THE Court of Tax Appeals (CTA) rejected for lack of merit Petron Corp.’s claim for a refund of P219.12 million worth of excise tax allegedly collected erroneously by the Bureau of Internal Revenue, ruling that a gasoline component imported by the company is subject to tax.
In a decision promulgated on Dec. 18, the CTA special second division ruled that Petron’s import of alkylate, a blending component in motor or aviation gasoline, is subject to excise tax under the Tax Code as it is similar to naphtha, a raw material used in making petrochemical products, and regular gasoline.
Section 148(e) of the National Internal Revenue Code of 1997 states that naphtha, regular gasoline, and other similar products of distillation as well as the by-products of processing of naphtha are subject to excise tax as soon as they are produced.
The Court concluded from the testimony of Petron’s witnesses that although alkalyte is formed through a different process, the raw materials in producing it are formed through distillation.
“Based on the afore-quoted law, excise tax shall attach to refined and manufactured mineral oils or motor fuels such as naphtha, regular gasoline, and other similar products of distillation as soon as they come to existence,” it ruled.
“As such, it is obvious that alkylate first undergoes the process of distillation, because it cannot come into existence without its raw materials, olefins and isobutane. Since it can be considered as a product of distillation similar to naphtha, alkylate is subject to excise tax, pursuant to Section 148(e) of the NIRC of 1997, as amended,” it added.
Petron was claiming a refund of 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.
It claimed that alkylate is not among the petroleum products listed in the Tax Code and cannot be considered as motor fuel. It also said that it is not a product of distillation and is solely used as a blending component in making unleaded premium gasoline.
The CTA also cited its decision in a previous case also involving Petron in which it ruled that alkylate is subject to excise tax as it is an “intermediate or raw gasoline component that possesses properties, especially octane and aromatics that meet gasoline requirements.” — Vann Marlo M. Villegas