PILIPINAS Shell Petroleum Corporation (Pilipinas Shell) posted a surety bond worth P7.35 billion with the Court of Tax Appeals (CTA) to prevent the Bureau of Customs (BOC) from confiscating their future shipments following the still unresolved tax disputes.

Roberto Kanapi, Shell's vice president for communications, said the interim arrangement between the Government and Shell provided a positive resolution, thus averting a shortage in oil supply that would have adversely affected the public and the economy.

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Shell posted the bond after the Government, through Solicitor General Alberto Agra, accepted the company's counter-proposal to post a bond in lieu of cash to secure the claim of the BOC in the event that a final judgment will be rendered against Shell in the tax case.

The acceptance of Pilipinas Shell’s bond offer was the outcome of talks between Pilipinas Shell and the Executive Department to avert an oil shortage crisis due to the BOC’s earlier threat to seize or hold PSPC’s incoming imports. Pilipinas Shell was set to announce the schedule of the depletion of its current inventory when the settlement was reached.

In a letter dated February 19, 2010 sent to PSPC, Solicitor General Agra, acting as counsel for the Department of Finance (DOF) and the Bureau of Customs (BOC), said that Pilipinas Shell’s surety bond offer was accepted by both the Department of Finance (DOF) and BOC "owing to the undeniable paramount public interest involved."

“With the posting of the surety bond, the BOC shall not seize or hold PSPC’s importations during the pendency of the CTA Case No. 8004 and until the issue on PSPC’s excise tax liability is resolved with finality,” the OSG said in the letter.

“We would like to express our gratitude to Secretary Teves, but most especially to President Gloria Macapagal Arroyo, Secretary Angelo Reyes, Secretary Peter Favila and Solicitor General Agra, who were instrumental in forging an agreement between the Government and Pilipinas Shell, that will be implemented during the pendency of the tax case,” Kanapi added.

With the surety bond in place, Shell can now proceed with its importation of products and raw materials that are necessary for it to supply nearly 30 percent of the market and minimize the supply disruption resulting from Pilipinas Shell's inability to import products for the last two weeks.

Meanwhile, Kanapi said the legal merits of the case will continue to be heard by the Court of Tax Appeals to determine the issues of "double taxation" and whether PSPC's imports of Catalytic Cracked Gasoline (CCG) and Light Catalytic Cracked Gasoline (LCCG) are raw materials and should not be subject to excise taxes.

The BOC said Shell should pay the P7.3 billion back taxes it failed to settle since 2004 up to 2009.

Finance Secretary Margarito Teves earlier said that Shell has proposed to post surety bond to continue its importation.

Kanapi last week said Shell decided to stop its importation due to threats of seizure from the BOC despite the TRO and the order from Malacanang.

The company also filed a motion for reconsideration before the CTA, to enable the resumption of its importations without the threat of seizure by BOC, while the case is being heard in the court.

Shell currently accounts for 30 percent of the Philippine market and employing over 18,000 workers nationwide. (MSN/Sunnex)