BIR Ruling [DA-066-99]

February 4, 1999 BIR RULING [DA-066-99] TWA, Inc. Km. 58, Cagayan Valley Road San Rafael, Bulacan Attention: Mr . Flaviano V . De Leon Gentlemen : This refers to your letter dated January 15, 1999 requesting for a clarificatory ruling that your importation of gas oil as base material in the manufacture of SUPRA Diesel using modern additive technology is subject to duties and VAT but exempt from excise tax. It is represented that BIR Ruling DA-289-98 dated July 1, 1998 issued in your favor clarifying that your importation of lube base stock, petroleum distillate, solvent, reformates and the like, being a Kalakalan 20 enterprise, is subject to duties and VAT and not to excise tax; that it is to be noted that the fuel consumers have recently been offered a better quality diesel with various attributes by the major oil companies such as Power Diesel of Caltex and Diesel MAX of Petron, manufactured by blending with updated additive technology; that you also, through advanced additive technology, would like to come up with SUPRA Diesel; and that your raw material is gas oil which is petroleum distillate. In reply, please be informed that the excise tax on Petroleum Products imposed under Section 148 of the Tax Code of 1997 is a tax levied against the manufacturer, producer and refinery of the products. The said tax shall attach to the product/s as soon as they are in existence and shall be collected before their removal from the place where they are manufactured, produced or refined pursuant to Section 130(A)(2) of the same Code, or on the date designated by the Secretary of Finance as provided for under Section 130(C) of the Tax Code. Further, the excise tax on petroleum products is also imposed on imported articles pursuant to Section 131(B) of Tax Code of 1997. In the case of a CBBE-registered enterprise, paragraph III(A)(2)(c) of Revenue Memorandum Order No. 39-90 implementing Republic Act No. 6810, otherwise known as "Kalakalan 20", states that the exemption from taxes and fees such as excise taxes, is limited to the taxes from which a CBBE-registered enterprise is directly liable to pay. In the instant case, the excise tax collected from the owner-importer of petroleum distillate which is by itself a finished product, under Section 148 in relation to Section 131(B), both of the Tax Code of 1997, is a direct tax liability of TWA, Inc. as an importer. However, since TWA, Inc. is a CBBE-registered enterprise, it is exempt from the excise tax imposed under said Section 148 of the Tax Code in relation to Section 131(B). Furthermore, the importation of such petroleum product to be used as raw material in producing another petroleum product subject to excise tax is also exempt from the value-added tax under Section 109(f) of the same Tax Code. It is, however, subject to such customs duties under the Tariff and Customs Code. The finished product SUPRA Diesel is subject to the excise tax imposed under Section 148(i) of the same Tax Code. However, since TWA, Inc. is a duly registered CBB Enterprise enjoying certain benefits and incentives under R.A. No. 6810, it is also exempt from the payment of said excise tax imposed under said Section 148(i) of the Tax Code of 1997, being a tax from which it is directly liable to pay. Such exemption from payment of excise taxes shall be valid for five (5) years from the grant of its CBBE Certificate Authority, i.e., on November 25, 1994, or until November 24, 1999. prLL This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it shall be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal & Enforcement Group