THE Court of Appeals (CA) has affirmed an injunction issued by the Regional Trial Court (RTC) in Pasay City stopping the Department of Finance (DOF) from invoking a certification issued by the Department of Energy (DOE) in imposing excise taxes on the aviation fuel importations of Philippine Airlines, the country’s flag carrier.
In a 22-page ruling penned by Associate Justice Franchito Diamante, the CA’s Special Third Division did not give weight to the argument of petitioners the DOF and the DOE that the trial court committed grave abuse of discretion when it disregarded the well-settled rule that all matters concerning the imposition and collection of excise taxes are within the exclusive jurisdiction of the Court of Tax Appeals (CTA).
The appellate court explained that based on its reading of the order issued by the RTC in Pasay City, it did not in any way rule on the validity of the DOE certification nor the authority of the DOE to issue the same.
The respondent trial court, according to the CA, made it clear that the issuance of preliminary injunction was merely to preserve the status quo until the merits of the case can be heard fully.
“What was restrained was not the collection of the excise tax but reliance on the DOE certification,” the Court noted.
The CA further noted that PAL is currently experiencing financial woes, thus, the reliance on the DOE certification to collect excise tax on fuel importations which validity is still being ascertained, “could affect the latter’s cash flow as PAL has to keep on paying excise taxes every [time] it imports fuel.”
The case stemmed from the letter sent in 2002 by then-Finance Secretary Jose Isidro Camacho to the DOE requesting for a certification on the availability of aviation fuel for use in domestic operations.
The DOF’s inquiry was in line with its review of the exemption from excise tax granted to certain domestic airlines on their importation of aviation fuel for use in domestic operations.
The DOE, in a letter-reply to the DOF dated December 20, 2002, confirmed and certified that aviation gas, fuel and oil for use in domestic operation of local airline companies are locally available in reasonable quantity, quality and price.
As a consequence of the DOE certification, the Bureau of Internal Revenue lifted the tax exemption granted to airline companies on their importation of aviation gas, fuel, and oil for their domestic operation.
On May 24 2005, Republic Act (RA) 9337, otherwise known as the Expanded-Value Added Tax Law, was enacted and amended several provisions of the National Internal Revenue Code.
Under the E-VAT law, petroleum products and other indigenous fuels are now subject to VAT.
On the other hand, aviation fuels are now imposed an excise tax pegged at P3.67 per liter of volume capacity.Thus, pursuant to RA 9337 and BIR Ruling 001-03, PAL and all other domestic airline companies were imposed excise taxes on their respective aviation fuel importations. Although PAL paid the excise tax on its fuel importations, it was done under protest.
PAL also managed to secure a certification from the Air Transportation Office (ATO) stating that it has no objection for the airline’s importation of aviation fuel as the same is not locally available in reasonable quantity, quality and price. This prompted PAL and other airline companies to institute tax refund cases before the CTA.
However, while the cases are pending with the CTA, PAL filed a complaint before the RTC in Pasay City seeking to declare null and void DOE’s certification with a prayer for the issuance of a temporary restraining order and/or a writ of preliminary injunction against the implementation of the said certification.
In August 24, 2010, the RTC in Pasay City granted PAL’s prayer for the issuance of a writ of preliminary injunction enjoining the DOF and DOE from implementing the latter’s certification.
The CA also denied the motion for reconsideration filed by the DOE and the DOF.
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By: Joel San Juan
Source: Business Mirror, Oct. 3, 2011
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