Nichimen Corporation - Philippine Branch vs. The Commissioner of Internal Revenue

DECISION

This is a petition for review instituted by Nichimen Corporation - Phi I ippine Branch against the Commissioner of Internal Revenue, praying for either a refund or tax credit of its alleged excess input value-added tax payments on purchases of taxable goods and services for taxable year 1993 in the amount of P268,184.98. Petitioner is a resident foreign corporation organized under the laws of Japan, with icense to do business in the Phi I i pp i nes through its Mani Ia Branch.

It is primarily "engaged in the business of indenting, wholesaling, buying and selling of lumber, abaca, sugar, mineral ores, machinery, steel products, cement and sundry goods in the Philippines;

in the business of buying and selling of industrial materials, textiles, foodstuffs to include oilseed, feeds, canned goods, etc., chemicals, steel products of ferrous and non-ferrous

- 2 - meta I products and products a I I i ed to those mentioned above" <Exhibit "8"). Petitioner is registered as a value-added tax entity and was issued VAT Registration Certificate No.

32-6- 000293 effective January 1, 1988 <Exhibit "A"). According to petitioner, its sales of services are subject to value-added tax at zero-rate (0%) provided for under Section 102(a)(2) [now (b)(2)l of the Tax Code, considering that its sales are paid for in acceptable foreign currency which are inwardly remitted to the Phi I i pp i nes and accounted for in accordance with the rules and regulations of the Central Bank. In compliance with the VAT provisions of the Tax Code and its implementing rules and regulations, petitioner filed its ·value added tax returns for the quarters ending March 31, 1993 <Exhibit "E"), June 30, 1993 <Exhibit "F"), September 30, 1993 <Exhibit "G"), and December 30, 1993 <Exhibit "H") on April 20,1993, July 20, 1993, September 30, 1993 and January 10 , 1994, respectively, showing a refundable amount totalling P268, 184.98, broken down as fo I I ows: 1993 Refundable Input Tax First Quarter Second Quarter Third Quarter Fourth Quarter Total p 25,935.64 17,323.71 211 , 796.26 13,129.37 P268,184.98

- 3 - On February 24, 1995, petitioner f i I ed an application for tax credit/refund of value added tax it had paid.

<Exhibit "0").

Respondent fa i I ed to act immediately upon said claim.

In order that the two-year prescriptive period provided by law would not lapse , petitioner filed the instant petition.

Respondent , in her answer, cIa i med by way of spec i a I and affirmative defenses that: "5.

Petitioner's claim for refund of alleged VAT input taxes paid is still under investigation/examination by the BIR; 6.

Claims for refund are construed strictly against the claimant, the same being in the nature of exemption from taxes. (CIA v.

Ledesma, 31 SCRA 95 [19701; Mani Ia Electric Co.

v. CIR, 67 SCRA 35 [19751); 7.

One who claims to be exempt from the payment of a particular tax must do so under clear and unmistakable terms found in the statute (Asiatic Petroleum v. Llanes, 49 Phi I.

466-477; Phi I ippine Acetylene Co., Inc. v. CIR, 20 SCRA 1056 [ 19671 ) . X X X" The sole issue to be resolved is whether or not petitioner is entitled to the refund of input taxes on its purchases covering the period from January 1, 1993 to December 31, 1993.

The governing provisions on zero-rated sales and refunds of input taxes which are pertinent to the case at bar are quoted hereunder:

- 4 - "Sec. 1 02.

Va I ue-added tax on sa I e of services and use or lease of properties.

(a) Rate and base of tax.-xxx (b) Transactions subject to zero-rate.-The following services performed in the Phi I ippines by VAT-registered persons shall be subject to 0%: (1) Processing, manufacturing or repacking goods for other persons doing business outside the Phi I ippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP).

(2) Services other than those mentioned in the preceding sub- paragraph, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pi I ipinas <BSP)."

<Underscoring supplied) XXX XXX XXX "Sec. 106.

Refunds or tax credits of input tax.-<a> Any VAT-registered person, whose sales are zero-rated or effectively zero- rated, may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales , except transitional input tax, to the extent that such input tax has not been app I i ed against output tax: xxx" It is undisputed that petitioner is VAT-registered subject to va I ue-added tax at 0% rate fo I I owing the above-quoted Section 102(b)(2) of the Tax Code.

In support of its claim , petit i oner subm i tted photocopies of~

- 5 - the receipts evidencing the value-added tax paid, as wei I as the statements from the Rizal Commercial Bank Corporation [an accredited agent bank of the Central Bank] to the effect that the acceptable foreign currency has been inwardly remitted and accounted for in accordance with applicable banking regulations. Respondent, on her part, alleged that it did not give due course to petitioner's claim for refund for its fa i I ure to submit substantia I proof that the sales reported were really zero-rated. We believe otherwise.

Respondent's demand for additional requirements is unnecessary considering that the documentary and testimonial evidence adduced by the petitioner are uncontroverted.

The same evidence has clearly substantiated petitioner's claim to the satisfaction of the Court. Furthermore, petitioner's position is strengthened by existing law and jurisprudence.

In CTA Case No. 4431 entitled Nichimen Corporation-Phi I ippine Branch vs.

Commissioner of Internal Revenue, dated February 13, 1995, involving the same party, this Court held: "The records show that petitioner is a VAT registered person subject to value-added tax at 0% rate pursuant to Sec.

102(a)(2) of the Tax Code, as amended, as the services rendered by it are paid for in foreign currency which are inwardly remitted to the Philippines in accordance with the rules and regulations of

- 6 - the Central Bank of the Therefore, Petitioner claim refund of input 106(b) of the Tax Code Regulations No. 5-87." Philippines <Exh. "A"). has the privl lege to taxes pursuant to Sec.

as amplified by Revenue The Court, however, noted that some purchases allegedly made by petitioner were not supported by receipts evidencing the input taxes paid, thus, petitioner's claim should be equitably reduced fo I I ows:

Total amount of Input Taxes claimed P268,184.98 Less: Input Taxes not supported by receipts Supplier Hi larion Levy Repub I i c Courier Workmate Amount Refundable Invoice Amount p 6,224.73 5,590.00 14 , 622.90 VAT p 622.47 559.00 1,462.29

WHEREFORE, in view of the foregoing, 2,643.76 P265,541 .22 judgment as is hereby rendered ordering the respondent to refund or issue the corresponding tax credit certificate to petit i oner the reduced amount of P265,541.22 representing input taxes covering the period from January 1, 1993 to December 31 , 1993.

WE CONCUR:

~ 1(2,~ ERNESTO D. ACOSTA Presiding Judge CIO Q. ~ ~ Associ ate J= y - 7 - CERTIFICATION 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

VI I I

of the Constitution.

~(Q,._ ~ ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals