SC affirms tax refund for Lucio


The Supreme Court has ordered the government to refund the Fortune Tobacco Corporation of business tycoon Lucio Tan more than P1 billion in overpaid excise taxes covering the years 2001 and 2002.

The SC’s Second Division denied the motion for reconsideration filed by the Office of the Solicitor General (OSG) seeking the reversal of its July 21, 2008 decision written by Associate Justice Dante Tinga.

“Acting on the Office of the Solicitor General’s motion for reconsideration of the decision dated July 21, 2008, the court resolves to deny the motion with finality, the basic issues raised therein having been duly considered and passed upon by the court in aforesaid decision and no substantial argument having been adduced to warrant the reconsideration sought,” the SC resolution stated.

The appealed SC ruling affirmed the judgments of the Court of Tax Appeals (CTA) and the Court of Appeals (CA), which directed the Bureau of Internal Revenue to reimburse FTC some P1.03 billion.

The SC ruled that Revenue Regulation No. 17-99 issued by the Department of Finance (DOF) upon the recommendation of the BIR “is indefensibly flawed” as it went beyond the provisions of the Tax Code.

RR No. 17-99 was issued to implement the provisions of the 12 percent increase of excise tax on cigars and cigarettes packed by machines by January 1, 2000.

The regulation also provides that “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.

According to the SC, the DOF regulation violated Section 15 of the Tax Code which states that within the next three years from the effectivity of the Tax Code, the excise tax for any brand of cigarettes shall not be lower than the tax due from each brand on October 1, 1996.

It said such qualification is absent as regards the 12 percent increase which is to be applied on cigars and cigarettes packed by machine, among others, effective on January 1, 2000.

It noted that Section 145 mandates a new rate of excise tax for cigarettes packed by machine due to the 12 percent increase effective on January 1, 2000 without regard to whether the revenue collection starting from this period may turn out to be lower than that collected prior to this date.