Union Carbide Philippines <Far East, Inc. vs. C. T'. A. Case No. 4890 Commissioner Lf Internal Revenue

DECISION

Presented to us is a petition for review for the refund of input value-added tax paid by petitioner for the capital goods purchased during the third and fourth taxable quarters of 1990 in the amount of P361,909.00. Petitioner is a do•estic corporation duly organized and existing under the laws of the Philippines with business address at the 15th floor, Royal Match Building, Ayala Avenue, Makati, Metro Manila.

It is a VAT registered entity with VAT registration no.32A-4-00S476 covered by VAT R~gistration Certificate no.087662 issued by the RDO of Makati-32-A CExh.

"A">.

Under said registration, its first quarter starts February !-April 30, Second quarter;

fro• May 1 to July 31; Third quarter 263 .__,...._~___.. __ -_ __._ .. _~~___...._ ______ ------· ·-~·· L~- -- ···- .,.

DECISION -

C.T.A. Case No. 4890 - 2 - fro• August 1 to October 31 and Fourth quarter fro• Nove•ber t to January 31 of calendar year. Jt is engaged in several business endeavors a•ong the •anufacture of goods particularly plastic products and bl"'ake fluid <see page &, TSN> ..

ln order to effect their production, petitioner pm"'chased 'various •aterials for which it paid value-added input taxes passed on to it by the sellers of these produ~ts.

For the third quarter of 1990 >-covering the •onths of Augttst to October, petitionel" filed its VAT return on Nove•ber 20, 1990 reflecting the total a•ount of P7,741,24t.&1 as VAT output tax and P11; 972,893. &5 COl"'l"'espondi ng to the VAT inpttt tax "N-3" l"'espeFtively>. On Fe bl"'ttary 20; 1991;

petitioner then filed.its VAT return for the .

' . - fourth·quarter of 1990 with an output tax in the su• of PB;527;712.t7 ·and an input tax in the total a•ount of P13,B74,&55.-5& <Exhibit "N-1";

"N-4";

••N-5" , .. e s pect i v e 1 y > • As a VAT-registered enterprise petitioner filed with the Bureau of Internal Revenue on Dece•ber 18, 1992, an application for tax refund/credit in P3&1·,909.00 COl"'J"'esponding to the input tax it paid on the capital goods it purchased during the third and fourth quarters of 1990 pursuant to Section tO& <c> of the National Internal Revenue Code. 264 - -

DECISION --

C.T.A. Case No.

~90 - 3 - Respondent failed to act on this clai•, hence petitioner filed this appeal on Dece•beJ" 22, 1992 to beat the pl"eSCl"iptive pel"iod Pl"Ovided by law in clai•ing fol" a ref\.md.

l n het" answer, respondent adduced the following special and affir•ative defenses, to wit: 3.

Petitioner has failed to state any cause of action under Section 204 of the TaH Code, under which the Co••issioner of Internal Revenue allegedly •ay credit or refund taHes erroneously or illegally received. 4.

ln the instant case, petitioner begs the issue, as it has •iserably failed to show on the face of the petition that the collection of the aforesaid taH liability in the a•ount of P3Gl,909.00 is illegal and erroneous as against the legal presu•ption . that the collection thereof is lawful and regula~. 5.

In addition, w.el,J-s_ettled is doctrine that provisions on th~·taH refund construed strictly against the taHpayer as aJ"e in the nat m"e of taH eHe•pt ion. the a1"e they G.

Besides, in an action for refund, the taHpayer has the burden to show that the taHes paid were erroneously or illegally paid and failure to do so is fatal to the action for refund.

7.

Moreover, and in this case, the clai• for refund is still under investigation. · Respondent did not sub•it any evidence to support leaving this case to be decided on the basis of the pleadings and evidence presented by the petitioner. 265 DEClSlON - C.T.A. Case No.

~90 - 4 - Petitioner, in support of its clai• for refund, pl~esent ed several ,VAT sales invoices to show that pm~cha s e s of goods suppliers during the period covered by the clai• and that input taMes were paid on said purchases.

In addition, The sole issue to be resolved is whether or not petitioner is entitled to the refundable a•ount of P3&1,909.00 representing the input taM it allegedly paid on the capital goods it purchased during the third and fourth quarters of 1990. Petitioner anchors its clai• on Section 10&<c> of the TaM Code, which provides, thus: Section 106. - A VAT- .~egiste•~ed pe.~son •ay apply for the issuance of a taM credit certificate or refund of input taMes paid on capital goods imported or locally purchased to the eMtent that such input taMes have not been applied against output taMes.

The application for refund •ay be •ade only after the eM pi •~at ion of 2 succeeding quarters f o 1 l _Q1'fi ng the q\.•arte•~ in which the i•portation- a•~ local purchase was •ade;

Provided, that a VAT- regist~red person who is just co••encing business •ay apply for refund of input taMes undtn~ this paragraph not ea1~1 i e•~ than 180 days fro• the date of registration or actual start of business operations whichever co•es later:

Provided• however, that the application is filed not later than 2 years fro• the dates herein presc•~i bed:

We find for the petitioner. 266 - --~ -- __ _.,/

DECISION --

C.T.R. Case No. 4090 - 5- A co•bination of substantive and procedural law w~re co•plied with by the petitioner providing this Court with a so\.md 1 egal basis for granting the clai• for J~efund of i ~t is i•portant to note at this point that the prescriptive period for clai•ing ~ refund of input taxes paid on capital goods by a VAT-registered person is that which is provided in Section lO&<c> of the Tax Code C supt~a).

The evidence presented by the petitioner shows that-the clai• for refund of input taxes for the 3rd and 4th quarters of 1990 fall within the prescribed period for clai•ing a refund. Equally i•portant to consider in deciding questions involving ,~ef\.md is the factua~ aspect .

' .

of such clai•s• In the instant case, this Court finds that only the a•ount of P289t244.8& should be granted to petitioner as co•pared to the a•ount of P3&l,909.00 originally prayed for in the petition.

ln. the co•putation of this final a•ount, of capital goods •ade outside the periods clai•ed were excluded, these are purchases •ade fro• the period April i990 to July 1990 falling within the first and second q\.tarte.~s of 1990 which is not coveJ~ed by the present petition.

Likewise purchases •ade in March 1991 were not inriluded as they already fall outside the fourth taxable 267 ..

DECISION -

C.T.R. Case No. 4890 - 6- quarter of 1990.

These eHclusions refer to EHhibits "B~, "C", "C-1", "C-2", "C-3", "D", "D-1", "D-2,, "E", ''E-1 .. , "E-2", "E-3", "E-4 .. , "E-5'', "E-G", "E-7" and

"L "•

Moreover• EHhibit "G" which refers to a purchase of a National washing machine was also eHcluded in the final cd•putation as it cannot be classified as "capital goods" as this term is defined in Revenue Regulations No. 5-87 implementing the value-added taH law, thus: Section 2. Definition of ter•s (o) .. capital goods" refers to goods with estimated useful life greater than one year and which are treated as depreciable assets under Section 29(f), used directly or indirectlY in the production or sale of taHable goods or services.

<Underscoring ~upplied> A summary of the final computation of all the capital goods purchased from the-period August 1, 1990 to January 31, 1991 is listed hereunder thus: lnYDicr Supplier fAT No.

Nulbrr Da\t Ellh.

Alo!l!\ fAT Andf Steel llorlls & Construction, Inc. J0-8-oo2024 lJSl 08--Gl...IJO F p 22,195.00 p 2.0l7.7l Ono Hinhtare Co., Inc. l8--G-G002l6 410000 08--o&...IJO F-1 l, 186.00 107.82 Uno Hmlware Co., Inc. 38--o-G002l6 U005l 08-lO...IJO F~ 152.00 ll.82 Genasco . Marketing Corp. ll~-G00-107 JOlOl 08-o'J-90 F~ 19.00 1.73 Ono HanhNre Co., Inc. l8--o-G002l6 . 410069 08-10...1)0 F-l llO.OO 10.00 st•te Construction & Auto Supplf 38-l-GOOl6J 21750 08-ll...IJO F-4 12.400.00 1,127.27 st•te Construction & Auto Supply l8-l-GOOl6J 21749 08-ll...IJO F-S 2.825.00 256.82 E.l.. S.iel Construction ·~--ooo46l 862 08-17...1)0 F-6 38,100.00 3,~64 RA8 Professional Technologists, Inc. 2J--oo2547 219 08-20...1)0 F-7 204,357.70 18,517.97 Andy Sttel llorks & Construction, Inc. J0-8-oo2024 1312 08-22...1)0 F-8 116,880.00 10,625.45 Andy steelllorks & Construction, Inc. J0-8-oo2024 1311 08-22...1)0 F-9 180.00 10.91 Aanlc S.les Corporatioa ef Ute Phils. J2A-6--oo5l44 4992 08~...1)0 F-lO 4,450.00 404.55 1'htrn Enginttrint Supplf Corporatien J2A-9-GOOJJ2 4l2J2 09-Gl...IJO 6 24,000.00 ~lll.82 lluan Trading and Construction Supplf l8-6-G00277 SIJ6. 09-05...1)0 6-l 352,800.00 32.012.73 E.l. S.nitl Construction 38~--ooo46l 899 09-13...1)0 6~ 52,073.17 4, 7JJ.CJ2 268 DECISION -- .

C.T.A. Case No. 4890 -~ 7 Ravan Trating and Coistrection Supply 3e-6-O0077 5193 03-13-% 6-3 Sat, SEHD. 1109 4,500.02 Lie’s Felding Furniture Hose Industry 32-4-(2895 XS OF IEW FH 4, 000. %) 545.45 Intra Developeest Ce. Lisited Uapertation) W001} OF-21-N G5 22%, 752.00 = 21,523.09 Alpha Stee} MAty. Corp. DIOS 867078 OF e1-D 6 22, 20.00 2,029.09 - Andy Stee} Works § Construction, Inc. ARO 1406 OFTSW FT £H,500.00 862i, 51818 E.L. Samiel Censtrection 3B-2-OO04] ORFIES § 10-10-90 ER 2,719.79 2,247.20 E.L. Sanie] Constrortion S82 ODE CRNONS 11-06-00 9 17, 3S. io 4, 148.0% Nercade’s Fursiture 3A S OO01TO Gi OF NO NY 3, am. 00 Het fee Biias Fine Furniture HE OO 1582 10-02 WO 7, G8. Of [bata Alpha Steel Witg. Corp. BERS MM 1017-8 7,00 4.09 Eurasia Heavy Industries Inc. Ed 3- ORO 3) 10-18-30 He 6, 500.00 0.91 Ranh Sales Corporation of the Phils, 320-6 005144 5161 10-19-90 3 23,530.00 2,14.% Conmedities UP] 3-005 = =—-HG 10-24-90 4 &, 386. 40 500.58 PH Engineering Works 3B CONES «= «3305 10-26-90 HS 20,160.00, 832.72 PH Engineering Works S6-0M%RMS = 302 10-26-W HE 1,430. 130.00 PH Engineering Works 3e6-O0KR8S = 3103 1026-7 1, 760.00 160.00 FH Engineering Works 36-90 = «3103 10-26-N OB 5, 582. 50 07.50 Race-Haven Ratosation Philippines Jac. 320-7-000615 ORISO4 10-25-90 HY £5, 000. 00 oy NY. OF 5 8 C Trading, Inc. 60-037 0207 11-20-90} 21,000.00 1,309.09 fndy Stee} Werks & Construction, Inc. 30-B-O02024 1429 11-21-N 1-1 26,000.00 ° 2,363.64 Integra) Builders & Supplies, loc. 31-7-000052 4352 (11-27-90 1-2 = -178, 000.00 16, 183.82 Rank Sales Corporation ef the Phids. 32R6-005144 S26) 12-07-00 J 6, 000. 00 545.45 Fibertech Industries 31- 0002808 6) 120M i SSO I RV. Stee] Manufacturer 3-1-001833 SHB 12-15-90 I-2 7, BOO. 06 718.09 Andy Stee] Works & Construction, Inc. MB-O02024 . 1463 12-20-90 J-3 39, 500. 00 35, 400,00 Andy Steel Works & Construction, Inc. 30-8-0020248 1442 12-20-90 J-4 51, 300.00 4, 663. 64 Andy Stee) Werks & Construction, Inc. 30-8-002024 1445 12-20-90 J-5 12,600.00 1,245.45 _ Portland Chesicals Corporation 25-4-000733 63432. 12-20-90 J-b 14,654.00 §, 332. 18 Portland Chesicals Corporation 25-4-000733 63431 12-20-90 J-7 27, 930. 00 2,539.09 Portland Chesicals Corperation 25-4-000733 63433 12-20-91 J-8 67, 336. 00 6, 121.45 Millers Hardware & Industry Supply 23-3-002320 26466 12-26-90 J-9 7,179.20 652.65 MH Philippines, Inc. . 32~5-O00116 115015 12-27-90 3-10 = 84,572.40 7, 688.40 Race-Haven Autosation Philippines Inc. 32A-7-000615 560 12-28-90 3-11 195,000.00 = 17, 727.27 Race-Haven Autosation Philippines Inc. 320-7-000615 548 12-28-90 J-12 65,000.00 5, 909.09 Fibertech Industries 31-0002808 076 01-16-93 K 299,610.00 _ 27,237.27 P3, 161,692.71 289,244.86

WHEREFORE, in view of the foregoing, the respondent Commissioner of Internal Revenue is ordered to refund or issue a tax credit certificate to petitioner in the sum of P289,244.86 representing the input VAT paid by petitioner on the capital goods purchased during the _aforesaid quarters.

269

DECISION -

C.T.A. Case No. 4890