The Court of Tax Appeals has denied the P83.02-million refund claim of San Miguel Brewery, Inc. on excise taxes paid on its San Mig Light product for the year 2013, when the sin tax law took effect.
This was because the San Miguel Corp. subsidiary failed to challenge first the legality of the Bureau of Internal Revenue’s 2012 circular that implemented the tax increase mandated by Republic Act No. 10351.
In a 17-page decision dated Aug. 18, the CTA Third Division said SMBI “availed of the wrong mode of appeal” in questioning the excise tax rates imposed under Revenue Memorandum Circular No. 90-2012.
“Petitioner should have directly attacked RMC No. 90-2012 via a Petition for Certiorari at the earliest opportunity, rather than through a collateral attack via judicial claim for refund, which indirectly but surely questions the validity of RMC No. 90-2012,” read the decision.
Under the circular, the BIR imposed a tax rate of P20.57 per liter for both the bottled and canned variants of SML, which have net retail prices of P47.99 per liter and P61.51 per liter, respectively.
SMBI had to pay the tax under protest so it could ship its products out of its breweries, but sought a refund later on the grounds that the tax rate was invalid.
The firm argued the RMC contradicted R.A. No. 10351, which imposed a P15.00 per liter excise tax on products with a net retail price of less than P50.60 per liter, and a P20.00 per liter tax on products priced above that threshold. It also claimed the RMC was issued without prior notice and hearing.
The CTA, however, sided with the BIR’s argument that SMBI’s refund petition was a “collateral attack on a presumably valid administrative issuance.”
The court noted it could not determine SMBI’s entitlement to a tax refund without ruling on the validity of RMC No. 90-2012.
“Unless and until RMC No. 90-2012 has been declared invalid and unconstitutional through the proper proceeding, the same is binding; and there is no basis for petitioner’s claim for refund or TCC,” read the decision penned by Associate Justice Lovell R. Bautista, with the concurrence of Associate Justice Esperanza R. Fabon-Victorino.
Associate Justice Ma. Belen M. Ringpis-Liban dissented. In her five-page opinion, she wrote the CTA could have deliberated the refund claim even without touching upon the RMC’s validity.
This was not the first time SMBI had sought refunds and questioned the BIR’s tax assessment on the SML product.
For the years before the sin tax law was enacted in 2012, the CTA consistently ruled in favor of SMBI when the BIR assessed SML with a higher tax rate of P20.57 per liter by considering it a “variant” of the older Pale Pilsen brand. The CTA previously set the tax on SML at P15.49 per liter as its own “brand,” because this was the BIR’s initial classification and it could only be changed by Congress. CBB