The Supreme Court denied the petition of the Commissioner of Internal Revenue (CIR) and affirmed the ruling of the Court of Tax Appeals (CTA) En Banc, declaring Revenue Memorandum Circular No. 90-2012 (RMC No. 90-2012) void for having been issued ultra vires. The Court ordered a refund in favor of San Miguel Brewery, Inc. in the amount of PHP 83,018,504.21, representing overpayment of excise taxes on San Mig Light removals for the period of January 1, 2013 to December 31, 2013.
The Case
Respondent San Miguel Brewery, Inc. (San Miguel) is a corporation duly organized and existing under the laws of the Republic of the Philippines, engaged in the business of manufacturing, selling, and distributing fermented and malt-based beverages.
On December 19, 2012, Republic Act No. 10351 took effect, which amended, among others, Sec. 143 of the 1997 National Internal Revenue Code (NIRC), and imposed an excise tax on fermented liquors effective January 1, 2013. The law set a rate of PHP 15.00 per liter if the net retail price per liter of volume capacity, excluding excise tax and value-added tax (VAT), is PHP 50.60 or less, and PHP 20.00 per liter if the net retail price per liter of volume capacity, excluding excise tax and VAT, is more than PHP 50.60.
On December 27, 2012, the CIR issued RMC No. 90-2012, which provided that, effective January 1, 2013, the applicable tax rate for San Mig Light, in bottle and in can, would be at PHP 20.57 per liter. At the time, San Mig Light's net retail price was PHP 47.99 per liter in bottle, or less than PHP 50.60 per liter of volume capacity, and PHP 61.51 per liter in can, or more than PHP 50.60 per liter of volume capacity.
To remove its product from the bonded warehouses, San Miguel paid the excise taxes due for the period January 1, 2013 to December 31, 2013. It then filed its administrative claim for refund in the amount of PHP 83,019,296.21 on December 9, 2014. Alleging inaction on the part of the CIR, San Miguel filed a Petition for Review before the CTA on December 19, 2014, arguing that RMC No. 90-2012 was issued without prior notice and hearing and was inconsistent with Sec. 143 of the NIRC, as amended.
The Issue
The Court addressed whether the CTA had jurisdiction to rule on the validity of RMC No. 90-2012, and whether that circular was null and void for supplanting Sec. 143 of the 1997 NIRC, entitling San Miguel to its refund claim.
The Ruling
The Court held that the CTA in Division was well within its jurisdiction when it ruled on the validity of RMC No. 90-2012 while deciding San Miguel's Petition for Review, because the invalidity of the circular was raised as a ground for the refund claim. The Court further held that RMC No. 90-2012 must be declared null and void for supplanting the law it sought to implement.
In its disposition, the Court declared: "ACCORDINGLY, the Petition is DENIED. The Decision dated November 26, 2024 of the Court of Tax Appeals En Banc is AFFIRMED, and Revenue Memorandum Circular No. 90-2012 issued by petitioner Commissioner of Internal Revenue is DECLARED VOID for having been issued ultra vires."
The Court also ordered the Court of Tax Appeals to issue a writ of execution directing the CIR to refund or to issue a tax credit certificate in favor of San Miguel Brewery, Inc. in the amount of PHP 83,018,504.21.
By the Numbers
- PHP 15.00 per liter — excise tax rate if net retail price is PHP 50.60 or less (R.A. No. 10351)
- PHP 20.00 per liter — excise tax rate if net retail price is more than PHP 50.60
- PHP 20.57 per liter — rate set by RMC No. 90-2012 for San Mig Light
- PHP 47.99 per liter — San Mig Light's net retail price in bottle
- PHP 61.51 per liter — San Mig Light's net retail price in can
- PHP 83,019,296.21 — amount initially claimed for refund
- PHP 83,018,504.21 — refund amount granted
- PHP 792.00 — downward adjustment for understatement of excise taxes
- 39.60 liters — underdeclared San Mig Light removals
- December 19, 2012 — effectivity of R.A. No. 10351
- December 9, 2014 — filing of administrative refund claim
The Court's Reasoning
The Court agreed with the CTA En Banc that the CTA has exclusive jurisdiction to determine the constitutionality or validity of tax laws, rules and regulations, and other administrative issuances of the CIR, pursuant to Sec. 7 of Republic Act No. 9282, as amended. Citing Banco de Oro v. Republic, the Court explained that the CTA may take cognizance of cases directly challenging the constitutionality of a tax regulation and cases where the regulation's legality is raised as a ground in disputing an assessment or claim for refund.
On the merits, the Court ruled that administrative issuances must not override, supplant, or modify the law. It found that RMC No. 90-2012 exceeded the bounds of merely implementing the law — it effectively amended it by imposing a tax rate not only different from that imposed by the NIRC, but higher than that prescribed, giving a new and additional obligation to the respondent by modifying the primary law. The Court stressed that mere administrative issuances, like a BIR regulation, cannot amend the law, and that courts will not hesitate to declare void a regulation that is not consistent with the statute it seeks to implement. Given this, the refund of erroneous excise tax payments in the amount of PHP 83,018,504.21 in favor of the respondent was in order.
Source: Supreme Court Decision in G.R. No. E-02918, Commissioner of Internal Revenue v. San Miguel Brewery, Inc.
This report summarizes a public Supreme Court decision and is not legal advice.