THE Supreme Court (SC) affirmed the suspension by the Court of Tax Appeals (CTA) of the collection of excise taxes from Pilipinas Shell Petroleum Corp. (PSPC) for its importation of a petroleum additive from January 2010 to June 2012 amounting to P1.99 billion.

However, the SC also ruled that CTA correctly refused to issue a suspension order on further taxation of PSPC’s shipment of the petroleum additive, alkylate.

In its decision promulgated March 15 and published on July 8, the high court said that the CTA can only decide on final and executory tax assessments.

The high court also remanded to the CTA First Division PSPC’s petition for a temporary restraining order on future taxation of its alkylate shipment.

The Bureau of Internal Revenue (BIR) earlier stated in 21 Authorities to Release Imported Goods (ATRIGs) that it issued for PSPC’s alkylate importations that these are not subject to excise tax because they are “not among those articles enumerated under Title VI of NIRC (National Internal Revenue Code) 1997.”

Title VI states that “the production of petroleum products, whether or not they are classified as products of distillation and for use solely for the production of gasoline, shall be exempt from excise tax.” 

The Bureau of Customs (BoC) later conducted a third-party test of the alkylate specifications, which showed that alkylate is “not in the nature of premium plus, premium, or regular gasoline but a mere component additive, and hence, should not be subject to excise tax.” 

However, in September 2011, the BIR began inserting in subsequent ATRIGs issued directly to the BoC that its “tax assessments were without prejudice to the collection of the corresponding excise taxes, penalties and interests depending on the final resolution of the Office of the Commissioner on the issue on whether this item is subject to the excise taxes under the NIRC of 1997, as amended.”

On June 27, 2012, however, the Department of Energy held that alkylate is not a finished product but an intermediate product, and thus, is not subject to excise tax.

Two days after, in response to a letter from then-BoC commissioner Rozzano R. Biazon requesting clarification on the matter, the BIR wrote back that its laboratory had found alkylate to be a product of distillation, and thus subject to excise and value-added taxes. — Bianca Angelica D. Añago