·, et al. vs. Commissioner of Internal Revenue

DECISION

This is a claim for the refund of input taxes alleged to have been paid by the petitioner on its domestic purchases of goods and services covering the period March 1, 1991 to May 31, 1 991 in the original amount of P4,327,151.63.

Petitioner is a domestic corporation engaged in the business of designing, exporting advanced and developing, large-scale manufacturing and , Integrated circuit components commonly called "VLSI" components or "IC's".

It is a VAT registered entity under VAT Registration Certificate No. 32A-3-002649, effective as of January 1, 1988.

Petitioner a I I eged that for the period starting March 1, 1991 to May 31, 1991 It generated export sales in the amount of P306,440,972.35 which were alI paid for DECISION - C.T.A.

CASE NO.

4967 - 2 - in acceptable foreign currency and inwardly remitted in accordance with existing regulations of the Central and are therefore classified as zero-rated Bank sales.

Petitioner further claims that it paid input taxes on its

/• : I

' ' domestic purchases of goods and servibes for ?he same period in the total amount of P4,327,151.63 which remained unutilized because of Its zero output tax I i ab I I i ty resu It i ng from Its zero-rated export sa I es.

Such input taxes paid were allegedly attributable to petitioner's zero-rated sales.

As a result, petitioner filed three separate appl !cations for tax cre9it/refund of input taxes with respondent in the total amount of P4,327,151.63.

A I I these app I i cat i ens were received by the respondent on March 18, 1992, July 24, 1992 and July 24, 1992, respectively.

Respondent did not act upon these appl icatlons for tax credit/refund so petitioner finally elevated its claim to this Court through a petition for review filed on March 18, 1993.

On May 11, 1993, during the pendency of this case in Court, respondent issued a Tax Credit Certificate SN.

001873, dated May 1 1 1 1993, in the amount of P1,052,889.44 in favor of the petitioner 'rep - resenting a portion of the total amount claimed as tax credit for the period covering March 1, 1991 to May 31 , 1 991 .

Thereafter, petitioner reduced the amount prayed for to DECISION - C.T.A. CASE NO. 4967 - 3 - P3,274,262.19 representing the balance after deducting the allowed portion from the original amount. Respondent's Answer was f i I ed on May 12, 1993, stating by way of Special and Affirmative Defenses the following:

8.

The petitioner states no cause of action as it does not state the specific date/s when the alleged input taxes were actually paid (Manufacturer's Bank and Trust Co., as Trustee for Gen.

Trust Plan vs.

Commissioner of Internal Revenue, C.T.A.

Case No.

1659, November 29, 1965);

9.

Petitioner 's claim for refund of the alleged creditable VAT input taxes is still under the usua I rout i nary exam i nat.l on/ investigation by respondent's Bureau;

10.

The allegation that petitioner has creditable VAT input taxes does not ipso facto warrant a refund/tax credit;

11.

The a I I eged Input taxes sought to be refunded herein were paid and co I I ected pursuant to law and pertinent BIR implementing ru I es and regu I at ions, hence, not refundab I e;

12.

Petitioner must prove that the alleged input taxes attritlutable to the alleged exported goods have not been app I i ed to the output tax and must prove that the alleged total foreign exchange proceeds have been accounted for by the Central Bank of the Phi I ippines.

Likewise, input taxes allegedly paid by petitioner on its I oca I purchases from VAT registered persons must be fu I I y supported by invoices issued pursuant to Section 108 of the Tax Code and must be made In the manner provided for therein; 13.

Claims for refund/tax credit are construed strictly against claimant, the same being In the nature of exemption from taxes (Commissioner of Internal Revenue vs.

Ledesma, ' ' DECISION - C.T.A.

CASE NO.

4967 - 4 - 31 SCRA 95 [1970];

Manila Electric Co.

vs.

Commissioner of I nterna I Revenue,

67 SCRA

35 [1975]);

14.

I n a claim for refund, it is incumbent upon petitioner to prove that it is entitled thereto.

I t must be able to point to a positive provision of the law granting such right.

Failure to do so is fatal to its claim for refund;

15.

Moreover, it is petitioner to prove that the provision of Section (pp. 32-34, CTA rec.) incumbent upon the it has campi ied with 230 of the Tax Code."

The sole issue involved in this case is whether or not the petitioner is entitled to the refund or tax credit of the remaining amount of P3,274,262.19 representing a I I eged unapp I i ed input taxes paid for the period covering March 1, 1991 to May 31, 1991.

The petitioner anchors its claim on two assertions:

first, that its sales from the period March 1, 1991 to May 31, 1991 are a I I classified as export sales and secondly, that all the input taxes claimed for refund are related or directly attributable to such export sales.

These claims made by the petitioner, if proven to be true, shall lead to the eventual refund of the amount claimed because of clear provisions of the law and pertinent revenue regulations.

Section 100(a) of the Tax Code provides that export sales are subject to 0% VAT, thus:

SEC.

goods.

100.

Va I ue-added tax on

(a) Rate and base of tax. sale of There fJ•· .

I

DECISION -

C.T.A.

CASE NO.

4967 - 5 - sha I I be I ev i ed, assessed and co I I ected on every sale, barter or exchange of goods, a value-added tax equivalent to 10% of the gross selling price or gross value in money of the goods so I d, bartered or exchanged, such tax to be paid by the seller or transferor:

Provided, That the fo I I owing sa I es by VAT-registered persons shal I be subject to 0%: (1) Export sales;

and ( 2) exemption agreements signatory zero rate.

sales to persons or entities whose under special laws or international to which the Philippines is a effectively subjects such sales to 'Export Sales' means the sale and shipment or exportation of goods from the Phi I ippines to a foreign country, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer Qf ownership of the goods so exported, or foreign currency denominated sales.

'Foreign currency denominated sales' means sales to non-residents of goods assembled or manufactured In the Philippines, for delivery to residents in the Philippines and paid for in convertible foreign currency remitted through the banking system in the Philippines."

Section 8 (a> of Revenue Regulation No.

5-87 authorizes the refund of input taxes paid in relation to such export sales, thus:

SEC.

8.

Zero-rating (a) In genera I.

A zero-rated sales is a taxable transaction for value-added tax purposes.

A sale by a VAT registered person of goods and/or services taxed at zero rate sha I I not resu It in any output tax.

The input tax on his purchaseQ of goods or services related to such zero-rated sale shall be avai !able as tax credit or refundable in accordance with Section 16 of these Regulations.

DECISION -

C.T.A. CASE NO. 4967 Section 104(b) following:

- 6 - of the SEC.

104.

Tax Creditable input tax.

Tax Code provides Credits.

XXX .

(a) (b) Excess output or input tax.

If at the end of any taxable quarter the output tax exceeds the input tax, the excess sha I I be paid by the VAT-registered person. If the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or quarters.

Any input tax attributable to the purchase of capital goods or to zero-rated sales by a VAT-registered person may at his option be refunded or credited against other internal revenue taxes, subject to the provisions of Section 106. the Sect i on 1 0 6 ( a ) of the same Code fur t her p r.o v i des thus:

"SEC.

106.

Refunds or tax credits of input tax.

(a) Export Sales.

An exporter ,who is a VAT-registered person may within two years from the date of exportation, apply for the issuance of the input tax attr.ibutable to the goods exported, to the extent that such input tax has not been applied to output tax and upon presentation of proof that the foreign exchange proceeds has been accounted for in accordance with the regulations of the Central Bank of the Philippines.

As a SOl-registered enterprise with a pioneer status as export producer, petitioner was able to obtain VAT R u I i ng No.

102(a)(1)-402(88) declaration that its service which income contail)ed the is automatically zero-rated (Exhibit "F" ,

p. 156, CTA rec.).

DECISION - C.T.A.

CASE NO.

4967 - 7 - Petitioner 's zero-rated taxability on its export sales, as confirmed by the above-mentioned VAT-ruling, led it to claim for the refund of unutilized input taxes that were paid for its domestic purchases of goods and services directly attributable to such export sales.

To support this particular claim for refund, petitioner presented the following documentary evidence:

1 ) Certification/Report of Punongbayan and Araullo, dated November 29, 1993, which included petitioner 's Export Sales Summary for the period March 1, 1991 to May 31, 1991 and the Summary of Input Taxds paid for the same period <Exhibit "J", pp.

165 - 167, CTA rec.).

This certification/report contained a summary of the procedures done in verifying the accuracy of the amount claimed as tax credit;

2) Photocopies of supplier 's sales invoices and official receipts for the period March 1, 1991 to May 31 , 1991, to prove that the input taxes claimed as tax credit are duly supported by invoices and official <Exhibits "K-1" to "K-4722");

and receipts 3) Photocopies of sales invoices, airway bills and bank credit memos to prove the accuracy of the amount- a I I eged to have been generated by its export sales from the period March 1, 1991 to May 31,

1991 .

The bank credit memos were particularly offered to prove that its

DECISION -

C.T.A. CASE NO. 4967 export sales were paid for in acceptable foreign currency inwardly remitted to the Philippines In accordance with existing Central Bank Regulations (Exhibits "L" to "L-655").

A thorough analysis of the evidence presented leads this Court to ‘the conclusion that petitioner is entitled to a tax credit in the amount of P88,568.74, detailed as follows:

Ref. Invoice Invoice VAT Reg. Total Net VAT Exh. Nos. Supplier’s Name Date Number Number Amount Amount Amount No. 4142 Aggregate Ventures Phils., Inc. 04-04-91 12658 32A-8-001372 P 510.00 P 463.64 P 46.36 K- 120 41497 Gascon Technology 04-12-91 079 32A-1-008 3,500.00 3,181.82 318.18 K-1705 41498 Gascon Technology 04-12-91 083 32A-1-008 3,500.00 3,181.82 318.18 K-1706 41499 Gascon Technology 04-12-91 081 32A-1-008 2,200.00 2,000.00 200.00 K-1707 5366 Gascon Technology 04-26-91 093 32A-1-008 10,577.00 9,615.45 961.55 K-1709 3220 Gascon Technology 04-03-91 074 32A-1-008 25,000.00 22,727.27 2,272.73 K-1717 4221 Gascon Technology 04-03-91 075 32A-1-008 21,375.00 19,431.82 1,943.18 K-1719 4222 Gascon Technology 04-05-91 076 32A-1-008 1,650.00 1,500.00 150.00 K-1720 4223 Gascon Technology 03-26-91 073 32A-1-008 22,000.00 20,000.09 2,000.00 K-1722 4484 Gascon Technology 04-05-91 077 32A-1-008 12,500.00 11,363.64 1,136.36 K-1724 4485 Gascon Technology 03-26-91 071 32A-1-008 43,500.00 39,545.45 3,954,555 K-1726 4897 Gascon Technology 04-12-91 082 32A-1-008 4,000.00 3,636, 36 363.64 K-1728 4898 Gascon Technology 04-12-91 078 32A-1-008 5,300.00 4,818.18 481.82 K-1729 5824 Gascon Technology 05-10-91 099 32A-1-008 36,152.00 32,865.45 3,286.55 K-1733 31742 Gascon Technology 03-21-91 069 32A-1-008 8,000.00 7,272.73 7127.27 K-1738 41139 Gascon Technology 04-13-91 088 32A-1-008 8,550.00 7,772.73 177.27) K-4741 41140 Gascon Technology 04-15-91 089 32A-1-008 55,000.00 50,000.00 §,000.00 K-1742 51193 Gascon Technology 05-09-91 095 32A-1-008 39,600.00 36,090.00 3,600.00 K-1744 51258 Gascon Technology 05-20-91 103 32A-1-008 1,500.00 1,363.64 136.36 K-1745 31611 Gras Mktg. & Enter 03-27-91 14 32A-5-008 7,031.50 6,392.27 639.23 K-1848 3703 IBM Phils. 03-01-91 878404 32-0-0003 27,520.47 25,018.61 2,501.86 K-2165 5595 {BM Phils. 03-11-91 026391 32-0-0003 69,578.41 63,253.10 6,325.31 K-2169 41015 IBM Phils. 07-01-91 878871 32-0-0003 27,520.47 25,018.61 2,501.86 K-2171 5205 JCR Mercantile 05-04-91 4698/96 34-6-0003 67,915.00 61,740.91 6,174.09 K-2462 5206 JCR Mercantile 05-02-91 4693/4713 34-6-0003 96,600.00 87,818.18 8,781.82 K-2463 4207 JCR Mercantile 05-09-91 4712/4700 34-6-0003 48,000.00 43,636.36 4,363.64 K-2465 4915 JCR Mercantile 04-17-91 4639/27 34-6-0003 84,600.00 76,909.09 7,690.91 K-2497

DECISION -

C.T.A. CASE NO. 4967 Ref. Invoice Invoice VAT Reg. Total Net VAT Nos, Supplier’s Name Date Number Number Amount Amount Amount 5860 JCR Mercantile 05-11-91 4721/26 34-6-0003 65,800.00 59,818.18 5,981.82 K- 5861 JCR Mercantile 05-17-91 4745 34-6-0003 32,200.00 29,272.73 2,927.27 K- 41047 Lane Moving 03-25-91 25389 32A-1-001 12,397.27 11,270.25 1,127.02 K- 4387 Realto Photo & Optical 04-16-91 39257 24-4-000352 13,800.00 12,545.45 1,254.55 K- 41382 SGV Dimensions Int'l. 04-16-91 9 4684 The Online an Adv. System 04-01-91 12708 32A-0-000927 104,678.97 95,162.70 9,516.27 K- 411 J.E, Automated 10,090.91 Parts Ent. 11-91-91 735 a 11,100.00 ; P974,256.09 P885,687.35 P88,568,74 The input taxes that are not directly attributable to petitioner’s zero-rated export sales were excluded in the computation of the final amount awarded as credit. These are the following:

1) Purchases of fire extinguishers, fire sprinklers, fire hose cabinet and service charges’ for their installation and repair, all of which do not’ form part of the product exported (Exhibits "K-1702", "K-1704", "K-1731", "K-1732", "K-1736", "K-1739"); and 2) Repair and maintenance of the fax machine which cannot be directly attributable to the zero-rated export sales of the petitioner (Exhibit "K-2444").

Invoices that were also excluded are those whose dates are not within the period being claimed (Exhibits "K-1711", "K-1713", "K-1714", "K-1735", "K-2162").

1 32A-4-002358 1,100.00 1,000.00 100.00 K- 1,009.09 K- Exh.

No.

2506 2507 2739 3586 3837 4054 4675 .

.

DECISION - C.T.A. CASE NO.

4967 - 10 - Moreover, this Court also excluded in its computation the invoices that were cance I I ed by the Department of Finance as these were already considered in the tax credit earlier granted in favor of petitioner.

WHEREFORE, in view of the foregoing, this Court hereby orders respondent CERTIFICATE in favor of to issue a TAX CREDIT petitioner the amount of P88,568.74 representing the balance of unuti I ized input taxes paid for the period SO ORDERED.

CONCUR:

Qll· I ERNESTO D;

ACOSTA Presiding Judge CERTIF 1991 to May 31, 1991.

.

.._· v J RAMON 0.

DE I('

Associate Jud CATION hereby certify that this decision was reached after due consultation with the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitution.

Q·Q ERNESTO D.

ACOSTA Presiding Judge Court of Tax Appeals