Del "Onte Philippines, Inc vs. The Com"Issioner of Internal Revenue, et al.

DECISION

This is a claim for refund in the amount of P992, 361. 00 representing allegedly erroneous payment of value added tax on the importation o£ 10,976 kgs. of Tilt 250 EC <Fungicide>.

Petitioner, is a domestic corporation organized and existing under the laws of the Republic o£ the Philippines, and registered with the Bureau of Internal Revenue as a value added tax <VAT) taxpayer pursuant to Section 107 o£ National Internal Revenue Code as amended by Executive Order No. 273 with Registration No. 75-0- 000108 <Annex A>.

It imported 10, 976 kgs. o£ Tilt 250 EC <Fungici de) under Entry No.

282- 89 <Exh.

B> and 1136

DECISION -

C.T.A. CASE Ho. 4622 - 2 - subsequently paid the value added tax on said importation in the amount of P992,361.00 on June 28, 1989 under Customs Official Receipt No. 1119151 <Exh. C-1>. On June 4, 1990, Petitioner obtained from the Fertilizer and Pesticide Authority a certification stating that the product Tilt 250 EC is a fungicide <a form of pesticide under the definition of "Pesticide" in Section 3(a) of .P.O. 1144 used to control fungal diseases in crops <see Exh.

D, D-1> .

Such being the case, petitioner contends that the product Tilt 250 EC <Fungicide> should be exempt from payment of VAT pursuant to Section 9<b ><3> of Revenue Regulations No. 5-87 which states in part, to wit: <b> Exempt transactions. -

x x x

<3> Fertilizers, ~~t~cid~~.

and herbicides, chemicals for the formulation of pesticides; x x x ?re ex~mpt on i~~rtation and sale in all stages of distribution, x x x . <Emphasis supplied> Thus, Petition r filed its applica~ion for tax refund/credit of erroneously paid VAT in the amount of P992,361.00 with the VAT division on February 5, 1990. On March 20, 1990, in order to remove the VAT paid on subject importation fro m available input taxes, and to reflect the same as tax refund/tax credit applied for. Petitioner filed an amended VAT return for the quarter September to November 1989 pursuant to Section 11 of 1 1 ·~ ·~ -'

DECISION -

C.T.A. CASE Ho. 4622 - 3 - Revenue Regulations No. 5-87 which states: SEC. 11.

Determination o~ input tax deductible during a taxable quarter. - All input taxes paid by or available to a VAT-registered person during a taxable quarter plus any input tax carried over £rom the preceding quarter shall be reduced by the applications £or re£und or applications £or the .

issuance o£ tax credit certi£icate and other adjustments such as those £or purchase returns or allowances in order to arrive at the input tax that can be deducted £rom output tax. " x x x There being no action on the request £or re£und on the part o£ the Respondent, Petitioner £iled this instant action on June 26, 1991, well within the two - year prescriptive period.

The issues £or resolution are the £allowing: < 1 > Whether or not petitioner is entitled to the re£und claimed.

< 2 > Whether or not petitioner already credited the amount claimed against its output tax. A££irmatively, We resolve the issues. The product, Tilt 250 EC <Fungicide) o£ which petitioner erroneously paid the value added tax on its importation has been certi£ied by the Fertilizer and Pesticide Authority as pesticide £inished product pursuant to Section <3><a> o£ P.O. 1144 which de£ines, as £allows:

a> •Pesticide• - any substance or product, or mixture thereo£, including active ingredients, adjuvants, and pesticide £ormulations, intended to control, prevent, destroy, repel or mitigate directly or indirectly, any pest. The term shall be understood to include insecticide, £ungicide,~ .

1 1 .-) .

/ L-f _,

DECISION ~

herbicide, molluscicide, plant regulator, defoliant, (Emphasis supplied).

bactericide, nematocide, avicide, rodenticide, desiccant and the Like.

Hence, it falls under transactions exempt from Value Added Tax under Section 9(b)(3) of Revenue Regulations No. 5-87, which provides:

(b) Exempt transactions. - x x x

(3) Fertilizers, pesticides, and herbicides, distribution, x x x. (Emphasis supplied) Relevant to the determination of the second issue, are the ledger of Petitioner, below:

PERIOD COVERED

Output tax on sales of goods Output tax on sales of services Total output tax Input tax carried over from previous wonth _ Input tax on domestic purchases Input tax on importation Input tax on purchase of taxable services Deewed paid (BOI Reg. Pioneer Ent.)

Total input tax Lesa: Refunds applied for VAT on exept sales Net creditable input tax Less: Amount applied this quarter Balance carried over to succeeding quarter VAT returne, subsidiary purchase journal and portions of which are reproduced (p. 36, BIR Records) June-Aug. ’89 23, 005, 262. 73 or Sa ner ae he weeenomtaronerosectsnt 9, 133, 114.70 13, 049, 386. 75 14, 604, 019. 85 1,081, 912, 42 665, 537. 84 38, 041, 535. 96 23, 130, 487.84 Exh. "H* for Pet.

Sept-Nov. ‘89 17, 216,727. 38 206, 785. 57 12, 329, 247. 90 10, 977, 064.75 16, 265, 374. 93 1, 127,775.70 £277, 160. 65 40, 976, 623. 93 A440, 484. 23 40, 536, 139. 70 BNL 5S.5 Exh, °F* for Pet.

(Amended) Sept-Nov. ‘89 17, 216, 727. 38 __ 206, 785.57 12, 329, 247. 90 10, 977, 064.75 17, 257,735. 93 1, 095, 996. 34 277,160.65 41,937, 205. 57 992, 361.00 M43, 575.17 40, 501, 269. 40 BUTS Exh. "L* for Pet.

Dec. ~Jan. '90 25, 548, 844. 60 148, 089, 60 23, 077, 756. 45 13, 064, 088.00 12, 631, 107. 00 1, 181, 200. 00 49, 954, 151.45 25,696, 934. 20 2,650, 48.08

DECISION -

C.T.A. CASE Ho. 4622 - 5 - It c a n be noticed that petitioner deduc ted the amount of P'3'32, 361. 00 a s a refund on the amended VAT return f or the quarter Septe mbe r to November, 1 '38'3 < Exh.

"F" ) .

As a consequence the amount carried over to the succeeding period December to February 1990 was reduced accordingly <Exh.

"L" ).

Simultaneous to this, petitioner made the necessary adjustme nts on its book, particularly on the general l e dger < Exhs.

"J" and

"J - 1")

and subsidia ry purchase journal <Exhs.

~ K" and "K - 1">, to c orrect the acc ount bala n c e o f its available input tax and to reflect a receiva ble a rising therefrom. The opin i o n of t he r e venue e x a miner that what should h a ve been amended was the quarterly VAT r e t u r n f or June to Aug ust 1989 because t he erroneo us payme nt occurred in June 198'3 is withou t basis. Revenue Regulatio n s No. 5 - 87 d oes not provi de any regulation to that effect. Moreso, the applicable law on said refund was n o t even under Sec. 16 of same regulation but under Sec. 230 of the Tax Code. Furthermo e, respondent a d mitted t he VAT r eturn for the quarter December to January 1990 < Exhs. "L" and "L - 1") wit h o u t qualification .

It fol l ows , the refo r e, that he also a dmi t ted that the a mount carrie d over was reduced by t h e amount of ? 992, 361 . 00. It will be unfair therefore if t he tax payer seeking remedy wi l l be d e prived of t he ref un d a fter i t deducted 1 1 ,, r j

- 6 - the portion < P992, 361. 00 > it should have been used as a tax credit against future output tax. Although the .I revenue examiner reported that the said amount was already used against the output tax £or the period June to August 1989, he, however, failed to examine subsequent entries on petitioner's book . In fact, the total input taxes for that period <June - August 1989 > is more than enough to cover the output tax of petitioner <see p. 38, BIR record s ).

basis of investigation was limited only to the subsidiary purchase journal for the quarter June to August 1989 which was not even presented to the Court for proper evaluation. To this d ate said amount is still unutilized as per record of the case.

WHEREFORE, We hereby RESOLVE 1'0 GRANT Petitioner's claim for refund in the a mount of' ?992,361.00 represen i g refund o rroneouely paid value added tax <VAT> on the importation of the product Tilt 250 EC <Fungicid e)

DECISION --

- 7 - WE CONCUR;

~tl~ RN STO D. ACOSTA ·~ w / _ RAHON 0. DE~~ Associate Judg G_~.B.. :J.:: ... :.! ... E ........... g .. A:.T ... ~ .. Q .. ~.

I hereby certify that this decision was reached after due consultation a mong the members of the Court of Tax Appeals in accordance with Section 13~ Article VIII of the Const "tut'on. 1142 ERNESTO D. ACOSTA Presiding Judge Cour of Tax Appeals