Rohm Electronics Philippines, Inc. vs. The Commissioner of Internal Revenue

DECISION

This Petition for Review is seeking for the refund or issuance of a tax credit certificate in the amount of P24,547,381.31, representing unutilized input value-added taxes (VAT, for brevity) paid on domestic purchases of taxable goods and services and on importation of goods attributable to zero-rated export sales for the period July 1, 1996 to March 31, 1997.

Petitioner is a domestic c_)l?_oration duly organized and existing tmder and by r:&:'-s·( virtue of the laws of the Philippin‚§ #Ith principal office in People Technology Complex, ,-p''"'! ' ·.··)'.

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Carmona, City.

It is reistf;f!t oard of Investments in accordance with t provisions of the Omnipus rrr f.fm N .ce of 1987 (CT A records, f, ? 1-33). -';' · .i·

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, :'$_ ';; "!'·:· ·,'r ): . · • • registered with the Bureau of Jnf(f)*+ )*Ye!1+,- as a VAT entity }{ 1{%! ; ertific:-:::·.- . ·: !

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Registration RDO Control ƒo. 94-540-00 165, dated June 13, 19·. :·

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, • principally engaged in the business of manufacturing and exporting microchip resisto;...,, capacitors, integrated circuits and other electronic products. 1240

For the period July 1, 1996 to March 31, 1997, Petitioner seasonably filed its quarterly Value-Added Tax (VAT) Returns showing, among others, the following information:

DETAILS OF SALES

Gross Taxable

Period Covered Exh. Goods/Services__ Output Tax Zero Rated Sales 07-01-96 to 09-31-96 B, B-1 & B-2 P 30,407.32 P 3,040.73 P1,146,406,356.11 10-01-96 to 12-31-96 C,C-1 & C-2 19,626.71 1,962.59 1,211,193,420.93 01-01-97 to 03-31-97. D, D-1 & D-2 41,473.29 4,148.11 1 ,418,680,952.32 Totals P91,507.32 P9,151.43 —_ P3,776,280,729.36

DETAILS OF PURCHASES

Domestic Purchases Importation of

Period Covered of Goods/Services Input Tax Goods Input Tax 07-01-96 to 09-31-96 P 62,911,066.57 P6,291,106.65 P3,710,800.00 P 371,080.00 10-01-96 to 12-31-96 94,680,849.21 9,468,084.91 2,250,720.00 225,072.00 01-01-97 to 03-31-97 38,358,600.22 3,835,860.02 44.437,704.70 _4.443,770.47 Totals P195,950,516.00 1 1.58 P50,399,224.70 P5,039,922.47 Petitioner, believing that it is entitled to the refund of input VAT because most of its sales were exported, filed with the One Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the Department of Finance, three separate Applications for Tax Credit/Refund of Value-Added Tax Paid, detailed as follows:

Period Covered Date Filed Exh. Import VAT Local VAT Total 07-01-96 to 09-31-96 08-29-97 E,F,G P 370,830.00 P6,206,363.42 P 6,577,193.42 10-01-96 to 12-31-96 09-24- 97 * Hy. I,J 220,523.00 9,475,107.15 9,695,630.15 01-01-97 to 03-31-97 02-16- 98: K; iv M_ _4,443,770.47 _ 3,835,860.02 _ 8,279,630.49 ~ Totals, P5,035,123.47 P19,517,330.59 P24,552,454.06 hs On September 29, 1995 Peles filed a judicial claim for refund, by way of the® :

- instant Petition for Review, in the ayo of P24, 634,974.03 in order to ool the runt ‘i

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i shit of the two-year prescriptive period under the law?

In his Answer, Resrundent raised the following Special and Affirme

Defenses:

5. Petitioner’s claims for refund/tax credit are still undergoing administrative routinary examination/investigation by the Department of 1241

Finance One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center;

6. Petitioner miserably failed to demonstrate that the taxes subject of the case at bar were erroneously or illegally collected on account of its dereliction to present proofs showing that its alleged sales are covered by the provisions of Section 106(A)(2)(a)(l) of the Tax Reform Act of 1997;

7. The total amount of P24,54 7,3 81.31 being claimed by petitioner as alleged unutilized input tax credits for the period July 1, 1996 to March 31, 1997 was not properly documented;

8. In an action for refund/credit, the burden of proof is on the taxpayer to establish its right to refund and failure to sustain the burden is fatal to the claim for refund/credit; and

9. In the long line of cases decided by no less than this Honorable Court, as affirmed by the Court of Appeals and the Supreme Court, claims for tax refund/credit are construed in strictissimi juris against the taxpayer as they partake the nature of exemption from tax. On November 23, 1998, a Pre-Trial Brief was filed by Petitioner of which Respondent admitted all three proposed stipulation of facts, namely: (1) that Petitioner is a BOI registered enterprise; (2) that it is a VAT registered entity; and (3) that the instant Petition for Review was filed within the two-year period prescribed under Section 230 of the Tax Code. As a result of these stipulated facts, the Court ruled that the only issue left 'f·-,;. ' to be resolved is factual, that ist· --Zhe%[ or not Petitioner is entitled to the tax •.8·-9 ' ,' ' : .· 7·A'J:

credit/refund of the unutilized mP,Nt YA r fM the period July 1, 1996 to March 31, 199’ . ,. '

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(see Minutes ofthe Sessi?n, Nq.y:LP3r.KJ· 1 .9,“8, CTA records p. 44). /45 ;;{$/ ·.

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*'·:·:1.;;_: . - Meanwhile, witness for the .\fitjoner1'Ms. ”andra Alkuino, manfh- : .-· 1 durinr·: •–·—.;˜ :t:J,UV)( ... ;:> ' >·. 2 · ;;

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sessio™ held on August 24, 199?{fh!JJ Tax •. ·redi Certificates have f4W·XY.j{· · een· <( ,,.":$"· · .. ?

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._ for VAT input taxes paid n 1 cal purchases of goods and services for the period Oc " :, .

1996 to December 1996 and for January I, 1997 to March 31, 1997. However, tax credit 1242 certificates have not yet been granted for VAT input taxes incurred on importation of capital goods for the same period (TSN, August 24, 1999, p. 8). Thus, the factual issue is now limited to whether or not Petitioner is entitled to the remaining claim for refund of unutilized input VAT paid on local goods and services for the period July 1, 1996 to September 31, 1996 and input VAT paid on importation of goods for the period July 1, 1996 to March 31, 1997, broken down as follows:

Period Covered

07-01-96 to 09-31-96 10-01-96 to 12-31-96 01-01-97 to 03-31-97

Totals

Input VAT Claimed with DOF

Local

P6,206,363 .42 granted granted P6.206.363.42

Import

p 370,830.00 220,523.00 4,443,770.47 P5.035.123.47

Total

p 6,577,193.42 220,523.00 4,443,770.47 P1 1.241.486.89 Petitioner, due to the voluminous nature of evidence to be presented, availed of the services of an independent Certified Public Accountant pursuant to CT A Circular No. 1-95, as amended.

As a consequence, Mr. Ruben R. Rubio, a Partner of SGV & Company was commissioned to verify the accuracy of Petitioner's summary of input taxes and export sales (TSN, February 9, 1999, pp. 5 to 7). Thereafter, three written reports were submitted stating the audit procedures performed with their corresponding :

findings (Exhs. S, S-1, EEE, EEE-! , . f.F,.:;d FFF-1). - ;;: . .t-·' 7 ,l In his final report, Mr. BHbi6, ltttes\!{1 to the following findings: (Exh. FFF) 2·< ;'·0/o..i.< .. : . 0 . ·';, I.

ACCURAR

OFfffe;.y OF INPUT TAXES ..

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Out of the total input tlf QfllOning to P24,634,974.03 fot •11P. , Žrioq :· · · covered by the claim [i.6:;'the third uarter (July to September u...1 ... ourth ·quarter (October to becember) of 1996; and first quarter (January to March of 1997], we hilVe verified only the amount of P11,241,486.47. We list down below the amounts of input taxes that we have not verified for each quarter covered by the claim: 1243

Input Taxes Not Verified

Third Quarter, 1996 Fourth Quarter, 1996 First Quarter, 1997

Total

p 84,993.63 9,472,633.91 3,835,860.02 P13.393.487.56

Findings and Observations:

Based on the procedures we performed, we present below our findings and observations on the input taxes we have verified.

Exceptions

Annex

Input Tax Claimed

Purchases of Services Not Supported

By VAT Official Receipts

A

p 3,007.04 Purchases of Goods Supp01ied by Non- Invoices Printed After 1 uly 31, 1991

B

11,630.89

Purchases of Goods Supported by VAT

Invoices issued not in Company's name

C

126.00 VAT on importation of Goods Paid

Before Third Quarter of 1996

D

4,271.00 P19,034.93

Total

II. INWARD REMITTANCE OF EXPORT SALES PROCEEDS

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We have verified only export sales amounting to P2,564,287,505.30 broken down as follows

Export Sales Verified

Third Quarter, 199.4 ' P1,146,405,356.11 First Quarter, 1997' 1,417,882,149.19 t(tUil'<;t- P2.564.287.505.30 We have not ver
ed +f;. ounting to PI ,211,992,224.06 broken down as follows·"' L'> ' .. t: . ' ,.,, • , J .:)· .

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; . ·<·:::·t (:. ;.·.: ·: ·.:<<t Export Sales Not V¢r} ted.' ·" . · . ;"· ·:

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Qua1 r/!R9 . ·" .. . :

\ /.P1,211,193,420.9,t :! \t. F1rst Quarter, l 997 ' · · 798,803. U· .

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P1.211.992.224.06 · •

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1244 - '· '•' "\ .• .. , The aforementioned findings show that the commissioned independent CPA re- computed the properly supported input taxes allocable to zero-rated sales which were not absorbed by the output tax for the period involved. For the third quarter of 1996, the proper input tax still unutilized amounted to P6,555,117.34; nothing for the fourth quarter of 1996 since the accuracy of the Summary of Export Sales was not verified; and for the first quarter of 1997 the sum of unutilized input tax amounted to P4,439,622.36. The Court, after a further review and verification of the findings embodied in the aforementioned final report together with the documentary exhibits presented, makes the following observations: 1.

The findings arrived at by the commissioned independent CPA is found to be in order;

2.

The verification of unutilized input VAT for the first quarter of 1997 by SGV & Co. pertains only to VAT on importation of goods; 3.

The issuance of tax credit certificates for local VAT for the fomih quarter of 1996 and first quarter of 1997 as manifested by Petitioner's witness, Ms. Alkuino, have no bearing because the verification of the accuracy of input taxes herein claimed refers only to those input taxes for the p$d Jl,lly 1, 1996 to March 31, 1997 which were not -1;!23-4: ! ·.:. ·() issued tax credit certificates; an-v.{> ( ' · . :;

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The remamm}; mp wX+J HJ.1; dxmestlc purchases of goods and ,erv1ces .c; .. · ..

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importation of goods for: the qu,rtef-.de/ yepteruber 31, 1996, and i!lt-;:il taxes ' . · ., ' ·0. ;)"\ ..

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importafion of goods for tze q{ .a,ne[ .* , |p4ed Pecemb · i- 31, 1996 and lvffh·· .,:; : · '199. , · ·' not been applied nor utilized against the output tax liability of Petitioner in ·.

succeeding VAT taxable quarters (Exhs. N, N-1, 0, P, P-1, Q, R). 1245

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' Z In conclusion, We find the computations of the independent CPA commendable and are hereby adopted, to wit: Third Quarter o(i 996

Total Input Taxes Claimed as Refund (DOF)

Less: Input Taxes Not Verified

Input Taxes Verified

Less: Exceptions Noted

Properly Supported Input Taxes

Sales

Subject to I 0% VAT (Per VAT Return)

Export Sales

Add(Less): Exceptions Noted

Export Sales Not Supported by

Export Sales Invoices and

Airway Bills

Understatement in Export Sales

Export Sales After Exceptions

Total Sales

(P221 ,026.35) 32,376.87

Properly Supported Input Taxes

Allocable to Sales Subject to I 0% VAT

Allocable to Sales Subject to 0% VAT

Total Input Taxes

Output Taxes

Less: Input Taxes Allocable to Sales Subject to 0% VAT

Unabsorbed Output Taxes

Less: Input Taxes Allocable to sales Subject to 0% VAT Properly Supported Input taxes allocable to Sales Subject

to 0% VAT Not Absorbed by Output Taxes

First Quarter o(i 997 :.

Total Input Taxes Claimed

.

as Refu'},.ffiPF)

Less: Input Taxes Not Venfied

;;:· ..•

Input Taxes Verified

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Less: Exceptions Noted

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Properly Supported Input Tcte;;;: Xft ': ·,:

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Sales

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• • ' ., Subject to 10% VATd (PeryAf Jte,'urp) ' · :

export Sales .

· . ·'.' ,,· , . \ : ,;,>; J-,ess: Export Sales Npt Yet.Vclrlflfd · export Sales Verifieg ..

'''·· · J_,ess: Exceptions Noted

Export Sales Not Supported by

Export Sales Invoices and

Airway Bills

Export Sales After Exceptions

Total Sales

Properly Supported Input Taxes

1246 P6,662, 186.63 84,993.63 P6,557,193.00 19,034.93 P6.558.I58,07 p 1' 146,405,356.11 (188,649.48) P8,279,630.49 3,835.860.02 P4,443,770.47 P4.443.70.47 p 30,407.32 l,l46.2 I 6, 706.63 Pl.l46.247.I 13.95 p p p p £ 173.97* 6,557,984.10** 6.558.158.07 3,040.73*** 173.97* 2,866.76 6,557,984.1 0** 6,555,11.34 ·.

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PI ,418,680,952.32, '!· . ; .

798,803.1(' :._: ,:·, ...  ..

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PI ,417,882, 149.1 fl' 2,579,304.20 .. \. ;. .

1,4 I 5,302,844.99 p 1.415,344.326.09

Allocable to Sales Subject to I 0% VAT

Allocable to Sales Subject to 0% VAT

Total Input Taxes

Output Taxes

Less: Input Taxes Allocable to Sales Subject to 0% VAT

Unabsorbed Output Taxes

Less: Input Taxes Allocable to sales Subject to 0% VAT Properly Supported Input taxes allocable to Sales Subject

to 0% VAT Not Absorbed by Output Taxes

*Computed using the following formula: Properly Supported Input taxes

X

**Computed using the following formula: Properly Supported Input taxes

X

***Computed using the following formula:

Sales Subject to I 0% VAT

Total Sales

Export Sales After Exceptions

Total Sales

Output Taxes = Sales Subject to I 0% VAT (exclusive of VAT) x I 0% p 130.24* 4,443,640.23** p 4.443.770.47 p 4,148.11*** 130.24* p 4,017.87 4,443,640.23** £ 4,432,622.36

WHEREFORE, in view of the foregoing, the instant Petition for Review is hereby PARTIALLY GRANTED. Petitioner's claim for refund for the fourth quarter of 1996 is hereby DENIED due to insufficiency of evidence while Petitioner's claims for refund for the third quarter of 1996 and first quarter of 1997 are GRANTED. Respondent is hereby

ORDERED

to REFUND or in the alternative to ISSUE A

TAX

CREDIT

CERTIFICATE in the total atriou.nt of Ten Million Nine Hundred Ninety Four ;<' • .

•:· Thousand Seven Hundred Tbirt)/ Nine and Seventy Centavos (PlO, 994, 739.70) . .

7t8··.\ 9s- ··  consisting of P6,5 55' 11 7 ;:4, r,Fpf.;<=PH>? um.ltilized input vAT on domestic purchases 0 # )*;.),_ .. ··., g &' r .I -$ > ."

 goods and services and 9" imfp5 .!sn:·P;: a:; ds for July 1, 1996 to Sept;Fr r 31, 106:·: • ;.'• ,h--1, I ;. L

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• • and f4,439,622.36, representi.g /·0fHiz1q 2!1PU3 YAT on importatiqp ·' ds f . . 1: ·:

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first quarter of 1997.

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ERNESTO D. ACOSTA

Presiding Judge



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WE CONCUR:

BC :i) RAMON 0. DE

RA

Associate Ju

e

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 Section 13, Article VIII of the Constitution.

124 \J, ERNESTO D. ACOSTA

Presiding Judge

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