FILPRIDE RESOURCES INCORPORATED duly represented by ANIEBETH S. SIONZON v. BUREAU OF INTERNAL REVENUE and/or COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FIRST DIVISION *** ***** *** * FILPRIDE RESOURCES INCORPORATED duly represented by ANIEBETH S. DIONZON, Petitioner, C.T.A. CASE NO. 6830 -versus- Members: ACOSTA, Chairperson BAUTISTA, and CASANOVA, JJ. BUREAU OF INTERNAL REVENUE and/or Promulgated: COMMISSIONER OF INTERNAL REVENUE, FEB 2 0 ">nm:t l::VIJIII , )' I0 p 1}1 . Respondents. �� � ~- x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x DECISION CASANOVA, C., J.: Before Us is a Petition for Review seeking the refund or issuance of a Tax Credit Certificate in the amount of P4,781,311.60 representing alleged overpayment of excise taxes from fuel sold by petitioner to the National Power Corporation (NPC) covering the period January 2002 to July 2002 pursuant to Section 135 (c) of the National Internal Revenue Code of 1997 in relation to Republic Act No. 6395, as amended, otherwise known as the NPC Charter$--

DECISION C.T.A. CASE NO. 6830 Page 2 Petitioner is a domestic corporation organized and existing under the Philippine Laws with office address at 304 J.P. Rizal St., Mandaluyong City. 1 It is engaged in the business of buying and selling, including importation of oil and other petroleum products for various customers. It is a registered taxpayer with the Bureau of Internal Revenue (SIR) with certificate of registration bearing Taxpayer Identification Number 002-216-589-000. 2 Respondent is the duly appointed Commissioner of Internal Revenue vested with the authority to refund any internal revenue erroneously or excessively assessed or collected or any penalty claimed to have been collected without authority or any sum alleged to have been excessively or wrongfully collected, with office address at SIR National Office, Agham Rd., Diliman, Quezon City. 3 In the course of its business operations, petitioner had the opportunity to enter into a sale transaction with NPC for the supply of diesel fuel to its various power plants located in the Philippines" by virtue of an "Open Purchase Order" in lieu of the standard 2001-2002 Contract of Supply/Delivery of Oil Based Fuel. 5 By virtue of the "Open Purchase Order'', petitioner caused the importation of 4,667,000. liters of diesel fuel from January to February 20026 which was subjected to an excise tax at the rate of Pl.63 to a liter and paid the corresponding duties and excise taxes in the total amount of P8,707,459.80/ detailed as follows: On January 4, 2002, upon full payment of the corresponding customs duties and excise taxes in the amount of P1,581,855.00, the Bureau of Customs released in favor of petitioner the 151 batch of imported diesel fuel consisting of some Eight Hundred Fifty Thousand (850,000) liters; On January 30, 2002, petitioner paid the Bureau of Customs the amount of P1,520,494.80 representing the corresponding customs duties and excise taxes for the importation of 817,000 liters of diesel products. This volume represented the 2nd batch of imported diesel productsig__ 1 Par. 1, Joint Stipulation of Facts and Issues. 2 Par. 3, Petition for Review. 3 Paragraph 2, Joint Stipulation of Facts and Issues. 4 Paragraph 4(c), Joint Stipulation of Facts and Issues. 5 Exhibit "H". 6 Exhibits "C-2", "C-4", "C-6" and "C-8". 7 Exhibits "C-1", "C-3", "C-5" and "C-7". �- I) ' ) { ) \.) .--:

DECISION C. T A CASE NO. 6830 Page 3 The 3'd batch of imported diesel products with a volume of 1,000,000 liters was released to petitioner on February 13, 2002 by the Bureau of Customs on upon the former's payment of the amount of P1,868,825.00 for the customs duties and excise taxes due thereon; and On February 27, 2002, the Bureau of Customs released to petitioner 2,000,000 liters of imported diesel products upon payment of corresponding customs duties and excise taxes in the amount of P3,736,285.00. This volume represented petitioner's 4th batch of imported diesel products. To summarize: Batch of Date of Volume of Exhibit Amount of Exhibit Importation Release by the Imported Customs Duties and Excise 1st Bureau of Diesel 2nd Customs Products Taxes (In Liters) 3 'd 01/04/02 C-2 P1,581,855.00 C-1 01/ 30/02 850,000 C-4 P1,520,494.80 C-3 4th 02/13/02 C-6 P1,868,825.00 C-5 TOTAL 02/27/02 817, 000 C-8 P3, 736,285.00 C-7 1,000,000 ea,zoz,~s9.ao 2,000,000 ~,661,000 From the foregoing importations of diesel products, petitioner allegedly sold and delivered a total of 2,933,320 liters of diesel fuel to NPC's various power plants on various dates. On the strength of the statutory exemption from payment of all forms of taxes, duties, fees and imposts granted to NPC pursuant to Republic Act No. 6395, petitioner consequently sought the refund of the alleged overpayment of excise taxes it paid for the diesel products it sold to NPC. It then filed, on separate dates,8 four (4) administrative claims for the issuance of tax credit certificate arising from the overpayment of excise taxes on sales of fuel to the National Power Corporation covering the period from January 2002 to July 2002. In a letter dated November 8, 2002,9 petitioner informed BIR of its intention to correct some errors on the volumes declared in its letter-claims and arrived at the total claim of P4,781,311.60 as follows~ 6 May 19, 2002, May 31, 2002, July 5, 2002 .and November 5, 200 2 (Exhibits " AA", "BB", "CC" and DO). 9 Exhibit "G". . . ._).... ' .._, "

DECISION p 1,647,489.90 C.T.A. CASE NO. 6830 1,295,947.80 Page 4 1,401,376.20 436,497.70 Application #11,010,730 liters@ 1.63/liter Application #2 795,060 liters @ 1.63/liter P4,781,311.60 Application #3 859,740 liters @ 1.63/liter Application #4 267,790 liters @�1.63/liter Total The above administrative claims for refund remained unresolved at the Bureau of Internal Revenue level. Such inaction prompted petitioner to elevate said claims with this Court on December 4, 2003, in order to toll the running of the two (2)-year prescriptive period. Respondent, in his Answer filed on February 5, 2004, interposed the following Special and Affirmative Defenses: "5. The claim for refund is still under examination by the respondent's Bureau; 6. The burden of proof is upon the petitioner to prove that it is entitled to the claim for refund; 7. The grant of a claim for refund tantamount to an exemption from taxation which is construed strictly against the claimant and in favor of the taxing authority; and 8. The taxes sought to be refunded were paid in accordance with law; the burden of proof to the contrary is upon the petitioner-claimant to show with clear and unambiguous provision of law supporting the same." This case was submitted for Decision on August 16, 2006 sans the memorandum of respondent. The parties jointly stipulated on the foregoing issues for resolution of this Court, to wit: I. Whether or not petitioner supplied and delivered fuel to NAPOCOR coming from its importation; II. Whether or not petitioner paid the corresponding excise taxes for every liter of imported fuel which the latter sold and delivered to NAPOCOR~

DECISION C.T.A. CASE NO. 6830 Page 5 III. Whether or not the sale transaction between petitioner and NAPOCOR is tax exempt; IV. Whether or not petitioner is entitled to a tax credit certificate and/or tax refund or reimbursement for the excise taxes it paid for the imported fuel products sold and delivered to NAPOCOR. Petitioner bases its cause on Section 135(c) of the National Internal Revenue Code of 1997, as amended, quoted hereunder for easy reference: "Section 135. Petroleum Products Sold to Internal Carriers, and Exempt Entities or Agencies. -Petroleum products sold to the following are exempt from excise tax: XXX XXX XXX (c) Entities which are by law exempt from direct and indirect taxes. ~~ As correctly pointed out by petitioner, entitlement to the claim for refund based on the afore-quoted provision of law is conditioned on the following, viz: (1) That petroleum products were sold to a tax exempt entity or entities; and (2) That excise taxes were actually paid on these petroleum products. Tax-Exempt Character ofNPC It has long been settled that NPC is categorically exempt from payment of all taxes, whether direct or indirect, pursuant to its Charter, Republic Act No. 6395, as amended. And the respondent himself does not dispute this fact. 10 Section 13 of Republic Act No. 6395 (NPC Charter), as amended, reads : "Section 13. Non-profit Character of the Corporation: Exemption from All Taxes, Duties, Imposts and Other Charges by the Government and Government Instrumentalities.- The Corporation shall be non-profit and shall devote all its returns from its capital investment, as well as excess revenues from its operations, for expansion. To enable the Corporation to pay its indebtedness and obligations in furtherance and effective implementation of the policy enundated in Section one of this Act, the Corporation, including its subsidiaries, is hereby declared exempt from the payment of all forms of taxes, duties, fees, imposts as well as costs and service fees including filing fees, appeal bonds, supersedeas bonds, in any C9!J~ or administrative proceedings." (Emphasis Supplied~ �..) / ~) �

DECISION C. T.A. CASE NO. 6830 Page 6 The Supreme Court, in the case of Ernesto M. Maceda vs. catalina Macaraig, et al., 197 SCRA 771, May 31, 1991, has even affirmed NPC's tax exemption, thus : "The NPC is a non-profit public corporation created for the general good and welfare wholly owned by the government of the Republic of the Philippines. From the very beginning of its corporate existence, the NPC enjoyed preferential tax treatment to enable the Corporation to pay the indebtedness and obligation and in the furtherance and effective implementation of the policy enunciated in Section one of " Republic Act No. 6395 XXX XXX XXX XXX It is noted that in the earlier law, R.A. No. 358, the exemption was worded in general terms, as to cover "all taxes, duties, fees, imposts, charges, etc., xxx." However, the amendment under Republic Act No. 6395 enumerated the details covered by the exemption. Subsequently, P.O. No. 380, made even more specific the details of the exemption of NPC to cover, among others, both direct and indirect taxes on all petroleum products used in its operation. Presidential Decree No. 938 amended the tax exemption by simplifying the same law in general terms. It succinctly exempts NPC from "all forms of taxes, duties, fees, imposts as well as costs and service fees including filing fees, appeal bonds, supersedeas bonds, in any court or administrative proceedings." The use of the phrase "all forms" of taxes demonstrate the intention of the law to give NPC all tax exemptions it has been enjoying before. The rationale for this exemption is that being non-profit the NPC 'shall devote all its returns from its capital investments as well as excess revenues from its operation, for expansion. Xxx XXX XXX XXX It is evident from the provisions of P.O. No. 938 that its purpose is to maintain the tax exemption of NPC from all forms of taxes including direct taxes as provided for under R.A. No. 6395 and P.D. No. 380 if it is to attain its goals. " Evidently, petitioner is the one directly liable for the payment of excise taxes on the importation of petroleum products it sold to NPC. But by the nature of indirect taxation , however, petitioner may then shift the burden of such taxation, by letting such economic burden to pass through the channels of commerce to the user or consumer of the products sold, NPC herein . But since NPC is exempt from both direct and indirect taxation, it must likewise be exempt from absorbing the burden of indirect taxation. This is when Article 13~ 1.. u ,_) . -~

DECISION C.T.A. CASE NO. 6830 Page 7 of the National Internal Revenue Code of 1997, as amended, comes to play and operates to grant tax exemption to petroleum product suppliers who are unable to shift the economic burden of taxation to the end user. Whether petitioner supplied and delivered fuel to NPC coming from its importations and whether the corresponding excise taxes due thereon were paid After a careful examination of the records in this case, the Court finds that indeed NPC executed several "Purchase Orders" (PO) dated October 16, 2001 11 as well as three (3) "Open Purchase Orders" (OPO) dated January 2002 12 for the supply of diesel fuel. The sale, release, and delivery of such diesel fuel to NPC was on a staggered basis depending on the required quantity and the name of the NPC power plant site as stated in the PO and OPO, summarized as follows: Exhibit OP/PO No. Delivery Point Ordered Purchase Order 417-SOI Araceli 45,000 J 402-SOI Basco 572, 000 L 414-SOI Busuanga 700,000 405-SOI Calayan M 407-SOI Casiguran 33,000 0 415-SOI Cuilion 362,000 p 413 - SOI Cuyo 411- SOl El Nido 89,000 Q 404- SOl Itbayat 563,000 R 409- SOI Jomalig 94,000 406- SOl Palanan s 410- SOl Patnanungan 35, 000 408- SOl Polilio 24,000 T 403- SOl Sabtang 26,000 412- SOl San Vicente 45,000 u 376,000 v 559 IMG Plantsite 28,000 w 265 IMG Plantsite 56,000 266 IMG Plantsite X 42,000 y 42,000 42,000 z .3,11~, 000 Open Purchase Order ~ I K N Total 11 Exhibits "J", "L", "M", "0 " to "Z". 12 Exhibits "! ", " K" and "N".

DECISION C.T.A. CASE NO. 6830 Page 8 Petitioner made a total importation of 4,667,000 liters of diesel oil13 and paid the corresponding duties and excise taxes in the total amount of P8J07,459.80, 14 summarized as follows: 817,000 C-4 8735749 1,520,494.80 C-3 1,000,000 C-6 1/30/2002 2,000,000 C-8 8737425 1,868,825.00 C-5 2/13/2002 4,667,000 212712002 8738447 3, 736,285.00 C-7 Total p 8l07,459.80 It should be noted that petitioner paid an excise tax of Pl.63 per liter of the imported diesel fuel. 15 This fact was even stipulated upon by the parties in their Joint Stipulation of Facts and Issue. 16 Moreover, records of this case reveal that in the course of its operation, petitioner $ has sold and delivered a total of )2,932,225 liters of diesel fuel to National Power Corporation on va.rious dates from January to July 2002,17 detailed as follows: Exhibit Invoice No. Date Volume (in E- 1-1 19043 March 19, 2002 E- 1-2 19006 March 4, 2002 Liters) E-1 -4 18987 February 19, 2002 E- 1-7 19118 May 2, 2002 42,000 E-1 -8 18984 February 19, 2002 42, 000 E-1-1 0 18979 February 7, 2002 19,950 E-1 -12 19079 April 12, 2002 19,950 E-1- 13 19083 April 16, 2002 42,000 E-1 - 14 19087 April16, 2002 68,880 E-1-16 19115 May 2, 2002 68 ,880 E-1-17 19125 May 13, 2002 68,880 E-1 -19 18964 January 11, 2002 68 ,880 E-1-21 18993 March 6, 2002 68 ,880 E- 1-23 19063 April 1, 2002 68 ,880 E-1-25 19108 April 19, 2002 105,000 E-1-27 19137 May 22 , 2002 105,000 E- 1-29 19192 July 20, 2002 105,000 E- 1-30 19198 July 12, 2002 105,000 E-1-32 19199 July 12, 2002 105,000 E- 1-34 19010 March 5, 2002 62 ,7 90 E-1 -36 19026 March 18, 2002 16,000 E- 1-38 18982 February 7, 2002 25,830 42,000 10,500 14 , 91~ 13 Exhibits "C-2", "C-4", " C-6" and "C-8". 14 Exhibits "C-1", "C-3", "C-5" and "C-7". 15 See the rate of tax as shown in the BOC IEIRD in relation to the LBP Official Receipts; Exhibits " C-1 " to "C-8 ". 16 Paragraph 4(d), Joint Stipulation of Facts and Issues. 17 Exhibits "E-1-1" to "E-1- 123 ".

_., DECISION 19088 April 16, 2002 14,910 C.T.A. CASE NO. 6830 18965 January 11 , 2002 23 , 100 1901 7 March 13, 2002 11 ,550 Page 9 19000 23,100 19062 March 2, 2002 21,210 E-1 -40 19078 April 1, 2002 25 ,200 E-1-42 19095 April 12, 2002 19,11 0 E-1-43 19099 April 19, 2002 11 ,550 E-1-44 19122 April 20, 2002 25 ,200 E-1-45 19127 May 7, 2002 25,20 0 E-1-47 19138 May 13, 2002 E-1-49 19153 May 22, 2002 5,460 E-1-50 19154 May 31, 2002 12,600 E-1-51 19160 May 31 , 2002 12,600 E-1-53 19170 May 20, 2002 12,600 E-1 -55 19162 June 20, 2002 18,900 E-1-56 191 75 June 10, 2002 18,060 E-1-57 19181 June 25, 2002 E-1-59 19189 July 1, 2002 4,200 E-1-61 19190 July 10, 2002 12,600 E-1 -62 19621 July 12, 2002 12,600 E-1-63 19628 July 26, 2002 E-1-64 18973 July 31 , 2002 7,560 E-1-65 18974 January 17, 2002 10,500 E-1 -66 19117 February 1, 2002 E-1-68 18971 May 2, 2002 6,300 E-1-69 January 24, 2002 21 ,000 E-1-71 19007 21,000 E-1-72 March 4, 2002 42,000 E-1 -73 19036 93 ,870 E-1-76 19093 March 20, 2002 E - 1- 7 8 April 19, 2002 52,500 E-1-81 19098 41,370 E-1-83 April 20, 2002 63 ,000 E-1-84 19131 31,500 E-1-85 191 21 May 16, 2002 93,870 E-1-86 May 2, 2002 93 ,870 E-1-89 19157 93 ,870 E-1-90 18976 May 20, 2002 42,000 E-1-92 February 2, 2002 52,500 E-1-93 19067 2 2 ,4 70 E-1-95 18981 April 6, 2002 22,470 E-1-97 19085 February 7, 2002 17,220 E-1-98 12,600 E-1-100 19060 Apri116, 2002 29,820 E-1 - 102 March 27, 2002 1 6,3 80 E- 1-104 -19057 E-1-105 19103 April 1, 2002 42,420 E-1-107 19058 Apri119, 2002 29,820 E- 1-109 April 1, 2002 89,880 E-1-111 19325 89,880 E-1 -112 June 7, 2002 86,100 E-1-113 19324 E-1-115 19161 July 7, 2002 3,780 E- 1-117 19116 May 20, 2002 10,500 E-1-119 19059 10,500 E-1-121 19055 May 2, 2002 11 ,918 E-1 - 123 19029 March 20, 2002 11,977 19028 42,000 Total 18980 April 1, 2002 29,820 19084 March 18, 2002 19065 March 18, 2002 2,932,225 18978 February 7, 2002 ~ April 16, 2002 April 6, 2002 February 4, 2002 . ',( '-) .: J

DECISION C.T.A. CASE NO. 6830 Page 10 The aforementioned sales were supported by various official receipts submitted by petitioner. 18 The claim for refund was filed within the two (2)-vear prescriptive provided under Section 229 in relation to Section 130{AJ{2) of the National Internal Revenue Code of 1997 Section 229 of the National Internal Revenue Code (NIRC) of 1997 provides: "SEC. 229. Recovery of Tax Erroneously or Illegally Collected. - No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefore, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid." In relation thereto, Section 130(A)(2) of the 1997 NIRC provides: "SEC. 130. Filing of Return and Payment of Excise Tax on Domestic Products.- (A) Persons Liable to File a Return/ Filing of Return on Removal and Payment of Tax - XXX XXX XXX (2) Time for Filing of Return and Payment of the Tax. - Unless otherwise specifically allowed, the return shall be filed and the excise tax paid by the manufacturer or producer before removal of domestic products from place of production: xxx'~ 18 Part of Exhibits " E- 1-1" to "E-1-124". ' () I ') t) 1..."

DECISION C.T.A. CASE NO. 6830 Page 11 As per evidence on record, petitioner paid the subject claimed excise taxes on January 4, 2002, January 30, 2002, February 13, 2002 and February 27, 2002. 19 On these excise taxes paid, petitioner filed four (4) separate administrative claims for refund with the � BIRon May 30, 2002, June 3, 2002, July 3, 2002 and November 5, 2002. 2 Counting from January 4, 2002, the date when petitioner first paid the excise taxes due on the sale of the subject diesel fuel, the administrative claims for refund as well as the present petition fall within the period allowed by law. Petitioner's entitlement to the refund of excise taxes it paid on petroleum � products it sold to NPC The removal of diesel fuel as a result of each of the sale transactions, as enumerated above, are reflected in petitioner's "Schedule of Receipts and Removal" covering the period from January 1 to July 31, 2002. From this Schedule, this Court notes that there were overstatements in the recording of the removal/withdrawn liters of diesel fuel as reflected in the "Schedule of Receipts and Removal" when compared with liters of diesel fuel which were actually sold as reflected in the invoices. The details of discrepancies between the recorded removed liters from "Schedule of Receipts and Removal," and the invoices are shown hereunder: As reflected As reflected Exhibit Overstatement in the "Schedule In the Invoice E-1-117 472 of Receipts and E- 1- 1 1 9 41 3 11 ,918 E-1-84 400 Removal" 11 ,977 E-1-129 210 (Exhibit F) 31 ,500 62,790 Total ~ 12,390 12,390 31 ,900 63,000 19 Exhibits "C" tD "C-8". 20 See Exhibits "G" to "G-2". , ' ,' I ,),) .l.

DECISION C.T.A. CASE NO. 6830 Page 12 In sum, petitioner was able to establish that it made a total importation of 4,667,000 liters of diesel oil; that it paid a total amount of P8,707,459.80 duties and excise taxes on the subject importation; the rate of excise tax paid was P1.63 per liter of imported diesel fuel; that it sold and delivered a total of 2,932,225 liters of diesel fuel to the National Power Corporation covering the period from January to July 31, 2002, as evidenced by various invoices and official receipts; 21 and that it f{led its claims within the two (2)-year prescriptive period provided for by law. Hence, petitioner is entitled to the issuance of a tax credit certificate in the amount of P4,779,526.75, computed as follows: Amount of claim P4,781,311.60 Less: Overstatement of the claimed volume of liters 2,933,320 1, 784.85 sold to NPC or Unsubstantiated claim 2.932.225 P4.779.526.75 as per Petition for Review (1,010,730+795,060+859, 740+267,790) liter 1,095 1.63 As per actual sales to NPC Difference Multiply by the tax rate of excise tax per liter Allowable Amount IN VIEW OF THE FOREGOING, the Petition for Review is hereby GRANTED but in the reduced amount of P4,779,526.75. Accordingly, respondent is ORDERED TO REFUND or ISSUE A TAX CREDIT CERTIFICATE in favor of the petitioner in the amount of P4,779,526.75 representing overpaid excise taxes from fuel sold by petitioner to National Power Corporation covering the period January 2002 to July 2002. SO ORDERED. $ CAESAR A. CASANOVA Associate Justice 21 Exhibits "E-1- 1" to "E-1- 124". I ; ' ' J I I) I : '- .J

DECISION C.T.A. CASE NO. 6830 Page 13 WE CONCUR: L-IP . 0&.-vA- ERNESTO D. ACOSTA Presiding 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's Division. Q_- \)1 � c'-'Vv"- ERNESTo D. ACOSTA Presiding Justice Chairman, First Division