BIR loses P600-M tax deficiency case vs Petron as SC upholds CTA ruling

The Supreme Court has rejected the P600-million excise tax deficiency case of the Bureau of Internal Revenue against Petron Corp. involving the use of allegedly fraudulent tax credit certificates (TCCs) to reduce the oil firm’s tax liabilities from 1995 to 1998.   It is the second major loss of the BIR involving the use of TCCs by an oil company. The prior case involved Pilipinas Shell against which the BIR had a P1-billion tax deficiency case.   “We agree with the pronouncement of the CTA en banc that Petron has not been shown or proven to have participated in the alleged fraudulent acts involved in the transfer and utilization of the subject TCCs,” the high court’s second division said in a ruling Associate Justice Lourdes Sereno wrote.   TCCs are documents stating the amount of tax credits that can be applied as deductions to taxes due to the government. The Department of Finance   On January 30, 2002, the BIR assessed Petron and ordered it to pay the purported excise tax deficiency of P600 million because the TCCs used were canceled by the Department of Finance, which said the documents were fraudulently issued and transferred to Petron.   “Petron had the right to rely on the joint stipulation that absolved it from any participation in the alleged fraud pertaining to the issuance and procurement of the subject TCCs,” the SC second division said. BIR not yet done   However, the BIR still holds out hope and will keep the case alive.   “Were going to file a motion for reconsideration,” BIR deputy commissioner Estela Sales said.   The Sereno ruling said Petron “is an innocent transferee of the TCCs.”   “Consequently, the tax returns it filed for the years 1995 to 1998 are not considered fraudulent. Hence, the Commission on Internal Revenue had no legal basis to assess the excise taxes or any penalty surcharge or interest thereon, as respondent had already paid the appropriate excise taxes using the subject TCCs," the ruling stated.   The court also took note of a May 15, 1998 letter of the Board of Investments which said “hydraulic oil, penetrating oil, diesel fuels and industrial gases are classified as supplies and considered the suppliers thereof as qualified transferees of tax credit.”   It also considered the BIR acknowledgements and acceptances of the transfers of TCCs from the various BOI registered entities. — ELR, GMA News