San Miguel Brewery, Inc. v. Commissioner of Internal Revenue

FIRST DIVISION [G.R. No. 258813. October 2, 2023.] SAN MIGUEL BREWERY, INC. , petitioner , vs. COMMISSIONER OF INTERNAL REVENUE , respondent . NOTICE Sirs/Mesdames : Please take notice that the Court, First Division, issued a Resolution dated October 2, 2023 , which reads as follows : " G.R. No. 258813 (San Miguel Brewery, Inc. v. Commissioner of Internal Revenue) . This Petition for Review on Certiorari 1 assails the Decision 2 dated 10 February 2022 of the Court of Tax Appeals (CTA) En Banc in CTA EB Nos. 2283 and 2284. The CTA En Banc affirmed the ruling of the CTA First Division in CTA Case No. 9743, partially granting petitioner San Miguel Brewery, Inc. (SMB)'s claim for refund or issuance of a tax credit certificate in the reduced amount of P27,967,813.47. 3 HTcADC Antecedents SMB is a subsidiary of San Miguel Corporation, a domestic corporation with address at 40 San Miguel Avenue, Mandaluyong City, Metro Manila. 4 On 14 December 2017, SMB filed a letter claim for refund with the Bureau of Internal Revenue (BIR). 5 SMB alleged that it overpaid excise taxes erroneously assessed and collected on its removals of its various products from 01 January 2016 to 31 December 2016 (subject period), in the amount of P30,591,410.67. 6 Thereafter, on 29 December 2017, SMB filed a Petition for Review with the CTA. Before the CTA, SMB presented as witnesses: (1) Noemi L. Ronquillo (Ronquillo), the Manager of its Accounting and Financial Services; and (2) Katherine O. Constantino, the Independent Certified Public Accountant (ICPA). 7 Ronquillo testified that for the year 2013, SMB paid excise taxes at the rate of P20.57 per liter for its beer products, as required by the BIR pursuant to Revenue Memorandum Circular (RMC) No. 90-2012. 8 SMB protested the tax rate on the ground that it was unlawfully applied to its San Mig Light (SML) products. 9 Nonetheless, it paid the prescribed rate to be able to make removals of its beer products. 10 Notably, Ronquillo claimed that SMB faced the same situation for year 2016. 11 It paid excise taxes on its removals of its products at an increased rate of P23.14 per liter, as required by the BIR, in accordance with Revenue Regulations (RR) No. 17-2012. 12 Prior to this, the rate imposed by the BIR was P22.25. 13 Similarly, SMB paid the required rate to be able to make removals of its products without penalty. 14 Meanwhile, the ICPA identified her Report containing the results of her audit, which was submitted to the CTA. 15 She found that SMB paid excise taxes in advance before the actual removal of its beer products, and filed the corresponding tax returns. 16 Also, she confirmed that the actual volume and the excise taxes due and paid for the subject period correspond to the amounts indicated in the Total Removals Report and Monthly Removals Schedule, which were submitted to the BIR. 17 The ICPA concluded that the excise tax due and paid by SMB for the subject period amounted to P4,651,049,570.73. 18 However, per her computation based on the correct rate, the amount due should have only been P4,620,458,157.84. 19 Based on her analysis, SMB is entitled to a refund of P30,591,375.88. 20 Ruling of the CTA First Division On 14 October 2019, 21 the CTA First Division issued its Decision partially granting the petition of SMB, to wit: WHEREFORE , the Petition for Review dated December 27, 2017 filed by . . . San Miguel Brewery, Inc. is PARTIALLY GRANTED . Accordingly [the CIR] is hereby ORDERED TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE in favor of [SMB] in [sic] the reduced amount of [Php]27,967,813.47 , representing erroneously and excessively collected excise taxes on its removals of SML (in bottles and in cans) and Other Beer Products for the period covering January 1, 2016 to December 31, 2016. CAIHTE SO ORDERED. 22 The CTA First Division confirmed that the amount of P27,967,813.47 represented erroneously collected excise taxes relating to its removals of SML in bottles and cans, and other beer products, for the subject period. 23 However, it rejected the remaining claim of SMB in the amount of P2,623,597.20 pertaining to it removals of SML in kegs, on the ground of failure to present the prescribed Sworn Statements showing the suggested net retail price ("NRP") of the said product, as required under Revenue Memorandum Circular ("RMC") No. RMC 3-2013 in relation to RMC No. 17-2012. 24 To assail the CTA First Division's Decision, respondent Commissioner of Internal Revenue (CIR) filed a Motion for Reconsideration, while SMB filed a Motion for Partial New Trial. 25 Therein, SMB attached the Sworn Declarations and argued that it was able to submit these to the BIR. 26 However, through mistake and excusable negligence, the Sworn Declarations were not given to the ICPA as the latter no longer asked for the same. 27 Instead, the ICPA referred to the Schedule of Net Retail Price of SML, which was purportedly based on the Sworn Statements submitted to the BIR. 28 Notably, both motions were denied by the CTA First Division in its Resolution dated 10 February 2022. 29 Aggrieved, the parties filed their respective Petitions for Review with the CTA En Banc . 30 Ruling of the CTA En Banc In its assailed Decision 31 dated 10 February 2022, the CTA En Banc denied the petitions of both parties. The fallo of its ruling reads: WHEREFORE , premises considered, the Court DENIES the instant Petitions for Review for lack of merit. The Decision dated October 14, 2019 and Resolution dated June 10, 2020 of the First Division in CTA Case No. 9743 are AFFIRMED . SO ORDERED. 32 The CTA En Banc rejected the CIR's arguments and explained that the CTA has jurisdiction over decisions or the inaction of the CIR in claims for refund of internal revenue taxes. 33 Also, it confirmed that it has jurisdiction over issues involving the validity or constitutionality of the rules and regulations and other administrative issuances of the CIR. 34 Thus, the CTA En Banc stated that the CTA First Division properly exercised jurisdiction over the case. 35 Particularly on SMB's claim for the remaining amount of P2,623,597.20, the CTA En Banc stated that this was correctly denied. 36 While SMB submitted the relevant sworn statements with its Motion for Partial New Trial, the CTA En Banc stated that its non-presentation of the same to the ICPA cannot be considered as excusable negligence. 37 Hence, the instant petition filed by SMB. aScITE Issue The relevant issue in this case is whether or not the CTA erred in denying SMB's claim for refund or issuance of tax credit certificate for excise taxes purportedly erroneously paid on its removals of SML in kegs, in the amount of P2,623,597.20. Ruling of the Court The petition has merit. Time and again, the Court has emphasized that claims for refund or the issuance of a tax credit certificate are in the nature of a claim for exemption, which should be construed strictissimi juris against the taxpayer. 38 Thus, the burden is placed on the taxpayer to establish that he or she has complied with the conditions for the grant of the tax refund or credit. 39 However, it has been ruled that not all claims for tax refund partake the nature of a tax exemption, which will put into operation the rule of strict interpretation against the taxpayer. 40 When the claim for tax refund is based on the erroneous payment of tax or the government's exaction in the absence of a law, the applicable rule is the doctrine of strict interpretation in the imposition of taxes. 41 This provides that a statute will not be construed as imposing a tax unless it does so clearly, expressly, and unambiguously. 42 In this regard, Section 229 of the Tax Code, as amended, provides the procedure in claiming for a refund or credit of tax erroneously or illegally collected: 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, of any sum alleged to have been excessively or in any manner wrongfully 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. DETACa 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. Specifically for excise taxes, Section 130 of the Tax Code, as amended, requires the taxpayer to file the necessary return and pay the excise taxes due before removal of the products from the place of production. However, a taxpayer may also be authorized to avail of the advance payment scheme. 43 This does away with the required prior filing of the return, if the taxpayer has sufficient balance of deposits with the BIR to fully cover the excise tax due on the removals. 44 In this regard, Section 143 of the Tax Code, as amended by Republic Act (RA) No. 10351 45 provides that effective 01 January 2016, if the net retail price (excluding the excise tax and the value-added tax) per liter of volume capacity is P50.60 or less, the tax shall be P21.00 per liter. 46 On the other hand, if the net retail price per liter is more than P50.60, the tax shall be P23.00 per liter. 47 Here, as confirmed by the CTA, SMB was able to timely file its claim for refund in accordance with Section 204 (C) and Section 229 of the Tax Code, as amended. 48 Similarly, it found that SMB was able to establish its claim for refund or issuance of a tax credit certificate in the amount of P27,967,813.47. 49 The remaining issue pertains to SMB's claim for excise taxes purportedly erroneously paid for its removals on SML in kegs in the amount of P2,623,597.20. SMB claims that the net retail price per liter of its SML in kegs is P50.60 or less. 50 Thus, the amount of excise tax per liter should be P21.00. 51 However, the BIR applied a higher rate of P23.14, in accordance with RR No. 17-2012. 52 The CTA confirmed that the higher rates imposed by the BIR have no basis under the law. 53 Nevertheless, it denied SMB's remaining claim of P2,623,597.20 on the ground that it failed to submit the sworn statement of the net retail price of SML in kegs as required under RR No. 17-2012 and RMC No. 3-2013. 54 While the factual findings of the CTA are generally given the highest respect, this rule does not apply where the judgment is based on a misapprehension of facts, or when it failed to consider relevant facts which would justify a different conclusion. 55 Verily, Section 7 of RR No. 17-2012 56 requires the submission to the BIR of the notarized sworn statement for alcohol or tobacco products: SECTION 7. Submission of Sworn Statement . Every local manufacturer or importer of alcohol and tobacco products shall a * duly notarized manufacturer's or importer's sworn statement for alcohol or tobacco product showing, among others, the following information: (a) Name, address, TIN and assessment number of the manufacturer or importer; (b) Complete root name of the brand as well as the complete brand name with modifiers, if any; (c) Complete specifications of the brand detailing the specific measurements, weights, manner of packaging, etc.; (d) Name(s) of the region(s) where the brand is/are to be marketed; (e) Wholesale price per case, gross and net of VAT and excise tax; (f) Suggested retail price, gross and net of VAT and excise tax, per pack or per bottle, as the case may be; (g) Detailed production/importation costs and all other expenses incurred or to be incurred until the product is finally sold ( e.g. , materials, labor, overhead, selling and administrative expenses) per case; (h) Applicable rate of excise tax per unit of measure or value, as the case may be; and (i) Corresponding excise and value-added taxes per case. HEITAD The manufacturer's or importer's sworn statement shall be submitted as a supporting document to the prescribed application for the initial registration of alcohol or tobacco product and thereafter submit an updated sworn statement on or before the end of the months of June and December of the year: Provided, however, That whenever there is a change in the cost to manufacture, produce and sell the brand or change in the actual selling price of the brand, the updated sworn statement shall be submitted at least five (5) days before the actual removal of the product from the place of production or release from the customs' custody, as the case may be: Provided, further , That if the manufacturer or importer sells or allows such goods to be sold at wholesale in another establishment of which he is the owner or the profits thereof of which he has an interest, the selling price in such establishment shall constitute the wholesale price. Should such price be less than the said costs and expenses, a proportionate margin of profit of not less than ten percent (10%) thereof shall be added to constitute the wholesale price. With respect to imported alcohol or tobacco products, the cost of importation shall, in no case, be less than the value indicated in the reference books or any other reference materials used by the BOC in determining the proper valuation of the imported products, or the dutiable value as defined under the Tariff and Customs Code of the Philippines, as amended, whichever, is higher: Provided, finally , That, in case the newly introduced alcohol or tobacco product shall be subsequently marketed in another region/other regions before the proper tax classification is finally determined by the BIR, an updated sworn statement shall be submitted to the appropriate BIR Office before the same shall be removed from the place of production. The sworn statement prescribed herein shall be subject to verification by the BIR to validate its contents with respect to its accuracy and completeness. In the event that the contents thereof are found to be inaccurate and/or incomplete, the taxpayer shall be required to submit a revised sworn statement, without prejudice to the imposition of corresponding sanctions and penalties. aDSIHc RMC NO. 90-2012 57 was issued listing the different brands of locally manufactured fermented liquors with their corresponding type of packaging, net retail price, and applicable excise tax rate per liter. Notably, RMC No. 3-2013 58 states that for alcohol and tobacco products which are not listed, their initial tax classification or rate shall be based on the suggested net retail price in the notarized sworn statement. The suggested net retail price is the net retail price at which the product is intended to be sold on retail in supermarkets or retail outlets, which shall be subject to regular validation by the BIR. 59 On this matter, RMC No. 3-2013 reads: 2. With respect to other alcohol and tobacco products that were not included in any of the Annexes of the said RMC, their respective initial tax classification or rate shall be based on the suggested net retail price declared in the latest sworn statement filed by the manufacturer and importer, as the case may be. A perusal of RMC No. 90-2012 reveals that SML in kegs was not included in the list of locally fermented liquors. In accordance with RR 17-2012 and RMC 3-2013, SMB was actually able to submit the relevant sworn statements for its SML in kegs to the BIR. 60 However, it admitted that these were not submitted to the ICPA, as the latter merely requested for a Schedule of Net Retail Price of SML products. 61 Nonetheless, SMB was able to submit the sworn statements to the CTA First Division when it filed its Motion for Partial New Trial. 62 Relevantly, the Court has held that proceedings before the CTA shall not be governed strictly by the technical rules of evidence. 63 The paramount consideration should be the ascertainment of truth. 64 Thus, there are cases where the Court considered evidence submitted by the taxpayer upon its filing of a motion for reconsideration or a motion for new trial. In the case of BPI Family Savings Bank, Inc. v. Court of Appeals , 65 petitioner filed a claim for refund for its tax withheld. Notably, petitioner indicated in its income tax return that it would apply the excess withholding tax as a tax credit for the following year. Thus, the CTA and the CA denied petitioner's claim as it failed to present its income tax return for the following year, which would show that the amount was not applied as a tax credit. ATICcS When it reached the Court, it was observed that petitioner was able to submit its final adjustment return for the following year when it filed a motion for reconsideration with the CTA. Therein, it was shown that petitioner did not in fact apply the claimed amount as tax credit. The Court proceeded to emphasize that the CTA is not strictly governed by the technical rules of evidence. It explained that the quest for orderly presentation of issues should not bar the courts from considering undisputed facts, to arrive at a just determination of a controversy. A similar conclusion was arrived at in the case of Filinvest Development Corp. v. Commissioner of Internal Revenue . 66 Therein, petitioner filed a claim for refund for its excess creditable withholding taxes. The CTA denied its claim for failure to present in evidence its income tax return for the following year, as it was necessary to determine whether it applied or credited the refundable amount. Verily, the Court considered that petitioner was able to submit its income tax return for the following year in its motion for reconsideration with the CTA. This confirmed that petitioner did not apply or credit the refundable amount. The Court stressed that technicalities should not be used to defeat substantive rights. Under the principle of solutio indebiti, the government has to restore to petitioner the sums representing its erroneous payments of taxes. In the recent case of Commissioner of Internal Revenue v. Vestas Services Philippines, Inc. , 67 the Court dealt with therein respondent's claim for refund or issuance of a tax credit certificate for its unutilized input VAT. Initially, the CTA dismissed respondent's petition on the ground that the period to file its judicial claim has already lapsed. However, it filed a Motion for Reconsideration with Motion for Leave of Court to Reopen the Case for Presentation of Additional Evidence, wherein it sought to submit evidence proving that it was able to timely file its judicial claim. The CTA allowed respondent to present the additional evidence in the interest of substantial justice. Upon appeal, the Court affirmed the CTA's allowance of respondent's supplemental evidence. Ultimately, it explained that justice would be better served if respondent was allowed a final opportunity to prove that its judicial claim was timely filed. After all, the CTA is not governed strictly by the technical rules of evidence. Procedural rules should not hamper the CTA to effectively and fully appreciate the facts of the case and ascertain the truth of the allegations of the parties. ETHIDa Similar to the abovementioned cases, the interest of substantial justice calls the Court to exercise liberality in its application of procedural rules. It appears that SMB was able to comply with the provisions of RR No. 17-2012 and RMC No. 3-2013, as it filed the relevant sworn statements for its SML in kegs for the subject period with the BIR. 68 While these were admittedly not submitted to the ICPA, the latter was able to refer to the Schedule of Net Retail Price of SML products. 69 In any case, the sworn statements stamped received by the BIR were submitted by SMB to the CTA with its Motion for Partial New Trial. 70 A perusal of the sworn statements for SMB's SML in kegs would show that its contents are substantially compliant with RR No. 17-2012. 71 Moreover, SMB's claim is supported by the testimonies of its witnesses. Ronquillo stated that the excise tax rates imposed by the BIR were higher than that provided under the Tax Code. 72 Nonetheless, SMB followed and paid these rates to be able to make removals of its products without penalty. 73 Markedly, per the ICPA's audit, she confirmed that the excise tax due on SMB's SML in kegs should have only been P21.00 per liter in accordance with RA No. 10351. 74 Since SMB paid P23.14 per liter, its tax payments were clearly excessive. 75 Moreover, it must be stressed that SMB's claim for refund is premised on its erroneous payment of excise taxes. Hence, the application of the doctrine of strict interpretation against the taxpayer, in relation to tax exemptions, is improper. 76 Rather, the appropriate rule in this case is the strict interpretation in the imposition of taxes, such that the statute must be construed against the government and in favor of the taxpayer. 77 Granted, SMB may have failed to strictly comply with the rules of procedure. However, substantial justice, equity, and fair play, should take precedence over technicalities and legalisms. 78 The government has no right to keep money not belonging to it, thereby enriching itself at the expense of law-abiding citizens. 79 If the government demands taxpayers to observe fairness and honesty in the payment of taxes, so must it observe the same standard in refunding erroneously paid taxes. 80 All told, simple justice requires the speedy refund of wrongly held taxes. 81 In light of the foregoing, the Court finds that SMB was able to sufficiently establish its claim for refund in the remaining amount of P2,623,597.20. Thus, the Court hereby grants its petition. TIADCc WHEREFORE , the petition is hereby GRANTED . The Decision dated 10 February 2022 of the Court of Tax Appeals En Banc in CTA EB Nos. 2283 and 2284 is REVERSED and SET ASIDE . Accordingly, respondent Commissioner of Internal Revenue is ORDERED to refund or issue a tax credit certificate in favor of petitioner San Miguel Brewery, Inc., in the total amount of P2,623,597.20, representing erroneously and/or excessively collected excise taxes on its removals of its San Mig Light in kegs for the period covering 01 January 2016 to 31 December 2016. SO ORDERED. " Hernando, J., on leave. By authority of the Court: (SGD.) MARIA TERESA B. SIBULO Division Clerk of Court Footnotes 1. Rollo , pp. 32-66. 2. Id. at 11-29. Penned by Associate Justice Ma. Belen M. Ringpis-Liban and concurred in by Presiding Justice Roman G. del Rosario and Associate Justices Juanito C. Castaeda, Jr., Erlinda P. Uy, Catherine T. Manahan, Jean Marie A. Bacorro-Villena, Maria Rowena Modesto-San Pedro, Marian Ivy F. Reyes-Fajardo, and Lanee S. Cui-David. 3. Id. at 13-14. 4. Id. at 12. 5. Id. at 13. 6. Id. 7. Id. 8. San Miguel Brewery, Inc. v. Commissioner of Internal Revenue , C.T.A. Case No. 9743, 14 October 2019. 9. Id. 10. Id. 11. Id. 12. Id. 13. Id. 14. Id. 15. Id. 16. Id. 17. Id. 18. Id. 19. Id. 20. Id. 21. Rollo , p. 13. 22. Id. at 14. 23. Id. at 13-14. 24. Id. at 14. 25. Id. at 88-95. 26. Id. at 89-90. 27. Id. at 90. 28. Id. 29. Id. at 10. 30. Id. at 15. 31. Id. at 11-29. 32. Id. at 28. 33. Id. at 19. 34. Id. at 21-22. 35. Id. at 13-26. 36. Id. at 26-28. 37. Id. at 26-27. 38. Coca-Cola Bottlers Philippines, Inc. v. Commissioner of Internal Revenue , 826 Phil. 329, 347-348 (2018). 39. Commissioner of Internal Revenue v. San Roque Power Corp. , 703 Phil. 310, 357 (2013). 40. Petron Corp. v. Commissioner of Internal Revenue , G.R. No. 255961, 20 March 2023. 41. Commissioner of Internal Revenue v. Fortune Tobacco Corp. , 581 Phil. 146, 166-168 (2008). 42. Medicard Philippines, Inc. v. Commissioner of Internal Revenue , 808 Phil. 528, 554 (2017). 43. Section 11.1, Revenue Regulations No. 02-97. 44. Id. 45. Entitled "AN ACT RESTRUCTURING THE EXCISE TAX ON ALCOHOL AND TOBACCO PRODUCTS BY AMENDING SECTIONS 141, 142, 143, 144, 145, 8, 131 AND 288 OF REPUBLIC ACT NO. 8424, OTHERWISE KNOWN AS THE NATIONAL INTERNAL REVENUE, CODE OF 1997, AS AMENDED BY REPUBLIC ACT NO. 9334, AND FOR OTHER PURPOSES." Approved: 19 December 2012. 46. Section 143 of the Tax Code, as amended by Republic Act No. 10351. 47. Id. 48. Rollo , pp. 20-21. 49. Id. at 13-14. 50. Id. at 53-57. 51. Id. at 34. 52. Id. 53. San Miguel Brewery, Inc. v. Commissioner of Internal Revenue , C.T.A. Case No. 9743, 14 October 2019. 54. Rollo , p. 14. 55. State Land Investment Corp. v. Commissioner of Internal Revenue , 566 Phil. 113, 119 (2008). 56. Prescribing the Implementing Guidelines on the Revised Tax Rates on Alcohol and Tobacco Products, 21 December 2012. 57. Revised Tax Rates of Alcohol and Tobacco Products under Republic Act No. 10351, 27 December 2012. 58. Clarifying Certain Provisions of Revenue Regulations No. 17-2012 Implementing the Provisions of Republic Act No. 10351 as well as the Provisions of Revenue Memorandum Circular No. 90-2012 Providing the Initial Tax Classifications of Alcohol and Tobacco Products, 08 January 2013. 59. Section 143 of the Tax Code, as amended by Republic Act No. 10351. 60. Rollo , pp. 103-108. 61. Id. at 90. 62. Id. at 88-108. 63. Commissioner of Internal Revenue v. Vestas Services Philippines, Inc. , G.R. No. 255085, 29 March 2023. 64. Id. 65. 386 Phil. 719-729 (2000). 66. 556 Phil. 439-455 (2007). 67. G.R. No. 255085, 29 March 2023. 68. Rollo , pp. 103-108. 69. San Miguel Brewery, Inc. v. Commissioner of Internal Revenue , C.T.A. Case No. 9743, 14 October 2019. 70. Rollo , pp. 88-108. 71. Id. at 103-108. 72. San Miguel Brewery, Inc. v. Commissioner of Internal Revenue , C.T.A. Case No. 9743, 14 October 2019. 73. Id. 74. Section 3, Republic Act No. 10351. 75. San Miguel Brewery, Inc. v. Commissioner of Internal Revenue , C.T.A. Case No. 9743, 14 October 2019. 76. Petron Corp. v. Commissioner of Internal Revenue , G.R. No. 255961, 20 March 2023. 77. Id. 78. Winebrenner & Iigo Insurance Brokers, Inc. v. Commissioner of Internal Revenue , 752 Phil. 375, 397 (2015). 79. Id. 80. BPI Family Savings Bank, Inc. v. Court of Appeals , 386 Phil. 719, 729 (2000). 81. State Land Investment Corp. v. Commissioner of Internal Revenue , 566 Phil. 113, 122 (2008).