Inquirer file photo/Lyn Rillon
MANILA, Philippines 鈥� The Court of Tax Appeals (CTA) has granted the petition of Petron Corp. to reclaim a total of P69.6 million in excise it 鈥渆rroneously鈥� paid in 2018 for the importation of alkylate, a component used to blend and produce cleaner gasoline.
In an Aug. 14 decision, the CTA ruled the payment of taxes for the alkylate imports Petron used for its manufacture of fuel was 鈥渆rroneous and illegal鈥� as the compound is 鈥渘ot categorically鈥� subject to Section 148 (e) of the National Internal Revenue Code.
In granting the petition for review filed by the oil company, the tax court directed the Bureau of Internal Revenue (BIR) to refund or issue tax certificates in the amount of P34.5 million, representing the import duties in January and April 2018. For another round of import taxes in May and July 2018, the BIR is directed to refund P35.05 million.
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鈥淐onsidering that ambiguities in tax laws should be construed against the government and in favor of taxpayers, the provision at issue should be interpreted as not imposing [taxes] on alkylate,鈥� the 14-page decision read.
The law identified the taxable 鈥渕anufactured oil and other fuel,鈥� such as naphtha, regular gasoline and other 鈥減roducts of distillation,鈥� as well as aviation turbo jet fuel, bunker fuel, kerosene, liquefied petroleum gas and asphalt.
The CTA rejected the argument of BIR that alkylate is covered by the Tax Code, saying the substance 鈥渃annot be considered a direct product of distillation,鈥� similar to the other taxable oil and fuel.
鈥淭he use of distillation for purifying alkylate does not necessarily make the substance a direct product of distillation,鈥� it said.
Blending material
Citing a 2023 decision by the Supreme Court, the tax court also noted that alkylate is 鈥渆xclusively intended鈥� for use as a 鈥渞aw material or blending component鈥� for the production of unleaded premium gasoline.
In the said SC ruling, alkalyte is described a mere component, 鈥渨hich can be blended into finished gasoline to help meet the specification requirements, particularly those related to octane quality and volatility.鈥�
The CTA said, 鈥淎s the intended use and nature of alkylate differ greatly from those of naphtha and regular gasoline, the former cannot be placed under the same category as the latter two substances.鈥�