PHILIPPINE AIRLINES, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY THIRD DIVISION PHILIPPINE AIRLINES, CTA Case No.10765 INC., Petitioner, Members: -versus- MANAHAN, Chairperson, REYES-FAJARDO, and ANGELESil COMMISSIONER OF Promulgated: INTERNAL REVENUE, FEB 11 2025 Respondent. X- - - - - - - - - - - - - - - - - - - - - - - - - - - -?- -- -- -- -- -- -,;- :- ~- .-..- (-:)1 -� "-"""-' - - - - - - -X DECISION I REYES-FAJARDO, J.: We resolve the Petition for Review filed on February 14, 2022, by Philippine Airlines, Inc., which aims to refund or credit, the amount of !>4,332,880.85, allegedly representing Philippine Airlines, Inc.'s illegally paid excise taxes on its importation of alcohol products for the period July 2018 until April2019.1 FACTS Petitioner Philippine Airlines, Inc. is a domestic corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with registered address at PNB Financial Center, President Diosdado P. Macapagal Avenue, CCP Complex, 1301 Pasay City.2 Docket, pp. 6-30. 2 Par. 1, Admitted Fact, Joint Stipulation of Facts and Issues GSFI). Id. at p. 611 .

DECISION CTA Case No. 10765 Respondent is the duly appointed Commissioner of Internal Revenue, with office address at the Bureau of Internal Revenue (BIR) National Office Building, Agham Road, Diliman, Quezon City.3 On June 11, 1987, petitioner was granted a franchise to operate domestic and international air transport services by virtue of Presidential Decree (PD) No. 1590, otherwise known as "An Act Granting a New Franchise to Philippine Airlines, Inc. to Establish, Operate, and Maintain Air-Transport Services in the Philippines and Between the Philippines and Other Countries." 4 From July 2018 to April 2019, petitioner imported various liquors and wine, as part of its in-flight and commissary supplies. These are evidenced by various Bureau of Customs (BOC) Single Administrative Documents, Informal Import Declarations and Entries, Air Waybills, and Authorities to Release Imported Goods (ATRIGs).s Via separate letters issued on various dates, the BOC billed petitioner for excise taxes on its importation of liquors and wines, in the total amount of 1'4,332,880.85 with the following details: Date of the Letter Amount May 7, 20196 '1'2,833 ,861.14 676,387.51 I July 15, 20197 822,632.20 I September 23, 20198 On February 12, 2020, petitioner paid under protest, excise taxes on its alcohol importations in the total amount of 1'4,332,880.85, broken down as follows: BOC Official Receipt Number Amount Paid 019076020509 '1'1,499,019.71 0190760206110 '1'2,833 ,861.14 ' Ibid. Par. 2, Admitted Fact, JSFI. Id. at p. 612. Exhibits "P-4" to "P-4.20," "P-5" to "P-5.20," and "P-6" to "P-6.20." Id. at pp. 718 to 810. Exhibit "P-7.2." /d. at p. 813. 7 Exhibit "P-7." Id. at p. 811. 8 Exhibit "P-7.1." Id. at p. 812. Exhibit "P-8." Id. at p. 814. 10 Exhibit "P-8.1." Id. at p. 815.

DECISION CTACaseNo.10765 On February 9, 2022, petitioner filed with the BIR its letter of even date, applying for the refund of, or issuance of tax credit certificate, the amount of P4,332,880.85, 11 allegedly representing excise taxes illegally assessed, levied upon, and paid by petitioner under protest on its importation of alcohol products constituting commissary and catering supplies for use of consumption in its international flights. On February 14, 2022, petitioner filed a Petition for Review,12 docketed as CTA Case No. 10765, initially raffled before the Court's Third Division. Under Order dated June 30, 2022, CTA Case No. 10765 was transferred from the Third Division, to the Court's Second Division.13 On July 5, 2022, respondent filed his Answer.14 On October 6, 2022, the pre-trial conference was held, whereby the parties jointly submitted, and we adopted the issue to be addressed in this case. The scheduled presentation of the parties' evidence, and the date of commissioner's hearing for the marking of their respective exhibits were as well set. Moreover, the parties were directed to submit their Joint Stipulation of Facts and lssues.15 On November 7, 2022, the parties submitted their Joint Stipulation of Facts and Issues,16 which became the basis of our Pre- Trial Order17 issued on January 4, 2023. By Resolution dated May 29, 2023,18 CTA Case No. 10765 went back to the Court's Third Division. During trial, petitioner presented: (1) Jonathan R. Castillo Lee,19 Manager for Company Materials Handling Division; (2) Cheryl V. 11 Exhibit "P-2." /d. at pp. 706-715. 12 Supra note 1. 13 Docket, p. 552. 14 Id. ot pp. 553-564. 15 Order dated October 6, 2022. /d. at pp. 602-604. 16 /d. at pp. 611-628. 17 /d. at pp. 632-638. 18 /d. at p. 1069.

DECISION CTA Case No.10765 Capinpin,20 Manager for In-flight Procurement Division; and (3) Rue! Ryan 0. Julian,21 Manager for Tax Services Division, as its witnesses. On August 7, 2023, petitioner filed its Formal Offer of Evidence,22to which respondent filed his Comment (on Petitioner's Formal Offer of Evidence) on August 14, 2023.23 By Resolution dated October 16, 2023, the pieces of evidence offered by petitioner were admitted.24 Petitioner rested its case. On the other hand, respondent manifested that he would not be presenting any witness.2s Through Minute Resolution dated February 12, 2024, 26 CTA Case No. 10765 was submitted for decision, considering: (1) respondent's Memorandum27 posted on December 4, 2023; and (2) petitioner's Memorandum28 filed on February 2, 2024. ISSUE Is petitioner entitled to the refund or credit of the excise taxes paid on its importation of alcohol products for the period July 2018 to April 2019, in the total amount of Four Million Three Hundred Thirty-Two Thousand Eight Hundred Eighty Pesos and 85/100 (P4,332,880.85) ?29 19 Exhibit "P-26." Id. at pp. 37-46. Identified in the hearing held on March 9, 2023, per Order of even date, id. at 664-665. 20 Exhibit "P-27." Id. at pp. 154-166. Identified in the hearing held on March 9, 2023, per Order of even date, id. at 664-665. 21 Exhibit "P-28." Id. at pp. 334-342. Identified in the hearing held on july 18, 2023, per Order of even date, id. at 679-681. 22 Id. at pp. 682-704. 23 Id. at pp. 1060-1062. 24 /d. at pp. 1072-1074. 25 Respondent's Manifestation filed on August 22, 2023. Id. at 1065-1067. 26 /d. at p. 1111. 27 Id. at pp. 1075-1085. 28 Id. at pp. 1089-1110. 29 See Stipulated Issue, )SF!. Id. at p. 614.

DECISION CTA Case No. 10765 ARGUMENTS Petitioner maintains that its importation of commissary and catering supplies are exempt from all taxes, pursuant to its franchise as Republic Act (RA) No. 9334 did not repeal PD No. 1590. Being so, the excise taxes it paid on its alcohol products, imported from July 2018 to April 2019, in the total amount of P4,332,880.85 were illegally and erroneously collected by the BIR. For this reason, the refund or credit thereof is in order, pursuant to Section 204(C), in relation to Section 229 of the 1997 National Internal Revenue Code (NIRC), as amended. Offering a different view, 30 respondent counters that petitioner's claim for refund or credit must be denied because: (1) RA No. 9334 repealed the tax exemption it enjoyed under PD No. 1590; and (2) assuming, the tax exemption in PD No. 1590 is still operative, petitioner failed to satisfy all the conditions for its entitlement. RULING The Petition is partly impressed with merit. First, do we have jurisdiction over this case? Yes. Section 7(a)(2) of Republic Act (RA) No. 1125,31 as amended by RA No. 9282 reads: Sec. 7. Jurisdiction. -The CIA shall exercise: a. Exclusive appellate jurisdiction to review by appeal, as herein provided: 2. Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in 30 Respondent's Answer. Sttpra note 14. 31 An Act Creating the Court of Tax Appeals.

DECISION CTA Case No. 10765 relations thereto, or other rnatters ansmg under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code provides a specific period of action, in which case the inaction shall be deemed a denial; 32 Section 3(a)(2), Rule 4 of the Revised Rules of the Court of Tax Appeals (RRCTA)33 clarified that the CTA in Division has jurisdiction over the inaction of respondent involving refunds of internal revenue taxes, among others. Among of the classes thereof is one premised upon illegal or erroneous collection of internal revenue tax, as acknowledged in Sections 204 and 229 of the NIRC, as amended. Commissioner of Internal Revenue v. Carrier Air Conditioning Philippines, Inc. 34 illuminated on the requirements for us to acquire jurisdiction over said type of refund case, as follows: Section 204 [of the NIRC, as amended] refers to the Commissioner of Internal Revenue's administrative authority to credit or refund erroneously paid or illegally collected taxes. Under this provision, an administrative claim for refund or credit must be filed within two years from payment of the tax. Section 229 [of the NIRC, as amended], on the other hand, requires two conditions for the filing of judicial claims: (1) an administrative claim must be filed first; and (2) the judicial claim must be filed within two years after payment of the tax sought to be refunded. Reading the two provrs10ns together, both administrative and judicial claims must be filed within the two-year period. Furthermore, the administrative claim must be filed before the judicial claim. This Court has previously declared that "[t]imeliness of the filing of the claim is mandatory and jurisdictional. The [Court of Tax Appeals] cannot take cognizance of a judicial claim for refund file either prematurely or out of time." On February 12, 2020, petitioner paid under protest, excise taxes billed by the BOC on its importation of alcohol products for the period July 2018 to April 2019.35 Counting two years from February 12, 2020, petitioner had until February 12, 2022 to file its 32 Boldfacing supplied. ,3.3 A.M. 05-11-07-CTA. G.R. No. 226592, July 27, 2021. 35 Supra notes 9 and 10.

DECISION CTA Case No. 10765 Page 7 of17 administrative and judicial claims for refund or credit in that order. Therefore, petitioner's timely filing of its administrative claim for refund or credit on February 9, 2022,36 and Petition for Review on February 14, 2022,37 resulted in our acquisition of jurisdiction over CTA Case No. 10765. The next question-can petitioner invoke the tax exemption conferred by PD No. 1590,38 despite the amendments introduced by RA No. 9334 on Section 131 of the NIRC, as amended? Yes. For one, Commissioner of Internal Revenue, et al. v. Philippine Airlines, Inc. 39 is unequivocal that "PD [No.] 1590 has not been revoked by the NIRC of 1997, as amended. Or to be more precise, the tax privilege of PAL provided in Sec. 13 of PD [No.] 1590 has not been revoked by Sec. 131 of the NIRC of 1997, as amended by Sec. 6 of RA [No.] 9334...." For another, Republic of the Philippines v. Philippine Airlines, Inc.40 is definitive that compliance with the conditions for tax exemption under Section 13 of PD No. 1590, would relieve petitioner's importation of commissary supplies used in transport and non- transport operations, and other incidental activities from the burden of, among others, excise tax imposition. The imported alcohol products are no exception: In other words, the franchise of PAL remains the governing law on its exemption from taxes. Its payment of either basic corporate income tax or franchise tax - whichever is lower - shall be in lieu of all other taxes, duties, royalties, registrations, licenses, and other fees and charges, except only real property tax. The phrase "in lieu of all other taxes" includes but is not limited to taxes, duties, charges, royalties, or fees due on all importations by the grantee of the commissary and catering supplies, provided that such articles or supplies or materials are imported for the use 36 Supra note 11. 37 Supra note 1. The last day, i.e., February 12, 2022, for petitioner to institute its judicial claim for refund or credit fell on a Saturday. 38 AN ACT GRANTING A NEW FRANCHISE TO PHILIPPINE AIRLINES, INC. TO ESTABLISH, OPERATE, AND MAINTAIN AIR-TRANSPORT SERVICES IN THE PHILIPPINES AND OTHER COUNTRIES. 39 G.R. Nos. 212536-37, August 27, 2014. 40 G.R. Nos. 209353-54, July 6, 2015.

DECISION CTA Case No. 10765 of the grantee in its transport and non[-]transport operations and other activities incidental thereto and are not locally available in reasonable quantity, quality, or price.41 On these accounts, petitioner may seek excise tax exemption under PD No. 1590, notwithstanding the enactment of, and amendment by RA No. 9334 on Section 131 of the NIRC, as amended. Finally, is petitioner entitled to the refund or credit of the excise taxes it paid on the importation of alcohol products, for the period July 2018 to April2019? Yes, albeit in part. For the excise tax exemption invoked by petitioner to lie, the requisites laid down in Section 1342 of PD No. 1590, as interpreted by jurisprudence must be observed. These are: (1) its payment of corporate income tax; (2) the imported supplies are to be the used in its transport/non-transport operations and other incidental activities; 43 and (3) said supplies are not locally available in reasonable quantity, quality or price. 44 Requisites (1) and (2) were duly met. Requisite (3) was as well complied with, save for a fraglJlent of petitioner's imported liquor. Bear in mind: 41 Boldfacing supplied. SECTION 13. The tax paid by the grantee under either of the above alternatives shall be in lieu of all other taxes, duties, royalties, registration, license, and other fees and charges of any kind, nature, or description, imposed, levied, established, assessed, or collected by any municipal, city, provincial, or national authority or government agency, now or in the future, including but not limited to the following: (2) All taxes, including compensating taxes, duties, charges, royalties, or fees due on all importations by the grantee of aircraft, engines, equipment, machinery, spare parts, accessories, commissary and catering supplies, aviation gas, fuel, and oil, whether refined or in crude form and other articles, supplies, or materials; provided, that such articles or supplies or materials are imported for the use of the grantee in its transport and transport operations and other activities incidental thereto and are not locally available in reasonable quantity, quality, or price; .... (Emphases supplied) 43 Commissioner of Internal Revenue, et al. v. Philippine Airlines, Inc., G.R. Nos. 215705-07, February 22, 2017. Ibid.

DECISION CTA Case No. 10765 First. Petitioner's Annual Income Tax Return for Calendar Years (CY) 2018, 45 2019, 46 and 2020, 47 together with their corresponding payment forms, duly proved its payment of corporate income taxes for said years, including the periods covered by the importation of its alcohol products on from July 2018 to April2019. Second. The concomitant ATRIGs 48 on petitioner's imported alcohol for the period July 2018 to April 2019, issued by respondent to the Commissioner of Customs, uniformly state that " ... the shipment to be released at the port of Ninoy Aquino Int'l Airport consisting of the above described articles, will be used exclusively FOR INTERNATIONAL INFLIGHT CONSUMPTION ONLY." Thus, there is prima facie proof that' petitioner's imported alcohol products are to be used on an activity incident to its transport operations, i.e., international inflight consumption. The most recent case of Commissioner ofInternal Revenue, et al. v. Philippine Airlines, Inc. 49 confirmed: The application and subsequent issuance of an ATRIG is not a mechanical process. As provided under Revenue Memorandum Order No. 35-2002, the BIR officer must coordinate with the Bureau of Customs (BOC) if an ocular inspection of the imported articles is necessary or for purposes of laboratory analysis. The BIR officer may likewise refer an application to the Legal Division of the Regional Office or to the Law Division of the National Office if it involves legal issues on the taxability or exemption of the imported articles. Whenever there are doubts on the representations made on the application, the BIR officer may require further substantiation, documentation, or certification from other regulatory offices to authenticate the statements made by the importer. In short, various verification and processes are done prior to the issuance of an ATRIG, which presumably arms the BIR officer with sufficient knowledge of the facts contained therein. To be clear, such entries are only prima facie evidence of the facts stated therein; they are not conclusive. The trustworthiness of such document is based on the presumption of regularity of performance of official duty, which is itself a mere disputable presumption. However, given the prima facie case established by the ATRIGs, the burden of evidence shifted to the petitioners to rebut the same with controverting proof. However, as the CTA En Bane correctly observed, no such controverting evidence was presented. 45 Exhibits "P-16" to "P-16.2." Docket, pp. 890-964. 46 Exhibit "P-20." Id. at pp. 977-1006. " Exhibits "P-24" to "P-24.1." Id. at pp. 1017-1054. " Exhibits "P-6" to "P-6.20." Id. at pp. 799-810. " G.R. Nos. 245330-31, Aprill, 2024. Emphases added.

DECISION CTA Case No. 10765 Third. Commissioner of Internal Revenue, et al. v. Philippine Airlines, Inc. and Philippine Airlines, Inc. v. Commissioner of Internal Revenue, et al. (2023 PAL),5� detailed the satisfactory proof to show that petitioner's imported wines and liquors are not locally available in reasonable quantity, quality, or price: Here, there is no question that the imported liquors, wines, and cigarettes were "inflight materials" used in PAL's transport/ flight operations. Moreover, the Judicial Affidavit of Capinpin categorically stated that the imported goods, specifically the Carlsberg Beer in Can, the Absolut Vodka, and the Gordon's Gin, were not locally available in reasonable quantity, quality or price. She testified that PAL imported the same because importation of said products is cheaper than buying them locally. We also note that the Tables of Comparison and supporting price lists submitted by PAL corroborated Capinpin's testimony that the imported items were not locally available in reasonable quantity, quality or price. Thus, in line with prevailing jurisprudence, We agree with PAL that the CTA erred in ruling that PAL has inadequately shown its compliance with Section 13 (b) (2) of PD [No.]1590 as regards the amount of 1"240,283.71. The pieces of evidence considered acceptable and sufficient in 2023 PAL, to exhibit the non-availability of imported wines and liquors locally, in reasonable price, were produced by petitioner here. Consider: For one, Cheryl V. Capinpin (Capinpin) declared that the imported alcohol products are not locally available in reasonable quantity, quality, or price.51 For another, Capinpin, too, professed that said wines and liquors, when imported, are cheaper compared to those locally available. Her declaration was arrived at, by comparing the local prices thereof vis- a-vis such articles' importation costs. 52 50 G.R. Nos. 236372-75. Resolution dated january 17, 2023. 51 Answer to Question No. 7, judicial Affidavit of Ms. Cheryl V. Capinpin (Exhibit "P-27"). Docket, p. 155. 52 Answer to Question Nos. 7 and 8, Judicial Affidavit of Ms. Cheryl V. Capinpin (Exhibit "P-22"). Id. at pp. 155-156.

DECISION CTA Case No. 10765 Page 11 of17 In addition, Capinpin's declarations here, are like what she attested in the proceedings before the Court in Division in 2023 PAL. 53 Moreover, Capinpin's testimony was also supported by a Table of Comparison,54 and price lists from various local suppliers, namely: (1) 2018 and 2019 Absolute Sales Corporation Price Lists;55 (2) Future Trade International Inc. Price List effective November 30, 2017;56 and (3) Minivan Enterprise Price Lists for 2018 and 2019.57 Simply put, the pieces of evidence presented here is the essentially same as that in 2023 PAL. Being so, petitioner satisfactorily proved that most of the alcohol products it imported from July 2018 to April2019, are not available locally in reasonable quantity, quality, or price. , Specifically, petitioner sought to refund or credit, the amount of N,332,880.85, corresponding to the excise taxes it paid on its imported liquor and alcohol products, for international in-flight consumption, covering the period July 2018 to April2019, detailed as follows: Informal Import Air Authority Declaration to Release Sales No. Arrival and Entry/ Waybim' Imported Invoice61 Product Imported Value Excise Tax Date BOC Single Goods60 Paid Administrative Documents ss Exhibit Number 1 13-0ct- "P-4" "P-5" "P-6" "P-10" Hardy Stamp AUD I 2018 "P-5.1" "P-6.1" RiesGwzt ROW 7,900.00 "P-10.1" Ballantines 21 YO r 65,7oo.oo 1 2 13-Sep- "P-4.1" Scotch Whisky USD 2018 Chivas Regal12 YO 5,529.60 i Scotch Whiskv ' Chivas Royal Salute USD 21 YO Scotch 2,736.00 84,202.61 Whisky USD 2,358.00 53 See Answer to Question Nos. 16 and 17, Judicial Affidavit of Ms. Cheryl Capinpin in CTA Case No. 8514 (Exhibit "WWW"). Docket (CTA Case No. 8514), pp. 619-620. Exhibit "P-11." Docket, pp, 840-842. 55 Exhibit "P-12" and "P-12.1." /d. at pp. 843-844. 56 Exhibits "P-12.2" and "P-12.3." Id. at pp. 845-863. 57 Exhibits "P-12.4" and "P-12.5." /d. at pp. 864-865. 38 Id. at pp. 718-768. 39 Id. at pp. 769-789. 60 Id. at pp. 790-810. 61 Id. at pp. 818-839.

DECISION CTA Case No. 10765 3 27-Mar- "P-4.2'1 "P-5.2" "P-6.2" "P-10.21' Absolut Blue Vodka USD "P-4.3" ''P-6.3'' "P-10.3'' Japanese Beer Asahi 1,058.40 2019 "P-5.3~" Super Dry 100,663.20 "P-4.4" "P-6.4" "P-10.4" HKD 35,949.31 4 29-Jan- "P-5.4" J&B Rare 68,400.00 ''P-63' "P-103' Ballantines 21 YO 2019 "P-53' ''P-6.6" 11 P-10.6" Scotch Whisky USD ''P-5.6" "P-6.7" "P-10.7" Chivas Regal12 YO 3,290.00 09-Jan- "P-5.7" "P-10.8'' Scotch Whisky "P-6.8" "P-10.9'' Chivas Royal Salute USD 2019 "P-5.8" "P-6.9" 21 YO Scotch 3,686.40 "P-5.9" "P-6.10" Whiskv 5 "P-5.10" Rawson's Retreat USD "P-6.11'' Private Release 5,472.00 "P-5.11" Shiraz Cabarnet "P-6.12" Camus Cognac USD 97,213.06 "P-5.12" VSOP Elegance 3,888.00 "P-6.13" Martini Sweet 6 11-Jan- "P-4.5" "P-5.13" ''P-6.14" Vermouth AUD 2019 "P-4.6" "P-5.14 11 "P-6.15" rvfa tini Dry 12,750.00 "P-4.7" "P-5.15" "P-6.16" Vermouth 85,410.00 7 22-0ct- ''P-5.16" "P-6.17" Johnnie Walker USD 66,759.36 "P-4.8" "P-5.17" "P-6.18" Double Black Label 7,400.00 2018 ''P-4.9" "P-5.18" "P-6.19" Johnnie YValker 21,024.00 ''P-4.10'' "P-5.19" "P-6.20" Black Label HKD 13-0ct- "P-5.20" 30,240.00 ! Beefeater Gin 103,173.70 ! 8 2018 HKD 30,240.00 16,292.27 : 9 10-Dec- USD 139,726.25 '' 2018 12,484.80 ' 10 26-Jan- USD 3,024.00 ! 2019 I USD 29-Jan- "P-10.10" Chivas Regal XV 1,200.00 i 2019 CamusVSOP "P-10.11" Borderies USD 108,331.53 i 11 Ballantines 21 YO 8,942.40 "P-10.12" Scotch Whisky 66,759.88 12 12-Feb- ''P-4.11" "P- Chivas Regal12 YO USD 2019 Scotch Whisky 6,609.60 131,594.02 10.13a" Chivas Royal Salute 21-Apr- "P-4.12" "P- 21 YO Scotch USD 2019 Whisky 5,529.60 10.13b" Jolmnie Vl alker 13 "P-10.14" Double Black Label USD "P-10.15" Johnnie Walker 3,556.80 14 09-Nov- "P-4.13" "P-10.16" Black Label 2018 "P-10.17" Johnnie Walker USD "P-10.18" Black Label 6,804.00 "P-10.19" ''P-10.20'' J&B Rare USD Rawson Private 4,960.80 Release Shiraz Cabernet USD Beringer California 5,385.60 Chardonnay Beringer California USD Chardonnay 10,250.00 Beringer California Chardonnay USD Japanese Beer Asahi 3,290.00 Super Dry 15 03-Dec- "P-4.14" Japanese Beer Asahi AUD "P-4.15" Super Drv 12,750.00 2018 "P-4.16" Champagne Brut 85,410.00 "P-4.17" Charles Heidsieck USD 18,790.20 16 13-Dec- "P-4.18'' Reserve 2,475.00 18,790.20 2018 "P-4.19" 11,274.12 "P-4.20" USD 120,978.00 17 13-Dec- 2,475.00 120,978.00 2018 USD 1,485.00 18 13-Dec- 2018 HKD 85,500.00 19 18-Jul- 2018 HKD 85,500.00 20 30-0ct- 2018 21 15-Dec- EUR 79,515.24 2,B33,B61.14 2018 1'4,332,880.85 TOTAL

DECISION CTA Case No. 10765 For refund or credit of said excise taxes to be allowed, it must be established that cost of importing such alcohol products is lower than purchasing them locally. This requires us to determine the cost of importation thereof, followed by comparison of said cost, with the cost of such alcohol products' local purchase. First-off, the cost of importation of the liquor and alcohol products referred to in the immediately preceding table, is exhibited in the following presentation: No. Product Excise Tax Value No. of Price per Ave. Price Ave. Price Ave. Total Imported Paid (In Foreign Bottles Bottle Exch. per Exchang per Excise Importatio Curreny) (In Rate Bottle Bottle Tax Per n Cost Per Foreign (USD) e Rate (PHP) Bottle per per BSP (PHP) Bottle Currency) BSP62 (PHP)" (PHP) (USD) (A) (B) (C) (D=B/C) (E) (F-DxE) (G) (H-FxG) (1-A/C) IJ=H+I) 1 Hardy Stamp 65,700.00 AUD 7,900.00 2,400 AUD 3.29 0.7105 2.34 54.0086 126.31 27.38 153.69 RiesGwzt ROW Baliantines 21 YO Scotch Whisky 39,856.771H USD 5,529.60 72 USD 76.80 N/A 76.80 53.9419 4,142.74 553.57 4,696.30 Chivas Regal12 YO Scotch 2 Whisky 19,720.80" USD 2,736.00 120 USD 22.80 N/A 22.80 53.9419 1,229.88 164.34 1,394.22 Chivas Royal Salute 21 YO Scotch Whisky 16,996.2166 USD 2,358.00 30 USD 78.60 N/A 78.60 53.9419 4,239.83 566.54 4,806.37 Absolut Blue Vodka 7,628.8367 USD 1,058.40 84 USD 12.60 N/A 12.60 53.9419 679.67 90.82 770.49 Japanese Beer 3 Asahi Super Dry 100,663.20 HKD 68,400.00 12,000 HKD 5.70 0.12739 0.73 52.4134 38.06 8.39 46...!5 4 J&B Rare 35,949.31 USD 3,290.00 840 USD 3.92 N/A 3.92 52.4679 205.50 42.80 248.30 Baliantines 21 YO Scotch Whisky 27,468.596S USD 3,686.40 48 USD 76.80 N/A 76.80 52.7691 4,052.67 572.26 4,624.93 Chivas Regal12 5 YO Scotch Whisky 40,773.69" USD 5,472.00 240 USD 22.80 N/A 22.80 52.7691 1,203.14 169.89 1,373.03 Chivas Royal Salute 21 YO Scotch VVhisky 28,970.7870 USD 3,888.00 48 USD 81.00 'C:/A 81.00 52.7691 4,274.30 603.56 .!,877.86 Rawson's Retreat 85,410.00 AUD 12,750.00 3,000 USD 4.25 0.7249 3.08 52.4679 161.64 28.47 I 6 Private Release II Shiraz Cabarnet 190.11 7 Camus Cognac 66,759.36 USD 7,400.00 600 USD12.33 N/A 12.33 54.0086 665.93 111.27 ' VSOP Elegance 777.19 Martini Sweet Vermouth 10,512.0071 HKD 30,240.00 2,880 HKD 10.50 0.1275 1.34 54.0086 72.30 3.65 75.95 8 Matini Dry Vennouth 10,512.0072 HKD 30,240.00 2,880 HKD10.50 0.1275 1.34 54.0086 72.30 3.65 75.95 62 Exhibit "P-14." Id. at p. 888. 63 Exhibit "P-13." Id. at p. 887. 64 Represents pro-rated amount based on product value. 65 Represents pro-rated amount based on product value. 66 Represents pro-rated amount based on product value. 67 Represents pro-rated amount based on product value. 68 Represents pro-rated amount based on product value. 69 Represents pro-rated amount based on product value. 70 Represents pro-rated amount based on product value. 71 Represents pro-rated amount based on product value. 72 Represents pro-rated amount based on product value.

DECISION CTA Case No. 10765 Johnnie Walker Double Black 9 Label 83,056.2"J73 USD 12,484.80 408 USD30.60 N/A 30.60 52.8083 1,615.93 203.57 1,819.50 1,498.41 johnnie Walker 25.20 167.65 4.00 54.31 263.3-i Black Label 20,117.4374 USD 3,024.00 120 USD 25.20 N/A 52.8083 1,330.77 2,289.62 37.26 52.8083 211.23 334.75 10 Beefeater Gin 16,292.27 USD 1,200.00 300 USD 4.00 N/A 52.4679 2,256.54 36.72 1,954.87 329.92 Chivas Regal XV 80,341.07" USD 8,942.40 240 USD 37.26 N/A -1,531.78 11 CamusVSOP 1,345.37 Borderies 59,385.1876 USD 6,609.60 180 USD 36.72 N/A 52.4679 1,926.62 4,779.61 Baliantines 21 1,862.36 YO Scotch 1,5.f6.11 vVhisky 37,697.6177 USD 5,529.60 72 USD 76.80 N/A 76.80 52.1901 4,008.20 523.58 435.02 249.34 Cltivas Regal12 186.15 12 YO Scotch 226.35 Whisky 24,248.2078 USD 3,556.80 156 USD 22.80 N/A 22.80 52.1901 1,189.93 155.44 226.35 Cltivas Royal 226.35 Salute21 YO 46.87 47.32 Scotch \tVhiskv 46,385.7379 USD 6,804.00 84 USD 81.00 N/A 81.00 52.1901 4,227.40 552.21 1,789.45 Jolumie Walker Double Black 13 Label 32,009.4380 USD 4,960.80 156 USD 31.80 N/A 31.80 52.1122 1,657.17 205.19 Johnnie Walker 26.40 170.35 6.83 66.41 Black Label 34,750.4581 USD 5,385.60 204 USD 26.40 N/A 3.92 52.1122 1,375.76 38.07 53.9419 368.60 14 JW Black Label 99,618.8182 USD 10,250.00 1,500 USD 6.83 N/A 53.9419 211.27 J&B Rare 31,975.21 83 USD 3,290.00 840 USD 3.92 N/A Rawson Private 15 Release Shiraz Cabernet 85,410.00 AUD 12,750.00 3,000 AUD 4.25 0.7031 2.99 52.7691 157.68 28.47 Beringer 16 California Chardonnay 18,790.20 USD 2,475.00 660 USD 3.75 N/A 3.75 52.7691 197.88 28.47 Beringer 17 California Chardonnay 18,790.20 USD 2,475.00 660 USD 3.75 N/A 3.75 52.7691 197.88 28.47 Beringer 11,274.12 USD 1,485.00 396 USD 3.75 N/A 3.75 52.7691 197.88 28.47 18 California 8.07 8.07 Chardonnay 19 Japanese Beer 120,978.00 HKD 85,500.00 15,000 HKD 5.70 0.12742 0.73 53.4329 38.81 Asahi Super Dry Japanese Beer 120,978.00 HKD 85,500.00 15,000 HKD 5.70 0.1275 0.73 54.0086 39.25 20 Asahi Super Dry Champagne Brut 21 Charles Heidsieck Reserve 2,833,861.14 ECR 79,518.24 4,266 EUR 18.64 1.1439 21.32 52.7691 1,125.16 664.29 Meanwhile, we likewise examined the 2018 and 2019 Absolute Sales Corporation Price Lists,84 Future Trade International Inc Price List-effective November 30, 2017;85 and Minivan Enterprise Price Lists for 2018 and 2019,86 Our inspection thereof divulged that some of the 73 Represents pro-rated amount based on product value. 74 Represents pro-rated amount based on product value. 75 Represents pro-rated amount based on product value. 76 Represents pro-rated amount based on product value. 77 Represents pro-rated amount based on product value. 78 Represents pro-rated amount based on product value. 79 Represents pro-rated amount based on product value. 80 Represents pro-rated amount based on product value. 81 Represents pro-rated amount based on product value. 82 Represents pro-rated amount based on product value. 83 Represents pro-rated amount based on product value. " Exhibit "P-12" and "P-12.1." Id. at pp. 843-844. 85 Exhibits "P-12.2" and "P-12.3." Id. at pp. 845-863. 86 Exhibits "P-12.4" and "P-12.5." !d. at pp. 864-865.

DECISION CTA Case No. 10765 imported alcohol and liquor products may not be found on those price lists. Ponder on the following presentation: Total Retail Price/Bottle (In PHP) if Purchased Importation Domestical_!y_ From Cost Per No. Product Imported Bottle Absolute Future Trade Minivan Sales International Enterprise (In PHP) 153.69 Corporation Inc. 1 Hardy Stamp RiesGwzt ROW 4,696.30 None 340.00 None Ballantines 21 YO Scotch Whiskv 1,394.22 I Chivas Regal12 YO Scotch Whisky 4,806.37 None None None Chivas Royal Salute 21 YO Scotch 2 Whiskv 770.49 None None None Absolut Blue Vodka 46.45 3 Japanese Beer Asahi Super Drv 248.30 No1u None None 4 j&B Rare None None None Baliantines 21 YO Scotch Whisky 4,624.93 56.25 None None 5 Chivas Regal12 YO Scotch Whisky 1,373.03 None None None Chivas Royal Salute 21 YO Scotch 4,877.86 None None 6 Whisky None None None 7 Rawson1s Retreat Private Release Shiraz 190.11 None 8 Cabarnet Camus Cognac VSOP Elegance 777.19 None None None 9 Martini Sweet Vermouth 75.95 10 Matini Drv Vermouth 75.95 None 578.00 451.00 11 johnnie Walker Double Black label None None None johnnie Walker Black label 1,819.50 None None None 12 Beefeater Gin 1,498.41 None None Chivas Regal XV None 530.00 None 13 Camus VSOP Borderies 265.54 None None None 14 Baliantines 21 YO Scotch Whisky 2,289.62 None None None 15 Chivas Regal12 YO Scotch Whisky 2,256.54 None None None 16 Chivas Royal Salute 21 YO Scotch 4,531.78 None None None 17 Whisky 1,345.37 None None None 18 Johnnie VValker Double Black Label 4,779.61 None None None 19 Johnnie V\Talker Black Label None 20 jW Black label 1,862.36 21 j&B Rare 1,546.11 None None None Rawson Private Release Shiraz Cabernet None Beringer California Chardonnay 435.02 None None None Beringer California ChardOimay 249.34 None Beringer California Chardonnay 186.15 None None None japanese Beer Asahi Super Drv 226.35 None None None japanese Beer Asahi Super Dry 226.35 None None None Champagne Brut Charles Heidsieck 226.35 None None 451.50 Reserve 46.87 None None 579.00 47.32 54.58 None 579.00 1,789.45 54.58 None 579.00 None None None None None 2,650.00 None Carving out those liquor and alcohol whose importation costs are lower than purchasing them locally, the excise taxes paid by petitioner thereon, to the extent of P3,472,366.86, should be refunded or credited in favor of the latter. This conclusion is drawn from the following presentation: No. Product Total Importation Retail Price/Bottle (In PHP) if Purchased Amount of Imported Cost Per Bottle Domestically From Excise Taxes (In PHP) Paid I I Absolute Minivan Future Trade

DECISION CTA Case No. 10765 Sales International Enterprise Corporation Inc. I Hardy Stamp 153.69 None 340.00 None r 65,700.00 RiesGwzt ROW 38.06 56.25 None None 100,663.20 3 Japanese Beer Asahi Super Drv 161.64 None 578.00 451.00 85,410.00 72.30 None 530.00 None 10,512.00 6 Rawson's Retreat Private Release 157.68 None None 451.50 85,410.00 Shiraz Cabarnet 197.88 None None 579.00 18,790.20 8 Matini Dry Vermouth 197.88 None None 579.00 18,790.20 15 Rawson Private 197.88 None None 579.00 11,274.12 Release Shiraz 38.81 54.58 None None 120,978.00 Cabemet 39.25 54.58 None 120,978.00 None 16 Beringer California 1,125.16 None 2,650.00 None 2,833,861.14 Chardonnay 1'3,472,366.86 17 Beringer California Chardonnay 18 Beringer California Chardonnay 19 Japanese Beer Asahi Super Drv 20 Japanese Beer Asahi Super Drv 21 Champagne Brut Charles Heidsieck Reserve TOTAL WHEREFORE, the Petition for Review filed on February 14, 2022, in CIA Case No. 10765, is PARTIALLY GRANTED. Accordingly, the Commissioner of Internal Revenue is DIRECTED to REFUND or ISSUE a TAX CREDIT CERTIFICATE in favor of Philippine Airlines, Inc., the amount of P3,472,366.86, representing the latter's erroneously paid excise taxes on its importation of liquors and wines for the period July 2018 to April 2019. SO ORDERED. . ~ft.. r~ -r~�~ MARIAN IV~F. REY~S--FAfARDO Associate Justice

DECISION CTA Case No. 10765 WE CONCUR: ~�r- CATHERINE T. MANAHAN Associate Justice HENRY /J!iNGELES Associate Justice ATTESTATION I attest 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. 7. ~ /ft~<�-�.......-~- - - CATHERINE T. MANAHAN Associate Justice Chairperson CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, 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. Presiding Justice