CTA Case No. 5030

DECISION

Promulgated :

JAN 0 7 1999

This petition for review is seeking for a - - - X refund or issuance of tax credit certificate in the total amount of ~5,465,204.94, representing excess input value-added tax (VAT, for brevity) for the period February 1, 1992 to January 31, 1993.

Petitioner is a domestic corporation duly organized and existing under the laws of the Philippines.

It is engaged in the mining business which includes, a mong others, the exploration, development, operation and production of mining prod ucts, and the subsequent sale thereof.

It is a VAT registered taxpayer with its latest VAT Registration No.

350-000-162-935-V (Exh. A-1) .

On February 2, 1988, petitio ner filed an Application for Zero Rate of its sales of mine prod ucts with the Bur ea u of Internal Revenue (Exh. B). For the period February 1, 1992 to Jan uary 31, 1993, petitioner seasonably filed its q uarterly VAT returns ® DECISION C.T.A. CASE NO. 5030.

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ced denbiyng. aime day a Libesins. Vite) es pated iis my Hee produets , Live Val ou bpuek Dag cern Lr on dtpene Legace On Waite Go Lb 6 PILE Gea us Gi goudefooivaces etd on AiO haa bh botie. who oyeods, bo wits ist Qtr. dnd Qtr. 3rd Qtr. 4th Qtr. Particulars (Exh. £) (Exh. F) (Evh. &} (Exh. H) Zero-rated Sales P33,329,357.43 P47 ,094,840.43 34,149,048.59 = P30,550, 200.10 VAT Output Tax p 31,196.67 18,929.97 # 92,837.45 2B 105.33 Less, Input Vai

1. Carried from previous quarter P2,013,159.77 PB 1,255,219.50 PF 2,594,363.35 PF 1,412,075.34

2. Domestic purchases of geods/services 1,027,224.43 1,191,583.10 1,279,982.07 1,229,755.91

3. Importation of goods 266,700.00 166,490.72 205,361.00 289,357.00 Total P3,297,084.20 7 2,613,293.32 PF 4,083,707,02 F 2,951,178.25 Excess Input VAT credits # 3,265,887.53 P 2,594,3635.35 8 3,990,569.57 oP 2,931,068.92 Less: Refund/TCC claimed 2,010,668.03 2,978,794. 23 Excees Lo be carried terward P1,255,219.50 PB 2,594,563.35 BP 1,412,075.34 PB 2,931,068.92 Pe bu taut , Velwaewsiig Lita. pb pe oui i bbed a) Lith: redunmd of excess sitpul VAL altribububle booths ged iu cbahed Sales ol WEL e Ui Ott Ss, plies bbatlt ban Lod bak Code, babed on La bed i AppliGalsorts pai we Laedact sited aiid Pavd of tollowe:

n Dighess ad Puryien tes ne ee Lbare deve dupe diteeied pw te bas otf {pad od > JS Mayeentassy 1, ho July LO-80- Oy Lee Wola ry oS kg Way od, Lo once) til sf MG mepai ale wee howl LUb ui mare Wered sy) Ol ud Vad bbe Baubeboal be LET. Amouiek 1 Riise, JM 7 cette, dius l DECISION C.T.A. CASE NO. 5030 . - 3 - Petitioner waited for more than sixty days for the respondent to act on such applications pursuant to Section 106(e) of the Tax Code.

Respondent did not act on these applications, hence, petitioner was compelled to file the instant petition for review on Septembe r· 1 4 ' 1993 in order to preserve its right to judicially claim the refund of excessive input VAT pay ments. Respondent, in his Answer, raised the following special a n d affirmative defenses: 5.

Local sales of gold to Central Ba n k are not considered "export sales " for purposes of Section 100(a) of the Tax Code, as amended, hence, subject to the 10% value added tax; 6.

Revenue Memorandum Order No.

22-92, dated May 14, 1992 (a guideline to clarify i mplementation of Revenue Regulation No.

2-88 and sale of gold to Central Bank) categorically provides that sale of gold to t h e Central Bank by any person, i ncluding mining co mpanies s hall be considered local sales for VAT purposes effective January 1, 1988; 7.

The opinion of the Secretary of Justice dated April 14, 1992 and the CB Circular No.

1301 dated Aug ust 7, 1991, which provides that " all sales of gold to the Central Bank are considered constructive exports " have been set aside by the respondent as exhaustively discussed in its VAT Ruling No.

059-92 date April 28, 1992. Hence, previous inconsiste n t rulings are co nsidered s u perseded because the government is not estopped to collect unpaid taxes on account of errors/mistake of its agents/officials and t here should be no vested right arising from an erroneous interpretation of the law ( Hilado vs.

Collector o f Internal Revenue, 200 Phils. 288 ). 9.

Claims constr u ed against in the nature of for refund t h e claimant, an exemption of taxes are t h e same being form taxation.

DECISION C.T.A. CASE NO. 5030. Hence, in actions proof is upon the right to refund;

- 4 for refund, claimant to the burden establish of the 10.

Petitioner failed to show in its petition that it is entitled to t he refund.

Mere allegations of refundability does not ipso facto entitle petitioner to refund claimed, thus, petitioner's failure to sustain the burden is fatal to its action for refund; 11.

It is incumbent upon the taxpayer to show that it has complied with the provisions of Section 104 and Section 230 of the Code. To bolster its claim for refund, petitioner formally offered the following documentary evidence: 1.

VAT registration certificate s (Exhs.

A and A-1) ;

2.

Application for zero rate (Exh. B); 3 .

Central Bank Circular No. 1301, series of 1991 (Exh. C);

4.

Opinion of Secretary of Justice dated April 14, 1992 composed of seven (7) pages (Exh. D); 5 .

Value-Added Tax Returns tor the period February 1, 1992 to January 31, 1993 together with the attachments of summary lists of sales, importations, and purchases (Exhs. E to H- 5, inclusive); 6 .

Applications for credit/refund of VAT paid (Exhs. I and J);

7 .

Certified xerox copies of the certificate of filing of Amended Articles of Incorporation issued by the Securities and Exchange Commission (Exhs. K and K-1); and DECISION C.T.A. CASE NO. 5030. - 5 - 8 .

CB Circular No.

960' dated October 3 1 ' 1993 (Exh. M).

Respondent, on the other hand, elected not to submit controverting evidence but instead submitted his case for decision (see Minutes of the Session, p • 195, CTA records).

Both parties submitted their respective memoranda.

The issues to be resolved by this Court are as follows:

1 .

The validity of VAT

Ruling

No.

8-92, dated January 23, 1992, which categorizes the sale of gold to Ce ntral Bank as local sale s ubj ect to 10% rate of VAT;

and 2 • Petitioner's entitlement to t h e refund of excess input VAT pursuant to Section 106 of the 1992 Tax Code.

At this juncture it is worthy to mention that this case was originally submitted for decision on September 22' 1995 but was held in abeyance pending resolution of cases involving similar issues by the Court of Appeals or until the appointme n t of a third member of the Co ur t (see Resolution, dated September 5 ' 1996, p .

253' CTA records).

Eventually, on February 6' 1998, the Court of Appeals rendered its decision in the case of Atlas Consolidated Mining & Development Corporation vs.

Court DECISION C.T.A. CASE NO. 5030. - 6 - of Tax Appeals and Commi ssi oner of Internal Revenue.

CA G.R. SP No. 34152, dated February 6, 1998 , which tackled, among ot hers, the validity ot VAT Ruling No.

008-92.

Hence, it is now proper to decide the case at bar.

Pertinent portions of the atorementioned decision read as follows:

In equipoise with the Central Bank's policy of conserving gold (Section 162, CB Circular No.

960), certain gold producers are required to sell their entire gold production to the Central Bank (Section 171, CB Circular 960).

Moreover, no person shall export or bring out, or attempt to export or bring out of the Philippines, gold and/or gold-bearing materials, in any shape, form and quantity without prior approval from the CB Export Department. (Section 107, CB Circular No. 1318) Prescinding from the aforesaid policy, gold producers are given incentives, such as considering their sales to the Central Bank as "exports".

According to settled jurisprudence, circulars of the Central Bank are neither statute no law, but being issued for the implementation of the law authorizing its issuance, it has the force and effect of law (People vs. Que Po Lay, 94 Phil.

640).

All that is required is that the regulation should be germane to the objects and purposes of the law;

that the regulation be not in contradiction with it, but conform to the standards that the law prescribes (United States vs. Tupasi Molina, 29 Phil. 119). A su co nverso, should the regulation conflict with the law, the validity of the Regulation cannot be sustained (Director of Forestry

v. Munoz, 23 SCRA 1183, Hijo Plantation, Inc.

v.

Central Bank, 164 SCRA 194).

The Department of Justice, in Opinion No.

47 S. 1992 (dated April 14, 1992) expressed the view that:

DECISION C.T.A. CASE NO. 5030. - 7 - " xxx With regard to sales of gold to the Central Bank, existing jurisprude nce recognizes that Central bank Circulars issued for the implementation of the law authorizing its issuance ... [have] the force and effect of law (People vs. Que Po Lay, 94 Phil.

640), and therefore C.B.

Circulars [sic] Nos. 960 and 1301 can be r ecognized as special laws wit h i n t h e ambit of Section 100(a)(2) of the Tax Code. "

( Underscori n g supplied.)

(pages 112-113 of the CTA Record) Based o n t h e foregoi ng, the conclusion is in e vita b l e t hat ....:..V....:..A:.....T :.__.......:..;R~u:....:l ::...;l.=- · :.....

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e d Jan uary 23, 1992) is bereft:

of legal basis in removing t h e VAT zero-rating treatment previo usly recognized on sale of gold to the Ce ntral Bank, incl uding co nstructive export sales to BOT-registered enterprises. XXX XXX XXX In s um , t his Court hereby resolves the as issues jointly stip u lated by the parties follo ws:

a.

VAr Ruling No.

008 ... ·92,, in imposing sales of copper concentrates to PASAR, to PHILP HO S a n d gold t:o t:he C'ent:ral Bank legal bases,, hence of no effect:". XXX XXX XXX VA r on pyrite lacks It is clear fro m the above decisio n , that VAT Ruling No.

008-92 lacks legal bases, he nce of no effect.

Therefore, petitio ner ' s sales ot gold to Central Ba n k is still classified a s export sales s ubject to zero percent rate of VAT p u rsuant to Sectio n 100(a)(1) of the 1992 Tax Code, to quote:

SEC.

100.

Value-added t:ax goods.

····· (a) Rat:e cmd base of s hall be levied assessed and every sale, barter or exchange on sale of There collected on ot goods, a a DECISION C.T .A. CASE NO . 5030 . -

B -

value-added tax equivalent to 10% of the gross selling price or gross value in money of the goods sold, bartered or exchanged, such tax to be paid by the seller or transferor:

Provided.

That the following sales by VAT-registered persons shall be subject to 0%: (1) Export sales; and XXX XXX XXX Having settled the legal issue involved in the instant case, We now determine if petitioner was able to support with substantial evidence, its claim for refund. Section 2 of Revenue Regulations No.

3-88 specifically enumerates the requirements for the issuance of tax credit certificate or tax refund of input taxes paid by a zero-rated taxpayer engaged in sale of goods or services, to quote:

SECTION 2 .

Regulations 5-87 follows:

"SECTION Section is hereby 16 of amended to 16.

Refunds of credits of input tax. - Revenue read as tax (a) Zero-rated sales of goods and services. - xxx (c) Claims for tax credits/ refunds - Application For Tax Credit/ Refund of Value Added Tax Paid (BIR Form No. 2552) shall be tiled with the Revenue District Office of the city or municipality where the principal place of business of the applicant is located or directly with the Commissioner, Attention:

VAT Division.

A invoice value photocopy of the purchase or receipt evidencing the added tax paid shall be DECISION C. T .A. CASE NO. 5030. It - 9 - submitted together with the application.

The original copy of the said invoice/receipt, however, shall be presented for cancellation prior to the issuance of the Tax Credit Certificate or refund.

In addition, the following documents shall be attached whenever applicable:

"1.

Export Sales i) Photo copy of export document showing the amount of export, and the date and destination of the goods exported.

With respect to foreign currency denominated sale, the photo copy of the invoice or receipt evidencing the sale of the goods, as well as the name of person to whom the goods were delivered. ii) Statement from the Central Bank or any of its accredited agent banks that the proceeds of the sale in acceptable foreign currency has been inwardly remitted and accounted for in accordance with applicable banking regulations. " 2 • Zero-rated sale of services. xxx.

is also important to note at this point petitioner's zero-rated sales are not only composed that of sales of gold to Central Bank but also (real) export sales to London, England. After a thorough and careful examination of all the documentary evidence presented, this finds that petitioner failed to comply with the aforementioned It did not present in evidence the DECISION C.T.A. CASE NO. 5030. - 10 - purchase invoices or receipts evidencing the value-added tax paid and t h e sales invoices which will show the amount of export, and the date and destination of the goods exported.

Further, petitioner also failed to submit statements fro m the Central Bank or any of its accredited agent banks that the proceeds of the sale in acceptable foreign currency has been inwardly remitted and accounted for in accordance with applicable banking regulations.

What petitioner submitted in evidence were summary lists of sales, importations and purchases, which although certified to by petitioner's Chief Accountant and Finance Assistant, would not suffice to establish the truthf uln ess and accuracy of the contents thereof unless the source documents were offered and actually verified by the Court itself.

The attestations of petitioner's own employees as to the correctness of the summary lists are at best self-serving, hence, of no consequence. The failure of petitioner to submit in evidence the documents req u ired under Section 2 of Revenue Regulations No. 3-88 prevented Us from confirming the veracity of the amount claimed by the petitioner as excess input VAT payments (Atlas Consolidated Mining and Development Corporation vs.

Commissioner of Internal Revenue, CTA Case No. 4601, 4632, 4655 and 4701, November 18, 1997) .

DECISION C.T.A. CASE NO. 5030. - 11 - In fact, We have already denied several claims for ref u nd of inp u t VAT for failure of petitioner to co mply wit h the requirements under Revenue Regulations No. 3-88 (Dow Elanco B.V. Philippine Branch vs. The Commissioner of Internal Revenue. CTA Case No. 5255. January 14. 1998;

AMI Philippines.

Inc.

vs.

Commissioner of Internal Revenue.

CTA Case No. 5304.

January 20.

1998;

Atlas Consolidated Mining and Development Corporation vs.

Commissioner of Internal Revenue.

CTA Case Nos.

5130.

5161 and 5190.

February 5. 1998; and Benguet Corporation vs. Commissioner of Internal Revenue. CTA Case No. 5306.

April 15.

1998), and it is for the same reaso n t hat We are denying the instant claim for ref un d.

WHEREFORE , in view of t h e foregoing, the petition for review is hereby DENIED due to i n s u fficiency of evidence.

WE CONCUR:

STO D. ACOSTA .. :.:~~:;

Associate Jud # DECISION C.T.A. CASE NO. 5030. - 12 - CERTIFICATION I hereby certify that the above decision was reached after due consultation with the members of the Court of Tax Appeals in accordance with of the Constit ution. Section 13, Article VIII L- t;2. ~ ERNESTO D. ACOSTA Presiding Judge