Customs refers Shell tax case to energy officials

One of the tax issues involving Pilipinas Shell Petroleum Corp.—where it has been accused of importing questionable petroleum materials for which it reportedly owes the government some P1.6 billion in taxes—has been passed from one government agency to another.

According to Customs Commissioner Angelito A. Alvarez, the Bureau of Customs (BoC) has “decided to refer the matter to the Department of Energy for guidance,” pending the outcome of the BoC’s investigation.

The case involves the importation of alkylate, which the Customs agency regards as a finished product, classifying it as gasoline, and thus subject to excise tax and value-added tax.

But Shell insists it is merely an input and not a finished product.

Although third-party tests had been conducted, the results of which supported Shell’s claim, Alvarez said his agency would continue with its case against the oil giant.

The BoC, under its Run After the Smugglers (RATS) initiative, filed with the Department of Justice several smuggling cases against Shell. The agency accused Shell of “intentional misclassification and misdeclaration” of various petroleum importations between August 2005 and May 2009.

Later, the BoC and Shell agreed to engage SGS Philippines to test a sample of alkylate taken from a Shell cargo and analyze the material whether it is gasoline or an intermediate product.

“The only way (to settle the matter is) through … a third party, an independent body that can provide credible and irrefutable certification on the true nature of alkylate,” Alvarez said in a statement.

But Alvarez said SGS had issued a testing certificate which stated that, based on the country’s product standard, alkylate is not gasoline.

Citing SGS findings, the customs chief said that the sample did not pass the 10-percent volume recovered distillation test for premium plus, premium and regular gasoline, as well as the octane number test for premium plus gasoline provided under the Philippine National Standard.

“And it does not help that [the Bureau of Internal Revenue] had effectively recognized alkylate as raw material not subject to excise tax when it issued an individual ‘authority to release imported goods (ATRIG)’ for all the alkylate importations involved in the subject claim,” Alvarez added.

Alvarez acknowledged that these developments did “not seem to support” the P1.6-billion claim recommended by the Batangas Collection District against Pilipinas Shell.

“Rest assured that the course of action we will take on this matter will depend on the preponderance of evidence for or against the P1.6-billion claim,” Alvarez said.