PILIPINAS SHELL PETROLEUM CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY THIRD DIVISION PILIPINAS SHELL CTA Case No.10966 PETROLEUM Petitioner, CORPORATION, Members: -versus- MANAHAN, Chairperson, REYES-FAJARDO, and ANGELES J1 COMMISSIONER OF Promulgated: INTERNAL REVENUE, AUG 12 2025: ~ Respondent. X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ~ J~- f ~ ~ - - - - - - - - - - -X DECISION REYES-FAJARDO, J.: This Petition for Review 1 dated August 30, 2022, filed by Pilipinas Shell Petroleum Corporation, seeks the refund or credit, the total amount of P83,495,520.00, representing the excise taxes it paid on Jet A-1 fuel, imported on September and October 2020, which was subsequently sold and delivered to tax-exempt international air carriers from October to December 2020. FACTS Petitioner Pilipinas Shell Petroleum Corporation is a corporation organized and existing under the laws of the Philippines, with office address at the 41st Floor, The Finance Center, 26th Street corner 9th Avenue, Bonifacio Global City, 1635 Taguig City.2 Respondent is the duly appointed Commissioner of the Bureau of Internal Revenue (BIR), vested under the appropriate laws with the authority to carry out the functions, duties, and responsibilities of - Docket, pp. 6-28. 2 Exhibit "P-37." Id. at pp. 599-614.

DECISION CTA Case No. 10966 said office, including, inter alia, the power to decide disputed assessments, grant tax refunds and issue tax credit certificates, pursuant to the provision of the National Internal Revenue Code (NIRC) and other tax laws, rules, and regulations.3 On April 7, 2021, petitioner filed its Application for Tax Credits/Refunds (BIR Form No. 1914),4 and letter dated March 9, 2021,5 with the BIR - Excise Large Taxpayers Audit Division II (BIR- ELTADII), applying for refund or credit of excise taxes for the periods November 13, 2020 to December 13, 2020, in the amount of P40,374,392.00, on the alleged sale of petroleum products to international air carriers of Philippine or foreign registry for consumption outside the Philippines. On April 16, 2021, petitioner filed another Application for Tax Credits/Refunds (BIR Form No. 1914),6 and letter dated February 10, 2021/ with BIR-ELTADII, applying for refund or credit of excise taxes for the periods October 2, 2020 to November 13, 2020, in the amount of P43,121,128.00 on the alleged sale of petroleum products to international air carriers of Philippine or foreign registry for consumption outside the Philippines. On August 31, 2022, petitioner filed a Petition for Review, 8 docketed as CTA Case No. 10966, to which respondent lodged his Answer9 on November 18,2022. On July 26, 2023, pre-trial conference was held. There, the issue to be addressed in CTA Case No. 10966 was formulated. Further, the respective schedule for the marking of the parties' document exhibits, was set. In addition, the schedule for the presentation of petitioner's evidence was, as well, set, whereas respondent manifested that there has yet to be a report on petitioner's administrative claim for refund or credit. Moreover, the parties were granted until August 25, 2023, to submit their Joint Stipulation of Facts and Issues, inter alia.l0 3 Par. 1, Stipulation of Facts, Joint Stipulation of Facts and Issues (JSFI). Id. at p. 264. 4 Exhibit "P-36-1." Id. at p. 598. Exhibit "P-36." Id. at pp. 595-597. 6 Exhibit "P-35-1." Id. at p. 594. 7 Exhibit "P-35." Id. at pp. 591-593. 8 Supra note 1. 9 Docket, pp. 112-120. 10 See Order dated July 26, 2023. Id. at pp. 261-263.

DECISION CTA Case No. 10966 On August 29, 2023, the parties filed their Joint Stipulation of Facts and Issues (JSFI).11 On the same date, petitioner filed a Motion to Avail of the Provisions of Section 5, Rule 12 of the Revised Rules of the Court of Tax Appeals.12 Under Minute Resolution 13 dated September 5, 2023, the parties' JSFI was admitted and approved, among others. On the basis thereof, a Pre-Trial Order14 dated October 10, 2023 was issued. Trial proceeded. Petitioner called multiple witnesses, the specifics of which are as follows: Witnesses Position/Designation Date Presented Petitioner's Import Additives Anna Beatriz Vergel de Scheduler October 11, Dios15 202316 Hazel Pangadian Tabamo October 11, (Commissioning as 202317 Independent Certified Public Accountan!}_ Patrick R. Manalo18 Petitioner's Airport Operations October 11, Manager 2023 19 and November 15, 202320 Berenice Angelique L. Petitioner's Tax Advisor November 15, Flores21 202322 Jonathan Juanillo23 Petitioner's former Terminal November 15, 202324 Operations Manager at Tabangao Depot and current Social Performance Adviser for Downstream Atty. Farida Nimfa G. Petitioner's Country Tax Manager November 23, Dimailig25 202326 11 Id. at 264-276. 12 Id. at pp. 277-280. 13 Id. at p. 290. 14 Id. at pp. 380-388. 15 Exhibit "P-43." Id. at pp. 90-105. 16 See Order dated October 11, 2023. Id. at pp. 392-394. 17 Ibid. 18 Exhibit "P-44." Docket, pp. 300-313. 19 Supra note 16. 20 For cross-examination by respondent's counsel. See Order dated November 15, 2023, infra note 22. 21 Exhibit "P-46." Docket, pp. 141-154. 22 See Order dated November 15, 2023. Id. at pp. 396-397. 23 Exhibit "P-45." Id. at pp. 69-75. 24 Supra note 22.

DECISION CTA Case No. 10966 Ma. Luz Salting-Verdejo27 Head Librarian, Carlos P. Romulo November 23, Library of the Department of 202328 Foreign Affairs Hazel Pangadian Independent Certified Public January 16, Tabamo29 Accountant 202430 On February 15, 2024, petitioner filed its Formal Offer of Evidence,31 which was met by respondent's Comment (Re: Formal Offer of Evidence)32 filed on February 16, 2024. By Resolution33 dated May 8, 2024, the evidence offered by petitioner was admitted. The latter rested its case. On June 24, 2024, respondent filed a Manifestation, expressing that he would not present witnesses in this case.34 On August 12, 2024, CTA Case No. 10966 was submitted for decision, considering: (1) respondent's Memorandurn 35 filed on August 2, 2024; and (2) Memorandum for Petitioner36 filed on August 12,2024. ISSUE37 Is petitioner entitled to the refund or credit of the amount of Eighty-Three Million Four Hundred Ninety-Five Thousand Five Hundred Twenty Pesos (P83,495,520.00), representing the alleged excise taxes paid by the latter on imported Jet A-1 Fuel, which were sold and delivered to various international carriers and to tax-exempt entities, for use or consumption abroad covering the period October to December 2020? 25 Exhibits "P-47" and "P-49." Id. at pp. 46-54 and 183-186, respectively. 26 See Order dated November 23, 2023. Id. at pp. 399-400. 27 Exhibit "P-48." Id. at pp. 193-198. 28 Supra note 26. 29 Exhibit "P-101." Docket, pp. 454-461. 30 See Order dated January 16, 2024. Id. at pp. 468-469. 31 Id. at pp. 470-507. 32 Id. at pp. 786-788. 33 Id. at pp. 795-796. 34 Id. at pp. 797-799. 35 Id. at pp. 802-810. 36 Id. at pp. 812-844. 37 See Par. 2, Stipulation of Issue, JSFI. Id. at pp. 264-265.

DECISION CTA Case No. 10966 ARGUMENTS Petitioner insists that it had complied with all the conditions for the ':1-llowance of refund or credit under Sections 204(C) and 229 of the NIRC, as amended. For one, both its administrative claims and judicial claim for refund or credit were filed within two (2) years from payment of excise taxes (ET) subject thereof. For another, the ET sought to be refunded or credited were illegally or erroneously collected internal revenue taxes because it is exempted from payment thereof, following Section 135(a) of the same Code. Taking an opposite view, respondent ripostes that petitioner's claim for refund or credit of ET should be rejected because: (1) its sale of Jet A-1 fuel to tax-exempt entities is not covered by the exemption under Section 135(a) of the NIRC, as amended; and (2) it is not one of the tax-exempt transactions set forth in Section 130(D) of the same Code. RULING We partly grant the Petition. First. Did We acquire jurisdiction over CTA Case No. 10966? Yes. Section 7(a)(2) of Republic Act (RA) No. 1125,38 as amended by RA No. 9282 reads: Sec. 7. Jurisdiction. -The CTA shall exercise: a. Exclusive appellate jurisdiction to review by appeal, as herein provided: 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 38 An Act Creating the Court of Tax Appeals.

DECISION CTA Case No. 10966 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; 39 Section 3(a)(2), Rule 4 of the Revised Rules of the Court of Tax Appeals40 clarified that the CTA in Division has jurisdiction over the inaction of respondent involving refunds of internal revenue taxes, among others. Among the classes thereof is one premised upon illegal, erroneous, or excessive collection of internal revenue taxes, as recognized in Sections 204(C) and 229 of the NIRC, as amended. Commissioner of Internal Revenue v. Carrier Air Conditioning Philippines, Inc. (Carrier) 41 illuminated on the requirements for Us to acquire jurisdiction over said type of refund case, as follows: Section 204 [of the NIRC, as amended] refers to the Commissioner of Internal Revenue's administrative authority to credit or refund erroneously paid or illegally collected taxes. Under this provision, an administrative claim for refund or credit must be filed within two years from payment of the tax. Section 229 [of the NIRC, as amended], on the other hand, requires two conditions for the filing of judicial claims: (1) an administrative claim must be filed first; and (2) the judicial claim must be filed within two years after payment of the tax sought to be refunded. Reading the two provisions together, both administrative and judicial claims must be filed within the two-year period. Furthermore, the administrative claim must be filed before the judicial claim. This Court has previously declared that "[t]imeliness of the filing of the claim is mandatory and jurisdictional. The [Court of Tax Appeals] cannot take cognizance of a judicial claim for refund file either prematurely or out of time." Petitioner paid the ET sought to be refunded or credited on September 2, 2020 42 and October 16, 2020. 43 Following Carrier, petitioner had two (2) years therefrom, or until September 2, 2022 and October 16, 2022 to lodge its administrative claims and judicial claims 39 Boldfacing ours. 40 A.M. 05-11-07-CTA. 41 G.R. No. 226592, July 27, 2021. 42 Exhibit "P-5." Docket, p. 513. 43 Exhibit "P-13." Docket, p. 523.

DECISION CTA Case No. 10966 for refund or credit in that order. Ergo, the timely filing of its administrative claims for refund or credit on April 7, 202144 and April 16, 2021,45 along with its seasonable institution of its Petition for Review46 on August 31, 2022, clothed Us with jurisdiction over CTA Case No. 10966. Second. Is petitioner entitled to the refund or credit of ET paid on its imported Jet A-1 fuel, which were subsequently sold and delivered to various international carriers and to tax-exempt entities, for use or consumption abroad covering the period October to December 2020? Yes, albeit in part. To properly understand the foundation of Our conclusion, it is necessary to elaborate on petitioner's process and document flow of its importation of Jet A-1 fuel in September and October 2020, the payment of taxes thereon, along with the withdrawal thereof from its importation facility. Witness Vergel de Dios47 explained that petitioner discontinued its refinery operations on August 2020. From then on, importation is the primary source of its petroleum products, including Jet A-1 fuel. Petitioner's refinery in Tabangao, Batangas was further converted to an importation facility (Tabangao Import Facility).48 The process and document flow on the importation of Jet A-1 fuel has three (3) stages, namely: (1) requisition of goods and importation; (2) arrival and discharge of imported goods; and (3) payment of taxes and import duties. 49 Witness Vergel de Dios as well said that petitioner's claim for refund or credit in this case pertains to ET paid relative to Jet A-1 fuel imported on September and October 2020.50 We expound on these two (2) importations in seriatim. 44 Supra notes 4 and 5. 45 Supra notes 6 and 7. 46 Supra note 8. 47 Exhibit "P-43." Docket, pp. 90-105. 48 Answer to Question No. 10, Exhibit "P-43." Id. at p. 93 49 Answer to Question No. 12, Exhibit "P-43." Ibid. 50 Answer to Question No. 42, Exhibit "P-43." Id. at p. 100.

DECISION CTA Case No. 10966 First Importation: Petitioner imported 11,353,500 liters of Jet A-1 fuel, which arrived on September 6, 2020, via MT Aulae Bella,s1 at Tabangao, Batangas City. This was declared under Bureau of Customs Single Administrative Document (BOC-SAD), with Customs Reference C 1017542. It likewise paid ET thereon, amounting to P45,414,000.00. sz These findings are evidenced by the following documents: 1. Bill of Lading No. 88215 dated August 28, 2020 showing the quantity of 11,353,500 liters(@ OBSRD);53 2. Load Port Survey Report (LPSR)- Summary Report No. INTSGP016274 dated August 28, 2020;54 3. Customs Invoice Bulk Product No. ITQQOE0001 dated August 28, 2020;55 4. BOC SAD with Customs Reference C 1017542 dated September 1, 2020 showing the quantity at 11,353,500 liters;56 5. Statement of Settlement of Duties and Taxes (SSDT) dated September 2, 2020;57 6. Authority to Release Imported Goods (ATRIG) dated September 2, 2020;58 7. Certificate of Quantity Received (CQR) with date received on September 6, 2020, showing the quantity at air of 11,266,033liters;59 and 8. Tax Invoice No. 91246214/P dated September 7, 2020.60 Second Importation: Petitioner imported 10,471,296 liters of Jet A-1 fuel, which arrived on October 23, 2020, via MT Marlin Apatite,61 at Tabangao, Batangas City. This was declared under BOC-SAD, with Customs 51 Exhibit "P-4." Docket, p. 512. 52 Supra note 50. 53 Exhibit "P-1." Docket, p. 508. 54 Exhibit "P-2." Id. at pp. 509-510. 55 Exhibit "P-3." Id. at p. 511. 56 Exhibit "P-4." Id. at p. 512. 57 Exhibit "P-5." Id. at p. 513. 58 Exhibit "P-6." Id. at p. 514. 59 Exhibit "P-7." Id. at p. 515. 60 Exhibit "P-8." Id. at pp. 516-518. 61 Exhibit "P-12." Docket, p. 522.

DECISION CTA Case No. 10966 Reference C 1019721.62 It likewise paid ET thereon, amounting to P41,885,184.00. 63 These findings are evidenced by the following documents: 1. Bill of Lading No. 2010-3-00035-E-BL-1 dated October 12, 2020 showing the quantity of 10,469,941liters (@ Obs. Temp.);64 2. LPSR- Summary Report No. I SPSG20002462 dated October 14, 2020;65 3. Customs Invoice- Bulk Product No. ITREJQ0001 dated October 13, 2020;66 4. BOC SAD with Customs Reference C 1019721 dated October 14, 2020 showing the quantity at 10,469,941liters;67 5. SSDT dated October 15, 2020;68 6. Updated SSDT dated October 15, 2020;69 7. ATRIG dated October 19, 2020;70 8. CQR with date received on October 23, 2020 showing the quantity at air of 10,471,296 liters;71 9. Tax Invoice No. 90823266/P dated November 4, 2020;72 and 10. BOC Official Receipt (OR) No. 01888877355 dated December 2, 2020.73 To be sure, BOC-SAD with Customs Reference C 1019721,74 as well as the original SSDT dated October 15, 2020/5 collectively reveal that petitioner paid ET amounting to P41,879,764.00 for 10,469,941 liters of imported Jet A-1 fuel. Yet, petitioner's updated SSDT dated October 15, 2020 76 reflected the amount of P41,885,188.00 77 as payment for ET for 10,471,296 liters of imported Jet A-1 fuel. The difference between the original and updated SSDT amounting to P5,424.00 (P41,885,188.00 less P41,879,764.00) was included in the 62 Ibid. 63 Answer to Question No. 42, "Exhibit "P-43." Docket, p. 100. 64 Exhibit "P-9." Id. at p. 519. 65 Exhibit "P-10." Id. at p. 520. 66 Exhibit "P-11." Id. at p. 521. 67 Exhibit "P-12." Id. at p. 522. 68 Exhibit "P-13." Id. at p. 523. 69 Exhibit "P-13-1." Id. at p. 524. 70 Exhibit "P-14." Id. at p. 525. 71 Exhibit "P-15." Id. at p. 526. 72 Exhibit "P-16." Id. at pp. 527-530. 73 Exhibit "P-18." Id. at p. 532. 74 Exhibit "P-12." Id. at p. 522. 75 Exhibit "P-13." Td. at p. 523. 76 Exhibit "P-13-1." Id. at p. 524. 77 Noted an overpayment of N.OO; N1,885,18�..00 per updated SSDT dated October 15, 2020 (Exhibit "P-13-1/' Docket, p. 524), against N1,885)81.00 per Judicial Affidavit of Ms. Anna Beatriz Verge! de Dios (Answer to Question No. 42, Exhibit "P-43/' Docket p. 100).

DECISION CTA Case No. 10966 payment made to BOC under OR No. 01888877355 dated December 2, 2020_78 Adding it up, petitioner proved that it paid ET worth P87,299,184.00 on two (2) importations of Jet A-1 fuel, tabled as follows: Transaction Quantity (in liters) ET Paid b_y Petitioner First Importation 11,353,500 p 45,414,000.00 (September 6, 2020) Second Importation 10,471,296 41,885,184.00 (October 23, 20201 Total 21,824,796 P87,299,184.00 Of the ET amounting to P87,299,184.00 paid by petitioner on the first and second importations, the latter seeks P83,495,520.00 thereof as refund or credit.79 According to petitioner, P83,495,520.00 pertains to ET on its imported Jet A-1 fuel which were sold to international air carriers for their use or consumption outside the Philippines; hence, exempt from ET imposition under Section 135(a) of the NIRC, as amended. Petitioner expounded on the particulars thereof through the following presentation:so Customer Count!}'_ of Re_gistry_ Total Volume Air China Ltd China in Liters Air Niugini Ltd Papua New Guinea 75,192 AirAsia Berhad Malaysia 509,586 Asiana Airlines Inc Republic of Korea 23,494 China Airlines Ltd China 371,512 China Eastern Airlines Co., Ltd China Deutsche Lufthansa Ag Germany 873,038 Federal Express Corp United States of America Hon_g_ Kong_ Airlines Limited Hong Kong 623,955 Jetstar Asia Airways Pte Ltd Singapore 304,412 Malaysia Airlines Berhad Malaysia 2,302,913 Philippine Airlines Inc Philippines Philippine AirAsia Inc Philippines 770 Xiamen Airline Co Ltd China 910 Total Aviation Sales (in Liters) 204,819 Excise Tax Rate 15,179,726 TOTAL EXCISE TAX 272,819 130,734 20,873,880 :P4.00/liter P83,495,520.00 78 Exhibit "P-18." Id. at p. 532. 79 See prayer, Petition for Review in CTA Case No. 10966. Supra note 8. 80 Par. 7, Statement of the Facts, Petition for Review. Docket, pp. 7-9.

DECISION CTA Case No. 10966 We partly agree with petitioner. Section 22981 of the NIRC, as amended, allows the recovery of taxes erroneously or illegally collected. An "erroneous or illegal tax" is defined as one levied without statutory authority, or upon property not subject to taxation or by some officer having no authority to levy the tax, or one which is by some other similar respect illegal.82 Erroneous or wrongful payment includes excessive payment because they all refer to payment of taxes not legally due.83 Petitioner tethered its erroneous or illegal payment of ET, on the tax exernption under Section 135(a) of the NIRC, as amended, which reads: 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 directly importing petroleum products, 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 the Secretary of Finance, upon recommendation of the Commissioner; For ET exemption under Section 135(a) of the NIRC, as amended, to lie, the following requisites must concur: first, the imported Jet A-1 fuel sold to international air carriers was stored in a bonded storage tank, and had been disposed of in accordance with the rules and regulations; second, foreign registry of the international 81 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; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. ... (Boldfacing ours) 82 See Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corporation, G.R. No. 188497, April25, 2012. 83 See Commissioner of Internal Revenue v. San Roque Power Corporation, G.R. No. 187485, February 12, 2013.

DECISION CTA Case No. 10966 air carriers, or in case of Philippine-registered air carriers, the latter's authority to operate international flights; and third, the imported Jet A-1 fuel was used or consumed outside the Philippines. Petitioner duly proved the first and third requisites, while two (2) of its clients failed to satisfy the second requisite. Bear in mind: First. Witness Manalo outlined84 the processes, and petitioner presented supporting documentation, before the imported Jet A-1 fuel reaches petitioner's storage tanks in Joint Oil Company Aviation Storage Plant (JOCASP) at the Ninoy Aquino Airport (NAIA) in Manila and the Clark Aviation Services Inc. (CASI) facility at the Clark International Airport in Pampanga, for eventual sale and delivery to the customers of petitioner, as well as the payments received on such sales. Specifically, before imported Jet A-1 fuel is withdrawn or removed from the Tabangao Import Facility to the Tabangao Depot, and from the Tabangao Depot to JOCASP and CASI, a Withdrawal Certificate (WC)S5 is prepared and signed by the Revenue Officer on Premises (ROOP) and petitioner's representative. The WC shows the kind of petroleum product withdrawn, the source thereof, its destination, date of withdrawal and volume withdrawn. If excise tax had already been paid on the petroleum product covered by the we withdrawn from the Tabangao Import Facility to the Tabangao Depot, the we shall contain a notation II tax-paid."86 Relatedly, both the Tabangao Import Facility and the Tabangao Depot have Official Register Books87 (ORBs) that respectively record the withdrawals of Jet A-1 fuel from the Tabangao Import Facility to the Tabangao Depot and from the Tabangao Depot to JOCASP and CASI.88 Said Jet A-1 fuel are delivered by lorries or tank trucks to JOCASP and CASI.89 Once in JOCASP and CASI, the Jet A-1 fuel is 84 Exhibit "P-44." Id. at pp. 300-312. 85 Exhibits "P-85" and "P-88," USB. 86 Answer to Question No. 12, Exhibit "P-44." Docket, p. 303. 87 Exhibits "P-84" and "P-87." USB. 88 Answer to Question No. 11, Exhibit "P-44." Docket, p. 303. 89 Ibid.

DECISION CTA Case No. 10966 then sold and delivered to international air carriers refueling in the airports.90 : Therefore, petitioner's testimonial and documentary evidence demonstrate that the imported Jet A-1 fuel sold to international air carriers were stored in a bonded storage tank, and had been disposed of in accordance with the rules and regulations. Second. Petitioner presented Civil Aeronautics Board Certification dated August 25, 2022 (CAB Certification),91 showing that the international air carriers of foreign registry listed therein, to which the Jet A-1 fuel subject of this case were sold, have been issued Foreign Air Carrier's Permit (FACP). Said FACP authorized them to operate international flights only, for a specific period, including, but not limited to year 2020. The same CAB Certification further contained the following details regarding the Philippine-registered air carriers: 1) Philippine Airlines, Inc. has been granted a Franchise Permit through Presidential Decree No. 1590 to operate and maintain air transportation services in the Philippines and between the Philippines and other countries, and that the said Franchise Permit authorizes the said airline to operate international flights from June 11, 1978 to present, including the year 2020; 2) Cebu Air, Inc. has been granted a Franchise Permit through Republic Act No. 7151 and a Certificate of Public Convenience and Necessity (CPCN) via CAB Board Resolution No. 20 (BM03a-05-05-2017) to operate and maintain air transportation services in the Philippines and between the Philippines and other countries, and that the said permits authorize[d] the said airline to operate international flights in the year 2020; and 3) Philippines AirAsia Inc., has been granted a Franchise Permit (through its predecessor Asian Spirit Inc.) titled Republic Act No. 9183 (RA 9183) and a Certificate of Public Convenience and Necessity (CPCN) via CAB Resolution No. 34 (BM04A-07-13-2017) to operate and 90 Answer to Question No. 10, Exhibit "P-44." Docket, p. 302. 91 Exhibit "P-41." Id. at p. 785.

DECISION CTA Case No. 10966 maintain air transportation services in the Philippines and between the Philippines and other countries, and that the said permits authorizes the said airline to operate international flights in the year 2020. So too did petitioner present Civil Aviation Authority of the Philippines Certification dated August 31, 2022 (CAAP Certification),92 confirming the country of registration of the aircraft operators listed therein. Tallying the data in the CAB93 and CAAP94 Certifications, the following are petitioner's customers, their respective countries of registration, along with those possessing FACPs to operate international flights: International Airlines Aircraft Country of Permit Date Permit Expiry 1. Air China Ltd. Registration No. Registration Issued Mar. 6,2025 2. Air Niugini Ltd. B6075, B6076,B6090,B6092 China May 6,2023 3. AirAsia Berhad P2PXC, P2PXD, P2PXV, Papua New Mar. 6, 2020 4. Asiana Airlines Inc. P2PXW Guinea May 6,2018 9MAJG, 9MRAA, 9MVAA, Malaysia 5. China Airlines Ltd. 9MVAB Republic of May5,2017 May 5, 2020 HL7700, HL7732, HL7755, Korea HL7756, HL7775, HL8254, China Sep.29,2019 Sep.29,2024 HL8284 B18303, B18317, B18352, China Jan. 8, 2017 Jan. 8, 2022 B18357, B18359, B18660, 6. China Eastern B15706, B15723, B15725, Germany Nov. 20, 2018 Nov. 20, 2023 Airlines Co., Ltd. B18302, B18306, B18307, B18308, B18309, B18310, 7. Deutsche Lufthansa B18311, B18315,B18316, None None B18351, B18355, B18356, B18358, B18360, B18361, B18612, B18615, B18651, B18652,B18653, B18655, B18656, B18657,B18658, B18663, B18665, B18666, B18667, B18701, B18707, B18708, B18709, B18710, B18711, B18712, B18715, B18717, B18719,B18720, B18722, B18761 B1041,B1640,B5902,B5938, B5941, B5973, B6085, B6543, B7347, B7367, B8968, B9906, B9947 DAIFC, DAIKB AG ' 92 Exhibit "P-39-2." Id. at p. 638. 93 Supra note 91. 94 Supra note 92.

DECISION CTA Case No. 10966 8. Federal Express N101FE, N102FE, N103FE, USA Jun. 4, 2020 Jun. 4, 2025 Corp. N104FD, N104FE, N106FE, N107FE, N108FE, N121FE, China Mar. 15,2018 Mar. 15, 2023 9. Hong Kong Airlines N572FE, N573FE, N583FE, Singapore Mar.30,2020 Mar. 30, 2025 Limited N584FE, N588FE, N593FE, Malaysia Aug. 30, 2017 Aug. 30, 2022 N594FE, N595FE, N605FE, China 10. Jetstar Asia N612FE, N613FE, N617FE, Philippines Feb.29,2020 Jan.3,2025 Airways PTE Ltd. N628FE, N642FE, N828FD, N844FD, N851FD, N853FD, Philippines 11. Malaysia Airlines N855FD, N858FD, N859FD, Berhad N861FD, N865FD, N868FD, N869FD, N876FD, N877FD, 12. Xiamen Airline N877FE, N878FD, N880FD, Co., Ltd. N882FD, N883FD, N884FD, N886FD, N887FD, N891FD, N892FD, N893FD, N894FD, N896FD, N897FD, N914FD, N919FD, N946FD, N948FD BLPL 9VJSM 9MMLO, 9MMTB, 9MMTE, 9MMTF, 9MMTJ, 9MMTM, 9MMTO, 9MMUA, 9MMUB, 9MMUD, 9MMXU, 9MMXV, 9MMXW B1356,B1566,B1567, B5535, B7836, B7838, B7846 13. Philippine Airlines RP-C3501, RP-C3503, RP- Inc. C3506, RP-C3507, RP-C3508, RP-C7772, RP-C7773, RP- 14. Philippines C7774, RP-C7775, RP-C7777, AirAsia Inc. RP-C7778, RP-C7781, RP- C7782, RP-C8764, RP-C8765, RP-C8766, RP-C8781, RP- C8786, RP-C8789, RP-C8963, RP-C9902, RP-C9914, RP- C9918, RP-C9926, RP-C9928, RP-C9933, RP-C9935, RP- C9936, RP-C9937, RP-C9938 RP-C8948, RP-C8966, RP- C8977, RP-C8978 Of petitioner's fourteen (14) clients detailed in the immediately preceding table, clients (3) and (7) failed to satisfy the second requisite. To be precise, AirAsia Berhad is no longer authorized to operate international flights on the period of claim because its FACP expired on May 5, 2020. Likewise, Deutsche Lufthansa AG is not included in the CAB Certification with valid FACP. It means that these two (2) entities may not be considered as international air carriers within the purview of Section 135(a) of the NIRC, as amended. For this reason, petitioner's sale of 304,412liters and 23,494 liters of Jet A-1 fuel to Deutsche Lufthansa AG and AirAsia Berhad, respectively, with corresponding excise tax payment of P1,217,648.00

DECISION CTA Case No. 10966 and P93,976.00, or 1n the total amount of P1,311,624.00, shall be disallowed from petitioner's claim. Such disallowance is broken down, as follows: Exhibit Volume Excise Tax Reference ASRNo. Delivery Date (in liters) @P4.00 Excise taxes on sale of Jet A-1 fuel to Deutsche Lufthansa AG with expired FACP "P-58," p. 440 0011149 Nov. 8, 2020 34,000 P136,000.00 "P-58," p. 441 0011150 Nov. 8, 2020 19,000 76,000.00 "P-58," p. 443 0011152 Nov. 8, 2020 20,978 83,912.00 "P-58," p. 485 0011198 Nov. 13,2020 34,000 136,000.00 "P-58," p. 490 0011203 Nov. 13,2020 19,000 76,000.00 "P-58," p. 491 0011204 Nov. 13,2020 18,040 72,160.00 "P-58," p. 591 00000287 Nov. 20,2020 19,000 76,000.00 "P-58," p. 592 00000288 Nov. 20,2020 32,099 128,396.00 "P,58," p. 602 00000302 Nov. 21,2020 34,000 136,000.00 "P-58," p. 650 00000384 Nov. 29,2020 13,202 52,808.00 "P-58," p. 653 00000387 Nov. 29, 2020 27,063 108,252.00 "P-58," p. 811 00000383 Nov. 29,2020 34,030 136,120.00 Sub-total 304,412 ?1,217,648.00 Excise taxes on sale ofjet A-1 fuel to AirAsia Berhad without FACP "P-58," p. 233 0010927 Oct. 5, 2020 2,134 P8,536.00 "P-58," p. 286 0010984 Oct. 12, 2020 4,892 19,568.00 "P-58," p. 558 0019035 Oct. 18, 2020 2,568 10,272.00 "P-58," p. 569 0019046 Oct. 19, 2020 2,656 10,624.00 "P-58," p. 355 0011056 Oct. 30, 2020 1,618 6,472.00 "P-58," p. 493 0011206 Nov. 13,2020 3,718 14,872.00 "P-58," p. 711 00000458 Dec. 6, 2020 5,908 23,632.00 Sub-total 23,494 ?93,976.00 Total 327,906 P1,311,624.00 Third. The Aviation Service Returns (ASRs) 95 submitted by petitioner indicated the details of the Jet A-1 fuel deliveries it made to international air carriers, including the origin and destination of the international air carriers, and volume in liters of Jet A-1 fuel delivered to international air carriers. Further, these ASRs exhibit the route of the international air carrier named therein (whether of foreign or Philippine registry) is only between the Philippines and other country. Thus, imported Jet A-1 fuel sold by petitioner to international air carriers, was used or consumed outside the Philippines. 95 Exhibit "P-58." USB.

DECISION CTA Case No. 10966 All told, out of the P83,495,520.00 worth of ET being claimed as refund or credit by petitioner, the latter successfully proved that it erroneously or illegally paid ET totaling P82,183,896.00, corresponding to 20,545,974 liters of Jet A-1 fuel it directly imported, and subsequently sold to international air carriers. Ergo, said P82,183,896.00 should be allowed as refund or credit in its favor, pursuant to Sections 204(C) and 229 of the NIRC, as amended. Ponder on the following table: Particulars Volume Amount of Volume/ Amount of Excise Tax Claim per in Liters Excise Taxes Petition for Review 20,873,880 Paid at P4.00 Less: Sales made to international air carriers p 83A95,520.00 327,906 without valid/expired FACP L311,624.00 Volume and corresponding Amount of 20,545,974 Refundable Excise Taxes P82,183,896.00 WHEREFORE, the Petition for Review dated August 30, 2022, 1n CTA Case No. 10966 is PARTIALLY GRANTED. The Commissioner of Internal Revenue is ORDERED TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE in favor of Pilipinas Shell Petroleum Corporation, in the reduced amount of P82,183,896.00, representing excise taxes it paid on Jet A-1 fuel, imported on September and October 2020, and subsequently sold to international air carriers from October to December 2020. SO ORDERED. ~ k r. ~ ,r~�(iVI.~ MARIAN rv#. REYiS~FAJARDO Associate Justice WE CONCUR: ~�r.~ CATHERINE T. MANAHAN Associate Justice

DECISION CTA Case No. 10966 HENRY V.~J:NGELES Associate Justice 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~~T. CATHERINE T. MANAHAN 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's Division. Presiding Justice