CASE DIGEST: Diageo vs. CIR (G.R. No. 183553; November 12, 2012)

CASE DIGEST: DIAGEO PHILIPPINES, INC., Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, Respondent. (G.R. No. 183553; November 12, 2012)

Diageo buys raw alcohol from a supplier who imports it and pays for excise taxes thereon. Diageo pays for said raw alcohol and the purchase price includes the excise taxes paid by the supplier-importer. Diageo then manufactures alcohol and exports them to Japan, Taiwan, Turkey and Thailand.Now, Diageo wants to be issued tax credit certificates for excise tax paid for goods actually exported. According to the Tax Code, "When goods locally produced or manufactured are removed and actually exported without returning to the Philippines, whether so exported in their original state or as ingredients or parts of any manufactured goods or products, any excise tax paid thereon shall be credited or refunded upon submission of the proof of actual exportation and upon receipt of the corresponding foreign exchange payment."

[1] Is it Diageo or the supplier who is entitled to tax refund or tax credit?
[2] Who is the taxpayer: Diageo or the supplier?

[1] It is the supplier who is entitled to tax refund or tax credit, not Diageo. Diageo has no legal personality to file a claim for refund or credit. The law on excise taxes, unlike the law on VAT, does not allow the subsequent purchaser under the tax credit method to refund or credit input taxes passed on to it by a supplier.

The phrase "any excise tax paid thereon shall be credited or refunded" requires that the claimant be the same person who paid the excise tax.

[2] The taxpayer here is the supplier-importer, not Diageo. What was passed ot Diageo is the tax burden, not the tax.

Though excise taxes are paid by the manufacturer or producer before removal of domestic products from the place of production or by the owner or importer before the release of imported articles from the customshouse, the same partake of the nature of indirect taxes when it is passed on to the subsequent purchaser.

Accordingly, when the excise taxes paid by the supplier were passed on to Diageo, what was shifted is not the tax per se but anadditional cost of the goods sold. Thus, the supplier remains the statutory taxpayer even if Diageo, the purchaser, actually shoulders the burden of tax.