ASSIGNED READINGS IN EXCISE TAXES

1. Excise Taxes (Secs 129 to 172, as amended by RA 9337, RA 9334, and RA 9224)
2. The NIRC Annotated by De Leon & De Leon, Vol. 2, 2003 ed., [Take note of the amendments after its
publication].

SUGGESTED QUESTIONS IN EXCISE TAX

1. What is the nature of excise taxes?

Excise taxes apply or attach to [1] goods manufactured or produced in the Philippines for (a) domestic
sale, (b) consumption or (c) or any other disposition and [2) to things imported. “It is evident that Am Jur
aside, the current definition of an excise tax is that of a tax levied on a specific article, rather than one
“upon the performance, carrying on, or the exercise of an activity.” This current definition was already in
place when the Code was enacted in 1991, and we can only presume that it was what the Congress had
intended as it specified that local government units could not impose “excise taxes on articles
enumerated under the [NIRC].” This prohibition must pertain to the same kind of excise taxes as
imposed by the NIRC, and not those previously defined “excise taxes” which were not integrated or
denominated as such in our present tax law.” (Petron Corp v Mayor Tobias Tiangco of Navotas, GR
158881, Apr 16, 2008.)

2. What are the two kinds of excise taxes according to the manner the tax is determined?

Specific taxes are excise taxes imposed and based on weight or volume capacity or any other physical unit
of measurement. Ad valorem taxes are excise taxes imposed and based on selling price or other specified
value of the good.

3. Who are liable for the payment of excise taxes?

Generally, local manufacturer or producer and importer of goods are liable for the payment of the tax, except
(a) domestic products be removed from the place of production without the payment of the tax, the owner or
person having possession thereof shall be liable for the tax due thereon and (b) in the case of indigenous
petroleum, natural gas or liquefied natural gas, the excise tax shall be paid by the first buyer, purchaser or
transferee for local sale, barter or transfer, while the excise tax on exported products shall be paid by the
owner, lessee, concessionaire or operator of the mining claim.
4. How do we classify goods subject to excise taxes according to source?

Locally manufactured or produced goods and imported goods.

5. When do excise taxes attach?

Generally, the tax attaches the moment the articles subject to excise tax come into existence, or in case of
imported articles, the moment they enter Philippine customs territory.

6. What goods are subject to Excise taxes?

7. What Alcohol Products are subject to excise taxes?

a. Distilled Spirits [per liter & NRP/per liter]

b. Wines [NRP/per liter]
c. Fermented liquors [NRP/per liter]
d. What are exempted from excise tax on alcohol products?
e. What are distilled spirits?
f. What is meant by proof liter?
g. What is denatured alcohol?
h. Are distilled spirits lost through evaporation subject or exempt from excise tax?
i. What is meant by medicinal preparations? How are they taxed?
j. What is meant by toilet preparations? How are they taxed?
k. What is the basis of the tax on locally produced or manufactured alcohol products?
l. What is meant by “Net Retail Price”?
m. What is the basis on imported alcohol products?
n. When does the tax attach?
o. Who is liable for the payment of this tax?
p. What is the rationale for the imposition of high taxes on alcohol products?

8. What tobacco products are subject to excise tax?

9. How is the tax determined?
10. What petroleum products are subject to excise tax?
11. When does the tax attach?
12. What is the basis of the tax?
13. Who are liable for this tax?
14. Who are exempted from this tax?
15. What miscellaneous articles are subject to excise tax?
16. When does the excise tax attach to automobiles?
17. What is the basis of the tax for locally manufactured and imported auto?
18. If it is not for sale, what is the basis of the tax for locally manufactured and imported auto?
19. What are not considered automobiles?
20. Who are exempt from this tax? See RR 25-2003.
21. What non-essential goods are subject to excise tax?
22. What is the basis of the tax?
23. Who are liable for this tax?
24. What mineral products are subject to excise tax?
25. What is the basis?
26. Who are liable to this tax?
27. Are exported mineral products exempt from excise tax? Any exception?

CASES:

1. Medina v. City of Baguio, 91 Phil 854. P150 per tin can not excise tax.
2. CIR v Abad L-19627, Jun 27, 1968. It does not matter to what use the article subject to tax is put.
3. CIR v CA, CTA and Fortune Tobacco Corp, GR No. 119761, 29 Aug 1996, 261 SCRA 236 (Extent of
BIR interpretative rule)
4. Compania General de Tobaccos de Filipinas v CA, 426 SCRA 203 (2004) Not being designated as an L-
7 tobacco manufacturer, petitioner cannot claim any exemption from payment of the specific tax on its
stemmed leaf tobacco.
5. CIR v La Campana Fabrica de Tabacos 369 SCRA 118 (2001). Purchase s of stemmed leaf tobacco
from the wholesale leaf tobacco dealers were not exempted from specific tax?
6. Rodriguez v CA 248 SCRA 288 (1995). When does importation begin and end?
7. Coll v. La Todena Inc. L-10431, Jul 31, 1962. Effect of evaporation on excise tax.
8. CIR v CTA 155 SCRA 386 Nov 5, 1989. Meaning of medicinal preparations – curing alleviating,
palliating or preventing some disease or affliction of the human body; toilet preparations: to improve
bodily appearance.
9. RR 25-2003 Implementing the excise on automobiles.
10. In [G.R. No. 122472. October 20, 2005.] APEX MINING CO., INC., petitioner, vs. COMMISSIONER
OF INTERNAL REVENUE and COURT OF APPEALS, respondents, the SC dismissed the petition for
review on certiorari under Rule 45 of the Rules of Court of Apex because the decision of the CA had
become final and executory, thus the CA decision in favor of CIR stands, to wit: “In sustaining
respondent's assessment on the petitioner vis a vis mineral products purchased by it from small scale
miners, the CA preliminary explained that since in the case of those locally extracted or produced
minerals, the rate of the ad valorem tax is based on the actual market value of the gross output thereof
at the time of removal from place of production pursuant to Section 151(a)(3) of the (old) Tax Code, the
excise tax on the extracted minerals while still in the hands of the small scale miners cannot as yet be
determined, not until the same is given a value when sold to a buyer like petitioner. The appellate court
then ratiocinated that because the liability of petitioner as regards minerals purchased from small scale
miners cannot be as a manufacturer or producer nor the present owner or possessor of the same in
accordance with Section 127(a) of the (old) Tax Code, 5 said provision should be related to other
provisions of the Code, specifically Section 151 (c) thereof which provides that the excise tax on
minerals shall be due and payable upon removal of the minerals from the locality where mined. Hence,
since there was no showing of a tax return filed by the small scale miners upon their extraction of the
minerals, petitioner should be the one assessed for having caused the removal of the minerals from the
locality where mined when it purchased the same from the small scale miners. Partly says the CA in its
 decision: The acts of Apex in causing the minerals to be removed from the place where extracted and a
value thereof determined by purchased, after which with evident intention to profit sold it to the Central
Bank leads to the conclusion that the excise tax became due while the minerals where in the possession
and ownership of Apex. To rule otherwise, will permit Apex to evade the payment of the tax 6.”
11. SilkAir v CIR GR 173594, Feb 5, 2008 – Exemption under Sec 135(b) of the Tax Code [on Excise Tax]
does not include exemption from indirect taxes. Also, the Air Transport Agreement between RP and
Singapore does not include indirect tax. The property party here to file claim for refund is the local
company who sold air fuel.
12. SilkAir (Singapore) Pte Ltd v CIR GR 171383 Nov 14, 2008 – Under Sec 135 and the Tax Treaty
between the Phils and Singapore, airline companies of the contracting parties are exempt from taxes on
fuel, customs duties. SilkAir purchased aviation fuel oil from Petron who included excise taxes to the
purchase price. SilkAir filed claim for refund but was denied on the ground it’s Petron who’s entitled to
refund as it’s the one liable to pay the tax but the tax being indirect, the burden could be passed on to
Silkair. Also, exemption is construed strictissimi juris. SilkAir said the exemptions under the NIRC and
the Tax Treaty would be meaningless if the contention of CIR is upheld. Issue: Is SilkAir the right party to
file the claim for refund? Ruling: The issue presented is not novel. In a similar case involving the same
parties, this Court has categorically ruled that “the proper party to question, or seek a refund of an
indirect tax is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the
same even if he shifts the burden thereof to another.” Revenue Regulations No. 3-2008 (RR 3-2008)
provides that “subject to the subsequent filing of a claim for excise tax credit/refund or product
replenishment, all manufacturers of articles subject to excise tax under Title VI of the NIRC of 1997, as
amended, shall pay the excise tax that is otherwise due on every removal thereof from the place of
production that is intended for exportation or sale/delivery to international carriers or to tax-exempt
entities/agencies.” The Department of Finance and the BIR recognize the tax exemption granted to
international carriers but they consistently adhere to the view that manufacturers of articles subject to
excise tax are the statutory taxpayers that are liable to pay the tax, thus, the proper party to claim any
tax refunds.
13. CIR v Fortune Tobacco - GR 167274 Jul 21, 2008 – Under Sec 145 of the NIRC, the rates of excise
tax on cigars and cigarettes under paragraphs (1), (2) (3) and (4) hereof, shall be increased by twelve
percent (12%) on January 1, 2000. On the other hand, Revenue Regulations No. 17-99 in the last
paragraph of Section 1 thereof, provides “(t)hat the new specific tax rate for any existing brand of cigars,
cigarettes packed by machine, distilled spirits, wines and fermented liquor shall not be lower than the
excise tax that is actually being paid prior to January 1, 2000.” The RR was questioned. The SC ruled
that the rule making power of the CIR cannot override the law which it seeks to implement. RR adding a
qualification in increasing the excise tax on cigarettes is invalid since that qualification is not found in the
law.
14. British American Tobacco v Sec Camacho, etc. GR 163583 Aug 20, 2008 - Whether Congress acted
improvidently in derogating, to a limited extent, the state’s interest in promoting fair competition among
the players in the industry, while pursuing other state interests regarding the simplification of tax
administration of sin products, elimination of potential areas for abuse and corruption in tax collection,
buoyant and stable revenue generation, and ease of projection of revenues through the classification
freeze provision, and whether the questioned provision is the best means to achieve these state
interests, necessarily go into the wisdom of the assailed law which we cannot inquire into, much less
overrule. The classification freeze provision has not been shown to be precipitated by a veiled attempt,
or hostile attitude on the part of Congress to unduly favor older brands over newer brands. On the
contrary, we must reasonably assume, owing to the respect due a co-equal branch of government and
as revealed by the Congressional deliberations, that the enactment of the questioned provision was
impelled by an earnest desire to improve the efficiency and effectivity of the tax administration of sin
products. For as long as the legislative classification is rationally related to furthering some legitimate
state interest, as here, the rational-basis test is satisfied and the constitutional challenge is perfunctorily
defeated.
15. Republic of the Philippines (Bureau of Customs) v Unimex Micro GR 166309-10 Nov 25, 2008 –
Denial of Motion for clarification. Need to read the 2007 case of the same parties which was finally
decided by the SC.
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