PAL to recover P6.89M in excise taxes, CTA rules

THE COURT of Tax Appeals (CTA) has partially granted Philippine Airlines, Inc.’s (PAL) petition for a tax refund, ruling that the airline is entitled to recover P6.89 million in excise taxes erroneously paid on the importation of liquors and wines intended for international flight consumption.

The tax court’s second division affirmed the airline’s exemption for most of the imported liquors and wines. Still, the court noted that it failed to prove that certain cigarette imports and some alcoholic products were not locally available at a reasonable price.

As a result, over P859,000 in excise tax refunds were disallowed, leaving the airline entitled to a refund of P6.89 million, Associate Justice Maria Rowena Modesto-San Pedro wrote in a 15-page ruling promulgated last Oct. 3.

The flag-carrier airline initially sought a refund of P7.76 million in excise taxes it paid under protest in December 2008, asserting its exemption under Presidential Decree No. 1590.

The decree gives PAL tax exemptions on specific imports for its international flights.

“As to the imported liquors, the Court En Banc explicitly stated that the evidence presented by [the] petitioner is sufficient to evaluate that the costs of importing liquors are lower than purchasing them locally,” it said, ordering the Bureau of Internal Revenue (BIR) and Bureau of Customs (BoC) to refund the amount.

The tribunal also confirmed that, based on evidence presented by PAL, the importation costs of the liquor and wine products were lower than the prices for equivalent products available in the local market.

The recent ruling stemmed from a CTA division decision on June 2, 2015, which denied PAL’s petition.

PAL assailed the 2015 decision by filing a petition for review before the CTA En Banc but also lost on April 5, 2017.

The airline company appealed before the tax court En Banc again by filing a motion for reconsideration on May 11, 2017. Its petition was eventually partially granted, remanding the case to the tax court’s division.

The respondents, BIR and BoC, appealed the decision before the Supreme Court through a petition for review on certiorari.

On March 27, 2019, the top court rendered a resolution, junking the petition the respondents filed “for failure of the [BIR and BoC] to sufficiently show that the CTA En Banc committed any reversible error in the assailed decision and resolution as to warrant the exercise of this court’s discretionary appellate jurisdiction.”

The top court’s second division issued the entry of judgment certifying the case had become final and executory on June 3, 2019, and had been recorded in the Book of Entries of Judgment.

In response, PAL filed a motion for execution of judgment on June 6, 2023, praying for the CTA to implement and execute the CTA en banc decision and to provide computation for the partial granting of PAL’s claim for a refund. — Chloe Mari A. Hufana