Taxes, including penalties, that are erroneously or illegally received can be refunded by the Bureau of Internal Revenue (BIR). These include (a) national internal revenue taxes erroneously or illegally assessed or collected, (b) penalties collected without authority, (c) amounts which have been excessively or in any manner wrongfully collected without authority, and (d) sums alleged to have been excessively or in any manner wrongfully collected.
Recovery is allowed only if the taxes and penalties are erroneously or illegally collected by the tax authority. An ‘erroneous or illegal tax’ is defined as one levied without statutory authority, or upon property not subject to taxation or by some officer having no authority to levy the tax, or one which, in some other similar respect, is illegal (GR 188497, April 25, 2012). For a claim for refund to prosper, there must be wrongful payment of an amount that is not due (GR 187485, February 12, 2013).
The tax court had the occasion to expound on this further in a recent case (CTA Case No. 11028, June 23, 2026). The case involves an application for refund of excise taxes paid on tobacco products. The Court of Tax Appeals (CTA) dismissed the claim, holding that the excise taxes were not erroneously or illegally paid and collected. So, the taxes cannot be refunded by the BIR.
In the case, the products of the taxpayer were damaged by a typhoon after the taxes had been paid and affixed on the excisable articles. The damage rendered the goods unfit for sale or consumption. So, the taxpayer sought to recover the taxes paid on the products. The taxpayer’s claim for refund is premised on the argument that excise taxes are imposed on goods that are to be sold, consumed or disposed of domestically. Following this, the taxpayer believes that the local sale component for the imposition of excise tax was not satisfied when the products can no longer be delivered and sold after they had been destroyed by the typhoon.
The CTA disagreed and ruled that sale is not a pre-condition in the imposition of excise tax. The tax court explained that excise taxes are due and paid before the removal of the goods from the place of production. The excise taxes are payable, even though the articles are removed merely for storage in some other place. In other words, excise taxes are not imposed on the basis of sale, and they are due to be paid even if the products are not actually sold or consumed.
The law also provides that, upon payment of the taxes, the ownership of the products is transferred in favor of the taxpayer. Any damage to or loss of the goods after release or removal from the place of production is the responsibility of the local manufacturer. The taxpayer shoulders and accounts for the loss.
Besides, the BIR can also refund only the value of internal revenue stamps when they are returned in good condition, or redeem or change unused stamps that have been rendered unfit for use.
Here, not only did the taxpayer use and affix the internal revenue stamps. More importantly, the taxpayer had rightfully paid the said taxes. Otherwise, it could not have removed or released the subject articles from the place of production for subsequent sale and consumption. In short, there was no erroneous or illegal payment of tax. Therefore, no taxes can be refunded. The taxpayer bears the value of the loss on the articles damaged by the typhoon.
The author is a partner of Du-Baladad and Associates Law Offices (BDB Law) (www.bdblaw.com.ph).
The article is for general information only and is not intended, nor should be construed as a substitute for tax, legal, or financial advice on any specific matter. Applicability of this article to any actual or particular tax or legal issue should be supported, therefore, by a professional study or advice. If you have any comments or questions concerning the article, you may e-mail the author at mabel.buted@bdblaw.com.ph or call 8403-2001 local 160.