DIGESTS
Excise Tax
Nature of excise taxes
Excise taxes are in the nature of internal revenue taxes, thus, falling under the primary jurisdiction of the BIR.
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Excise taxes are taxes on property, not on the sale of the property.
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Imposition of excise taxes.
Under Section 129 of the NIRC, as amended, excise taxes are imposed on two (2) kinds of goods, namely: (a) goods manufactured or produced in the Philippines for domestic sales or consumption or for any other disposition; and (b) things imported.
With respect to the first kind of goods, Section 130 of the NIRC states that, unless otherwise specifically allowed, the taxpayer obligated to file the return and pay the excise taxes due thereon is the manufacturer/producer.
On the other hand, with respect to the second kind of goods, Section 131 of the NIRC states that the taxpayer obligated to file the return and pay the excise taxes due thereon is the owner or importer, unless the imported articles are exempt from excise taxes and the person found to be in possession of the same is other than those legally entitled to such tax exemption.
While the NIRC mandates the foregoing persons to pay the applicable excise taxes directly to the government, they may, however, shift the economic burden of such payments to someone else – usually the purchaser of the goods – since excise taxes are considered as a kind of indirect tax.
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The application of ad valorem tax deposits of an excise taxpayer to its specific tax deficiency is allowed.
No grave abuse of discretion was committed when the SB upheld private respondent’s approval of SMC’s application of its excess ad valorem tax deposits to its specific tax deficiency.
First, the approval given by private respondent was correct. Ad valorem taxes and specific taxes are both excise taxes on alcohol products. The payment by installment of a portion of the total specific tax deficiency of SMC, in addition to the application of its excess and unused ad valorem tax deposits to the remaining portion, fully covered the total net specific tax shortfall. BIR committed an oversight in failing to credit the amount of deposits to the specific tax deficiency, as well as an error in crediting the same amount to a subsequent ad valorem tax liability. A confusion was thus created when it issued a later assessment for the same specific tax deficiency, this time inclusive of increments. Proper was the BIR officials’ abatement or cancellation of the specific taxes of SMC, after the amount of its ad valorem tax deposits had already been credited to it.
To state that the balances of accounts pertaining to different tax deposits could only be applied to cover certain tax liabilities upon the approval of a request for tax credit is to validate the proposition that the acceptance of payment by installment of a portion of the specific tax deficiency was indeed tantamount to the approval of the request. No law or regulation prevented such approval.
Private respondent’s letter states a condition: should the final computation of specific and ad valorem taxes yield a different result, the difference plus penalties would be paid in addition to them. Obviously, this condition referred solely to the discrepancy, not to the application, and had nothing to do with the approval that was given.
Second, such approval had the concurrence of top tax officials within the Bureau. Not only was there a presumption of regularity in the performance of official functions; also, their collective conclusion was controlling. Besides, the disclosure of the change in beer formulation was timely and voluntary; no attribution of bad faith or fraud could be made. A change in technology that would result in a change in the manner of computing taxes was well within the realm of tax administration, on which private respondent had reasonable discretion to rule.
Third, the law and revenue regulations allowed pre-payment schemes, whereby excise taxes on alcohol products could be paid in advance of the dates they were due. Since the equivalent value of specific taxes by way of advance ad valorem tax deposits had already been paid, the government lost nothing. It was a simple request properly granted for applying the advance deposits made on one type of excise tax to another type. Granting such request was well within private respondent’s authority to administer tax laws and regulations. Again, the assessment was not final, demandable or executory at the time.
Fourth, in a letter to the Blue Ribbon Committee of the Senate, no less than the succeeding commissioner of internal revenue declared that the abatement of the specific tax deficiency through the proposed application was proper. Even if the new commissioner had admittedly been advised by private respondent, there remained the unrebutted presumptions of good faith and regularity in the performance of official functions.
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The gross selling price should that which is charged at the brewery prior to the removal of the fermented liquor.
Section 110 of the NIRC of 1977, as amended in 1986 by PD 1994, explicitly provides that the excise taxes on domestic products shall be paid by the manufacturer or producer before the removal of those products from the place of production. “It does not matter to what use the article[s] subject to tax is put”; the excise taxes are still due, even though the articles are removed merely for storage in some other place and are not actually sold or consumed. The intent of the law is reiterated in several implementing regulations. This means, therefore, that the price that should be used as the tax base for computing the ad valorem tax on fermented liquor is the price at the brewery. After all, excise taxes are taxes on property, not on the sale of the property.
Verily, the price differential cannot be ascertained at the time the fermented liquor is removed from the brewery, because such ascertainment will involve amounts that cannot be determined with certainty in advance, and that vary from one commercial outlet to another. The price differential, according to SMC, represents the cost of discounts, promotions, rebates, and transportation. To require the inclusion of the price differential in, not its deduction from, the tax base for purposes of computing the ad valorem tax would certainly lead to the impossible situation of computing for such tax, because the price differential itself cannot be determined unless the fermented liquor is actually sold.
Hence, no ad valorem tax can ever be paid before the removal of the fermented liquor from the place of production. This outcome cannot be countenanced, for it would be contrary to what the law mandates –payment before removal. It follows that the tax base to be used should be net of the price differential. In other words, the gross selling price should be that which is charged at the brewery prior to the removal of the fermented liquor.
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