PHILIPPINES AIRLINES, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURTOFTAXAPPfuUB QUEZON CITY ENBANC PHILIPPINE AIRLINES, CTA EB NO. 2811 INC., (CTA Case No. 10311) Petitioner, Present: -versus- DEL ROSARIO, P.J., RINGPIS-LIBAN, MANAHAN, BACORRO-VILLENA, MODESTO-SAN PEDRO, REYES-FAJARDO, CUI-DAVID, FERRER-FLORES, and ANGELES, JJ. COMMISSIONER OF Promulgated: INTERNAL REVENUE, JAN 2!t 2025 Respondent. }{- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - DECISION ANGELES, J.: The case at bar assails the Decision 1 dated May 30, 2023 2 (assailed Decision) and Resolution3dated October 4, 20234 (assailed Resolution), both issued by the Court of Ta}{ Appeals (CTA) Special First (1st) Division (Court in Division) in CTA Case No. 10311. In its Petition for Reviews, petitioner Philippine Airlines, Inc. prays for the reversal of the denial of its claim for refund or application for ta}{ credit certificate in the amount of PhP20,059,948-44, representing e}{cise ta}{es on importations of liquor and tobacco that were paid under protest on August 3, 2019. 1 Penned by Associate Justice Catherine T. Mana ha n, concurred by Presiding Justice Roma n G. Del Rosario and with Concurring and Dissenting Opinion by Associate Justice Marian Ivy F. Reyes- Faj ardo. 2 Division (Div) Docket, Vol. IV, pp. 2825 - 2852. 3 Penned by Associate Justice Catherine T. Ma na ha n, concurred by Presiding Justice Rom an G. Del Rosario and with Concurring and Dissenting Opinion by Associate Justice Marian Ivy F. Reyes- Fajardo. 4 Div Docket, Vol. IV, pp. 2914 - 2922. s EB Docket , pp. 1 - 4 2.

DECISION CTA EB No. 2811 (C.T.A. Case No. 10311) X--------------------------------------------------X FACTS Petitioner Philippine Airlines, Inc. (PAL) is a corporation duly organized and existing under the laws of the Republic of the Philippines with registered address at PNB Financial Center, President Diosdado P. Macapagal Ave., CCP Complex, 1307, Pasay City.6 Respondent is the duly appointed Commissioner of Internal Revenue of the Bureau of Internal Revenue (BIR), a government agency tasked with the assessment and collection of all national internal revenue taxes, fees, and charges, including excise taxes paid on liquor and tobacco products under Sections 142 and 145 of the National Internal Revenue Code (NIRC) of 1997, as amended.? On June 11, 1987, petitioner was granted a franchise to operate air transport services domestically and internationally 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 Other Countries".a Section 13 thereof granted petitioner an exemption from the payment of all taxes, duties and other fees, and charges of any kind or nature on all importations of commissary and catering supplies, among others, and imported articles, supplies or materials for use in its transport and non-transport operations.9 For the period beginning August 2014 until February 2018, petitioner imported various kinds of liquor and tobacco as part of its in-flight and commissary supplies. The Bureau of Customs (BOC) demanded in separate letters the payment of excise taxes that amounted to a total of PhP20,059,948-44 for petitioner's importation of liquor and tobacco products. The following is a summary of the demands: Date Ofthe letter Amount demanded (PhP) February 27, 2018 2,030,645.28 March 2, 2018 1,583,077.91 March 2, 2018 1,453,430.94 Aoril13, 2018 1,754,759�73 Apri113, 2018 1,973,623.38 Aoril13, 2018 2,376,473�57 Mav 24,2018 1, 783,716.24 Mav 24,2018 3,219,267.24 May 24,2018 1,927,120.50 6 EB Docket, p. 2. 'EB Docket, p. 52. s Div Docket, Vol. III, p. 1836. 9 PD No. 1590, Section 13.

DECISION CTA EB No. 2811 (C.T.A. Case No. 10311) x--------------------------------------------------x On August 3, 2018, petitioner paid under protest the taxes on its importations of liquor and tobacco products in the total amount of PhP20,059,948-44, which was documented as follows: BOC Official Receipt Number Amount paid (PhP) 01893415719 13,129,844-46 01893415720 6,930,103-98 On July 30, 2020, petitioner filed with the BIR a letter to request for the refund or the issuance of a tax credit certificate for the amount of PhP20,059,948-44, representing excise taxes allegedly illegally assessed, levied upon, and paid by petitioner under protest on its importation ofliquor and tobacco products that constituted part of its commissary and catering supplies. On August 3, 2020, petitioner filed a Petition for Review with the Court of Tax Appeals (CTA). During trial, petitioner offered the testimonies of (1) Mr. Jonathan R. Castillo Lee 10 , the Manager for petitioner's Company Materials Handling Division, (2) Mr. Ruel Ryan 0. Julian 11 , the Manager for petitioner's Tax Services Division, and (3) Ms. Cheryl V. Capinpin12, the Manager of petitioner's In-flight Materials Purchasing Division. Respondent opted not to present evidence.'3 After filing of their respective memorandums 14, the Court in Division rendered the assailed Decision on May 30, 2023, as follows: WHEREFORE, in light of the foregoing considerations, the present Petition for Review is DENIED for lack of merit. SO ORDERED.'s The Court in Division ruled that petitioner failed to present sufficient and convincing evidence to prove that the imported liquor and tobacco products were not locally available in reasonable quantity, quality, or price at the time of importation. The Court in Division found such failure as non-compliance with the conditions required under Section 13 of PD No. 1590 to merit the grant of a tax exemption. w Div Docket, Vol. II, pp. 740- 749; Vol. III, pp. 1912- 1914. "Div Docket. Vol. II, pp. 1089- 1099; Vol. ITT, pp. 1912- 1914. "Div Docket, Vol. II, pp. 1313- 1325; Vol. III, pp. 1912- 1914. '' Div Docket, Vol. TV, p. 2771. >4 !d., pp. 2772- 2779, 2781- 2799. �s Div Docket, Vol. TV, p. 2848.

DECISION CTA EB No. 2811 (C.T.A. Case No. 10311) X--------------------------------------------------X Petitioner moved for reconsideration16 but it was denied in the Resolution dated October 4, 2023, the dispositive portion of which reads as follows: WHEREFORE, petitioner's Motion for Reconsideration (Re: Decision dated 30 May 2023) is DENIED for lack of merit. SO ORDERED. 17 In denying the motion, the Court in Division emphasized that tax refunds are in the nature of tax exemptions and are to be construed strictly against the taxpayer. On November 22, 2023, petitioner filed the instant Petition for Review, praying to set aside the assailed Decision and Resolution of the Court in Division and to grant its claim for refund amounting to PhP20,059,948-44, representing excise taxes for its importation of liquor and tobacco products as part of its in-flight and commissary supplies for the period beginning August 2014 until February 2018. 's Petitioner argues that the evidence it presented sufficiently established that the subject imported liquor and tobacco products are not locally available in reasonable quantity, quality, or price. It insists that the CTA and the Supreme Court have previously ruled favorably on the grant of refund in past cases involving the same parties, similar circumstances, and similar kinds of evidence presented. It emphasized that the CTA previously ruled that a Table of Comparison between the cost of importing and cost of locally purchasing its supplies were sufficient evidence to prove its cause. Respondent did not comment on the petition.'9 ISSUE Petitioner assigns the following error upon the Court in Division: Whether the Court in Division erred in dismissing the Petition for Review on the ground that petitioner failed '' Div Docket, Vol. IV, pp. 2877- 2900. >7 Div Docket, Vol. IV, p. 2922. 18 EB Docket, pp. 1 - 42. '' EB Docket, p. 94.

DECISION CTA EB No. 2811 (C.T.A. Case No. 10311) X--------------------------------------------------X to establish that its importations were not locally available in reasonable quantity, quality, or price20 RULING OF THE COURT The Petition for Review before the Court En Bane was timely filed. Petitioner received a copy of the assailed Resolution on October 9, 2023.21 Petitioner, thus, had fifteen (15) days from such receipt or until October 24, 2023 to avail of the remedies provided by law.22 On October 24, 2023, petitioner timely filed the instant Petition for Review. 23 Petitioner failed to prove that the imported products were not locally available in reasonable quantity, quality, or price. To enjoy the tax privilege under Section 13 of PD No. 1590, petitioner must show compliance with the following: SEC. 13. In consideration of the franchise and rights hereby granted, the grantee shall pay to the Philippine Government during the life of this franchise whichever of subsections (a) and (b) hereunder will result in a lower tax: (a) The basic corporate income tax based on the grantee's annual net taxable income computed in accordance with the provisions of the National Internal Revenue Code; or 20 EB Docket, p. 7. "EB Docket, p. 6. "Revised Rules of the Court of Tax Appeals (RRCTA), Rule 8, Section 3(b) reads as follows: Procedure in Civil Cases Sec. 3� Who may appeal; period to file petition. XXX XXX XXX (b) A party adversely affected by a decision or resolution of a Division of the Court on a motion for reconsideration or new 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 lawful fees and deposit for costs before the expiration ofthe reglementary period herein fixed, 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 review. '' EB Docket, p. 1.

DECISION CTA EB No. 2811 (C.T.A. Case No. 10311) )(--------------------------------------------------}( (b) A franchise tax of two per cent (2%) of the gross revenues derived by the grantee from all sources, without distinction as to transport or non[-]transport operations; provided, that with respect to international air-transport service, only the gross passenger, mail, and freight revenues from its outgoing flights shall be subject to this tax. 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 (Emphasis supplied) In summary, petitioner must prove the following conditions: 1. Payment of the corporate income tax; 2. The articles, materials, or supplies are imported for the use of the franchisee in its transport or non-transport operations and other incidental activities; and 3. The imported articles, materials, or supplies are not locally available in reasonable quantity, quality, or price.

DECISION CTA EB No. 2811 (C.T.A. Case No. 10311) X--------------------------------------------------X The Court in Division found that petitioner successfully proved the first and second conditions. It, however, found that petitioner failed to prove compliance with the third condition. Petitioner prays for the refund of excise taxes paid on importations consisting of (i) liquor and (ii) tobacco products. As correctly observed by the Court in Division, petitioner failed to adduce any evidence regarding the price of tobacco products in the local market.z4 While Ms. Capinpin testified on the importations by PAL of tobacco products, petitioner failed to present any evidence to prove that the subject tobacco products were not available in reasonable quantity, quality, or price. Regarding its importation of alcohol products and its allegation that the imported alcohol products were not locally available in reasonable quantity, quality, or price, petitioner offered the following pieces of evidence: (1) the Judicial Affidavit of Ms. Cheryl V. Capinpin2s, petitioner's Manager for In-flight Materials Purchasing Division; (2) the 2014 and 2015 Price Lists of Absolute Sales Corporation26; (3) 2013, 2014, 2015,2016, 2017, and 2018 of Future Trade International Travel Retail27; (4) 2014, 2015, 2016, 2017, and 2018 Price Lists of Minivan Enterprise 28 ; (5) 2016 and 2017 Price Lists of AB Heineken Phils., Inc. 29; and (6) BIR's Price List per Revenue Memorandum Circular (RMC) No. 90-2012.3� After a review of the records of the case and petitioner's arguments, the Court En Bane finds no reason to disturb the findings of the Court in Division. The Court En Bane agrees that the evidence presented by petitioner is not sufficient to prove that the subject products are not available locally in reasonable quantity, quality, or price. The Court is not convinced that the price lists represent the local market price for the entire country. It is a basic rule in evidence that each party must prove its affirmative allegations.31 In civil cases, such as the present tax refund case, the party having the burden of proof must establish its case by preponderance of evidence. Section 1, Rule 133 of the 2019 Revised 24 Div Docket, Vol. IV, pp. 2847- 2848. '' Div Docket, Vol. II, pp. 1313- 1325; Vol. III, pp. 1912- 1914. ' 6 Div Docket, Vol. III, pp. 2411- 2416. "Div Docket, Vol. III, pp. 2417-2467. 28 Div Docket, Vol. III, pp. 2468- 2472. "Div Docket, Vol. III, pp. 2473- 2477. 3� Div Docket, Vol. III, pp. 2473- 2477� 3' Commissioner ofInternal Revenue v. Traders Royal Bank, G.R. No, 167134, March 18,2015.

DECISION CTA EB No. 2811 (C.T.A. Case No. 10311) X--------------------------------------------------X Rules on Evidence discusses the manner how preponderance of evidence is determined, to wit: Section 1. Preponderance of evidence, how determined. - In civil cases, the party having the burden of proof must establish his or her case by a preponderance of evidence. In determining where the preponderance or superior weight of evidence on the issues involved lies, the court may consider all facts and circumstances of the case, the witnesses' manner of testifying, their intelligence, their means and opportunity ofknowing the facts to which they are testifying, the nature of the facts to which they testify, the probability or improbability of their testimony, their interest or want ofinterest, and also their personal credibility so far as the same may legitimately appear upon the trial. The court may also consider the number of witnesses, though the preponderance is not necessarily with the greater number. (Emphasis supplied) It is the burden of petitioner to present evidence to prove its entitlement to tax refund. Petitioner highlights that it compared the price of the imported products with the price lists provided by approximately four (4) local suppliers. It insists that the quotations from such suppliers are sufficient to prove its case. The argument, however, fails to convince as this Court and the Court in Division looked into the quality of the evidence presented and not simply on the quantity of evidence. It is a well-settled rule in tax refund cases that the taxpayer has the burden to prove by sufficient and competent evidence its entitlement to a claim for refund.32 The mere fact that respondent did not present any evidence or to refute the evidence presented by the petitioner does not ipso facto entitle petitioner to a tax refund. It is not the duty of the government to disprove a taxpayer's claim for refund. Rather, the burden of establishing the factual basis of a claim for refund rests on the taxpayer.33 ''Philippine Geothermal, Inc. v. Commissioner ofInternal Revenue, G.R. No. 154028, July 29, 2005. 33 Commissioner ofInternal Revenue v. Far East Bank & Trust Company, G.R. No. 173854, March 15, 2010.

DECISION CTA EB No. 2811 (C.T.A. Case No. 10311) X--------------------------------------------------X Ms. Capinpin revealed in her testimony the manner how the price lists were obtained. The following are relevant portions of her Judicial Affidavit, which served as her direct testimony: 8. Q: Why do you say that importing the said catering and commissary supplies are cheaper and reasonably priced than purchasing them locally? A: I have compared the local prices and the importation costs for the alcohol products. Upon comparison of these prices, it is easily determinable that importing these products are way cheaper than purchasing them locally. 9. Q: How do you compare the local prices and importation costs? A: I have prepared a Table of Comparison to show the complete comparison of prices for the alcohol products imported by PAL for the period August 2014 to February 2018. 34 (Emphasis supplied) Her testimony was subjected to cross-examination, wherein it was revealed that there were other local suppliers of the products from whom they failed to secure price quotations. Relevant portions of which are as follows: ATIY. BABARAN: Q Now, aside from Minivan and AB Heineken did you make any requests from other suppliers of alcohol products? MS. CAPINPIN: A Yes I did, Ma'am. Unfortunately, the suppliers did not respond to the requests and did not submit the Price List that we requested. ATIY. BABARAN: Q May I know, Ma'am, what are these stores? 34 Div Docket, Vol. II, pp. 1314-1315.

DECISION CTA EB No. 2811 (C.T.A. Case No. 10311) x--------------------------------------------------x MS. CAPINPIN: A We particularly requested from Duty Free Philippines, from Philippine Wine Merchants, but unfortunately we did not receive any response. ATIY. BABARAN: Q Was it done through a letter and you made the request, you signed the same or any other from your staff? Any other person? MS. CAPINPIN A I made a request through phone for the Philippine Wine Merchants. ATIY. BABARAN: Q So, it is only through phone, it's not a formal request? MS. CAPINPIN A Yes ATIY. BABARAN: Q What about from Duty Free? MS. CAPINPIN A From Duty Free Philippines, we made a written request, however, they did not respond.3s (Emphasis supplied) The answers of Ms. Capinpin in her direct and cross examination necessitated clarificatory questions from the Court in Division regarding the manner the price lists were obtained. It was noteworthy that there were instances when petitioner informally requested for price quotations. Upon further inquiry, Ms. Capinpin's answers revealed that there was no effort on the part of the petitioner to make an actual purchase that would allow local suppliers to match the price of the imported products. There was also no genuine effort to inquire on the possibility of securing prices that were competitive with the price of the imported products. The following are the relevant portions of Ms. Capinpin's testimony, to wit: 35 TSN, October 19, 2021, pp. 14- 20, 25- 29.

DECISION CTA EB No. 2811 (C.T.A. Case No. 10311) X--------------------------------------------------X JUSTICE DEL ROSARIO: Yes. Just a few clarificatory questions. Ms. Capinpin, follow-up on the cross-examination conducted by the respondent. Did I understand you correctly that the basis of the prices you mentioned in your Judicial Affidavit are all based on queries without actual purchase ofthe products? They are just based on queries? MS. CAPINPIN: A Yes, your Honors. JUSTICE DEL ROSARIO: Comparison from what is being sent to you, which is not under oath at that time and which is just listed, but there's actually no negotiations ever conducted between Philippine Airlines, as well as the supposed suppliers? MS. CAPINPIN: A There was no negotiation at that time, your Honors, because we have seen it, the prices from the local suppliers were already very high and as compared to the imported (inaudible). JUSTICE DEL ROSARIO: I'm sure you are aware that the listed price is always different from the actual purchase of any commodity by a buyer, is it not? MS. CAPINPIN: A Yes, your Honors. JUSTICE DEL ROSARIO So, ordinarily, even if you look into online sales when there is an actual bulk purchase the price is always

DECISION CTA EB No. 2811 (C.T.A. Case No. 10311) X--------------------------------------------------X different from what is listed. That is an ordinary practice oftrade. You are aware of that? MS. CAPINPIN A Yes, your Honors, I am aware ofthat. JUSTICE DEL ROSARIO: ...... So there has been no instance in writing wherein you already indicated in your letter to the supplier that you are willing to purchase several beverages if they are willing to pay or to sell at a price that you already have in mind, which is lower tha[n] the imported product? MS. CAPINPIN: A: Your Honors, we do send e-mails to negotiate and asked them to give the best price. JUSTICE DEL ROSARIO: Only the best price? MS. CAPINPIN: A The best price. JUSTICE DEL ROSARIO: But you never give them a pnce lower tha[n] the imported cost? MS. CAPINPIN: A No, your Honors. We don't mention any price to them. We just give them the liberty to propose to us the best price,36 (Emphasis supplied) Evidence to be believed must not only proceed from the mouth of a credible witness, it must be credible in itself - such that common experience and observation of mankind can approve as probable under the circumstances. 37 By petitioner's own admission, it had been importing the same products over the years and had been applying for the refund of excise taxes imposed on similar products.38 Considering 36 TSN, October 19, 2021, pp. 14- 20, 25- 29. 37 Tortona, eta/., v. Gregorio, eta/., G.R. No, 202612, January 17, 2018. 38 EB Docket, pp. 22- 25.

DECISION CTA EB No. 2811 (C.T.A. Case No. 10311) x--------------------------------------------------x that petitioner has been importing the same products, the clarificatory questions of Honorable Presiding Justice Del Rosario are relevant to shed light on the manner the price lists were obtained and the efforts exerted by petitioner to determine the availability of the subject products in the local market. The observations of the Court in Division regarding the testimony of petitioner's witness must be accorded respect since it had first-hand account on the manner she testified in court and her demeanor during trial. As aptly observed by Honorable Presiding Justice Del Rosario, the lack of genuine effort to secure competitive pricing from local suppliers reveals that the practice of petitioner to request quotations from local suppliers were merely pro-forma. Honorable Presiding Justice Del Rosario made the following observation: JUSTICE DEL ROSARIO: The point is, I'm asking you there is already a specific price because [you have] already made all these transactions in the past. So, if it is just a pro-forma practice that you get the list but certainly you already know that the price is only going to be used for the purpose of the request but there is already in your mind a pre-determination to purchase from abroad. That's why the Court would like to ascertain whether you are doing the right thing because there are certain government interests here, there are tax impositions. So, in fairness to you and in fairness to the government, that's why the question is like that..... . JUSTICE DEL ROSARIO: Anyway, more or less the Court understands now why you have been making the importations. Only, you are making the importations because you get hold of a price list from sources. From sources wherein in the past you have already determined that the prices are always higher. And, since in the past the prices are always higher[,] you never dared to write them in writing to lower the price so that you will be able to purchase locally.39 (Emphasis supplied) 39 TSN, October 19, 2021, pp. 14- 20, 25- 29.

DECISION CTA EB No. 2811 (C.T.A. Case No. 10311) X--------------------------------------------------X From the testimony of petitioner's witness, it is observed that there is lack of diligent effort on the part of petitioner to study the availability of local products and the reasonableness of their prices from other local suppliers. The witness' testimony and other pieces of evidence presented by petitioner does not convince the Court that the imported products were not locally available in reasonable quantity, quality, or price at the time of importation. It is doubtful that petitioner's Table of Comparison and its presented price lists represent the local market prices for the subject products. It cannot be concluded that the comparison made by petitioner is sufficient to entitle it to a tax refund. Moreover, not all prices of the imported products were compared with the prices offered by local suppliers. A perusal of the Table of Comparison reveals that it had eighty (So) entries of imported alcohol but only forty five (45) entries were compared with the prices from local suppliers.4� Petitioner failed to explain why it failed to do so. This further supports the finding that petitioner failed to exert diligent effort to study the availability oflocal products and the reasonableness of prices from local suppliers. Petitioner cites previous similar cases wherein the Court ruled favorably upon petitioner after it presented pricelists from one or two suppliers. The Supreme Court has previously held that CTA Decisions do not constitute precedents and do not bind this Court nor the public.41 Every case is evaluated and decided based on the evidence presented. It has been consistently held that actions for tax refund, as in the instant case, are in the nature of a claim for exemption and the law is construed strictissimi juris against the taxpayer. Similarly, pieces of evidence presented entitling a taxpayer to an exemption is also strictly scrutinized and duly proven. In Paseo Realty & Development Corporation v. Court ofAppeals, et al., the Supreme Court ruled: Taxation is a destructive power which interferes with the personal and property rights of the people and takes from them a portion of their property for their support of the government. And since taxes are what we pay for civilized society, or are the lifeblood of the nation, the law frowns against exemptions from taxation and statutes granting tax exemptions are thus construed 4o Div Docket, Vol. III, pp. 2409- 2410. ''San Roque Power Corporation v. Commissioner ofInternal Revenue, G.R. No. 203249, July 23, 2018.

DECISION CTA EB No. 2811 (C.T.A. Case No. 10311) x--------------------------------------------------x strictissimi juris against the taxpayer and liberally in favor of the taxing authority. A claim of refund or exemption from tax payments must be clearly shown and be based on language in the law too plain to be mistaken. Elsewise stated, taxation is the rule, exemption therefrom is the exception.42 (Emphasis supplied) All told, petitioner has not presented any argument that convinces this Court to reverse or modify the findings of the Court in Division that denied petitioner's claim for refund. For having failed to present sufficient and convincing evidence to prove that the imported subject products were not locally available in reasonable quantity, quality, or price at the time of importation, petitioner failed to fulfill all conditions to be entitled to the tax exemption granted under Section 13 of PD No. 1590. Consequently, the Court finds no erroneous or illegal excise taxes to be refunded in favor of petitioner. WHEREFORE, the instant Petition for Review is DENIED for lack of merit. The Decision dated May 30, 2023 and Resolution dated October 4, 2023 in CTA Case No. 10311 are AFFIRMED. SO ORDERED. HENRY itGELES Associate Justice WE CONCUR: 0 Presiding Justice ~.~ -l'--- (With due respect, please see Concurring and Dissenting Opinion) MA. BELEN M. RINGPIS-LIBAN Associate Justice '' Paseo Realty & Development Corporation v. Court ofAppeals, G.R. No. 119286, October 13, 2004.

DECISION CTA EB No. 2811 (C.T.A. Case No. 10311) x--------------------------------------------------x ~' T-./,t.-�~~A--- CATHERINE T. MANAHAN Associate Justice r ~~f. ~ -F~�~~ (I reiterate mfconcurrmg and Dissenting Opinion in the challenged Decision) MARIAN IVY F. REYES-FAJARDO Associate Justice ~!:t!l~e (With due respect, I join Ma. Belen M. Ringpis-Liban's Concurring and Dissenting Opinion) LANEE S. CUI-DAVID Associate Justice (With due respec s~soc-'t&~.�te �Ju~stic Ma. B en M. Ringpis-Liban in h rring and Dissenting_ pinion) CORAZON G. FE - LORES Associate Justice

DECISION CTA EB No. 2811 (C.T.A. Case No. 10311) x--------------------------------------------------x CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, 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. 0 Presiding Justice

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC PHILIPPINE AIRLINES, INC., CTA EB NO. 2811 Petitioner, (CTA Case No. 10311) -versus- Present: Del Rosario, P.J., Ringpis-Liban, Manahan, Bacorro-Villena, Modesto-San Pedro, Reyes- Fajardo, Cui-David, Ferrer-Flores, and Angeles,JL COMMISSIONER OF INTERNAL Promulgated: REVENUE, Respondent. X--------------------------------------------------------------------------- --------------------X CONCURRING AND DISSENTING OPINION RINGPIS-LIBAN,.L; I concur with the ponencia of Associate Justice Henry S. Angeles insofar as it ruled that petitioner failed to prove that the tobacco products it imported were not locally available in reasonable quantity, quality, or price at the time of importation in order for the same to enjoy the tax exemption privileges under Presidential Decree (PD) No. 1590, as amended. However, I dissent insofar as the imported alcoholproducts are concerned for the reasons stated below. The present case is not the first time this Court is confronted with the question of sufficiency of evidence for purposes of establishing that petitioner's imported articles are not locally available in reasonable quantity, quality, or price. Enumerated below are the cases, albeit covering different taxable periods, wherein this Court ruled that petitioner was able to sufficiently r/

CONCURRING AND DISSENTING OPINION CTA EB No. 2811 (CTA Case No. 10311) establish that its imported articles are not locally available in reasonable quantity, quality, or price on the basis of local prices reflected in the price lists submitted bv two (2) suppliers or, in some cases, even from only one (1) supplier, to wit: Case Number Evidence Presented Ruling CTA Case Nos. 1. Judicial Affidavit of Mr. Victor The claim for refund was partially granted as the 7677, 7685 & 7746 Santos, PAL's Assistant Vice petitioner was able to discharge such burden of (Dated ,\pril 25, President in charge of the proof as regards the portions that were duly 2013) as affirmed in Catering and In-flight Sub- substantiated. CTA EB Nos. 954 & department; 1046 (Dated October 14, 2014) 2. Philippine Wine Merchants' Price List for 2005 and 2006; 3. lvlonthly Philippine Dealing Systems rates for the year 2005- 2006. CTA Case Nos. 1. Testimony of 1\Ir. Andy Li, The claim for refund was 7665 & 7713 (Dated P,-\L's Vice-President for granted because petitioner April 17, 2012) as Corporate Logistics and was able to discharge the affirmed in CTA EB Services Department; burden of proof to allow Nos. 920 & 922 refund of erroneously paid (Dated September 9, 2. Letter addressed to Atty. Oscar exc1se tax on Its 2013). C. Ventanilla, Jr. containing a importations of tabulation of comparison of the cotnmissary and catering cost of importing the subject supplies for July 2005 to articles and the cost of February 2006. purchasing them locally, invoices issued to PAL for its purchase of the subject articles; 3. Price List for 2005 of Duty- Free Philippines corresponding to the same articles subject of this claim for refund. CTA Case No. 8153 1. Judicial Affid.,�it of 1\lr. Victor The claim for refund was (Dated January 17, Santos, PAL's Assistant Yice partially granted as the 2013) as affirmed in President in charge of the e\�idence presented CTA. EB Nos. 1029, Catering and In-flight 1\laterials corresponding to the I 031 & 1032 (Dated and Purchasing Sub- excise tax payments on April 30, 2014) department; wines and liquors fully complied with the 2. Philippine Wine Merchants' conditions imposed by PD Price List dated January 11, 1590 as amended. 2007; The claim for refund on 3. Table of Comparison Between the excise taxes on Cost of Importing and Cost of cigarettes was denied for Locallv Purchasing Commissary failure to present a price

CONCURRING AND DISSENTING OPINION CTA EB No. 2811 (CTA Case No. 10311) Case Number Evidence Presented Ruling and Catering Supplies; list of local suppliers. 4. l'vlonthly PDS rates for the year 2007-2008, 2008-2009, and 2009-2010. CTA Case No. 8236 1. Judicial Affidavit of Ms. Cheryl The claim for refund was (Dated December Capinpin, P/\L's ~lanager of partially granted insofar as 18, 2013) as affirmed In-flight Materials Purchasing the erroneously paid excise m CTA EB No. Division; tax on its importation of 1162 & 1167 (Dated wines and liquor for its January 7, 2016) 2. Philippine Wine Merchants' catering and commissar:: Price List for 2008; supplies for international consmnptwn. 3. Table of Comparison Between Cost of Importing and Cost of Locally Purchasing Commissary and Catering Supplies; 4. Monthly Philippine Dealing System (PDS) Rates for fiscal years 2008, 2009 and 201 0; 5. Letters of Ms. Marianne C. Raymundo, P/\L's Vice- President for Financial Services with the subject "Booking Rates" for the months of January, July, September, and October 2008. CTA No. 8184 1. Affidavit of ~Is. Cheryl The claim for refund was partially granted because (Dated ~larch 25, Capinpin, PAL's Manager of the petitioner has complied with the requirements 2014 affu:med m In-flight Materials Purchasing prescribed under its franchise for exemption CTA EB No. 1216, Di\�ision; from payment of excise taxes on its importation of 1217 & 1221 (Dated commissary and catering supplies, specifically the 1\lay 27, 2016) 2. Philippine Wine Merchants' imported liquors used for its inflight consumption. Price List for 2008; 3. Table of Comparison of prices of commissary articles as those imported by PAL and locally available articles. CTA EB No. 1347 1. Judicial /\ffidm�it of ~Is. Cheryl The Court En Bane (CTA Case No. V. Capinpin, P,\L's In-flight re\�ersed the Court in 8340) August 30, ~laterials Purchasing Division, Division's ruling. It 2017 Catering & In-flight Materials partially granted the Purchasing Sub-Department Petition for review and Manager; remanded the case to the Court in Division as the 2. Philippine Wine Merchants' petitioner has sufficiently (PWM) Price List for the established that the alcohol years 2007, 2008 and 2009; products it imported were ;�/

CONCURRING AND DISSENTING OPINION CTA EB No. 2811 (CTA Case No. 10311) Case Number Evidence Presented Ruling 3. Future Trade International not a\�ailable in reasonable Price List dated April 8, quantity, quality, or price in 2009; the local market. 4. Table of Comparison between Cost of Importing and Cost of Locally Purchasing Commissary and Catering Supplies; 5. Sales invoices issued by foreign suppliers; 6. Letter of 1\fs. 1\farianne C. Raytnundo, petitioner's Vice President for Financial Services with the subject "Booking Rates-August 2007"; 7. Monthly Philippine Dealing System (PDS) rates for the years 2000 to 2010. CTA EB No. 1363 1. Judicial Affidavit of Ms. Cheryl The Court En Bane (CTA Case No. Capinpin, PAL's Manager for reversed the Court in 8198) February 13, In-flight Materials Purchasing Division's ruling. It 2018 Division, Catering & In-flight partially granted the Materials Purchasing Sub- Petition for Review and Deparunent; remanded the case to the Court in Division as the 2. Philippine Wine Merchant petitioner has sufficiently Price List; established that the liquors it imported were not 3. Sales im�oices issued to available in reasonable petitioner for its purchase of quantity, quality, or price in the local market. the subject articles; 4. t.lonthly Philippine Dealing The Court En Bane denied System Rates (2007 to 2010); the claim insofar as the 5. 2008 Booking Rates for the imported cigarettes are concerned as the Court did Month of May; not give credence to the witness' uncorroborated 6. Letters of Ms. Marianne C. testimony. Raymundo, p e t i t i o nc t 1 Vice S President- Financial SetYices re: Booking Rates for the months ofJanuary, t.larch, and April2008; CTA EB No. 1648 7. Table of Comparison. (CTA Case No. 1. Judicial Affidavit of t.!s. Cheryl The Court partially granted Capinpin, PAL's 1\fanager for the claim for refund and

CONCURRING AND DISSENTING OPINION CTA EB No. 2811 (CTA Case No. 10311) Case Number Evidence Presented Ruling 8708 & 8770) In-flight and Commissary allowed the refund of October 18, 2018 1\laterials Purchasing Division, erroneously paid excise tax Corporate Logistics and on PAL's importation in Services Department; the years 2006, 2008 to 2012 of assorted liquor, 2. Philippine Wine Merchants wine and cigarettes ("PWM") Price Lists for the constituting its co1nnllssary years 2006, 2008, 2009, 2010, and catering supplies for 2011, and 2012; international flight consumption. 3. Future Trade International ("FTI") Price Lists dated April 8, 2009, October 1, 2010 and for the years 2006 to 2013; 4. 2010 BIR Price Survey; 5. Report of the Court- commissioned Independent Certified Public Accountant ("!CPA") CTA EB No. 1484 1. Judicial Affidavit of Ms. Cheryl The Court En Bam� is (CTA Case No. Capinpin (petitioner's Manager convinced that petitioner 8362) April 10,2018 for In-flight ~laterials has sufficiently established Purchasing Division); that the alcohol and tobacco products it 2. Philippine Wine Merchants imported were not (PWM) Price List for the available in either years 2007, 2008, and 2009; reasonable quantity or price in the local market. 3. Future Trade International Travel Retail Price List as of The Court En Bane Feb 2009; remanded the case to the Court in Di,~ision for a 4. Affida,�it of Gilbert l\l. Galedo complete determination of \vho testified to the canvassed petitioner's refund claim. list of 2009 retail prices of imported wines and cigarettes taken from the rack of Duty- Free Philippines; 5. Table of Comparison between Cost of Importing and Cost of Locally Purchasing Commissary and Catering Supplies; 6. l\lonthly Philippine Dealing System (PDS) rates for the years 2007 to 2010.

CONCURRING AND DISSENTING OPINION CTA EB No. 2811 (CTA Case No. 10311) In congtuence with the rulings in the foregoing cases, I believe that the pieces of evidence presented by petitioner, particularly the price lists obtained from four (4) local suppliers namely: (1) Absolute Sales Corporation; (2) Future Trade International Travel Retail; (3) i\Iinivan Enterprise; and (4) ,\B 1-lcineken Phils., Inc. together with the judicial affidavit of its witness and the BIR's Price List per Revenue i\Iemorandum Circular No. 90-2012, are sufficient for the Court in Division to evaluate the prices of the subject alcohol products imported by petitioner vis-a-vis their prices in the local market and to determine whether there is compliance with 3'd condition required by PD No. 1590, as amended. \'\lith respect to the importation of tobacco products, I agree that the testimony of petitioner's witness, J\Is. Cheryl V. Capinpin, standing alone and without any corroborating evidence through which the Court can verify the truth of such statements, is not sufficient for purposes of establishing that the imported tobacco products are not locally available in reasonable quantitY, CjUa!it:y, or price. _\ll told, I vote to PARTIALLY GRANT the Petition for Review and to REMAND the case to the Court in Division for the determination of refundable amount with respect to the imported akoho!prodmls of the petitioner. _, '---- MA. BELEN M. RINGPIS-LIBAN Associate Justice

"' REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS Quezon City ENBANC PHILIPPINE AIRLINES, INC., CTA EB No. 28n Petitioner, (CTA Case No. 10311) -versus- Present: DEL ROSARIO, �.1_, RINGPIS-LIBAN, MANAHAN, BACORRO-VILLENA, MODESTO-SAN PEDRO, REYES-FAJARDO, CUI-DAVID, FERRER-FLORES, and ANGELES, Jl. COMMISSIONER OF INTERNAL REVENUE, Respondent. X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - CONCURRING OPINION BACORRO-VILLENA, L.: I concur with the ponencia of my esteemed colleague, Associate Justice Henry S. Angeles, in denying petitioner Philippine Airlines, Inc.'s (petitioner's/ PAL's) claim for refund of excise taxes paid on imported tobacco and alcohol products. I also agree with the ponencia's disquisition that the submitted price lists should not be accorded evidentiary weight since it was established during the hearing that petitioner, in conducting its price survey, merely engaged in a pro-forma inquiry without any genuine intent to actually study the availability of local products in terms of quantity and/or quality and/or the reasonableness of their prices from other local suppliers. Consequently, this renders the price lists insufficient to satisfy the crucial requirement of showing that the locally available articles are either , inadequate in quantity, or is of subpar quality, or is severely overpricedJ compared to its imported variant.

CONCURRING OPINION CTA EB No. 2811 [CTA Case No. 10311) Philippine Airlines, Inc. v. Commissioner of Internal Revenue X-------------------------------------------�---- -X I submit this Concurring Opinion to further bolster the conclusion reached in the ponencia. Section 13(2) of Presidential Decree No. 1590 reads: SEC. 13. In consideration of the franchise and rights hereby granted, the grantee shall pay to the Philippine Government during the life of this franchise whichever of subsections (a) and (b) hereunder will result in a lower tax: 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 ofany 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 nontransport operations and other activities incidental thereto and are not locally available in reasonable quantity, quality, or price. The foregoing provision requires the concurrence of three (3) requisites before petitioner's importations may be considered tax-exempt, to wit- 1. Petitioner paid its corporate income tax covering the period when the subject importations were made; 2. The articles, supplies, or materials are imported for petitioner's use in its transport and non-transport operations and other activities incidental thereto; and 3� The imported articles, supplies, or materials are not locally available in reasonable quantity, quality, or price.';Ji' Commissioner of lnlernaf Revenue and Commissioner of Customs v. Philippine Airlines, Inc., G.R. Nos. 245330-31. 01 April2024.

CONCURRING OPINION CTA EB No. 2811 (CTA Case No. 10311) Philippine Airlines, Inc. v. Commissioner of Internal Revenue X-------------------------------------------------X As to the 3'd condition, the Supreme Court in Commissioner ofInternal Revenue and Commissioner of Customs v. Philippine Airlines, Inc. 2 , ruled that such qualification for exemption is in the alternative, and not cumulative. Simply stated, petitioner only needs to prove that the locally available article is either insufficient in quantity, or is of subpar quality, or is severely overpriced compared to its imported variant. Here, petitioner focuses on the price of the locally available tobacco and alcohol products and asseverates that the same are overpriced compared to their imported variants by submitting: (1) the Judicial Affidavit of Ms. Cheryl V. Capinpin3, petitioner's Manager for In-flight Materials Purchasing Division; (2) the 2014 and 2015 Price Lists of Absolute Sales Corporation4; (3) 2013, 2014, 2015, 2016, 2017, and 2018 of Future Trade International Travel Retail 5; (4) 2014, 2015, 2016, 2017, and 2018 Price Lists of Minivan Enterprise6 ; (5) 2016 and 2017 Price Lists of AB Heineken Phils., Inc. 7; and (6) BIR's Price List per Revenue Memorandum Circular (RMC) No. 90-2012. 8 I find petitioner's pieces of evidence insufficient to prove that the locally available tobacco and alcohol products are overpriced compared to their imported variants. Firstly, considering that RMC No. 90-20129 was based on the 2010 BIR price survey of alcohol products, no valid comparison can be made between the prices of petitioner's wines and liquors that were imported from August 2014 to February 2018 and that of the said price survey that was done in 2010. Common sense dictates that the quantity, quality or price oflocally available alcohol or tobacco products will fluctuate over time; thus, the contents of the RMC No. 90-2012 pursuant to the price survey conducted in 2010 (which predates the subject importations) should not be given weight. Secondly, a meticulous examination of petitioner's Table of Comparison [for] Alcohol10 reveals that, although petitioner submitted price lists from four (4) merchants (Absolute Sales Corporation, Future Trade International Travel Retail, Minivan Enterprise and AB Heineken Phils., Inc.) not all of these merchants provided their respective retail prices for each , alcohol product. In fact, on a per-product basis, only two (2) alcohol productJ. I d. Division Docket. Volume II, pp. 1313-1325: Volume Ill. pp. 1912-1914. ld., Volume III. pp. 2411-2416. ld .. pp. 2417-2467. ld., pp. 2468-2472. !d.. pp. 2473-2477. Revised Tax Rates of Alcohol and Tobacco Products Under Republic Act No. 10351. "An Act Restructuring the Excise Tax on Alcohol and Tohacco Products by Amending Sections 141. 142. 143. 144. 145. 8. 131 and 288 of Republic Act No. 8424. Otherwise Known as the National Internal Revenue Code of 1997. as Amended by Republic Act No. 9334. and for Other Purposes". Id. lCt Exhibit ��P-12", Division Docket. Volume Ill. p. 2409.

CONCURRING OPINION CTA EB No. 2811 (CTA Case No. 10311) Philippine Airlines, Inc. v. Commissioner of Internal Revenue X---------------�--------------------------------- X - Beringer California Chardonnay and Rawson Private Release Shiraz Cabernet, appear in the price list sourced from two (2) suppliers - Minivan Enterprise and Future Trade International Travel Retail. The remaining alcohol products are supported either by pricing data derived solely from a single supplier, or exclusively from RMC No. 90-2012 or from a combination of both sources. Lastly, petitioner submitted no corroborating evidence to prove that the price lists from Absolute Sales Corporation, Future Trade International and Minivan Enterprise and AB Heineken Phils., Inc. represent the local market prices for the subject alcohol products from August 2014 to February 2018 vis-a-vis the totality oflocal suppliers who are engaged in selling similar products in the same period. En totale, petitioner failed to sufficiently establish that the cost of importing the said tobacco and alcohol products is lower than purchasing them locally. All told, I vote to DENY the Petition for Review for lack of merit.