Petron to get another tax refund for alkylates

Inquirer file photo/Lyn Rillon

MANILA, Philippines — The Court of Tax Appeals (CTA) has granted the petition of Petron Corp. to reclaim a total of P69.6 million in excise it “erroneously” paid in 2018 for the importation of alkylate, a component used to blend and produce cleaner gasoline.

In an Aug. 14 decision, the CTA ruled the payment of taxes for the alkylate imports Petron used for its manufacture of fuel was “erroneous and illegal” as the compound is “not categorically” subject to Section 148 (e) of the National Internal Revenue Code.

In granting the petition for review filed by the oil company, the tax court directed the Bureau of Internal Revenue (BIR) to refund or issue tax certificates in the amount of P34.5 million, representing the import duties in January and April 2018. For another round of import taxes in May and July 2018, the BIR is directed to refund P35.05 million.

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“Considering that ambiguities in tax laws should be construed against the government and in favor of taxpayers, the provision at issue should be interpreted as not imposing [taxes] on alkylate,” the 14-page decision read.

The law identified the taxable “manufactured oil and other fuel,” such as naphtha, regular gasoline and other “products of distillation,” as well as aviation turbo jet fuel, bunker fuel, kerosene, liquefied petroleum gas and asphalt.

The CTA rejected the argument of BIR that alkylate is covered by the Tax Code, saying the substance “cannot be considered a direct product of distillation,” similar to the other taxable oil and fuel.

“The use of distillation for purifying alkylate does not necessarily make the substance a direct product of distillation,” it said.

Blending material

Citing a 2023 decision by the Supreme Court, the tax court also noted that alkylate is “exclusively intended” for use as a “raw material or blending component” for the production of unleaded premium gasoline.

In the said SC ruling, alkalyte is described a mere component, “which can be blended into finished gasoline to help meet the specification requirements, particularly those related to octane quality and volatility.”

The CTA said, “As the intended use and nature of alkylate differ greatly from those of naphtha and regular gasoline, the former cannot be placed under the same category as the latter two substances.”