MANILA, Philippines -- The Court of Tax Appeals has allowed the Bureau of Customs to seize the Pilipinas Shell Petroleum Corp.?s raw fuel imports, voting 2-1 against the plea of the oil firm for a suspension order on the BoC seizures.

Shell legal counsel John Balisnomo said the split in the CTA decision could result in the "unlawful confiscation of Shell's importations by the BOC."

"This will have dire consequences not only for Shell but for the national economy," he stressed.

In a four-page resolution issued on Tuesday, Justices Erlinda Uy and Esperanza Fabon-Victorino explained that "the damage in [Shell's] property rights, must in the meantime, take a back seat to the paramount need of the state for funds to sustain governmental functions. Compared to the damage to the state, which may be caused by reduced financial resources, the damage to [Shell] is negligible."

However, Presiding Justice Ernesto Acosta, the most senior member of the division hearing the case, rendered a 13-page dissenting opinion stating that "[Shell] has a right to be protected during the pendency of the case."

Acosta explained that "the threatened action of [the BOC] is damaging not only to [Shell's] interests but also to the whole community considering the undesirable effects of rising prices of basic consumer needs, possible unemployment of a large number of people and extinguishment of opportunities for businesses dependent on [Shell's] operations."

BOC had planned to seize part of Shell's imports to offset the P7.3 billion in alleged unpaid excise taxes, which the oil company refused to pay on the argument that imported raw materials for its fuel refinery operations should not be subjected to any excise taxes.

Shell is currently disputing before the special tax court this P7.34 billion tax assessment slapped by the BOC on Shell importations of catalytic cracked gasoline (CCG) and light catalytic cracked gasoline (LCCG) from 2004-2009.

In December 2009, Shell was able to secure from the CTA a 60-day temporary restraining order (TRO) barring the BOC from seizing the imports. The TRO, however, lapsed on Tuesday.

As of Tuesday, a source said that the tanks of Shell at the Tabangao refinery were already being sealed by the Customs in preparation for seizure.

"It is unfortunate that this split in the CTA clearly results to unlawful double taxation. Apart from the economic disruption that will be caused by the seizures, the long term consequence of the ruling is that manufacturing in the country will be discouraged and the security of our energy supply will be placed at great risk due to the eventual closure of the Batangas refinery," Balisnomo said.

Shell earlier said the seizure of future shipments could lead to the closure of its Batangas refinery, which has been employing 823 workers, and losses of P11 billion a month.

With no products to sell, Shell's 959 retail stations would eventually shut down, according to Shell executives. Shell's dealers accounted for 34 percent of the market as of June 2009.

These stations employ nearly 17,000 daily wage earners who also stand to lose their jobs as a result of the seizures.

Apart from Shell's 27.7-percent market share on average in the retail fuels market, it also supplies 33 percent of the fuel requirements of power plants, including the National Power Corp.; 17.2 percent of the entire aviation fuels market; 24.6 percent of the marine transport market; and 70.2 percent of the demand for bitumen by contractors engaged in roadwork.

Even Energy Secretary Angelo T. Reyes earlier warned of a possibly supply shortage should Shell lose its fuel imports.

"Of course, there are other players but we're talking about 30 percent of all petroleum products. Even if the other players can absorb the 30 percent additional importation, the distribution might have problems," Reyes had explained.

Edgar Chua, Shell country chairman, earlier said that the oil company had been advised by its head office that "if we don't get suspension order and (if) BOC will be mandated to seize imports, we will be forced to stop imports."

Chua further disclosed that should the oil company stop its planned fuel importations, its inventory of petroleum products may last for only about 10 to 15 days.

Meanwhile, Roberto S. Kanapi, Shell vice president for communications called such seizures as "oppressive acts."

"Shell cannot pay back taxes claimed by BIR/Customs since these are under dispute. This is because Shell has adopted the Foreign Corrupt Practices Act and the OECD as part of its corporate governance principles. This prohibits the payment of assessments that are in dispute, meant to have retroactive effect, or subject of a rewards system to private individuals," Kanapi explained.

"The severe consequences of the ruling compel us to exhaust all available legal remedies. We will not stop until we are able to stop these oppressive measures," Balisnomo added.

Reyes on Monday called a stakeholders? meeting attended by representatives of Shell, other petroleum players, BIR and BOC. Reyes expressed concerns about the security of the country's energy supply in the event of such seizures.

Reyes met with Finance Secretary Margarito Teves on Monday, on the issue, but has not issued an official statement as of press time, on Tuesday