Request for Refund of Amount Representing Specific and Ad Valorem Taxes on Petroleum Products Sold to Timex Phil.

July 23, 1986 BIR RULING NO. 126-86 128 000-00 126-86 Gentlemen : This refers to your letter dated January 21, 1986 requesting refund of the amount of P34,269.25 representing specific and ad valorem taxes on petroleum products sold and delivered to Timex Philippines for the month of December 1985. It appears that during said month, you sold and delivered quantities of tax-paid petroleum products to Timex Philippines, a firm registered with the Export Processing Zone, without billing to the purchaser, the specific and ad valorem taxes paid thereon. Since you paid the taxes on said products, you now claim the refund thereof. The basis of your claim is your contention that said products are exempt from payment of taxes, pursuant to Section 17 of P.D. No. 66 and the letter-ruling of the Ministry of Finance dated December 11, 1984. In reply, I have the honor to inform you that, after a study of your claim for refund, this Office believes, and so holds, that the same is not meritorious. It is to be noted that Sec. 17 of P.D. No. 66, which is the basis of your claim, only state that the petroleum products in question "shall not be subject to customs and internal revenue laws and regulations . . . ." The said provision of law and the aforestated ruling of the Ministry of Finance do not state clearly that petroleum products sold and delivered to EPZA registered enterprises are exempt from taxes. It is a settled rule in taxation that tax exemption cannot be created by implication because exemption from taxation are highly disfavored in law; and one who claims exemption from tax must be able to justify his claim by the clearest grant of organic or statute law. An exemption from the common burden cannot be permitted to exist on vague implications. (Asiatic Petroleum Co. vs. Llanes, 49 Phil. 466) Furthermore, since refund partakes of the nature of an exemption, it cannot be allowed unless granted in the most explicit and categorical languages. (Resins Inc. vs. Auditor General, G.R. No. L-17888, October 29, 1968) cdtech Moreover, paragraph (i) of Section 18 of P.D. No. 66, as added by P.D. No. 1449, effective June 11, 1978, provides: "(i) Tax Credit . Every registered zone enterprise shall enjoy a tax credit equivalent to the sales, compensating and specific taxes and duties on supplies, raw materials and semi-manufacture products used in the manufacture, processing or production of its export products and forming part thereof: . . . ." Under the above-quoted provision, the tax credit is given to a registered zone enterprise and shall cover, among others, the specific taxes on supplies used in the manufacture or processing of export products and forming part thereof . In the instant case, your claim covers the specific taxes paid on quantities of diesel fuel oil and liquified petroleum gas which do not appear to form part of the export products manufactured by the zone enterprise. Finally, at the time the products in question were sold and delivered by you to Timex Philippines, the same were already tax paid. Consequently, assuming that said purchaser is a tax exempt enterprise with respect to the petroleum products consumed by it within the Zone, such exemption does not render the collection of the tax erroneous or illegal with respect to the tax were legally collected at the time of payment; hence, the same cannot be the subject of refund. In view thereof, your above claim for refund of the specific and ad valorem taxes is hereby denied for lack of legal basis. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner