PETRON CORPORATION v. COMMISSIONER OF INTERNAL REVENUE [consol with 10266 & 10267]

CTA Fonn No. 8 (For DCC) 1111111111111111111111 11111 11111 1111111111111111111111111 1111111111 1111111111111 I9-0006 I I-0105 REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FIRST DIVISION CTA CASE NOS. 10232, 10266 & 10267 PETRON CORPORATION, Petitioner, - versus- NOTICE OF RESOLUTION COMMISSIONER OF INTERNAL REVENUE, Respondent. To: OFFICE OF THE SOLICITOR GENERAL 134 Amorsolo Street, Legaspi V illage Makati City ATTY. SYLVIA R. ALMA JOSE ATTY. AYESHA HANIA B. GUILING-MAT ANOG ATTY. CLARISSA J. VJRTUDES-BABARAN Bureau of Intemal Revenue Room 703, Litigation Division, BIR National Office Building Sen. Miriam P. Defensor-Santiago Avenue Diliman, Quezon City DU-BALADAD AND ASSOCIATES 20th Floor, Chatham H ouse Rufmo corner Valero Streets Salcedo V illage, Makati City GREETINGS: You are hereby notified by these presents that on March 11, 2025,a Resolution was rendered in the above-entitled case, copy of which is attached hereto. Quezon City, Philippines, March 13, 2025. Atty. Mar Executiv

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS Quezon City FIRST DIVISION PETRON CORPORATION, CTA Case Nos. 10232, 10266 Petitioner, and 10267 Members: - versus - DEL ROSARIO, P.�L. Chairperson, BACORRO-VILLENA, and CUI-DAVID, JL COMMISSIONER OF INTERNAL REVENUE, Promulgated: ;J ~ ~op~. .,11 Respondent. MAR 11 2025 ' X-- -- ---- -- - - - ---- - --------- --- -- ------? -~ ~- - ---- - ---- - X RESOLUTION BACORRO-VILLENA, L.: For the Court's resolution are the following: 1. Respondent Commissioner of Internal Revenue's (respondent's/ CIR's) "Motion for Reconsideration (Re: Decision promulgated 15 August 2024)"1 (MR), filed on 10 September 2024, with petitioner Petron Corporation's (petitioner's/Petron's) "Comment (on Respondent's [MR] dated September 9, 2024)''2 (Comment), filed on 30 October 2024; and, 2 . Petitioner's "Motion for Partial Reconsideration (Re: Decision dated August 15, 2024)"3 (MPR), filed on 20 September 2024, with respondent's "Opposition (Re: [MPR] of the Decision dated~ August 2024)"4 (Opposition), filed on 15 October 2024 . D Division Docket, Volume IV, pp. 1597- 1604. 2 ld ., pp. 1630-1656. ld ., pp. 1608- 16 19. !d., pp. 1623- 1626.

RESOLUTION CTA Case Nos. 10232, 10266 and 10267 Petron Corporation v. Commissioner of Internal Revenue Page 2 of9 X------------------------------------------- -X Both respondent's MRS and petitioner's MPR6 seek the reconsideration, reversal, or setting aside of this Court's Decision7 promulgated on 15 August 2024 (assailed Decision). The dispositive portion of which reads as follows: WHEREFORE, with the foregoing premises, the consolidated Petitions for Review filed by petitioner Petron Corporation on 26 December 2019 (CTA Case No. 10232), II March 2020 (CTA Case No. 10267), and II March 2020 (CTA Case No. 10266), respectively, are hereby PARTIALLY GRANTED. Accordingly, respondent 1s ORDERED TO REFUND OR ISSUE TAX CREDIT CERTIFICATE in favor of petitioner the amount of f727>332>597�oo, representing petitioner's erroneously paid excise taxes for its locally-produced unleaded gasoline fuel and diesel fuel oil sold to Micro Dragon Petroleum, Inc., a tax-exempt entity, for the period from 01 January 2018 to 30 September 2018, or the 15' to 3'd Quarters ofTY 2018. SO ORDERED. In his or her MR, respondent once again asserts that claims for refund of excise taxes paid are authorized only by Section 13o(D)8 of the National Internal Revenue Code (NIRC) of 1997, as amended, and not by Section 135(c)9 of the NIRC of 1997, as amended. Moreover, respondent reiterated that petitioner is liable to pay excise tax on locally-produced unleaded gasoline fuel and diesel fuel oil subsequently sold and delivered to Micro Dragon Petroleum, Inc. (MD PI) because the latter failed to meet the conditions prescribed in its Subic Bay~ D Metropolitan Authority (SBMA)-issued Certificate of Registration and Supra at note I. Supra at note 3. Division Docket, Volume IV, pp. 1545-1596. SEC. 130. Filing ofReturn and Payment ofExcise Tax on Domestic Products. - (D) Credit for Excise Tax on Goods Actually Exported. -When goods locally produced or manufactured are removed and actually exported without returning to the Philippines, whether so exported in their original state or as ingredients or parts of any manufactured goods or products, any excise tax paid thereon shall be credited or refunded upon submission of the proof of actual exportation and upon receipt of the corresponding foreign exchange payment: Prov;ded, That the excise tax on mineral products, except coal and coke, imposed under Section 151 shall not be creditable or refundable even if the mineral products are actually exported. (Emphasis supplied) SEC. 135. Petroleum Products Sold to !nternulhmal Carriers and Exempt Entities or Agendes. - Petroleum products sold to the following are exempt from excise tax: (c) Entities which are by law exempt from direct and indirect taxes.

RESOLUTION CTA Case Nos. 10232, 10266 and 10267 Petron Corporation v. Commissioner of Internal Revenue Page 3 of9 X--------------------------------------------X Tax Exemption10, particularly that MDPI's sales within the customs territory exceeded the 30% threshold. Thus, the excise taxes paid were not erroneously or illegally paid. In its Commentn, petitiOner contends that the arguments in respondent's MR are mere rehash of those previously raised in respondent's Answer'2 dated 20 January 2020 and Memorandum'3 dated 10 May 2023. In the assailed Decision,'4 the Court has already thoroughly examined and passed these arguments. On the other hand, petitioner, in its MPR's, insists that it has fully complied with the legal requirements and has established, by a preponderance of evidence, its entitlement to a refund, including the amount of'P46,s67,625.oo, which this Court disallowed. The excise tax payments (subject of the present refund claims) represent petitioner's erroneous excise tax payments on its locally-produced unleaded gasoline fuel and diesel fuel oil, which were sold to MDPI, a tax-exempt entity, for the period from 01 January 2018 to 30 September 2018, or the I 5t to 3'd Quarters of the taxable year (TY) 2018. In respondent's Opposition'6, it is argued that this Court has already categorically ruled that the amount of1'46,s67,625.oo should be disallowed for failure to verify that it formed part of the excise tax payments subject of the present refund claims. Respondent asserts that claims for tax refunds are in the nature of tax exemptions and must therefore be strictly construed against the claimant. Consequently, such claims cannot be allowed unless granted in the most explicit and categoriallanguage. We resolve.t 10 See Ce11itlcate of Registration and Tax Exemption No. 2006-0048 dated 27 October 2017, Exhibit "P-884", USB (Exhibit "P-124-B"); Included under Exhibit "R-5", B1R Records (CTA Case No. 10232), pp. 3-4/Exhibit "R-8", BIR Records (CTA Case No. 10267), pp. 3-4/Exhibit "R-4", BIR Records (CTA Case No. 10266), pp. 304-305. II Supra at note 2. Division Docket, Volume I, pp. 64-72. !d., Volume IV, pp. 1468-1476. Supra at note 7. Supra at note 3. "' Supra at note 4.

RESOLUTION CTA Case Nos.10232, 10266 and 10267 Petron Corporation v. Commissioner of Internal Revenue Page 4 of9 X------------------------------------------- -X After a careful consideration of the parties' arguments, this Court finds no merit in both respondent's MR'7 and petitioner's MPR.'8 RESPONDENT'S MOTION FOR RECONSIDERATION As petitioner correctly argues, a cursory review of the instant MR immediately reveals that respondent merely rehashed his or her previous arguments (reiterating word-for-word the grounds and discussion in his or her Answer'9 and Memorandum20) that this Court has already considered and passed upon in the assailed Decision.2 ' Given that respondent raises an issue that has already been resolved, this Court finds the instant MR unworthy of further consideration. In the case of The Department of Energy v. Commissioner of Internal Revenue22, the Supreme Court, citing Shangri-la International Hotel Management, Ltd., eta/. v. Developers Group ofCompanies, Inc. 23, held that, while an MR, by its nature, may tend to dwell on issues already resolved in the decision or resolution sought to be reconsidered, a circumstance which should not be an obstacle for a reconsideration, litigants must still raise matters substantially plausible or compellingly persuasive to warrant a reversal of the Court's previous ruling. Furthermore, as held in Social justice Society (S]S) Officers, eta/. v. Alfredo S. Lim24, when the grounds relied on are mere reiterations of the issues already passed upon by the Court, there is no need to 'cut and paste' pertinent portions of the assailed Decision or re-write the ponencia in accordance with the outline of the MR. Accordingly, since the instant MR fails to present any new or substantial legal ground that would warrant reconsideration 9f the assailed Decision, this Court finds the same to be without merit.t 17 Supra at note I. I~ Supra at note 3. 19 Supra at note 12. 10 Supra at note 13. Supra at note 7. G.R. No. 260912 (Resolution), 30 August 2023. G.R. No. 159938,22 January 2007. G.R. No. 187836 (Resolution), 10 March 2015.

RESOLUTION CTA Case Nos. 10232, 10266 and 10267 Petron Corporation v. Commissioner of Internal Revenue Page 5 of9 X------------------------------------------- -X PETITIONER'S MOTION FOR PARTIAL RECONSIDERATION Petitioner assails the Court's disallowance amounting to t'46,s67,625.oo (out of the total excise tax payments of t'773,902,402.0025) corresponding to petitioner's erroneous excise tax payments on its locally-produced unleaded gasoline fuel and diesel fuel oil subsequently sold and delivered to MDPI, a tax-exempt entity, for the period from 01 January 2018 to 30 September 2018, or the 1'' to 3rd Quarters of TY 2018. As explained in the assailed Decision26, this Court could not verify whether the excise tax payments, amounting to 1'46,s67,62s.oo (corresponding to the removals oflocally produced diesel fuel oil with a total volume ofr8,627,050 L@ air), were included in the total excise tax payments of I'773,902,402.oo (adjusted to I'773,900,222.oo) that are subject of the present refund claims. This determination could not be made by reconciling petitioner's Excise Tax Returns (ETRs) with the Official Register Books (ORBs) in petitioner's Computerized Accounting System (CAS) or the SAP-generated ORBs, viz: However, upon further verification, this Court finds that the following removals of locally-produced diesel fuel oil with the total volume of 18,627,050 L @ air and corresponding alleged excise tax payments in the aggregate amount of 1"46,567,625.oo should be disallowed, to wit: Exhibit No. Total Locally-Produced Unleaded Gasoline Fuel and Diesel Fuel Oil Date Withdrawn Removed from the PBR for Sale & 25 Aprilzm8 Delivery to MDPI oz May 2018 ETR SAP-generated coc we 17 May 2018 Volume Excise Tax ORB 26 May 2018 (in L@ air) "P�399 " "P�983" "P- 950" "P-46o" "P-toi6" "P�984' "P- 95�" Total 4,so8,8so PU,272,125.00 "P-474 " "P-1ot7" "P�98s" "p. 953" "P�489" "P�987'' "P- 954" 3,011,)60 7.sz8o4oo.oo "P-1019" ?,519,877.50 3,007,951 20,247,222.50 "P-1020" 8,og8,889 f'46,s67,62s.oo t8,627,050 The said removals of 18,627,050 L@ air from the PBR that were subsequently sold to MOP! cannot be verified by reconciling petitioner's ETRs with its SAP-generated ORBs. Specifically, the U aforementioned removals oflocally-produced diesel fuel oil cannot be~ found in or traced within the detailed transaction listings in the Adjusted to 1'773,900,222.00. Supra at note 7.

RESOLUTION CTA Case Nos. 10232, 10266 and 10267 Petron Corporation v. Commissioner of Internal Revenue Page 6 of9 X------------------------------------------- -X corresponding SAP-generated ORBs, which reflect the breakdown of the amounts paid per ETR. This observation, coupled with the fact that the amounts paid per the corresponding ETRs tied up with the SAP-generated ORBs, suggests that these removals fall outside the scope of the subject refund claims. As a result, the Court cannot ascertain whether these removals are indeed part of the excise tax payments totalling 1"773,902,402.oo (with an adjusted amount of f"773.900,222.oo), which are the subject of the present refund claims. Proof of payment of the subject taxes is essential in refund cases. While the collection of taxes may theoretically be found to be illegal or erroneous, the claimant cannot be refunded amounts that were not actually paid or remitted to the government.27 Petitioner now asserts that, based on the procedure carried out by the court-commissioned Independent Certified Public Accountant (ICPA), the ICPA successfully validated, confirmed, and traced the subject removals and the corresponding excise tax payments, amounting to P46,s67,625.oo, using the exhibits submitted to this Court. We quote below the pertinent portions of petitioner's arguments in its MPR:28 9� Petitioner respectfully submit that the removals of locally- produced diesel fuel oil with the total volume of 4,so8,85o L@ air can be traced with Exhibits P-1016, P-983 and P-950, to wit: SAP- eoe we generated P-qo;o 4,')08,8')0 ORB SL-PanAsia [MOP!] P-ror6 P-q81 Volume (in L@ air) 1'),872,7'i0 4,')08,8')0 Delivered from eonsie:nee PBR SL-PanAsia SL-PanAsia [MOP!] 10. Further, Petitioner respectfully submit that the removals of locally-produced diesel fuel oil with the total volume of 3,0n,36o L@ air can be traced with Exhibits P-1017, P-984 and P-951, to wit: Volume (in L@ air) SAP- eoe we Delivered from generated Consie:nee P-984 P-<J'il ORB 1,0ll;'l60 1,011,160 P-1017 SL-PanAsia SL-PanAsia [MOP!] ro,ooS,o;u [MOP!] PBR SL-PanAsia Supra at note 7, pp. 1591-1592; Citations omitted and italics in the original text. Supra at note 3, pp. 1612-1614.

RESOLUTION CTA Case Nos. 10232, 10266 and 10267 Petron Corporation v. Commissioner of Internal Revenue Page 7 of9 X------------------------------------------- -X 11. Furthermore, Petitioner respectfully submit that the removals of locally-produced diesel fuel oil with the total volume of 3,007,951 L @ air can be traced with Exhibits P-1019, P-985, P-953, to wit: Volume (in L@ air) SAP- coc we Delivered from generated Consignee P-98~ P-9~1 ORB P-1019 j,OO?,Q'i1 1,007,951 SL-PanAsia SL-PanAsia 6,00?,288 [MOP!] [MD PI] PBR SL-PanAsia 12. Lastly, Petitioner respectfully submit that the removals of locally-produced diesel fuel oil with the total volume of 8,098,889 L @air can be traced with Exhibits P-1020, P-987, P-954, to wit: Volume (in L@ air) SAP- coc we Delivered from generated Consig_nee P-987 P-9'i4 ORB 8,oq8,889 8,oq8,88g P-1020 SL-PanAsia SL-PanAsia [MD PI] [MD PI] 9,00j,482 PBR SL-PanAsia However, this Court notes that petitioner has still failed to provide a reconciliation that would confirm that the said removals of locally produced diesel fuel oil with a total volume of 18,627,o5o L @ air can be found in or traced within the detailed transaction listings in the corresponding SAP-generated ORBs, which reflect the breakdown ofthe amounts paid per ETR. Again, as explained in the assailed Decision, the aforesaid lack of reconciliation coupled with the fact that the amounts paid per the corresponding ETRs tied up with the SAP-generated ORBs29, suggests that these removals fall outside the scope of the subject refund claims.t Excise Tax Exhibit Excise Tax Exhibit Net Net Amount Difference Payments No. Payments per No. Adjustments Filed and Paid lei~ lal- per ETR SAP-generated ldl ~ lbl-lcl "P-399" "P-I 0 16'' Jcl ldl Ia I "P-460" ORB "P-1017" I' I03,776,249.50 '"P-474" fbi "P-I 0 19" (1'3,819,934.50) 76,746,540.53 1'- I' I03,776,249.50 "P-489" "P-I 020" 1'?,353,532.50 81,671,341.00 (0 OJ) 76,746.540.52 1'1 07,596,184.00 93,464,773.80 81,671.341.00 74,393.008.03 (I' I5,793,079.00) - 93,464,773.80 97,464,420.00 (1'8,039, I88.00) 101,503,961.80

RESOLUTION CTA Case Nos. 10232, 10266 and 10267 Petron Corporation v. Commissioner of Internal Revenue Page 8 of9 X------------------------------------------- -X Thus, the Court remains unable to determine whether the excise tax payments corresponding to the removals of locally produced diesel fuel oil with a total volume of 18,627,050 L @ air, amounting to r46,567,6zs.oo, were included in the excise tax payments totalling r773,902,402.oo (with an adjusted amount of r773,90o,zzz.oo), which are the subject of the present refund claims. Moreover, it bears stressing that this Court is not bound by the findings of the court-commissioned ICPA. The ICPA Report is a tool or guide to aid the Court in the resolution of the case. It is only persuasive in nature and not conclusive upon the Court. Section 3, Rule 13 of the Revised Rules of the Court of Tax Appeals (RRCTA), provides: SEC. 3� Findings of independent CPA. - The submission by the independent CPA of pre-marked documentary exhibits shall be subject to verification and comparison with the original documents, the availability ofwhich shall be the primary responsibility ofthe party possessing such documents and, secondarily, by the independent CPA. The findings and conclusions of the independent CPA may be challenged by the parties and shall not be conclusive upon the Court, which may. in whole or in part. adopt such findings and conclusions subject to verification. (Emphasis supplied) Thus, while the ICPA is commissioned to assist the Court in determining the merits of a taxpayer's case, its findings and conclusions are not conclusive upon the Court. The Court remains free to either fully or partially adopt, or entirely disregard, the ICPA's findings after conducting its own verification and evaluation of the evidence on record. In other words, the Court will still examine and verify the documents audited or reviewed by the ICPA. Moreover, in the exercise of its sound discretion, the Court may render judgment without considering the ICPA Report. Clearly, petitioner cannot rely solely on the !CPA's findings to substantiate its claim, as the ultimate determination rests with the Court based on the evidence submitted by the parties. This Court reiterates, for emphasis, that proof of payment of the subject taxes is essential in refund cases. While the collection of taxe~~ may theoretically be found to be illegal or erroneous, the claimantU

RESOLUTION CTA Case Nos. 10232, 10266 and 10267 Petron Corporation v. Commissioner of Internal Revenue Page 9 of9 x~-------------------------------------------x cannot be refunded amounts that were not actually paid or remitted to the government. In this case, petitioner failed to fully substantiate the present refund claims, as it did not provide proof demonstrating that the disallowed excise tax payments corresponding to the removals of 18,627,050 L @ air of locally produced diesel fuel oil were indeed paid and remitted to the Bureau oflnternal Revenue (BIR). Given this crucial consideration, the Court affirms the disallowance ofP46,567,625.oo. In light ofthe foregoing discussion, this Court finds no compelling reason to modify or overturn the assailed Decision.3� WHEREFORE, premises considered, respondent's "Motion for Reconsideration (Re: Decision promulgated 15 August 2024)" and petitioner's "Motion for Partial Reconsideration (Re: Decision dated August 15, 2024)" are DENIED for lack of merit. SO ORDERED. WE CONCUR: Presiding Justice ON LEAVE LANEE S. CUI-DAVID Associate Justice 30 Supra at note 7.