Tax court sides with San Miguel beer unit in P740-M tax refund case

A TAX COURT has ordered the government to refund San Miguel Brewery, Inc. over P740 million in taxes it paid in 2011, affirming that San Mig Light is a separate brand that should be taxed lower than variants of existing products.

In a 29-page decision dated Dec. 23, the second division of the Court of Tax Appeals (CTA) told the Bureau of Internal Revenue “to refund or to issue a tax credit certificate in favor of petitioner in the reduced amount of P740,294,926.62 representing overpayment of its excise taxes for the period covering Jan. 1, 2011 to Dec. 31, 2011.”

The decision, penned by Associate Justice Juanito C. Castañeda, Jr., cited the tax court’s previous rulings that classify San Mig Light -- a low-calorie beer sold in bottle and in can with 5% alcohol content -- as a “new brand.”

This had the effect of taxing San Mig Light “according to its current net retail price,” reducing the imposed excise tax to P15.49 per liter, from the previous P20.57 per liter.

The nearly P1-billion refund sought covered 145.7 million liters of the product removed from its five plants in 2011. The brewery paid close to P3 billion in excise taxes, but this would now be reduced to P2.26 billion because of the product’s classification as a “new brand.”

In partially granting the refund, the court reduced the claim by P5,791.20 because 1,140 liters of San Mig Light were either misclassified, or declared in August 2011 excise tax returns and not removed.

The Bureau of Internal Revenue classified San Mig Light as a “variant” of an existing San Miguel Brewery product in 2002, which led to it being “taxed under the highest classification of any variant of that brand” under Republic Act (RA) No. 8424, a 1997 law that amended the Tax Code’s provisions on excise taxes.

Under RA 9334 enacted in 2004 and which amended the Tax Code’s classification of fermented liquors, a “new brand” is one registered after an older law -- RA 8240 took effect on Jan. 1, 1997. That 1997 law amended sections of the National Internal Revenue Code governing taxes on distilled spirits, wines, liquor and cigar.

“Variants,” on the other hand, “refer to a brand on which a modifier is prefixed and/or suffixed to the root name of the brand.”

However, the decision said that San Mig Light was introduced in 1999 as a “new brand” of the brewery’s fermented liquor, because the existing Pale Pilsen brand -- a beer with more calories but the same 5% alcoholic content -- did not have the root name of “San Miguel” or “San Mig” in its names.

The decision also cited a 2012 ruling noting that Pale Pilsen and San Mig Light had “marked differences” in their label designs.

Associate Justice Amelia R. Cotangco-Manalastas dissented.

The case was docketed as CTA Case No. 8591, San Miguel Brewery, Inc., a subsidiary of San Miguel Corporation versus the Commissioner of Internal Revenue. -- V. A. A. F. Nonato

source:  Businessworld