PETRON CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS Quezon City SPECIAL SECOND DIVISION PETRON CORPORATION, CTA CASE NO . 9947 Petitioner, Members: -versus- BACORRO-VILLENA, Acting Chairperson, and CUI-DAVID,lL. COMMISSIONER OF Promulgated: INTERNAL REVENUE, Respondent. MARQ51:9U J( - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - RESOLUTION BACORRO-VILLENA, L.: For the Court's resolution is respondent Commissioner oflnternal Revenue's (respondent's/CIR's) "Motion for Reconsideration (Re: Decision promulgated [27 September] 2023)" (MR) filed on 17 October 2023, with petitioner Petron Corporation's (petitioner's/Petron's) "Opposition (to Motion for Reconsideration dated 17 October 2023)" (Opposition) filed on 03 November 2023. In his or her MR, respondent assails this Court's Decision dated 27 September 2023 (assailed Decision), finding petitioner entitled to a refund ofP43,912>370.oo, representing erroneously paid eJ(cise taJ(es on importations ofalkylate. Taking into account that refund is in the nature of a taJ( eJ(emption and should be construed strictissimi juris against the claimant, respondent insists that petitioner is liable to pay eJ(cise ta)(es since alkylate is a product of distillation, and falls within the category of r naphtha, regular gasoline and other similar products of distillation0

RESOLUTION CTA CASE NO. 9947 Petron Corporation v. Commissioner of Internal Revenue Page 2 ofB X------------------------------------------- --X hence, subject to excise tax under Section 148(e)' of the National Internal Revenue Code (NIRC) of1997, as amended. In support of his or her position, respondent cites the Court En Bane's ruling in Petron Corporation v. Commissioner of Internal Revenue.2 There, the Court En Bane sustained the Court in Division's finding that since alkylate cannot be produced without the raw material 'isobutane', which is a product of distillation, it logically follows that alkylate itself, although indirectly, is a product of distillation. Consequently, it still falls under the purview of excise tax as outlined in Section 148(e) of the NIRC of1997, as amended. Respondent also cites the dissent of Associate Justice Erlinda P. Uy (Ret.) in the more recent case of Commissioner of Internal Revenue v. Petron Corporation3, stating that "[w]hile it is true that ~lkylation, not distillation, is the process which produce alkylate, however, it is also true that isobutane - one of the raw materials of alkylate, is a product of distillation. In other words, alkylate cannot be produced without isobutane, which is a product of distillation. Hence, alkylate is subject to excise tax under Section 148 (e) of the NIRC ofl997, as amended". Further, respondent cites the dissent of Associate Justice Juanita C. Castaneda, Jr. (Ret.) in the earlier case of Petron Corporation v. Commissioner of Internal Revenue4, stating that "while alkylate is not directly produced through the process of distillation but by alkylation, still, it can not be d enied that its very existence owleafsindsearinvdedisfroobmutthaen~1 utili zation of these two r aw materials, namely, SEC. 148. Jv/am~factured Oils and Other Fuels.- There shall be collected on refined and manufactured mineral oils and motor fuels, the following excise taxes which shall attach to the goods hereunder enumerated as soon as they are in existence as such: (e) Naphtha, regular gasoline and other similar products of distillation, per liter of volume capacity, Four pesos and thirty-five centavos (P4.35): Provided, however, That naphtha, when used as a raw material in the production of petrochemical products or as replacement fuel for natural-gas-fired- combined cycle power plant, in lieu of locally-extracted natural gas during the non-availability thereof. subject to the rules and regulations to be promulgated by the Secretary of Energy, in consultation with the Secretary of Finance, per liter of volume capacity, zero (PO.OO): Provided, further, That the by-product including fuel oil, diesel fuel, kerosene, pyrolysis gasoline, liquefied petroleum gases and similar oils having more or less the same generating power. which are produced in the processing of naphtha into petrochemical products shall be subject to the applicable excise tax specified in this Section, except when such by-products are transferred to any of the local oil refineries through sale, bm1er or exchange, for the purpose of fU!iher processing or blending into finished products which are subject to excise tax under this Section[.] CTA EB Case No. 2425 (CTA Case Nos. 9565, 9606 & 9645), 21 June 2022. CTA EB Case No. 2527 (CTA Case Nos. 9327 & 9460), 20 April2023. CTA Case Nos. 9327 & 9460 (Amended Decision), 15 February 2021.

RESOLUTION CTA CASE NO. 9947 Petron Corporation v. Commissioner of Internal Revenue Page 3 ofS X------------------------------------------- --X which are both products of crude oil distillation. Thus, alkylate would not have come into existence without the presence of the said raw materials". Lastly, respondent acknowledges the Supreme Court's recent decision in Petron Corporation v. Commissioner of Internal Revenue5 (Petron), which categorically held that 'alkylate' is not among the articles covered by Section 148(e)6 of the NIRC of 1997, as amended, as it does not fall under the category of "other similar products of distillation". However, respondent nonetheless submits that the same has not yet attained finality since an MR seeking its reversal is still pending with the Supreme Court. According to respondent, Petron cannot serve as a binding precedent as the principle of stare decisis applies only to final decisions of the Supreme Court. On the other hand, in its Opposition, petitiOner echoes this Court's findings in the assailed Decision. Specifically, petitioner puts forward the following countervailing arguments: 1. The instant MR should be denied outright for being pro forma as it failed to comply with the requirements for an MR under Section 2 7, Rule 37 of the Rules of Court, as amended, and respondent's sole argument is a mere rehash of his or her argument that has already been passed upon and rejected by this Court. La The instant MR failed to comply with Section 2, Rule 37 of the Rules of Court, as amended, as it does not point out specifically the findings or conclusions in the assailed Decision which are purportedly not supported by the 1 evidence, or which are contrary to law. Neither does it mak8 G.R. No. 255961.20 March 2023. 6 Supra at note I. Sec. 2. Contents ofmotionfor new u�ial or recom;ideration and notice thereof- The motion shall be made in writing stating the ground or grounds therefor, a written notice of which shall be served by the movant on the adverse party. A motion for reconsideration shall point out specifically the findings or conclusions of the judgment or final order which are not supported by the evidence or which are contrary to law, making express reference to the testimonial or documentary evidence or to the provisions of law alleged to be contrary to such findings or conclusions. A pro forma motion for new trial or reconsideration shall not toll the reglementary period of appeal. (Emphasis supplied)

RESOLUTION CTA CASE NO. 9947 Petron Corporation v. Commissioner of Internal Revenue X------------------------------------------- --X express reference to the testimonial or documentary evidence or to the provisions of law alleged to be contrary to this Court's such findings or conclusions. 1.b Respondent has the burden of presenting matters substantially plausible or compellingly persuasive to warrant reconsideration. LC The instant MR essentially raises a single ground for the reversal of the assailed Decision-that alkylate is a product of distillation because its raw materials are supposedly products of distillation-which this Court has already passed upon and rejected in the assailed Decision. 1.d Respondent does not address any of this Court's findings and conclusions in the assailed Decision. Instead, he or she merely quotes, without explanation or context, the Court En Bane's Decision in CTA EB Case No. 2425 and the dissent of Associate Justice Erlinda P. Uy (Ret.) in CTA EB Case No. 2527. 2. Respondent no longer disputes the applicable rule of statutory construction that Section 148(e)8 of the NIRC of1997, as amended, shall be construed strictly against the government and liberally in favor of the taxpayer. Therefore, for such a provision to apply, it should "clearly, expressly, and unambiguously" cover alkylate. If there is any doubt about whether it covers alkylate, such doubt should be resolved in petitioner's favor. 2.a As held in Commissioner ofInternal Revenue v. Fortune Tobacco Corporation9, the rule on strict interpretation in the imposition of taxes applies to a claim for refund premised on the erroneous payment of tax or the government's exaction of a tax in the absence of a law. Accordingly, in case of doubt, a tax statute must be construed "most strongly" against the government and in favor of the taxpayer. The rule on strict construction of tax exemptions would apply only if a claim for refund is based on a tax exemption statute or a tax refund statuti:J'' Supra at note I. 9 G.R. Nos. 167274�75, 21 July 2008.

RESOLUTION CTA CASE NO. 9947 Petron Corporation v. Commissioner of Internal Revenue Page 5 ofB X------------------------------------------- --X 2.b A plain reading of Section 148(e)10 of the NIRC of 1997, as amended, shows that alkylate is not found in the enumeration of excisable articles as it only imposes excise tax on (a) regular gasoline, (b) naphtha, and (c) other similar products of distillation. Applying the principle of expressio unius est exclusio alterius, the exclusion of 'alkylate' from Section 148(e) is Congress' refusal to "clearly, expressly, and unambiguously" impose any excise tax thereon. 2.c Assuming there is any doubt about whether Section 148(e) of the NIRC of1997, as amended, covers alkylate, such doubt would have to be resolved in petitioner's favor. 3� This Court correctly ruled that alkylate is not a product of distillation and is not similar to naphtha or regular gasoline. 3.a. The case records are replete with evidence supporting this Court's ruling that alkylate is not a product of distillation. It can only be produced by alkylation, and distillation is not a part of the process to produce alkylate. 3.b. Respondent's theory that alkylate is still a product of distillation because its raw materials are supposedly products of distillation, without pointing to any documentary or testimonial evidence to support such a position, is untenable. This is because the applicable rule of construction is the strict interpretation of tax laws against the government. 3.c The Supreme Court categorically held in Petron that "it is incorrect to say that both raw materials [i.e., olefins and isobutane] utilized to produce alkylate are products of distillation, much more to declare alkylate as a product of distillation simply because its raw materials are produced through distillation. To be sure, [Section 148(e) of the NIRC of1997, as amended], imposes excise tax on naphtha, regular gasoline, and other similar products of distillation only, and not on the raw materials or ingredients used for their production"3 10 Supra at note I.

RESOLUTION CTA CASE NO. 9947 Petron Corporation v. Commissioner of Internal Revenue Page 6 of8 x--------------------------------------- ------ x 3.d Respondent failed to refute petitioner's evidence that alkylate differs from naphtha and regular gasoline in terms of (a) their nature or properties and (b) their intended use or purpose. 3.e The Supreme Court has also declared in Petron that "[c]onsidering the intended purpose and nature ofalkylate, it certainly cannot be placed under the same category as naphtha and regular gasoline". Petitioner also notes that while the Supreme Court's decision in Petron has yet to attain finality, it should nonetheless be given great persuasive value since it was rendered by the Highest Court of the Land. Under Section 1", Rule 129 of the Revised Rules on Evidence, as amended, this Court is mandated to take judicial notice of Petron, it being an official act of the judiciary. We resolve. A simple cursory of respondent's MR immediately reveals that he or she merely rehashed his or her previous arguments which the Court has already exhaustively considered and passed upon in its assailed Decision. Considering that he or she forwards similar issues already resolved, We deem that respondent's MR deserves scant consideration. In Shangri-la International Hotel Management, Ltd., et al. v. Developers Group of Companies, Inc.", the Supreme Court made clear that it is incumbent upon the respondent-movant to raise substantially plausible matters to warrant the relief sought, thus: The bulk of the aforementioned grounds is a mere rehash of movant's previous arguments. While DGCI is correct in stating that a motion for reconsideration, by its very nature, may tend to dwell on issues already resolved in the decision sought to be reconsidered and that ' this should not be an obstacle for a reconsideration, the hard reality i~ II Sec. 1. Judicial notice, when mandatory. - A court shall take judicial notice, without the introduction of evidence, of the existence and tenitorial extent of states, their political history, fonns of government and symbols of nationality, the law of nations, the admiralty and maritime couns of the world and their seals. the political constitution and history of the Philippines. the official acts of the legislative, executive and judicial departments of the Philippines, the laws of nature, the measure of time, and the geographical divisions. (Emphasis and underscoring supplied) 12 G.R. No. 159938,22 January 2007; Citation omitted.

RESOLUTION CTA CASE NO. 9947 Petron Corporation v. Commissioner of Internal Revenue Page 7 ofB X--------------------------------------------- X that movant has failed to raise matters substantially plausible or compellingly persuasive to warrant the desired cause of action. Considering that the grounds presently raised have been sufficiently considered, if not squarely addressed, in the subject Decision, it behooves movant to convince the Court that certain findings or conclusions in the Decision are contrary to law. As it is, however, the instant motion does not raise any new or substantial legitimate ground or reason to justify the reconsideration sought. Further, as correctly pointed out by petitioner, the instant MR should be denied outright as it lacks compliance with Section 2'3, Rule 37 of the Rules of Court, as amended. Indeed, it does not specify the findings or conclusions in the assailed Decision that lack evidence or contradict the law, nor does it reference evidence or laws contrary to this Court's findings. Respondent's burden to present compelling reasons for reconsideration has not been met. Additionally, the instant MR essentially reiterates an argument already addressed and dismissed by the Court. It is also worth noting that the Supreme Court's decision in Petron, though not final, carries significant persuasive value and should be considered as an official act of the judiciary. That being said, this Court, is bound to take mandatory judicial notice of the same in the resolution of the case, pursuant to Section 1'4, Rule 129 of the Revised Rules on Evidence, as amended. For this reason, the objection to such recognition interposed by respondent is of no moment. Clearly from the Supreme Court's ruling in Petron and the testimonies of petitioner's expert witnesses, alkylate is not among the articles covered by Section 148(e)'5 of the NIRC ofl997, as amended, as it does not fall under the category of "other similar products of distillation" subject to excise tax. Moreover, Section 148(e) of the NIRC of 1997, as amended, imposes excise tax on naphtha, regular gasoline, and other similar products of distillation only, and not on the raw materials or ingredients used for their production. Hence, petitioner's excise tax paym~ts upon its importation of alkylate are deemed illegal and erroneous3' 13 Supra at note 7. Supra at note I I . 15 Supra at note 1.

RESOLUTION CTA CASE NO. 9947 Petron Corporation v. Commissioner of Internal Revenue Page 8 ofS X�------------------------------------------- -X Accordingly, there being no new matters raised that would have compelled this Court to revisit its prior ruling and/or reverse the same, respondent's "Motion for Reconsideration (Re: Decision promulgated [27 September]2023)" is DENIED for lack of merit. SO ORDERED. JEAN MA~R~a-t~e~JusLticLe ENA I CONCUR: ~(hi! LANEE S. CUI-DiVID Associate Justice