THE Bureau of Internal Revenue (BIR) lost its P2.7 billion tax case against Lucio Co’s Puregold Duty Free Inc. after the Supreme Court dismissed its appeal and affirmed the Court of Tax Appeals’ decision clearing the company of tax liabilities for importation of alcohol and tobacco products from January 1998 to May 2004.
In a 17-page decision, the high court’s third division through Associate Justice Presbitero Velasco
said the Tax Court dismissed the argument raised by BIR Commissioner Kim Henares that under Section 131 (a) of the 1997 National Internal Revenue Code, only importations of distilled spirits, wines and cigarettes to the freeports in Subic, Cagayan and Zamboanga, as well as importations by government-owned duty free shops, are exempt from payment of value added tax (VAT) and excise taxes.
“It is significant to note that there is nothing in Section 1 of Republic Act 9399 (Act Declaring a One time Amnesty on Certain Tax and Duty Liabilities, Inclusive of Fees, Fines, Penalties, Interest and Other Additions, Incurred by Certain Business
Enterprises Operating Within the Special Economic Zones and Freeports) that excludes Section 131 (A) of the 1997 NIRC from the amnesty. In fact, there is no mention at all of any tax or duty imposed by the 1997 NIRC as being specifically excluded from the coverage of the tax amnesty,” the high court said.
Enterprises Operating Within the Special Economic Zones and Freeports) that excludes Section 131 (A) of the 1997 NIRC from the amnesty. In fact, there is no mention at all of any tax or duty imposed by the 1997 NIRC as being specifically excluded from the coverage of the tax amnesty,” the high court said.
“If Congress intended Section 131 of the 1997 NIRC to be an exception to the general grant of amnesty given under RA 9399, it could have easily so provided in either the law itself or even the implementing rules. In implementing tax amnesty laws, the CIR cannot now insert an exception where there is none under the law. And this court cannot sanction such action,” the high court added.
The BIR went to the Supreme Court after the Tax Court en banc upheld the decision of its 2nd division which states that Puregold is entitled to, and properly availed of, the tax amnesty under RA 9399, Puregold is engaged in the sale of various consumer goods within the Clark Special Economic Zone (CSEZ) and operates in-store under the authority and jurisdiction of Clark Development Corporation (CDC) and CSEZ. BIR, in its appeal also argued that Puregold is not entitled to the benefits under RA 9399 because its principal place of business is in Metro Manila as shown in its articles of incorporation.
But the high court pointed out that the BIR failed to challenge Puregold’s eligibility to avail of the tax amnesty under R.A. 9399 while the case is with the Tax Court. Still, the high court cited documents showing that Puregold is also doing business inside the special economic zone.
“Clearly, the location of Puregold’s principal office is not, standing alone, an argument against its availment of the tax amnesty under RA 9399,” the high court said. Also, the high court noted that the Tax Court has ruled that the amnesty provision of R.A. 93999 covers the deficiency taxes assessed on Puregold and rejected the arguments raised by the BIR. Such findings of the Tax Court, according to the high court, “merits utmost respect” since its function are by nature dedicated exclusively to the consideration of tax problems.
of Puregold’s principal office is not, standing alone, an argument against its availment of the tax amnesty under RA 9399,” the high court said. Also, the high court noted that the Tax Court has ruled that the amnesty provision of R.A. 93999 covers the deficiency taxes assessed on Puregold and rejected the arguments raised by the BIR. Such findings of the Tax Court, according to the high court, “merits utmost respect” since its function are by nature dedicated exclusively to the consideration of tax problems.
“We cannot sanction the CIR’s (Commissioner of Internal Revenue) position as it would amount to nothing less than an emasculation of an otherwise clear and valid law – R.A. 9399. Clearly, if the Court would uphold the CIR’s argument that even before the rulings in John Hay and Coconut Oil, respondent’s duty-free privileges were already withdrawn by the 1997 NIRC, this Court would in effect be negating the remedial measure contemplated in R.A. 9399 against these rulings,” the high court said.
