MANILA, Philippines—The Court of Tax Appeals has ordered the Bureau of Internal Revenue (BIR) to refund over P900 million to San Miguel Corp. (SMC) and its subsidiary San Miguel Brewery Inc. (SMBI) for overpayment of excise taxes on reclassification of “San Mig Light” from Aug.1, 2007, to Dec. 31, 2008.
In a 32-page ruling penned by Associate Justice Juanito Castañeda Jr., the tax court ruled that the BIR violated Republic Act No. 9334 or the law that increases the excise tax rates imposed on alcohol and tobacco products.
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Under the law, brands of fermented liquors introduced in the domestic market between Jan. 1, 1997, and Dec. 31, 2003 shall remain in the classification which the BIR determined that they belong as of December 2003.
San Mig Light was classified by the BIR as a “new and medium-priced” brand on Oct. 27, 1999.
However, in 2002, the BIR reclassified the product as a “variant” which is subjected to a higher excise tax of P828,487,561.71 from Oct. 1, 2007, to Dec. 31, 2008.
The tax court in its ruling said there is nothing under the law which allows the BIR to update the tax classification of new brands.
In enacting the law, the tax court said Congress has rejected the finance department’s proposal to give the BIR the authority to periodically reclassify alcohol and cigarette brands.
“It will be recalled that these brands were already classified by the BIR based on their current net retail prices in 1999 through a market survey. Consequently, their upward reclassification in 2003 by the BIR through another market survey is a prohibited reclassification,” the tax court said.
The tax court added that the claim of P934,119,938.35 million as overpayment is substantiated by petitioners SMC and SMBI and verified by the court commissioned independent Certified Public Accountant.
“After a thorough scrutiny of the evidence submitted, the court agrees with the findings and observation of the independent CPA,” the court said as it ordered the BIR to refund the said amount.