BIR ordered to return P94.6 million to Air Philippines

The Court of Tax Appeals (CTA) has ordered the Bureau of Internal Revenue (BIR) to refund or issue a tax credit certificate to Air Philippines Corporation worth P94.6-million in excise taxes paid for the importation of Jet A-1 fuel for its domestic operations for the period of March to November 2006.

In a 55-page decision, the Tax Court, through Associate Justice Lovell R. Bautista, said Air Philippines has sufficiently proved that it is entitled to a refund.

The tax refund in question was for the payments in protest made by Air Philippines for the series of importations of Jet A-1 fuel it made in 2006.

The airline firm filed a written protest with the District Collector of Customs but to avoid the lapse of the two-year prescriptive period for claiming a refund erroneously collected from taxes under section 229 of the National Internal Revenue Code (NIRC), it filed a written request for a refund with the BIR and eventually a petition for review before the CTA.

The case started when the BIR assessed Air Philippines for specific taxes on its importations of Jet A-1 fuel for its domestic operations.

In response to the petition, the BIR said Air Philippines must prove that the amount it is claiming is properly documented.

“In an action for refund, the burden of proof is on the taxpayer to establish its right to refund and failure to sustain the burden is fatal to the claim,” the BIR told the CTA, adding that the claims were subject to administrative routinary investigation.

The BIR added that Air Philippines’ petition should be dismissed for failure to exhaust all administrative remedies before taking the case with the CTA.

BIR said Air Philippines failed to appeal with the Office of the President the certification of the Department of Energy (DOE) which provides that aviation fuel for use in domestic operation is locally available in reasonable quantity, quality and price.

“This is contrary to the requirements of the law that where there is a condition precedent, in this case, an appeal before the President of the Philippine, petitioner must observe the same. Petitioner, however, went straight before this Honorable Court which is a clear contravention of the law,” the BIR said, adding that by going straight to the CTA, Air Philippines was in effect asking the court to override the factual determination made by the DOE.

The Tax Court, in its ruling, said it has jurisdiction to act on the claim for refund by Air Philippines. It noted that under the law, the Tax Court is vested with “exclusive appellate jurisdiction to review by appeal…decisions of the [BIR] in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties…and other matters arising under the NIRC or other laws administered by the BIR.”

The CTA ruled that after looking at Air Philippines’ franchise, the airline company is entitled to exemption from all taxes due on importations of aviation fuel subject to several conditions, including the aviation fuel is not locally available in reasonable quantity, quality or price.

The Tax Court said Air Philippines has sufficiently proved based on documents that even the DOE acknowledged the importation of the Jet A-1 fuel for its transport and non-transport operations.

The Tax Court also took note of the endorsements made by the Department of Finance (DOF) and the Air Transportation Office (ATO) that it is not objecting to the importation of the Jet A-1 fuel./rga