(Adds more on court ruling)
WASHINGTON, Nov 1 (Reuters) - The U.S. Court of Appeals for the Federal Circuit on Thursday upheld a lower court ruling that Sunoco not be allowed to deduct $1 billion in alcohol fuel mixture credits on its federal excise tax returns, the U.S. Justice Department said.
In a statement, the department said Sunoco LP, a publicly traded partnership controlled by pipeline operator Energy Transfer Equity, sought to reduce its federal income taxes with an excise tax expense that was never paid.
It said the appeals court's decision, which upheld a ruling by the Court of Federal Claims, was "precedential."
Sunoco, which operates retail fueling sites and convenience stores, did not immediately respond to a request for comment.
The appeals court held that the plain language of the Internal Revenue Code precluded Sunoco from obtaining a $300 million reduction in taxes, the Justice Department said.
Reporting by Eric Beech; Editing by David Alexander and Peter Cooney