Wreck Corporation is a domestic corporation engaged in the business of importing, refining and selling petroleum products. During the period from September 1, 2014 to December 31, 2014, Wreck Corporation imported 225 million liters of Jet A-1 aviation fuel and paid the excise taxes thereon. Seventy-five percent (75%) of the total volume of aviation fuel imported were actually sold to international carriers of Philippine and foreign registries for their use or consumption outside of the Philippines in the period from November 1, 2014 to December 31, 2014. Wreck Corporation did not pass on to the international carriers the excise taxes it paid on the importation of petroleum products.
On June 25, 2015, Wreck Corporation filed an administrative claim for refund or issuance of tax credit certificate amounting to the excise taxes it had paid on the importation of 225 million liters of Jet A-1 aviation fuel.
If you were the Commissioner of Internal Revenue, will you grant Wreck Corporation’s administrative claim for refund or issuance of tax credit certificate? Explain your answer. (6%)
Suggested answer only. Not an official answer and not legal advice.
**Answer:** Yes, I will **partially grant** the claim, but only for the excise tax corresponding to the **75% volume** sold to international carriers.
**Legal Basis:** Under **Section 135(a)** of the NIRC, petroleum products sold to international carriers for consumption outside the Philippines are **exempt from excise tax**. The statutory taxpayer directly liable for excise tax is entitled to a refund on exempt sales (*CIR v. Pilipinas Shell*).
**Application:** Wreck Corporation, as importer, is entitled to a refund of excise taxes paid on the 75% volume actually sold to international carriers. The remaining 25% remains subject to excise tax and cannot be refunded.
**Conclusion:** Thus, the claim is granted only as to the 75% volume sold to international carriers, and denied as to the rest.
This is not an official scoring system and carries no weight with the Supreme Court or any bar review provider. It measures how much of the suggested answer's wording your response covers, not whether your reasoning is correct. For practice only.
Quick check
Under Section 135(a) of the Tax Code, petroleum products sold to which entities are exempt from excise tax?
Section 135(a) of the Tax Code explicitly exempts petroleum products sold to international carriers for consumption outside the Philippines from excise tax.
Who is the proper party with legal standing to claim a refund of excise taxes paid on petroleum products sold to tax-exempt entities?
The statutory taxpayer directly liable for paying the excise tax possesses legal standing to claim a refund on tax-exempt petroleum sales.
What happens to an excise tax refund claim when only seventy-five percent of imported aviation fuel is sold to international carriers?
An administrative claim for excise tax refund is granted partially for the volume actually sold to tax-exempt international carriers.
Under the National Internal Revenue Code, what type of tax is an excise tax on imported petroleum products?
Excise tax on petroleum products is an indirect tax imposed upon the importation or production of goods prior to sale.
Which judicial doctrine allows petroleum importers to claim refunds for excise taxes paid on fuel sold to tax-exempt international carriers?
Settled jurisprudence in CIR v. Pilipinas Shell confirms that the statutory taxpayer directly liable for excise tax can claim refunds on exempt fuel sales.
Learn more about these topics
1. Petroleum Excise Exemption
Under Section 135(a) of the National Internal Revenue Code, petroleum products sold to international carriers of Philippine or foreign registries for their use or consumption outside the Philippines are exempt from excise tax. This statutory exemption ensures that international air and sea carriers operating in foreign trade are not burdened by domestic indirect taxation on fuel consumed beyond Philippine territory. When an importer or refiner pays excise tax upon importation but subsequently sells a portion of the fuel to qualified international carriers, the tax exemption attaches to the actual volume consumed in international transport.
2. Refund Right Standing
In excise taxation, the statutory taxpayer directly liable to pay the excise tax upon importation or removal from the place of production is the proper party possessing legal standing to claim a tax refund. Under settled jurisprudence, a petroleum importer or refiner that pays excise taxes without passing them on to tax-exempt international carriers is entitled to claim a refund or tax credit for taxes paid on exempt sales. Because excise tax is an indirect tax, the manufacturer or importer who bore the legal obligation to pay the tax holds the statutory right to seek recovery from the government.
3. Partial Tax Refundability
A claim for excise tax refund or credit on imported petroleum products is legally allowable only to the extent of the volume actually sold to tax-exempt international carriers. Any portion of imported aviation fuel that is distributed for domestic consumption or retained in general inventory remains subject to standard excise taxation under the National Internal Revenue Code. Consequently, the Commissioner of Internal Revenue must partially grant an administrative refund claim for the exact percentage sold to international carriers while denying the claim for fuel diverted to non-exempt domestic uses.