Court of Tax Appeals denies PAL's bid for P20 million tax refund

The Court of Tax Appeals (CTA) denied Philippine Airlines' bid for a P20 million tax refund involving its tobacco and alcohol imports due to lack of merit.

In a 28-page decision dated May 30 but released this week, the CTA said PAL failed to meet one of the three conditions for it to be exempt from excise taxes on its importation of tobacco and alcohol products for its catering and commissary supplies for international consumption: that these products are not locally available in reasonable quantities, quality, or price.

PAL had argued that they should be granted the P20 million tax refund as provided under Presidential Decree 1530 or An Act Granting a New Franchise to Philippine Airlines, Inc. To Establish, Operate, and Maintain Air-transport Services in the Philippines and Other Countries.

PAL presented the following as evidence to bolster its case:

• judicial affidavit of Cheryl Capinpin, PAL’s Manager for In-flight Materials Purchasing Division;
• 2014 and 2015 Price Lists of Absolute Sales Corporation
• 2013, 2014, 2015, 2016, 2017, and 2018 Price Lists of Future Trade International Travel Retail;
• 2014, 2015, 2016, 2017, and 2018 Price Lists of Minivan Enterprise
• 2016 and 2017 Price Lists of AB Heineken Phils., Inc.
• Bureau of Internal Revenue’s Price List per Revenue Memorandum Circular (RMC) No. 90-2012

The CTA, however, dismissed these by citing the cross-examination on Capinpin during which she testified that her observation that the imported products are not available locally in a reasonable quantity, quality, or price was based on the price lists from Absolute Sales Corporation and Future Trade International Travel Retail, Minivan Enterprise, and AB Heineken Phils., Inc.,

“This Court finds the foregoing evidence insufficient. Based on the foregoing disquisitions, petitioner (PAL) failed to make an effort to look for a supplier or dealer that can offer a price lower than the price of the subject imported alcohol products,” the CTA said.

The CTA added that it could not rely on the product price lists from four dealers and the testimony merely based thereon, saying it is hard to be convinced that the price lists from the said dealers represent the market price locally or for the entire country.

“Lacking corroborating evidence to prove that the price lists of Absolute Sales Corporation and Future Trade International Travel Retail, Minivan Enterprise, and AB Heineken Phils., Inc., represent the local market prices for the subject alcohol products for the period August 2014 until February 2018 vis-a-vis the totality of local suppliers who are engaged in selling similar products in the same years, this Court cannot conclude that petitioner's comparison of the prices of its imported alcohol products with that of the said dealers is deemed sufficient,” the CTA said.

As regards its importation of tobacco products, the CTA also ruled that PAL failed to offer supporting evidence that would verify the statements made by Capinpin in her judicial affidavit.

In addition, the CTA said PAL failed to submit, at the very least, price lists of tobacco products that indicate the local market prices of the said products.

“Apropos, the testimony of Ms. Capinpin, standing alone, is insufficient to ascertain whether the subject tobacco products were, indeed, not locally available in reasonable quantity, quality or price. In sum, petitioner failed to present sufficient and convincing evidence to prove that the imported tobacco and alcohol products were not locally available in reasonable quantity, quality, or price, at the time of importations,” the CTA said.

The CTA concluded that PAL had not fulfilled all conditions to be entitled to the tax exemption granted under Section 13 of PD No. 1590.

“Thus, this Court finds no erroneous or illegal excise taxes that are refundable in favor of the petitioner (PAL). Tax refunds are in the nature of tax exemptions, and are to be construed strictissimi juris against the entity claiming the same,” the CTA said.

“Thus, the burden of proof rests upon the taxpayer to establish by sufficient and competent evidence, its entitlement to a claim for refund. Petitioner (PAL), unfortunately, failed to discharge this burden. Wherefore, in light of the foregoing considerations, the present Petition for Review is denied for lack of merit,” the CTA added.

GMA News Online had sought comment from PAL on the Court of Tax Appeals ruling, but the company had yet to respond as of this posting. — DVM, GMA Integrated News