TANDUAY DISTILLERS, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS Quezon City ENBANC TANDUAY DISTILLERS, INC., CTA EB NO. 2101 Petitioner, (CTA Case Nos. 9017 & 9035) -versus- Present: DEL ROSARIO, U, CASTANEDA, JR., UY, RINGPIS-LIBAN, MANAHAN, BACORRO-VILLENA, and MODESTO-SAN PEDRO, fl. COMMISSIONER OF INTERNAL REVENUE, Respondent. X---- - --------- ----------------------- RESOLUTION BACORRO-VILLENA, L: Before the Court En Bane is Tanduay Distillers, Inc.'s (petitioner's) Motion for Reconsideration (MR) filed on 16 November 2020\ with respondent Commissioner of Internal Revenue's (respondent's) Opposition/Comment thereto filed on 16 December 202o.2 The MR seeks the reversal of the Court En Bane's Decision promulgated on 14 October 2020 (assailed Decision). The dispositive portion of the assailed Decision reads/ Rollo, pp. 16 1-1 81. 2 Jd., 191-195. @!)

RESOLUTION CTA EB NO.ll.l!.l (CTA Case Nos. 9017 & 9035) Tanduay Distillers, Inc. v. CIR Page 2 of7 X-----------------���----------- �--X WHEREFORE, with the foregoing, petitioner Tanduay Distillers, Inc.'s Petition for Review is DENIED for lack of merit. Accordingly, the Decision dated 07 February 2019 and Resolution dated 28 June 2019 of the Special Second Division in CTA Case Nos. 9017 and 9035, similarly entitled Tanduay Distillers, Inc. v. Commissioner ofInternal Revenue, are hereby AFFIRMED. SO ORDERED. In the instant MR, petitioner reiterates its argument that the Court erroneously brushed aside the stipulations reached by the parties which carries with it the admission of the correctness of the factual issues of the case, including the nature and volume of tax-paid raw materials factored in the production of finished goods (for which excise taxes were paid anew in 2013 and became the subject of the present claim for refund). According to petitioner, respondent's witness, Revenue Officer Evangeline M. Casipe (RO Casipe) stated in her Judicial Mfidavit3 that the only reason for the denial of petitioner's claim for refund was the stringent provision of Revenue Memorandum Circular (RMC) No. 3- 2013.4 Petitioner further claims that the case records are bereft of any indication that the cause for the denial was due to factual reasons as nothing was discussed relative to any perceived deficiency in the volume of tax-paid raw materials used to produce the finished goods. Petitioner also imputes error upon the Court En Bane as to its finding that the former failed to prove the actual payment of excise taxes passed on by its local suppliers and the remittance thereof to the Bureau of Internal Revenue (BIR). In support of such allegation, petitioner claims that it was able to present the pertinent documents such as accounts payable vouchers (APV), sales invoices, delivery receipts and local suppliers' confirmation letters as contained in the sub markm. gs of Exh1'bI' ts "P-41-2"5, "P-41-3"6 and "P-41-4"7, wh1' ch, m. turn, provides the summary of the foregoing documents relative to ity' 4 Division Docket {CTA Case No. 9017), Volume V, pp. 2635-2639. Clarifying Certain Provisions of Revenue Regulations No. 17-2012 Implementing the Provisions of Republic Act No. 10351 as well as the Provisions of Revenue Memorandum Circular No. 90- 2012 Providing the Initial Tax Classifications of Alcohol and Tobacco Products. 6 Summary of Alcohol 140%- Asian Alcohol. Summary of Alcoholl89%- Absolut (Purchases). 7 Summary of Alcoholl89%- Kooll Company (Purchases). w

RESOLUTION CTA EB NO. 2.1lU (CTA Case Nos. 9017 & 9035) Tanduay Distillers, Inc. v. CIR Page 3 of7 X� ---------------------------------x purchases from Asian Alcohol, Absolut Distillers and Kooll Company, respectively. As to the raw materials imported from January to February 2013, petitioner contends that since Exhibits "P-43.1" to "P-43.8"8 clearly give reference to the entry number of the import transactions and even mentioned the Central Bank Release Certificate (CBRC), the sam~ have probative value for purposes of proving the importations and the payment of excise taxes. Additionally, petitioner insists that these entries in Exhibits "P-43.1" to "P-43.8" were made at or near the time of transaction by persons who were in the position to know the facts stated therein and therefore these are considered as prima facie evidence of the transactions as the entries have been entered in the ordinary or regular course of business. Lastly, petitioner maintains its position that since the figures Oi1 the volume of tax-paid alcohol raw materials and the volume of finished goods removed are already presented in proof liters, there is no more need for a conversion factor. Considering that both raw materials and finished goods are already presented in proof liters, there is already a one-to-one (1:1) relationship such that one (1) proof liter of raw material is the same one (1) proof liter of finished goods, citing Section 1419 of the National Internal Revenue Code (NIRC) of 1997, as amended. Petitioner further asserts that it did not present an expert witness to explain the essence of a proof liter considering that the law already provides for its definitioy 8 9 SEC. 141. Distilled Spirits. -On distilled spirits, subject to the provisions of Section 133 of this Code, an excise tax shall be levied, assessed and collected based on the following schedules: 'Proof spirits' is liquor containing one�half (1/2) of its volume of alcohol of a specific gravity of seven thousand nine hundred and thirty-nine ten thousandths (0.7939) at fifteen degrees centigrade (15�C). A 'proof liter' means a liter of proof spirits. ~

RESOLUTION CTA EB NO.llJll (CTA Case Nos. 9017 & 9035) Tanduay Distillers, Inc. v. CIR Page4of7 X--------�-------------------���-- -X On the other hand, respondent contends that the Court En Bane correctly denied petitioner's claim for refund. He further avows that in an action for refund, the burden of proof is on the taxpayer to establish its right to refund and failure to sustain the said burden is fatal to its claim. Lastly, respondent reiterates that claims for refund are construed strictly against the claimant for the same partakes the nature of exemption from taxation. We resolve. After considering the arguments of the parties, the Court En Bane is constrained to deny petitioner's MR. At the onset, it must be emphasized that petitioner has not presented any new matter which have not yet been considered or passed upon by the Court in Division and the Court En Bane. Nonetheless, for emphasis, the Court En Bane shall briefly discuss and reiterate its reasons for the denial of petitioner's Petition for Review and the consequent affirmance of the Court in Division's Decision and Resolution dated 07 February 2019 and 28 June 2019, respectively. On petitioner's contention that the stipulations made by the parties were brushed aside, this Court correctly ruled that it is not bound strictly by the issues raised specifically by the parties10 and it may also rule upon related issues, especially so in claims for refund, where the taxpayer is bound to prove every minute aspect of its case.11 It must be noted that RO Casipe merely confirmed the denial of the claim for refund purely on a legal basis. At most, it could only mean that, since the claim for refund was denied based on the .- provisions of Revenue Regulations (RR) No. and RMC 12 1~ 17-2012 10 See Commissioner of Internal Revenue v. Lancaster Philippines, Inc, G.R. No. 183408, 12 July 2017. II See KEPCO Philippines Corporation v. Commissioner ofInternal Revenue, G.R. No. I79356, 14 December 2009. 12 Prescribing the Implementing Guidelines on the Revised Tax Rates on Alcohol and Tobacco Products Pursuant to the Provisions of Republic Act No. 10351 and to Clarify Certain Provisions of Existing Revenue Regulations. (e)

RESOLUTION CTA EB NO. 2.1JU (CTA Case Nos. 9017 & 9035) Tanduay Distillers, Inc. v. CIR Page 5 of7 x- ---------------------------------x 2013'3, there was no need for the BIR to ascertain petitioner's compliance with the factual requirements in support of the said claim. In any case, the government cannot be prejudiced by such statement of RO Casipe as estoppel does not apply to the government, especially on matters of taxation.14 Thus, the government cannot be estopped by the mistake, negligence, or omission of its agents.'5 As to the documents that allegedly prove the actual payment of excise taxes passed on by its local suppliers and the remittance thereof to the BIR, the Court En Bane reiterates that APVs, sales invoices, delivery receipts and local suppliers' confirmation letters that petitioner banked on could only prove that it was charged and billed for its purchases but not the actual payment of the excise taxes passed on and its remittance to the BIR. In a claim for tax refund or tax credit, the applicant must prove not only entitlement to the grant of the claim under substantive law. It must also show satisfaction of all the documentary and evidentiary requirements for an administrative claim for a refund or tax credit.'6 With respect to petitioner's insistence that there is no more need for a conversion factor since the figures on the volume of tax-paid alcohol raw materials and the volume of finished goods removed are already presented in proof liters and citing Section 141'7 of the NIRC of 1997, as amended, it is worth stressing that the said provision merely states the definition of "proof spirits" and "proof liters". However, the same does not establish the fact that one (1) proof liter of raw material is the same one (1) proof liter of finished goods. Thus, in the absence of any evidence to prove the foregoing, the Court En Bane could not ascertain if the finished goods in proof liters were produced from the very same proof liters of raw materials that went into productiOI)f 13 Further ClarifYing the Taxability of Distilled Spirits Provided under Revenue Memorandum Circular No. 3-2013. 14 See The Heirs ofAtty. Jose C. Reyes, eta/. v. Republic of the Philippines, G.R. No. 150862, 03 August 2006. " See Visayas Geothermal Power Company v. Commissioner ofInternal Revenue, G.R. No. 197525, 04 June 2014. 16 See Western Mindanao Power Corporation v. Commissioner of Internal Revenue, G.R. No. 17 181136, 13 June 2012. Supra at note 9. ~

RESOLUTION CTA EB NO.llJU (CTA Case Nos. 9017 & 9035) Tanduay Distillers, Inc. v. CIR Page 6 of7 X�����---------------------------- -X As a final note, petitioner's claim for refund is anchored on the exemption clause provided in Section 8 of the NIRC of 1997, as 170' amended, which requires that rectified spirits were produced exclusively from the use of spirits upon which the excise tax has already been paid. In this case, petitioner was not able to clearly and sufficiently establish the same from the evidence it presented before the Court in Division. In sum, petitioner failed to present any new matter as to warrant the reversal of the assailed Decision. WHEREFORE, petitioner Tanduay Distillers, Inc.'s Motion for Reconsideration filed on 16 November 2020 is DENIED for lack of merit. SO ORDERED. JEANMAKI~: ~'LUKKu-VILLENA WE CONCUR: ON LEAVE ROMAN G. DEL ROSARIO Presiding Justice ~�t; C. G..:r-~<>4 I Q. ER~P.UY JfiANITO C. CASTANEDA, Jft Associate Justice Associate Justice 18 SEC. 170. Requirements Governing Rectification and Compounding of Liquors. - Persons engaged in the rectification or compounding of liquors shall, as to the mode of conducting their business and supervision over the same, be subject to all the requirements of Jaw applicable to distilleries: Provided, That where a rectifier makes use of spirits upon which the excise tax has been paid, no further tax shall be collected on any rectified spirits produced exclusively therefrom: Provided, further, That compounders in the manufacture of any intoxicating beverage whatever, shall not be allowed to make use of spirits upon which the excise tax has not been previously paid. �)

RESOLUTION ~~T~ CTA EB NO. 2.1.IU (CTA Case Nos. 9017 & 9035) CATHERINE T. MANAHAN Tanduay Distillers, Inc. v. CIR Associate Justice Page 7 of7 X�-------------------------------- -X ~. ~ ..;~ MA. BELEN M. RINGPIS-LIBAN Associate Justice MARlAR ustice 0iJ