PHILIPPINE AIRLINES, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC PHILIPPINE AIRLINE S, INC., CTA EB NO. 2639 (CTA Case No. 991 3) Petitioner, Present: - vers11s - D el Rosario, P.J . Ringpis-Liban, Manahan, B aco rro -V illena, Modesto-San Pedro, Reyes-Fajardo, Cui-D avid, and. Fcrrer-Flores, J1. COMMISSIONER OF INTERNAL P ro mulga ted: REVEN UE, ~UN2 2 ~ ~?._\~�'!::~'!'"�-, Respondent. � X---------------------------------------------------------------------------- DECISION RINGPIS-LIBAN,.L; Before the Court En Bane is a P etition for Review1 flied by Philippine Airlines, Inc. on july 4, 2022. It seeks the reversal of the D ecision dated july 29, 20212 (Assailed D ecision) as well as the Resolution dated May 26, 20223 (.i\ ssailed Resolution) of the First Division (Court in Division)4 of this Court in CTA Case No. 9913 / 1 Court En Bane's Docket, pp. 10-38. 2 !d., pp. 45-67. 3 !d. , pp. 72-78 . 4 Composed of Presiding Justice Roman G. Del Rosario, Associate Justice Catherine T. Manahan (ponente} and Associate Justice Ma rian Ivy F. Reyes-Faj ardo.

DECISION CTA EB No. 2639 (CT"A Case No. 9913) The respective dispositive portions of the Assailed Decision and Resolution are quoted hereunder: Assailed Decision: WHEREFORE, in light of the foregoing considerations, the instant Petition for Review is DENIED for lack of merit. SO ORDERED. Assailed Resolution: WHEREFORE, premises considered, petitioner's Motion for Reconsideration (Re: Decision dated 29 July 2021) is DENIED for lack of merit. SO ORDERED. THE FACTS The facts of the present case were laid down by the Court in Division in the Assailed Decision as follows: 5 "Petitioner Philippine Airlines, Inc. is a domestic corporation duly registered with the Bureau of Internal Revenue (BIR), with address at PNB Financial Center, President Diosdado P. Macapagal Avenue, CCP Complex, Pasay City, and TIN 000-597- 645-00000. Respondent Commissioner of Internal Revenue is the duly appointed Commissioner of the Bureau of Internal Revenue (BIR), a government agency tasked with the assessment and collection of all national internal revenue taxes, fees, charges, including excise taxes imposed on wines and cigarettes under Sections 142 and 145 of the National Internal Revenue Code (NIRC) of 1997, as amended, with principal office at the BIR National Office Building, Agham Road, Dillman, Quezon City. On June 11, 1987, pet1t10ner was granted a franchise to operate air transport services domestically and internationally by virtue of Presidential Decree (PD) No. 1590, otherwise known as 'An Act Granting a New Franchise to Philippine Airlines, Inc. to 5 Court En Bane's Docket, pp. 45-49 (Citations omitted).

DECISION CTA EB No. 2639 (CTA Case No. 9913) Establish, Operate, and Maintain Air-Transport Seroices in the Philippines and Between the Philippines and Other Countries.' From October 2012 to March 2013, petltioner imported various liquors and wines, as parts of its in-flight and commissary supplies. Thereafter, the Bureau of Customs (BOC) in separate letters dated April 17, 2013 and June 25, 2013, ordered the collection of excise taxes from petitioner in the amounts of P2,139,699.09 and P2,352,544.34 for its importation of alcohol and tobacco products. On August 26, 2016, petmoner paid under protest excise taxes on its cigarette and alcohol importations in the total amount ofP4,492,243.43, as follows: BOC Oflicial Receipt Number Amount Paid 01877319994 P2, 139,699.09 01877320019 P2,352,544.34 Petitioner filed an administrative claim for refund before the office of respondent on August 23, 2018. Petitioner flied a Petition for Review on August 28, 2018. This case was originally raffled to this Court's Second Division. Pursuant to the Court's Order dated September 24, 2018, this case was transferred to this Court's First Division. On September 26, 2018, respondent flied his Answer interposing his defenses. The Pre-Trial Conference of the case was subsequendy scheduled and held on January 24, 2019. Prior thereto, the Respondent's Pre-Trial Briefwas filed on October 24, 2018, while petitioner's Pre-Trial Briefwas submitted on January 18, 2019. On February 26, 2019, the parties submitted to this Court their Joint Snpulation of Facts and Issues GSFI). In the Resolution dated March 7, 2019, the Court approved the said JSFI, and deemed the Pre-Trial terminated. The Pre-Trial Order was issued on May 8, 2019, wherein the Court, inter alia, noted respondent counsel's manifestation that she will no longer present any witness.

DEQSION CTA EB No. 2639 (CTA Case No. 9913) As trial ensued, pet1t10ner presented its testimonial and documentary evidence. It offered the testimonies of the following individuals, namely: (1) Ms. Cheryl V. Capinpin, the Manager for petitioner's In-flight Materials Purchasing Division; (2) Ms. Rue! Ryan 0. Julian, Manager for petitioner's Tax Services Division; (3) Mr. Jonathan R. Castillo Lee, Manager for petitioner's Company Materials Handling Division; and (4) Ms. Katherine 0. Constantino, the Court-commissioned Independent Certified Public Accountant (ICPA). The ICPA submitted her Report on June 27, 2019. On August 7, 2019, petitioner flied its Formal Offer ofEvidence. Respondent submitted his Comment (Re: Petitioner's Formal Offer of Evidence) on August 8, 2019. In the Resolution dated September 19, 2019, the Court admitted petitioner's exhibits, except for Exhibit 'P-7.1', for failure of the formally offered and identified exhibit to correspond with the duly marked exhibit; and Exhibit 'P-9', for failure to present the original for comparison. Petitioner then flied an Omnibus Motion (I. For Partial Reconsideration of the Resolution dated 19 September 20 19; and II. Motion for Commissioner's Hearing) on October 22, 2019. On even date, respondent flied his Memorandum. On November 6, 2019, petitioner flied a Manifestation (With Motion to Suspend Filing of Memorandum), praying that this Court suspend the filing of the parties' respective memoranda until the Omnibus Motion is resolved. In the Resolution dated November 14, 2019, the Court noted and granted petitioner's Manifestation (With Motion to Suspend Filing of Memorandum), and deferred the filing of the parties' respective memoranda until further orders from this Court. Respondent failed to file his comment on petitioner's Omnibus Motion. In the Resolution dated January 23, 2020, the Court granted petitioner's Motion for Commissioner's Hearing and set the case for Commissioner's Hearing on March 3, 2020; and held in abeyance the resolution of petitioner's Motion for Partial Reconsideration of the Resolution dated 19 September 20 19. Subsequently, the Court, in the Resolution dated June 23, 2020, granted petitioner's Motion for Partial Remnsideration of the

DECISION CTA EB No. 2639 (CTA case No. 9913) Resolution dated 19 September 2019, and admitted petitioner's Exhibits 'P-7.1' and 'P-9'. On September 10, 2020, petitioner electronically filed its Memorandum. This case was submitted for decision on September 28, 2020." On July 29, 2021, the Court in Division rendered the Assailed Decision denying the Petition for Review for lack of merit. Aggrieved, petitioner filed a Motion for Reconsideration (Re: Decision promulgated on 29 July 2021) on November 8, 2021 which the Court in Division denied in the Assailed Resolution. On July 4, 2022, petitioner filed the present Petition for Review within the extended period granted by the Court En Banc.6 In a Resolution dated July 29, 2022, this Court required respondent to ftl.e his Comment to the Petition for Review.7 On August 30, 2022, this Court's Judicial Records Division submitted a Records Verification Report stating that as of even date, respondent has yet to ftle his Comment to the Petition for Review.8 In a Resolution dated September 13, 2022, this Court submitted the present case for decision.9 THE ISSUE Petitioner ftled the present Petition for Review on the sole assigned error claiming that the Court in Division erred in dismissing the Petition for Review as the evidence presented sufficiendy established that the subject importations were not locally available in reasonable quantity, quality, or price. 10 6 Minute Resolution dated June 23, 2022, Court En Banes Docket, p. 9. 7 Court En Banes Docket, pp. 80-82. 8 Id., p. 92. 9 Id., pp. 94-95. 10 Id., p. 16.

DECISION CTA EB No. 2639 (CTA Case No. 9913) THE COURT EN BANCS RULING The Petition for Review is partially meritorious. In its Petition for Review, petitioner submits that the evidence it presented sufficiendy established that the subject imported liquors, wines, and tobacco products are not locally available in reasonable quantity, quality, or price. Petitioner also contends that the Court in Division's imposition of stringent requirement in proving that petitioner's importation of liquors, wines, and cigarettes are not locally available in reasonable quantity, quality, or price defeats the purpose of the tax exemption granted to petitioner under Presidential Decree (PD) No. 1590. It may be recalled that in the Assailed Decision, the Court in Division found that petitioner timely flied both of its administrative and judicial claims for refund. Considering that the payment of subject excise taxes was made on August 26, 2016, petitioner had until August 26, 2018 within which to file both claims. Accordingly, the filing of the administrative claim on August 23, 2018 and of the judicial claim on August 28, 2018 (the next working day after August 26, 2018 which fell on a Sunday) were timely made. The Court in Division likewise ruled that the tax privilege of petitioner under Section 13 of PD No. 1590 has not been revoked by Section 131 of the N ationa! Internal Revenue Code of 1997, as amended by Section 6 of Republic Act (RA) No. 9334. The enjoyment of such tax privilege is, however, subject to certain conditions. With regard to the exemption from payment of excise tax on its importation of tobacco and alcohol products, petitioner must comply with the following conditions, to wit: 1. Payment of the corporate income tax; 2. The articles, materials, or supplies are imported for the use of the franchisee in its transport or non-transport operations and other incidental activities; and 3. The imported articles, materials or supplies are not locally available in reasonable quantity, quality, or price. The Court in Division found that, based on the evidence presented, the petitioner was able to fulfill the 1" and 2"d conditions. With respect to the 3'd condition, however, the Court in Division ruled that petitioner fell short of proving compliance therewith. As noted by the Court in Division in the Assailed Decision, petitioner presented the following pieces of evidence to prove that the imported alcohol

DECISION CTA EB No. 2639 (CTA Case No. 9913) products were not locally available in reasonable quantity, quality, or price: (1) Judicial Affidavit of Ms. Cheryl V. Capinpin, petitioner's Manager for In-flight Materials Purchasing Division; (2) Absolute Sales Corporation Price List for 2013; (3) Future Trade International Price List Effective February 1, 2013; (4) BIR Revenue Memorandum Circular No. 90-2012; (5) Report of the Court- commissioned ICPA; and (6) Judicial Affidavit of the Court-commissioned ICPA. 11 The Court in Division found the foregoing pieces of evidence insufficient. It held as follows: 12 "The Court, however, cannot simply rely on the product price lists from two (2) dealers, and the testimonies merely based thereon. It is hard to be convinced that the price lists from the said dealers represent the market price locally or for the entire country. With the lack of corroborating evidence to prove that the price lists of Absolute Sales Corporation and Future Trade International represent the local market prices for the subject alcohol products in 2013 vis-a-vis the totality of local suppliers who are engaged in selling similar products in the same year, this Court cannot conclude that petitioner's comparison of the prices of its imported alcohol products with that of the said dealers is deemed sufficient. Likewise, considering that RMC No. 90-2012 was based on the 2010 BIR price survey of alcohol products, no valid comparison can be made to the prices of petitioner's imported alcohol products for 2013 with that of the said price survey. Simply put, with the evidence presented by petitioner, the Court cannot determine, with certainty, whether the cost of importing alcohol is lower than purchasing them locally." (Emphasis supplied) The Court En Bane disagrees. The present case is not the first time this Court is confronted with the question of sufficiency of evidence for purposes of establishing that petitioner's imported articles are not locally available in reasonable quantity, quality, or price. Enumerated below are the cases, albeit covering different taxable periods, wherein this Court ruled that petitioner was able to sufficiendy establish that its imported articles are not locally available in reasonable quantity, quality, or price on the basis of local prices reflected in the price lists submitted by two (2) suppliers or, in some cases, even from only one (1) supplier, to wit: 11 !d., p. 61. 12 !d., pp. 65�66.

DECISION CTA EB No. 2639 (CTA Case No. 9913) Case Number Evidence Presented Ruling CTA Case Nos. 1. Judicial Affidavit of Mr. Victor The claim for refund was partially granted as the 7677, 7685 & 7746 Santos, PAL's Assistant Vice petitioner was able to discharge such burden of (Dated April 25, President in charge of the proof as regards the portions that were duly 2013) as affirmed in Catering and In-flight Sub- substantiated. CTA EB Nos. 954 & department; 1046 (Dated October 14, 2014) 2. Philippine Wine Merchants' Price List for 2005 and 2006; 3. Monthly Philippine Dealing Systems rates for the year 2005- 2006. CTA Case Nos. 1. Testimony of Mr. Andy Li, The claim for refund was granted because petitioner 7665 & 7713 (Dated PAL's Vice-President for was able to discharge the burden of proof to allow April 17, 2012) as Corporate Logistics and refund of erroneously paid excise tax on its affirmed in CTA EB Services Department; importations of commissary and catering Nos. 920 & 922 supplies for July 2005 to February 2006. (Dated September 9, 2. Letter addressed to Atty. Oscar 2013). C. Ventanilla,Jr. containing a tabulation of comparison of the cost of importing the subject articles and the cost of purchasing them locally, invoices issued to PAL for its purchase of the subject articles; 3. Price List for 2005 of Duty- Free Philippines corresponding to the same articles subject of this claim for refund. CTA Case No. 8153 1. Judicial Affidavit of Mr. Victor The claim for refund was (Dated January 17, Santos, PAL's Assistant Vice partially granted as the 2013) as affirmed in President in charge of the evidence presented CTA EB Nos. 1029, Catering and In-flight Materials corresponding to the 1031 & 1032 (Dated and Purchasing Sub- excise tax payments on April 30, 2014) department; wines and liquors fully complied with the 2. Philippine Wine Merchants' conditions imposed by PD Price List dated January 11, 1590 as amended. 2007; The claim for refund on 3. Table of Comparison Between the excise taxes on Cost of Importing and Cost of cigarettes was denied for Locally Purchasing Commissary failure to present a price and Catering Supplies; list of local suppliers. 4. Monthly PDS rates for the year 2007-2008,2008-2009,and 2009-2010.

DECISION CTA EB No. 2639 (CTA Case No. 9913) Case Number Evidence Presented Ruling CTA Case No. 8236 1. Judicial Affidavit of Ms. Cheryl The claim for refund was (Dated December Capinpin, PAL's Manager of partially granted insofar as 18, 2013) as affirmed In-flight Materials Purchasing the erroneously paid excise In CTA EB No. Division; tax on its importation of 1162 & 1167 (Dated wines and liquor for its January 7, 2016) 2. Philippine Wine Merchants' catering and commissary Price List for 2008; supplies for international consumption. 3. Table of Comparison Between Cost of Importing and Cost of Locally Purchasing Commissary and Catering Supplies; 4. Monthly Philippine Dealing System (PDS) Rates for fiscal years 2008, 2009 and 201 0; 5. Letters of Ms. Marianne C. Raymundo, PAL's Vice- President for Financial Services with the subject "Booking Rates" for the months of January, July, September, and October 2008. CTA No. 8184 1. Affidavit of Ms. Cheryl The claim for refund was partially granted because (Dated March 25, Capinpin, PAL's Manager of the petitioner has complied with the requirements 2014 affirmed In In-flight Materials Purchasing prescribed under its franchise for exemption CTA EB No. 1216, Division; from payment of excise taxes on its importation of 1217 & 1221 (Dated commissary and catering supplies, specifically the May 27, 2016) 2. Philippine Wine Merchants' imported liquors used for its inflight consumption. Price List for 2008; 3. Table of Comparison of prices of commissary articles as those imported by PAL and locally available articles. CTA EB No. 1347 1. Judicial Affidavit of Ms. Cheryl The Court En Bane (CTA Case No. V. Capinpin, PAL's In-flight reversed the Court in 8340) August 30, Materials Purchasing Division, Division's ruling. It 2017 Catering & In-flight Materials partially granted the Purchasing Sub-Department Petition for review and Manager; remanded the case to the Court in Division as the 2. Philippine Wine Merchants' petitioner has sufficiently (PWM) Price List for the established that the alcohol years 2007, 2008 and 2009; products it imported were not available in reasonable 3. Future Trade International quantity, quality, or price in Price List dated April 8, the local market. 2009; 4. Table of Comparison between

DECISION CfA EB No. 2639 (CfA Case No. 9913) Case Number Evidence Presented . Cost of Importing and Cost of Ruling Locally Purchasing Commissary and Catering Supplies; 5. Sales invoices issued by foreign suppliers; 6. Letter of Ms. Marianne C. Raymundo, petitioner's Vice President for Financial Services with the subject "Booking Rates~August 2007''; 7. Monthly Philippine Dealing System (PDS) rates for the years 2000 to 2010. CTA EB No. 1363 1. Judicial Affidavit of Ms. Cheryl The Court En Bane (CTA Case No. Capinpin, PAL's Manager for reversed the Court in 8198) February 13, In~flight Materials Purchasing Division's ruling. It 2018 Division, Catering & In~flight partially granted the Materials Purchasing Sub~ Petition for Review and Department; remanded the case to the Court in Division as the 2. Philippine Wine Merchant petitioner has sufficiently Price List; established that the liquors it imported were not 3. Sales invoices issued to available in reasonable petitioner for its purchase of quantity, quality, or price in the subject articles; the local market. 4. Monthly Philippine Dealing The Court En Bane denied System Rates (2007 to 201 0); the claim insofar as the imported cigarettes are 5. 2008 Booking Rates for the concerned as the Court did Month of May; not give credence to the witness' uncorroborated 6. Letters of Ms. Marianne C. testimony. Raymundo, petitioner's Vice President - Financial Services re: Booking Rates for the months ofJanuary, March, and April2008; CTA EB No. 1648 7. Table of Comparison. The Court partially granted (CTA Case No. 1. Judicial Affidavit of Ms. Cheryl the claim for refund and 8708 & 8770) allowed the refund of October 18, 2018 Capinpin, PAL's Manager for erroneously paid excise tax In~flight and Commissary on PAL's importation in Materials Purchasing Division, the years 2006, 2008 to Corporate Logistics and 2012 of assorted liquor, Services Department; wine and cigarettes 2. Philippine Wine Merchants

DECISION CTA EB No. 2639 (CTA case No. 9913) Case Number Evidence Presented RuliJ:!g ("PWM") Price Lists for the constituting its commissary years 2006, 2008, 2009, 2010, and catering supplies for 2011, and 2012; international flight consumption. 3. Future Trade International ("FTI") Price Lists dated April 8, 2009, October 1, 2010 and for the years 2006 to 2013; 4. 2010 BIR Price Survey; 5. Report of the Court- commissioned Independent Certified Public Accountant ("ICPA"). CTA EB No. 1484 1. Judicial Affidavit of Ms. Cheryl The Court En Bane is (CTA Case No. Capinpin (petitioner's Manager convinced that petitioner 8362) April 10, 2018 for In-flight Materials has sufficiendy established Purchasing Division); that the alcohol and tobacco products it 2. Philippine Wine Merchants imported were not (PWM) Price List for the available in either years 2007, 2008, and 2009; reasonable quantity or price in the local market. 3. Future Trade International Travel Retail Price List as of The Court En Bam� Feb 2009; remanded the case to the Court in Division for a 4. Affidavit of Gilbert M. Galedo complete determination of who testified to the canvassed petitioner's refund claim. list of 2009 retail prices of imported wines and cigarettes taken from the rack of Duty- Free Philippines; 5. Table of Comparison between Cost of Importing and Cost of Locally Purchasing Commissary and Catering Supplies; 6. Monthly Philippine Dealing System (PDS) rates for the years 2007 to 2010. In congruence with the rulings in the foregoing cases, the Court En Bane finds that the pieces of evidence presented by petitioner, particularly the price lists obtained from two (2) local suppliers, are sufficient for the Court in Division to evaluate the prices of the subject alcohol products imported by

DECISION CTA EB No. 2639 (CTA Case No. 9913) petitioner vis-a-vis their prices in the local market and to determine whether there is compliance with 3'J condition required by PD No. 1590, as amended. With respect to the importation of tobacco products, the Court En Bane agrees with the Court in Division in finding that the testimony of petitioner's witness, Ms. Cheryl V. Capinpin, standing alone and without any corroborating evidence through which the Court can verify the truth of such statements, is not sufficient for purposes of establishing that the imported tobacco products are not locally available in reasonable quantity, quality, or price. The required number of votes for the reversal of the assailed Decision and Resolution were not obtained. During the deliberation of the present Petition for Review, the members of the Court En Bane were equally divided in their votes. The ponente, together with Associate Justice Maria Rowena Modesto-San Pedro, Associate Justice Marian Ivy F. Reyes-Fajardo, and Associate Justice Lanee S. Cui-David voted to partially grant the Petition for Review and to remand the case to the Court in Division for the determination of the amount of refundable, substantiated excise taxes paid on petitioner's importation of alcohol products, or a total of four (4) votes. On the other hand, Presiding Justice Roman G. Del Rosario, Associate Justice Catherine T. Manahan, Associate Justice Jean Marie A. Bacorro-Villena, and Associate Justice Corazon G. Ferrer-Flores voted to deny the Petition for Review, or a total of four (4) votes. Section 2 of Republic Act (RA) No. 1125, as amended, and Section 3, Rule 2 of the Revised Rules of the Court of Tax Appeals (RRCTA), respectively provide as follows: Sec. 2, RA 1125 as amended SEC. 2. Sitting En Bane or Division; Quorum; Proceedings. The CTA may sit en bane or in three (3) Divisions, each Division consisting of three (3) Justices. Five (5) Justices shall constitute a quorum for sessions en bane and two (2) Justices for sessions of a Division: Provided, That when the required quorum cannot be constituted due to any vacancy, disqualification, inhibition, disability, or any other lawful cause, the Presiding Justice shall designate any Justice of other Division of the Court to sit temporarily therein.

DECISION CTA EB No. 2639 (CTA Case No. 9913) The affirmative votes of five (5) members of the Court en bane shall be necessary to reverse a decision of a Division but a simple majority of the Justices present necessary to promulgate a resolution or decision in all other cases or two (2) members of a Division, as the case may be, shall be necessary for the rendition of a decision or resolution in the Division level. Sec. 3. Rule 2, RRCTA SEC. 3. Court en bane, quorum and voting. - The presiding justice or, if absent, the most senior justice in attendance shall preside over the sessions of the Court en bane. The attendance of five (5) justices of the Court shall constitute a quorum for its session en bane. The presence at the deliberation and the affirmative vote of five (5) members of the Court en bane shall be necessary to reverse a decision of a Division but only a simple majority of the justices present to promulgate a resolution or decision in all other cases. Where the necessary majority vote cannot be had, the petition shall be dismissed; in appealed cases, the judgment or order appealed from shall stand affirmed; and on all incidental matters. the petition or motion shall be denied. (Emphasis and underscoring supplied) Considering that the required affirmative votes of five (5) members of the CTA En Bane were not obtained to reverse the assailed Decision and Resolution, the dismissal of the present Petition for Review is in order. WHEREFORE, the present Petition for Review is DISMISSED pursuant to Section 2 of Republic Act No. 1125, as amended, in relation to Section 3, Rule 2 of the Revised Rules of the Court of Tax Appeals. The assailed Decision dated July 29, 2021 and Resolution dated May 26, 2022 of the First Division of this Court in CTA Case No. 9913 shall stand AFFIRMED. SO ORDERED. ~.-fi..f.t-- -z-L-- MA. BELEN M. RINGPIS-LIBAN Associate Justice

DECISION CTA EB No. 2639 (CTA Case No. 9913) WE CONCUR� Ijoin Associate Justire Catherine T. Manahan's Dissenting Opinion ROMAN G. DEL ROSARIO Presiding Justice (1~ . 7- ~:.c.....c....lc~- With due respet't, please see my Dissenting Opinion CATHERINE T. MANAHAN Associate Justice c .. With due respert, Ijoin the~sentiny_ �opinion JEAN MAIllE ) MARIA D�'\W~~~ ~ L /f ~-ritQnJJ. MARIAN I~ F. REclS-FAJAi.DO Associate Justice LA~k'luiufs"~/CtUmI-D~AVID Associate Justice ~ ~~ With due respect, Ijoin]. insofar as the price lists do not cover the pen'od ofimportati, CORAZON G. FERRER-~ORES Associate Justice

DECISION CTA EB No. 2639 (CTA Case No. 9913) CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in above decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. Presiding Justice

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC PHILIPPINE AIRLINES, INC., CTA EB No. 2639 Petitioner, (CTA Case No. 9913) Present: -versus- Del Rosario , P.J. Ringpis-Liban, Manahan, Bacorro-Villena, Modesto-San Pedro, Reyes-Fajardo, Cui-David, and Ferrer-Flares, JJ. Promulgated: COMMISSIONER OF INTERNAL JUN 2 2 2023 REVENUE, ~~ Respondent. _C/:/'! _/1�' S"4 a.~ . )(- - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - )( DISSENTING OPINION MANAHAN, J .: With due respect, I dissent to the decision remanding the case for the determination of the amount of refundable, substantiated eJ<cise tax:es paid on petitioner's importation of alcohol products. I maintain that petitioner failed to present sufficient and convincing evidence to prove that the imported alcohol products were not locally available in reasonable quantity, quality, or price, at the time of importation. There are three (3) conditions for petitioner to be eJ<empt from eJ<cise tax: on its importation of alcohol products, as follows : 1. Payment of the corporate income tax:; ~

DISSENTING OPINION CTA EB No. 2639 Page 2 of7 2. The said supplies are imported for the use of the franchisee in its transport and non-transport operations and other incidental activities; and 3. The said supplies are not locally available in reasonable quantity, quality, or price. Petitioner submitted the following with respect to the third condition: 1. Judicial Affidavit of Ms. Cheryl V. Capinpin, its Manager for In-Flight Materials Purchasing Division; 2. Absolute Sales Corporation Price List for 2013; 3. Future Trade International Price List Effective February 1, 2013; 4. BIR Revenue Memorandum Circular No. 90-2012; 5. Report of the Court-commissioned Independent Certified Public Accountant (ICPA); and 6. Judicial Affidavit of the ICPA. 1 I reiterate that it is hard to be convinced that the price lists of Absolute Sales Corporation and Future Trade International represent the market price of the said products locally or for the entire country. With the lack of corroborating evidence to prove that the price lists provided by these two companies represent the local market prices for the subject alcohol products in 2012-2013 vis- a-vis the totality of local suppliers who are engaged in selling similar products in the same period, I cannot conclude that said products are indeed not available locally in reasonable quantity, quality, or price, which would justify an importation by petitioner. I am not unaware of the various CTA cases which have ruled that pricelists from two (2) suppliers, or even one (1) supplier, are sufficient to establish that the imported articles are not locally available in reasonable quantity, quality, or price. However, in the case of San Roque Power Corporation v. Commissioner of Internal Revenue,2 the Supreme Court held that CTA Decisions do not constitute precedents, and do not bind this Court or the public. That is why CTA decisions are appealable to the Supreme Court, which may affirm, reverse or modify the CTA decisions as the facts and the law may warrant. 1 EB Docket, Division Resolution dated May 26, 2022, p. 75. 2 G.R. No. 203249, July 23, 2018. ~

DISSENTING OPINION CTA EB No. 2639 Page 3 of7 Only decisions of the Supreme Court constitute binding precedents, forming part of the Philippine legal system.3 Despite the various CTA rulings, I believe that the probative value given to the pricelists provided by petitioner should be revisited. My reservation on relying on the said pricelist as being representative of the local price of the said products stems from the following testimonies: During the cross-examination of Ms. Capinpin, she testified that her observation that the imported products are not available locally in reasonable quantity, quality or price, is merely based on the price lists from Absolute Sales Corporation and Future Trade International, viz: "ATTY. CAYETANO Q Ms. Witness, in Question No. 11 of your Judicial Affidavit, you answered that you compared the prices in relation to the Absolute Sales Corporation price list, Future Trade International retail price list and RMC No. 90- 2012. Is Absolute Sales Corporation and Future Trade International the only one who sell these products in the Philippines? MS. CAPINPIN A They are not the only one who sell these products but those are the suppliers who responded to our request for price list. ATTY. CAYETANO Q So, you were not able to get price list from other suppliers although they do exist? MS. CAPINPIN A Yes, they did not respond to our request. ATTY. CAYETANO Q In Question No. 7, you mentioned that the products are not available locally in reasonable quantity, quality or price? Is this correct? MS. CAPINPIN 3 Article 8, Civil Code of the Philippines.~

DISSENTING OPINION CTA EB No. 2639 Page 4 of7 A Yes. ATIY.CAYETANO Q But this observation is based on the price list that were given to you when you requested that? MS. CAPINPIN A Yes." In like manner, during the cross and re-direct examinations of Ms. Constantino, the Court-commissioned !CPA, she testified that her finding that importation is cheaper than purchasing liquor locally is based on the two (2) price lists provided by petitioner, and RMC No. 90-2012, viz: "CROSS EXAMINATION BY ATTY. BABARAN: XXX XXX XXX ATIY. BABARAN: Q. So, as far as you know, the petitioner requested for the price list only from these two (2) companies? MS. CONSTANTINO A. Yes. ATIY. BABARAN: Q. No other company or any other price list survey was given to you? MS. CONSTANTINO None. ATIY. BABARAN: Q. And, you did not make also any survey? MS. CONSTANTINO A. Not. XXX XXX XXX RE-DIRECT EXAMINATION BY ATIY. SEGUNDO: xxxxxxxxx ~

DISSENTING OPINION CTA EB No. 2639 Page 5 of7 JUSTICE VICTORINO: Just a clarification. Your conclusion that importation is cheaper than purchasing the liquor locally. This conclusion was based on the two (2) quotations provided to you by petitioner from two (2) companies? MS. CONSTANTINO: A. Yes, your Honors, and the BIR. JUSTICE VICTORINO: And that you also consider its BIR Revenue Memorandum Circular 90-2012? MS. CONSTANTINO: Yes, your Honors. JUSTICE VICTORINO: Yes. And, with these documents, you already concluded that it's cheaper to import rather than to buy those liquors locally? MS. CONSTANTINO: A. We tried searching in the internet for the prices, but then, we could not really find. So, there was an effort made on our part, unfortunately, we could not really find sources that could provide us with additional information as to the prices. JUSTICE VICTORINO: Did you consider your conclusion enough for the Court to sustain the relief being prayed for by petitioner? MS. CONSTANTINO: A. My conclusion was based only on the documents that we've examined, that some of the products were not available. JUSTICE VICTORINO: That would be all. ~

DISSENTING OPINION CTA EB No. 2639 Page 6 of7 JUSTICE DEL ROSARIO: Just a follow-up question on that. There were two (2) price quotations you were able to get, one, from the Absolute Sales, the other one from Future Trade International. Did you verify the nature of the business of these two (2) supposed corporations? MS. CONSTANTINO: A. No, your Honors. JUSTICE DEL ROSARIO: Would you know if these two (2) corporations are the exclusive distributors of the alcohol products involving this case? MS. CONSTANTINO: A. No, I'm not certain, your Honors. JUSTICE DEL ROSARIO: You have no information as to whether there is any dealer that exclusively sells the alcohol products in the country? MS. CONSTANTINO: A. We tried looking in the internet for a dealer but we could not really find one. JUSTICE DEL ROSARIO: So, it is uncertain whether there is an exclusive distributor or seller of the alcohol products that are involved in this present case? MS. CONSTANTINO: A. Yes, your Honors, we only based it on the internet."4 In addition, the said pricelists are effective for 2013, or in the case of the Future Trade International Pricelist, effective February 1, 2013. However, the instant case involves importations for the period October 2012 to March 2013. Further, RMC No. 90-2012 was based on the 2010 BIR price 4 EB Docket, Division Decision dated July 29, 2021, pp. 61-65. ~

DISSENTING OPINION CTA EB No. 2639 Page 7 of7 survey of alcohol products. Thus, there can be no valid comparison between the prices of petitioner's imported alcohol products for October 2012 to March 2013 and the pricelists limited to 2013 and the 2010 BIR price survey. Clearly, it was not established that the pricelists were from entities whose prices could be seen as representative of the local prices of said alcohol products. Neither was there any evidence showing the alleged local prices and availability of the said products for the period October 2012 to December 2012. Based on the foregoing, petitioner failed to show that the subject imported alcohol products were not locally available in reasonable quantity, quality or price for the periods involved. I vote to deny the Petition for Review, docketed as CTA EB No. 2639 and affirm the Decision and Resolution, dated July 29, 2021 and May 26, 2022, respectively, in CTA Case No. 9913. ~ " 7- ~~��--~u~v---- CATHERINE T. MANAHAN Associate Justice