Case # 4 Khatriinah B.

Abella

CIR vs FORTUNE TOBACCO CORPORATION

GR # 180006 September 28, 2011

Facts:

Pursuant to RA 8240 which amended RA 8424 RE specific tax imposed on any brand
of cigarettes, respondent Fortune Tobacco Corporation (respondent) paid in advance its
excise taxes for the year 2003 in the amount of PHP 11.15 billion and for the period
covering January 1 to May 31, 2004 in the amount of PHP 4.90 billion.

Upon learning that the taxes paid were erroneously and/or illegally collected in the
amount of PHP 491 million assailing the proviso in Sec. 1 of RR 17-99 that requires the
payment of excise tax actually being paid prior January 1, 2000 if the amount is higher
than the new specific tax rate, respondent filed an administrative claim for tax refund
with the CIR. It claimed that by including the proviso, the CIR went beyond the language
of the law and usurped Congress power – without waiting for the CIR’s action on its claim;
respondent filed a judicial claim for tax refund with the CTA.

The CTA First Division ruled in favor of the respondent and granted its tax refund
claim. The same was upheld on appeal filed by the CIR before the CTA en banc. Hence, this
petition.

Issue:

Whether or not there was an overpayment of excise tax which entitles respondent
for a tax refund.

Ruling:

The court ruled that this case presents same issue that has long been resolved in 2008,
where Fortune Tobacco found an invalid proviso in Sec. 1of RR 17-99 – in which the court upheld its
tax refund claim.

Applying the principle of stare decisis, the proviso in Sec. 1 of RR 17-99 clearly went beyond
the terms of the law it was supposed to implement and therefore entitles respondent to claim a
refund of the overpaid excise taxes collected pursuant to this provision.

Given is that RA 8240 was enacted to raise government revenues but this is not the sole and
only objective of the law. The imposition of specific taxes, which are based on the volume of goods
produced would prevent price manipulation and also cure the unequal tax treatment created by the
skewed valuation of similar goods.

Moreover, the Constitution requires that taxation should be uniform and equitable.
Uniformity in taxation requires that all subjects or objects of taxation similarly situated are to be
treated alike both in privileges and liabilities – which in this case is unwittingly violated when the
proviso in Sec. 1of RR 17-99 is applied in certain cases.