THE Court of Tax Appeals (CTA), sitting en banc, has affirmed the grant of a refund to San Miguel Brewery, Inc. worth over P761 million after a finding that it overpaid excise tax on its San Mig Light brand of beer.
In a decision dated Oct. 11, the court denied the appeal of the Bureau of Internal Revenue (BIR) and upheld the decision of its Second Division on June 9, 2017 which ordered the BIR to refund or issue a tax credit certificate amounting to P761,063,826.70 to San Miguel Brewery.
In 2012, San Miguel Brewery paid P20.57 per liter worth of excise tax on San Mig Light but claimed that the correct rate was only P15.49, the difference of P5.08 per liter it then sought to reclaim.
In the June 2017 decision, the Second Division said that the CTA has “consistently ruled” that “San Mig Light” is a new brand and not a variant of an existing product, thus, “subject to the excise tax rate of P15.49 per liter instead of the P20.57 per liter…”
The CTA, sitting en banc, reiterated that it has been “settled” that “San Mig Light” is a new brand, citing a Supreme Court ruling, which found against the treatment of San Mig Light as a variant of the company’s core Pale Pilsen offering.
According to SC precedent, a variant carries the same logo or design of the alleged parent brand or is determined by the name of the product and formed either by attaching prefixes or suffixes to the parent brand.
“Plainly stated, ‘San Mig Light’ cannot be treated as a variant of ‘Pale Pilsen’ because they do not share a root word; and neither is there an existing brand called ‘San Mig’ to arrive at the conclusion that the suffix Light’ renders ‘San Mig Light’ as its variant. Thus, there can be no doubt now that ‘San Mig Light’ is a new brand,” the CTA en banc ruled.
San Mig Light was registered as a brand on Oct. 27, 1999. BIR Large Taxpayers Assistance Division II Acting Chief Conrado P. Item sent a letter to San Miguel Corp. (SMC) on Feb. 7, 2002, confirming that San Mig Light was allowed to register as a new brand.
The Master List of Registered Brands of Locally Manufactured Alcohol Products” also listed San Mig Light as a new brand.
On May 28, 2002, the BIR issued a Notice of Discrepancy to SMC which stated, among others, that San Mig Light is a variant of existing beer products.
San Miguel Brewery, Inc. is a subsidiary of SMC. — Vann Mario M. Villegas
