MANILA, Philippines - The House of Representatives' ways and means committee scored the Bureau of Internal Revenue (BIR) for insisting to impose excise taxes on Pilipinas Shell Petroleum Corp.'s fuel imports despite a finding by the Department of Energy (DOE) that these are just raw materials.

In a report signed by its 38 members and released on Jan. 27, the committee said this was "a naked, arbitrary, and whimsical abuse of administrative power by the Commissioner of Internal Revenue and a usurpation of the power to tax solely vested in Congress by the Constitution."

BIR Commissioner Joel Tan-Torres issued the controversial ruling imposing excise taxes on Shell's catalytic cracked gasoline (CCG) and light catalytic cracked gasoline (LCCG) imports after the Bureau of Customs (BOC) slapped the oil firm with a P7.3-billion deficiency tax assessment.

Before this, the BIR consistently ruled since 2004 that CCG and LCC were “not finished gasoline products intended for use by end consumers” and were not subject to excise tax upon importation.

Business groups have expressed concern over the sudden change in the BIR's decision.
 
The ways and means committee, which is responsible for initiating all tax laws, found that the Tan-Torres' ruling "is arbitrary as it lacks factual and legal basis.”

It further stated that “a closer analysis of the Tan-Torres ruling clearly discloses that it is a very strained interpretation of the excise tax provisions of the NIRC (National Internal Revenue Code) which results in absurdity.”
 
The report pointed out that the DOE, the primary agency in the implementation and enforcement of laws relating to petroleum products, had ruled that the importation of LCCG and CCG as raw materials for the production or processing of gasoline should not be subject to excise taxes.
 
“The factual finding binds the BIR and its agent, the BOC, since it is the BIR which in the first place requested for a DOE opinion,” the report said adding that “the BIR never disputed this factual finding.”
 
The report also cited rulings by the Supreme Court which explained that excise taxes are imposed on certain specified goods. It noted that the NIRC does not list CCG and LCCG among the specified goods subject to such taxes.
 
The committee also lambasted the BIR for resorting to double taxation. It said the BIR "in effect levies an excise tax twice on CCG and LCCG, first as raw materials upon withdrawal from the port of entry and second as components of a finished product upon withdrawal from Shell’s refinery."

The committee said that the latest BIR ruling cannot be applied retroactively to Shell importations from 2004 to 2009. It noted that while the bar against retroactive application of BIR rulings allows for exceptions, "these exceptions may not be invoked as the material facts on which the rulings of previous Commissioners were confirmed by the DOE that CCG and LCCG are raw materials, in contradistinction to finished products."

Shell has questioned the BOC's tax deficiency assessment before the Court of Tax Appeals.

In the meantime, the ways and means committee has asked the BOC to refrain from seizing P43 billion worth of Shell's future fuel imports as payment for its alleged back taxes, pending the resolution of the issue by the court.