San Miguel Brewery excise tax refund partly granted

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Court of Tax Appeals-CTA

THE Court of Tax Appeals (CTA) has partially granted the excise tax refund claim of San Miguel Brewery, Inc. worth P44.5 million, which was erroneously collected on its beer products in 2015.

In a 25-page decision on June 13, the CTA special second division allowed P44.5 million out of the initial P48.3 million claim, with the difference not supported by required documents.

In granting the petition of the San Miguel, the court said the Bureau of Internal Revenue (BIR) erroneously charged the brewery a uniform excise tax of P22.25 on removals of San Mig Light (SML) in bottle and in can and other products as well as San Mig Light in Keg.

“(T)he Court finds that respondent erroneously imposed a uniform P22.25 excise tax on petitioner’s beer products,” the court said.

The CTA noted that Republic Act No. 10351, which amended Section 143 of the Tax Code, states that excise tax of P19 should be collected per liter on beer products with net retail price of P50.60 or less (Tier 1) and P22 per liter for products that are more than P50.60 (Tier2), effective 2015. Starting 2018, the tax is to increase by 4% every year.

RA No. 10351 revised the previous classifications of alcoholic beverages based on existing brands and new brands and simplified the tiers based on net retail price.

The BIR issued Revenue Regulations No. 17-2012, of which Section 5 prohibits downward reclassification, with the 4% annual hike to start Jan. 1, 2014. The BIR also issued Revenue Memorandum Circular (RMC) No. 90-2012 imposing the uniform excise tax of P22.25 on beer products.

“(T)he Supreme Court reiterated the hornbook doctrine that ‘in case there is a discrepancy between the law and a regulation issued to implement the law, the law prevails because the rule or regulation cannot go beyond the terms and provisions of the law,’” the court noted.

“In this case, the Court finds that there is no basis for imposing the additional four percent (4%) excise tax as explained above. At the time of effectivity of RA No. 10351 as well as at the time when petitioner’s cause of action arose, no downward reclassification, i.e., from Tier 2 to Tier 1, of petitioner’s beer products was made. Therefore, the BIR has no basis to impose additional excise taxes under Annex A-1 of RMC No. 90-2012,” the CTA said.

The court partially denied the refund claim for excise taxes on SML in kegs due to the lack of submission of a duly notarized sworn statement indicating its suggested retail price.

RMC No. 90-2012 provided list of locally manufactured fermented alcoholic beverages, with their corresponding net retail price and applicable excise tax per liter, but did not include SML in kegs. RMC No. 3-2013 clarified that net retail price of alcoholic beverages not on the list was to be based on the latest sworn statement by the manufacturer or importer.

“The submitted schedule of net retail price per liter does not constitute a sworn statement in accordance with the requirements under the rules. Consequently, the same cannot be used as basis of the net retail price of SML in kegs. For this reason, it is therefore deemed proper to deny petitioner’s claim for refund with respect to excise taxes on SML in kegs.” the court said.

The decision was written by Associate Justice Juanito C. Castañeda, Jr. and was concurred in by Associate Justice Catherine T. Manahan. — Vann Marlo M. Villegas