The petition filed by the Commissioner of Internal Revenue (CIR) that sought to block the claim for a tax refund of oil giant Petron Corporation, amounting to P394.77 million, representing erroneously paid excise tax on petroleum products sold to international carriers and tax-exempt entities, was denied by the Court of Tax Appeals (CTA) En Banc.

Associate Justice Marian Ivy F. Reyes-Fajardo, in an 18-page ruling she penned, stated that the CTA En Banc affirmed the decision and resolution promulgated by the CTA Special Third Division on 1 August 2023 and 9 October 2023, respectively, which declared that Petron was entitled to the tax refund.

The BIR’s argument that Petron has no legal personality to avail itself of the tax exemption under Section 135 of the Tax Code and that its claim for a refund is unjustified because the tax benefit it invokes is exclusively available to international carriers and tax-exempt entities was not given merit by the tax court in its ruling dated 28 February 2025.

The CTA held that Petron enjoys exemption from excise taxes on its locally manufactured or imported petroleum products subsequently sold to international carriers and tax-exempt entities.

Section 129 of the Tax Code, according to the CTA, provides that "excise taxes apply to goods manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition and to things imported."

It noted that excise tax liability attaches to the petroleum product itself "immediately upon importation or as soon as the goods come into existence when manufactured."

The CTA explained that the person liable for excise taxes on domestic products shall be "the manufacturer or producer, before removal of domestic products from the place of production."

The excise taxes on imported articles shall be paid by the "owner or importer before the release of such articles from the customs house."

Following the general rule, the CTA said Petron shall be liable to pay excise taxes on its locally produced Jet A-1 and unleaded premium gasoline before removal from the Petron Bataan Refinery (PBR) and imported Jet A-1 fuel before release from customs custody.

However, the CTA said Section 135 of the Tax Code provides an exemption from the general excise tax liability relative to petroleum products, particularly those sold to international carriers or exempt entities or agencies covered by tax treaties, conventions, and other international agreements, and entities which are by law exempt from direct and indirect taxes.

It said Petron met the requisites for exemption under Section 135 of the Tax Code and that “the excise taxes it previously paid were collected in error.”

The CTA declared, “Contrary to the CIR’s theory, the excise tax exemption under Section 135 of the Tax Code shall benefit Petron Corporation, as the manufacturer or importer of petroleum products.”