CIR v.
CTA and PETRON CORPORATION
Facts:
1. Petron is engaged in the manufacture and marketing of
petroleum products, imports alkylate as a raw material or
blending component for the manufacture of ethanol-blended
motor gasoline.
2. From Jan 2009 – Aug 2011 and April 2012, Petron
transacted an aggregate of 22 separate importation for
which the CIR issued Authorities to Release Imported Goods
(ATRIGs), stating that its importation is exempt from the
payment of excise tax under the RA 8424.
3. However, the importation covering period Sept 2011 to June
2012, the CIR inserted, without prior notice, a reservation
for all ATRIGs issued that such authority is without
prejudice to the collection of the corresponding excise
taxes, penalties and interest depending on the final
resolution of the Office of the Commissioner [of Customs]
on the issue of whether this item is subject to the excise
taxes under the NIRC.
4. In June 2012, Petron imported 12,802,660 liters of alkylate
and paid VAT. Said importation was subjected by the
Commission of Customs (COC) to excise taxes of P55M and
additional VAT of P6M. This is premised on Customs
Memorandum Circular No. 164-2012 implementing the
Letter of CIR which states that:
“Alkylate which is a product of distillation similar to that of
naphta is subject to excise tax under Section 148€ of the
NIRC”
5. Petitioner 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.
6. CIR filed a MTD, which was granted. Upon MR of Petron,
CTA reversed its earlier disposition.
7. CIR filed an MR, but was denied by CTA.
8. CIR filed this petition to SC alleging that CTA committed
grave abuse of discretion when CTA assumed authority to
take cognizance of the case despite its lack of jurisdiction to
do so.
a. CIR argues that the interpretation of Sec 148(e),
embodied in the Circular, is an exercise of its quasi-
legislative function which is reviewable by the Secretary
of Finance, whose decision is appealable to the Office of
the President, and ultimately to the regular courts.
b. Also, that only her quasi-legislative functions or the
authority to decide disputed assessment, refunds,
penalties and the like are subject to the exclusive
appellate jurisdiction of the CTA.
c. Also, the petition suffers prematurity due the failure
to exhaust all available administrative remedy within
the Tariff and Customs Code (TCC)
9. The CTA counter argues that the Petition filed before it
“simply puts in question” the propriety of CIR’s
interpretation and application of Sec 148(e) “in relation to”
the imposition of imposition of excise tax on Petron’s
importation of alkylate”; thus the CTA posits that the case
should be regarded as “other matters arising under NIRC”
under the 2nd par of Sec4 of NIRC, therefore falling within
the CTA’s jurisdiction.
Issue: WON the CTA has jurisdiction to determine the
validity of a ruling issued by the CIR or the COC in the
exercise of their quasi-legislative powers to interpret tax
laws
Held: No, Sec 7 of the RA 1125 (creating CTA) does not include
such power. The Resolution of CTA is reversed and set aside.
Ratio:
CTA is a court of special jurisdiction, with power to review by
appeal decision involving tax disputes rendered by either
the CIR or the COC. Conversely, it has no jurisdiction to
determine the validity of a ruling issued by the CIR or the COC in
the exercise of their quais0-legislative powers to interpret laws.
Petron’s tax liability was premised on the COC’s issuance of CMC
No. 162-2012 which gave effect to the CIR’s interpretation of
Section 148(e). Thus, Petron’s petition before the CTA ultimately
challenges the legality and constitutionality of the CIR’s
interpretation of a tax provision. However, such interpretation 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 rules 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.
The “others matters arising under the NIRC” should be understood
as pertaining to those matters directly related to the phrase
“disputed assessments, refunds or internal revenue taxes, fees or
other charges, penalties imposed in relation thereto” and must
therefore not to be taken in isolation to invoke the jurisdiction of
the CTA.

Under Section 4 of RA 1125, what is appealable to CTA, among

others, is the decision of the COC over customs collector’s
adverse ruling on a taxpayer’s protest.

While the customs collector admitted during the CTA’s hearing that
the computation he had written at the back page of the IEIRD
served as the final assessment imposing excise tax on Petron’s
import of alkylate, the Court rules that such was not yet the final
assessment that could be the proper subject of review.

The TCC prescribes that a party adversely affected by a ruling or

decision of the customs collector may protest such ruling or
decision upon payment of the amount due and if aggrieved by the
action of the customs collector on the matter under protest, may
have the same reviewed by the COC. It is only after the COC shall
have made an adverse ruling the matter may the aggrieved party
file an appeal to the CTA.

Petron did not file any protest of the assessment before the
customs collector, which can be appealed to the COC. Hence the
filing of the petition before the CTA was premature as there was
nothing to review yet.

SUMMARY:

CIR/COC’s interpretation of a tax provision

1. Petition for review to the Secretary of Finance

2. Appeal to Regular courts

Ruling of a customs collector

1. File protest
2. Petition for review to COC
3. Appeal to CTA