BIR loses appeal at SC, will refund P1B in taxes to Fortune Tobacco

THE Supreme Court yesterday affirmed its July 21 decision ordering the Bureau of Internal Revenue to refund Fortune Tobacco some P1 billion in overpaid excise taxes erroneously collected by government from the firm’s eight cigarette brands manufactured between 2000 and 2002.

In a minute resolution, the SC’s Second Division denied with finality the motion for reconsideration filed by the Office of the Solicitor General, representing the Commissioner of the BIR, seeking the reversal of the rulings of the Court of Appeals and the Court of Tax Appeals.

"The Court resolves to deny the motion with finality, the basic issues raised therein having been duly considered and passed upon by the Court and no substantial argument having been adduced to warrant the reconsideration sought," the SC ruled.

The high court’s decision, penned by Associate Justice Dante Tinga, affirmed the CA and CTA’s rulings ordering the Commissioner of the BIR to pay back the overpaid taxes of the tobacco firm owned by taipan Lucio Tan.

In that decision, the SC gave weight to the argument of Fortune that the CA and CTA merely followed the letter of the law when they ruled that the basis for the 12 percent increase in the tax rate should be the net retail price of the cigarettes in the market as outlined in Section 145 of the Tax Code.

This provision states that the classification of each brand of cigarettes based on its average net retail price as of Oct. 1, 1996, shall remain in force until revised by Congress. It further stated that "the new specific tax rate for any existing brand of cigars, cigarettes, packed by machine... shall be lower than the excise tax that is actually being paid prior to Jan. 1, 2000."

The tribunal said the CTA was correct in declaring null Revenue Regulation 17-99 (RR 17-99), issued Dec. 16, 1999, increasing the tax rates imposed on cigars and cigarettes, saying the revenue officials appeared to have ventured into unauthorized administrative legislation.

The SC also dismissed the contention of the BIR that a tax refund partakes the nature of a tax exemption and does not apply to the tax refund to which Fortune Tobacco is entitled. It said that there is parity between tax refund and tax exemption only when the former is based either on a tax exemption statute or a tax refund statute.

"Obviously that is not the situation here. Quite the contrary, Fortune Tobacco’s claim for refund is premised on its erroneous payment of the tax, or better still, the government’s exaction in the absence of a law," the SC said.