Petron Corp. v. Commissioner of Internal Revenue

SECOND DIVISION [C.T.A. CASE NOS. 9327 & 9460. October 5, 2020.] PETRON CORPORATION , petitioner , vs. COMMISSIONER OF INTERNAL REVENUE , respondent . DECISION CASTAEDA, JR. , J p : THE CASE The consolidated Petitions for Review filed by petitioner Petron Corporation against the respondent Commissioner of Internal Revenue, seek for the refund or issuance of a tax credit certificate (TCC) of the amount of P26,580,431.00, covering the period from April 1, 2014 to April 30, 2014 for CTA Case No. 9327, and of the amount of P28,236,198.00 for the period of August 19, 2014, for CTA Case No. 9460, representing excise tax allegedly paid by petitioner on the importation of alkylate. 1 HTcADC THE PARTIES Petitioner Petron Corporation is a corporation organized and existing under the laws of the Philippines, with principal office at San Miguel Corporation Head Office Complex, 40 San Miguel Avenue, 1550 Mandaluyong City. 2 Respondent Commissioner of Internal Revenue is the chief of the Bureau of Internal Revenue (BIR),a government agency tasked to, among others, assess and enforce all forfeitures, penalties, and fines connected therewith. He may be served with legal processes, orders and resolutions of this Court at the Office of the Commissioner, BIR National Office Bldg.,BIR Road, Diliman, Quezon City. 3 ANTECEDENTS (ADMINISTRATIVE LEVEL) Petitioner made alkylate importations on two occasions where corresponding excise taxes were imposed, to wit: Vessel Name Arrival Dates Excise Tax Bill of Lading No. Import Entry & Internal Revenue Declaration (IEIRD) M/T Amorea April 6, 2014 4 P26,580,431.00 A-001 5 00374437468 6 M/T Great Lady August 18-21, 2014 7 P28,236,198.00 ML-8002 8 00376827474 9 Thus, petitioner paid the imposed excise taxes, viz. : Bill of Lading No. Date of Payment Excise Tax Paid Authority to Release Imported Goods A-001 April 7, 2014 10 P26,580,431.00 ATRIG dated April 29, 2014 11 ML-8002 August 19, 2014 12 P28,236,198.00 ATRIG dated September 5, 2014 13 Upon removal of its finished petroleum products, petitioner paid excise taxes on June 7, 2014. 14 Thereafter, petitioner filed administrative claims for refund or issuance of TCC representing the erroneously paid excise taxes arising from the aforesaid importation of alkylate on March 31, 2016 and August 12, 2016. 15 PROCEEDINGS BEFORE THIS COURT On April 6, 2016, 16 petitioner filed a Petition for Review praying, inter alia ,for the refund or issuance of TCC in the amount of P26,580,431.00, allegedly representing excise tax paid by petitioner on importation of alkylate covered by IEIRD No. 00374437468. The case was docketed as CTA Case No. 9327. This case was originally raffled to this Court's First Division. On July 4, 2016, respondent posted his Answer in CTA Case No. 9327, 17 interposing the following special and affirmative defenses: The court does not have jurisdiction over the instant petition as the subject matter thereof does not fall under the special jurisdiction of the court provided for by law; 18 The petition was prematurely filed for failure to exhaust all available remedies within the administrative level in accordance with the Tariff and Customs Code of the Philippines; 19 The petition is dismissible for failure to state a cause of action; 20 and, The excise tax paid by petitioner on its importation of alkylate is neither erroneous nor illegal, thus, its reliance on Sections 204 and 229 of the National Internal Revenue Code of 1997 (1997 NIRC) is misplaced. 21 On September 2, 2016, the Court received another Petition for Review ,which was posted by petitioner on August 19, 2016, 22 praying, among others, for a refund or issuance of TCC in the amount of P28,236,198.00, allegedly representing excise tax paid by petitioner on importation of alkylate covered by IEIRD No. 00376827474. This case was docketed as CTA Case No. 9460, and was also raffled to this Court's First Division. The Pre-Trial Conference for CTA Case No. 9327 was initially scheduled on October 13, 2016. 23 On September 22, 2016, petitioner filed its Motion for Consolidation with Motion to Defer Pre-Trial Conference in CTA Case No. 9327, 24 and Motion for Consolidation in CTA Case No. 9460, 25 for the consolidation of the said cases, and for the deferment of the scheduled Pre-Trial Conference. In the Resolution dated September 30, 2016, 26 the Court, inter alia ,deferred the Pre-Trial Conference in CTA Case No. 9327. Respondent, on the other hand, filed a Manifestation with Motion to Defer Transmittal of BIR Records on October 13, 2016. 27 The said Motion was granted; and respondent's manifestation that he had no objection to the consolidation of the said two cases, was noted. 28 Respondent filed his Answer (With express reservation on jurisdiction) in CTA Case No. 9460 on November 16, 2016, 29 raising the following special and affirmative defenses, to wit: The court has no jurisdiction over the instant petition, specifically: 1. The petition is dismissible for failure to state its cause of action; 30 2. Assuming arguendo that respondent is the real party in interest, it is still dismissible for its subject matter is not within the jurisdiction of the court; 31 3. Interpretative rulings issued by the CIR are subject to review by the Secretary of Finance; 32 4. Petitioner failed to exhaust administrative remedies; 33 5. Alkylate is a product of distillation similar to naphtha and regular gasoline, thus, it is subject to excise tax under Section 148(e) of the tax code; 34 6. Excise taxes apply to goods manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition and to things imported; 35 and, 7. The imposition of excise tax on the importation of alkylate does not amount to double taxation and does not violate any law. 36 In the Resolution dated December 20, 2016, 37 the Court granted petitioner's Motions for Consolidation ;and considered respondent's reservation on jurisdiction expressed in the latter's Answer in CTA Case No. 9460 as a Motion to Dismiss ,and thus, petitioner was directed to comment thereon. In compliance, petitioner filed its Reply and Comment/Opposition (To Respondent's Express Reservation on Jurisdiction in His Answer dated November 7, 2016) on January 13, 2017. 38 Thereafter, in the Resolution dated August 15, 2017, 39 the Court denied respondent's prayer for dismissal, in his Answer (With express reservation on jurisdiction) filed in CTA Case No. 9460. After the consolidation of CTA Case Nos. 9327 and 9460, the Pre-Trial Conference of the same was subsequently scheduled and held on December 7, 2017. 40 In the meantime, Respondent's Pre-Trial Brief was filed on December 1, 2017, 41 while the Court received the Pre-Trial Brief for Petitioner on December 4, 2017. 42 On January 5, 2018, the parties submitted to this Court their Joint Stipulation of Facts and Issues (JSFI). 43 In the Resolution dated January 17, 2018, 44 the Court approved the said JSFI, and deemed the termination of the Pre-Trial. The Pre-Trial Order was issued on March 19, 2018. 45 As trial ensued, petitioner presented its testimonial and documentary evidence. Petitioner offered the testimonies of the following individuals, namely: (1) Mr. Simon Christopher Mulqueen, 46 Director of Technical Services for Europe, Middle East, Africa and Asia Pacific for Innospec Fuel Specialties; (2) Mr. Jonathan F. Del Rosario, 47 Terminal Manager of petitioner's Batangas Terminal; (3) Mr. Ricardo S. Infante, 48 Supervising Science Research Specialist of the Oil Industry Management Bureau (OIMB) of the Department of Energy (DOE);(4) Mr. Michael F. Manzano, 49 petitioner's Commercial Services Manager; (5) Ms. July Ann D. Vivas, 50 petitioner's Financial Accounting Manager; (6) Mr. Gardelio P. Malgapo, 51 petitioner's Process Engineering Department Manager; (7) Ms. Ma. Clarissa C. Arguelles, 52 petitioner's Tax Manager; (8) Ms. Cecilia N. Sengia, 53 petitioner's Refinery Finance Department Manager; (9) Dr. Joey D. Ocon, 54 a Chemical Engineer and consultant of petitioner; and (10) Ms. Ma. Milagros F. Padernal, 55 the duly Court-commissioned Independent Certified Public Accountant (ICPA) for the instant consolidated cases. 56 The ICPA submitted her Report on May 24, 2018. 57 Pursuant to the Court's Order dated September 26, 2018, 58 these cases were transferred to this Court's Second Division. Respondent transmitted the BIR Records of these cases on February 26, 2019. 59 On April 15, 2019, petitioner filed its Formal Offer of Exhibits [Ad Cautelam] . 60 Respondent submitted his Comment (Re: Formal Offer of Evidence [Ad Cautelam]) on April 22, 2019. 61 In the Resolution dated October 1, 2019, 62 the Court admitted petitioner's exhibits, except for the following: (1) Exhibits "P-20" to "P-50",for failure to present originals for comparison; and (2) Exhibits "P-74","P-83" to "P-89","P-96" to "P-199",and "P-203-1-3" to "P-203-1-4",for not being found in the records. As a result, petitioner filed its I. Tender of Excluded Evidence [marked as Exhibits "P-20" to "P-50"] and II. Manifestation on Exhibit References Not Used [Re: Exhibits "P-74","P-83" to "P-89","P-96" to "P-199",and "P-203-1-3" to "P-203-1-4"] , 63 which tendered the excluded evidence, specifically, Exhibits "P-20" to "P-50",and manifested that Exhibits "P-74","P-83" to "P-89","P-96" to "P-199",and "P-203-1-3" to "P-203-1-4" do not correspond or refer to any documentary evidence of petitioner, and hence, not formally offered. Accordingly, the Court noted the same, in the Resolution dated November 18, 2019. 64 At the hearing held on October 23, 2019, respondent's counsel manifested that respondent has no witness to present in these cases; and upon motion of the counsels for both parties, the Court granted the parties thirty (30) days from the said date to file their memoranda. 65 On November 22, 2019, petitioner and respondent respectively filed their Memorandum . 66 These consolidated cases were considered submitted for decision on December 2, 2019. 67 THE ISSUE RAISED BY THE PARTIES As stipulated, the sole issue for the Court's determination is as follows: "Whether petitioner is entitled to the claimed refund in the amount of P26,580,431.00 covering the period from April 1, 2014 to April 30, 2014[,] and P28,236,198.00 for its importation on August 19, 2014, allegedly representing the excise tax paid for its importation of alkylate." 68 Petitioner's arguments: Petitioner argues that alkylate should not subject to excise tax because it cannot be used as a "motor fuel" as contemplated in the opening paragraph of Section 148 of the 1997 NIRC; that alkylate is not a product of distillation as contemplated under Section 148 (e) of the 1997 NIRC; that excise taxes apply only to goods manufactured or produced in the Philippines or to imported goods for domestic sale or consumption or for any other disposition; that the imposition of excise tax on imported alkylate is tantamount to double taxation and is highly oppressive, arbitrary and confiscatory; that inasmuch as petitioner filed both the formal claims for refund with the BIR and the instant petitions with this Court before the two-year prescriptive periods, it is clear that petitioner's claims for refund falls within the two-year period prescribed under Section 229 of the 1997 NIRC; and that petitioner is entitled to its claim for refund of excise taxes paid on its importation of alkylate covered by IEIRD Nos. 00374437468 and 00376827474 in the amount of P54,816,629.00. Respondent's counter-arguments: Respondent contends that alkylate is a product of distillation, and falls within the category of naphtha, regular gasoline and other similar products of distillation, hence, subject to excise tax under Section 148 (e) of the Tax Code; that the alkylate imported by petitioner and removed from customs custody, although alleged to have been used as blending component, is still lawfully subject to excise tax for being a thing imported in accordance with Section 129 of the NIRC of 1997; that contrary to the allegation of petitioner that the imposition of excise tax on imported alkylate is tantamount to double taxation and is highly oppressive, arbitrary and confiscatory, it is respondent's position that such allegations are erroneous conclusions or interpretations of fact and law; and that claims for refund are construed strictly against the claimant, for the same partake the nature of exemption from taxation and as such, they are looked upon with disfavor. aScITE THE COURT'S RULING In Commissioner of Internal Revenue vs. Court of Tax Appeals and Petron Corporation 69 the Supreme Court has decided that the CTA has jurisdiction over the subject matter of this case The Court has jurisdiction over the subject matter of this case. This issue was laid to rest in the recent case of Commissioner of Internal Revenue vs. Court of Tax Appeals and Petron Corporation 70 which held that, under Section 7 of R.A. 1125, as amended, the CTA has the power to resolve all tax matters including the validity of the CIR's interpretation and consequent imposition of excise tax on alkylate ,thus: " The Court's Ruling At the onset, Petron insists that the CTA has jurisdiction to pass upon the validity of the CIR's interpretative ruling on alkylate , arguing that the CTA may rule on the validity of a revenue regulations, ruling, issuance or other matters arising under the NIRC and other tax laws administered by the Bureau of Internal Revenue (BIR). As basis, Petron cites for the first time in its motion for reconsideration the Court's ruling in The Philippine American Life and General Insurance Company v. The Secretary of Finance and the Commissioner of Internal Revenue (Philamlife) . Philamlife is a 2014 case decided by a Division of the Court, which controversy arose from an unfavorable ruling by the Secretary of Finance that affirmed, through its power of review under Section 4 of the NIRC, the CIR's denial of a request to be cleared of liability for donor's tax. Noting the absence of an express provision in the law concerning further appeals from the Secretary of Finance, the issue framed for resolution was 'where does one seek immediate recourse from the adverse ruling of the Secretary of Finance in its exercise of its power of review under Sec. 4?' Resolving this issue, the Court in Philamlife held that: "Admittedly, there is no provision of law that expressly provides where exactly the ruling of the Secretary of Finance under the adverted NIRC provision is appealable to. However, We find that Sec. 7(a)(1) of RA 1125, as amended, addresses the seeming gap in the law as it vests the CTA, albeit impliedly, with jurisdiction over the CA petition as "other matters" arising under the NIRC or other laws administered by the BIR. As stated: Sec. 7. Jurisdiction. The CTA shall exercise: a. Exclusive appellate jurisdiction to review by appeal, as herein provided: 1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue or other laws administered by the Bureau of Internal Revenue. x x x Even though the provision suggests that it only covers rulings of the Commissioner, We hold that it is, nonetheless, sufficient enough to include appeals from the Secretary's review under Sec. 4 of the NIRC." Corollary to this disposition, however, the Court's Third Division extended its discussion on the issue regarding the CTA's jurisdiction over the rulings of the CIR, viz. : Evidently, City of Manila can be considered as a departure from Ursal in that in spite of there being no express grant in law, the CTA is deemed granted with powers of certiorari by implication. Moreover, City of Manila diametrically opposes British American Tobacco to the effect that it is now within the power of the CTA, through its power of certiorari ,to rule on the validity of a particular administrative rule or regulation so long as it is within its appellate jurisdiction. Hence, it can now rule not only on the propriety of an assessment or tax treatment of a certain transaction, but also on the validity of the revenue regulations or revenue memorandum circular on which the said assessment is based. The foregoing remarks appear to be in direct opposition to the ruling in British American Tobacco v. Camacho, et al. (British American Tobacco) ,which is a 2008 case decided by the Court En Banc, cited as basis by the Court in its July 15, 2015 Decision in this case regarding the issue of jurisdiction. The apparent conflicting jurisprudence on the matter involving the Court's 2008 En Banc ruling in British American Tobacco and the Court's Third Division Ruling in Philamlife has been seemingly settled in the 2016 En Banc case of Banco De Oro v. Republic of the Philippines (Banco De Oro) wherein it was opined that: "Section 7 of Republic Act No. 1125, as amended, is explicit that, except for local taxes, appeals from the decisions of quasi-judicial agencies (Commissioner of Internal Revenue, Commissioner of Customs, Secretary of Finance, Central Board of Assessment Appeals, Secretary of Trade and Industry) on tax-related problems must be brought exclusively to the Court of Tax Appeals. In other words, within the judicial system, the law intends the Court of Tax Appeals to have exclusive jurisdiction to resolve all tax problems. Petitions for writs of certiorari against the acts and omissions of the said quasi-judicial agencies should thus be filed before the Court of Tax Appeals. Republic Act No. 9282, a special and later law than Batas Pambansa Blg. 129 provides an exception to the original jurisdiction of the Regional Trial Courts over actions questioning the constitutionality or validity of tax laws or regulations. Except for local tax cases, actions directly challenging the constitutionality or validity of a tax law or regulation or administrative issuance may be filed directly before the Court of Tax Appeals. Furthermore, with respect to administrative issuances (revenue orders, revenue memorandum circulars, or rulings), these are issued by the Commissioner under its power to make rulings or opinions in connection with the implementation of the provisions of internal revenue laws. Tax rulings, on the other hand, are official positions of the Bureau on inquiries of taxpayers who request clarification on certain provisions of the National Internal Revenue Code, other tax laws, or their implementing regulations. Hence, the determination of the validity of these issuances clearly falls within the exclusive appellate jurisdiction of the Court of Tax Appeals under Section 7(1) of Republic Act No. 1125, as amended, subject to prior review by the Secretary of Finance, as required under Republic Act No. 8424. (Emphases supplied) The En Banc ruling in Banco De Oro has since not been overturned and thus, stands as the prevailing jurisprudence on the matter. Accordingly, the Court is prompted to reconsider its ruling in this case with respect to the issue of jurisdiction. xxx xxx xxx Nevertheless, Petron has presently manifested that it had already complied with the protest procedure prescribed under the NIRC, and later on, filed an administrative claim for refund and/or tax credit with the BIR on November 21, 2013. Records are bereft of any showing that the CIR had already acted on its claim and hence, Petron filed before the CTA a Supplemental Petition for Review to include a claim for refund and/or tax credit of the excise tax that was levied on its alkylate importation. The CTA then gave due course to the petition and, as per Petron's manifestation, the parties have already been undergoing trial. Consequently, considering that the CTA had taken cognizance of Petron's claim for judicial refund of tax which, under Section 7 (a) (1) of RA 1125, is within its jurisdiction, the Court finds that these supervening circumstances have already mooted the issue of prematurity. Thus, in conjunction with the Banco De Oro ruling that the CTA has jurisdiction to resolve all tax matters (which includes the validity of the CIR's interpretation and consequent imposition of excise tax on alkylate), the Court finds it proper to reconsider its decision . WHEREFORE ,the motion for reconsideration is GRANTED .Respondent Petron Corporation's petition for review docketed as CTA Case No. 8544 is hereby DECLARED to be within the jurisdiction of the Court of Tax Appeals, which is DIRECTED to resolve the case with dispatch. SO ORDERED ." Accordingly, the Court holds that it has jurisdiction over the subject matter of the instant case. Requisites of the claim under Sections 204 (C) and 229 of the 1997 NIRC Sections 204 (C) and 229 of the 1997 NIRC provide for the refund of illegally or erroneously paid tax, which read: "SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes . The Commissioner may xxx xxx xxx (C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty : Provided, however ,That a return filed showing an overpayment shall be considered as a written claim for credit or refund." (Emphasis supplied) "SEC. 229. Recovery of Tax Erroneously or Illegally Collected . No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however ,That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid." (Emphasis supplied) Based on the foregoing provisions, in order to be entitled to a refund of erroneously or illegally collected tax, the taxpayer must comply with the following requisites, to wit: 1) The tax has been erroneously or illegally collected, or the penalty has been collected without authority, and/or any sum has been excessively or in any manner wrongfully collected; 2) The claim for refund or credit has been duly filed with the Commissioner, within two (2) years from the date of payment of tax, or penalty; and, 3) The suit or proceeding is instituted with this Court within two (2) years from the date of payment of tax or penalty. HEITAD For an orderly disposition of the consolidated cases, which are closely intertwined, the Court shall first discuss the second and third requisites. Petitioner timely filed its administrative and judicial claims. The second and third requisites pertain to the timeliness of petitioner's claims both at the administrative and judicial levels. Section 204 (C) refers to the administrative claims filed with the BIR, whereas Section 229, judicial claims. Relative thereto, the Supreme Court has consistently ruled that a claim for refund or credit with the BIR and the subsequent appeal to this Court must be filed within two (2) years from the date of payment of the tax. 71 Records show the following significant date relevant to the subject claim for refund: DATE OF PAYMENT OF EXCISE TAX LAST DAY OF THE 2-YEAR PRESCRIPTIVE PERIOD DATE OF FILING OF ADMINISTRATIVE CLAIM DATE OF FILING OF JUDICIAL CLAIM First Administrative Claim April 7, 2014 72 April 7, 2016 March 31, 2016 73 April 6, 2016 74 Second Administrative Claim August 19, 2014 75 August 19, 2016 August 12, 2016 76 August 19, 2016 77 Given the above dates, the earliest last day to file the first administrative and judicial claims for refund is April 7, 2016; while the earliest last day to file the second administrative and judicial claims for refund is August 19, 2016. Since the first administrative claim was filed on March 31, 2016 and the judicial claim was filed on April 6, 2016, and the second administrative claim was filed on August 12, 2016 and the judicial claim was filed on August 19, 2016, both the first and the second claims for refund were timely filed within the two-year prescriptive period. Thus, petitioner fulfilled the above-stated second and third requisites. Petitioner's alkylate importations are subject to excise tax ; thus , petitioner is not entitled to refund . As regards the first requisite, the Court shall determine whether the excise taxes which petitioner paid were erroneously or illegally collected for the latter to be entitled for a refund. The relevant provision thereto is Section 129 of the NIRC of 1997, as amended, viz. : "SEC. 129. Goods Subject to Excise Taxes . Excise taxes apply to goods manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition and to things imported. The excise tax imposed herein shall be in addition to the value-added tax imposed under Title IV. For purposes of this Title, excise taxes herein imposed and based on weight or volume capacity or any other physical unit of measurement shall be referred to as 'specific tax' and an excise tax herein imposed and based on selling price or other specified value of the good shall be referred to as ' ad valorem tax.'" Accordingly, excise tax is imposed on goods manufactured, produced or imported in the Philippines for domestic sales or consumption or for any other disposition. On imposing excise tax on manufactured oils and other fuels, Section 148 (e) of the NIRC of 1997, as amended, provides: "SEC. 148. Manufactured Oils and Other Fuels . There shall be collected on refined and manufactured mineral oils and motor fuels, the following excise taxes which shall attach to the goods hereunder enumerated as soon as they are in existence as such: xxx xxx xxx (e) Naphtha, regular gasoline and other similar products of distillation, per liter of volume capacity, Four pesos and thirty-five centavos (P4.35): Provided, however, That naphtha, when used as a raw material in the production of petrochemical products or as replacement fuel for natural-gas-fired-combined-cycle power plant, in lieu of locally-extracted natural gas during the non-availability thereof, subject to the rules and regulations to be promulgated by the Secretary of Energy, in consultation with the Secretary of Finance, per liter of volume capacity, Zero (P0.00): Provided, further, That the by-product including fuel oil, diesel fuel, kerosene, pyrolysis gasoline, liquefied petroleum gases and similar oils having more or less the same generating power, which are produced in the processing of naphtha into petrochemical products shall be subject to the applicable excise tax specified in this Section, except when such by-products are transferred to any of the local oil refineries through sale, barter, or exchange, for the purpose of further processing or blending into finished products which are subject to excise tax under this Section." Under the above-quoted law, excise tax shall attach to mineral oils or motor fuels, i.e. ,naphtha, regular gasoline and other similar products of distillation, as soon as they are in existence as such. Based on the foregoing, the Court shall now determine whether petitioner's alkylate importations are subject to excise tax. On this score, it is imperative for the Court to determine the nature of alkylate based on the pieces of evidence submitted by petitioner. Petitioner argues that alkylate is not a product of distillation as contemplated under Section 148 (e) of the NIRC of 1997, as amended. Petitioner further asserts that alkylate is neither in any way similar to naphtha or regular gasoline nor can be used as a motor fuel as stated in Section 148 of the NIRC of 1997, as amended. To prove its material allegations, petitioner presented the Letter dated July 24, 2017 78 issued by OIMB of the DOE, stating: 79 "Our own readings and research confirm with the details you were able to gather from your own research and interviews with experts on the field. Although we have a minor clarification with the second sentence of item 2.c. Probably, a better way of stating this sentence may be as follows: Distillation, a physical separation process, does not directly cause the production of alkylate. Alkylation, a separate chemical process utilizing products from distillation, converts light olefins and isobutene into isoparaffin isomers that produces alkylates." Mr. Ricardo Infante, petitioner's witness, testified via Judicial Affidavit as follows: 80 "Q-18 Taken in relation to the statement in the DOE Letter, what is distillation? A-18 Distillation, which is the process of applying heat to crude oil, is the starting point within the refinery process. The physical separation of crude oil into fractionates is the result of the varying high temperatures employed in distillation. Some of the materials produced through this physical separation resulting from distillation are light olefins and isobutane. Q-19 What happens next, if any, to the olefins and isobutene? A-19 The olefins and isobutane are subject to other important chemical processes, particularly the process called 'alkylation,' to produce alkylate. While it is true that certain raw materials that may be used in the chemical process of alkylation is extracted from distillation, distillation is not the process that directly produces alkylate and neither does it indirectly cause such. Distillation simply causes the separation of raw materials which need to be further subjected to a chemical process called alkylation to produce alkylate." The following were further stated by Mr. Infante, to wit: 81 "JUSTICE CASTAEDA: I have question. Do you confirm that the ultimate raw material of this alkylate is oil? Because it says here in your Answer to No. 18, the course of applying its, the crude oil is the starting point within the refinery. .. WITNESS: Yes. Your Honors, the distillation process or the heating of the crude oil is the starting process in the refinery. This distillation process produces so many kinds of components and one of those or some of those are the olefins and the isobutene which are now being use as raw materials to another chemical process which we called the alkylation which produces the alkylate products. JUSTICE CASTAEDA: All right. The ultimate source is the crude oil? WITNESS: Yes, Your Honors. xxx xxx xxx ATTY. NGO: Ok. Mr. witness, in relation to the same answer, second paragraph, you also mentioned that we noted that distillation produces the light olefins and isobutane which are raw materials that undergo a separate chemical process called alkylation to produce alkylate. Correct? WITNESS: Correct, ma'am. ATTY. NGO: So would you agree with me that olefins and isobutane are indispensable in the production of alkylate? WITNESS: Correct, ma'am. Yes, ma'am. xxx xxx xxx ATTY. LOMBOY: Mr. witness, is distillation a part of the alkylation process? WITNESS: No. ATTY. LOMBOY: What is the relation of distillation and alkylation in the production of alkylate, Mr. Witness? WITNESS: Distillation just produces the raw materials they used in the alkylation process. ATTY. LOMBOY: What process is necessary to produce alkylate? WITNESS: Alkylation is the process, and it is a chemical process that is not related to distillation. It is a separate process; separation process being done before the alkylation. JUSTICE CASTAEDA: I have a question. The alkylate, can this be used for motive power? WITNESS: It cannot use as motive power in the sense, Your Honors that it would be suitable in motor engine. JUSTICE CASTAEDA: But can it run? WITNESS: It can run but you can find trouble just like other substance you can feed it but you can find trouble it will not stay the performance desired. So, it is not suitable for use as fuel." As stated earlier, petitioner also presented Mr. Simon Christopher Mulqueen to testify as to the nature of alkylate. Based on his testimony, alkylate is produced from the combination of light olefins (C3-C5) with isobutane in the presence of a strong acid catalyst, the process of which is known as alkylation. 82 Alkylate is used as a blending component in motor or aviation gasoline in order to meet certain required characteristics such as octane number and volatility requirements. He also attested that: "Q-15 What, if you know, are the raw materials or feedstock to produce alkylates? A-15 Light C3-C5 olefins, e.g. ,isobutene and isobutane. Q-16 How are these raw materials produced? A-16 Light C3-C5 olefins are typically produced from a fluid catalytic cracker (FCC) unit and/or a cooker unit. Isobutane, on the other hand, is a component of natural gas. It can be a product of crude oil distillation or it can also be recovered from other petroleum refinery streams that result from catalytic cracking, catalytic reforming. ATICcS Q-17 You mentioned that isobutane can be a product of crude oil distillation. What is crude oil? A-17 Crude oil is a complex mixture of organic compounds typically comprising paraffins, naphthenes, aromatics and asphaltenes. Crude oil does not typically contain olefinic compounds. Typically, these compounds ( i.e. ,paraffins, naphthenes, aromatics and asphaltenes) are organic rich sediments formed from plant, vegetable and animal matter. High temperature and pressure, in the absence of air, converts these sediments into oil over millions of years. Crude oil is the basic material to produce transport fuel. xxx xxx xxx Q-19 Can you explain in simple terms the process of distillation? A-19 The process of distillation involves the application of heat to a mixture of two or more compounds such as crude oil. Each component of the mixture boils at a different boiling point and is condensed into a liquid and collected." 83 During the cross-examination of Mr. Mulqueen, he testified that isobutane, a raw material for alkylate, is a product of crude oil distillation, viz. : 84 "ATTY. LIM: Q. Just to confirm. To produce Alkylate the raw materials would be C3-C5 Olefins, example Isobutene and Isobutane? MR. MULQUEEN: A. Yes. ATTY. LIM: Yes. Q. And Isobutane in return is a product of crude oil distillation? MR. MULQUEEN: A. One of them, yes. xxx xxx xxx JUSTICE DEL ROSARIO: Yes. Mr. Mulqueen, just kindly enlighten the Court, when you talk of light olefins, like C3, the C5, is it possible that light olefins could be produced by distillation? MR. MULQUEEN: A. No, they are produced through a cracking process. JUSTICE DEL ROSARIO: But is there any way that these light olefins can be produced by distillation? MR. MULQUEEN: A. No." Furthermore, Dr. Joey D. Ocon, testified through his Judicial Affidavit that alkylates are valuable fuel additives or blending component in the production of motor fuel or gasoline. 85 Nonetheless, Dr. Ocon deposed during the hearing held on July 10, 2018 the following: "ATTY. LIM: Q. Yes or No? Can an alkylate be used to start or run an engine or motor vehicle? Yes or No? MR. OCON: A. It could. xxx xxx xxx ATTY. LOMBOY: Q. Mr. Witness, you stated during cross-examination that alkylate can be used to start a motor vehicle. But what is your basis for saying so? MR. OCON: A. I said, yes, it could because like any other hydrocarbon of similar nature to other fuels for vehicle it can be combusted and therefore it could convert that energy into a mechanical power to start any vehicle. But the question as to whether it will be able to maintain the vehicle running, that's another question." 86 Based on the evidence presented, the Court finds that alkylate is a product of distillation. It is indubitable that the raw materials used in producing alkylate, i.e. ,light olefins and isobutane, are derived from petroleum. However, the Court finds that alkylate is still a product of distillation because while alkylate is not directly produced through the process of distillation but by alkylation, the raw materials, namely, olefins and isobutane, are products of distillation. It is clear that alkylate first passes through the process of distillation because it cannot come into existence without its raw material isobutane. In other words, while it is true that alkylation, not distillation, is required to produce alkylate, it is without doubt that isobutane one of the raw materials of alkylate, is a product of distillation. Simply put, there can be no alkylate without isobutane, which is a product of distillation. Such being the case, alkylate, being a product of distillation, is subject to excise tax under Section 148 (e) of the NIRC of 1997, as amended. There is no double taxation. As a corollary, contrary to petitioner's averments, the Court likewise find that double taxation does not exist in this case. Double taxation means taxing the same property twice when it should be taxed only once; that is, taxing the same person twice by the same jurisdiction for the same thing. It is obnoxious when the taxpayer is taxed twice, when it should be but once. Otherwise described as " direct duplicate taxation ," the two taxes must be imposed on the same subject matter, for the same purpose, by the same taxing authority, within the same jurisdiction, during the same taxing period; and they must be of the same kind or character. 87 In this case, the subject matter of the tax imposed is on the importation of alkylate. And it is already a different subject matter when excise tax is imposed on the alleged use of alkylate as a blending component or raw material to produce another taxable article or goods. It must be noted that the law itself affirms this notion of two different subject matters arising from same imported article. To be sure, upon importation, there is an excise tax imposition. When the imported goods go through reprocessing, an imposition of tax happens again. However, there is no double taxation in this case since one of its elements is lacking, i.e. ,that the two taxes must be imposed on the same subject matter. This is so because the first imposition is upon the importation of goods, and the second, upon removal or reprocessed goods from production site. In other words, the first imposition is simply concerned with the importation of articles, while the subsequent imposition is on the manufacturing or production of goods in the Philippines for domestic sale or consumption or for any other disposition. Such being the case, the imposition of excise tax is on two different subject matters. Hence, no double taxation or "direct duplicate taxation" exists. In sum, the Court finds no merit on petitioner's prayer for the refund or issuance of TCC of the amounts of P26,580,431.00 and P28,236,198.00, representing excise tax payments on importations of alkylate covered by IEIRD Nos. 00374437468 and 00376827474, respectively. Our consistent ruling is that actions for tax refund, as in the instant case, are in the nature of a claim for exemption and the law is not only construed in strictissimi juris against the taxpayer, but also the pieces of evidence presented entitling a taxpayer to an exemption is strictissimi scrutinized and must be duly proven. 88 WHEREFORE ,in light of the foregoing considerations, the instant consolidated Petitions for Review are DENIED for lack of merit. SO ORDERED . TIADCc (SGD.) JUANITO C. CASTAEDA, JR. Associate Justice Jean Marie A. Bacorro-Villena, J. ,concurs. Footnotes 1. Statement of the Case, Pre-Trial Order dated March 19, 2018, Docket (CTA Case No. 9327) Vol. II, p. 639. 2. Par. 1, Stipulation of Facts, Joint Stipulation of Facts and Issues (JSFI),Docket (CTA Case No. 9327) Vol. II, p. 589. 3. Par. 2, Stipulation of Facts, JSFI, Docket (CTA Case No. 9327) Vol. II, p. 589. 4. Exhibit "P-6",Docket (CTA Case No. 9327) Vol. II, pp. 895 to 900. 5. Exhibit "P-4",Docket (CTA Case No. 9327) Vol. II, p. 893. 6. Exhibit "P-8",Docket (CTA Case No. 9327) Vol. II, p. 902. 7. Exhibit "P-14",Docket (CTA Case No. 9327) Vol. II, pp. 908 to 919. 8. Exhibit "P-12",Docket (CTA Case No. 9327) Vol. II, p. 906. 9. Exhibit "P-16",Docket (CTA Case No. 9327) Vol. II, p. 921. 10. Exhibits "P-9" and "P-11",Docket (CTA Case No. 9327) Vol. II, pp. 903 and 905. 11. Exhibit "P-7",Docket (CTA Case No. 9327) Vol. II, p. 901. 12. Exhibits "P-17" and "P-19",Docket (CTA Case No. 9327) Vol. II, pp. 922 and 924. 13. Exhibit "P-15",Docket (CTA Case No. 9327) Vol. II, p. 920. 14. Exhibits "P-56" and "P-57",Docket (CTA Case No. 9327) Vol. II, pp. 995 and 996. 15. Exhibits "P-58","P-59","P-60",and "P-61",Docket (CTA Case No. 9327) Vol. II, pp. 997, 998 to 1009, 1016, and 1017 to 1028. 16. Docket (CTA Case No. 9327) Vol. I, pp. 10 to 34. 17. Docket (CTA Case No. 9327) Vol. I, pp. 106 to 125. 18. Docket (CTA Case No. 9327) Vol. I, pp. 107 to 109. 19. Docket (CTA Case No. 9327) Vol. I, pp. 109 to 120. 20. Docket (CTA Case No. 9327) Vol. I, pp. 121 to 122. 21. Docket (CTA Case No. 9327) Vol. I, pp. 122 to 124. 22. Docket (CTA Case No. 9460),pp. 16 to 42. 23. Notice of Pre-Trial Conference dated July 22, 2016, Docket (CTA Case No. 9327) Vol. I, pp. 128 to 129. 24. Docket (CTA Case No. 9327) Vol. I, pp. 132 to 135. 25. Docket (CTA Case No. 9460),pp. 100 to 103. 26. Docket (CTA Case No. 9327) Vol. I, p. 139. 27. Docket (CTA Case No. 9327) Vol. I, pp. 140 to 142. 28. Order dated October 19, 2016, Docket (CTA Case No. 9327) Vol. I, p. 144. 29. Docket (CTA Case No. 9460),pp. 119 to 136. 30. Docket (CTA Case No. 9460),pp. 120 to 121. 31. Docket (CTA Case No. 9460),pp. 121 to 123. 32. Docket (CTA Case No. 9460),pp. 123 to 124. 33. Docket (CTA Case No. 9460),pp. 124 to 128. 34. Docket (CTA Case No. 9460),pp. 129 to 131. 35. Docket (CTA Case No. 9460),pp. 131 to 133. 36. Docket (CTA Case No. 9460),pp. 133 to 135. 37. Docket (CTA Case No. 9327) Vol. I, pp. 153 to 156. 38. Docket (CTA Case No. 9327) Vol. I, pp. 157 to 171. 39. Docket (CTA Case No. 9327) Vol. I, pp. 178 to 185. 40. Notice of Pre-Trial Conference dated August 22, 2017, Docket (CTA Case No. 9327) Vol. I, pp. 186 to 187; Minutes of the hearing held on, and Order dated, December 7, 2017, Docket (CTA Case No. 9327) Vol. I, pp. 560 to 566. 41. Docket (CTA Case No. 9327) Vol. I, pp. 538 to 540. 42. Docket (CTA Case No. 9327) Vol. I, pp. 543 to 558. 43. Docket (CTA Case No. 9327) Vol. II, pp. 589 to 602. 44. Docket (CTA Case No. 9327) Vol. II, p. 605. 45. Docket (CTA Case No. 9327) Vol. II, pp. 639 to 647. 46. Exhibit "P-81",Docket (CTA Case No, 9327) Vol. I, pp. 193 to 202; Minutes of the hearing held on, and Order dated, May 22, 2018, Docket (CTA Case No. 9327) Vol. II, pp. 698 to 702. 47. Exhibit "P-91",Docket (CTA Case No. 9327) Vol. I, pp. 210 to 214; Order dated June 19, 2018, Docket (CTA Case No. 9327) Vol. II, pp. 733 to 734. 48. Exhibit "P-95",Docket (CTA Case No. 9327) Vol. II, pp. 745 to 750; Minutes of the hearing held on, and Order dated, March 27, 2019, Docket (CTA Case No. 9327) Vol. II, pp. 815 to 817. 49. Exhibit "P-77",Docket (CTA Case No. 9327) Vol. I, pp. 234 to 244; Minutes of the hearing held on, and Order dated, April 10, 2018, Docket (CTA Case No. 9327) Vol. II, pp. 683 to 687. 50. Exhibit "P-90",Docket (CTA Case No. 9327) Vol. I, pp. 313 to 317; Order dated June 19, 2018, Docket (CTA Case No. 9327) Vol. II, pp. 733 to 734. 51. Exhibit "P-93",Docket (CTA Case No. 9327) Vol. I, pp. 334 to 344; Order dated July 10, 2018, Docket (CTA Case No. 9327) Vol. II, pp. 736 to 737. 52. Exhibit "P-78",Docket (CTA Case No. 9327) Vol. I, pp. 364 to 372; Exhibit "P-79",Docket (CTA Case No. 9327) Vol. II, pp. 664 to 666; Minutes of the hearing held on, and Order dated, April 10, 2018, Docket (CTA Case No. 9327) Vol. II, pp. 683 to 687. 53. Exhibit "P-80",Docket (CTA Case No. 9327) Vol. I, pp. 461 to 467; Minutes of the hearing held on, and Order dated, May 22, 2018, Docket (CTA Case No. 9327) Vol. II, pp. 698 to 702. 54. Exhibit "P-92",Docket (CTA Case No. 9327) Vol. I, pp. 497 to 504; Order dated July 10, 2018, Docket (CTA Case No. 9327) Vol. II, pp. 736 to 737. 55. Exhibit "P-94",Docket (CTA Case No. 9327) Vol. II, pp. 766 to 771; Minutes of the hearing held on, and Order dated, March 13, 2019, Docket (CTA Case No. 9327) Vol. II, pp. 813 to 814. 56. Oath of Commission dated April 24, 2018, Docket (CTA Case No. 9327) Vol. II, p. 691; Exhibit "P-82",Docket (CTA Case No. 9327) Vol. II, pp. 618 to 622; Minutes of the hearing held on, and Order dated, April 24, 2018, Docket (CTA Case No. 9327) Vol. II, pp. 689 to 690, and 692 to 693, respectively. 57. Docket (CTA Case No. 9327) Vol. II, pp. 708 to 731. 58. Docket (CTA Case No. 9327) Vol. II, p. 776. 59. Compliance dated February 22, 2019, Docket (CTA Case No. 9327) Vol. II, pp. 803 to 804. 60. Docket (CTA Case No. 9327) Vol. II, pp. 827 to 889. 61. Docket (CTA Case No. 9327) Vol. II, pp. 1097 to 1098. 62. Docket (CTA Case No. 9327) Vol. III, pp. 1121 to 1123. 63. Docket (CTA Case No. 9327) Vol. III, pp. 1124 to 1130. 64. Docket (CTA Case No. 9327) Vol. III, pp. 1135 to 1137. 65. Minutes of the hearing held on, and Order dated October 23, 2019, Docket (CTA Case No. 9327) Vol. III, pp. 1132 to 1133. 66. Docket (CTA Case No. 9327) Vol. III, pp. 1138 to 1184, and 1186 to 1196, respectively. 67. Resolution dated December 2, 2019, Docket (CTA Case No. 9327) Vol. III, p. 1198. 68. Par. II, Stipulation of Issues, JSFI, Docket (CTA Case No. 9327) Vol. II, p. 590. 69. Resolution, G.R. No. 207843, February 14, 2018. 70. Resolution, G.R. No. 207843, February 14, 2018. 71. Commissioner of Internal Revenue vs. Victorias Milling Co., Inc. and The Court of Tax Appeals , G.R. No. L-24108, January 3, 1968; J. N. Sweeney, A. O. Baigrie, and Ramon Burgas vs. Collector ,G.R. No. L-12178, August 21, 1959; P.J. Kiener Company, Ltd. v. Saturnino David ,G.R. No. L-5163, April 23, 1953. 72. Exhibits "P-9" and "P-11",Docket (CTA Case No. 9327) Vol. II, pp. 903 and 905. 73. Exhibits "P-58" and "P-59",Docket (CTA Case No. 9327) Vol. II, pp. 997 and 998 to 1009. 74. Docket (CTA Case No. 9327) Vol. I, p. 10. 75. Exhibits "P-17" and "P-19",Docket (CTA Case No. 9327) Vol. II, pp. 922 and 924. 76. Exhibits "P-60",and "P-61",Docket (CTA Case No. 9327) Vol. II, pp. 1016 and 1017 to 1028. 77. Docket (CTA Case No. 9460),p. 16. 78. Exhibit "P-63",Docket (CTA Case No. 9327) Vol. II, p. 1041. 79. Exhibit "P-95",Docket (CTA Case No. 9327) Vol. II, p. 746. 80. Exhibit "P-95",Docket (CTA Case No. 9327) Vol. II, pp. 748 to 749. 81. Transcript of Stenographic Notes (TSN) dated March 27, 2019, pp. 7, 9 to 10. 82. Exhibit "P-81",Docket (CTA Case No. 9327) Vol. I, pp. 193 to 202. 83. Id. 84. TSN dated May 22, 2018, pp. 15 to 16. 85. Exhibit "P-92",Docket (CTA Case No. 9327) Vol. I, p. 500. 86. TSN dated July 10, 2018, pp. 16 to 17. 87. Commissioner of Internal Revenue vs. Bank of Commerce ,G.R. No. 149636, June 8, 2005. 88. Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue , G.R. No. 159490, February 18, 2008. +