CHEVRON PHILIPPINES INC., v.

COMMISSIONER OF INTERNAL REVENUE

Bersamin, J. 01 September 2015 G.R. No. 210836
Doctrine Excise tax on petroleum products is essentially a tax on property, the direct liability for which pertains to the statutory taxpayer.
Any excise tax paid by the statutory taxpayer on petroleum products sold to any of the entities or agencies named in Section
135 of the NIRC exempt from excise tax is deemed illegal or erroneous and should be credited or refunded to the payor
pursuant to Section 204 of the NIRC. This is because the exemption granted under Secction 135 of the NIRC must be
constured in favour of the property itself, that is, the petroleum products.
Summary Chevron did not pass on to CDC the excise taxes it paid on the importation of petroleum products it later sold to CDC so it filed
a claim for tax refund or credit. The CTA denied the claim so Chevron went to the SC. Initially, the SC sided with the CTA but
later reversed its decision holding that Chevron did not pass on to CDC the excise taxes paid because the latter was exempt
from indirect taxes. Thus, the tax Chevron paid must be credited or refunded.
Facts • Chevron sold and delivered petroleum products to Clark Development Corporation (CDC) from August to December 2007.
Chevon did not pass on to CDC the excise taxes paid on the importation of the petroleum products sold to the latter. Thus,
on June 26, 2009, Chevron filed an administrative claim for tax refund or issuance of tax credit certificate. CIR did not act
on it so Chevron elevated the claim to the CTA.
• The CTA denied Chevron’s judicial claim and also its MR. The CTA en banc affirmed the ruling of the CTA First Division. T
said that considering that an excise tax is in the nature of an indirect tax, Section 135(c) of the NIRC should be construed
as prohibiting the shifting of the burden of the excise tax to tax-except entities who buys petroleum products from the
manufacturer/seller by incorporating the excise tax component as an added cost in the price fixed by the
manufacturer/seller.
• The CTA en banc denied the MR. The SC (2nd division) denied the petition for review.
Ratio/Issues W/M Chevron is entitled to the tax refund or the tax credit for the excise taxes paid on the importation of petroleum
products that it had sold to CDC. [YES]
o See Doctrine. The excise taxes that Chevron paid on its importation of petroleum products subsequently sold to CDC
were illegal and erroneous and should be credited or refunded to Chevron in accordance with Sec. 204 of the NIRC.

o Under Section 129 of the NIRC, excise taxes are imposed on 2 kinds of goods: (a) goods manufactured or produced
in the Philippines for domestic sales or consumption or for any other disposition, and (b) things imported.
o With respect to imported things, Section 131 of the NIRC declares that excise taxes on imported things shall be paid
by the owner or importer to the Customs officers. For this purpose, the statutory taxpayer is the importer of the things
subject to excise tax. Chevron, being the statutory taxpayer, paid the excise tax on its importation of the petroleum
products.
o Section 135(c) of the NIRC states that petroleum products sold to entities which are by law exempt from direct and
indirect taxes are exempt from excise taxes. The phrase “which are by law exempt from direct and indirect taxes”
describes the entities to whom the petroleum products must be sold in order to render the exemption operative. The
Section should thus be constured as an exeption in favour of the petroleum products on which the excise tax was
levied in the first place. The exemption cannot be granted to the buyers (the entities that are by law exempt from direct
and indirect taxes) because they are not under any legal duty to pay the excise tax.

• The CDC was created as the implementing arm of the BCDA to manage the Clark Special Economic Zone. As a duly
registered CSEZ enterprise, it has been exempt from paying direct and indirect taxes. Chevron’s liability to pay excise
taxes accrued immediately upon importation and prior to the removal of the products from the customshouse, but the
status of the petroleum products as exempt would be confirmed only upon their sale to CDC in 2007. Before that
time, Chevron did not have any legal basis to claim the tax refund or credits.
• Thus, the payment of the excise taxes by Chevron upon its importation was deemed illegal. Section 204 of the NIRC is
explicit in saying that since this was an illegal and erroneous payment, it can claim, as the statutory taxpaper, refund.
• The general rule is that in cases involving excise tax exemptions, it is the statutory taxpayer bearing the economic burden
who can claim the tax refund or credit. Chevron did not pass on to CDC the excise taxes paid on the importation of the
petroleum products because the same was exempt from indirect taxes based on RA 7916 (Special Economic Zone Act of
1995), in relation to RA 9400 (BCD Act), not because Section 135(c) exempted CDC from the payment of excise tax.
Held Granted. Refund the excise taxes.
Prepared by: JR [Tax 2 | Laforteza]