268.72 Laguna 14,666,026.32 739,443,438.36 TOTAL 95,767,337.92 374,507,325.72 33,233,412.96 16,831,789.92 P3,984,183,813.14 179,064,441.04 Upon examination of the corresponding ETRDs of the foregoing removals, the ICPA reported the following findings: 38 9--:- 36 Jd., pp.15-19. 37 Exhibit P-5, p.20 38 Id.

DECISION CTA Case No. 9513 Findings Exhibit Location Quantity Excise Excise Tax Amount "San Mig Light" removals Bacolod (in liters} Tax p 264,732,662.70 supported by original P-6-e to P-6-e-320 11,898,097.20 Rate ETRDs duly signed and P-6-e-973 to P-6- Davao 22.25 148,358,032.02 attested by the BIR ROOP 6,667,776.72 22.25 326,319,085.62 e-1298 Mandaue, Cebu 14,666,026.32 22.25 1,474,675,147.52 "San Mig Light" removals P-6-e-321 to P-6- Polo, 66,277,534.72 22.25 739,443,438.36 supported by certified Valenzuela 33,233,412.96 22.25 372,041,831.70 true C0[1}' of ETRD e-660 San Fernando, 16,720,981.20 22.25 "Other Beer Products" P-6-e-1718 to P- Pampanga 2,465,494.02 removals supported by Sta. Rosa, 110,808.72 22.25 original ETRDs duly 6-e-2298 Laguna 656,148,121.20 signed and attested by P-6-e-1299 to P- 29,489,803.20 22.25 P3,984,183,813.14 BIR ROOP 179,064,441.04 Grand Total 6-e-1662 P-6-e-661 to P-6- e-972 P-6-e-2356 Sta. Rosa, Laguna P-6-e-1663 to P- Polo, 6-e-2355 Valenzuela After due consideration, the Court finds that the !CPA report is in order. The removal of SML supported by a certified copy of ETRD is corroborated by the SSRs from the Sta. Rosa, Laguna plant, particularly for the month of February 2015, thus: 39 Removals of SML and Other Beer Excise Tax Amount Exhibit Month Total Removals Excise Tax Amount Products P-6-d-60 P-6-d-61 January 8 270 703.36 p 162 618 927.12 1 299 196.80 p 28 907 128.80 P-6-d-62 P-6-d-63 February 7 563 626.88 149 263 105.74 1 294 769.52 28 808 621.82 P-6-d-64 P-6-d-65 March 8 413,814.64 165 821,779.20 1,396 644.48 31,075,339.68 P-6-d-66 P-6-d-67 April 8 640,204.72 170 105 143.02 1,398 204.72 31 110 055.02 P-6-d-68 P-6-d-69 May 10 263 616.08 201 635 826.90 1 560 580.56 34 722 917.46 P-6-d-70 P-6-d-71 June 9 203 718.96 180 480 027.96 1 332 603.36 29 650 424.76 Julv 8,439,860.64 165,643 360.14 1,248 168.24 27 771,743.34 August 9 029,234.88 176 984 503.92 1 243 218.24 27 661 605.84 September 9 605 106.96 188 889 929.52 1 456 329.60 32 403 333.60 October 8 844 065.04 174,199 037.34 1 406 409.84 31 292,618.94 November 9,733 205.76 191,222 998.98 1 472 225.04 32 757 007.14 December 11 838 062.88 232 586 337.24 1 723 439.52 38 346 529.32 TOTAL 109,845,220.80 P2,159,450,977.08 16,831,789.92 P374,507,325.72 Based on the foregoing, the total removals of all domestic beer products and total removals of SML and other beer products from the /t- 39 Id., p. 19.

DECISION CfA Case No. 9513 Sta. Rosa, Laguna plant for the year 2015, with the corresponding excise tax amounts, tally with the findings of the ICPA as previously shown. Moreover, the ICPA examined other supporting documents such as shipping memoranda,40 Issue/Receipt Documents (IRD), Plant Breakages Report, Gate Pass, Delivery Receipts (DR), Claim Memoranda and Stock Transfer Receipts.41 In fine, petitioner is entitled to its claim for refund in the reduced amount of P44,474,387.74, computed as follows: Total excise taxes claimed for refund p 48,266,780.24 Less: Excise taxes on SML in kegs 3,792,392.50 Refundable Excise Taxes p 44,474,387.74 WHEREFORE, the instant Petition for Review is PARTIALLY GRANTED in the reduced amount of P44,474,387.74. Accordingly, respondent is ORDERED to REFUND OR ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner for the erroneously, excessively, and/or illegally collected excise taxes on its San Mig Light and other beer products in bottles and cans for the taxable year 2015. SO ORDERED. I CONCUR: t:;k_�t; c. Q.~U>~I ~� !fuANITO C. CASTANED~, JR. Associate Justice ~H--/ J: /;f.A~~--~- CATHERINET.MANAHAN Associate Justice 40 Exhibits P-6-f to P-6-f-29051. 41 Exhibits P-6-g-1490.

DECISION CfA Case No. 9513 ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. ~-~c.~.. ...-.,(.. ... ~ JtJANITO C. CASTANED~, JR. Associate Justice Chairperson CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. Presiding Justice