Commissioner of Internal Revenue vs. Manila Mining Corporation

A VAT-registered seller claiming refund or tax credit of input VAT attributable to zero-rated sales must substantiate actual payment by formally offering purchase invoices or official receipts for verification by the Court of Tax Appeals; CPA-certified summaries and alleged admissions do not substitute for that proof.

Respondent Manila Mining Corporation is a mining corporation organized under Philippine laws and registered with the Bureau of Internal Revenue as a VAT-registered enterprise. Its 1991 sales of gold were made to the Central Bank, now Bangko Sentral ng Pilipinas. Under Bureau of Internal Revenue rulings then in effect, including the October 10, 1988 letter of Deputy Commissioner Victor Deoferio and VAT Ruling No. 3788-88, sales of gold to the Central Bank by a VAT-registered person were treated as export sales subject to zero rate under Section 100 of the National Internal Revenue Code, as amended by Executive Order No. 273.

Respondent Manila Mining Corporation, a VAT-registered mining enterprise under VAT Registration Certificate No. 32-6-00632, sold gold to the Central Bank in 1991 in the total amount of ₱200,832,364.70. On April 22, 1991, July 23, 1991, October 21, 1991 and January 20, 1992, it filed its VAT Returns for the first, second, third and fourth quarters of 1991, respectively, with the Bureau of Internal Revenue through the VAT Unit at Revenue District Office No. 47 in East Makati. Relying on the October 10, 1988 letter of then Bureau of Internal Revenue Deputy Commissioner Victor Deoferio stating that gold sold to the Central Bank is considered an export sale subject to zero rate if made by a VAT-registered person, respondent treated its sales as zero-rated.

Thereafter respondent filed applications for tax refund or credit of input VAT paid. On April 7, 1992 it filed with the Commissioner, through the Bureau of Internal Revenue-VAT Division, an application for refund or credit of input VAT paid from July 1-December 31, 1999 in the amount of ₱8,173,789.60, as stated in the decision, and on March 5, 1991 another application for refund or credit of input VAT paid from January 1-June 30, 1991 in the amount of ₱5,683,035.04. Because the Commissioner failed to act within sixty days from filing, respondent filed petitions for review before the Court of Tax Appeals docketed as CTA Case No. 4968 for the first-semester claim and CTA Case No. 4991 for the second-semester claim.

During the proceedings respondent served Requests for Admissions asserting, among others, that original copies of official receipts and sales invoices reflected in its schedules had been submitted to the Bureau of Internal Revenue-VAT as required, showing a total net claimable of ₱5,268,401.90 plus importation VAT of ₱679,853.00 for the first semester, and ₱7,953,816.38 plus importation VAT of ₱563,503.00 for the second semester. The Commissioner specifically denied the veracity and accuracy of the amounts, although its Reply in Case No. 4968 was initially unverified, leading the Court of Tax Appeals to deem the matters admitted in its February 28, 1994 Resolution, while in Case No. 4991 it admitted only matters not specifically denied. At joint trial respondent presented its Chief Accountant Danilo Bautista, who testified that 20,288.676 ounces of gold valued at ₱200,832,364.70 were sold to the Central Bank as certified by the Director of the Mint and Refinery Department, and that copies of invoices and receipts summarized and certified by external auditor Joaquin Cunanan & Co. had been submitted to the Bureau of Internal Revenue. Senior Audit Manager Irene Ballesteros testified that she conducted special audit work for the second semester of 1991, examined every original supplier's invoice and receipt, and found no discrepancies between respondent's summaries and the invoices examined. Respondent then formally offered its evidence, which the Court of Tax Appeals admitted by Resolution of July 18, 1995, but found that no sales invoices, receipts or other documents required under Section 2(c)(1) of Revenue Regulations No. 3-88 had actually been presented and verified before it.

• Fatal Lack of Documentary Proof: Petitioner argued that respondent's failure to submit documentary evidence to confirm the veracity of its claims is fatal, and that the Court of Tax Appeals, being a court of record, is not expected to go out of its way and dig into the records of the Bureau of Internal Revenue to supply insufficient evidence.
• Formal Offer Requirement: Petitioner maintained that only evidence formally presented before the Court of Tax Appeals may be considered in deciding cases before it.
• Documents Must Be Presented to the CTA: Petitioner argued through the Office of the Solicitor General that documents required to be submitted to the Bureau of Internal Revenue under Revenue Regulation No. 3-88 should likewise be presented to the Court of Tax Appeals to prove entitlement to input tax credit.
• CPA Certification Insufficient: Petitioner maintained that certification by an independent Certified Public Accountant under CTA Circulars 1-95 and 10-97 does not relieve respondent of the onus of adducing in evidence the invoices, receipts and other documents showing input VAT paid.

• Compliance Through Submission to BIR: Respondent averred that it complied with Section 2(c)(1) of Revenue Regulation No. 3-88 when it submitted the original receipts and invoices to the Bureau of Internal Revenue, which fact of submission had been deemed admitted by petitioner as confirmed by the Court of Tax Appeals Resolutions granting its Requests for Admissions.
• Admissions Relieve Burden of Proof: Respondent argued before the Court of Appeals that in light of the Commissioner's admissions of the matters subject of its Requests for Admissions, it was relieved of the burden of submitting the purchase invoices or receipts to support its claims.

• Sufficiency of Evidence for Input VAT Refund: Whether respondent adduced sufficient evidence to prove its claim for refund of its input VAT for taxable year 1991 in the amounts of ₱5,683,035.04 and ₱8,173,789.60.
• Effect of Requests for Admissions: Whether the amounts of input VAT claimed were established by the Commissioner's implied admission under Rule 26, Section 2 of the Revised Rules of Court for failure to file a verified denial.
• Effect of CPA Certification Under CTA Circulars: Whether summaries and schedules of input VAT payments certified by an independent Certified Public Accountant pursuant to CTA Circular No. 1-95, as amended, suffice as evidence of input VAT payments without pre-marking and submission of the invoices and receipts to the Court.

• Sufficiency of Evidence for Input VAT Refund: No. The claim failed because respondent did not substantiate input VAT paid by purchase invoices or official receipts formally offered and verified before the Court of Tax Appeals as required by Revenue Regulation No. 3-88 and the rules on evidence.
• Effect of Requests for Admissions: No. The Requests for Admissions were mere reiterations of matters already alleged and specifically denied in the pleadings and thus did not fall within admissions as a mode of discovery, with the unverified Reply being a merely formal defect manifesting intent to deny.
• Effect of CPA Certification Under CTA Circulars: No. Certification does not relieve the claimant of pre-marking photocopies of receipts and invoices and submitting them to the Court for accessibility and verification, nor does it establish that the invoices are VAT invoices.

• Sufficiency of Evidence for Input VAT Refund: Zero-rating was not disputed, sales of gold to the Central Bank by a VAT-registered seller being considered export sales chargeable with no output VAT while the seller may claim refund or credit of input VAT previously charged by suppliers. For a judicial claim to prosper, however, the claimant must prove VAT registration, timely filing, and, critically, substantiate input VAT paid by purchase invoices or official receipts. Revenue Regulation No. 3-88, amending Revenue Regulation No. 5-87, expressly requires a photocopy of the purchase invoice or receipt evidencing VAT paid to accompany the application, with the original presented for cancellation prior to issuance. Because the Court of Tax Appeals is a court of record trying cases de novo, no evidentiary value could be given to invoices allegedly submitted to the Bureau of Internal Revenue unless formally offered before the Court pursuant to Section 34, Rule 132. Respondent offered only listings, summaries and schedules, without the underlying invoices or receipts for verification as to authenticity and whether they were VAT invoices under Section 21 of Revenue Regulation No. 5-87, under which purchases covered by non-VAT invoices are not entitled to refund. For the first semester no evidence beyond respondent's own summary and schedules was adduced; for the second semester the Joaquin Cunanan & Co. certification invoked only such auditing procedures as were considered necessary, not generally accepted auditing principles, and did not specify that the input taxes were attributable to gold sales to the Central Bank.
• Effect of Requests for Admissions: Admissions as discovery contemplate interrogatories clarifying the truth or falsity of pleaded allegations, not mere reiteration of what was already alleged and denied, which would be redundant and pointless. Respondent sought admission of total input VAT amounts already alleged in its petitions and specifically denied in the Commissioner's Answers of May 10, 1993 and August 16, 1993, so a second denial could not be exacted. Although the Reply in Case No. 4968 was initially unverified, lack of oath was a formal rather than substantive defect that could be dispensed with where intent to specifically deny veracity and accuracy was evident, and in Case No. 4991 a timely specific denial was filed. Hence no implied admission establishing the amounts arose.
• Effect of CPA Certification Under CTA Circulars: CTA Circular No. 1-95, as amended, was promulgated for speedy administration of justice to avoid time-consuming individual presentation, marking and identification in court, but still requires pre-marking by the party and submission to the Court of the receipts, invoices and other documents on which the summary and certification are based, with originals ready for verification if authenticity is doubted. Without those pre-marked documents, the Court cannot verify the auditor's conclusions. A mere listing, even if certified as previously examined by an independent accountant, therefore does not establish truthfulness and accuracy unless offered and actually verified. Absent abuse or improvident exercise of the tax court's authority, its factual conclusions, informed by expertise in tax problems, were sustained, especially as refund claims, akin to exemptions, are construed strictissimi juris against the taxpayer.

• Zero-rating of gold sales to the Central Bank — Sales of gold to the Central Bank by a VAT-registered person are considered export sales subject to zero rate under Section 100 of the National Internal Revenue Code, as amended by Executive Order No. 273; no output VAT is chargeable to the purchaser, while the seller charging no output VAT may claim refund or tax credit for input VAT previously charged by suppliers. The Court applied this to treat respondent's 1991 gold sales as zero-rated but held that zero-rating alone does not ipso facto entitle the seller to the amount sought without proof of input taxes paid.
• Substantiation of input VAT refund claim — A judicial claim for refund requires proof of VAT registration, timely filing, and substantiation of input VAT paid by purchase invoices or official receipts. Under Section 16 of Revenue Regulations No. 5-87 as amended by Revenue Regulation No. 3-88, a photocopy of the purchase invoice or receipt evidencing VAT paid shall be submitted with the application, with the original presented for cancellation before issuance of the certificate or refund. Respondent's failure to present such invoices or receipts defeated the claim.
• Court of Tax Appeals as court of record trying cases de novo; formal offer — Under Section 8 of Republic Act No. 1125, the Court of Tax Appeals is a court of record that conducts a formal trial de novo where parties must present evidence if they desire consideration thereof, and under Section 34, Rule 132, no evidence not formally offered shall be considered. Thus documents submitted to the Bureau of Internal Revenue have no evidentiary value unless formally offered and verified before the Court, which need not dig into Bureau records.
• CTA Circular No. 1-95 procedure for voluminous documents — The party desiring to introduce voluminous invoices or receipts must present (a) a summary containing totals and a chronological or numerical list of numbers, dates and amounts, and (b) certification of an independent Certified Public Accountant attesting to correctness after examination and evaluation, identified by a competent witness; individual marking before the Court is dispensed with, but the receipts and invoices must still be pre-marked and submitted to the Court for access and verification, with originals ready for comparison. The Court held CPA-certified summaries alone, without submitted pre-marked documents, cannot establish authenticity, veracity, or VAT-invoice status under Section 21 of Revenue Regulation No. 5-87.
• Request for admissions as mode of discovery — Following Concrete Aggregates Corporation vs. Court of Appeals, admissions contemplate interrogatories clarifying the truth or falsity of pleaded allegations and do not refer to mere reiteration of what has already been alleged and denied; a party that already specifically denied the matter in its answer need not make a second denial, and an unverified denial manifesting intent to deny may be treated as a merely formal defect. Applied to reject respondent's reliance on deemed admissions of input VAT totals.
• Strict construction of refund claims — A claim for refund is in the nature of a claim for exemption and is construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority. The Court applied this to deny respondent's claim for failure to strictly comply with procedural rules and to establish the factual basis of the refund.

• "A photocopy of the purchase invoice or receipt evidencing the value added tax paid shall be submitted together with the application." — States the documentary requirement under Revenue Regulation No. 3-88 for tax credit or refund applications, central to the finding of insufficiency of evidence.
• "The court shall consider no evidence which has not been formally offered." — States the formal-offer rule under Section 34, Rule 132, applied to deny evidentiary value to invoices allegedly filed only with the Bureau of Internal Revenue.
• "Mere listing of VAT invoices and receipts, even if certified to have been previously examined by an independent certified public accountant, would not suffice to establish the truthfulness and accuracy of the contents thereof unless offered and actually verified by this Court." — States the Court of Tax Appeals' approved holding on why CPA-certified summaries cannot substitute for pre-marked invoices submitted under CTA Circular No. 1-95, as amended.
• "A claim for refund is in the nature of a claim for exemption and should be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority." — States the interpretive rule justifying denial where the taxpayer failed to establish the factual and procedural basis for refund.

• Commissioner of Internal Revenue vs. Benguet Corporation, G.R. Nos. 134587 & 134588, July 8, 2005 — Cited as noting Bureau of Internal Revenue rulings since 1988, including VAT Ruling No. 3788-88, treating sales of gold to the Central Bank as zero-rated export sales; used to support zero-rating premise.
• Commissioner of Internal Revenue vs. Seagate Technology (Philippines), G.R. No. 153866, February 11, 2005 — Cited for the rule that input VAT must be substantiated by purchase invoices or official receipts, and for strict construction of refund claims against the taxpayer.
• Concrete Aggregates Corporation vs. Court of Appeals, 266 SCRA 88 (1997) — Cited as holding that admissions as discovery clarify pleaded allegations and do not cover mere reiteration of matters already alleged; applied to reject deemed admissions of input VAT totals.
• Briboneria vs. Court of Appeals, 216 SCRA 607, 615 (1992) — Cited for the proposition that a party that already denied pleaded matters in its answer should not be required to make a second denial in response to a request for admissions.
• Atlas Consolidated Mining and Development Corporation vs. Court of Appeals, CA-G.R. SP No. 34152, February 6, 1998; Manila Mining Corporation vs. Commissioner of Internal Revenue, CA-G.R. SP No. 38287, June 5, 1997; Benguet Corporation vs. Commissioner of Internal Revenue, CA-G.R. SP No. 37205, 38958 and 39435, July 10, 1998 — Cited as the Court of Tax Appeals' bases for holding gold sales to the Central Bank not subject to 10% output VAT.
• Paseo Realty & Development Corporation vs. Court of Appeals, 440 SCRA 235, 242 (2004) — Cited to sustain deference to the Court of Tax Appeals' conclusions given its exclusive expertise in tax problems absent abuse of authority.
• Compañia Maritima vs. Allied Free Workers Union, 77 SCRA 24, 39 (1977) — Cited to support that without pre-marked documents the court cannot verify the authenticity and veracity of the independent auditor's conclusions.

• Section 100(a)(1), National Internal Revenue Code, as amended by Executive Order No. 273 — Imposes 10% VAT on sales of goods but subjects export sales by VAT-registered persons to 0%; applied to treat respondent's gold sales to the Central Bank as zero-rated.
• Section 106(e), Presidential Decree No. 1158 — Requires the Commissioner to refund input taxes within 60 days from filing of the application; applied to reckon the Commissioner's inaction triggering judicial recourse to the Court of Tax Appeals.
• Sections 204(3) and 230, Presidential Decree No. 1158 — Require a written claim for credit or refund within two years after payment and prior filing with the Commissioner before suit for recovery; invoked by the Commissioner as conditions respondent must demonstrate.
• Section 16, Revenue Regulations No. 5-87, as amended by Section 2, Revenue Regulation No. 3-88 — Governs refunds or tax credits of input tax on zero-rated sales, requiring application with the Revenue District Office or Commissioner with photocopy of purchase invoice or receipt evidencing VAT paid and presentation of originals for cancellation; noncompliance was the basis for denial.
• Section 21, Revenue Regulation No. 5-87 — Provides that only VAT invoices support input tax credits and purchases covered by other invoices are not entitled to refund; applied to require examination of invoices to confirm VAT-invoice status.
• Section 8, Republic Act No. 1125 — Describes the Court of Tax Appeals as a court of record, not strictly governed by technical rules of evidence but required to conduct formal trial de novo; applied to require formal presentation and verification of evidence.
• Section 34, Rule 132, Revised Rules of Court — Provides that only formally offered evidence shall be considered; applied to disregard Bureau of Internal Revenue filings not offered before the Court of Tax Appeals.
• Sections 1 and 2, Rule 26, Revised Rules of Court — Govern requests for admission after issues are joined and implied admission for failure to serve a sworn specific denial; applied to reject respondent's deemed-admission theory.
• CTA Circular No. 1-95, as amended by CTA Circular No. 10-97 (and Circular No. 1-97) — Prescribes summary plus independent Certified Public Accountant certification procedure for voluminous documents, still requiring pre-marking and submission to the Court with originals available; applied to hold summaries alone insufficient.

Artemio V. Panganiban, Chairman, Angelina Sandoval-Gutierrez, Renato C. Corona, Cancio C. Garcia — no separate concurring reasoning elaborated in the text.