Fortune Tobacco wins P491-M tax refund battle at SC

The Supreme Court has ordered the Bureau of Internal Revenue to return almost half a billion pesos in taxes collected in 2003 and 2004 from Fortune Tobacco Corp., a company owned by business tycoon Lucio Tan.

Fortune Tobacco’s cigarette products include Champion, Salem, Salem King, Camel F King, Camel Lights Box, Camel Filters Box, Winston F Kings, and Winston Light.

Fortune Tobacco manufacturers

Fortune Tobacco manufacturers

In a 14-page ruling, the high court’s Second Division affirmed the Court of Tax Appeals’ 2007 decision that granted Fortune Tobacco’s bid for a tax refund amounting to P491 million.

The SC held that Fortune Tobacco is entitled to a tax refund because a provision in Revenue Regulation 17-99 went beyond the wording of Section 145 of the National Internal Revenue Code of 1997.

“The proviso in Section 1 of RR 17-99 clearly went beyond the terms of the law it was supposed to implement, and therefore entitles Fortune Tobacco to claim a refund of the overpaid excise taxes collected pursuant to this provision,” said the SC decision written by Associate Justice Arturo Brion.

Those who concurred were Associate Justices Mariano del Castillo, Jose Portugal Perez and Jose Catral Mendoza.

Citing the 1987 Constitution, the SC said that taxation must be uniform and equitable — a rule the BIR violated when it implemented RR 17-99.

Section 1 of the regulation provides that “the new specific tax rate for any existing brand of cigars and cigarettes packed by machine, distilled spirits, wines and fermented liquors shall not be lower than the excise tax that is actually being paid prior to January 1, 2000.”

“In the process, the [then] CIR (Commission on Internal Revenue) also perpetuated the unequal tax treatment of similar goods that was supposed to be cured by the shift from ad valorem to specific taxes,” said the high court.

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