Silkair (Singapore) Pte., Ltd. Vs. Commissioner of Internal Revenue (Februar !

, "##$% &ovember '(, "##$% and )anuar "#, "#'") F*C+S, Silkair (Singapore) Pte. Ltd. (Petitioner) is a foreign corporation duly licensed by the Securities and Exchange Commission (SEC) to do business in the Philippines as an on-line international carrier. n the course of its international flight operations! Silkair purchased a"iation fuel from Petron Corporation (Petron)! pa ing t-e e./ise ta.es t-ereon in t-e sum of P0,##1,#(2.23 . +-e pa ment 4as advan/ed b Singapore *irlines, Ltd. on be-alf of Silkair. #hen! Silkair filed an administrati"e claim for refund in the amount of P$!%%&!%'(.() representing excise taxes on the purchase of *et fuel from Petron! +hich it alleged to ha"e been erroneously paid. #he claim is based on Section ,($ (a) and (b) of the ,))& #ax Code! +hich pro"idesSEC. 135. Petroleum Products Sold to International Carriers and Exempt Entities or Agencies. Petroleum products sold to the following are exempt from excise tax !a" International carriers of Philippine or foreign registry on their use or consumption outside the Philippines Pro#ided$ %hat the petroleum products sold to these international carriers shall &e stored in a bonded storage tank and ma' &e disposed of onl' in accordance with the rules and regulations to &e prescri&ed &' the Secretar' of (inance$ upon recommendation of the Commissioner) !&" Exempt entities or agencies co#ered &' tax treaties, conventions and other international agreements for their use or consumption Pro#ided$ howe#er$ %hat the countr' of said foreign international carrier or exempt entities or agencies exempts from similar taxes petroleum products sold to Philippine carriers$ entities or agencies) and x x x x !Emphasis supplied." Silkair also in"oked .rticle '(/) of the .ir #ransport .greement bet+een the 0o"ernment of the 1epublic of the Philippines and the 0o"ernment of the 1epublic of Singapore (.ir #ransport .greement bet+een 1P and Singapore) +hich readsA*%. + xxxx ,. (uel$ lu&ricants$ spare parts$ regular e-uipment and aircraft stores introduced into$ or ta.en on &oard aircraft in the territor' of one Contracting Part' &'$ or on &ehalf of$ a designated airline of the other Contracting Part' and intended solel' for use in the operation of the agreed ser#ices shall$ with the exception of charges corresponding to the ser#ice performed , be exempt from the same customs duties$ inspection fees and other duties or taxes imposed in the territor' of the first Contracting Part'$ e#en when these supplies are to &e used on the parts of the /ourne' performed o#er the territor' of the Contracting Part' in which the' are introduced into or ta.en on &oard. %he materials referred to a&o#e ma' &e re-uired to &e .ept under customs super#ision and control. Silkair /ontends 5 it is the proper party to file the claim for refund! being the entity granted the tax exemption under the .ir #ransport .greement bet+een 1P and Singapore. t disagrees +ith C 12s reasoning that since excise tax is an indirect tax it is the direct liability of the manufacturer! Petron! and not Silkair! because this puts to naught +hate"er exemption +as granted to Silkair by .rticle ' of the .ir #ransport .greement. CIR /ontends - the excise tax passed on to Silkair by Petron being in the nature of an indirect tax! it cannot be the sub*ect matter of an administrati"e claim for refund3tax credit! follo+ing the ruling in Contex Corporation #. Commissioner of Internal *e#enu. 4oreo"er! assuming arguendo that Silkair falls under any of the enumerated transactions3persons entitled to tax exemption under Section ,($ of the ,))& #ax Code! +hat the la+ merely contemplates is exemption from the payment of excise tax to the seller3manufacturer! in this case Petron! but not an exemption from payment of excise tax to the 5 1! much more an entitlement to a refund from the 5 1. 6eing t-e bu er! Silkair is not the person re6uired by la+ nor the person statutorily liable to pay the excise tax but the seller! follo+ing the pro"ision of Section ,(% (.) (,) (/).

ISS78, 9-et-er or not Silkair -as t-e legal personalit to file an administrative /laim for refund of e./ise ta.es alleged to -ave been erroneousl paid to its supplier of aviation fuel -ere in t-e P-ilippines. R*+I:, &o. Petron -as t-e legal personalit . Excise taxes! +hich apply to articles manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition and to things imported into the Philippines! is basically an indirect tax. 7hile the tax is directly le"ied upon the manufacturer3importer upon remo"al of the taxable goods from its place of production or from the customs custody! the tax! in reality! is actually passed on to the end consumer as part of the transfer "alue or selling price of the goods! sold! bartered or exchanged. n early cases! +e ha"e ruled that for indirect taxes (such as "alued-added tax or 8.#)! the proper party to 6uestion or seek a refund of the tax is the statutor ta.pa er! the person on +hom the tax is imposed by la+ and +ho paid the same e"en +hen he shifts the burden thereof to another. #hus! in Contex Corporation #. Commissioner of Internal *e#enue$ SC held that +hile it is true that petitioner corporation should not ha"e been liable for the 8.# inad"ertently passed on to it by its supplier since their transaction is a 9ero-rated sale on the part of the supplier! the petitioner is not the proper party to claim such 8.# refund. 1ather! it is the petitioner;s suppliers +ho are the proper parties to claim the tax credit and accordingly refund the petitioner of the 8.# erroneously passed on to the latter. n the first Sil.air case (/%%:)! theCourt categorically declared%he proper part' to -uestion$ or see. a refund of$ an indirect tax is the statutor' taxpa'er$ the person on whom the tax is imposed &' law and who paid the same e#en if he shifts the &urden thereof to another. Section 130 !A" !," of the 1I*C pro#ides that 23u4nless otherwise specificall' allowed$ the return shall &e filed and the excise tax paid &' the manufacturer or producer &efore remo#al of domestic products from place of production.5 %hus$ Petron Corporation, not Silkair, is the statutory taxpayer which is entitled to claim a refund based on Section 13 of the !I"C of 1##$ and %rticle &'() of the %ir *ransport %greement between "P and Singapore+ E#en if Petron Corporation passed on to Sil.air the &urden of the tax$ the additional amount &illed to Sil.air for /et fuel is not a tax &ut part of the price which Sil.air had to pa' as a purchaser.!Emphasis supplied." ;ust a fe+ months later! the decision in the second Sil.air case +as promulgated! reiterating the rule that in the refund of indirect taxes such as excise taxes! the statutory taxpayer is the proper party +ho can claim the refund. SC also clarified that petitioner Silkair! as the purchaser and end-consumer! ultimately bears the tax burden! but this does not transform its status into a statutory taxpayer. #he person entitled to claim a tax refund is the statutory taxpayer. Section //(<) of the < 1C defines a taxpayer as =any person sub*ect to tax.> n Commissioner of Internal *e#enue #. Procter and 6am&le Phil. 7fg. Corp.! the Court ruled that?. =person liable for tax> has been held to be a =person sub*ect to tax> and properly considered a =taxpayer.> #he terms =liable for tax> and =sub*ect to tax> both connote a legal obligation or duty to pay a tax.2 #he excise tax is due from the manufacturers of the petroleum products and is paid upon remo"al of the products from their refineries. E"en before the a"iation *et fuel is purchased from Petron! the excise tax is already paid by Petron. Petron! being the manufacturer! is the =person sub*ect to tax.> n this case! Petron! +hich paid the excise tax upon remo"al of the products from its 5ataan refinery! is the =person liable for tax.> Petitioner is neither a =person liable for tax> nor =a person sub*ect to tax.> #here is also no legal duty on the part of petitioner to pay the excise tax@ hence! petitioner cannot be considered the taxpayer. E"en if the tax is shifted by Petron to its customers and e"en if the tax is billed as a separate item in the a"iation deli"ery receipts and in"oices issued to its customers! Petron remains t-e ta.pa er be/ause

t-e e./ise ta. is imposed dire/tl on Petron as t-e manufa/turer. <en/e, Petron, as t-e statutor ta.pa er, is t-e proper part t-at /an /laim t-e refund of t-e e./ise ta.es paid to t-e 6IR.