cta_decision CTA Case No. EB 2559EB 2559 2024-03-13

COMMISSIONER OF INTERNAL REVENUE v. PHILIPPINE AIRLINES, INC.

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC COMMISSIONER OF CTA EB NO. 2559 INTERNAL REVENUE, (CTA Case Nos. 7670, 7818,7869, 7954,8034) Petitioner, -versus- PHILIPPINE AIRLINES, INC. , Respondent. X==============================X COMMISSIONER OF CTA EB NO. 2577 CUSTOMS, (CTA Case Nos. 7670, Petitioner, 7818, 7869, 7954, 8034) Members: -versus- DEL ROSARIO, P.J., RINGPIS-LIBAN , MANAHAN , BACORRO-VILLENA, MODESTO-SAN PEDRO, REYES-FAJARDO, CUI-DAVID, FERRER-FLORES, ANGELES, JJ. Promulgated: MAR 1J 202',".t PHILIPPINE AIRLINES, INC., Respondent. ){- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - DECISION CUI-DAVID, J.: Before the Court En Bane are the Petitions for Review separately filed by the Commissioner of Internal Revenue (''CIR") 1 and the Commissioner of Customs ("COC")2 under . ~ 1 En Bane (�8) Docket (CTA �8 No. 2559), pp. 7-1 9. 2 �8 Docket (CTA �8 No. 2577), pp. 1-38.

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, Inc. Page 2 of47 X------------------------------------------------------------------------------------------X Section 3(b), Rule 8,3 in relation to Section 2(a)(1), Rule 44 of the Revised Rules of the Court of Tax Appeals 5 ("RRCTA"), assailing the Decision dated March 9, 2021 6 ("assailed Decision") and Resolution dated October 27, 20217 ("assailed Resolution") of the Court's Third Division ("Court in Division") in CTA Case Nos. 7670, 7818, 7869, 7954, and 8034 entitled Philippine Airlines, Inc. v. Commissioner ofInternal Revenue and Commissioner of Customs. THE PARTIES Petitioner CIR is the Commissioner of the Bureau of Internal Revenue ("BIR"), which is the government agency in charge of the assessment and collection of all national internal revenue taxes, fees, and charges, including the excise tax on aviation turbo fuel imposed under Section 148(g) of the National Internal Revenue Code ("NIRC") of 1997, as amended. He holds office at the BIR National Office Building, Agham Road, Diliman, Quezon City. Petitioner COC is the head of the Bureau of Customs ("BOC") delegated and authorized by petitioner CIR through an Authority to Release Imported Goods ("ATRIG")/BIR Form No. 1918 to assess and collect customs duties and all other charges on imported articles, including the excise tax on aviation turbo fuel imposed under Section 148(g) of the NIRC of 1997, as amended. He holds office at the Port Area, Bureau of Customs, Manila. Respondent Philippine Airlines, Inc. ("PAL" or "respondent") is a domestic corporation duly organized and existing in accordance with the laws of the Republic of the Philippines with principal office at the 8th Floor, PNB Financial t{ 3 Section 3. Who .\lay .-lppeal: Period to File Petition.- (a):.;.\ (b) A party ad\'l.:rsely affected b~ a decision or resolution of a Division of the Coun on a motion for reconsideration or ne'' trial may appeal to the Court by !1\ing before it a petition for revie\v \vi thin tirteen 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 lhcd. 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". 4 Section 2. Cases Within the Jurisdiction o.fthe Court En Bane. -The Court en bane shall exercise exclusive appellate jurisdiction to rcvic\v by appeal the follo,,�ing: (a) Decisions or resolutions on motions for reconsideration or new trial of the Court in Di\ isions in the exercise of its exclusive appellate jurisdiction over: (I) Cases arising from administrative agencies - Bureau of Internal Re,�enue. Bureau of Customs. Department of Finance. Department of Trade and Industry. Department of Agriculture. ; A.M. 'lo. 05-11-07-CTA. 6 EB Docket (CTA EB 1\o. 2559). pp. 27� 77. ' /d.. pp. 78-82.

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, Inc. X------------------------------------------------------------------------------------------X 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 non-transport operations and other activities incidental thereto and are not locally available m reasonable quantity, quality, or price;" Subsequently, Letter of Instruction No. 1483 ("LOI No. 1483") was issued on 31 October 1985. The said issuance withdrew the tax-exemption privilege granted to PAL on its purchases of domestic petroleum products for its use in its domestic operations effective 1 November 1985. On 29 January 1999, however, BIR Ruling No. 013-99 ("1999 BIR Ruling'') was issued, clarifying that the petroleum products imported or purchased by PAL abroad for use in its domestic operations will remain free from excise tax, to wit: "x x x we confirm your opinion that petroleum products purchased or imported by PAL from abroad can be used by it in its domestic operations without payment of tax since the said products were not a domestic purchase. The intention of LOI No. 1483 is to impose a tax on domestic petroleum products purchased by PAL for use in its domestic operations." The 1999 BIR Ruling was later on confirmed by then Secretary of Finance, Edgardo B. Espiritu, in his Letter, dated 8 September 1999, addressed to [respondent's] Mr. Andrew L. Huang .... Meanwhile, on 20 December 2002, the Department of Energy ("DOE") issued a Certification ("2002 DOE Certification") stating that aviation gas, fuel, and oil for use in the domestic operations of domestic airline companies are locally available in reasonable quantity, quality, and price.

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, lnc. and Commissioner of Customs v. Philippine Airlines, Inc. Page 5 of47 X------------------------------------------------------------------------------------------X On account of the said 2002 DOE Certification, then CIR Guillermo L. Parayno, Jr., issued BIR Ruling No. 001-03 ("2003 BIR Ruling") on 29 January 2003. The said ruling provided that the importation of petroleum products made by PAL, along with the other airline companies, would no longer be exempted from taxes imposed under the Tax Code, considering that aviation gas, fuel, and oil were then already locally available in reasonable quantity, quality, and price. The relevant portion of the 2003 BIR Ruling reads as follows: "In the light of the Certification of the Department of Energy dated December 20, 2002 that aviation gas, fuel and oil for use in domestic operation of domestic airline companies are locally available in reasonable quantity, quality and price, it is the considered opinion of this Office that there is now an absence of the second condition required for the airlines to continue to enjoy tax exemption on their importations of petroleum products for domestic operations as stated in Section 13 of PAL's Charter (PD 1590, as amended by LOI 1483) and which condition applies ipso facto to other airlines. Accordingly, your importations may not be given the same treatment as before for as long as there is such available domestic supply of petroleum products. This Ruling, therefore, supersedes the above-stated rulings and all such other ruling that may be contrary to the intent of this Ruling, and constitutes the final decision of this Office on the matter." Aggrieved, [respondent], on 24 October 2003, filed a letter addressed to then DOE Secretary, Vicente Perez, asking for reconsideration of the 2002 DOE Certification. 12 It had also earlier filed, on 19 March 2003, a letter to then Commissioner Guillermo Parayno, Jr., requesting the reconsideration of the 2003 BIR Ruling. Thereafter, Secretary Perez, in his letter, dated 2 April 2004, said that, per its records for years 2002 and 2003, it confirms that the Jet A-1 fuel are locally available in quantity. As for the reasonableness of the price, it endorsed [respondent's]letter to the Department of Finance ("DOF") for appropriate action. As for the BIR Ruling 2003, [respondent] had not yet received any decision from the CIR as of date. On 24 May 2005, Republic Act ("RA") No. 9337 was passed which effectively abolished the franchise tax under [respondent's] charter and subjected it to corporate income tax and value-added tax ("VAT"). Nevertheless, the law

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, Inc. Page 6 of47 X------------------------------------------------------------------------------------------X retained [respondent's] exemption from taxes, duties, royalties, registration, license, and other fees and charges, provided under its franchise. The pertinent portion of the said law is Section 22 of RA No. 9337 which is hereby quoted, to wit: "SECTION 22. Franchises of Domestic Airlines.- The provisions of P.D. No. 1590 on the franchise tax of Philippine Airlines, Inc., R.A. No. 7151 on the franchise tax of Cebu Air, Inc., R.A. No. 7583 on the franchise tax of Aboitiz Air Transport Corporation, R.A. No. 7909 on the franchise tax of Pacific Airways Corporation, R.A. No. 8339 on the franchise tax of Air Philippines, or any other franchise agreement or law pertaining to a domestic airline to the contrary notwithstanding: (A) The franchise tax is abolished; (B) The franchisee shall be liable to the corporate income tax; (C) The franchisee shall register for value- added tax under Section 236, and to account under Title IV of the National Internal Revenue Code of 1997, as amended, for value-added tax on its sale of goods, property or services and its lease of property; and (D) The franchisee shall otherwise remam exempt from any taxes, duties, royalties, registration, license, and other fees and charges, as may be provided by their respective franchise agreement." Subsequently on separate dates (as indicated below), [respondent] imported Jet A-1 fuel allegedly for its use in its domestic operations. On the basis of the 2003 BIR Ruling, the CIR through the COC assessed [respondent] for excise taxes on the said importations. In order to effect the release of the imported Jet A-1 fuel, [respondent] paid under protest the excise taxes on the said products in the aggregate amount of P1,174,628,066.60. The details of [respondent's] payments are as follows: CTACase Date of Importation Date of Payment Amount Paid No. under Protest 13 July 2005 11 Aug_ust 2005 P53,076,377.00 7670 23 November 2005 24,775,172.00 23 November 2005 22 December 2005 28,357,995.00 22 December 2005

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, Inc. Page 7 of47 X------------------------------------------------------------------------------------------X 7818 17 February 2006 8 March 2006 53,062,743.00 7869 23 March 2006 18 April 2006 64,851,866.00 7954 28 April 2006 6 June 2006 42,834,897.00 8034 3 July 2006 3 August 2006 10,492,152.00 1 July 2006 3 August 2006 54,660,848.00 7 July 2006 9 August 2006 58,535,245.00 18 August 2006 11 October 2006 47,549,251.00 6 October 2006 31 ,339' 138.00 2 September 2006 14 December 2006 31,863,296.00 10 November 2006 7 February 2007 45,880,876.00 18 January 2007 16 March 2007 6,466,405.00 12 February 2007 27 March 2007 34,964,402.00 12 February 2007 22 March 2007 58,633,179.00 16 February 2007 12 April 2007 41,595,483.00 10 May_2007 40,557,820.00 14 March 2007 5 June 2007 10 April 2007 30 July 2007 137,988.00 10 April 2007 14 September 2007 52,986,165.00 14 July 2007 12 September 2007 59,258,962.00 5 August 2007 7 November 2007 41,386,730.00 18 AURUSt 2007 9 January 2008 53,140,393.00 5 October 2007 5 March 2008 29,429,503.00 13 December 2007 26 March 2008 58,839,935.60 5 February 2008 10 April 2008 39,547,678.00 24 February 2008 17 April 2008 47,740,472.00 8 March 2008 15 May 2008 8 March 2008 18 June 2008 181,155.00 24 April 2008 20,724,223.00 30 May 2008 35,757,717.00 Thereafter, [respondent] filed its formal written protests with the BOC, asking for refund of the excise taxes paid, on the following dates: CTA Case Date of Date of Payment Date of Filing of No. Importation under Protest Protest with COC 7670 13 July 2005 11 August 2005 23 November 2005 24 August 2005 7818 23 November 2005 22 December 2005 6 January 2006 17 Februar,y 2006 22 December 2005 6 January 2006 7869 23 March 2006 21 March 2006 7954 28 April 2006 8 March 2006 3 July 2006 18 April 2006 2 May 2006 1 July 2006 6 June 2006 20 June 2006 7 July 2006 3 August 2006 16 August 2006 18 August 2006 3 August 2006 16 August 2006 2 September 2006 9 August 2006 23 August 2006 10 November 2006 11 October 2006 23 October 2006 18 January 2007 6 October 2006 19 October 2006 12 February 2007 14 December 2006 27 December 2006 12 February 2007 7 February 2007 21 February 2007 16 February 2007 16 March 2007 14 March 2007 27 March 2007 30 March 2007 10 April 2007 22 March 2007 10 April 2007 12 April 2007 3 April 2007 14 July 2007 10 May 2007 24 April 2007 5 August 2007 5 June 2007 22 May 2007 30 July 2007 19 June 2007 14 September 2007 14 August 2007 26 September 2007

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, Inc. X------------------------------------------------------------------------------------------X Commissioner of Customs' Answer dated October 31, 2007 on 19 November 2007. Subsequently, [petitioners] CIR and COC filed their respective Pre-Trial Briefs on 7 January 2008 and 11 January 2008. [respondent] filed its Pre-Trial Brief on 11 February 2008. Pre-trial ensued on 27 March 2008, which was only attended by [respondent's] counsel. Considering the same, the Court ordered [petitioners] in default and allowed [respondent] to present evidence ex parte. This prompted the COC to file his Motion to Lift Resolution of Default dated March 27, 2008.... Meanwhile, the CIR filed his Manifestation and Motion praying for the same relief as the COC.... In the interest of substantial justice and considering [respondent] did not interpose any objection, the Court granted both Motions on 5 July 2008. Thereafter, pre-trial ensued on 3 July 2008. The parties filed their Joint Stipulation of Facts and Issues ("JSFI") on 4 September 2008. The Court then issued a Resolution on 9 September 2008, approving the JSFI and ordering the termination of Pre-trial. Proceedings in CTA Case No. 7818 For this case, [petitioners] CIR and COC filed their Answers on 9 September 2008 and 20 October 2008, respectively. Subsequently, [petitioners] CIR and COC filed their Pre- Trial Briefs on 17 September 2008 and 13 November 2008. [respondent] filed its Pre-Trial Brief on 5 November 2008. Pre- trial commenced on 4 December 2008. Thereafter, the parties filed their JSFI on 10 February 2009. On 12 February 2009, the Court issued a Resolution approving the JSFI and ordering the termination of Pre-trial. Proceedings in CTA Case No. 7869 [Petitioner] CIR filed his Answer on 4 March 2009, and the COC filed his on 17 April 2009. On 30 March 2009, the CIR filed his Pre-Trial Brief while the COC filed the same on 17 April 2009. Pre-trial ensued on 23 April 2009, which was only attended by [petitioners'] counsels. Considering the same, the Court ordered the dismissal of CTA Case No. 7869.

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, Inc. Page 11 of47 X------------------------------------------------------------------------------------------X On 7 May 2009, [respondent] filed its Motion to Admit Pre-Trial Brief and Set Case for Pre-Trial. It alleged that due to heavy work load [sic], its counsel was not able to file its Pre- Trial Brief on time. Hence, it prayed for the Court to admit the said pleading. Having received the Court's order dismissing CTA Case No. 7869, [respondent] filed its Omnibus Motion (a) For Reconsideration of the Resolution dated 7 May 2009; (b) To Admit Pre-Trial Brief and Set Case for Pre-Trial Conference. On 18 August 2009, the Court issued a Resolution granting [respondent's] Motions, admitting [respondent's] Pre-Trial Brief, and ordering the recall and setting aside of its earlier order of dismissal. Pre-trial proceeded on 10 September 2009, followed by the filing of the parties' JSFI on 20 November 2009. On 25 November 2009, the Court issued a Resolution approving the JSFI and terminating pre-trial for said case. Proceedings in CTA Case No. 7954 [Petitioner] COC filed his Answer on 25 August 2009, while the CIR filed his on 22 September 2009. The parties' respective Pre-Trial Briefs were filed on 5 October 2009 for [respondent] and on 6 October 2009 for the COC and the CIR. Pre-Trial commenced on 9 October 2009. Afterwards, the JSFI was filed by the parties on 22 December 2009. The Court approved the JSFI and ordered the termination of the pre-trial through a Resolution dated 5 January 2010. Proceedings in CTA Case No. 8034 [Petitioner] COC filed his Answer on 25 March 2010. Meanwhile, the CIR filed a Motion to Admit Attached Answer on 4 June 2010, which was granted in open court on 10 June 2010. On 28 May 2010, [respondent] filed a Motion to Clarify Answer addressed to the COC. The COC responded by filing a Manifestation and Motion on 17 June 20 10, asking the Court to admit its Amended Answer. The Court admitted the said pleading through its Resolution dated 18 June 2010. Thereafter, the COC and the CIR filed their respective Pre-Trial Briefs on 8 June 2010 and 19 July 2010. [respondent] filed its Pre-Trial Brief on 19 July 2010.

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, Inc. X------------------------------------------------------------------------------------------X In separate Motions filed by both the COC and [respondent], the parties moved for the consolidation of the above-captioned cases. The Court granted the same through a Resolution dated 5 August 2010. On 14 January 2011, [respondent] filed its Request for Subpoena Duces Tecum, asking the Court to issue a subpoena to respondent COC to furnish the Court the Import Entry & Internal Revenue Declarations ("IEIRD") of all local oil companies for the period August 2005 to June 2008 and IEIRDs of other airline companies for the same period. The Court denied the said request on the ground that the description of the documents was not definite. This prompted [respondent] to file its Request for Subpoena Duces Tecum anew asking for the specific IEIRDs of all local oil companies (e.g., Phoenix Petroleum, Pilipinas Shell Petroleum Corp., CaltexjChevron, and Petron) and airlines (e.g., Cebu Pacific Air and Air Philippines Corp.) for the period August 2005 to June 2008. Acting on the said request, the Court directed [respondent's] counsel to secure instead certified true copies of the said documents since the same are public in nature. On 21 January 2011, the parties filed their JSFI for CTA Case No. 8034. On 18 February 2011, the Court issued the Pre-Trial Order which marked the end of Pre-Trial for CTA Case No. 8034. Thereafter, on separate dates, [respondent] filed several requests for the issuance of Subpoena Ad Testificandum addressed to the following: 1. Ms. Glendalyn P. DelaCruz ("Ms. DelaCruz"), Senior Science Research Specialist, Oil Industry Competition and Monitoring Division of the DOE. 2. Atty. Eleazar C. Cesista, Director III of the Revenue Operations Group of the DOF. [respondent] intends to let Atty. Cesista identify certain documents and testify on matters regarding the issuance of the 1st indorsement by the DOF; and the latter's reliance on the certifications issued by the Air Transportation Office ("ATO") or Civil Aviation Authority of the Philippines ("CAAP"), among others. The Court granted [respondent's] request and issued a subpoena to Ms. Dela Cruz on 11 March 2011. Meanwhile, during Trial, [respondent] presented the following witnesses:

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, Inc. X------------------------------------------------------------------------------------------X 1. Mr. Elvis A. Yao ("Mr. Yao"), Senior Assistant Vice President-Fuel Management Department of [respondent]. Mr. Yao's testimony focused on proving that (a) [respondent] imported Jet A-1 fuel during the relevant periods in question; (b) [respondent] paid excise taxes due on the said importation; (c) [respondent] filed Protest Letters to BOC and BIR; (d) the 2002 DOE Certification was issued in violation of its rights to due process; (d) the 2003 BIR Ruling is invalid; (e) the Jet-1 fuel is not locally available in reasonable quantity, quality, or price; (f) the CIR is a proper party-in-interest in this case; (g) [respondent] was able to submit all the required documents in support of its administrative claim for refund; (h) it is entitled to the relief prayed for; (i) the 2003 BIR Ruling does not apply to year 2003 and subsequent years; and (j) subsequent government certifications show that there is no locally available Jet A-1 fuel in reasonable quantity, quality, and price. He also identified documents relevant to [respondent's] importation of the Jet A-1 fuel. 2. Ms. Evelyn L. Taghap ("Ms. Taghap"), Manager-Tax Services and Compliance Division of [respondent]. Ms. Taghap testified that [respondent] paid both income tax and VAT for the years 2005-2008. She also confirmed that [respondent] is a VAT registered taxpayer. 3. Ms. DelaCruz- Senior Science Research Specialist, Oil Industry Competition and Monitoring Division of the DOE. Ms. Dela Cruz expounded on the DOE Report she prepared showing the volume or quantity of importation, exportation, and local refinery production of vanous petroleum products, including the Jet A-1 fuel, and the demand for each product for the year 2001-2010. 4. Ms. Myra Celeste 0. Dabalos ("Ms. Dabalos") Independent Certified Public Accountant appointed by the Court on 19 March 2012. Ms. Dabalos discussed her findings in relation to the propriety of the amount of refund being claimed by [respondent]. She also reported that it is cheaper for [respondent] to import Jet A-1 Fuel than to purchase it locally from Petron and Shell. 5. Mr. Mario V. Tiaoqui ("Mr. Tiaoqui") - former Secretary of the DOE who was presented as an expert witness.

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, Inc. Page 14 of47 X------------------------------------------------------------------------------------------X Mr. Tiaoqui testified that local supply and local domestic refinery production had been considered by the DOE and by oil companies as one and the same and that importation or any imported product was different from locally available supply or one that had been processed and produced in the country by local refineries. He opined that the phrase "not locally available" under Section 13 of PD No. 1590 would mean that which was not refined or processed in the Philippines. 6. Mr. Roberto R. Razal ("Mr. Razal")- Supervising Fuel Technical Specialist-Fuel Management Department of [respondent]. Mr. Razal testified on the fact that [respondent's] imported Jet A-1 fuel was solely used in its domestic operations. He also identified documents in relation to PAL's consumption of said fuel. 7. Atty. Arminda Acyatan-Guerrero- ("Atty. Acyatan- Guerrero") !CPA appointed by the Court on 15 August 2016. Atty. Acyatan-Guerrero testified on the verification procedures she performed in determining whether [respondent] indeed consumed the relevant Jet A-1 fuel in this case. Based on her audit, she was able to verify that (a) there was indeed an importation of Jet A-1 fuel made by [respondent]; (b) [respondent] maintains records of its imported Jet A-1 fuel on the basis of "first-in, first out" ("FIFO") method; and (c) [respondent] was able to fully consume the imported Jet A-1 fuel in this case in the aggregate total of 320,062,141liters. On 1 April 2013, the Court issued a Resolution ordering [petitioners] to elevate their respective case records pertinent to the instant Petitions. [Petitioner] CIR manifested that he has no case records to elevate, claiming that the issues herein involves the collections of the BOC. Meanwhile, [petitioner] BOC transmitted his records on 11 June 2013 and 8 April 2015. On 3 April 2014, [respondent] filed its Manifestation and Request for Admission. [respondent] explained that it instituted a separate action in the Regional Trial Court of Pasay City-Branch 114 ("RTC"), assailing the validity of the 2002 DOE Certification and that on 27 February 2014, the RTC rendered a Decision declaring the same null and void. The RTC found that the DOE has no legal authority to issue such certification since it is the CAAP or the ATO or its predecessor agencies which are legally authorized to issue the .. / same. ~

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, Inc. X------------------------------------------------------------------------------------------X On the basis of the foregoing, [respondent] requested the Court to admit the RTC Decision. The Court granted [respondent's] Manifestation and Request for Admission through a Resolution dated 23 June 2014. Thereafter, [respondent] filed its Formal Offer of Evidence ("FOE") on 13 March 2015. On 24 August 2015, the Court issued a Resolution admitting [respondent's] offered exhibits except for the following: Aggrieved, [respondent] filed its Omnibus Motion (A) For Partial Reconsideration of the Court's Resolution dated 24 August 2015 and (B) For Reopening of Trial for the Recall of Witness and Presentation of Additional Evidence on 14 September 2015. The Court, through a Resolution dated 5 February 2016, granted [respondent's] request to reopen trial and to recall its witness. However, the Court deferred its resolution on [respondent's] Motion asking reconsideration to admit its denied exhibits. Thereafter, [respondent] filed its Supplemental FOE on 20 October 2016. On 21 March 2017, the Court issued a Resolution admitting the pieces of evidence offered by [respondent] m its Supplemental FOE [with certain exceptions.] On 19 April 2017, [respondent] filed its Omnibus Motion (A) For Partial Reconsideration of the Resolution dated 21 March 20 17; and (B) For Recall of Witness and Identification of Exhibits.... On 19 April 2018, the Court directed the !CPA to submit the aforementioned documentary exhibits but deemed it proper not to call her again to testify since the exhibits had already been previously identified. [respondent] filed the missing documentary exhibits on 15 May 2018. In light of the additional documents submitted by [respondent], it filed its Manifestation and Motion to Admit Attached 2nd Supplemental Formal Offer of Evidence on 17 September 2018. On 7 March 2019, the Court issued a Resolution admitting the 2nd Supplemental FOE. It also resolved [respondent's] Motions for Reconsideration on the Court's Resolutions dated 24 August 2015 and 21 March 2017 reconsidering the admission of [respondent's] exhibits [with certain exceptions.]

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, Inc. Page 20 of47 X------------------------------------------------------------------------------------------X The CIR likewise questions the ruling of the Court in Division, stating that the Court in Division ruled that respondent's imported Jet A-1 fuel was not locally available in reasonable quality, quantity, and price, and that imported Jet A-1 fuel should not be included in the computation of whether there is locally available Jet A-1 fuel in reasonable quality, quantity, and price. According to the CIR, there is no qualification in the words "locally available" to make the term refer only to locally refined fuel as ruled by the Court in Division. The CIR also argues that reliance on the certifications issued by the ATO is improper. It is the CIR's position that the DOE is officially tasked to determine whether the total supply is enough for total demand. The CIR points out to the Energy Planning and Monitoring Bureau, a special bureau within the DOE that monitors energy resources' supply and demand. According to the CIR, the CAAP "has nothing to do with monitoring fuel supply and demand." The testimony of Ms. Glendalyn P. DelaCruz, Senior Science Research Specialist of the DOE, likewise supports BIR's protestation that aviation fuel was locally available in sufficient quantity, quality, and price. The CIR thus argues that PAL was not able to prove that the imported Jet A-1 fuel was not locally available in reasonable quality, quantity, and price. PAL's Arguments In its Comment, PAL argues that it has sufficiently proven that it used its imported Jet A-1 aviation fuel for its domestic flight operations. PAL states that it did not solely rely on the ATRIG, but it likewise presented as its witness Mr. Roberto R. Razal, its Supervising Fuel Technical Specialist, and Ms. Arminda T. Acyatan-Guerrero, the court-commissioned independent Certified Public Accountant ("ICPA"). Further, PAL argues that it has sufficiently proven that Jet A-1 aviation fuel was not locally available in reasonable quantity, quality, and price. PAL asserts that the CAAP has the authority to issue certifications concerning the local availability of fuel when it comes to civil aviation matters and that the certifications from said agency prove that Jet A-1 aviation fuel was not locally available in a reasonable quantity, quality, and pnce.

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, Inc. X------------------------------------------------------------------------------------------X The COC's Petition for Review CTA EB No. 2577 COC's Arguments The COC contends that excise tax on imported articles under Section 131(a) of the NIRC of 1997, as amended, is a customs law under the BOC's jurisdiction. According to the COC, customs law includes all laws and regulations the BOC enforces and does cover not only taxes imposed by the Tariffs and Customs Code of the Philippines ("TCCP")32 but also all taxes imposed by the NIRC and special laws that are entrusted to the BOC, including Section 131(a) of the NIRC of 1997, as amended.33 Thus, according to the COC, the protest and appeal are governed by Sections 2308 to 2313 and 2402 ofthe TCCP.34 The COC further contends that an excise tax on imported articles is not removed from the definition of customs laws simply because it is an internal revenue tax imposed by the NIRC, citing Leuterio v. COC (Leuterio case)35 According to the COC, the case of Caltex (Phils.), Inc. v. CIR (Caltex case)36 is applicable, as the special import tax discussed therein is "the precursor to the tax involved in this case." 37 Preceding from the above premise, the COC then argues that PAL deviated from the protest and appeal procedures established under Sections 2308 to 2313 and 2402 of the TCCP, as it filed claims for refund involving the same taxes with the BIR while the protests were pending before the Collector of Customs.38 According to the COC, the proper procedure was for PAL to await the Collector's decision, which, if adverse, can be elevated to the COC for review. 39 The COC further alleges that PAL committed forum shopping when it filed claims for a refund while the protests were pending. 40 The COC argues that the Court in Division did not have appellate jurisdiction as there was no decision or inaction by either the CIR or the COC. The COC argues that the CIR did not decide on PAL's claims as he had no authority to entertain .12 Now the Customs Modernization and TarifTAct ('"CMTA""). 33 Petition for Review. CIA EB No. 2577. pars. 21-23. J-1 /d.. par. 2..J-. 35 G.R. No. L-9810. April27. 1957. 101 PI-IlL 223-228. 36 G.R. No. L-20462. June 30. 1965. 121 PHIL 1390-1396. -~ 7 Petition for Rc,�iew. CT;\ EB No. 2577. par. 29. 38 !d.. par. 33. 39 !d.. par. 35. " !d.. pars. 40-41.

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, Inc. Page 22 of47 X------------------------------------------------------------------------------------------X PAL's claims for a refund involving a customs law. Conversely, the COC could not be "guilty of inaction" because PAL did not elevate any matter before him.41 As to the validity of BIR Ruling No. 001-2003, the COC argues that PAL cannot assail the validity of such ruling via the Petitions for Review it filed before the Court in Division. According to the COC, PAL should have requested the Secretary of Finance ("SOF") to review the said ruling in accordance with Section 4 of the NIRC of 1997, as amended and as implemented by Department Order ("DO") No. 7-02.42 The COC further cites Egis Projects S.A. v. Secretary of Finance43 as support for its argument that ruling on the validity ofBIR Rulings is outside the appellate jurisdiction of the Court. Echoing the CIR's arguments, the COC also argues that the CAAP Certifications have no probative value as it is not the CAAP's function to determine the local availability of aviation fuel. According to the COC, such a function belongs to the DOE.44 While PAL presented a DOE Table, the COC argues that it is imprecise as it merges domestic and international demand data without providing specific data on domestic demand only. The COC emphasizes that the issue before the Court is the local availability of aviation fuel only for domestic use. The DOE Table does not likewise indicate the specific dates of production and importation.45 Even considering the DOE Table, the COC argues that the table shows the supply of aviation fuel in the Philippines was "constantly higher" than the demand, except in 2005. 46 The COC, similar to the CIR, likewise faults the Court in Division in its exclusion of fuel imported by local oil companies in computing total local available supply as the term used in Section 13 of PD No. 1590 is "'locally available,' plain and simple, without any distinction as to the source of the goods in question."47 The COC likewise questions the applicability of Philippine Airlines, Inc. v. CIR. 48 According to the COC, the case only dealt with the scope of Letter of Instruction ("LOI") No. 1483, which withdrew PAL's tax exemption on purchases of ' 1 /d.. pars. 43-44. 42 /d.. pars. 46-48. -u CTA EB Case No. 1023 (CTA Case No. 8413). September 16.2014. 44 Petition for ReYiew. CTA I:B No. 2577. par. 55. -~~!d.. pars. 56-58. 46 /d.. par. 59. "!d.. par. 63. ' 8 G.R. No. 198759. July I. 2013.713 PHIL 134-160.

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, Inc. Page 23 of47 X------------------------------------------------------------------------------------------X "domestic petroleum products" for its domestic operations.49 Thus, the COC maintains that all aviation fuel, whether locally produced or imported, forms part of the Philippines' supply, which must be considered in determining local availability. 5o The COC argues that PAL failed to prove that aviation fuel was not available at reasonable prices as it only presented price quotations from Petron and Shell without presenting any representatives ofthe said oil companies. Accordingly, the COC argues that these price quotations are hearsay. 51 The COC further contends that, even if these price quotations will be considered, the fact that the imported prices are lower than the price quotations does not render the local prices unreasonable. 52 The COC states that in the Comparative Tables presented by PAL, there were multiple periods wherein Shell and Petron's prices were even cheaper than PAL's importations. 53 PAL's Arguments In its Comment, PAL argues that it correctly invoked the CIR's jurisdiction, considering that the case's subject matter is an excise tax on aviation fuel, a national internal revenue tax. Accordingly, PAL suggests that the Court in Division validly obtained jurisdiction considering the inaction of the CIR. PAL also argues that it did not commit forum shopping as it resorted to only one judicial remedy: filing the Petitions for Review before the Court in Division. As to whether PAL has sufficiently proven that the aviation fuel was not locally available in a reasonable quantity, quality, and price, PAL effectively reiterates its Comment against the Petition for Review filed by the CIR. THE COURT EN BANC's RULING Before going into the merits of the case, We shall first resolve whether the Court En Bane has jurisdiction over the instant Petitions for Review. 49 Petition for Re\'iew. CTA EB No. 2577. par. 64. 50 !d.. par. 67. " /d.. pars. 70-71. " !d.. pars. 72-76. 33 !d.. par. 77.

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, Inc. Page 24 of47 X------------------------------------------------------------------------------------------X The Court En Bane has jurisdiction over the present Petitions. On October 27, 2021, the Court in Division promulgated the assailed Resolution denying both petitioners' Motions for Reconsideration. 54 The CIR received the Resolution on December 20, 2021, while the COC received its copy on February 11,2022. As provided under Section 3(b), Rule 855 of RRCTA, the CIR had until January 4, 2022, to file his Petition for Review before the Court En Bane. On the other hand, the COC had until February 26, 2022, to do the same. On January 4, 2022, within the reglementary period, the CIR filed a Motion for Extension of Time to File Petition for Review, 56 which the Court En Bane granted in a Minute Resolution dated January 10, 2022, giving him until January 19, 2022, to file his Petition for Review.57 On January 12, 2022, the Supreme Court issued Memorandum Order No. 10-2022.58 The said Memorandum Order provides: Per Administrative Circular No. 01-2022, the filing periods of any and all pleadings and other court submissions that will fall due this month are EXTENDED until February l, 2022. [Emphasis and underscoring supplied.] On February 2, 2022, considering the issuance of the above-quoted Memorandum Order No. 10-2022, the CIR timely posted his Petition for Review. 59 On February 22, 2022, the COC filed a Motion for Time to File Petition for Review, 60 which the Court En Bane deemed / not~ ).t Supra at 7. '\J< ~ 5 Section 3. Who May Appeal: Period to File Petition.- (b) A party adversely affected by a decision or resolution of a Division of the Court on a motion for reconsideration or ne\\' 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 la\vful fees and deposit for costs before the expiration of the reglemcntary period herein fixed. the Court may grant an additional paiod not exceeding fifteen days from the expiration of the original period within which to file the petition for review. ~6 Supra at note 15. ~7 Supra at note 16. ~ 8 Rc: Rising Cases ofCoYid 19 Infection I Ph\sical Closure of Courts in Select Areas. 59 February ...!. 2022 was declared as a special .non-\vorking holiday pursuant to Proclamation 1236. The next working dav is FebruarY 2. 2022. 60 �Supra at noie 22.

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, Inc. Page 25 of47 X------------------------------------------------------------------------------------------X granted in a Resolution dated October 4, 2022.61 Accordingly, the COC was given until March 13, 2022 to file his Petitionfor Review. On March 14, 2022,62 the COC timely posted his Petition for Review.63 Having settled that the Petitions for Review of the COC and the CIR were timely filed, the Court En Bane rules that it has jurisdiction to take cognizance of both Petitions pursuant to Section 2(a)(1), Rule 464 ofRRCTA. We shall discuss first the procedural andjurisdictional issues raised in the COC's Petition for Review in CTA EB No. 2577. The Court in Division did not err in holding that PAL's refund claims are governed by the NIRC of 1997, as amended. The COC contends that excise tax on imported articles under Section 131 (a) of the NIRC of 1997, as amended, is a "customs law" under the BOC's jurisdiction. According to the COC, customs laws include all laws and regulations the BOC enforces and do not only cover taxes imposed by the TCCP but also all taxes imposed by the NIRC and special laws that are entrusted to the BOC, including Section 131(a) of the NIRC of 1997, as amended. 65 Thus, according to the COC, the protest and appeal are governed by Sections 2308 to 2313 and 2402 of the TCCP.66 The Court disagrees. ""'�v Section 131 (A) of the NIRC of 1997, as amended, provides the mannec of payment of exdse tax on ;mported goods, 61 Supra at note 25. 6~ March 13. 2022 fell on a Sunday� the next working day is March 14. 2022. 63 Supra at note 2. 64 Section 2. Cases II ithin the Jurisdiction ofthe Court En Bane.- The Court en bane shall exercise exclusive appellate jurisdiction to review by appeal the following: (a) Decisions or resolutions on motions for reconsideration or ne\v trial of the Court in Divisions in the exercise of its exclusive appellate _jurisdiction over: ( 1) Cases arising from administrative agencies - Bureau of Into;;:rnal ReYenue. Bureau of Customs. Department of Finance. Department of Trade and Industry. Department of Agriculture: 6~ Petition for Review. CTA EBNo. 2577. pars. 21-23. 66 /d.. par. 24.

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, Inc. Page 26 of47 X------------------------------------------------------------------------------------------X SEC. 131. Payment of Excise Taxes on Imported Articles. - (A) Persons Liable. - Excise taxes on imported articles shall be paid by the owner or importer to the Custom Officers, conformably with the regulations of the Department of Finance and before the release of such articles from the customs house, or by the person who is found in possession of articles which are exempt from excise taxes other than those legally entitled to exemption. In the case of tax-free articles brought or imported into the Philippines by persons, entities, or agencies exempt from tax which are subsequently sold, transferred or exchanged in the Philippines to non-exempt persons or entitles, the purchasers or recipients shall be considered the importers thereof, and shall be liable for the duty and internal revenue tax due on such importation. [Emphasis and underscoring supplied] The authority provided under Section 131(A) of the NIRC of 1997, as amended, for the Customs Officers to collect excise taxes does not automatically signify that excise taxes on imported articles are governed by customs law. We note that the collection of excise taxes by custom officers is pursuant to the general authorization granted by law to the COC and his subordinates as agents of the CIR concerning the collection of national internal revenue taxes on imported goods, to wit: SEC. 12. Agents and Deputies for Collection of National Internal Revenue Taxes. -The following are hereby constituted agents of the Commissioner: a) The Commissioner of Customs and his subordinates with respect to the collection of national internal revenue taxes on imported goods; ....Any officer or employee of an authorized agent bank assigned to receive internal revenue tax payments and transmit tax returns or documents to the Bureau of Internal Revenue shall be subject to the same sanctions and penalties prescribed in Sections 269 and 270 of this Code. [Emphasis and underscoring supplied] In relation thereto, Section 21 of the NIRC of 1997, as amended, enumerates the taxes, fees, and charges included under the term "national internal revenue taxes," viz.: The following taxes, fees, and charges are deemed to be national internal revenue taxes:

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, Inc. Page 27 of47 x------------------------------------------------------------------------------------------x (a) Income tax; (b) Estate and donor's taxes; (c) Value-added tax; (d) Other percentage taxes; (e) Excise taxes; (f) Documentary stamp taxes; and (g) Such other taxes as are or hereafter may be imposed and collected by the Bureau of Internal Revenue. [Emphasis and underscoring supplied] As such, the individual or agency collecting the tax is not determinative of whether or not a tax is a national internal revenue tax. Excise taxes, such as the excise taxes on aviation fuel, which PAL has paid under Section 148 of the NIRC of 1997, as amended, are undoubtedly in the nature of national internal revenue taxes, thus falling under the pnmary jurisdiction of the BIR. 67 In Commissioner of Internal Revenue v. Court of Tax Appeals (First Division), 68 the Supreme Court, although ruling on the issue of forum shopping, still unequivocally pronounced: ... Here, although the BIR and the BOC are separate government agencies, in this particular instance, their functions overlap with respect to the assessment and collection of excise taxes for imported articles. Undoubtedly, excise taxes are in the nature of internal revenue taxes, thus falling under the primary Jurisdiction of the BIR. However, by the express mandate of Section 12 (a) of the Tax Code, the COC and his subordinates, including the Collector, are agents of the Commissioner "with respect to the collection of national internal revenue taxes on imported goods." The subject matter of CTA Case No. 8535 solely relates to the imposition of excise taxes on PSPC's alkylate importations. Thus, any attempt on the part of the Collector or the BOC to collect the same must necessarily proceed from their deputization as agents of the BIR. This agency relation was, in fact, confirmed by the Collector during his testimony in one of the suspension hearings, to wit: , J Q: Do you confirm Mr. Witness that the authority of the Collector to collect excise tax proceeds from the ATRIGs issued by the BIR? ~\ 07 Commissioner of Internal Revenue v. Court ofTax Appeals (first Dirision). G.R. Nos. 210501. 211294 & 212490. March 15. 2021. 68 G.R. Nos. 210501.211294 & 212490. March 15.2021.

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, Inc. Page 28 of47 X------------------------------------------------------------------------------------------X A: Yes, Sir. Q: And it is actually the BIR that makes the computation in determining in its ATR!Gs the exc1se tax liability for articles which is deemed excisable? A: Yes, sir. [Emphasis and underscoring supplied] The COC cites Leuterio v. COC,69 which cited the Revised Administrative Code, in stating that the law considers all laws and regulations subject to enforcement by the Bureau of Customs as customs law. The Revised Administrative Code or Act No. 2711 was enacted on March 10, 1917. Chapter 39 of the Revised Administrative Code pertains to the BOC, while Chapter 40 pertains to the BIR. Section 1419 of the Revised Administrative Code provides that "customs law" includes not only the provisions of the Customs Law and regulations pursuant thereto but all other laws and regulations which are subject to enforcement by the BOC or otherwise within its jurisdiction. Reliance on the 1957 Leuterio case, which interpreted the Revised Administrative Code, holds no water as the Revised Administrative Code is no longer the law governing the BOC and the BIR. Jurisprudence is replete with cases where claims for refund or tax credit of excise taxes on importation of Jet A-1 fueF0 and aviation fueF 1 were filed with the CIR and not with the COC. While it may be argued that these cases did not involve issues relating to the jurisdiction of the CIR, the fact that the SC found no infirmity in the procedure for claiming a refund with the CIR and not with the COC speaks of the nature of excise taxes on the importation Jet A-1 fuel as being under the jurisdiction of the CIR, whose decision or inaction on the v claim is under the appellate jurisdiction of the CTA.72 �"G.R. No. L-9810. April27. 1957. 101 PHIL 223-228. 7 Filipinos Shell Petroleum Cm]J. v. Commissioner of !merna! Revenue. G.R. "\Jo. 211303. June 15. 2021: Filipinos Shell Petroleum Cmp. r. Commissioner of!merna! Re\�enue, G.R. No. 211779 (:'\Jotice). No\'cmber 3. 2020. 71 Commissioner o( Inrerna/ Re��enue r . .-lir Philippines Corp.. G.R. No. 24-3260 (1\otice). February 5. 2020: Chevron Phds.. Inc. r. Con;missioner of/nternal Revenue. G.R. No. 21 0836 {Resolution). September 1. 2015: Commissi011er q( Internal Rerenue r. Phil. .-1 irlines, Inc., G.R. Nos. 212536-3 7. August 27. 2014-: Commissioner of!merna/ Revenue v. Pilipinas Shell Petroleum Cmp.. G.R. No. I88497 (Resolution). February 19. 20 I4: Phil. Airlines. Inc. \". Commissioner ofInternal Revenue, G.R. Nos. 198759. July 1. 2013. 72 Section 7 of RA No. 1125. as amended by RA T\o. 9282.

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, Inc. Page 29 of47 X------------------------------------------------------------------------------------------X It is axiomatic that the power to decide refunds of internal revenue taxes, i.e., excise taxes, is vested in the CIR, subject to the exclusive appellate jurisdiction of the Court of Tax Appeals. 73 Accordingly, the Court in Division did not err in holding that respondent's refund claims fall within the jurisdiction of the CIR under the NIRC of 1997, as amended. PAL did not violate the rule against forum shopping. Records reveal that PAL filed written protests with the BOC, asking for a refund of the excise taxes paid. The COC did not act on the protest and failed to render a decision. Thus, when the two (2)-year prescriptive period under Section 204 (C) of the Tax Code was about to end, PAL filed its written claims for refund with the CIR for the excise taxes paid. The CIR did not act on PAL's refund or tax credit claims; hence, it filed the Petitions for Review before the Court in Division on various dates. Given the foregoing, We affirm the Court in Division's finding that PAL did not violate the rule against forum shopping. We find it fit to quote the Court in Division's disquisition on the matter,74 to wit: Likewise, the Court finds that the act of petitioner in filing its refund claims with both BOC and BIR does not constitute forum shopping. Normally, the concept of forum shopping is only applicable to cases filed before the courts or in a court and in an administrative agency, except when the rules of the said administrative agency provide otherwise. The case of Land Car, Inc. v. Bachelor Express, Inc., et al., illustrates this point, to wit: "Forum shopping refers to the act of availing oneself of several judicial remedies in different courts, either simultaneously or successively, substantially founded on the same transaction and identical material facts and circumstances, raising basically like issues either pending in, or already resolved by, some other court. The principle applies not only with respect to suits filed before courts but also in connection with a litigation commenced in court while an administrative proceeding is pending in order to 73 Section 4. NJRC of \997. as amended. 7-1 Assailed Decision. pp. 25-26.

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, Inc. Page 30 of47 x------------------------------------------------------------------------------------------x defeat administrative processes in anticipation of an unfavorable administrative ruling and possibly a favorable court ruling. Forum shopping is said to exist where the elements of litis pendentia are present or where a final judgment in one case would amount to res judicata in the other; or where, in the two or more cases pending, there is identity of (a) parties, (b) rights or causes of action, and (c) reliefs sought." Hence, absent any allegation of a clear rule which prohibits the filing of refund claims with both the BOC and BIR, the Court cannot subscribe to the allegation of respondent BOC. Moreover, even assuming that the rule on forum shopping applies to this case, the Supreme Court has consistently allowed the relaxation of the said rule on account of special circumstances and in the interest of substantial justice. [Emphasis supplied; Citations omitted] Indeed, PAL could not be faulted for complying with the mandated requisites under the law - filing the administrative claim for refund with the CIR and, subsequently, the judicial claim with the CTA- to avoid the lapse ofthe prescriptive period under the NIRC. PAL did not err in filing an administrative claim for refund with the CIR before filing its judicial claim with the CTA. Having ruled that PAL's refund claims are governed by the NIRC of 1997, as amended, the Court En Bane reiterates that PAL did not err when, after the COC failed to act on its protest, it filed an administrative claim for refund with the CIR before filing a judicial claim with the CTA. The refund or recovery of internal revenue taxes erroneously or illegally collected is governed by Sections 204 (C) and 229 of the NIRC of 1997, as amended, to wit: "SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. - The Commissioner may - (C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, Inc. X------------------------------------------------------------------------------------------X returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two 121 years after the payment of the tax or penalty: Provided, however, That a return filed showing an overpayment shall be considered as a written claim for credit or refund. 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 121 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 therefor, 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." [Emphasis and underscoring supplied] Section 204(C) of the NIRC, as amended, applies to administrative claims for refund, while Section 229 thereof pertains to judicial claims for refund. The claimant must first file an administrative claim with the CIR before filing a judicial claim with the courts oflaw. Both claims must be filed within a 2-year reglementary period, and the claimant can file the latter without waiting for the resolution of the former to prevent the forfeiture of its claim through prescription. The timeliness of filing the claim is mandatory and jurisdictional, and the Court cannot take -1 cognizance of a judicial claim for a refund filed either prematurely or out of time. It is worth stressing that as for the judklal claim, tax law even explicitly provides that It be filed

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, Inc. Page 32 of47 X------------------------------------------------------------------------------------------X within two years from payment of the tax "regardless of any supervening cause that may arise after payment. " Accordingly, PAL properly invoked the CTA's jurisdiction over its claim for refund or tax credit, pursuant to Section 7(A)(2) of RA No. 1125, as amended by RA No. 9282,75 and Section 3(a)(2), Rule 4 of the RRCTA, 76 which provide for the jurisdiction of the CTA in cases when there is an "inaction" on the part of the CIR over claims for refunds, as in the instant case. Petitioner timely filed its administrative and judicial claims; hence, the Court in Division had jurisdiction over the original Petitions for Review. As to the timeliness of the filing of PAL's claims, We affirm and quote below the Court in Division's finding that petitioner timely filed its administrative and judicial claims within the two years prescribed under Sections 204 and 229 of the NIRC of 1997, as amended, viz.:77 In this case, petitioner paid the subject taxes, filed its claim for refund with the CIR, and subsequently its judicial claim with this Court on the following dates: CTA Case Date of Date of Written Date of Filing of No. Payment under Claim for Refund to the Petition for 7670 Protest CIR Review 11 August 2005 22 December 2005 9 July 2007 10 August 2007 22 December 2005 8 March 2006 18 April 2006 6 June 2006 75 An Act Creating the Court ofTax Appeals. June 16. 1954. SEC. 7. Jurisdiction.- The CTA shall exercise: (a) ExclusiYe appellate jurisdiction to reYiew by appeal. as herein providc:d: (2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments. refunds of internal revenue taxes. fees or other charges. penalties in relation thereto. or other matters arising under the National Intemal Revenue Code or other laws administered bv the Bureau of Internal Revenue. "here the National Internal Rc\�enue Code proYides a specific period for action. in \\'hich case the inaction shall be deemed a denial: ... rEmphasis and 11nderscoring suppliedJ 76 SECTION 3. Cases Within the Jurisdiction of the Court in Divisions.- The Court in Divisions shall exercise: (a) Exclusive original or appellate jurisdiction to review by appeal the following: (2) Inaction hy the Commissioner of lntemal Re\�enue in cases involving disputed assessments. refunds of internal revenue taxes. fees or other charges. penalties in relation thereto. or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue. ,,�here the National Internal Revenue Code or other applicable law provides a specific period for action: .... lEmplwsis and underscoring suppliedj 77 Assailed Decision. pp. 30-31.

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, lnc. Page 39 of47 X------------------------------------------------------------------------------------------X The issue is not novel and has been the subject of discussion by this Court numerous times. In Commissioner of Internal Revenue v. Philippine Airlines, Inc.,s3 We discussed: As this Court has held in Air Philippines Corporation v. Commissioner of Internal Revenue and Commissioner of Customs, in determining local availability of Jet A-1 fuel, the term 'locally available' cannot include imported Jet A-1 fuel. In that case, We held: In PAL v. CIR, the Supreme Court held that domestic petroleum products excluded imported products, as follows: First, examining its phraseology, the word 'domestic,' which means 'of or relating to one's own country' or 'an article of domestic manufacture,' clearly pertains to goods manufactured or produced in the Philippines for domestic sales or consumption or for any other disposition as opposed to things imported. In other words, by sheer divergence of meaning, the term 'domestic petroleum products' could not refer to goods which are imported. Applying the foregoing to the present case, in the determination of whether there is locally available Jet A-1 fuel in reasonable quantity, quality, or price, Jet A-1 fuel which was imported cannot be possibly included in the computation. After all, if locally available Jet A-1 fuel includes both local production and imports, there will never be an instance when the Jet A-1 fuel available is insufficient to meet the demands of the domestic market. Consumers of Jet A-1 fuel will always import the same to meet their needs if no other Jet A-1 fuel is locally available m reasonable quantity, quality, or price.' To appreciate the import of the conclusions of the Supreme Court in the PAL us. CIR case (PAL Case) further, We quote: "Based on Section 13 of PAL's franchise, PAL's tax exemption privileges on all taxes on aviation gas, fuel and oil may be classified into three (3) kinds, namely: (a) all taxes due on PAL's local purchase of aviation gas, fuel and oil; (b) all taxes directly due from or imposable upon the purchaser or the seller, producer, manufacturer, 83 C.T.A. EB Case No. 2256 (C.T.A. Case No. 8220). June 9. 2021.

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, Inc. Page 40 of47 X------------------------------------------------------------------------------------------X or importer of aviation gas, fuel and oil but are billed or passed on to PAL; and (c), all taxes due on all importations by PAL of aviation gas, fuel, and oil. Viewed within the context of excise taxes, it may be observed that the first kind of tax privilege would be irrelevant to PAL since it is not liable for excise taxes on locally manufactured/produced goods for domestic sale or other disposition; based on Section 130 of the NIRC, it is the manufacturer or producer, i.e., the local refinery, which is regarded as the statutory taxpayer of the excise taxes due on the same. On the contrary, when the economic burden of the applicable excise taxes is passed on to PAL, it may assert two (2) tax exemptions under the second kind of tax privilege namely, PAL's exemptions on (a) passed on exc1se tax costs due from the seller, manufacturer/ producer in case of locally manufactured/produced goods for domestic sale (first tax exemption under the second kind of tax privilege); and (b) passed on excise tax costs due from the importer in case of imported aviation gas, fuel and oil (second tax exemption under the second kind of tax privilege). The second kind of tax privilege should, in turn, be distinguished from the third kind of tax privilege which applies when PAL itself acts as the importer of the foregoing petroleum products. In the latter instance, PAL is not merely regarded as the party to whom the economic burden of the excise taxes is shifted to but rather, it stands as the statutory taxpayer directly liable to the government for the same. In view of the foregoing, the Court observes that the phrase 'purchase of domestic petroleum products for use in its domestic operations' - which characterizes the tax privilege LOI 1483 withdrew- refers only to PAL's tax exemptions on passed on excise tax costs due from the seller, manufacturer/ producer of locally manufactured/produced goods for domestic sale and does not, in any way, pertain to any of PAL's tax privileges concerning imported goods, may it be (a) PAL's tax exemption on excise tax costs which are merely passed on to it by the importer when it buys imported goods from the latter (the second tax exemption under the second kind of tax privilege); or (b) PAL's tax exemption on its direct excise tax liability when it imports the

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, Inc. Page 41 of47 x------------------------------------------------------------------------------------------x goods itself (the third kind of tax privilege). Both textual and contextual analyses lead to this conclusion: First, examining its phraseology, the word 'domestic,' which means 'of or relating to one's own country' or 'an article of domestic manufacture,' clearly pertains to goods manufactured or produced in the Philippines for domestic sales or consumption or for any other disposition as opposed to things imported. In other words, by sheer divergence of meaning, the term 'domestic petroleum products' could not refer to goods which are imported. Second, examining its context, certain 'whereas clauses' in LOI 1483 disclose that the said law was intended to lift the tax privilege discussed in Department of Finance (DOF) Ruling dated November 17, 1969 (Subject DOF Ruling) which, based on a reading of the same, clarified that PAL's franchise included tax exemptions on aviation gas, fuel and oil which are manufactured or produced in the Philippines for domestic sales (and not only to those imported). In other words, LOI 1483 was meant to divest PAL from the tax privilege which was tackled in the Subject DOF Ruling, namely, its tax exemption on aviation gas, fuel and oil which are manufactured or produced in the Philippines for domestic sales. Consequently, if LOI 1483 was intended to withdraw the foregoing tax exemption, then the term 'purchase of domestic petroleum products for use in its domestic operations' as used in LOI 1483 could only refer to 'goods manufactured or produced in the Philippines for domestic sales or consumption or for any other disposition,' and not to 'things imported.' In this respect, it cannot be gainsaid that PAL's tax exemption privileges concerning imported goods remain beyond the scope ofLOI 1483 and thus, continue to subsist.' As evident from the above discourse, what qualifies as domestic petroleum products, which in this case is aviation fuel, cannot include those that are imported. It is necessarily excluded from the term." We further affirm the Court in Division in its application ~:~::'::::n,~,,~i~::~~~~:~:.~:.CJR M Fiest, the case discu"cs th~

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, Inc. Page 42 of47 X------------------------------------------------------------------------------------------X charter of PAL, precisely the respondent in this case. Second, as a matter of consistency and stability in judicial decisions, this Court adheres to its prior pronouncement in the absence of any showing of any error that would warrant a reversal of our earlier ruling. Third, the conclusion that the term "locally available" necessarily excludes imported fuel is reasonable, considering that the necessity to import arises precisely due to the inadequacy of the fuel produced in the Philippines. As PAL sensibly argued in its Comment, "if its importations (meant to address its fuel needs) were to be added to the "locally available supply" then there would never be a situation where "locally available supply" would be insufficient to meet its demand. Including PAL's importation would contribute to a condition that prevents it from using a tax exemption privilege provided under PD No. 1590."85 Finally, as PAL has already discharged its burden of proof that the Jet A-1 fuel is not available in reasonable quantity in the Philippines, We note that the CIR and the COC were remiss in rebutting or controverting PAL by their failure to introduce evidence that would prove otherwise. Hence, the Court in Division did not err in ruling that Jet A-1 fuel was unavailable in reasonable quantity in the Philippines from 2005 to 2008. The CIR and the COC also argue that reliance on the ATO (now CAAP) certifications is improper. It is the petitioners' position that the DOE is officially tasked to determine whether the total supply is enough for total demand. Again, the issue is not novel. This Court has repeatedly upheld the sufficiency of ATO certifications in proving that imported Jet A-1 fuel was not locally available in a reasonable quantity, quality, and price. In Commissioner of Internal Revenue v. Air Philippines Corp.86 and CommissionerofCustoms v. Air Philippines Corp., 87 we ruled: As to the sufficiency of ATO Certificates in proving that the imported Jet A-1 aviation fuel was not locally available in reasonable quantity, quality or price, the case of Commissioner of Customs v. Air Philippines Corporations, which involves same facts and issues but with different taxable year, is controlling: ~ 85 Comment. par. 35: EB Docket (CTA FB No. 2559). p. IOJ. 80 CTA EB Case No. 2064 (CTA Case 'los. 7872.7883.7922.7929. and 7952). July 29.2020. 87 CTA EB Case Nos. 1704 & 1707 (C:.T.A. Case Nos. 7252. 7362. 7383. 7445. 7494. 7517. 7521 & 7566). May 2. 2019.

DECISION CTA EB Nos. 2559 and 2577 (CTA Case No. 7670, 7818, 7869, 7954, 8034) Commissioner of Internal Revenue v. Philippine Airlines, Inc. and Commissioner of Customs v. Philippine Airlines, Inc. Page 44 of47 x------------------------------------------------------------------------------------------x The foregoing mandate negates the CIR's contention that only the DOE could best determine the local availability in reasonable quantity, quality and price of the subject Jet A-1 aviation fuel." Considering the mandated functions of the ATO, it certainly had the means of knowing the facts stated in the subject ATO Certifications. Such being the case, the ATO Certifications must be given weight under the Section 44, Rule 130 of the Rules of Court. With the said ATO Certifications, respondent has shown compliance with the third requisite in granting tax exemption, i.e., that the imported articles, supplies or materials are not locally available in reasonable quantity, quality or price. [Emphasis and underscoring supplied.] From the foregoing, We find no merit in petitioners' contention that the ATO Certifications could not be given weight by this Court. At this juncture, it must be pointed out that the use of conjunctive "or" in the third requisite- the imported articles, supplies or materials are not locally available in a reasonable quantity, quality or price - connotes alternative, not a cumulative qualification for the determination of whether there is locally available Jet A-1 fuel. Thus, it was sufficient that respondent was able to prove one (1) qualification to avail of the exemption, i.e., that at the time of the subject importations, there was no locally available Jet A-1 fuel in reasonable quantity. 88 Accordingly, We rule that PAL has sufficiently proved its entitlement to a refund or issuance of a tax credit certificate of the excise taxes it paid on its importations of Jet A-1 fuel for its domestic operations from July 13, 2005 to May 30, 2008. We see no compelling reason to modify, much more reverse, the assailed Decision and Resolution of the Court in Division. It behooves the government to refund what it erroneously i collected. To borrow from BPI Family Savings Bank, Inc. v. Court ofAppeals,s9 if the state expects taxpayers to observe fairness and honesty in paying their taxes, it must hold itself against 83 Commissioner r?(Customs r. Air Philippines Corp.. CTA EH Case Nos. 1704 & 1707 (CTA Case Nos. 7252. 7362. 7383.7445.7494.7517.7521 & 7566). Ma' 2. 2019. 89 G.R. No. 122480. April12. 2000. .

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