THE Court of Tax Appeals denied for lack of merit the petition of Petron Corp. seeking to reverse the ruling that denied its claim for refund over taxes worth P219.15 million for the importation of alkylate.

In a 21-page decision dated July 22, the court, sitting en banc, affirmed the December 2018 decision and April 2019 resolution of its special second division, saying Petron is not entitled to refund as the tax was not erroneously collected.

It cited the special second division’s ruling that alkylate first undergoes the process of distillation, subjecting the product to excise tax.

“Petitioner then is not entitled to the refund of excise tax paid inasmuch as the same was not erroneously or illegally collected,” it said.

The court said that the raw materials for alkylate are derived from petroleum and the said raw materials are products of distillation.

“[I]t cannot be denied that alkylate is also a product of distillation similar to naphtha and regular gasoline,” the court ruled.

The Tax Code does not qualify whether an item subject to excise tax is a primary or secondary product of distillation, it said.

Section 148(e) of the Tax Code says naphtha, regular gasoline and other similar products of distillation, a physical process where different components of chemicals are separated, should be levied with excise tax. 

Petron claimed a refund for the excise tax it paid from September 2012 to December 2012 worth P148.55 million, and from February to July 2013 worth P70.61 million.

Petron said that Section 148 of the Tax Code did not state that alkylate is subject to excise tax and said the court stretched the coverage of the law to include the item as product of distillation, making it similar to naphtha and regular gasoline.

It also contended that the law only aims to tax motor fuels only once as a finished product and imposing excise tax on imported alkylate is equal to taxing it twice.

The tax appeals court ruled that the claim of Petron that the Tax Code did not mention excise tax imposition on alkylate and the division’s stretched coverage of the provision that the item is a product of distillation “are clearly bereft of merit.”

The court denied the claim of double taxation, citing a similar case involving Petron that imported alkylate is taxed only once upon importation. It also said that the use of alkylate as a blending component on raw material to produce another product is a different matter. — Vann Marlo M. Villegas