CIR & Commissioner of Customs v. PAL

Facts:

On June 11, 1978, PAL was granted under Presidential Decree No. 1590 (PD 1590) a franchise to operate air transport services domestically and internationally. Section 133 of the decree prescribes the tax component of PAL’s franchise. Under it, PAL, during the lifetime of its franchise, shall pay the government either basic corporate income tax or franchise tax based on revenues and/or the rate defined in the provision, whichever is lower and the taxes thus paid under either scheme shall be in lieu of all other taxes, duties and other fees.

PAL was assessed excise taxes on its February and March 2007 importation of cigarettes and alcoholic drinks for its commissary supplies used in its international flights. In due time, PAL paid the corresponding amounts, as indicated below, under protest:

BOC Official Receipt Number	Date of Payment	Amount Paid
138110892	February 5, 2007	PhP 1,497,182
1138348761	February 26, 2007	PhP 1,525,480
138773503	March 23, 2007	PhP 1,528,196.85

PAL, filed separate administrative claims for refund before BIR for the alleged excise taxes it erroneously paid on said dates. As there was no appropriate action on the part of the then CIR and obviously to forestall the running of the two-year prescriptive period for claiming tax refunds, PAL filed before CTA a petition for review. CIR and COC were ordered to pay PAL by way of refund the amount of PhP 4,550,858.85. The amount represented the excise taxes paid in February and March 2007, covering PAL’s importation of commissary supplies. CIR and the COC interposed separate motions for reconsideration, both of which were, however, denied which prompted CIR to elevate the matter to the CTA en banc on a petition for review. CTA en banc, with two justices dissenting, dismissed the CIR and COC’s petitions, thereby effectively affirming the judgment of the CTA. Petitioners separately sought reconsideration, but the CTA en banc denied the motions.

Issue:

Whether or not PAL’s importations of alcohol and tobacco products for its commissary supplies are subject to excise tax.

Held:

The petition lacks merit. It is a basic principle of statutory construction that a later law, general in terms and not expressly repealing or amending a prior special law, will not ordinarily affect the special provisions of such earlier statute.

While it is true that Sec. 6 of RA9334 as previously quoted states that "the provisions of any special or general law to the contrary not withstanding," such phrase left alone cannot be considered as an express repeal of the exemptions granted under PAL’s franchise because it fails to specifically identify PD 1590 as one of the acts intended to be repealed. x x x

In addition, where there are two statutes, the earlier special and the later general – the terms of the general broad enough to include the matter provided for in the special – the fact that one is special and other general creates a presumption that the special is considered as remaining an exception to the general, one as a general law of the land and the other as the law of a particular case.

Any lingering doubt, however, as tothe continued entitlement of PAL under Sec. 13 of its franchise to excisetax exemption on otherwise taxable items contemplated therein, e.g., aviation gas, wine, liquor or cigarettes, should once and for all be put to restby the fairly recent pronouncement in Philippine Airlines, Inc. v. Commissioner of Internal Revenue. In that case, the Court, on the premise that the "propriety of a tax refund is hinged on the kind of exemption which forms its basis," declared in no uncertain terms that PAL has "sufficiently prove[d]" its entitlement to a tax refund of the excise taxes and that PAL’s payment of either the franchise tax or basic corporate income tax in the amount fixed thereat shall be in lieu of all other taxes or duties, and inclusive of all taxes on all importations of commissary and catering supplies, subject to the condition of their availability and eventual use.

PAL’s payment of either the basic corporate income tax or franchise tax, whichever is lower, shall be in lieu of all other taxes, duties, royalties, registration, license, and other fees and charges, except only real property tax. The phrase "in lieu of all other taxes" includes but is not limited to taxes that are "directly due from or imposable upon the purchaser orthe seller, producer, manufacturer, or importer of said petroleum products butare billed or passed on the grantee either as part of the price or cost thereof or by mutual agreement or other arrangement." PAL is exempt from paying: (a) taxes directly due from or imposable upon it as the purchaser of the subject petroleum products; and (b) the cost of the taxes billed or passed on to it by the seller, producer, manufacturer, or importer of the said products either as part of the purchase price or by mutual agreement or other arrangement. Therefore, given the foregoing direct and indirect tax exemptions under its franchise, and applying the principles as above-discussed, PAL is endowed with the legal standing to file the subject tax refund claim, notwithstanding the fact that it is not the statutory taxpayer as contemplated by law.

In all then, PAL has presented in context a clear statutory basis for its refund claim of excise tax, a claim predicated on a statutory grant of exemption from that forced exaction. It thus behooves the government to refund what it erroneously collected.