Shell should stand trial, S Court rules

THE SUPREME Court has ruled that oil giant Pilipinas Shell Petroleum Corp. (PSPC) should stand trial over the alleged use of fraudulently acquired tax credit certificates (TCCs) worth P10 million almost two decades ago.

In a 19-page decision, the high court reversed the earlier decisions of the Court of Appeals in favor of Pilipinas Shell and remanded the case filed by the Bureau of Customs (BOC) to the Manila Regional Trial Court.

The decision, penned by recently retired Associate Justice Martin Villarama Jr., was promulgated on Dec. 9, 2015, but was released only last Friday.

The ruling said the appeals court had erred in dismissing the BOC’s case against Pilipinas Shell, one of several collection suits the agency filed in an effort to recover huge revenue losses from the so-called “tax credit scam” that proliferated in the 1990s.

The case stemmed from the allegedly fake credit memos issued by Filipino Way Industries (Filway), which allowed it to assign TCCs worth P10,088,912 to Pilipinas Shell on May 7, 1997.

Refunds

TCCs are payment refunds granted to exporters and manufacturers of BOI-registered products for export who had actually paid duties and taxes on the raw materials and supplies they had used.

Pilipinas Shell then used the TCCs to settle its customs duties and taxes on its oil importations with the BOC—with prior approval by the Department of Finance’s (DOF) One Stop Shop-Inter Agency Tax Credit and Duty Drawback Center.

The DOF later discovered that the credit memos used by Filway were spurious. The TCCs were cancelled and the BOC filed cases against several companies before the Manila court for collection of money with damages.

Under the “tax credit scam,” refunds were made on taxes that were never paid or tax credits granted to some firms that had ceased operations.

In its earlier rulings, the Court of Appeals and the trial court both cited the case of “Pilipinas Shell Petroleum Corp v CIR,” in which it was said that Pilipinas Shell was a “transferee in good faith” and that there was no evidence presented that it participated in any way in the issuance of the TCCs to Filway.

Wrong remedy

Pilipinas Shell also contended that the orders of the RTC attained finality since the BOC availed of the wrong remedy.

But the high court said trial courts had limited authority to render summary judgments, and that the petitioner should be given the opportunity to substantiate its allegations of fraud.

The court agreed with the BOC that “(t)he matter of whether or not Pilipinas Shell is a transferee in good faith…is a genuine issue to be resolved, and it must be ventilated in a full trial.”