MANILA - The Supreme Court (SC) has thumbed down a petition filed by the Bureau of Internal Revenue (BIR) that seeks to collect around P3 billion in alleged tax liabilities from oil giants Pilipinas Shell Corp. and Petron Corp.
In a 26-page decision penned by Chief Justice Teresita Leonardo-De Castro, the SC’s First Division upheld the ruling the high court issued in favor of Shell and Petron in 2008 and 2010, respectively.
The case stemmed from Shell and Petron’s use of Tax Credit Certificates (TCCs) to pay in part for their excise tax liabilities from 1992 to 1997. The TCCs were transferred to Shell and Petron by Board of Investments-registered export companies that bought bunker and other fuel products from the 2 firms.
The transfer was made through the execution of Deeds of Assignment in favor of Shell and Petron; the deeds were approved by the Department of Finance (DOF), through its One Stop Shop Inter-Agency Tax Credit and Duty Drawback Center.
The DOF inter-agency center issued Tax Debit Memoranda (TDM) to the BIR’s Collection Program Division, allowing Shell and Petron to use the TCCs as payment for the excise taxes.
The BIR accepted the TDM, but later invalidated these due to Shell and Petron’s alleged failure to meet the requirement that “transferees of TCCs [need not only be] BOI-registered firms, but also a domestic producer of the raw materials and components being supplied.”
In separate post-audit collection letters in 1998, BIR sought payment from Shell and Petron in the amount of Pl,705,028,008.06 and Pl,107,542,547.08, respectively. Assessment letters were issued to the 2 oil firms in 1999.
Shell and Petron elevated their case to the Court of Tax Appeals (CTA), and both obtained favorable decisions on July 23, 1999.
In both decisions, the tax appeals court upheld the validity of the TCC transfers from the BOI-registered export entities to Shell and Petron. The CTA further ruled that the BIR attempted to collect the alleged excise tax deficiencies without an assessment and thus denied the oil firms due process.
Shell and Petron also elevated the rulings of the CTA to SC that junked their separate pleas against the post-audit assessment letters. The SC granted the petitions as it upheld the validity of the TCCs with finality on March 17, 2008 in the case of Shell, and on November 2, 2010 in the case of Petron.
In its decision on the BIR’s P3 billion excise tax collection bid, the SC said the validity of the TCCs and their transfer to Shell and Petron “had been finally settled” by its 2008 and 2010 decisions, respectively.
“The Court's (SC) aforementioned findings in the 2007 Shell Case and 2010 Petron Case are conclusive and binding upon this Court in the petitions at bar. Res judicata by conclusiveness of judgment bars the Court from re- litigating the issues on the TCCs' validity and respondents' qualifications as transferees in these cases. “
“As a result of such findings in the 2007 Shell Case and 2010 Petron Case, then respondents could not have had excise tax deficiencies for the Covered Years as they had validly paid for and settled their excise tax liabilities using the transferred TCCs,” the SC decision stated.
The high court further said the BIR denied Shell and Petron due process “for failing to observe the prescribed procedure for collection of unpaid taxes through summary administrative remedies.”
The SC also said the period allowed for the BIR to collect the alleged tax deficiencies in court had already lapsed, noting that it only had 5 years from the time a company files its excise taxes to file a court action without an assessment.