PHILIPPINE AIRLINES, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES Court ofTax Appeals QUEZON CITY En Bane PHILIPPINE AIRLINES, INC., CTAEB NO. 2949 Petitioner, (CTA Case No. 10730) -versus- Present: RINGPIS-LIBAN, Acting P.J, MANAHAN, BACORRO-VILLENA, MODESTO-SAN PEDRO, REYES-FAJARDO, CUI-DAVID, FERRER-FLORES, and ANGELES,JJ Promulgated: COMMISSIONER OF INTERNAL REVENUE, R es p o n de n t. X ---------------------------------------------------------------------------------------- X DECISION MODESTO-SAN PEDRO, J.: The Case Before the Court En Bane is a Petition for Review ("Petition"), filed on July 17, 2024, 1 without respondent' s Comment.2 The Petition assails the February 21 , 2024 Decision3 of the Court's Special First Division denying its Petition for Review, which sought the refund of or issuance of a tax credit certificate for the amount of P586,326.28 allegedly representing erroneously paid excise taxes on importations of alcohol products for the period from September to December 2019, as well as the June 13, 2024 Resolution4 r denying its Motion for Reconsideration. Rollo, pp. 1-65 . !d. at 66. 3 !d., at 46-60. 4 !d. at 61 -65 .

DECISIO'i CTA EB NO. 29~9 (CT A Case 'Jo. 10730) The Parties Petitioner, Philippine Airlines, Inc., is a domestic corporation duly organized and existing under and by virtue ofthe laws of the Republic of the Philippines with registered business address at Philippine Airlines, Lucio K. Tan Jr. Center, PAL Gate 5, Andrews Avenue, Nichols, Pasay City, Philippines.5 On the other hand, respondent is the Commissioner of the BIR, vested with the authority to decide, approve, and grant tax refunds pursuant to Section 112 (C) of the National Internal Revenue Code of 1997. as amended ("Tax Code"). He may be served with summons and other Court processes at the BIR National Office Building, Agham Road, Diliman, Quezon City.6 The Facts The case began on January 11, 2022 when petitiOner filed an administrative claim for refund before the BIR's Excise Large Taxpayers Audit Division seeking the refund of or issuance of tax credit certificate for the amount ofl'586,326.28, representing excise taxes it paid under protest on January 17, 2020 for its importation of alcohol products, which, under Presidential Decree ("PD") No. 1590, are exempt from excise tax. 7 On February 2, 2022, petitioner instituted its judicial claim for refund via a Petition for Review filed before the Court in Division.8 Respondent filed h1.s Answer9 on May -?, ?_O-?-?� Following trial, the Court, acting through its Special First Division, issued the assailed Decision denying the case for lack of merit. Petitioner's Motion for Reconsideration, filed on March 13, 2024 10, was denied per the June 13, 2024 Resolution. Having received said Resolution on July 2, 2024, petitioner filed the J instant Petition on July 17, 2024 before the Court En Bane. ,, Petition for Review, id.. p. 2. !d. !d.. at3. Ibid. 9 Ibid 10 !d. at 4.

DH'ISIO~ CTA I:B :-10. 29-19 (CTA Case No. 10730) The Court En Bane then issued a Resolution, dated August 16, 2024, requiring respondent to file its Comment to the Petition within I0 days from notice. 11 However, respondent did not comply with such directive. 12 On October 30, 2024, this Court En Bane issued a Resolution submitting the instant case for Decision. 13 Hence, this Decision. The Issue The sole issue for this Court's resolution is whether the denial of the Petition for Review before the Court in Division was proper as petitioner's evidence did not sufficiently establish that the subject imported alcohol and tobacco products were not locally available in reasonable quantity, quality or price at the time of importation. Arguments ofthe Parties Petitioner's Arguments Petitioner insists that the evidence it presented sufficiently established that the subject imported alcohol and tobacco products are not locally available in reasonable quantity, quality or price. It holds out that in several cases involving the same parties, this Court and the Supreme Court have ruled that the Table of Comparison with testimonial evidence and price list of just one retailer has been found to be sufficient and convincing evidence. Per petitioner, the Court in Division mistakenly applied the rule on hearsay evidence as to the price lists it provided. Moreover, petitioner insists that the Court in Division failed to consider that the third requisite should show that the imported articles are not locally available either in reasonable quality, quantity or price. For petitioner, the Court in Division disregarded the fact that the submission of comparative local price is not the only determining factor to justify the exemption of the subject importation. Further, petitioner insists that the Court in Division is mistaken when it relied the Assailed Decision and Assailed Resolution on a case that is still currently pending appeal. Petitioner concludes that the Court in Division has clearly deviated from settled jurisprudence. It argues that the Special First Division failed to appreciate the preponderant and uncontroverted evidence it adduced. According to petitioner, the Court in Division's imposition of stringent requirement in proving that its importation of liquors, wines, and cigarettes are not locally available in reasonable quantity, quality or price defeats the purpose of the tax r exemption it is entitled under PD No. 1590. 11 Rollo. at 66. 1 !d. at. 67. ' 13 !d. at 68.

DECISIO:\ CTA EB NO. 29-l9 (CTA Case No. 10730) Page-l of 15 The Ruling ofthe Court Petitioner's claim for refund is anchored upon PD No. 1590 which exempts it from the payment of excise taxes for its imported commissary and catering supplies, subject to its compliance with set requirements. The pertinent section of PD No. 1590 provides, as follows: Section 13. In consideration orthe ti"anchise and rights hereby granted, the grantee shall pay to the Philippine Government during the life of this franchise whichever of subsections (a) and (b) hereunder will result in a lower tax: (a) The basic corporate income tax based on the grantee's annual net taxable income computed in accordance with the provisions of the National Internal Revenue Code; or (b) A franchise tax of two per cent (2%) of the gross revenues derived by the grantee from all sources, without distinction as to transpm1 or nontransport operations; provided, that with respect to international air-transport service. only the gross passenger, mail, and freight revenues from its outgoing flights shall be subject to this tax. The tax paid by the grantee under either of" the above alternatives shall be in lieu of" all other taxes, duties, royalties, registration, license, and other fees and charges of any kind, nature. or description. imposed. levied, established, assessed. or collected by any municipal, city, provincial. or national authority or government agency. now or in the future. including but not limited to the following: I. All taxes. duties. charges, royalties, or fees due on local purchases by the grantee of aviation gas, fuel, and oil, whether refined or in crude fonn, and whether such taxes. duties. charges. royalties. or fees are directly due from or imposable upon the purchaser or the seller, producer, manufacturer. or importer of said petroleum products but are billed or passed on the grantee either as part of the price or cost thereof or by mutual agreement or other arrangement; provided. that all such purchases by, sales or deliveries of aviation gas, fuel, and oil to the grantee shall be for exclusive use in its transport and nontransport operations and other activities incidental thereto; 2. All taxes. including compensating taxes, duties. charges. royalties, or fees due on all importations by the grantee of" aircraft, engines. equipment, machinery. spare parts, accessories, commissary and catering supplies, aviation gas. fuel. and oil, whether refined or in crude fonn and other articles, supplies, or materials; provided, that such articles r or supplies or materials are imported for the use of the grantee in its transport and transport operations and other

DECISIO:\ CTA FB NO. 29-!9 (CTA Case :\Jo. 10730) activities incidental thereto and are not locally available in reasonable quantity, quality, or price; (Emphasis. supplied) Hence, the issue in this case is whether the imported products for which petitioner claims a tax refund are not locally available in reasonable quantity, quality or price. In denying the claim for refund, the Court, acting m Division, elucidated as follows: Finally, with respect to the third (3'ct) requisite, i.e., said supplies are not locally available in reasonable quantity, quality or price. petitioner presented as evidence the price lists fonn various local suppliers. viz: (I) 2019 Price List of Absolute Sales Corporation (ASC); (2) Future Trade International Travel Retail Price List, effective October 20, 2018 (FTI) (3) 2019 Price List of Minivan Enterprises (ME); (4) On top of these price lists. Revenue Memorandum Circular (RMC) No. 90-2012. In both the present case and in the previous PAL case. petitioner presented essentially the same suppliers. Likewise. in both cases, petitioner failed to present corroborating evidence that the price list of the said suppliers represent the local market prices for the imported alcohol products vis-a-vis the totality of local suppliers who are engaged in selling similar products in the same years. Finally, considering that RMC No. 90-2012 was based on the 20 I 0 BIR price survey of alcohol products, no valid comparison can be made to the prices of petitioner's imported alcohol products for 2018 to 2019 with that of the said price survey. Consequently, based on the evidence presented by petitioner. it cannot be determined with certainty whether the subject imported alcohol products are not locally available in reasonable quantity, quality or price. Thus, the Court finds that petitioner failed to satisfy the third (3rd) requirement for it to avail the benefits of Section 13 ofPD No. 1590. 14 At this point, it would be instructive to review jurisprudence on this issue. It would appear that there are seven Supreme Court decisions touching on the issue of whether petitioner has presented evidence sufficient to entitle it to its claim for refund of excise taxes it paid under protest for importations of liquor and wine. Of these seven, four are Notices of unsigned Resolutions, and three are full Decisions. A summary of the conclusions in these cases and ( " !d.. at 52-54.

DECISIO' CTA tB NO. 29.J9 (CT A Case Nt). 10730) those in the corresponding En Bane and Division cases appealed from IS contained in the table below: CASE NO. TESTIMONY EVIDENCE WHY CONCLUSION REJECTED I G.R. No. 236343-45. Capinpin- Tables of Disagreed with 236372-74: Notice Carlsberg. Comparison: CTA finding that (2023-0 1-17)- Absolut. Supporting price PAL has granted: sufficient Gordons list- inadequately corroborated shown its Unsigned Resolution Capinpin"s compliance with but discussed facts testimony Section 13 (b) and law on which it (2) of PD I590 was based as regards the CTA EB No. 1308. Capinpin -No Table of ' amount of I P240,283.71. ' Testimony that Due to testimony 1309.1311 (2017- local suppliers: Comparison: PAL imported on no local 02-27) J Liban- no reasonable because suppliers. as to partially granted quantity cheaper than one product, available locally buying locally additional -as to Volupta insufficient- P550.81 0.26 Blanco and Local prices refunded: not available alternative, not Rosso Lee: Galedo for comparison cumulative ' qualification for exemption; partial refund of P3,983,223.10 CTA Case No. 8514 Capinpin: Lee; Table of Local prices of Costs of (20 15-0 1-06) J Galedo Comparison: some alcohol importing Casanova- partially Philippine Wine products not identified liquors granted Merchants Price available for and wines are List: Future comparison; lower than the Trade costs of International purchasing them Price List: Duty locally - Partial Free Price List refund granted 2 G.R. No. 231638 Capinpin- PAL Philippine Wine CTA committed Notice (2021-02- I6) imported Merchants Price a severe -granted: sufficient because cheaper list: Table of depa1iure from than buying Comparison settled Unsigned Resolution locally jurisprudence but discussed facts amounting to and \a\v on which it abuse or was based improvident exercise of authority when it ruled that the pieces of evidence PAL presented are �'inadequate'' to show compliance with Section 13 (b) (2) CTA EB No. 1299 Alcohol- PAL Capinpin Cross Affirmed (2016-10-03)1 Uy- imp011ed Examination- Division dismissed: because cheaper only Phil Wine dismissing insufficient than buying Merchants Petition: PJ Del locally submitted Rosario Cigarettes - no quotation; Duty dissented local suppliers Free- only visited to see prices: did not try to obtain r

DECISIO\ CTA FR NO. 29-�9 (CTA Case No. 10730) price from other suppliers: none of the comparative price list contain price on ci oarettes CTA Case No. 8130 Capinpin- only The information (2014-12-01) J I supplier gathered from Victorino- granted request the two sources dismissed: for price Iist: but insofar as insufficient request \vas only imp011cd wine to Duty Free and liquors are concerned are seriously deficient to justify conclusion that the said imported items arc not available in reasonable quantity. qual it)' or price in the local market : Denied Petition 3 G.R. No. 240532 Respect CTA Notice findings of fact (20 19-03-27)- sufficient EB No. 1363- Capinpin Philippine Wine Followed 2 other Amended Decision Merchants Price CTA cases (20 18-02-13) - pJ List where Table of Del Rosario - Comparison and sufficient local prices reflected in I price list found sufficient; remanded to Division to detenn ine refund amount 2 other cases - CTA Case Nos. 7677, 7685,and 7746 (Decision and Amended Decision) affirmed with modifications in CTA EB 954 & I046, October 14, 2014; and CTA Case No. 8153, January 17,2013 (affirmed in CTA EB Nos. 1029, 1031 and April30, 2014) Original Decision Capinpin- only Philippine Wine Affirmed CTA EB No. 1363 I price list Merchant Division- only (20 17-04-05) J because other I supplier Grulla: insufficient local merchants insufficient: refused to give Cap in in their price list testimony is f uncorroborated

DECISIO:\ CTA EB NO. 29-!9 (CTA Case .\Jo. 10730) CTA Case No. 8198 Capinpin- only Table of PAL could not Denied Petition (20 15-06-02) J I price list Comparison: have Presenting only Bautista- because other Philippine Wine determined the I supplier is insufficient local merchants Merchants Price availability of insufficient refused to give List the imported their price list wmes or liquors in reasonable quantity, quality or price in the local market based solely on the price list provided by only one supplier. 4 G.R. No. 238672 Respect CTA Notice (20 18-07-09) findings of fact sufficient CTA EB No. 1433 Capinpin Table of Cited several (2017-10-18) J Comparison: CTA EB cases Casanova- Philippine Wine (CTA EB Case sufficient Merchants price Nos. 1216. 1217 Iist; Future and 1221 {CTA Trade Case No. 8184), International May 27. 20 16, Price List; Duty CTA EB Case Free Retail Nos. 954 & I046 Prices (CTA Case Nos. 7677, 7685 and 7746). October 14, 2014; CTA EB Case Nos. 920 & 922 (CTA Case Nos. 7665 and 7713), September 9, 2013 (G.R. Nos. 109353-54, 211733-34, July 6, 2015); CTA EB Case Nos. 1029,1031& I032 (CTA Case No. 8153), April 30, 2014; CTA Case No. 8236. December 18, 2013.) which consistently ruled that the Table of Comparison Between Cost of Importing and Cost of Locally Purchasing Commissary and Catering Supplies with local prices reflected in the Philippine Wine Merchants' Price List and/or Duty Free Philippines Retai I Prices, r tooether with the

DECISIO:\ CTA EB .\JO. 29-19 (CTA Case .\lo. 10730) testimony of petitioner's witness, were deemed sufficient Also cited SC ruling in G.R. Nos. 215705-07 where there \Vas only one price I ist presented and evidence still found sufficient Noted that PAL �s evidence remained unrebutted as the BIR did not present any evidence to refute PAL's claim CTA Case Nos. Capinpin Table of Imported Remand to 8529 and 8590 Comparison; brands not (20 15-1 0-27) J Philippine Wine mentioned in Division to Victorino- Merchants Price price Iist of determine refund insufficient List; Duty Free Philippine Retai I Prices Wine amount Merchants nor Duty Free Denied Petition When the subject importations were made in 2009, petitioner did not have any data. reliable or otherwise, on the price and availability of the subject imported items: Witness also admitted in open cou1t that petitioner had nothing to show that it conducted internal canvassing pertaining to the local availability of the subject I imported I products f

DECISIO' CTA EB NO. 29-!,9 (CT A Case No. 10730) 5 G.R. No. 215705-07 Respect CTA findings of fact (20 17-02-22)- Aftirmed sufficient Division in toto CTA EB No. 1029. Santos Philippine Wine Partially granted as to wine 1031, 1032 (2014- Merchants Price products: I supplier 04-30) J Uy - List: Table of sufficient Respect CTA sufficient Comparison: findings of fact I Affirmed Prima facie case Division: issue : not discussed established. One supplier sufficient: burden of Refund granted evidence shifts Respect CTA findings of fact to respondent Affirmed which presented Division no controverting Refund granted evidence CTA Case No. 8153 Santos- Philippine Wine (2013-01-17) J importing Merchants Price Castaneda- supplies cheaper List: Table of sufficient than purchasing Comparison locally 6 G.R. No. 209353-54. 211733-34 (20 15- 07-06)- sufticient CTA EB No. 920. 922 (20 13-09-09) J Grulla -sufficient CTA Case No. 7665, Li- impo11ation Duty Free Price 7713 (2012-04-17)J cheaper than list: Table of Castaneda- purchasing Comparison sufficient locallv 7 G.R. No. 212536-37 (20 14-08-27)- sufficient CTA EB No. 942, 944 (20 13-12-09) J Castaneda- sufficient CTA Case No. 7868 Santos- Various price (20 12-06-22) J importing is lists (3) Casanova- cheaper than sufficient purchasing locallv As it stands, then, the presentation of just one supplier cannot be the basis for finding the evidence of petitioner insufficient. Indeed, in six of the seven cases, above, the ultimate holding is that the presentation of one supplier's price list, together with a Table of Comparison and testimonial evidence that importing the subject alcohol products is cheaper than purchasing them locally, is sufficient to prove that the subject imported products were not locally available in reasonable quantity, quality or price at the time of importation. At first blush, then, it would appear that the Court in Division erred in finding the evidence of petitioner insufficient, given that not only did it present the testimony of its usual witness, Cheryl V. Capinpin, but also a Table of Comparison and price lists from four sources. r Yet, the Court still agrees with the Division's finding.

llECISIO:\ CTA EB NO. 29-:1:9 (CTA Case :--Jo. 10730) Page11of1S The rationale is found m the following disquisition found m the questioned Resolution: Still, even if the price lists presented by PAL are sufficient to prove its claim, the Court cannot give probative weight to these pieces of evidence for being hearsay documents. Witness Cheryl V. Capinpin testifies in her Judicial Anidavit that: .. 13. Q: You mentioned that you compared the local prices and the importation costs for the alcohol products. What documents did you use in comparing these prices? A: For alcohol products, I used the following as my sources of local pnces: I. Absolut Sales Corporation 2019 Price List; 2. Future trade International Travel Retail Price List etTective 20 October 2018: 3. Minivan Enterprise 2019 Price List; and 4. Bureau of Internal Revenue's (BIR) Revenue Memorandum Circular (R.M.C.) No. 90-2012 Price List. 17. Q: How did you secure the local prices of these local suppliers? A: These price Lists were given to me by their authorized representatives. 18. Q: On the bottom left corner of Annex 'P-11', there appears a signature on top of the name Melvin Zablan. Whose signature is this~ A: This is the signature of Mr. Melvin Zablan, Business Development Manager of Absolut Sales Corporation. He was the one who prepared the local Price List for Absolut Sales Corporation for 2019. 19. Q: On each and every page of Annex 'P-11.1'. there appears a signature of one Rowena Miralles. Whose signature is this? A: This is the signature of Ms. Rowena Miralles. Credit and Collection Officer of Future Trade International. Inc. She was the one who prepared the local Price List for Future Trade as of20 October 2018. 20. Q: On the bottom-right corner of 'P-11.2', there appears a signature on top of the name Ivan Tan. Whose signature is this? A: This is the signature of Mr. Ivan Tan. Authorized Representative of Minivan Enterprise. He was the one who prepared the local Price List for Minivan Enterprise for 2019.'' Based on the above-testimony. witness Cheryl V. Capinpin has no f personal knowledge on the subject price lists because she had no participation whatsoever in their preparation or execution. Instead, the

DECISIO' CT A fH t\0. 29-!9 (CTA Case 1\"o. 10730) alleged authorized representatives of these suppliers should have been presented as witnesses to a�Tord the CIR the opportunity to cross examine them. While a scrutiny of the records reveals that the CIR failed to object to the hearsay nature of the subject price lists, the Supreme Court has consistently held that 'hearsay evidence, whether objected to or not, has no probative value unless the proponent can show that the evidence falls within the exceptions to the hearsay evidence rule.' As such, despite the CIR's failure to object, the Court cannot give probative weight to the subject pieces of evidence. (Citations omitted) Clearly, the denial of the claim for refund is not simply because there were only four price lists presented (as the presentation of one price list will suffice) but because the evidence presented was not reliable. As admitted by petitioner's witness herself, she was not the one who prepared the price lists introduced in evidence, i.e., 2019 ASC Price List, 2018 FTI price list, 2019 ME price list. Petitioner failed to present the persons who actually prepared the price lists, i.e.. Melvin Zablan- ASC Price List, Rowena Miralles- FTI price list, and Ivan Tan- ME price list. Without the testimony of the persons who actually prepared such price lists, these documents are hearsay. As such, this Court En Bane cannot give probative value on such documentary evidence regardless if respondent objected or not to the presentation of these price lists. As said in Republic of the Philippines v. ManansalaY The general rule is that hearsay evidence is not admissible. However, the lack of objection to hearsay testimony may result in its being admitted as evidence. But one should not be misled into thinking that such declarations are thereby impressed with probative value. Admissibility of evidence should not be equated with weight of evidence. Hearsay evidence whether objected to or not cannot be given credence for it has no probative value. Contrary to the arguments posited by petitioner, it is not the testimony of Ms. Capinpin with respect to the preparation of the Table of Comparison which is hearsay considering that she had a hand and personal knowledge in the preparation of the same. Instead, the hearsay evidence are the price lists as the actual persons who prepared the same were not presented before the Court a quo. All told, in finding that petitioner's evidence was insufficient to prove that the imported products were not locally available in reasonable quantity, quality or price at the time of importation, the questioned Decision looked into the quality of the evidence presented by petitioner and not just the quantity r thereof. 15 G.R. No. 241890. May 3.2021.

DECISIO' CTA tB NO. 29..J-9 (CTA Case No. 10730) Page 13 of15 With the meager evidence presented by petitioner, the Court cannot make the conclusion that, indeed, the imported products were not locally available in reasonable quantity, quality or price at the time of importation. It is well-settled that the party who alleges the affirmative of the issue has the burden of proof, and that with the plaintiff in a civil case, the burden of proof never parts. Once the plaintiff makes out a prima facie case in his or her favor in the course ofthe trial, however, the duty or the burden of evidence shifts to the defendant to controvert the plaintiffs prima facie case, otherwise, a verdict must be returned in favor of the plaintiff. I6 In turn, 'prima facie" is defined as evidence good and nif.fzcient on its face. Such evidence as, in the judgment of law, is stif.fzcient to establish, a given fact, or the group ofchain of facts constituting the party's claim or defense and which if not rebutted or contradicted will remain sufficient. I 7 Here, as explained above, the evidence presented by petitiOner can hardly qualify as good and sufficient on its face such that it does not even require controverting evidence. Indeed, it is only when "the plaintiff makes out a prima facie case in his or her favor in the course of trial that the duty or the burden of evidence shifts to the defendant to controvert the plaintiffs prima facie case." IS Finally, the Court must emphasize that being a derogation of the State's power of taxation, tax refunds or credits, just like tax exemptions, are strictly construed against taxpayers and liberally in favor of the State. Strict compliance with the mandatory and jurisdictional conditions prescribed by law to claim such tax refund or credit is essential and necessary for such claim to prosper. 19 Perhaps with this ruling, petitioner can see fit in the future to present evidence sufficient not just in quantity but more importantly, in quality. ACCORDINGLY, the Petition for Review, filed on July 17, 2024, is hereby DENIED for lack of merit. The Assailed Decision, dated February 21, 2024, and the Assailed Resolution, dated June 13, 2024, of the Court in Division are hereby AFFIRMED. ( 16 Singson v. Spouses Carpio. G.R. No. 238714. August 30, 2023. " Ugani:a y (}uinday v. People. G.R. No.236379 (Notice). October 9. 2023. 18 Sps. Ponce & lv'erosa v. A/danese. G.R. No. 216587. August 4, 2021. 19 Philipp;,le National Bank v. Commissioner t:?f!merna/ Revenue. G.R. Nos. 24264 7 & 243814 & 242842- 43 (Notice). March 15. 2022.

DECISIO:-; CTA EB 1\0. 2949 (CTA Case 1\o. 10730) SO ORDERED. stice WE CONCUR: ~.~ ...., '--- MA. BELEN M. RINGPIS-LIBAN Associate Justice !'~ T fo'~'---- cATHERINE T. MANAHAN Associate Justice � JEAN MARl ~ ~ {i ~ -~~@..._~ I reiterate my CDO in the-fbecision in CTA Case No. 10730 MARIAN IVY F. REYES-FAJARDO Associate Justice fbwn{tn,~ LANEE S. CUI-DAVID Associate Justice Just~In i~~TA !join the CDO ofcoR.'AiO:ff'c~FERRER-FLoj.ffs Case No. 10730 Associate Justice � HENRY~fNGELES Associate Justice

DECISIO:\ CTA Efl NO. 29-19 (CTA Cast' No. 10730) CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, 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. ~-~7-- MA. BELEN M. RINGPIS-LIBAN Acting Presiding Justice

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC PHILIPPINE AIRLINES, INC., CTA EB NO. 2949 Petitioner, (CTA Case No. 10730) Present: -versus- DEL ROSARIO, P.l., RINGPIS-LIBAN, MANAHAN, BACORRO-VILLENA, MODESTO-SAN PEDRO, REYES-FAJARDO, CUI-DAVID, FERRER-FLORES, and ANGELES, fl. COMMISSIONER OF INTERNAL REVENUE, PromuJ$ated: Respondent. OCT z9 ~ :ld-:-18/-".w,.x x-------------------------- --------- CONCURRING OPINION BACORRO-VILLENA, L.: I concur with the ponencia in denying petitioner Philippine Airlines, Inc.'s (petitioner's/PAL's) Petition for Review for lack ofmerit. Consequently, this affirms the First Division's Decision dated 21 February 2024 (Assailed Decision) and Resolution dated 13 June 2024 (Assailed Resolution), which denied petitioner's claim for a refund amounting to P586,J26.28. This amount represents excise taxes imposed on petitioner's importation of alcohol products (from September to December 2019), which were allegedly collected erroneously or illegally and paid under protest on 17 January 2020. The denial is based on petitioner's failure to present sufficient and convincing evidence demonstrating compliance with the third (fd) condition required by r Presidential Decree (PD) No. 1590\ as amended, i.e., that the imported / AN ACT GRANTING A NEW FRANCHISE TO PHILIPPINE AIRLI NES, INC. TO ESTABLISH, OPERATE, AND MAINTA IN AIR-TRANS PORT SERVICES IN THE PHI LI PPINES AND BETWEEN TH E PHI LI PPINES AND OT HER COUNTRIES.

CONCURRING OPINION CTA EB No. 2949 (CTA Case No. 10730) Philippine Airlines, Inc. v. Commissioner of Internal Revenue Page 2 of8 X------------------------------------------X alcohol products were not locally available in reasonable quantity, quality, or price at the time of importation. I wish to emphasize that the 20142 and 2017 PAL Decisions3, 20154 PAL Resolution and the PAL Minute Resolutions of 20185, 20196, 2o217, and 20238 cannot be used as bases for deeming the pieces of evidence presented (i.e., the testimony of Cheryl V. Capinpin9 [Capinpin], petitioner's Manager for In-flight Materials Purchasing Division, the Table of Comparison'" and the Price Lists" that were deemed hearsay) as sufficient compliance with the fd condition. Unfortunately, the cited Decisions, Resolution and Minute Resolutions are clearly inapplicable to the instant case. Additionally, and more particularly, the Minute Resolutions are not binding precedents. To expound, Section 13(2) ofPD 1590 reads: SEC. 13. In consideration of the franchise and rights hereby granted, the grantee shall pay to the Philippine Government during the life of this franchise whichever of subsections (a) and (b) hereunder will result in a lower tax: The tax paid by the grantee under either of the above alternatives shall be in lieu of all other taxes, duties, royalties, registration, license, and other fees and charges of any kind, nature, or description, imposed, levied, established, assessed, or collected by any municipal, city, provincial, or national authority or government agency, now or in the future, including but not limited to the following: (2) All taxes, including compensating taxes, duties, charges, royalties, or fees due on all importations by the grantee of aircraft, engines, equipment,~ Commissioner ofInternal Revenue and Commissioner ofCustoms v. Philippine Airlines. Inc.. G.R. Nos. 212536- 37.27 August 2014. Commissioner <~(Internal Revenue and Commissioner ofCustoms v. Philippine Airlines, Inc.. G.R. Nos. 215705- 07. 22 February 2017. Repuh!ic c?fthe Philippines. rep. b_1� the Commissioner ofCustoms v. Phi/JjJjJine Airlines. Inc. (P.�IL). G.R. Nos. 209353-54 & 211733-34 (Resolution). 06 July 2015. Commissioner (flntenwl Revenue and Commissioner ofCustoms v. Philippine Airlines. Inc.. G.R. No. 238672 (Notice). 09 July 2018. Commissioner of Infernal Rewnue (C!R). et a!. v. Philippine .�lirlint:s. Inc. (PAL). G.R. No. 240532 (Notice). 27 March 2019. Philippine rl irfines. Inc. v. Commissioner of lnremal Revenue. et oL G.R. No. 23163 8 (Notice). 17 February 2021. Commissioner oj1memal Reven11e. eta!. v. Philippine Airlines. Inc.. G.R. Nos. 236343-45 & 2363 72-74 (Notict:). 17 January 2023. Exhil1it ��p-22... Division Docket. pp. I OJ -192. with uttuchcU cxhibit:-;. 10 Exhibit ��r-1 o��. id.. p. 461. II Exhibits "P-11". "P-11.1''. "P-11.2" and "P-11.3'". id .. pp. 463. 464-472. 473 and 474-494 (with annexes). rcspectiYdy.

CONCURRING OPINION CTA EB No. 2949 (CTA Case No. 10730) Philippine Airlines, Inc. v. Commissioner of Internal Revenue Page 3 ofS x------------------------------------------x machinery, spare parts, accessories, commissary and catering supplies, aviation gas, fuel, and oil, whether refined or in crude form and other articles, supplies, or materials; provided, that such articles or supplies or materials are imported for the use of the grantee in its transport and non- transport operations and other activities incidental thereto and are not locally available in reasonable quantity, quality, or price. The foregoing provision requires the concurrence of three (3) requisites before petitioner's importations may be considered tax-exempt, to wit: 1. Petitioner paid its corporate income tax covering the period when the subject importations were made; 2. The articles, supplies, or materials are imported for petitioner's use in its transport and non-transport operations and other activities incidental thereto; and 3� The imported articles, supplies, or materials are not locally available in reasonable quantity, quality, or price.'2 As to the fd condition, the Supreme Court in Commissioner ofinternal Revenue and Commissioner ofCustoms v. Philippine Airlines, lnc.'3, ruled that such qualification for exemption is in the alternative, and not cumulative. Simply stated, petitioner only needs to prove that the locally available article is either insufficient in quantity, or is of subpar quality, or is severely overpriced compared to its imported variant. In this case, petitioner submitted the following pieces of documentary evidence to prove that the subject imported alcohol products were not locally available in reasonable quantity, quality or price: (1) the Judicial Affidavit of Capinpin'4, petitioner's Manager for In-flight Materials Purchasing Division; (z) Absolute Sales Corporation's (ASC's) Price List for 2019'5; (3) Future Trade International's (FTI's) Travel Retail Price List effective 20 October 2018'6; (4) Minivan Enterprise's (ME's) Price List for 2019'7; and (s) the Bureau of Internal Revenue's (BIR's) Price List per Revenue Memorandum Circular; (RMC) No. 90-2012.'8 Commissioner of!nternol Revenue and Commissioner q(Cusloms v_ Philtj)j)ine Airlines. Inc.. G.R. Nos. 245330- 31.01 April2024. IJ Id. ",, Exhibit "'P-22"". supra at note 9. Exhibit ��P-11". supra at note II. '" Exhibit --P-11.1 --. ~upra at not<:: II. " Exhibit ��P-11.2". supra at note II. 18 Exhibit ��P-11.3"'. supra at note 11.

CONCURRING OPINION CTA EB No. 2949 (CTA Case No. 10730) Philippine Airlines, Inc. v. Commissioner of Internal Revenue Page 4 of8 x------------------------------------------x It is my considered view that petitioner's pieces of evidence are insufficient to prove that the locally available alcohol products are either overpriced or scarce or subpar compared to their imported variants. First, as highlighted in the ponencia, RMC No. 90-2012'9 was based on the 2010 BIR price survey of alcohol products. Given this, no valid comparison can be made between the prices of petitioner's wines and liquors imported from September to December 2019 and those reflected in the 2010 price survey. It is common knowledge that the quantity, quality, and price of locally available alcohol and tobacco products fluctuate over time. Consequently, the contents of RMC No. 90-2012, which relied on a price survey conducted in 2010 - several years before the subject importations - should not be accorded significant weight or relied upon as a basis for comparison. Second, a meticulous examination of petitioner's Table ofComparison20 reveals that there is only one (1) merchant or supplier (i.e., either ASC, FTI or ME) that supposedly establishes local prices for some (and, in fact, none for 'Camus Cognac VSOP Elegance') of the imported alcohol products listed therein. Pertinent portions of the Table of Comparison are reproduced below: Bill of Product Imported Price Per Absolute Future Minivan RMCNo. Lading Bottle Sales (PHP) (PHP) Trade go-2012 079"4527�1214 Beringer California Chardonnay ..(PHP) 579� 00 079-4527-1225 Beringer California Chardonnay 195-39 ...(PHP) Price List 079�4611-8553 Asahi Super Dty Can 330 ml 195-39 s6.zs .. ...579-00 (PHP) 079�46u-866o Asahi Super Dry Can 330 ml 37�88 ...340.00 .... 079�4611-8671 Camus Cognac VSOP Elegance 37-45 ..56.25 739�77 079�4266-0844 Hardy's Stamp Riesling 635�22 739-77 079-46u-8844 Asahi Super Dry Can 330 ml 194�69 s6.2s 10343 079-4611-9032 Camus Cognac VSOP Elegance 36�94 079�4611-9010 Asahi Super Dry Can 330 ml 625.63 � .103-43 37�16 s6.2s . .103A3 103-43 Clearly from the foregoing. although petitioner submitted price lists from three (3) merchants (ASC. FTI and ME) not all of these suppliers provided retail prices for each of the imported alcohol products. Consequently, the pricing data for petitioner's imported alcohol products rests either on the figures of a single supplier alone, on a combination of RMC No. 90-2012 and a single supplier, or on neither source./ Rn ised Tax Rates of Alcohol and Tobacco Products Under Republic Act No. I0351. .. An Act Restructuring the Excise Tax on Alcohol and Tobacco Products by Amending Sections 141. 142. 143. 144. 145. 8. 131 and 288 of Republic Act No. 8424. Other\\'ise Knm;,�n as the National Internal Revenue Code of 1997. as Amended by Republic Act No. 9334. and for Other Purposes". 1'1 Exhibit "P-11.3". supra at note 18. Exhibit "P-10... supra at note 10.

CONCURRING OPINION CTA EB No. 2949 (CTA Case No. 10730) Philippine Airlines, Inc. v. Commissioner of Internal Revenue Page 5 of8 x------------------------------------------x Third, petitioner submitted no reliable evidence to prove that the price lists from ASC, FTI and ME represent the local market prices (or that these merchants or suppliers serve as the exclusive distributors) of the above-listed alcohol products from September to December 2019 vis-a-vis the totality of local suppliers who are engaged in selling similar products in the same period. Consequently, the Court is left unable to ascertain whether the subject imported alcohol products are unavailable locally at a reasonable price. Fourth, it cannot be determined from the pieces of evidence presented whether the subject imported alcohol products are not available locally in reasonable quantity and/or quality. There is no indication from Capinpin's testimony, nor from evidence on record, that the subject imported alcohol products are unavailable locally at a reasonable quantity and/or quality. Lastly, it is worth noting that, as regards petitioner's importation of alcohol products from September to December 2019, reliance cannot be made on the aforesaid 2014 and 2017 PAL Decisions, 2015 PAL Resolution and the PAL Minute Resolutions of2018, 2019,2021, and 2023 in terms of appreciating the price lists from three (3) local suppliers to establish compliance with the 3'd condition since the subject matter of these cases pertain to importations made prior to the issuance of the BIR's RMC No. 90-2012. Particularly, the 2014 and 2017 PAL Decisions and 2015 PAL Resolution involved importations of various liquors and wines from February to March 2007, from October to December 2007 and from July 2005 to February 2006, respectively, whereas the PAL Minute Resolutions of 2018, 2019, 2021, and 2023 involved those imported on various dates in 2007, 2009 and 2010, from January to April zooS, from March to November 2007 and from June 2007 to October 2oo8 and July 2009 to October zoo9,h f" respectively. 2 ' Supreme Court Issuance Case 1'\o. Period of Importation 2014 PAL Decision G.R. Nos. 212536-37 From February to March 2007 20 17 PAL Decision G.R. Nos. 215705-07 From October to December 2007 2015 PAL Resolution G.R. Nos. 209353-54 From July 2005 to February 2006 & 211733-34 2018 PAL Minute Resolution G.R. No. 238672 Various dates in 2007. 2009 and 2010 2019 PAL Minute Resolution G.R. No. 240532 From January to July 2008 2021 PAL Minute Resolution G.R. No. 231638 From March to Novcmbc!" 2007 2023 PAL Minute Resolution G.R. Nos. 236343-45 From June 2007 to October 2008 and July 2009 to October 2009

CONCURRING OPINION CTA EB No. 2949 (CTA Case No. 10730) Philippine Airlines, Inc. v. Commissioner of Internal Revenue Page 6 ofB x------------------------------------------x Notably, RMC No. 90-201222 was based on the BIR's 2010 price survey of alcohol products. Therefore, it is understandable that for liquors and wines imported before and during 2010, a price list from a single local supplier would suffice to meet the ]'d condition, as RMC No. 90-2012 already provides a benchmark for the prices of those available in the local market. Since the instant case involves petitioner's imported alcohol products for the period from September to December 2019, which is beyond the scope of the BIR's 2010 price survey of alcohol products as per RMC No. 90-2012, it is reasonable to conclude that this issuance can no longer serve as a benchmark for the prices of those available in the local market. Without such a benchmark, the 2018 and 2019 price lists obtained from three (3) local merchants or suppliers in this case (apart from being inadmissible for being mere hearsay) cannot be considered sufficient, as it can hardly be said that the prices indicated therein are representative of the prevailing local prices corresponding to petitioner's imported alcohol products. I also wish to emphasize that, in determining compliance with the 3'd condition, the focus should not be on the number of price lists obtained from local suppliers. Instead, it should be on whether petitioner was able to ascertain, within a reasonable time prior to importation, that the alcohol products sought to be imported could not be sourced from the local market in the necessary quantity, quality, or price - thereby justifying the need for importation. There should be evidence that petitioner determined the prices and availability of each imported alcohol product through a survey conducted with a representative number of local dealers, in order to reasonably conclude that such products cannot be sourced locally and must be imported. Certainly, since a statute granting tax exemption is strictly construed against the person or entity claiming the exemption23, it is incumbent upon petitioner to demonstrate that the ]'d condition for excise tax exemption on the importation of alcohol products under PO 1590 was met not after, but within a reasonable time before or at the very least by the date ofimportation. It must be remembered that every case is evaluated and decided based on the evidence presented. A divergence in the rulings of the priorly-;' promulgated cases is not violative of the doctrine of stare decisis. Exhibit ��P-11.3". supra at note 18. :J Commissioner of Internal Revenue v. Eastern Telecommunications Philippines. Inc.. G.R. No. 163835. 07 July 20 Ill.

CONCURRING OPINION CTA EB No. 2949 (CTA Case No.10730) Philippine Airlines, Inc. v. Commissioner of Internal Revenue Page 7 of8 x------------------------------------------x Additionally, the rulings in the PAL Minute Resolutions of 201824, 20192 s, 2 0 2 1 26 and 202327 are not applicable since a minute resolution is , not considered a binding precedent. Citing Philippine Health Care Providers, Inc. v. Commissioner of Internal Revenue28, in San Miguel Corporation v. Commissioner of Internal Revenue>9 (San Miguel), the Supreme Court clarified that a previous case ruled with a different subject matter albeit with the same parties and same issues will not be considered res judicata to the other cases as well as stressed that there is a substantial distinction between a minute resolution and a decision, viz: In the case of Philippine Health Care Providers, Inc. v. Commissioner of Internal Revenue, the Court clarified that a Minute Resolution is not binding precedent: It is true that, although contained in a minute resolution, our dismissal of the petition was a disposition of the merits of the case. When we dismissed the petition, we effectively affirmed the CA ruling being questioned. As a result, our ruling in that case has already become final. When a minute resolution denies or dismisses a petition for failure to comply with formal and substantive requirements, the challenged decision, together with its findings of fact and legal conclusions, are deemed sustained. But what is its effect on other cases? With respect to the same subject matter and the same issues concerning the same parties, it constitutes res judicata. However if other parties or another subject matter (even with the same parties and issues) is involved the minute resolution is not binding precedent. Thus. in CIR v. Baier- Nickel, the Court noted that a previous case C!R v. Baier-Nickel involving the same parties and the same issues. was previously disposed of by the Court through a minute resolution dated February 17. 2003 sustaining the ruling of the CA. Nonetheless the Court ruled that the previous case "(h)ad no bearing" on the latter case because the two cases involved different subject matters as they were concerned with the taxable income of different taxable years. Besides, there are substantial, not simply formal, distinctions between a minute resolution and a decision. The constitutional requirement under the first paragraph of Section 14, Article VIII of the Constitution that the facts and the law on which the judgment is based must be expressed clearly and distinctly applies only to decisions, not to minute resolutions. A minute resolution is signed only by the clerk of court by authority of the justices, unlike a decision. It does not require the certification of the Chief Justice. Moreover, unlike decisions, minute resolutions are , not published in the Philippine Reports. Finally, the proviso or; Supra at note 5 25 Supra at note 6. 26 Supra at note 7. ::s Supra at note 8. G.R. No. 167330 (Resolution). 18 September 2009. G.R. No. 257697 and 259446. 12 April 2023.

CONCURRING OPINION CTA EB No. 2949 (CTA Case No. 10730) Philippine Airlines, Inc. v. Commissioner of Internal Revenue Page 8 of8 X------------------------------------------X Section 4(3) of Article VIII speaks of a decision. Indeed, as a rule, this Court lays down doctrines or principles oflaw which constitute binding precedent in a decision duly signed by the members of the Court and certified by the Chief justice-'0 Here, the subject alcohol products were imported from September to December 2019. In contrast, as aforementioned, the PAL Minute Resolutions dealt with importations from 2007 to 2010. Thus, any declarations made in the said minute resolutions will not affect the instant case. With the foregoing disquisitions, I submit that petrtwner failed to present sufficient and convincing evidence to prove that the subject alcohol products it imported were not locally available in sufficient quantity, quality, or price at the time of their importation. All told, I vote to DENY the present Petition for Review for lack of merit and thereby, AFFIRM the First Division's Decision dated 21 February 2024 and Resolution dated 13 June 2024. 30 Citation omitted. emphasis and italics in the original tcxL and underscoring supplied.