Court of Tax Appeals · First Division

Boehringer Ingelheim (PHILIPINES), Inc. vs. Commissioner of Internal Revenue

CTA Case No. 10758 October 22, 2024 CUI-DAVID

1111111111111111 11111111111 1111111111 1111111111111111111111111111111111111111111

CT A Form No. 8

22-000049-0056

REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

FIRST DIVISION

CTA CASE NO. 10758

BOEHRINGER INGELHEIM

(PHILIPINES), IN C.,

Petitioner,

- versus-

NOTICE OF DECISION

COMMISSIONER OF INTERNAL

REVENUE,

To:

Respondent.

OFFICE OF THE SOLICITOR GENERAL

134 Amorsolo Street, Legazpi Village

Makati City

A TTY. BRYAN ANTONY C. DIEGO

Bureau of Internal Revenue

Room 703, Litigation Division, BIR National Office Building

Sen. Miriam P. Defensor-Santiago Avenue

Diliman, Quezon City

CASTILLO LAMAN TAN PANTALEON & SAN JOSE

2nd to 5th and 9th Floors, The Valero Tower

122 Valero Street, Salcedo Village

Makati City

GREETINGS:

You are hereby notified by these presents that on October 22, 2024, a

Decision was rendered in the above-entitled case, copy of which is attached

hereto.

Quezon City, Philippines, October 28, 2024.

Atty. Maria Jo~

Chan-Te

Executive ~~~urt II

Page 1 of 1

REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

FIRST DIVISION

BOEHRINGER INGELHEIM

CTA CASE NO. 10758

(PHILIPPINES), INC.,

Petitioner,

Members:

DEL ROSARIO, P.J., Chairperson,

-versus-

BACORRO-VILLENA, and

CUI-DAVID, JJ.

COMMISSIONER OF

Promulgated:

INTERNAL REVENUE,

02~

Respondent. .QCT 2 2 2

1 ;Jar-

)(---------- - --------------- -~- --- _v_--- -)(

DECISION

CUI-DAVID, J.:

Before the Court is the Petition for Review 1 filed by petitioner Boehringer Ingelheim (Philippines), Inc. on February 2, 2022, praying for the Court to render judgment ordering respondent Commissioner of Internal Revenue (CIR) to refund the amount ofP89,760,906.71 , representing petition~r's alleged erroneously paid and/ or collected value-added ta)( (VAT) on its importation of prescription drugs and medicines for diabetes, high cholesterol, and hypertension from January 23, 2020 to April 20, 2020.

THE PARTIES

Petitioner Boehringer Ingelheim (Philippines), Inc. is a domestic corporation with principal office address at the 23rd floor, BDO Towers (formerly Citibank Tower) Valero Building, 8741 Paseo de RoJ(as, Bel-Air, Makati City, Philippines.2 It is registered with the Bureau of Internal Revenue (BIR) under Ta)( Identification Number (TIN) 000-11 0-0 15-000.3 \{<"

Boehringer Ingelheim (Philippines), Inc. v. Commissioner of Internal Revenue

Pursuant to the Amended Articles of Incorporation 4 of petitioner, the primary purposes for which it was formed are "to import, export, manufacture, process, compound, repack, prepared for market, buy, sell at wholesale, distribute, transport and promote general merchandise, goods and wares of all kinds and descriptions, particularly but not limited to pharmaceutical preparation, drugs, medicines, veterinary medicines, agricultural chemical, pesticides, fungicides, insecticides, chemicals, compounds, druggists' sundries and supplies, cosmetics, perfumeries, toilet articles, scientific apparatus, and physicians and hospital supplies; and likewise to apply for, obtain, register, purchase, lease or otherwise, acquire, and to hold, use, exercise, develop, operate and introduce, and to sell, assign, grant licenses or territ~rial rights in respect of, or otherwise to turn to account or dispose of, any trademarks, trade names, brands, labels, patents, inventions, formulas or processes for such products." Respondent is the Commissioner of the BIR, vested by law to enforce and implement the provisions of the Tax Code, as amended, as well as related statutes and their implementing rules and regulations. He holds office at the BIR National Office Building, BIR Road, Diliman, Quezon City. 5

THE FACTS AND THE PROCEEDINGS

From January 17, 2020 to April 20, 2020, petitioner imported various prescription drugs and medicines for the treatment of diabetes, high cholesterol, and hypertension. ' These products were subjected to VAT on importation, which petitioner paid per relevant importation from January 23, 2020 to April 20, 2020.6 On January 22, 2020, the President of the Philippines approved Republic Act (RA) No. 11467,7 which amended certain sections of the National Internal Revenue Code (NIRC) of 1997, as amended.s Section 15 of RA No. 11467 states that the law shall "take effect on January 1, 2020, after its complete /d. at 74-82, Exhibit ·'P-1".

Docket- Vol. lll, p. 967, JSFI, Stipulated Facts. par. I. !d. at 967-968, JSFI, Stipulatt:d Facts, par. 3. ~ AN ACT AMENDING SECTIONS 109.141, 142, 143,144, 147, 152, 263, 263-A, 265, AND 288-A, AND ADDING A NEW SECTION 290-A TO REPUBLIC ACT NO. 8424, AS AMENDED, OTHERWISE KNOWN AS THE NATIONAL INTERNAL REVENUE CODE OF 1997, AND FOR OTHER PURPOSES Docket- Vol. lll, p. 968, JSFI. Stipulated Facts, par. 4.

Boehringer Ingelheim (Philippines), Inc. v. Commissioner of Internal Revenue publication either in the Official Gazette or in a newspaper of general circulation."9 Subsequently, on June 8, 2020, respondent issued Revenue Memorandum Circular (RMC) No. 62-2020,10 which published the full text of a letter from the Food and Drug Administration (FDA) of the Department of Health (DOH), listing prescription drugs and medicines exempt from VAT pursuant to RA No. 11467. The RMC also stated that the listed medicines would be exempt from VAT beginning January 27, 2020.11 On June 26, 2020, the Secretary of Finance issued Revenue Regulations (RR) No. 18-2020,12 implementing RA No. 11467.13 .

Thereafter, on October 14, 2020, respondent issued RMC No. 113-2020, 14 which amended RMC No. 65-2020, 15 and published the full text of a letter from the Department of Finance (DOF) clarifying the effective date of RA No. 11467. The issuance confirmed that the law took effect on January 23, 2020, instead of January 27, 2020, due to its publication on the Official Gazette website on that date. 16 On October 15, 2020, respondent issued Revenue Memorandum Order (RMO) No. 36-2020,17 laying down the guidelines and procedures for the refund of erroneously paid VAT on imported prescription drugs pursuant to RR No. 18- 2020 and Section 204(c) of the NIRC of 1997, as amended. 18 10

II

IJ

14 15 " 17 18 \i !d. at 968. JSFI, Stipulated Facts, par. 5.

SUBJECT:

Publishing the Full Text of the Letter from the Food and Drug Administration (FDA) of the Department of Health (DOH) Containing the "List of Prescription Drugs and Medicines for Diabetes, High- Cholesterol and Hypertension Exempt from VAT Beginning January 27, 2020" Pursuant to Section I of Republic Act No. I I467.

Docket- Vol. III, p. 968, JSFI, Stipulated Facts, par. 6.

SUBJECT:

Regulations to Implement Section 1 of Republic Act (R.A.) No. 11467, Further Amending Section 109 (AA) of the National Internal Revenue Code (Tax Code) of 1997, as Amended by Republic Act (R.A.) No. 10963 or the "TRAIN Law," Providing for Value-Added Tax (VAT) Exemption on the Sales and Importation of Drugs and Medicines Prescribed for Diabetes, High CholesteroL Hypertension, Cancer. Mental Illness, Tuberculosis, and Kidney Diseases.

Docket- Vol. III, p. 968, JSFI. Stipulated Facts, par. 7.

SUBJECT:

Publishes the full text of the letter from the Department of Finance to amend the effectivity date of RA No. I 1467, as circularized under RMC No. 65-2020

SUBJECT:

Circularizes the effectivity date of Republic Act (RA) No. 11467 entitled "An Act Amending Sections 109, 141, 142, I43, 144, 147, 152,263. 263-A, 265 and 288-A, and Adding a New Section 290-A to RA No. 8424 as Amended, Otherwise Known as the National Internal Revenue Code of 1997, and for Other Purposes" Docket- Vol. III, p. 968, JSFJ, Stipulated Facts. par. 8.

SUBJECT:

Providing Guidelines and Procedures in the Refund of Erroneously Paid Value Added Tax (VAT) on Imported Drugs Prescribed for Diabetes, High Cholesterol and Hypertension as Implemented Under Revenue Regulations (RR) No. 18-2020 Pursuant to Section 204(C) of the Tax Code of 1997, as Amended. Docket- Vol. III, p. 969, JSFI, Stipulated Facts, par. I 0.

Boehringer Ingeiheim (Philippines), Inc. v. Commissioner of Internal Revenue

Petitioner's total VAT paid on the importation of medicines covered by RA No. 11467, as listed in the DOH-FDA's letter published under RMC No. 62-2020, within the relevant period of the claim, amounted to P89,760,906.71.19 Hence, on December 15, 2020, petitioner filed an administrative claim 2o for a refund with the Large Taxpayer Audit Division (LTAD) 1 of the BIR, requesting a refund of the erroneously paid VAT amounting to P89,760,906.71. In a letter dated January 7, 2021, the BIR LTAD 1 required petitioner to submit: (a) wet-ink signed originals of BIR Form No. 1914, and (b) Bureau of Customs (BOC)-authenticated copies of the Single Administrative Document (SAD) and Statement of Settlement of Duties and Taxes (SSDT), which were already attached to the claim for refund. Petitioner complied on January 20 and 21, 2021.21 Thereafter, the BIR's Large Taxpayers Service, through OIC-Assistant Commissioner (OIC-ACIR) Manuel V. Mapoy, issued a letter dated February 8, 2021, denying petitioner's administrative claim for a refund.22 Petitioner filed a request for reconsideration23 which was denied through a letter dated June 3, 2021.24 Petitioner then filed a Request for Reconsideration with respondent on July 9, 2021. 25 Alleging inaction, petitioner elevated its claim to the Court via the instant Petition for Review filed on February~' 2022. In his Answer (Re: Petition for Review dated 31 January 2022) filed on April 19, 2022, respondent argued that the instant Petition for Review should be denied, citing petitioner's failure to substantiate its claim for refund at the administrative level.

According to respondent, tax refunds are subject to administrative and routine investigation and are not ipso facto granted. The BIR still had to investigate and ascertain the validity of the claim. The BIR must investigate and verify the 19 /d. at 968, JSFI, Stipulated Facts, par. 9. \nl\/ 20 Docket- Vol. I, pp. 103 to I 10. Exhibit ·'P-3".

\I'

21 Docket- Vol. III, p. 969, JSFI, Stipulated f-ncts, par. 12. 22 Docket- Vol. III, p. 969, JSFI, Stipulated Facts. par. 13: Docket- Vol. I, pp. I 44-145, Exhibit "P-I 9". 23 !d. at 969, JSFI, Stipulated Facts, par. !4; !d. at 146-154. Exhibit "P-20". " !d. at 969, JSFI, Stipulated Facts, par. 15; !d. at 163-164, Exhibit "P-24".

25 !d. at 969, JSFI, Stipulated Facts, par. 16; !d. at 165-174, Exhibit ·'P-25''.

Boehringer Ingelheim (Philippines), Inc. v. Commissioner of Internal Revenue validity of the claim. Moreover, the taxpayer-claimant bears the heavy burden of proving compliance with all statutory and administrative requirements to be entitled to a tax refund. Allegedly, petitioner failed to demonstrate its entitlement to refund the alleged erroneously paid VAT on its importation of prescription drugs and medicines, in the amount of 1"89,760,906.71, at the administrative level. Since a decision had been rendered at the administrative level, petitioner could not submit documents not previously submitted. Moreover, the Court is confined to reviewing whether the denial was proper, given the evidence submitted during the administrative proceedings.

On June 16, 2022, respondent transmitted to this Court the BIR Records of the case,26 consisting of 153 pages in one folder.

After the Pre-Trial Conference on September 12, 2022, the parties submitted a Joint Stipulation of Facts and Issues27 on October 12, 2022, which served as the basis for the Pre-Trial Order2B issued on November 7, 2022.

The trial then ensued, during which petitioner presented its witnesses, including: (¹) Mr. Ermel N. Teodoro,29 petitioner's Head of Finance and Administration; (²) Ms. Mylene P. Salindong-Vicmudo, 30 petitioner's

Central

Accounting

Manager; (³) Mr. Marlon L. Sesante,3 1 petitioner's Commercial Supply Chain Lead; and (4) Mr. Ericson D. Tadeja,32 the Court- commissioned independent certified public accountant (ICPA).33 On April 14, 2023, petitioner filed its Offer of Documentary of Evidence,34 to which respondent filed his Comment (Re: Offer of Documentary Evidence dated 14 April 2023) on April 19, 2023. 35 ~ 26 Jd. at 905-907, Compliance dated June 16, 2022. 27 !d. at 967-978.

28 !d. at 992-999.

29 Docket- Vol. I, pp. 55-73, Exhibit "'P-30''; Docket- Vol. Ill, pp. 1005-1007. Minutes of the hearing held on, and Order dated. Februarv 15. 2023.

30 Docket- Vol. II, pp.· 846-855, Exhibit ··P-32": Docket- Vol. III, pp. 1005-1007, Minutes of the hearing held on, and Order dated, February 15,2023.

Jt

Docket- Vol. I, pp. 184-190, Exhibit "P-31"; Docket- Vol. Ill. pp. 1042-1044, Minutes of the hearing held on. and Order dated, March 30, 2023.

l2 Docket- Vol. 111, pp. t027-1040. Exhibit "P-37" (offered as Exhibit "P-34"); 1042-1044. Minutes of the hearing held on, and Order dated, March 30, 2023. n Docket- Vo1.111, p. 1001, Oath of Commission dated January 26.2023: 1002-1004, Minutes of the hearing held on. and Order dated. January 26, 2023. 34 Docket- Vol. Ill, pp. 1045-1054.

" !d. at I 056--1058.

Boehringer Ingelheim (Philippines), Inc. v. Commissioner of Internal Revenue

In a Resolution dated May 5, 2023,36 the Court admitted petitioner's offered exhibits, except Exhibits "P-16-139" and "P- 16-195", for not being found in the records of the case; and Exhibit "P-17 ," for failure to submit the duly marked ex)l.ibit. On May 18, 2023, petitioner filed a Motion for Partial Reconsideration, 37 praying the Court to partially reconsider its Resolution dated May 5, 2023, and to admit into evidence Petitioner's Exhibits "P-1 7'' "P-16-139" "P-35" "P-1-ICPA" "P- ' ' ' ' 2-ICPA" "P-3-ICPA" "P-4-ICPA" "P-5-ICPA" "P-6-A-ICPA" "P- ' ' ' ' ' 6-B-ICPA", "P-7 -ICPA series", Annex "A.1-ICPA" and "P-36". Respondent filed a Comment (Re: Petitioner's Motion for Partial Reconsideration dated 18 May 2023) on June 5, 2023.38 ' In the Resolution promulgated on July 6, 2023,39 the Court admitted Exhibits "P-16-139" and "P-1 7", except Exhibits "P-1-ICPA" "P-2-ICPA" "P-3-ICPA" "P-4-ICPA" "P-5-ICPA" "P- ' ' ' ' ' 6-A-ICPA", "P-6-B-ICPA", "P-7-ICPA series" and Annex "A.1- ICPA", for not being properly offered. For his part, respondent offered the testimony of Revenue Officer (RO) Ellen TS. Espiritu.4o After presenting his lone witness, respondent filed a Formal Offer of Evidence 41 on August 9, 2023, to which petitioner filed a Comment/ Opposition (re: respondent's Formal Offer of Evidence dated August 9, 2023) on August 22, 2023.42 On September 13, 2023, the Court issued a Resolution43 admitting all of respondent's offered exhibits. In • the same Resolution, the parties were given thirty (30) days from notice to file their respective memoranda.

With the filing of petitioner's Memorandum on October 18, 202344 and respondent's Manifestation on October 23, 2023,45 adopting his arguments in his Answer dated April 19, 2022 as his Memorandum, the instant case was submitted for qecision on November 9, 2023.

36 Id. at 1061-1064.

37 !d. at 1067-1070.

38 !d. atl 080 to I 082.

39 !d. at 1087-1091.

" /d. at 897-904, Exhibit "R-8"; 1099-1100, Order dated August 8, 2023. 41 /d.at1104-1107.

42 /d.atllll-1115.

43 !d. at 1119-1120.

44 !d. at 1154-1180.

" !d. at 1184--1186.

Boehringer Ingelheim (Philippines), Inc. v. Commissioner of Internal Revenue

THE ISSUE

As stipulated by the parties, 46 the lone rssue for this Court's resolution is:

WHETHER PETITIONER IS ENTITLED TO A

REFUND IN THE AMOUNT OF EIGHTY-NINE

MILLION SEVEN HUNDRED SIXTY THOUSAND

NINE HUNDRED SIX PESOS AND SEVENTY-ONE

CENTAVOS (!'89,760,906.71) REPRESENTING

ERRONEOUSLY PAID VAT FOR THE PERIOD

JANUARY 23, 2020 TO APRIL 30, 2020.

Petitioner's arguments:

Petitioner asserts that its importation of prescription drugs and medicines for diabetes, high cholesterol, and hypertension are exempt from VAT; that in good faith, petitioner duly substantiated its claim for refund based on the prevailing issuances at the time of filing of the said claim; that RMC No. 99-2021 does not apply to its refund claim; and that the taxes erroneously collected by the BIR must be refunded under the principle of solutio indebiti.

Respondent's counter-arguments:

Respondent contends that the instant claim should be denied for petitioner's failure to substantiate its claim for refund at the administrative level; that it is incumbent upon petitioner to prove its entitlement to the refund, as a refund is not ipso facto granted upon filing; that tax refunds are subject to administrative routinary investigation and are strictly construed against the taxpayer and in favor of the government.

THE COURT'S RULING

Pertinent to the resolution of the issue at hand are Sections 204(C) and 229 of the NIRC of 1997, as amended, which read as follows:

SEC. 204.

Authority

of Compromise, Abate and Refund Commissioner may x x x the

Commissioner

to or Credit Taxes. - The

46 Docket- Vol. lll. p. 970, JSFI. Stipulated Issue. par. 20.

Boehringer Ingelheim (Philippines), Inc. v. Commissioner of Internal Revenue

(C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided, however, that a return filed showing an overpayment shall be considered as a written claim for credit or refund. xxx SEC. 229.

Recovery of Tax Erroneously or fllegally Collected.- No suit or proceeding shall be maintained jn any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress.

In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid. (Emphasis supplied) Pursuant to the aforementioned provisions, to be entitled to a refund of erroneously or illegally collected taxes, the following requisites must be satisfied and established:

1. that the tax has been erroneously or illegally collected, or the penalty has been collected without authority, and/ or any sum has been excessively or in any manner wrongfully collected; and

2. that the claim for refund or credit has been filed within two years from the date of payment of tax, or penalty, regardless of any supervening cause that may arise after payment.

Boehringer Ingelheim (Philippines), Inc. v. Commissioner of Internal Revenue

As in other refund cases, the Court must first determine the timeliness of petitioner's administrative and judicial claims for a refund.

Both Sections 204 and 229 of the NIRC of 1997, as amended, govern the refund of erroneously or illegally collected taxes. Section 204 applies to administrative claims for refund, while Section 229 pertains to judicial claims for refund. In both instances, the claim must be filed within two (2) years from the date of tax payment or penalty. Notably, Section 229 requires that an administrative claim for refund must first be lodged with the CIR before the taxpayer may seek judicial intervention for the claim for refund or credit. 47 The two (2)-year prescriptive period is mandatory, regardless of any supervening cause that may arise after payment_4s In other words, filing the claim for refund with respondent is a pre-requisite to filing a Petition for Review with this Court. However, both the administrative and judicial claims must be filed within two (2) years from the date of the tax paymer;tt being refunded.

Petitioner's administrative and judicial claims for refund were filed within the 2-year prescriptive period.

Record shows that petitioner, on various dates from January 23, 2020 to April20, 2020, paid VAT on its importation of prescription drugs and medicines for diabetes, high cholesterol, and hypertension, covering the period from January 17, 2020, to April 20, 2020. 49 Counting from the earliest payment on January 23, 2020, 50 petitioner had until January 23, 2022, to file its administrative and judicial claims for a refund.

47 CBK Power Company Limited v. Commissioner of Internal Revenue. G.R. Nos. 193383-84 & 193407-08, January

14. 2015 [Per J. Pcrlas-I3crnabc, First Division]. 48 Commissioner of Internal Revenue v. Manila Electric Company (MERALCO), G.R. No. 181459, June 9, 2014 [Per J. Peralta, Third Division].

' 0 Docket- Vol. III, pp. 967-968, JSFI, Stipulated Facts, par. 3. so !d.: Exhibit "P-14", BIR Records, p. I.

Boehringer Ingelheim (Philippines), Inc. v. Commissioner of Internal Revenue

However, due to the alarming increase in COVID-19 infections, the Supreme Court issued Administrative Circular No. 01-2022 on January 10, 2022,51 extending "the filing periods of any and all pleading and other court submissions falling due in the month of January 2022 in all courts" until February 1, 2022. Notably, February 1, 2022,s2 was declared a special non-working day under Presidential Proclamation No. 1236, dated October 29, 2021.53 Consequently, petitioner had until February 2, 2022, to file its judicial claim. Evidently, petitioner's administrative claim for a refund, filed on December 15, 2020, with the BIR,54 and the Petition for Review filed with this Court on February 2, 2022,55 are well within the two (2)-year prescriptive period. The importation of prescription drugs and medicines for diabetes, high cholesterol, and hypertension from January 23, 2020, to April 20, 2020, is exempt from VAT;

hence, petitioner successfully proved that the VAT payment was erroneous.

Section 109(1)(AA)(i) of the NIRC of 1997, as amended by RA No. 10963, 56 otherwise known as the Tax Reform for Acceleration and Inclusion Act (TRAIN), and further amended by RA No. 11467,57 provides that the importation of prescription drugs and medicines for diabetes, among others, is exempt from VAT, as follows:

"SEC. 109. Exempt Transactions. - (1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from the value-added tax:

XXX

51 Extension of the deadline for the filing of any and all pleadings and other court submissions falling due in the month of January 2022 in all courts.

52 Chinese Ne\v Year was observed on February I, 2022 (Tuesday). 53 Declaring the regular holidays and special (working/non-working) days for the year 2022. " Docket- Vol. I, pp. 103-110, Exhibit "P-3". ss Docket- Vol. I, pp. 7-54; Docket- Vol. Ill, p. 970, JSFI, Stipulated Facts, par. I9. ss AN ACT AMENDING SECTIONS 5. 6, 24. 25, 27, 31. 32, 33, 34, 51, 52, 56, 57, 58, 74, 79, 84, 86, 90, 91, 97, 99, 100,101,106, 107,108 .. 109, 110,112,114,116,127, I28,129,145,148, 149,151,155,171.174,175,177,178, 179, 180, 18I, 182.183, 186, 188, 189, 190. 191. 192. 193, 194, 195, 196, 197,232,236,237,249,254,264,269, AND 288: CREATING NEW SECTIONS 51-A, 148-A, 150-A, 150-B, 237-A, 264-A, 264-B, AND 265-A; AND REPEALING SECTIONS 35,62, AND 89: ALL UNDER REPUBLIC ACT NO. 8424, OTHERWISE KNOWN AS THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED. AND FOR OTI-IER PURPOSES. 57 Supra note 7.

Boehringer Ingelheim (Philippines), Inc. v. Commissioner of Internal Revenue

(AA) Sale or importation of prescription drugs and medicines for:

Diabetes, high cholesterol, and hypertension beginning January 1, 2020; and 11.

Cancer, mental illness, tuberculosis, and kidney diseases beginning January 1, 2023:

Provided, That the DOH shall issue a list of approved drugs and medicines for this purpose within sixty (60) days from the effectivity of this Act: xxx (Emphases and underscoring added) Pursuant to the foregoing provision, RMC No. 62-202058 was issued on June 8, 2020, following the release ,of a letter dated March 2, 2020, by the DOH-FDA with an approved list of medicines for diabetes, high cholesterol, and hypertension that qualified for VAT exemption beginning January 27, 2020. Furthermore, on October 14, 2020, respondent issued RMC No. 113-2020,59 clarifying that the effectivity date of RA No. 11467 was January 23, 2020, rather than January 27, 2020, based on the law's publication m the Official Gazette via its website on that date.6o It is worth noting, however, that while RMC No. 113-2020 indicates that the exemption begins on January 23, 2020, RA No. 11467 explicitly provides for an effectivity date of January 1' 2020.

The time-honored doctrine in case of conflict is that the law prevails over the administrative regulations implementing it. The authority to promulgate implementing rules proceeds from the law itself. To be valid, a rule or regulation must conform to and be consistent with the provisions of the enabling statute. 51 Thus, if a discrepancy occurs between the law and an implementing rule or regulation, the law prevails because the law cannot be broadened by a mere administrative issuance - an administrative agency certainly cannot amend an act of Congress. 62 58 59 60 61

SUBJECT:

Publishing the full text of the letter from the Food and Drug Administration (FDA) of the Department of Health (DOH) containing the ''List of Prescription Drugs and Medicines for Diabetes, High-Cholesterol and Hypertension Exempt from VAT beginning January 27. 2020" pursuant to Section 1 of Republic Act No. 11467.

SUBJECT:

Publishing the full text of the letter from the Food Publishing the Full Text of the Letter from the Department of Finance (DOF) to Amend the Effectivity Date of Republic Act (R.A.) No. 11467, as Circularized Under Revenue Memorandum Circular No. 65-2020. Docket- Vol. Ill, p. 968. JSFI. Stipulated Facts. par. 8. Perez v. Philippine Telegraph and Telephone Company, G.R. No. 152048. April 7, 2009 [Per J. Corona, En Bane]. AfCC Industrial Sales Corporation v. Ssangyong Corporation, G.R. No. 170633, October 17, 2007 [Per J. Nachura, Third Division].

Boehringer Ingelheim (Philippines), Inc. v. Commissioner of Internal Revenue

Administrative issuances must not override, supplant, or modify the law; they must remain consistent with the law intended to carry out.63 Particularly, administrative issuances such as revenue memorandum circulars cannot amend or modify the law.64 In the recent case of Manila Peninsula Manila Hotel, Inc. v. Commissioner of Internal Revenue, 65 the Supreme Court cited Philippine Bank of Communications v. Commissioner of Internal Revenue,66 where it upheld the nullification ofRMC No. 7-85 for being inconsistent with Section 230 of the 1977 NIRC. In so doing, the Supreme Court stated that the BIR did not simply interpret the law; instead, it legislated guidelines contrary to the statute passed by Congress. Thus, the Court held as follows: "It bears repeating that Revenue

[Memorandum

Circulars] are considered administrative rulings (in the sense of more specific and less general interpretations of tax laws) which are issued from time to time by the Commissioner of Internal Revenue. It is widely accepted that the interpretation placed upon a statute by the executive officers, whose duty is to enforce it, is entitled to great respect by the courts. Nevertheless, such interpretation is not conclusive and will be ignored if judicially found to be erroneous. Thus, courts will not countenance administrative issuances that override, instead of remaining consistent and in harmony with, the law they seek to apply and implement." (Emphasis added) Similarly, in Saint Wealth Ltd. v. Bureau of Internal Revenue,67 the Supreme Court En Bane declared cet;tain parts of RMC No. 102-2017 and RMC No. 78-2018 invalid and unconstitutional for being issued without any statutory basis and for encroaching upon the legislative power to enact laws. Applying these jurisprudential pronouncements to the present case, the Court holds that the importation of prescription drugs and medicines for diabetes, high cholesterol, and hypertension is exempt from VAT beginning January 1, 2020.

63 Bureau of Internal Revenue v. First £-Bank Tower Condominium Corp., G.R. No. 215801 & 218924, January 15, [Per J. Lazaro-Javier. First Divisionl 64 JNG Bank N 1~ v. Commissioner o/lntcrnal Rc\'CJIIIC, G.R. No. 167679 (Resolution), Apri\20, 2016 [Per J. Leon en. Second Division l 65 G.R. No. 229338, Aprill7, 2024 [Per J. Caguioa, Third Division]. 66 G.R. No. 112024, January 28, 1999 [Per J. Quisumbing, Second Division]. 67 G.R. Nos. 252965 and 254102, December 7. 2021 [Per J. Gaerlan. En Bane].

Invoice

Exhibit

"P-16-3"

Exhibit

"P-16-6"

Exhibit

"P-16-9"

Exhibit

"P-16-12"

Exhibit

"P-16-15"

Exhibit

"P-16-18"

Exhibit

"P-16-21"

Exhibit

"P 16-24"

Boehringer Ingelheim (Philippines), Inc. v. Commissioner of Internal Revenue

Notably, the parties have already stipulated that petitioner imported various prescription drugs and medicines for diabetes, high cholesterol, and hypertension from January 17, 2020 to April20, 2020 and that these imported products were subjected to VAT on importation, which petitioner paid per relevant importations from January 23, 2020 to April 20, 2020. 68 Furthermore, they stipulated that the total VAT paid by petitioner during the relevant period for the medicines covered by RA No. 11467, as listed in the DOH-FDA's letter published under RMC No. 62-2020, amounted to P89,760,906.71.69 Nevertheless, petitioner submitted in evidence ~he related BOC SADs, SSDTs, and suppliers' invoices which reflected VAT payments in the total amount of P95,308,789.42, which is higher by a net amount ofP5,547,882.71, when compared with that of petitioner's claim of P89,760,906.71, as summarized below:

VAT Payment

Discrepancy I

SAD

SSDT

SSDT Date

Item Description

Claim is

Per SAD I SSDT

Per Claim

lhl•herl/lower

Exhibit

29 January

20188 PCS

p 500,325.00 p 500,325.00 -

"P-16-1"

"P-16-2"

2020 TRAJENTA, FICTA

Exhibit

29 January

CATAPRESAN, TABS/ J00/0.075MG -

"P-16-4"

"P-16-5"

2020

BLIRP

4,324.043.00 4,324,043.00 MICARDIS,

Exhibit

30 January

TABSj30/40MG BLI

RP

"P-16-7"

"P-16-8"

2020 ~AR~~~ANCE , FICTA 2,788,265.00 2,788,265.00

10 25MG BLI PH

Exhibit

23 January

MICARDIS.

"P-16-10"

"P-16-11"

2020

TABS/30/40MG BLI

2,728.295.00 2,728,295.00

RP

Exhibit

24 February

11899 PCS

TWYNSTA,LTAB/30/ -

JARDIANCE FICTA

(4,492.91)

"P-16-22"

"P-16 23"

30/JOMG RP

2,840,734.8070 2,845,227.71 68 Docket- Vol. III, pp. 967-968, JSFI, Stipulated Facts, par. 3. 69 !d. at 968, JSFI, Stipulated Facts, par. 9. 70

XXX

Allocation of

the difference

Dutiable Value

between

per SAD

Dutiable

(Annex A. I

Value and

VA Table

!CPA Report,

Gross Weight

VA Table

Value

Exh. "P-27",

in KG

Value per

(Landed Cost)

12% VAT

USB)

per SAD

SAD

per SAD

oer SAD

Jardiance Ficta 30/IOMG RP

P21,781,312.95 Jardiance Duo, Ficta/1 0/12.5+500MG 762.096.41

Subtotal

P22,543,409.36 1,636,000 1'1, I 29,380.62 1'23,672,789.98 1'2,840, 734,80 Pradaxa, Cansu/3011 10 MG 890,130.76 94,000 64,89!.06 ·955,02 !.82 114.602.62

Exhibit

"P-16-27"

Exhibit

"P-16-30"

Exhibit

"P-16-33"

Exhibit

"P-16-36"

Exhibit

"P-16-39"

Exhibit

"P-16-42"

Exhibit

"P-16-45"

Exhibit

"P-16-48"

Exhibit

"P-16-51"

Exhibit

"P-16-54"

Exhibit

"P-16-57"

Exhibit

"P-16-60"

Exhibit

"P-16-63"

Exhibit

"P-16-66"

Exhibit

"P-16-69"

Exhibit

"P-16-72"

Exhibit

"P-16-75"

Exhibit

"P-16-78"

Boehringer Ingelheim (Philippines), Inc. v. Commissioner of Internal Revenue

JARDIANCE DUO, FICTA/10/ 12.5+500

MGBLI

PRADAXA,CAPSU/

30/110 MG

114,602.6271 GLYXAMBI,

FICTA/ 10/ IO+SMG

406,744.00 405,725.00

BLI RP

SPIRIVA OTHER

MED. AIDS 18,318.00

HANDIHALER

JARDIANCE DUO , FICTA/30f12.5f100 "Exhibit

Exhibit

19 February

OMG RP

P-16-25"

"P-16-26"

2020

GLYXAMBI

9,924,683.00 9,924,683.00

FICTA/30/ I0/5MG

RP

Exhibit

10 February

7600 PCS

TRAJENTA DUO

"P-16-28"

"P-16-29"

2020

FICTA

509,511.00 509,511.00

Exhibit

7 February 2020

20886 PCS

"P-16-31"

"P-16-32"

TWYNSTA, LTAB 2,188,419.00 2,188,419.00

Exhibit

12 February

24480 PCS

MICARDIS,TABS/30

"P-16-34"

"P-16-35"

2020

/80MG BLI RP

1,892,552.00 1,892,552.00

Exhibit

17 February

7972 PCS

TRAJENTA

"P-16-37"

2020 JARDIANCE, 5,710,729.00 5,710,729.00

FICTAj30J25MG RP

SPIRIVA, INHCA/

Exhibit

27 February

30/18UG REFILL RP

1,767,397.00

"P-16-55"

"P-16-56"

2020 JARDIANCE, FICTA/

10/IOMG

399,283.00 ' 398,184.00

Exhibit

26 February

19440 PCS

TWYNSTA LTAB

"P-16-58"

"P-16-59"

2020

30/80/IOMG

2,020,229.00 2,020,229.00

Exhibit

28 February

35187 PCS

"P-16-61"

"P-16-62"

2020

TRAJENTA DUO

2,352,135.00 2,352,135.00

FICTA

14676 PCS

Exhibit

28 February

JARDIANCE DUO

"P-16-64"

"P-16-65"

2020 FICTA /10/12.5 724,905.00 724,905.00

+IOOOMG

Exhibit

15387 PCS

12 March 2020

TWYNSTA,LTAB/30/

"P-16-67"

"P-16-68"

40/5MG

1,130,147.00 1,130,147.00

Exhibit

14400 PCS

II March 2020

TWYNSTA, LTAB

"P-16-70"

"P-16-71"

30j40/5MG RP 1,069,583.00 I ,069,583.00

Exhibit

7354 PCS

"P-16-73"

"P-16-74"

II March 2020

TWYNSTA,LTAB/30/ 540,972.00 540,972.00

40/5MG RP

GIOTRIF

,FICTA/28j30MG 1,642,891.00

Exhibit

5 March 2020

811 RP

"P-16-76"

"P-16-77"

JARDIANCE,

FICTA/30/25MG RP

5,368,840.00 5,371,285.00 114,602.62 1,019.00 18,318.00 - - - - - - - - 1,767,397.00 I ,099.00 - - - - - - 1,642,891.00 12,445.00)

Total

P23,433,540, 12 1,730,000 Pl,l94,271.68 P24,627,811.80 P2,955,337.42 71 !d.

Boehringer Ingelheim (Philippines), Inc. v. Commissioner of Internal Revenue

GLYXAMBI,FICTA/3

0/25/5MG

4,483,479.00 4,484,821.00 11,342.001 TRAIN-KIT PLAC,

DOSLI/4ML 1/+RSP

2,010,836.00 2,010,836.00

GB

Exhibit

MICARDIS, "P-!6-8!"

"P-!6-79"

"P-16-80"

II March 2020

TABS/30/40MG BLI

2,552,961.00 2,552,961.00

RP

Exhibit

M1CARDIS,

"P-16-84"

"P-!6-82"

"P-16-83"

10 March 2020

TABS/30/40MG BLI

2,436,939.00 2,436,939.00

RP

Exhibit

!3 March 2020 6323 PCS TWYNSTA, "P-!6-87"

"P-16-85"

"P-16-86"

LTAB/30/40/5MG

472,021.00 472,021.00 -

Exhibit

14027 PCS

"P-16-90"

"P-16-88"

"P-16-89"

25 March 2020

TWYNSTA,LTAB/30/ 1,032,225.00 1,032,225.00

40/10 MG

Exhibit

MICARDIS PLUS, "P-16-

3 April2020

TABS/30/40+ 12,5M "P-!6-198" 196"

"P-16-197"

G BLI RP

2,704,709.00 2,704,709.00 -

Exhibit

MICARDIS, ' "P-16-

3 April2020

TABS/30j40MG BLI "P-16-20!"

"P- !6-200" 2,672,798.00 2,672,798.00 199"

RP

Exhibit

GLYXAMBI

"P- !6-204" "P-16-

"P-16-203"

6 April 2020

F!CTA/30/25j5MG 5,846,959.00 5,846,959.00 202"

RP 1

Exhibit

MICARDIS PLUS

"P-16-207"

"P-16-

"P-16-206"

6 April 2020

TABS/30/4+12, 837,084.00 837,084.00 205"

5MG BLI RP

MICARDIS,

Exhibit

TABS/30j80MG BLI

Exhibit

RPI

"P-16-210"

"P-16-

"P-16-209"

3 April2020

JARDIANCE DUO, 5,100,086.00 5,100,086.00 - 208" FICTA/20/ 12.5/500

MGRP

Exhibit

MICARDIS,

"P-16-213"

"P-16-

- TOTAL P95,308,789.42 P89:760,906.71 P5,547,882.71 It is important to note that the following discrepancy amounting to .P5,554,044.62 does not form part of petitioner's claim, as this represents VAT paid on prescription drugs and medicines that are not included in the DOH-FDA approved list of VAT-exempt prescription drugs and medicines:

Invoice

SAD

SSDT

SSDT Date

Item Description

Discrepancy

PRADAXA, CAPSU/30/110 r 114,602.62

Exhibit

5 February 2020

MG

"P-16-24"

"P-16-22"

"P-16-23"

SPIRIVA OTHER MED. AIDS 18,318.00 HAND! HALER

Exhibit

27 February

SPIRIVA, INHCA/ 30/ 18UG 1,767,397.00

"P-16-57"

"P-16-55"

"P-16-56"

2020

REFILL RP

GIOTRIF, FICTA/28/30MG I ,642,891.00

Exhibit

5 March 2020

BLI RP

"P-16-78"

"P-16-76"

"P-16-77"

TRAIN-KIT=PLAC, 2,010,836.00

DOSLI/4ML I /+RSP GB

Total

P5,554,044,62

Invoice

Exhibit

"P-16- 24"

Boehringer Ingelheim (Philippines), Inc. v. Commissioner of Internal Revenue

Anent the discrepancies involving petitioner's claim, the Court finds instances where the claimed amount exceeded the payment reflected per SAD/SSDT or vice-versa. Therefore, in line with the principle that tax refunds are strictly construed, this Court shall only consider the lesser of the two amounts. Accordingly, petitioner's claim for a refund requires a downward adjustment of'P8,279.91, broken down as follows:

SAD

SSDT

SSDT Date

Item Description

JARDIANCE FICTA

30/IOMG RP

JARDIANCE DUO,

Exhibit

FICTA/ 10/ 12.5+500MG "P-16- "P-16-

5 February

BLI

22" 23" 2020

JARDIANCE

FICTA/30/25MG RP

GLYXAMB!,FICTA/30/2

5/5MG

The requirement that the input tax on imported items must not have been reported or claimed as an input tax credit in the monthly and/or quarterly

VAT

returns should not apply to petitioner's refund claim.

VAT Pavment

Claim is Per

SAD/SSDT

Per Claim

higher P2,840,734.80 P2,845,227.71 ' p (4,492.91) 5,368,840.00 5,371,285.00 12 445.00\ 4,483,479.00 4,484,821.00 (l ,342.001

Total

p (8,279.91) Petitioner argues that RMC No. 99-2021,72 issued on August 16, 2021, does not apply to its refund claim, which was already filed on December 15, 2020. In other words,. according to petitioner, the requirement to reflect the importation as part of the "Purchases not Qualified for Input Tax" row in the Quarterly VAT Return and Monthly VAT Declaration did not exist at the time petitioner filed its refund. The Court agrees with petitioner.

Clarifying Issues Relative to the Value-Added Tax (VAT) Exemption of Certain Medicines and other Medical Devices for COVID-19 Under Sections 109(l)(AA) and 109(l)(BB)(ii) ofthc Nattonallnternal Revenue Code of 1997 (Tax Code), as Amended by Republic Act (RA) Nos. 10963 (TRAIN Law), 11467 and 11534 (CREATE Act).

Boehringer Ingelheim (Philippines), lnc. v. Commissioner of Internal Revenue to properly show the amount of purchases for a certain period." (Emphasis added) Notably, the phrase "provided that the input tax on the imported items have not been reported and claimed as input tax credit in the monthly and/ or quarterly VAT returns" found in RR No. 18-2020, does not appear in the law itself, i.e., RA No. 11467. As a corollary, before the effectivity of RR No. 18-2020, no such requirement or condition existed in any BIR administrative issuance.

It is a well-established principle that statutes, 'including administrative rules and regulations, operate prospectively unless a clear legislative intent to the contrary is manifest by express terms or necessary implication. 78 There is no clear indication of a legislative intent to apply the requirement that "the input tax on the imported items have not been reported and claimed as input tax credit in the monthly and/or quarterly VAT returns" to transactions that already transpired prior- to the issuance of RR No. 18-2020 on June 26, 2020, and RMC No. 99-2021 on August 16, 2021. Thus, this requirement cannot be applied to petitioner's refund claim, which covers transactions from January 23, 2020 to April 20, 2020. Be that as it may, the input tax on the imported items has not been claimed as an input tax credit in the monthly and/or quarterly VAT returns.

A perusal of petitioner's Amended Quarterly VAT Return for the 1st quarter of the calendar year 2020 and Amended Monthly VAT Declaration for April 2020 reveals that while the claimed amount ofP89,760,906.71 was included in the reported input VAT for "Importation of Goods Other Than ·Capital Goods",79 it remained unutilized in the computation of the VAT payable, because it was also deducted as "VAT Refund/TCC claimed" in that same VAT return and declaration, in the amounts of 1'66,244,083.71 8o and 1'23,516,823.00, 81 respectively. Consequently, this claim no longer formed part of the excess input VAT of 1'6,434,932.90 as of April 30, 2020,

7R

BPI Leasing Cmporafion v. Court a/Appeals. G.R. No. 127624. November 18. 2003 [Per J. Azcuna, First Oi~ision_l 79 Exhibit ·'P-2T, Line 21H (1'142,931,815.99) and Exhibit "P-28". Line ISH (1'28.941.024.82') as summanzed m Exhibit "P-16", USB.

80 Exhibit ·'P-2T, Line 23D, USB.

8 ' Exhibit ·"P-28", Line 20D, USB.

Boehringer Ingelheim (Philippines), Inc. v. Commissioner of Internal Revenue which was to be carried over to the succeeding months/quarters.

Thus, on this score, petitioner must be deemed to have satisfied the wisdom behind above-stated requirement under RR No. 18-2020, as articulated in the above- quoted A6 ofRMC No. 99-2021, which aims "to ensure that the imported items have not been reported and claimed as input tax credit in the monthly and quarterly VAT returns pursuant to Section 110 of the Tax Code of 1997, as amended, for purposes of computing the VAT payable."

In summary, petitioner has sufficiently demonstrated that the claimed amount of P89,760,906.71 was not claimed as an input tax credit in its VAT returns for the subject period of claim and in the succeeding months/quarters. Verily, the amount ofP89,752,626.80, as computed below, constitutes erroneously paid VAT that is refundable pursuant to Sections 204 and 229(C) of the NIRC of 1997, viz.:,

Amount of VAT Claim

p 89,760,906.71

Less: Overstatement of Claim

8,279.91

Refundable VAT Claim

P89, 752,626.80

WHEREFORE, in light of the foregoing considerations, the Petition for Review is PARTIALLY GRANTED. Accordingly, respondent is ORDERED TO REFUND to petitioner the amount of 1"89,752,626.80, representing the erroneously paid value- added tax on its importation of prescription drugs and medicines for diabetes, high cholesterol, and hypertension from January 23, 2020 to April 20, 2020.

SO ORDERED.

WE CONCUR:

JEANMA

/rwMdfnJ..

LANEE S. CUI-DAVID

Associate Justice

LLENA

Boehringer Ingelheim (Philippines), Inc. v. Commissioner oflnternal Revenue

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court . .---.,

Presiding Justice

Footnotes

1
Docket -Vol. l, pp. I5-51.
2
Docket - Vol. Ill, p. 967, Joint Stipulation of Facts and Issues (JSFI), Stipulated Facts, par. 2.
3
Docket- Vol. I, p. Ill, Exhibit "P-4".