ExxonMobil v. Commissioner of Internal Revenue

G.R. No. 180909 (January 19, 2011)

Facts:

Petitioner ExxonMobil Petroleum and Chemical Holdings, Inc. - Philippine Branch (Exxon) is a foreign corporation organized under the laws of Delaware, USA, and is authorized to conduct business in the Philippines. Exxon is engaged in selling petroleum products to both domestic and international carriers. Between November 2001 and June 2002, Exxon purchased Jet A-1 fuel and other petroleum products from Caltex Philippines, Inc. (Caltex) and Petron Corporation (Petron), which had already paid the excise taxes on these products. However, these taxes were passed on to Exxon, which ultimately bore the cost.

Exxon sold a total of 28,635,841 liters of Jet A-1 fuel to international carriers, amounting to excise taxes of Php105,093,536.47. Subsequently, Exxon filed administrative claims for refund with the Bureau of Internal Revenue (BIR) for the excise taxes paid. On October 30, 2003, Exxon filed a petition for review with the Court of Tax Appeals (CTA) seeking a refund or tax credit for the excise taxes paid on the fuel sold to international carriers.

The CTA First Division ruled in favor of the Commissioner of Internal Revenue (CIR), dismissing Exxon's claim for refund. Exxon filed a motion for reconsideration, which was denied. Exxon then escalated the matter to the CTA En Banc, which upheld the First Division's decision.

Legal Issues:

1. Whether the CTA En Banc erred in ruling that Exxon, as the distributor and vendor of petroleum products to international carriers, is not the proper party to claim a refund of the excise taxes paid.
2. Whether the CTA erred in affirming the dismissal of Exxon's claim for refund based on the CIR's motion to resolve the issue of Exxon's standing to claim a refund.

Arguments:

• Petitioner (Exxon):

  • Exxon argued that it is a real party in interest as it paid the excise taxes on the petroleum products sold to international carriers. It contended that the exemption from excise tax under Section 135 of the National Internal Revenue Code (NIRC) applies to the products themselves, not the seller, and thus it should be entitled to claim a refund.
  • Exxon also claimed that the CIR's motion to resolve the issue of standing was essentially a motion to dismiss filed out of time, as it was submitted after Exxon had begun presenting evidence.

• Respondent (CIR):

  • The CIR contended that Exxon is not the proper party to seek a refund because the excise taxes are indirect taxes, which are primarily the liability of the manufacturers (Caltex and Petron). The CIR argued that while Exxon bore the burden of the tax, it was not the statutory taxpayer liable for the excise tax, and therefore, it could not claim a refund.
  • The CIR maintained that the motion to resolve the issue of Exxon's standing was appropriate and did not constitute a motion to dismiss.

Court's Decision and Legal Reasoning:

The CTA En Banc affirmed the dismissal of Exxon's petition for refund, agreeing with the First Division's ruling. The court emphasized that only the taxpayer or the manufacturer of the petroleum products has the legal standing to claim a refund of excise taxes. The court cited Sections 130(A)(2) and 204(C) of the NIRC, which establish that the manufacturer or producer is directly liable for the payment of excise taxes and is the only party entitled to seek a refund for erroneously paid taxes.

The court further clarified that excise taxes are indirect taxes, meaning that while the burden may be passed on to the purchaser, the liability remains with the manufacturer. The court referenced previous cases, including Philippine Acetylene Co., Inc. v. Commissioner of Internal Revenue and Cebu Portland Cement Company v. Collector of Internal Revenue, to support its position that the statutory taxpayer is the only party entitled to claim a refund.

Additionally, the court rejected Exxon's argument regarding the violation of bilateral agreements, stating that the right of international carriers to invoke the exemption from excise taxes was not affected by the ruling.

Significant Legal Principles Established:

1. Only the statutory taxpayer, or the manufacturer of goods, has the legal standing to claim a refund of excise taxes paid, even if the burden of the tax is passed on to another party.
2. Excise taxes are classified as indirect taxes, where the liability for payment lies with the manufacturer, while the burden may be shifted to the purchaser as part of the purchase price.
3. Tax refunds are treated as exemptions and are construed strictly against the claimant.