PHILIPPINE AIRLINES, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC PHILIPPINE AIRLINES, CTA EB NO. 2656 INC., Petitioner, (CTA Case No. 9990) Present: -versus- DEL ROSARIO, �L, RINGPIS-LIBAN, MANAHAN, BACORRO-VILLENA, MODESTO-SAN PEDRO, REYES-FAJARDO, CUI-DAVID, FERRER-FLORES, and ANGELES, fl. COMMISSIONER OF Promulgated: INTERNAL REVENUE, Respondent. x----------------------------------------------x DECISION BACORRO-VILLENA, L.: The case at bar assails the Decision dated 21 October 2o211 (assailed Decision) and Resolution dated 10 June 20222 (assailed Resolution) of the Court's Third Division3 in CTA Case No. 9990, entitled Philippine Airlines, Inc. v. Commissioner ofInternal Revenue. In , petitioner Philippine Airlines, Inc.'s (petitioner's/PAL's) instan~ Rollo, pp. 44-66. ld., pp. 68-72. Penned by Associate Justice Maria Rowena Modesto-San Pedro, with (Ret.) Associate Justice Erlinda P. Uy concurring and Associate Justice Ma. Belen M. Ri ngpis-Liban, concurring in the resul t.

CTA EB NO. 2656 (CTA Case No. 9990) Philippine Airlines, Inc. v. Commissioner of Internal Revenue DECISION X-------------------------------------------X Petition for Review4 filed on 29 July 2022s, pursuant to Section 3(b)6, Rule 8, in relation to Section 2(a)(1)7, Rule 4 of the Revised Rules of the Court of Tax Appeals8 (RRCTA), it seeks the reversal of the assailed Decision and assailed Resolution. It prays instead for a judgment declaring its entitlement to a refund from or the issuance of Tax Credit Certificate (TCC) by the Bureau of Internal Revenue (BIR) in the amount of f>I,o36,677-47, representing its allegedly erroneously paid excise taxes on the importation of alcohol products for the years 2013 and 2014.9 PARTIES OF THE CASE Petitioner is a domestic corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with registered address at PNB Financial Center, President Diosdado P. Macapagal Avenue, CCP Complex, Pasay City.10 Respondent Commissioner of Internal Revenue (respondent/ CIR), on the other hand, is the head of the BIR, the government agency tasked with the assessment and collection of all national internal t!J'� revenue taxes, fees and charges, including excise taxes on alcohol products under the National Internal Revenue Code (NIRC) of 1997, Rollo. pp. 11-38. The Petition for Review was filed subsequent to the grant of a fifteen ( 15)-day extension by the Cou11 En Bane pursuant to a ��Motion for Extension of Time to File Petition for Review�� per En Bone Minute Resolution dated IS July 2022. id .. p. 10. SEC. 3. ~Vho ma.l� appeal: period to file petithm. (b) A pmty adversely affected by a decision or resolution of a Division of the Court on a motion for reconsideration or new trial may appeal to the Court by filing before it a petition for review within fifteen days from receipt of a copy of the questioned decision or resolution. Upon proper motion and the payment of the full amount of the docket and other lawful fees and deposit for costs before the expiration of the reglementary period herein fixed. the Court may grant an additional period not exceeding fifteen days from the expiration of the original period within which to file the petition for revie\v. SEC. 2. Cases 11�ithin the jurisdiction of the Cuurt en hanc. - The Cmu1 en hanc shall exercise exclusive appellate jurisdiction to revie\V by appeal the following: (a) Decisions or resolutions on motions for reconsideration or new trial of the Court in Division in the exercise of its exclusive appellate jurisdiction over: ( 1) Cases arising from administrative agencies-- Bureau of Internal Revenue. Bureau of Customs. Depm1ment of Finance. Department of Trade and Industry. Depat1ment of Agriculture[.] A.M. No. 05-11-07-CTA. 10 Prayer. Petition for Review. supra at note 4. Paragraph I. Petition for Review. Division Docket. Volume I. p. 10.

CTA EB NO. 2656 (CTA Case No. 9990) Philippine Airlines, Inc. v. Commissioner of Internal Revenue DECISION X-------------------------------------------X amended. He or she holds office at the BIR National Office Building, Agham Road, Diliman, Quezon City. FACTS OF THE CASE On n June 1987, Presidential Decree (PD) No. 1590, otherwise known as "An Act Granting a New Franchise to Philippine Airlines, Inc. to Establish, Operate, and Maintain Air-Transport Services in the Philippines and Other Countries"u granted petitioner a franchise to operate air transport services domestically and internationally. Section 13 thereof provides for PAL's exemption from the payment of all taxes, duties and other fees, and charges of any kind or nature on all importations of commissary and catering supplies, among others, and imported articles, supplies or materials for use in its transport and non- transport operations (as well as other activities incidental thereto).12 On 01 July zoos, Republic Act (RA) No. 9337, entitled "An Act Amending Sections 27, 28, 34, 106, 107, 108, 109, no, 111, 112, 113, 114, n6, 117, n9, 121, 148, 151, 236, 237, and z88 of the [NIRC] ofl997, as Amended, and For Other Purposes" took effect, expressly and specifically amending petitioner PAL's franchise, and subjecting it to value-added tax (VAT). As for all other taxes, petitioner's exemption was retained.'3 During the period of December 2013 until August 2014, petitioner imported various liquors and wines as part of its commissary and catering supplies for use in its transport operations. When they arrived at the Ninoy Aquino International Airport (NAIA), these importations were covered by various Informal Import Declarations and Entries'4 (IIDEs), Airway Bills/Bills of Lading'5 (AWBs/BLs) and Authority to Release Imported Goods'6 (ATRIGs). Subsequently, the Bureau of Customs (BOC), in a letter dated 03 November 2015'7, ordered petitioner to pay excise taxes for its ! importation of alcohol products in the amount of P1,o36,677-47� In a(;t' II Par. 2. Admitted Facts. Joint Stipulation of Facts and Issues (JSFI). id., p. 257. I' See par. 3. id. ~~ See par. 4. id., p. 258. '�' Exhibit "P-4" to "P-4f". BIR Records.. pp. 63. 54. 45. 34. 22. 15 and 7. 15 Exhibit "P-5"' to "P-5F". id .. pp. 62. 53. 44. 32. 20. 14 and 6. 16 Exhibit "P-6" to �'P-6F". id.. pp. 61. 52. 43. 3 I. 19. 13 and 5. 17 Exhibit "P- 7". id.. p. 66.

CTA EB NO. 2656 (CTA Case No. 9990) Philippine Airlines, Inc. v. Commissioner of Internal Revenue DECISION X-------------------------------------------X letter dated 23 December 201618 (Protest Letter), petitioner protested the assessment and collection of excise taxes on its alcohol importations. It, however, paid under protest the said amount, as evidenced by official receipt (OR) No. 01880549791, also dated 23 December 2016.19 In view of petitioner's payments under protest, the BIR issued the ATRIGS a 20 nd thereafter, the subject importations of alcohol products were released to it. On 19 December 2018, petitioner filed before the office of respondent an administrative claim for refund or issuance of a TCC of the excise taxes paid under protest.21 A day after, or on 20 December 2018, petitioner also filed before this Court a Petition for Review pursuant to Section 20422 in relation to Section 2292 3 of the NIRC of 1997, as amended. The same was raffled to the Third Division, docketed as CTA Case No. 9990.24 In the said petition with the Third Division, petitioner mainly argued that its exemption from the payment of excise taxes under PO 1590 was not modified nor revoked with the passage of RA 9337� Consequently, it prayed for the refund of the excise taxes of P1,o36,677.47 that was erroneously paid on the importation of alcohol products for the years 2013 and 2014.2 5 On 16 January 2019, respondent filed his or her Answer26 and interposed the following special and affirmative defenses: (1) PO 1590 was expressly repealed by RA 9334 thus, petitioner's exemption from to{:r excise taxes had ceased to exist; and, (2) petitioner failed to timely file , its administrative claim which deprived respondent the opportunity examine and evaluate the matter. 18 Exhibit "P-9". id.. p. 64. 19 Exhibit "P-8... id .. p. 65. 2(1 Supra at note 16. 0I Exhibit "P-2". Division Docket. Volume II. pp. 557-565. Sec. 204. Authority ofthe Commissioner lo Compromise. Ahate. and Refimd or Credit Taxes. Sec. 229. Recove1:r of Tax Erroneously or 11/ega/Z,� Collected. Then Third Division was composed or Associate Justice Erlinda P. Uy (Ret.). as Chairperson and Associate Justice Ma. Belen M. Ringpis-Liban. as Member. Division Docket, Volume L p. 21. Id.. pp. 66-71.

CTA EB NO. 2656 (CTA Case No. 9990) Philippine Airlines, Inc. v. Commissioner of Internal Revenue DECISION X-------------------------------------------X On 18 January 2019, the Court issued a Notice of Pre-Trial Conference7 setting the pre-trial on 02 May 2019. Accordingly, respondent filed his or her Pre-Trial BrieP8 on 07 February 2019, while petitioner filed its Pre-Trial Brief29 on 29 April 2019. On 02 May 2019, the Pre-Trial Conference proceeded where the Third Division granted both parties fifteen (15) days within which to file their Joint Stipulation of Facts and Issues (JSFI).3a On w May 2019, the parties submitted their JSFP' On 13 June 2019, the Third Division issued a Pre-Trial Order,32 approving the said JSFI and setting the hearing dates. In the trial that ensued, petitioner presented three (3) witnesses, namely: (1) Jonathan R. Castillo Lee (Castillo Lee), Manager for Company Materials Handling Division; (2) Cheryl V. Capinpin (Capinpin), Manager for In-flight Materials Purchasing Division; and, (3) Rue! Ryan 0. Julian (Julian), Manager for Tax Services Division. In his Judicial Affidavit33, Castillo Lee testified that: (1) he is the Manager of petitioner's Company Materials Handling Division; (2) he is in charge of ensuring the timely release of petitioner's importation of catering and commissa1y supplies, among others, from different cargo warehouses; (3) his duties also include the filing of proper importation documents and coordination with various offices and government agencies for the release of the imported goods; (4) petitioner paid under protest the excise taxes of P1,o36,677-47 as evidenced by an OR dated 23 December 2016; (5) in addition to the OR, he wrote a letter addressed to the BOC's Collection Division to formally protest the assessment and collection of excise taxes; (6) in the Protest Letter, he invoked petitioner's exemption from payment of taxes, duties, charges and fees under its charter, PO 1590, as regards the importation of commissary supplies (7) whenever petitioner imports commissary supplies used in its operations, his team gathers and prepares all the relevant importation documents (i.e., !IDEs, AWBs/BLs and ATR!Gs); and, (8) all 1 the importations subject of the claim for refund or tax credit are duZ' ld.. pp. 73-74. ld.. pp. 77-80. Id.� pp. 232-242 . .'(! See Order dated 01 May 2019. id .. pp. 248-250. .1 I Id.. pp. 256-262. ld.. pp. 436-443. See Judicial Affidavit of Jonathan R. Castillo Lee. Exhibit "P-34". id .. pp. 88-96.

CTA EB NO. 2656 (CTA Case No. 9990) Philippine Airlines, Inc. v. Commissioner of Internal Revenue DECISION X-------------------------------------------X covered by the importations documents. No cross-examination was conducted.34 On the witness stand, Julian likewise testified, through his Judicial Affidavit35, that: (1) he is the Manager of petitioner's Tax Services Division; (2) he is in charge of ensuring that petitioner is compliant with all its tax liabilities under its charter, PD 1590 vis-a-vis the provisions of the NIRC of 1997, as amended; (3) under its charter, petitioner enjoys exemption from payment of excise taxes on importation of commissary and catering supplies; (4) petitioner's BIR Certificate of Registration does not include excise tax as a tax type for importation of alcohol and tobacco products in the portion "Registered Activity(ies) Tax Type"; (s) the importations subject of the present claim for refund or tax credit arrived in 2013 and 2014 and, since its BIR Certificate of Registration covered the period when the importations were made, petitioner's tax information as indicated and recorded therein should be the basis in determining if petitioner made its correct tax filings for the relevant taxable periods; and, (6) petitioner has paid the taxes due for the relevant taxable periods as can be shown by the different tax returns filed by petitioner corresponding to each tax type. No cross-examination was conducted.36 Lastly, Capinpin, testified, through her Judicial Affidavit37 and Supplemental Judicial Affidavit38, that: (1) she is the Manager of petitioner's In-flight Materials Purchasing Division; (2) it is her duty to efficiently and effectively plan, procure, and control all foreign and local materials, supplies, equipment and services, among others, for the said division; (3) petitioner imported catering and commissary supplies such as alcohol, liquor and tobacco products because the cost of said products, when imported, is cheaper compared to those locally available and they are not available locally in reasonable quantity, quality or price; (4) upon comparison of the local prices and the importation costs for the alcohol products, importing the said products appeared to be cheaper than purchasing them locally; (s) she prepared a Table of , Comparison39 that shows the complete comparison of prices for the~ See Order dated 25 July 2019. id .. pp. 454-455. See Judicial At1\davit of Rue I Ryan 0. Julian. Exhibit "P-35". id .. pp. 125- I 33. See Order dated 22 August 2019. id .. pp. 463. See Judicial Affidavit ofCher0�1 V. Capinpin. Exhibit "P-49". id.. pp. 288-299. See Supplemental Judicial Affidavit of Cheryl V. Capinpin. Exhibit "P-50", id .. Volume II. pp. 505- 509. 3') Exhibit "P-48". id. p. 520.

CTA EB NO. 2656 (CTA Case No. 9990) Philippine Airlines, Inc. v. Commissioner of Internal Revenue DECISION Page 7 of21 x-------------------------------------------x alcohol products imported by petitioner for the period of December 2013 to August 2014; (6) for the local prices of alcohol products, she used the following sources: (a) Absolute Sales Corporation's (Absolute Sales's) Product Price Lists for 201340 and 20144', (b) Future Trade International Inc.'s (Future Trade's) Product Price List for 201342 and 201443, and, (c) BIR's Revenue Memorandum Circular (RMC) No. 90-201244; and, (7) for the importations costs, she used the actual product value as shown in the sales invoice issued by petitioner's suppliers, the product value as shown in the ATRIG and the product value as shown in the IIDE. On cross-examination, when Capinpin was confronted with the Table of Comparison, she confirmed that there are no indicated prices under Absolute Sales 2013 and 2014, and Future Trade 2013.45 On redirect examination, she explained that the local suppliers (Absolute Sales and Future Trade) did not have a quotation for the imported alcohol products.46 No re-cross examination was conductedY On o6 January 2020, after completing the presentation of its testimonial evidence, petitioner filed its Formal Offer of Evidence48 (FOE) consisting of Exhibits "P-3" to "P-so-a", inclusive of sub- markings. On o8 January 2020, respondent filed his or her "Comment (Re: Petitioner's Formal Offer ofEvidence)".49 In the Resolution dated 26 February 202os0, the Third Division admitted all of petitioner's exhibits except Exhibit "P-3o"s' for failure of petitioner's witnesses to identify it. Considering respondent's ~'"" manifestation that the case has no report ofinvestigation and that he o~ "' Exhibit '"P-27". id. pp. 665-667. " Exhibit '"P-28'". id .. pp. 668-670. Exhibit '"P-29'". id .. pp. 671-676. Exhibit '"P-3o��. id .. pp. 677-687. Exhibit '"P-31"". id .. pp. 688-708. Revised Tax Rates of Alcohol and Tobacco Products Under Republic Act No. 10351. '"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. Otherwise Known as the National Internal Revenue Code of \997. as Amended by Republic Act No. 9334. and for Other Purposes". TSN dated 03 December 2019. pp. 16-17. \d .. p. 18. See Order dated 03 December 2019. Division Docket. Volume II. pp. 524-524-a. ,,, \d.. pp. 529-711. with attached exhibits. ld.. pp. 713-715. 50 Id.. pp. 722-724. 51 Offered as .. Future Trade International Inc .. Price List for 2014 effective 15 December 2014 and certified as true copy by Ms. Analu Santos".

CTA EB NO. 2656 (CTA Case No. 9990) Philippine Airlines, Inc. v. Commissioner of Internal Revenue DECISION X-------------------------------------------X she has no witness to present, the Court likewise ordered the parties to file their respective memoranda in the same Resolution. On 24 June 2020, respondent filed his or her Memorandumsz while petitioner filed its Memorandum via email on 19 October 2o2o.s3 Accordingly, on 28 October 2020, the Third Division considered the case submitted for decision.s4 Thereafter, the Third Division rendered the assailed Decision denying petitioner's Petition for Review for lack ofmerit.ss The pertinent portion thereof reads: WHEREFORE, in light of the foregoing considerations, the Petition for Review filed by petitioner Philippine Airlines, Inc. is hereby DENIED for lack of merit. SO ORDERED. Initially, the Third Division ruled that petitioner's refund claim was barred due to the latter's failure to exhaust the available administrative remedies. It pointed out that since petitioner's judicial claim was filed merely a day after its administrative claim was filed, respondent was not afforded the opportunity to exercise his or her administrative powers and resolve the matter before the claim was appealed before this Court. However, assuming administrative remedies were exhausted, the petition must still be denied for petitioner's failure to comply with requirement under Section 13(b)(2)56 of PD 15900� ' 52 Division Docket, Volume IL pp. 725-730. !d .. pp. 733-746. See Resolution dated 28 October 2020. id .. p. 750. 55 Supra at note I. 56 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: (b) A franchise tax oft\VO percent (2%) of the gross revenues derived by the grantee from all sources. without distinction as to transport or non-transp011 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 altematives shall be in lieu of all other taxes, duties. royalties. registration, license. and other fees and charges of any kind. nature. or description.

CTA EB NO. 2656 (CTA Case No. 9990) Philippine Airlines, Inc. v. Commissioner of Internal Revenue DECISION X-------------------------------------------X specifically, to establish that the imported alcohol products were not locally available in reasonable quantity, quality, or price. In so ruling, the Third Division held that the price list from one (1) local supplier cannot represent the local market prices. According to it, the Court cannot determine if the alcohol products were indeed not available locally in reasonable prices. On 15 December 2021, petitiOner filed its Motion for Reconsideration (MR)S7contending that: (1) it did not fail to exhaust the administrative remedy; and, (2) it sufficiently established that imported alcohol products are not locally available in reasonable quantity, quality, or price. In the assailed Resolution of 10 June 2022, the Third Division remained unconvinced and denied the MR. It held:S8 WHEREFORE, premises considered, petitioner's Motion for Reconsideration (Re: Decision dated 21 October 2021) is hereby DENIED for lack of merit. SO ORDERED. In the assailed Resolution, the Third Division clarified that in light of the Supreme Court's pronouncement in Commissioner of Internal Revenue v. Carrier Air Conditioning Philippines, Inc.s9 , petitioner's administrative claim and judicial claim were properly filed pursuant to Sections 20460 and 22961 of the NIRC of 1997, as amended, despite the one (1)-day duration of filing. Nevertheless, notwithstanding the foregoing ruling, the Third Division determined that petitioner stil~t 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 follmving: 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 form and other atticles. supplies. or materials: provided. that such articles or supplies or materials are imported for the use of the grantee in its transport and transp011 operations and other activities incidental thereto and are not locally available in reasonable quantity, quality, or price[.] (Emphasis supplied) 57 Division Docket, Volume IL pp. 775-799. Supra at note 1. G.R. No. 226591. 27 July 2021. Supra at note 2:2. 6] Supra at note 23.

CTA EB NO. 2656 (CTA Case No. 9990) Philippine Airlines, Inc. v. Commissioner of Internal Revenue DECISION X-------------------------------------------X failed to prove that the subject importations are not locally available in reasonable prices. PROCEEDINGS BEFORE THE COURT EN BANC Following petitioner's receipt of a copy of the assailed Resolution on 29 June 20226\ it filed a "Motion for Extension ofTime to File Petition for Review"63 (Motion for Extension) with the Court En Bane on 14 July 2022. On 29 July 2022 or within the extended period granted6+, petitioner filed the instant Petition for Review6s seeking the reversal of the Third Division's assailed Decision and Resolution. After petitioner's compliance with the Resolution dated 01 September 202266, and without respondent's comment67, the Court En Bane deemed the case submitted for decision. 68 ISSUE The sole issue for the Court En Bane's determination is- WHETHER THE THIRD DIVISION ERRED IN RULING THAT PETITIONER PHILIPPINE AIRLINES, INC. FAILED TO ESTABLISH THAT THE SUBJECT IMPORTED ALCOHOL PRODUCTS ARE NOT LOCALLY AVAILABLE IN REASONABLE QUANTITY, QUALITY, OR PRICE AT THE TIME OF IMPORTATION. In support of the above, petitiOner contends that the Third Division failed to appreciate its pieces of evidence despite the fact that respondent did not refute them. Having submitted the required preponderance of evidence, petitioner insists that it has proven that the imported articles were not locally available in reasonable quantity, quality, or price. ~ See Notice of Resolution dated 16 June 2021. Division Docket. Volume IL p. 816. 63 Rollo.pp. 1-7. " See Minute Resolution dated 18 July 1022. id.. p. I0. 65 Supra at note 4. 66 Rullo, pp. 74-75. 67 See Records Verification dated 04 November :20:2.:2. id .. p. 86 68 See Resolution dated 18 Janum; 1023. id .. p. 88.

CTA EB NO. 2656 (CTA Case No. 9990) Philippine Airlines, Inc. v. Commissioner of Internal Revenue DECISION X-------------------------------------------X Petitioner also points out that the unavailability of the prices from the local suppliers (such as Absolute Sales and Fortune Trade) only proves that the imported commissary supplies are not available m sufficient quantity or quality in the Philippine local markets. Petitioner further posits that, in several cases69, the Court of Tax Appeals (CTA) has already ruled that the Table of Comparison between the cost of importing and cost of locally purchasing commissary and catering supplies (with local prices reflected) were deemed sufficient to rule that the cost of importing commissary and catering supplies is lower than purchasing them locally. To bolster its stance, petitioner refers to the Minute Resolution in the case of Philippine Airlines, Inc. v. Commissioner of Internal Revenue, et a/.7� (PAL Minute Resolution) where the Supreme Court determined that this Court committed a severe departure from settled jurisprudence when it ruled that PAL's evidence was inadequate to comply with Section 13(b)(2)7' of PD 1590, i.e., the imported articles are not locally available in reasonable quantity, quality, or price. Hence, with the sudden deviation in the rulings, petitioner avers that the assailed Decision and assailed Resolution are contradictory to the doctrine of stare decisis. Lastly, petitioner claims that the Court's imposition of stringent requirements in proving that the subject importations are not locally available in reasonable quantity, quality, or price defeats the tax exemptions granted under PD 1590. RULING OF THE COURT Before going into the merits of the case, We shall first resolve whether the Court En Bane has jurisdiction over the present petition.3 Petitioner referred the cases of Commissioner q(lnternal Rerenue r. Philippine Airlines. Inc. (PAL}, CTA EB No. 942 (CTA Case No. 7868). 09 December 2013: Philippine Airlines. Inc. !PAL! 1'. Commh;sioner of Internal Rerenue & Commh;sioner o(Customs. CTA Case No. 7677. 24 August 20 12: Philippine Airlines. Inc. r. Commissioner r?f!merna/ Rerenue and Commissioner q{Cusloms, CTA Case No. 7943. 03 August 2012: Commi.\�shmer qj"!nterna/ Revenue \'. Philippine Airlines, Inc.. CTA EB No. !216, 24 October 2016: PhHippine A ir/ines. Inc. r. Commissioner of Internal Rerenue. e1 a/.. CTA EB Nos. 1162 & 1167.07 January 2016. 7(! G.R. No. 231638 (Minute Resolution). 17 February 2021. 71 Supra at note 56.

CTA EB NO. 2656 (CTA Case No. 9990) Philippine Airlines, Inc. v. Commissioner of Internal Revenue DECISION x-------------------------------------------x THE COURT EN BANC HAS JURISDICTION OVER THE PRESENT PETITION. The Third Division promulgated the assailed Resolution denying petitioner's MR on the assailed Decision on 10 June 2022. Petitioner received the said assailed Resolution on 29 June 2022J2 Under Section 2(a)(1)73, Rule 4 in relation to Section 3(b)74, Rule 8 of the RRCTA, petitioner had fifteen (15) days from 29 June 2022 or until 14 July 2022, within which to file an appeal before this Court. On the said date, petitioner posted a Motion for Extension7s, requesting an additional period of 15 days from 14 July 2022 or until 29 July 2022, within which to file its Petition for Review. The Court En Bane thus granted the same in its Minute Resolution dated 18 July 2022.?6 Accordingly, on 29 July 2022, petitioner timely filed the present Petition for Review.77 Hence, the Court En Bane validly acquired jurisdiction to take cognizance of this case. We now proceed to the merits of the case. After a thorough examination of the records of the case and petitioner's arguments, We find no cogent reason to deviate from the Third Division's actions in denying petitioner's claim for refund or the issuance of a TCC. PETITIONER FAILED TO PROVE THAT THE IMPORTED ALCOHOL PRODUCTS WERE NOT LOCALLY AVAILABLE IN REASONABLE QUANTITY, QUALITY OR PRICE. For emphasis, to avail of the excise tax exemption on the imported alcohol products, petitioner must have shown compliance with the conditions enumerated under Section 13(b)(2) ofPD 1590:21" Supra at note 61. Supra at note 7. Supra at note 6. 75 Supra at note 63. 76 Supra at note 64. Supra at note 4.

CTA EB NO. 2656 (CTA Case No. 9990) Philippine Airlines, Inc. v. Commissioner of Internal Revenue DECISION Page 13 of21 x-------------------------------�-----------x 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: (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 transport or non[-]transport 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: (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 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 transport operations and other activities incidental thereto and are not locally available in reasonable quantity, quality, or price[.]78 Simply stated, petitioner must fulfill the following conditions to be exempt from excise tax on its importations, to wit: {!j"' 1. Petitioner paid its corporate income tax covering the period when the subject importations were made; 7$ Emphasis supplied.

CTA EB NO. 2656 (CTA Case No. 9990) Philippine Airlines, Inc. v. Commissioner of Internal Revenue DECISION x-------------------------------------------x 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. As the Third Division aptly determined, petitioner complied with the first and second conditions. However, with regard to the third condition, i.e., the non-availability of the subject imported alcohol products at reasonable quantity, quality or price in the local market, We still find that petitioner failed to prove compliance therewith. To prove that the imported alcohol products were not locally available in reasonable quantity, quality or price, petitioner submitted the following: (1) Judicial Affidavit79 and Supplemental Affidavit of Capinpin80; (2) Absolute Sales's Product Price Lists for 20138' and 201482; (3) Future Trade's Product Price Lists for 201383 and 201484; (4) SIR's RMC No. 90-201285; and, (5) Table of Comparison prepared by petitioner.86 The Court En Bane, however, finds petitioner's proffered pieces of evidence to be insufficient. As lengthily discussed in the assailed Decision, petitioner failed to prove the existence of the third condition. The Third Division stated - However, a closer look at the Table of Comparison reveals that there is only one (1) supplier (i.e., Future Trade International, Inc.) which supposedly establishes local prices. Pertinent portions of the Table of Comparison are reproduced below:} 70 Supra at note 37 "" Supra at note 38. 81 Supra at note 40. 82 Supra at note 41. s_~ Supra at note 42 " Supra at note 43. gs Supra at note 44. S6 Supra at note 39.

CTA EB NO. 2656 (CTA Case No. 9990) Philippine Airlines, Inc. v. Commissioner of Internal Revenue DECISION x-------------------------------------------x IIDE Product Price Absolute Future Absolute Future RMC Entry Imported Sales 2013 Trade Sales Trade No. pe' Bottle (PHP) 2013 2014 2014 90� (PHP) (PHP) (PHP) (PHP) 2012 9235 Volupta Rosso 75-78 .. .. .' - Price 4518 List Queen Adelaide 108.26 255.00 10!60 Cabernet ..(PHP) Sauvi!2,non 9227 Queen Adelaide . '. z;;.oo - Chardonnay ;040 108.26 . ' . Queen Adelaide ;6q Cabernet . 255-00 72 Sau\'ignon Queen Adelaide 107.17 Chardonnay . . . Queen Adelaide Cabernet 10 ;.17 -. 255-00 Sauvignon Queen Adelaide . 2')').00 ' Chardonnay Beringer 10').84 California Chardonnay . .. 255-00 . Stolichnaya Gold 105.84 -. . 164-13 Louis Royer XO Patron Silver 489.88 ... ... .- ... ... Tequila 2 -3'55- 19 Rawson Pri\�ate Release Shiraz 1,036.28 Cabernet Lindenman's 1.11.70 - 525.00 . 578.oo ' Premiere Chardonnay . 341.00 - . !6}.19 351.00 From a cursory reading ofRMC No. 90-2012, it can be easily determined that it was based on a 2010 price survey of alcohol products. Considering that it is based on a 2010 price survey, no valid comparison can be made with importations in 2013 and 2014. More importantly, RMC No. 90-2012 does not contain any price quotation for any of the listed alcohol products. Neither did petitioner present any proof to establish that the absence of price quotation is due to the non-availability of the identified alcohol products in the local market. Likewise, the Absolute Sales Corporation price list does not contain a price quotation for any of the alcohol products imported by petitioner. Petitioner also did not present any proof showing that the absence of price quotation is due to non- availability of the alcohol products in the local markets. During cross-examination and re-direct examination of Ms. Capinpin, she confirmed that there are no price quotations for 8" Absolute Sales Corporation and that only one (1) supplier, Future Trade International, Inc., was able to provide price quotations:

CTA EB NO. 2656 (CTA Case No. 9990) Philippine Airlines, Inc. v. Commissioner of Internal Revenue DECISION X-------------------------------------------X AITY. BABARAN Q: In the table of comparison marked as Exhibit P-48, I noticed that there is only one supplier that is mentioned here, Future Trade? MS. CAPINPIN A: We presented Absolute Sales and Future Trade. AITY. BABARAN Q: Yes, but Absolute Sales, there is no price, only Future Trade? MS. CAPINPIN A: Yes, Ma'am. AITY. BABARAN No further question, Your Honors. JUSTICE UY Re-direct? AITY. PIERAZ Yes, Your Honors. Re-Direct: AITY. PIERAZ Q: Ms. Witness, why were you unable to put the price list for Future Trade 2013? MS. CAPINPlN A: We asked for a price list for Absolute sales but unfortunately, they did not have quotations for the mentioned items that we imported. From the foregoing, it appears that petitioner determined local prices for 2013 and 2014 from the price list of only one (1) supplier, that is Future Trade International, Inc. Considering that the 2014 price list of Future Trade International, Inc. was not admitted in evidence for not having been identified, the Court will only consider the 2013 price list as admitted in evidence. However, the Court cannot rely on the price list of only one (1) supplier absent any corroborating evidence that such supplier adequately represents the local market prices or that said supplier is the exclusive distributor of the listed alcohol products. Thus, the Court cannot determine if the imported alcohol products are not available locally in reasonable price. Similarly, the Court cannot determine from the evidence 1 presented whether the imported alcohol products are not availab~

CTA EB NO. 2656 (CTA Case No. 9990) Philippine Airlines, Inc. v. Commissioner of Internal Revenue DECISION X-------------------------------------------X locally in reasonable quantity. In Ms. Capinpin's testimony, she merely confirmed that there is no price available or that the supplier "did not have quotations for the mentioned items." From her testimony, the Court cannot ascertain that there is no available product locally. The testimony merely implies the non-availability of "price or quotation" and does not necessarily prove non-availability of the "product" itself in the local market. Simply put, there is no indication from the testimony, nor from evidence on record, that the imported alcohol products are not available locally in reasonable quantity.87 Similarly, We are not convinced that this Court is prevented from, or should absolutely remain tied to, applying previously decided cases allowing refunds based merely on the presentation of a Table of Comparison (as petitioner so insists). 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. In Commissioner of Internal Revenue v. San Roque Power Corporation88, the Supreme Court emphasized that CTA decisions do not constitute binding precedents: There is also the claim that there are numerous CTA decisions allegedly supporting the argument that the filing dates of the administrative and judicial claims are inconsequential, as long as they are within the two-year prescriptive period. Suffice it to state that CTA decisions do not constitute precedents, and do not bind this Court or the public. That is why CTA decisions are appealable to this Court, which may affirm, reverse or modify the CTA decisions as the facts and the law may warrant. Only decisions of this Court constitute binding precedents, forming part of the Philippine legal system. As held by this Court in The Philippine Veterans Affairs Office v. Segundo: ... Let it be admonished that decisions of the Supreme Court "applying or interpreting the laws or the Constitution ... form part of the legal system of the Philippines," and, as it were, "laws" by their own right because they interpret what the laws say or mean. Unlike rulings of the lower courts, whic~ ~ bind the parties to specific cases alone, our judgments areij 87 Citations omitted and emphasis supplied. 88 G.R. No. 187485, 12 February 2013; Citations omitted, emphasis and italics in original text and underscoring supplied.

CTA EB NO. 2656 (CTA Case No. 9990) Philippine Airlines, Inc. v. Commissioner of Internal Revenue DECISION Page 18 of21 X-------------------------------------------X universal in their scope and application, and equally mandatory in character. Let it be warned that to defy our decisions is to court contempt. The same basic doctrine was reiterated by this Court in De Mesa v. Pepsi Cola Products Phils., Inc.: The principle of stare decisis et non quieta movere is entrenched in Article 8 of the Civil Code, to wit: ART. 8. judicial decisions applying or interpreting the laws or the Constitution shall form a part of the legal system of the Philippines. It enjoins adherence to judicial precedents. It requires our courts to follow a rule already established in a final decision of the Supreme Court. That decision becomes a judicial precedent to be followed in subsequent cases by all courts in the land. The doctrine of stare decisis is based on the principle that once a question of law has been examined and decided, it should be deemed settled and closed to further argument. Lastly, petitioner's assertion that We should rely on the PAL Minute Resolution89 is untenable. We cannot subscribe to the ruling therein since a minute resolution is also not considered a binding precedent. Citing Philippine Health Care Providers, Inc. v. Commissioner of Internal Revenue90, in San Miguel Corporation v. Commissioner ofInternal Revenue9' (San Miguel), the Supreme Court also 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: ...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~ 89 Supra at note 70. ')(I G.R. No. 167330. 18 September2009. 91 G.R. No. 257697. 12 April2023: Emphasis and italics in the original text and underscoring supplied.

CTA EB NO. 2656 (CTA Case No. 9990) Phil"1ppine Airl"1nes, Inc. v. Commissioner of Internal Revenue DECISION X-------------------------------------------X and issues) is involved, the minute resolution is not binding precedent. Thus. in CIR v. Baier-Nickel, the Court noted that a previous case, CIR 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. Here, the subject alcohol products were imported in 2013 and 2014. On the other hand, the PAL Minute Resolution, as well as the cited cases therein, dealt with importations between the years 2006 and 2010. Thus, any declarations made in the said minute resolution will not affect the instant case. Moreover, in San Migue/92 , the Supreme Court reiterated that there is a substantial distinction between a minute resolution and a decision: 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 ofcourt 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 of Section 4(;) of Article VIII speaks of a decision. Indeed, as a rule, this Court lays down doctrines or principles of law which constitute binding precedent in a decision duly signed by the members of the Court and certified by the Chief Justice. With the foregoing disquisitions, We could only agree with the Third Division that petitioner failed to present sufficient and 09 convincing evidence to prove that the subject alcohol products it 1 imported were not locally available in sufficient quantity, quality, 9' Supra: Citation omitted and underscoring supplied.

CTA EB NO. 2656 (CTA Case No. 9990) Philippine Airlines, Inc. v. Commissioner of Internal Revenue DECISION x-------------------------------------------x price at the time of their importation. Such being the case, the Court En Bane finds no reason to reverse the Third Division's assailed Decision and Resolution. WHEREFORE, in light of the foregoing, the instant Petition for Review filed by petitioner Philippine Airlines, Inc. on 29 July 2022 is hereby DENIED for lack of merit. Accordingly, the assailed Decision and Resolution dated 21 October 2021 and w June 2022, respectively, of the Third Division in CTA Case No. 9990, entitled Philippine Airlines, Inc. v. Commissioner ofInternal Revenue, are AFFIRMED. SO ORDERED. ""'L''f'--~LLENA WE CONCUR: Presiding Justice ~- ~ -\...._ MA. BELEN M. RINGPIS-LIBAN Associate Justice ~--~ CATHERINlT. MANAHAN Associate Justice Associate Justice

CTA EB NO. 2656 (CTA Case No 9990) Philippine Airlines, Inc. v. Commissioner of Internal Revenue DECISION X-------------------------------------------X ~~ r~-!bj~ MARIAN Ivii-. REYEg-FAJARDO Associate Justice ~AAAAdrnt) LA~rJ'~~CUI-DAVID Associate Justice ~""''~~ CORAWN G. RRER- L RES Associate Justice HENRJ/};,G'CLES Associate Justice 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. Presiding Justice