Can the Bureau of Internal Revenue (BIR) use a revenue regulation to collect taxes from a company that the law itself exempts? In a 2026 ruling, the Supreme Court said no. It ended a 13-year dispute in favor of Semirara Mining and Power Corp. (SMPC) and upheld its ₱27.34-million tax refund.
The Court’s decision was reached in January 2026 and released in May 2026.
Background
The dispute began in 2013. SMPC held a Certificate of Qualification under Presidential Decree No. 972, the law that exempts qualified coal operators from taxes on fuel they import for their own mining operations.
When SMPC imported diesel for its operations, it was nonetheless charged value-added tax (VAT) and excise taxes of more than ₱27 million on a single partial shipment. The basis was a 2012 BIR revenue regulation that imposed advance VAT on fuel imports, refundable later, as an anti-smuggling measure.
SMPC paid under protest and went to court. It argued that a revenue regulation cannot override an exemption granted by law. In effect, a “pay now, refund later” scheme cannot be imposed on a taxpayer the law says should not pay at all.
The road to the Supreme Court
- A Regional Trial Court agreed with SMPC.
- Separate appeals went to the Court of Appeals and the Supreme Court.
- SMPC also filed a refund claim with the Court of Tax Appeals (CTA), which ruled in its favor in 2018, again on reconsideration, and again when the BIR appealed to the CTA En Banc.
- The Commissioner of Internal Revenue elevated the case to the Supreme Court, which denied the petition and affirmed the CTA’s order to refund the full ₱27.34 million.
The key principle
An administrative regulation cannot repeal, amend, or take away an exemption that the law grants. Revenue regulations exist to implement tax laws, not to expand or override them. The BIR’s anti-smuggling goals may be legitimate, but they cannot be pursued by imposing taxes on a taxpayer that a statute and a valid certificate have already exempted.
Commentators have also linked the case to the non-impairment clause of the Constitution. The government had issued SMPC a certificate promising tax-exempt fuel imports, and a later regulation could not undo that commitment.
What this means for taxpayers
- Know your exemptions and incentives. If your business enjoys a statutory exemption or incentive, such as under PD 972, investment incentive laws, or special economic zone laws, keep your certificates and supporting documents current and on hand.
- Regulations are not the last word. If a BIR regulation, circular, or assessment seems to contradict the law, it can be challenged. The courts have repeatedly struck down issuances that go beyond the law, including a recent CTA ruling voiding BIR withholding tax rules on e-marketplace remittances for violating due process.
- Pay under protest and preserve your claim. SMPC protected its position by paying under protest and pursuing a timely refund. Strict deadlines apply to refund claims and appeals, so missing them can forfeit your rights.
- Persistence pays. Tax disputes can take years, but well-documented claims grounded in the law can succeed even against repeated appeals.
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How Recososa Law Firm can help
Our Taxation Law practice assists businesses and individuals with tax planning and compliance, protests against BIR assessments, refund claims, and representation before the Court of Tax Appeals. If you have received an assessment or believe you’ve paid taxes you are exempt from, contact us for an evaluation.
This article is a simplified summary of a reported Supreme Court decision for general information only. It is not legal advice. Read the full text of the decision and consult a lawyer about your specific case.