Regulations governing the denaturing, taxation and removal of distilled spirits or alcohol for blending with gasoline or other motor fuels for motive power

September 1, 1980 REVENUE REGULATIONS NO. 06-80 SUBJECT : Regulations Governing the Denaturing, Taxation and Removal of Distilled Spirits or Alcohol for Blending with Gasoline or Other Motor Fuels for Motive Power TO : All Internal Revenue Officers and Others Concerned SECTION 1 . Scope . Pursuant to Section 326 of the National Internal Revenue Code of 1977, as amended, the following regulations are hereby promulgated in compliance with Letter of Instructions No. 1051, dated August 1, 1980. These Regulations shall, until further instructions, govern the denaturing, taxation and removal of distilled spirits or alcohol for blending with gasoline or other motor fuels for motive power as originally envisioned under Presidential Decree No. 1089. Revenue Regulations No. 6-77 remains suspended in view of the deferment of the implementation of Presidential Decree No. 1089. SECTION 2 . Taxability of Distilled Spirits or Alcohol . The imposition of the specific tax on distilled spirits or alcohol, whether rectified or absolute, to be used for blending with gasoline or other motor fuels for motive power as contemplated under Presidential Decree No. 1089 is hereby suspended. In effect, the specific tax at the same rate as the tax imposed on premium gasoline shall, until further instructions, not apply to distilled spirits or alcohol to be used for blending with gasoline or other motor fuels for motive power. However, alcohol to be used for the production of "Alcogas" shall be subject to specific tax at P0.01 per liter in accordance with Section 153(d) of the National Internal Revenue Code of 1977, as amended. SECTION 3 . Prior Denaturing Required before any Distilled Spirits or Alcohol may be removed from the Distillery Premises or Place of Production for Blending with Gasoline or other Motor Fuels for Motive Power . In order to prevent the unlawful diversion of distilled spirits or alcohol intended for "Alcogas" production to the illicit manufacture of compounded liquors or any other intoxicating beverage whatever or medicinal preparations, flavoring extracts, and all other preparations containing distilled spirits as chief ingredient subject to specific taxes, no distilled spirits or alcohol intended for blending purposes in the production of "Alcogas" shall be allowed to be removed from the distillery premises or place of production without first having been suitably denatured and rendered unfit for oral intake in accordance with Section 175 of the National Internal Revenue Code of 1977, as amended. The denaturing process shall, therefore, be governed by the following statutory requirements under Section 175, supra : cd 1. The process of denaturing alcohol shall be effected only within the distillery premises where the alcohol to be denatured is produced; 2. The denaturing formula must first be approved by the Bureau of Internal Revenue; and 3. The denaturing process shall be done only in the presence of duly designated BIR representatives. SECTION 4 . Procedure to be followed by any person or firm producing distilled spirits or alcohol intended to be used for blending with gasoline or other motor fuels in the production of " Alcogas ". Any supplier of distilled spirits or alcohol intended to be used for blending with gasoline or other motor fuels in the production of "Alcogas" shall first apply in writing to the Commissioner of Internal Revenue, Attention: Specific Tax Service, for a permit to denature said alcohol on a case-to-case basis. The letter-request or application for denaturing permit must substantially contain the following data and information: 1. Quantity and proof (alcohol strength) of alcohol; 2. Quantity and kind of denaturant(s) to be used; 3. A brief statement of the BIR-approved denaturing formula; 4. Date, time and place of denaturing to be done; 5. Name and complete address of purchaser/consignee of denatured alcohol intended for "Alcogas" production; and 6. Such other relevant information. The letter-request or application for denaturing permit must invariably contain a brief statement or "conforme" of the oil company-purchaser/consignee of the alcohol to be denatured attesting to the correctness and veracity of the data and information indicated on the application. Upon issuance of the required denaturing permit, the process of denaturing shall be done only in accordance with the statutory requirements under Section 175 of the Tax Code and enumerated under Section 3 of these Regulations. cdt After each denaturing shall have been completed, a corresponding certificate shall be prepared in five (5) copies and signed by the supplier of the alcohol thus denatured or his duly authorized representative, duly attested to by the members of the BIR Denaturing Committee constituted for the purpose and present during the entire denaturing process. The denaturing certificate herein required shall be submitted to the BIR Denaturing Committee Chairman for distribution as follows: Original Specific Tax Service, BIR, National Office, Diliman, Quezon City Duplicate Alcohol Tax Division Triplicate Gasoline (now Oil) & Misc. Tax Division Quadruplicate Specific Tax Branch, Revenue Region (if place of denaturing is outside of BIR National Office jurisdiction); Quintuplicate Taxpayer's copy. SECTION 5 . Who may be Allowed to Denature Alcohol Intended for Blending Purposes in the Production of " Alcogas " and Remove the Alcohol thus Denatured in accordance with these Regulations and existing Revenue Laws . Only persons or firms duly provided with necessary privilege tax receipts (PTR's) and authorized in writing, upon proper application, to engage in business as distiller, rectifier and/or denaturer of distilled spirits or alcohol may be allowed to denature alcohol intended for blending purposes in the production of "Alcogas" and to subsequently remove such denatured alcohol in accordance with the requirements prescribed under these Regulations and in accordance with existing revenue laws. No shipment of denatured alcohol shall be allowed to be removed from the distillery premises where produced and denatured without the prepayment of the specific tax prescribed under Section 153(d) of the Tax Code. Every shipment or delivery of denatured alcohol intended for blending purposes in the "Alcogas" production shall always be accompanied by a corresponding Official Tax Receipt (OTR), duly accomplished by the shipper thereof, while the shipment is enroute and at all times from point of origin to final destination. SECTION 6 . Who may Purchase, Receive or Take Delivery of Denatured Alcohol as Contemplated under these Regulations and Mix or Blend the same with Gasoline or other Motor Fuels intended for the Production of " Alcogas " No oil company operating in the country shall be allowed to purchase and receive any shipment of distilled spirits or alcohol denatured in accordance with these regulations and undertake the blending thereof with gasoline for motive power, until and unless the following requirements are met or complied with to the satisfaction of the Commissioner of Internal Revenue: a. Plat and plan of oil refinery or terminal/depot premises clearly indicating the portion thereof where the blending will be done to be submitted to and approved by the Commissioner; b. The plat and plan of the premises herein required to be submitted to the Commissioner for approval shall indicate the relative location of the tank or tanks to be used exclusively for the storage of denatured alcohol, gasoline or other motor fuels and the resultant admixture to be used for motive power; c. The tank or tanks mentioned in preceding item b, must be properly calibrated to determine the accurate capacity thereof; clearly marked for identification purposes; and each tank must be provided with a gauge glass or any suitable metering device to facilitate an accurate measurement of its content. d. A surety bond must be filed in accordance with the provisions of Section 167 of the National Internal Revenue Code, as amended, to be approved by the Commissioner or Deputy Commissioner in accordance with existing BIR Office policies. No shipment of denatured alcohol governed by these regulations shall be allowed to be delivered, received, stored, mixed, blended or processed with gasoline or other motor fuels outside of the duly approved premises of the oil refinery, terminal or depot as herein required except under justifiable circumstances and with the written authority issued therefor by the Commissioner of Internal Revenue upon application in writing. SECTION 7 . Records to be kept by the Oil Company, its Terminal or Depot Authorized to Purchase, Receive or Take Delivery of, Store, Mix, Blend or Process Denatured Alcohol with Gasoline or other Motor Fuels for the Production of " Alcogas ". Pending the design, adoption and availability of new and suitable BIR forms for recording transactions governed by these regulations, oil company terminals or depots concerned shall make use of existing BIR Forms (Official Register Books) issued for their usual or regular transactions in oil products. However, separate records of accounts shall be kept for each of the following: acd a. Denatured alcohol b. Gasoline or other motor fuels c. Finished products resulting from the blending of above (a) and (b). At the end of each month, transcripts of the transactions recorded in each of the said register books shall be prepared and submitted on or before the 10th of the succeeding month to the following revenue offices: a. If the establishment is located within Metro Manila and municipalities of Apalit, Pampanga; and San Pedro, Laguna, under the direct supervision of the National Office . Original Gasoline (now Oil) & Misc. Tax Division Duplicate Alcohol Tax Division Triplicate Taxpayer's copy b. If located within the jurisdiction of a regional office outside of Metro Manila and municipalities aforementioned . Original Gasoline (now Oil) & Misc. Tax Division Duplicate Alcohol Tax Division Triplicate Specific Tax Branch of Regional Office Concerned. On the part of distillers, rectifiers and denatures covered by these regulations, every removal of denatured alcohol within the purview of these Regulations shall be duly recorded on the corresponding Official Register Book in accordance with existing revenue regulations, clearly indicating the oil company-consignee of the shipment, place of delivery thereof and the letter-permit issued by the Commissioner for each removal. SECTION 8 . Penal Provisions . (a) Unlawful use of denatured alcohol. It shall be unlawful for any person, who, for the purpose of manufacturing any beverage, uses denatured alcohol or alcohol specially denatured to be used for motive power or withdrawn under bond for industrial uses or alcohol knowingly misrepresented to be denatured to be unfit for oral intake, or who knowingly sells or offers for sale any beverage made in whole or in part from such alcohol for the manufacture of liquid medicinal preparations taken internally, or knowingly sells or offers for sale such preparations containing as an ingredient such alcohol. aisa dc It shall likewise be unlawful for any person who shall unlawfully recover by distillation or other process any denatured alcohol or who knowingly sells or offers for sale, conceals, or otherwise disposes of alcohol so recovered or redistilled. For any of such acts involving the unlawful use of denatured alcohol as aforementioned, the violator shall on conviction be fined not less than P10,000.00 and imprisonment for not less than 6 years and one day. If the offending party is an alien, he shall be liable for deportation. (Section 181 of the National Internal Revenue Code of 1977, as amended.) (b) Denaturation, withdrawal and use of denatured alcohol . Any person who produces, withdraws, sells, transports or knowingly uses denatured alcohol, or articles containing denatured alcohol in violation of laws or regulations now or hereafter in force pertaining thereto shall be required to pay the corresponding tax, in addition to the penalties provided for under Chapter III (Penal Provisions) of Title IV of the Tax Code. (Section 140 of the same Tax Code.) (c) Administrative sanctions . Aside from the applicable penalties imposed under Chapter III of Title IV of the Tax Code, any distiller, rectifier or denaturer who removes, transfers or ships distilled spirits intended to be denatured to be used for motive power without first denaturing the same in accordance with these regulations shall be penalized administratively by a summary cancellation of his basic permit as distiller, rectifier or denaturer, as the case may be, and his special permit issued in accordance with these regulations. Any violation of these regulations, for which no specific penalty is otherwise provided by law, shall be subject to the penalties imposed under Section 337 of the Tax Code, as amended. cd i SECTION 9 . Repealing Clause . All regulations, rulings, or orders or portions thereof which are inconsistent with the provisions of these regulations are hereby revoked or repealed accordingly. SECTION 10 . Effectivity . These regulations shall take effect upon approval hereof. (SGD.) ALFREDO PIO DE RODA, JR. Acting Minister of Finance Recommended by: RUBEN B. ANCHETA Acting Commissioner