CIR vs CTA and Petron Corporation

 G.R. No. 207843               July 15, 2015

COMMISSION OF INTERNAL REVENUE, Petitioner,

vs.

COURT OF TAX APPEALS (SECOND DIVISION) and PETRON CORPORATION,* Respondents.

FACTS:

Customs Memorandum Circular (CMC) No. 164-2012 dated July 18, 2012, implementing the Letter dated June 29, 2012 issued by the CIR, which states that:

"Alkylate which is a product of distillation similar to that of naphta, is subject to excise tax under Section 148( e) of the National Internal Revenue Code (NIRC) of 1997."

In view of the CIR's assessment, Petron filed before the CTA a petition for review raising the issue of whether its importation of alkylate as a blending component is subject to excise tax as contemplated under Section 148 (e) of the NIRC.

CIR filed a motion to dismiss on the grounds of lack of jurisdiction and prematurity.

Initially, CTA granted the CIR's motion and dismissed the case. However, on Petron's motion for reconsideration, it reversed its earlier disposition and eventually denied the CIR's motion for reconsideration therefrom. 

Aggrieved, the CIR sought immediate recourse to the Court, through the instant petition, alleging that the CTA committed grave abuse of discretion.

ISSUE:

Whether CIR is correct.

RULING:

Yes, in this case, Petron's tax liability was premised on the COC's issuance of CMC No. 164-2012, which gave effect to the CIR's June 29, 2012 Letter interpreting Section 148 (e) of the NIRC as to include alkylate among the articles subject to customs duties, hence, Petron's petition before the CTA ultimately challenging the legality and constitutionality of the CIR's aforesaid interpretation of a tax provision. 

CIR correctly argues that the CTA had no jurisdiction to take cognizance of the petition as its resolution would necessarily involve a declaration of the validity or constitutionality of the CIR's interpretation of Section 148 (e) of the NIRC, which is subject to the exclusive review by the Secretary of Finance and ultimately by the regular courts. 

In British American Tobacco v. Camacho, the Court ruled that the CTA's jurisdiction to resolve tax disputes excludes the power to rule on the constitutionality or validity of a law, rule or regulation.

WHEREFORE, the petition is GRANTED.