MANILA, Philippines - The Bureau of Internal Revenue (BIR) clarified on Wednesday that the reversal of its position on the tax dispute involving Pilipinas Shell Petroleum Corp. was "allowed by law and done in the discharge of its mandate."

The tax bureau's statement came after various business groups expressed their misgivings about the matter.

The Bureau of Customs (BOC) threatened to seize future imports of Shell and sell these in an auction to collect P7.3 billion in excise taxes from the oil firm's importation of Catalytic Cracked Gasoline (CCG) and Light Catalytic Cracked Gasoline (LCCG) from 2004 to 2009.

Shell, citing the BIR's past ruling, said CCG and LCCG are merely raw materials and not finished products subject to such taxes.

The BIR has reversed its ruling, raising concerns among business groups including the Philippine Chamber of Commerce and Industry (PCCI), the European Chamber of Commerce of the Philippines (ECCP), and the Employers Confederation of the Philippines (ECOP).

"We came out with a new position on the taxation of CCG imported by Pilipinas Shell when we received new information from the BOC regarding the importation of the CCG which was not considered in the previous BIR position of exemption of this product. This information clearly established the basis for imposing the excise tax on Pilipinas Shell," BIR Commissioner Joel Tan-Torres said.

PCCI earlier questioned the retroactive imposition of excise taxes on Shell's imports, saying it was a dangerous precedent and would scare away potential investors. Similar concerns have been raised by the ECCP and ECOP.

Tan-Torres said: "The retroactive imposition of this excise tax was done by the BOC, which has been deputized by the BIR in the implementation and collection of internal revenue taxes due on importation. There are legitimate instances when a retroactive imposition of tax can be done and I believe that the BOC took this into account when they acted on this matter."

"Rest assured that we are conscious of the rights of taxpayers and we will make sure that these are protected. However, when the Tax Code mandates a particular tax treatment, then that should be implemented even if this may be harsh for the affected taxpayers," he added.

Shell is disputing the tax assessment made by the BOC before the Court of Tax Appeals.