FACTS: When
SMC's October 19, 1999 letter requested the registration and authority to
manufacture "San Mig Light," to be taxed at ₱12.15 per liter, the BIR
granted the request, thus confirming SMC can register, manufacture, and sell
"San Mig Light" as a new brand.
The CIR argues that "San Mig Light," launched in
November 1999, is not a new brand but merely a low-calorie variant of "San
Miguel Pale Pilsen." Thus, the application of the higher excise tax rate
for variant products is appropriate (₱19.91 per liter instead of ₱9.15 per
liter) and SMC should not be entitled to a refund or issuance of a tax credit
certificate. The CTA sided with SMC; hence, this petition by the CIR with the
SC.
ISSUES: [1] Can
the BIR validly reclassify brands?
[2] Is
"San Mig Light" is a new brand and not a variant of "San Miguel
Pale Pilsen"?
[3] Is
it not that estoppel does not apply to the government in case of collection of
taxes?
[4] Is
SMC entitled to a refund of excess payment of excise taxes on "San Mig
Light"?
HELD: [1] No,
any reclassification of fermented liquor products should be by act of Congress.
(Section 143 of the Tax Code)
The CIR's letters and Notices of Discrepancy, which
effectively changed San Mig Light's brand's classification from "new brand
to variant of existing brand," necessarily changes San Mig Light's tax
bracket. Based on the legislative intent behind the classification freeze
provision, petitioner has no power to do this. A reclassification of a
fermented liquor brand introduced between January 1, 1997 and December 31,
2003, such as "San Mig Light," must be by act of Congress. There was
none in this case.
[2] A
new brand still because the BIR has no power to reclassify.
Also, a 'variant of a brand' shall refer to a brand on
which a modifier is prefixed and/or suffixed to the root name of the brand. The
word "Light" cannot he considered as a mere suffix to the word
"San Miguel," hut it is part and parcel of an entirely new brand
name, "San Mig Light."
Though the "escudo" logo appears on both
"Pale Pilsen" bottle and "San Mig Light" bottle and can,
the same cannot be considered as an indication that "San Mig Light"
is merely a variant of the brand "Pale Pilsen", since the said
"escudo" insignia is the corporate logo of petitioner. It merely identifies
the products, as having been manufactured by petitioner, but does not form part
of its brand. In fact, it appears not only in petitioner's beer products, but
even in its non-beer products.
[3] While
estoppel generally does not apply against government, especially when the case
involves the collection of taxes, an exception can be made when the application
of the rule will cause injustice against an innocent party.136 Respondent had
already acquired a vested right on the tax classification of its San Mig Light
as a new brand. To allow petitioner to change its position will result in
deficiency assessments in substantial amounts against respondent to the
latter's prejudice.
The authority of the Bureau of Internal Revenue to
overrule, correct, or reverse the mistakes or errors of its agents is conceded.
However, this authority must be exercised reasonably.
[4] Yes,
SMC is entitled to tax refund or tax credit certification. The Tax Code
includes remedies for erroneous collection and overpayment of taxes. Under
Sections 229 and 204(C) of the Tax Code, a taxpayer may seek recovery of
erroneously paid taxes within two (2) years from date of payment.
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