BIR Ruling [DA-232-99]

April 14, 1999 BIR RULING [DA-232-99] TWA, Inc. Km. 58 Cagayan Valley Road San Rafael, Bulacan Attention: Mr . Flaviano De Leon Gentlemen : This refers to your letter dated March 1, 1999 requesting for a ruling on the following: 1) Whether or not the excise tax paid on the original kerosene raw material be availed of as tax credit. cdta 2) As a Kalakalan 20 registered enterprise, you are exempt from excise tax imposed on jet fuel. It is represented that BIR Ruling DA-289-98 dated July 1, 1998 was originally 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 through advanced additive technology, you come up with SUPRA Diesel; that your raw material is gas oil which is a petroleum distillate; that thereafter BIR Ruling DA-066-99 dated February 4, 1999 was issued in your favor, clarifying and modifying the ruling first mentioned, thus "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(1) 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." cdti that you also purchase kerosene locally, tax paid from various sources; that you upgrade said kerosene to jet fuel through a manufacturing process using chemicals and filtration elements to eliminate water, sediments and to a certain degree Mercaptan; that it is corrected to come up with the accepted range of electrical conductivity for jet fuel; and that Anti freeze dosage is also added. In reply, please be informed of the following: A. Considering 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, which shall attach to the product/s as soon as they are in existence the payment of which is done 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, the excise tax paid on the original kerosene used as raw material is not your direct liability. It was merely passed on to you as part of the cost of the petroleum by-product. Such being the case, a tax credit is not availing in your purchase of kerosene being used as raw material. B. The jet fuel you produced from kerosene through a manufacturing process using chemical and filtration elements to eliminate water, sediments and mercaptan, is subject to excise tax under Section 148(g) of the Tax Code. However, as a CBB registered enterprise, you are exempt from the excise tax for which you are directly liable to pay pursuant to paragraph III(A)(2)(c) of Revenue Memorandum Order No. 39-90 implementing R.A. No. 6810 otherwise known as the "Kalakalan 20". Accordingly, as a duly registered CBB enterprise enjoying incentives and benefits under RA 6810, you are exempt from payment of said excise tax imposed under Section 148(g) of the Tax Code of 1997. Such exemption shall be valid only for five (5) years from the grant of your CBBE Certificate Authority, i.e., on November 25, 1994 or until November 24, 1999. 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