Taganito Mining Corporation vs. Commissioner of Internal Revenue

DECISION

This case involves a claim for tax credit in the amount of P1,001,439.41 equivalent to the value-added tax <input tax> paid by petitioner herein on its domestic purchases of goods and services for the period coveringL January 1, 1994 to December 31, 1994.

Petitioner is a domestic corporation pr·imari ly engaged in the business of exploring, producing and exporting beneficiated n i eke I s iIi cate ores and chrom i te ores found in Parcel One of the Surigao Reservation area in the Mun i cip a l ity of Claver, M in e ral Surigao del Norte and was granted by respondent permit to engage in such business under BIR Permit No.

0057-MP-90 (Exh.

"G", p.

95, CTA records) on June 22, 1990.

Effective January 1, 1988, it registered itself with the Bureau of Inter nal Revenue <BIR) as a Value-Added Tax (VAT) entity and was issued VAT Regi s t rat io n Certif icate No.

32A-0-003939 (Exh.

"H" , p.

98, C.T.A.

records).

It

DECIS ION

C.T . A . CAS E NO.

5305 - 2 - also registered with the Board of Investments as a non- pioneer enterprise and is in possession.

Certificate No.

EP 8 8-306 (Exhibit "1").

of BOt For the period from January 1, 1994 to December 31, ' 1994, petitioner alleges that it rea I i zed zero-rated export sales amounting to ONE

HUNDRED THREE

MILLION FOUR

HUNDRE D

NINE T Y T WO

T HOUS AND T HREE

HUNDRED NINETY

THREE

P ESOS

AND 45/100

(P103,492 ,393. 45 ) which was paid for in acceptable foreign currency inwardly remitted to the Philippines and accounted for in accordance with existing regu I at ions of the Centra I Bank of the Phi I i pp i nes (now Bangko Sentral ng Pilipinas).

For the same period, petitioner paid VAT input taxes on its domestic purchases of taxable goods and services amounting to ONE

MILL ION ONE

T HO U S A N D

FOUR HUNDRED THIRTY NINE

- P ESOS

AND 41/100 (P1 ,001,439.41) which allegedly were directly attributable to its zero-rated export sales amounting to P103,492,393. 45 .

The abovementioned zero-rated export sales and VAT input taxes paid on its domestic purchases of taxable goods and services are broken down as ·fo I I ows:

PERIOD COVERED

1/1/94-3/31/94 4/1/94-6/30/94 ZERO-RATED

EXPORT SALES

p 20,500,105.97 26,413,983.18

DOMESTIC PURCHASE

OF TAXABLE GOODS/

SERVICES p 1 ' 907' 151 . 30 3,207,030.98 VAT INPUT TAXES p 190,715. 13 320,703.05 DECISION C.T.A.

CASE NO.

5 3 0 5 7/1/94-9/.30/94 10/1/94-12/31/94 TOTAL - 3 - 20,442,370.09 36,135,934.21 P103,492,393.45 2, 623,470. 57 2,276 , 740.80 P10,014,393.65 262,347.15 227,674.08 P1,001,439.41 The corresponding VAT returns ccmprising the aforestated periods were filed with and received by the respondent (Exhibits "J", "K", "L", "M", and "N" and submarkings). Petitioner asserted that the VAT input taxes wl1ich it paid have not been applied to any of its VAT output tax I iabi I ity during the same period or to any succeeding quarter or quarters and that the VAT input taxes of P1,001,439.41 are duly supported by sales invoices and/or official receipts issued by its suppliers (Exhs.

"C" to "C- 339" and "D" to "D-998"). Hence, on February 21, 1995, petitioner filed with respondent a written claim for refund of VAT input taxes in tile amount of P878,981.64 (Exh.

"W") which it amended later on July 20, 1995 by fi I ing an amended written claim for refund/issuance of a tax credit certificate in the amount of P1,001,439.41 (Exh.

" Y " )

.

Since the two-year prescriptive period for the fi I ing of a claim for refund was about to lapse sans any action on the part of the respondet, petitioner instituted the instant case on December 18, 1995.

In her Answer filed on January 18, 1996, respondent sets forth the following special and affirmative defenses: 1.

The petition states does not allege the dates when refunded were actually paid; no cause of action as it the taxes sought to be DECISION C.T.A. CASE NO.

5305 - 4 - 2.

Petitioner's excess VAT input taxes respondent's bureau;

· claim is st iII for refund of alleged under investigation by 3.

PetItIoner fa I I ed to show camp I I ance wIth the provision of Section 16(c)(3) of Revenue Regulations No. 5-87 as amended by Revenue Regulations No. 3-88; 4.

The input taxes al fegedly paid on its local purchases are not supported by invoices pursuant to Section 108 of the Tax Code, as amended; 5.

Claims for refund are construed against the claimant, the same being in the exemption from taxes; strictly nature of 6.

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. The lone issue to be resolved in this case is whether or not petitioner is entitled to the issuance of a tax credit certificate amounting to P1,001,439.41 representing VAT input taxes paid on its domestic purchases of taxable goods and services for the period from January 1, 1994 to December 31, 1994. The provisions of law applicable in the case at bar are Sections 100 (a)(1), 102 (a)(2), 104 (b), and 106 (a) of the Tax Code, pertinent portions of which are quoted hereunder: "Sec. 100.

Value-added tax on sale of goods.

(a) Rate and base of tax.

-There shai I be levied, assessed and collected on every sale, barter or exchange of goods, a value-added tax equivalent to 10% of the gross sel I ing 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 shal I be subject to 0%:

(1) Exports sales; x x x."

DECISION C . T .A.

CASE NO.

5305 - 5 - "Sec. 102.

Value-added tax on sale of services. (a) Rate and base of tax.

There shal I be levied, assessed and collected, a value-added tax equivalent to 10% of gross receipts derived by any person engaged in the sale of services.

x x

x · Provided Tl1at the following services performed in the Philippines by VAT­ registered persons shal I be subject to 0%:

X

X X

X X X-

X X X

(2) Services other than those mentioned in the preceding sub-paragraph, the consideration for which is paid for in acceptable foreign currency which is remitted Inwardly to the Phi I ippines and accounted for in accordance with the rules and regulations of the Central Bank of the Phi I ippines:

X X X

X X X

X X X. "

"Sec.

104.

Tax Credits.

-

X X X

X X X

X X X.

(b) Exc e s s o u t p u t o r in put tax.

- If at the end of any taxable quarter the output tax exceeds the input tax, the excess shal I be paid by the VAT-registered person.

If the input tax exceeds the output tax, the excess shal I 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."

(Under! ining ours} "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 a tax credit certificate or refund of the input tax attributable 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 regulation of the Central Bank of the Phi I ippines." (Emphasis supplied) In this case, petitioner submitted documentary evidence necessary to substantiate its claim for refund and/olœ tax credit pursuant to Section 16 of Revenue Regulations No. 5-87, as amended by

D E CISION

C .T .A . C ASE NO. 5 305 - 6 - Revenue Regulations No.

3-88 such as App I i cat ion for Tax Credit/Refund of Value-Added Tax Paid CBIR Form No. 2552, Exhs. "X" and "Z"), photocopy of supplier's invoices and/or official receipts (Exhs. "C " to "C-339" and "D " to "D-988");

and bank credit advises (Exhs.

E & F to F-42).

Based on the above-enumerated provisions of the Tax Code and the facts presented, petitioner is rightfully entitled to a refund or to the issuance of a tax credit certificate for the VAT input taxes on its domestic purchases of goods and services. And this conclusion finds support in Section 8(a) of Revenue Regulations No. 5-87 which provides as follows:

"Section 8.

Zero-rating.

(a) In general - A zero-rated sale 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 shal I not result in any output tax.

The input tax on his purchases of goods eor services related to such zero-rated sale shal I be available as tax credit or refundable in accordance with Section 16 of these Regulations." (Underscoring ours) In view of the voluminous sales invoices and official receipts which the petitioner had to present during the trial to buttress its claim and in campi iance with the requirement of CTA Circular No. 1- 95, it engaged the services of Punongbayan and Araul lo, an independent Certified Public Accountant (CPA).

Their findings as embodied in their Certification marked as Exhibit "A" (p.

45, CTA records) may be summed up thus:

DECISION C . T .A . CASE NO .

53 0 5 - 7 - 1.

The VAT paid per summaries prepared by petitioner for the period January 1, 1994 to December 31, 1994-Head Office <Exhibit "B") and Minesite (Exhibit "B-1") in the amount of P1, oo·1,493. 81 are pro;?er I y recorded in the books; 2.

The date of the invoices and/or official receipts is within the period covered in the application; - 3.

The suppliers' VAT numbers are indicated on the Invoices and/or official receipts; 4.

The supp I i ers' invoices and/or official receipts on file represent original copies; 5.

The VAT paid are correctly and properly computed;

6.

The export sales indicated in the summe.ry are recorded in the books. 7.

However, input tax credits total I ing P79,009.28 were found to have either no supporting invoices or official receipts, or if otherwise supported by such documents, there were erroneous entries therein or an erroneous tax base was used, or in a few other transactions, the petitioner returned suppl ics thus resulting in the adjustment of amounts reflected in some invoices or receipts as specified in the "Summary of Findings".

After a thorough study of al I the exhibits offered by the petitioner, the Court concurs with the aforementioned findings of Punongbayan and Araul lo.

The evidence offered by respondent consisting only of Letter of Authority No. 62176 dated July 25, 1995 and the signature of Mr.

Hernani S.

Arboleda thereon <Exhibits "1" I and "1-A", respectively;

p.

129, CTA records) did not, after all, controvert the evidence of the petitioner.

Said exhibits merely authorized RO Leticia Lorna Dosado/GS Jul ita Batoon of Revenue District 47, East Makati to examine petitioner's books of accounts DECISION C.T.A.

CASE NO.

5305 - 8 - and other accounting records in connection with its claim for refund of VAT for the subject period. In conclusion, this Court finds that petitioner is entitled to a lesser amount of P922,419.19 after taking into consideration the exhibits offered by the petitioner including the findings of the independent CPA.

The detai Is of the computation are specified below, thus:

Input Taxes Paid (E X h i b i t 'B' l Summation Head Office Mine Site Per Quarter January 1994 p 10,199.81 p 62,559.00 February 1994 15,773.38 33,925.73 March 1994 9 1 723, 77 58,533.59 p 190,715.28 April 1994 p 53,871.85 p 39,319.93 May 1994 42,812.89 56,018.95 June 1994 82,151.75 46,516.74 320,692.11 July 1994 P118,269.86 p 33,304.71 August 1994 20,425.92 30,878.04 SepteXber 1994 13,689.92 45,843.89 262,412.34 October 1994 P122,909.11 p 32,041.43 Nomtber 1994 2,322.68 23,298.89 December 1994 19,886.13 27,215.84 227,674.08 Total P1,001,493.81 Less findings arrived at by the independent CPA: (p. 48, Ex h. D of Ex h. A, p. 94, CTA rec. l a.

Erroneous entry b.

No invoice c.

Returned supplies d.

No official receipt e.

Not a VAT supplier f.

No original sales invoice g.

Erroneous tax base

AMOUNT REFUNDABLE

A m o u n t (EX h. 'Y') Claimed wl BIR  190,715.13 320,703.05 262,347.15 227,674.08 P_hQ_01?41 p 72,005.71 4,741.82 836.36 827.58 272.73 259.09 65.99 Amount Verified p 190,715.13 320,692.11 262,347.15 227,674.08 P1,001,428.47 79,009.28 p 922,419.19 I I

DECISIO N

C.T.A.

CASE NO.

5305 - 9 -

WHEREFORE, in view of the foregoing, respondent is hereby ORDERED to ISSUE a tax credit certificate in favor of petitioner in the amount of P922,419.19, representing VAT input taxes for the period January 1 , 1994 to December 31 ,_ 1994. WE I I