MANILA, Philippines?The Bureau of Customs has ordered Pilipinas Shell Petroleum Corp. to pay P7.34 billion in excise taxes for unleaded gasoline imports from 2004 to October 2009 that it declared as a blending component rather than as a finished product.

The demand letter was signed by Customs Commissioner Napoleon Morales on Nov. 11 and was payable 10 days from its receipt. The amount does not include penalties.

The BOC order came 11 months after its Batangas district collector, Juan Tan, issued the first demand letter. The district uncovered Shell?s allegedly fraudulent scheme of passing off its unleaded gasoline as catalytic-cracked gasoline (CCG), which it claimed was a blending component not subject to tax.

But investigation by the office of Morales, Deputy Customs Commissioner Reynaldo Nicolas, and the Office of Presidential Adviser for Revenue Enhancement Narciso Y. Santiago Jr. upheld Tan?s recommendation that Shell pay P7.34 billion in taxes for the unleaded gasoline it started classifying as CCG five years ago.

The BOC noted that Shell had been paying value-added and excise taxes on its unleaded gasoline imports from 2001 to 2003.

The company stopped paying taxes, however, when it started bringing in CCG which it claimed was an intermediate product rather than a finished product and thus not subject to tax. Its position was upheld by Deputy Commissioner Jose Mario Buñag of the Bureau of Internal Revenue in a March 2004 opinion.

Then Revenue Commissioner Sixto Esquivias IV upheld Buñag?s ruling in June. Esquivias resigned as BIR chief on Oct. 30.

In its decision, the BOC ruled that ?gasoline whenever imported shall be subject to excise tax and VAT based on the landed cost, whatever is the intention of the importer to the use thereof.?

The BOC pointed out that among the petroleum companies in the country, only Shell was not paying taxes on its unleaded gasoline imports. The BOC probers said the company had admitted that CCG was the same as unleaded gasoline.

The law does not qualify whether regular or unleaded gasoline will be used as a raw material or blending component to produce a finished product, according to the BOC.

In the petrochemical industry it has been expressly provided that naphtha, a raw material for plastic, would have zero excise tax if used as a raw material, the customs commissioner said. Gil C. Cabacungan Jr.