Tokumi Electronics Philippines, Inc. vs. Commissioner of Internal Revenue

DECISION

Before Us for consideration is a Petition for Review filed by the Petitioner on October 20, 1997, seeking for a refund of the amount of TWO MILLION FOUR HUNDRED THIRTY SEVEN THOUSAND EIGHT HUNDRED SIX AND 161100 PESOS (PhP2,437,806.16) representing alleged unutilized input taxes paid by the Petitioner on its local purchases of goods and services directly attributable to its zero- rated sales for the period July 1, 1995 to December 31, 1995. The antecedent facts of the case giving rise to the controveroy at bar are as follows: Petitioner is a domestic corporation organized and existing under and by virtue of the laws of the Republic of the Philippines. It is a VAT -registered entity (Exhs. A & C) engaged primarily in the business of manufacturing, exporting_ buying and selling at wholesale of speakers, assemblies, microphones, headphones and other electronic goods of similar nature. Petitioner is also registered with the Export Prc,cessing Zone Authority ("EPZA") having been issued EPZA Certificate of Registration No. 92-024.

Records reveal that on October 20, 1995 and January 22, 1996, Petitioner filed with the Bureau of Internal Revenue its VAT returns for the third and fourth quarters of 199 5, respectively, reporting a total amount of zero-rated export sales of P379,350,941.94 and total input tax payments of P2,43 7,806.16 on local purchases dir^ctly attributable to said sales broken down as follows: Inp u t VAT Carried over Carrieq over

Zero-rated

From previous On purchases to subsequent 1995 Exh.

Sales

quarter this quarter

Quarter

3rd qtr

D

p 200,268,423.02 p I ,812,194.28 p 1,120,518.09 p 2,932,712.37 4th qtr

E

179,082,518.92 2,932,712.37 I ,317,288.07 4,250,000.44

Total

p 379,350,941.94 p 2,43 7,806.16 As a VAT -registered entity and with export sales that were paid for in acceptable foreign currency inwardly remitted to the Philippines and acc01 mted for in accordance with existing regulations of the Bangko Sentral ng Pilipinas (BSP), Petitioner contends that the said export sales are not subject to 10% value added ta'{ but are subject to 0% pursuant to Section 1 OO(a)(2)(A) of the 1995 National Internal Revenue Code. For having erroneously paid the aforesaid VAT input taxt:S, and having no VAT output tax liability during the period July 1, 1995 to December 31, 1995 and in any succeeding quarter, Petitioner claims that it is entitled to refUl1d pursuant to Section 4.102-2 of Revenue Regulations No. 1-95 and Section 106(b) of the NIRC which reads, thus:

"Section 4.100-2.

Zero-rated safes.

A zero-rated sale by a VAT registered person, which is a taxable transaction for VAT purposes, shall not J) . .-.1 ' 1 r:., 0 t result in any output tax. However, the input tax on his pu;·chases of goods, properties or services related to such zero-rated sale shall be available as a tax credit or refund in accordance with these regulations." (Rev. Reg. 7-95) "Section 106. Refunds or tax credits of creditable input tax. - (a) Any VAT -registered person, whose sales are zero-rated or e-:-rectively 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 n0t been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 1 OO(a)(2)(A)(i),(ii) and (b) and Section 1 02(b )(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accow1ted for in accordance with the regulations of the Ban gko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basi; of the volume of sales."

Consequently, on October 17, 1997, Petitioner filed with the Bureau of Internal Revenue an administrative claim for refund of its unutilized input VAT payments attributable to its zero-rated sales for the period July 1 to Decemt er 31, 1995 amounting to P2,43 7,806.16 (Exhibit "J"). There being no affirmative response from the Respond€nt, and the two-year prescriptive period about to lapse, Petitioner elevated its grie\ ance to this Court on October 20, 1997.

In his Answer to the Petition for Review, Respondent interposed the following Special and Affirmative Defenses, to wit:

3. Petitioner's right to claim refund has partiall), if not totally, prescribed;

',) ·j . · '-'- u 4. Petitioner's claim for refund 1s still pendi21g administrative investigation and evaluation;

5. Taxes paid and collected are presumed to have been in accordance with law and regulations and hence, not refundable;

6. In an action for tax refund, the burden of proof is on the taxpayer to establish its right to refund and failure to sustain the bU'.·den is fatal to the corresponding action;

7. Claims for refund are strictly construed against clJ.imants since they partake of the nature of an exemption from taxation. The issue in this case is whether or not Petitioner was able :o substantially prove its entitlement to a refund.

The Court, after a thorough evaluation and painstaking scrutiny of the records of this case, conformably with existing laws and jurisprudence en the matter, is of the position, that the claim for refund must be granted. A perusal of all the evidence presented reveals that petiti01er has complied with all the requirements for zero rating of its sales set forth under Section 1 OO(a)(2) of the Tax Code which provides, thus:

Section 100. Value-added tax on sale of goods or properties. - (a) Rate and base of tax.

- There shall be levied, assessed ::.nd collected on every sale, barter or exchange of goods or properties, a value-added tax equivalent to 1 0% of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor.

(2) The following sales by VAT -registered persons sJ· all be subject to 0%:

(A)

Export sales. - The term 'export sales' means: (i) The sale and actual shipment of gc,ods from the Philippines to a foreign country, irrei:pective of any

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shipping arrangement that may be agreed upon which may influence or determine the transfer (Jf ownership of the goods so exported and paid for in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pili pinas (BSP). In the course of the proceeding, Petitioner was able to prove that it is a VAT- registered entity having been issued Value-Added Tax Registration Ce1iificate No. 001- 504-637-V (Exh. C). As shown by its Summary Export Sales, ƒxport invoices, airway bills, bills of lading and RCBC credit memos (Exhs. P, Q, S to S-1775, inclusive) covering the period July 1 to December 31, 1995, the period covered by this petition, there is no squabble that the Petitioner actually made export sales in the amount of P3 78,802,543.04 which were paid for in acceptable foreign curJ ency inwardly remitted and accounted for in accordance with Bangko Sentral ng Pilipinas regulations. Although Petitioner's total reported zero-rated export sales of P379,350,941. 94 in its 1995 third and fourth quarterly VAT returns was over by P548,398.90 as again:,t its actual export sales ofP378,802,543.04, it does not alter the fact that its sales are zero-rated. However, Petitioner was only able to overcome the burden of proof of excess input VAT in the amount ofP1,676,017.24 as this is the amount ascert2ined and verified by the Court to be the correct refundable amount to the petitioner, prcperly substantiated and supported by documents in accordance with the existing VAT law. After verification and examination of the accuracy of Petiti :mer's claim for refund, Punongbayan and Araullo certified in its report that the total amount of P682, 198.26 was not supported by Petitioner's supplier's invoices/official receipts, thus must be disallowed:

Reason for the Disallowance

a.) Purchases not in the account of Tokumi Electronics Philippines, Inc. b.) Purchases prior to the period covered in the application c.) Invoices/Official Receipts were not on file and could no longer be located d.) Invoices/Official Receipts do not indicate the VAT registration number of the supplier or the VAT registration number was only stamped e.) Invoices/Official Receipts do not show the BIR permit number of the printer f.)

Payment of services for which Tokumi Electronics Phils. Inc received provisional receipts or acknowledgement receipts only g.) No machine validation on billing statements for services availed by Tokumi Electronics Phils.lnc. The machine validation is require:! for the billing statements to serve as official receipts.

Total:

Exh.

Amount

0-1 p 3,095.86 0-17 403,741.64 0-18 14,390.10 0-23 225,414.46 0-24 3,427.53 0-25 .22,234.30 0-28 9,894.37 p 682,198.26 Likewise, in addition to the aforementioned disallowance, this Court finds the amount of P79,590.66 as not properly substantiated for not comr;lying with the invoicing requirements and the prescriptive period, broken down as follows:

Reason for the Disallowance

Amount

1.)

Reported twice p 629.00 2.)

Not in the name Tokumi Electronics Philippines, Inc. 439.35 3.)

Not within the period of claim 5,259.69 4.)

Overstatement of reported invoice amount 103.72 5.)

Without Invoice/Official Receipt but only supported by a statement of account 17,052.33 6.)

Without supporting documents 3,475.44 7.)

Invoice/Official Receipt without TIN 43.18 8.)

Discrepancy between amount of input taxes per vat Return & amount of input taxes per summary 52,587.95

Total:

p 79,590.66 As earlier adverted to, We are persuaded to extend the relief sought by Petitioner but only up to the amount ofP1,676,017.24 after considering th= above findings and the fact that the said excess input tax was never applied against any output tax liability of the 3 ..l 'I

I

Petitioner for the third and fourth quarters of 1995 and even in the succeeding quarters as evidenced by its quarterly VAT returns (Exhs. D, E & T to W, inclusive), computed as follows:

Amount of Claim (Exhs. D, E & J)

Less: Disallowances

a.)

Per Punongbayan & Araullo's Findings (Exh. L) 1.) Purchases not in the account of Tokumi Electronics Philippines, Inc. (Exh. 0-1) 2.) Purchases prior to the period covered in the application (Exh. 0-17) 3.) Invoices/Official Receipts were not on file and could no longer be located (Exh. 0-18) 4.) Invoices/Official Receipts do not indicate the VAT Registration number of the supplier or the VAT registration number was only stamped (Exh. 0-23) 5.) Invoices/Official Receipts do not show the BIR Permit number of the printer (Exh. 0-24) 6.) Payment of services for which Tokumi Electronics Phils. Inc. received provisional receipts or or acknowledgement receipts only (Exh. 0-25) 7.) No machine validation on billing statements for services availed by Tokumi Electronics Phils. Inc. The machine validation is required for the Billing statements to serve as official receipts (Exh.0-28) b.)

Per Court's Further Verification (Annex A)

1.) Reported twice 2.) Not in the name Tokumi Electronics Philippines, Inc. 3.) Not within the period of claim 4.) Overstatement of eported invoice amount 5.) Without Invoice/Official Receipt but only supported by a statement of account 6.) Without supporting documents 7.) Invoice/Official Receipt without TIN 8.) Discrepancy between amount of input taxes per vat Return & amount of input taxes per summary

Amount Refundable

p 3,095.86 403,741.64 14,390.IO 225,414.46 3,427.53 22,234.30 9,894.37 :'682, 198.26 p 629.00 439.35 5,259.69 I03.72 17,052.33 3,475.44 43.18 52,587.95 79,590.66 p 2,437,806.16 761,788.92 p 1,676,017.24

WHEREFORE, in the light of all the foregoing, the petition is PARTIALLY GRANTED. Respondent is hereby ORDERED to REFUND or ISSUE a TAX CREDIT

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CERTIFICATE to herein Petitioner in the amount of ONE MILLJON SIX HUNDRED SEVENTY SIX THOUSAND SEVENTEEN PESOS and 2"'1100 (P1,676,017.24), representing the latter's input VAT for the period July 1 to Decem.:..>er 31, 199 5.

CERTIFICATION

-(),
ERNESTO D. ACOSTA PR·esiding Judge I hereby ce1iify that the above decision was reached after duv consultation with the members of the Court of Tax Appeals in accordance with Section 13, A1iicle VIII of the Constitution.

oG ERNESTO D. ACOSTA

Presiding Judge

TOKUMI ELECTRONICS PHILIPPINES, INC. vs. COMMISSIONER OF INTERNAL REVENUE

SCHEDULE OF COURT'S DISALLOWANCES

ON CLAIMED INPUT TAXES -

3rd & 4th QUARTERS 1995

Supplier Month

1.) Not in the name of Tokumi Electronics Phlls.

Cargohaus Sep-95

Cargohaus Nov-95

Cargohaus Nov-95

Cargohaus Nov-95

Cargohaus Nov-95

Cargohaus Nov-95

Cargohaus Nov-95

2.) Not within the period of claim

Cargohaus Jul-95

Cargohaus Jul-95

Cargohaus Jul-95

Cargohaus Jul-95

Cargohaus Jul-95

Cargohaus Jul-95

Cargohaus Jul-95

Cargohaus Jul-95

Cargohaus Jul-95

Cargohaus Jul-95

Cargohaus Jul-95

Cargohaus Jul-95

Cargohaus Jul-95

K Line Air Service Phils., Inc. Jul-95 K Line Air Service Phils., Inc. Jul-95 K Line Air Service Phils., Inc. Jul-95 K Line Air Service Phils., Inc. Jul-95

PAC-Atlantic Lines Jui-95

Pair Cargo & Warehousing Jul-95

Pair Cargo & Warehousing Jul-95

Pair Cargo & Warehousing Jul-95

Pair Cargo & Warehousing Jul-95

Pair Cargo & Warehousing Jul-95

Pair Cargo & Warehousing Jul-95

Pair Cargo & Warehousing Jul-95

Pair Cargo & Warehousing Jul-95

Phil. Skylanders, Inc. Jul-95 Phil. Skylanders, Inc. Jul-95 Phil. Skylanders, Inc. Jul-95 Phil. Skylanders, Inc. Jul-95 Phil. Skylanders, Inc. Jul-95

Philcopy Corporation Jul-95

3.) Overstatement of reported invoice amount OOCL Phils. Inc. Dec-95

Overseas Agency Services Dec-95

im bal > ne.

R-982

R-1475

R-1618

R-1620

R-1624

R-1626

R-1628

R-296

R-297

R-298

R-299

R-300

R-301

R-302

R-303

R-304

R-305

R-306

R-307

R-308

R-309

R-310

R-311

R-312

R-149, R-150

R-313

R-314

R-315

R-316

R-317

R-318

R-319

R-320

R-321

R-322

R-323

R-324

R-325

R-186 to R-188

R-1992, R-1993

R-2146

Invoice

Number

239691 239625 254780 253541 254778 254781 256115 216297 210720 210721 215005 208067 208066 210718 208068 215007 215006 217049 217050 217048 10821 10993 10545 10457 0015428 429579 429403 432944 428992 436343 436342 437749 436341 068513 075489 075001 071701 075496 16641 8060595

Repérted Amount

Actual Amount

Overstatement

Reported Amount

Actual Amount

Overstatement

34 O.R.

Number

Invoice

Amount

ANNEXA

Disallowed Input Taxes Claimed - 1995

142964 142967 153802 152748 153803 153801 154916 127013 123221 123222 125962 121847 121846 123219 121848 125964 125963 127526 127527 127525 10821 10993 10545 10457 29744 429579 429403 432944 428992 436343 436342 437749 436341 068513 075489 075001 071701 075496 97617 7969 57209 P 188.¢ 3 376.29 1,010.53 341.€4 266.51 618.63 2,030.23 subtotal P 362.C5 1,018.43 663.5 228.23 597.69 166.65 594.23 540.¢0 1,184.81 817.45 1,505.5 282.29 3,691.78 §00.C9 500.CO §00.C9 500.C0 1,183.€9 246.55 1,331.22 144.43 1,053.&0 228.47 614.05 145.29 302.09 353.E7 640.¢2 662.64 1,365.5 4 1,429.69 34,500. 0 P_ 57,856.11 subtotal P= 10,610.45 9,645.0 P 4,643.69 P 964.¢5 P 1,936.C0 1,760.10 P 1,140.05 subtotal P 176.60 3rd Quarter 4th Quarter Total P 17.18 P P 17.18 qa 422.17 422.17 P 17.18 P 422.17_P 439.35 P__5,259.69 P P 5,259.69 _ P__ 5,259.69 P - P 5,259.69 P P 103.72 P 103.72 P -__P 103.72 P 103.72

TOKUMI ELECTRONICS PHILIPPINES, INC. vs. COMMISSIONER OF INTERNAL REVENUE

SCHEDULE OF COURT'S DISALLOWANCES

ON CLAIMED INPUT TAXES -

3rd & 4th QUARTERS 1995

ANNEX A

Invoice OR. Invoice ___Disallowed Input Taxes Claimed - 1995 __ Supplier Month Exh, Number Number _ Amount 3rd Quarter 4th Quarter __—Total_ 4.) Without invoice/official receipt but supported only by a statement of account KC Business Management Dec-95 R-2279 0519 0379 P_ 187,575.67 _P P_ 17,052.33, P__17,052.33 subtotal P - 17,052.33 17 052.33 5.) Without supporting documents Cargohaus Aug-95 223551 131621 P 460.7% AHK Awards Aug-95 0792 0792 8,641.60 National Bookstore Sep-95 430.50 9,532.8 866.63 866.63 A.N. Villaluz Construction Oct-95 3099 870.0 A.N. Villaluz Construction Oct-95 3095 643.0 Archetype Computer Service Oct-95 13858 3207 400.00 Columbia Computer Center Oct-95 005125 150.00; Dee Hwa Liong Electronics Oct-95 29995 8,120.0( Espana Photo Express Oct-95 0090 126.0%: ICTSI Oct-95 351751 351751 165.9 ICTSI Oct-95 R-1167 353621 353621 24.2 Lucy Salazar Hardware Oct-95 0842 75.0 Minda's Commercial Center, Inc. Oct-95 1586 3,280.00 Motor Express Oct-95 468 3,500.0: MR-2 Music & Gen. Merchandise Oct-95 0996 778.00 MR-2 Music & Gen. Merchandise Oct-95 0995 5,957.5 National Bookstore Oct-95 351905 110.50 National Bookstore Oct-95 733196 167.5 Photo City Manila Oct-95 5388 454.6 S. Serafico Hardware & Elect. Supp = Oct-95 63465 200.01) Tatoland Hardware & Const. Supp Oct-95 8127 792.09 Toyota Bel-Air Oct-95 237396 193907 2,882.6) ICTSI Oct-95 R-1144 1093715 1093715 P 2,998.6 ICTSI Oct-95 R-1145 1092900 1092900 1,306.8 ICTSI Oct-95 R-1163 1080438 1080438 1,306.89 ICTS! Oct-95 R-1169 1085468 1085468 1,306.8) P_ 35,615.9. 3,237.81 3,237.81 _ subtotal P 866.63 P 3,237.81 P 4,104.44 6.) Invoice/Official Receipt without TIN Airlift Asia Jul-95 R-457 8716 8716 P 475.0) P 43.18 P P 43.18 subtotal P 43.18 P - P 43.18 7.) Discrepancy between amount of input taxes reported per vat return and amount of Input taxes per summary

Per Vat Return Per Summary

(Exhs.M,D,E) (Exhs.M.N) Overstatement July 358,085.29 308,136.69 49,948.60 P 49,948.60 P P 49,948.60 Aug 495,184.87 495,067.10 117.77 117.77 117.77 Nov. 441,540.69 439,019.11 2,521.58 2,521.58 2,521.58 subtotal P 50,066.37 P 2,521.58 P 52,587.95 Total P__56,253.05 P_ 23,337.62 P 79,590.66

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