MANILA, Philippines - The Supreme Court (SC) has junked a P2.78-billion tax case filed by the Bureau of Internal Revenue (BIR) against Puregold Duty Free tycoon Lucio Co.
Voting 3-2, the fifth division of the high court upheld a 2012 decision of the Court of Tax Appeals (CTA) dismissing the suit filed by the BIR against the firm located at the Clark special economic zone.
The BIR wanted the firm to pay P2,780,610,174.51 in liabilities plus surcharges and interests supposedly representing deficiencies in value-added tax (VAT) and excise tax for its importations of alcohol and tobacco products from January 1998 to May 2004.
The SC dismissed the BIR’s petition and agreed with the CTA’s ruling that Puregold is entitled to the tax amnesty under Republic Act 9399, which grants a one-time tax amnesty for business enterprises operating within special economic zones and free ports.
The SC rejected the argument of the BIR that under Section 131 (a) of the 1997 National Internal Revenue Code, only importations of distilled spirits, wines and cigarettes at the free ports in Subic, Cagayan and Zamboanga, as well as importations by government-owned duty free shops, are exempt from payment of VAT and excise taxes.
The BIR also argued that based on its Articles of Incorporation, Puregold’s principal place of business is in Metro Manila, and therefore cannot avail itself of the benefits extended under RA 9399.
But the SC did not agree. It stressed that during proceedings before the CTA, the BIR never challenged Puregold’s eligibility to avail itself of the tax amnesty under RA 9399 on the ground that its principal place of business is in Metro Manila and not in Clark Field, Pampanga.
“This Court cannot take cognizance, much less consider, this argument as a ground to divest Puregold of its right to avail of the benefits of RA 9399,” read the 17-page decision penned by Associate Justice Presbitero Velasco Jr.
The high tribunal also noted that the CTA has ruled that the amnesty provision of RA 9399 covers the deficiency taxes assessed on Puregold and rejected the arguments raised by the BIR.
Associate Justices Diosdado Peralta and Bienvenido Reyes concurred with the ruling. Associate Justices Martin Villarama Jr. and Jose Mendoza dissented and sided with the BIR.
Records showed that Puregold availed itself of the tax amnesty under RA 9399 on July 27, 2007.
But on Oct. 26, 2007, Puregold received a formal letter of demand from the BIR for the payment of P2.78 billion supposedly representing deficiency VAT and excise taxes on its importations of alcohol and tobacco products from 1998 to 2004.
The firm requested the cancellation of the assessment on the ground that it had already availed itself the tax amnesty under RA 9399.
But the BIR issued on June 23, 2008 a final decision on disputed assessment stating that the availment of the tax amnesty under RA 9399 did not relieve Puregold of its liability for deficiencies in VAT, excise taxes, and inspection fees under Sec. 13l(A) of the 1997 National Internal Revenue Code.
This prompted Puregold to seek redress before the CTA, which ruled in its favor.