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

DECISION

This Petition for Review is seeking for the refund of alleged unutilized input value-added tax (VAT, for brevity) on importation and domestic purchases of goods and services attributable to zero-rated export sales in the amount of P18,960,206.19 (originally in the amount of P45,709,892.97) for the quarter ended March 31, 1998. The facts as borne out by the records and pleadings of the case are as follows: Petitioner is a corporation duly organized and existing under and by virtue of the laws of the Philippines with office address located at the People's Technology Complex, Carmona, Cavite (par. 1, Joint Stipulation of Facts & Issues, CTA Records, p. 64). It is engaged in the business of manufacturing and exporting microchip resistors, capacitors, integrated circuits and other electronic products.

Petitioner is registered with the Bureau of Internal Revenue as a VAT taxpayer with Certificate of Registration bearing RDO Control No. 94-540-000165 dated June 13, 1994 (Exhibit "D ").

It is likewise registered with the Board of Investments in accordance with the provisions of the Omnibus Investments Code of 1987 enjoying a six- year income tax holiday from the start of its commercial operations (Exhibits “A”, “B” and “C'"), For the period April 1, 1997 to March 31, 1998, petitioner seasonably filed its quarterly Value-Added Tax Returns (Exhibits “E”, “F”, “G”, and “H”). These VAT returns were simultaneously amended on June 24, 1999 reflecting, among others, a total output VAT in the amount of P20,193.12 with an aggregate input VAT in the sum of P69,211,519.52, and zero-rated export sales of P7,738,538,025.25, detailed as follows:

Period Output Input VAT Zero-Rated

Covered Exh. VAT Domestic Importation Sales 2nd Qtr. 1997 I, -1,1-2 P 3,220.40 P 3,901,640.51 P 4,219,638.00 P 1,671,131,740.55. 3rd Qtr. 1997 L,L-1,L-2 4,412.91 19,599 985.99 6,689,199.00 1,867,786,505.06 4th Qtr. 1997 O, O-1, O-2 3,726.43 10,131,996.83 5,708,853.00 1,986, 165,606.20 1st Qtr.1998 R,R,-1, R-2 8,833.38 9,756,407.19 9,203,799.00 2,213,454,173.44

Total

P20,193.12 P43,390,030.52 P25,821,489.00 P7,738,538,025.25 Pursuant to BIR Revenue Audit Memorandum Order No. 2-93, petitioner filed on different occasions seven (7) separate Applications for Tax Credit/Refund of Value- Added Tax Paid with the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the Department of Finance covering the aforementioned input taxes in the following manner:

Period Date of Input VAT Credits

Covered Exhibit Filing Domestic Importation Total

27 Qtr 1997. UU T,U2 (02-16-98 P38, 901,645.57 —P 4,299.625.00 P 8,111,270.57, Additional Y, Y-1 to Y-3 06-25-99 10,013.00 10,013.00 3rd Qtr. 1997 V, V-1, V-2 03-02-98 19,624, 863.8¢ 6,034,613.00 25,659,476.89 Additional Z, Z-1 to Z-3 06-25-99 664,599.00 664,599.00 4th Qtr. 1997 W, W-1 to W-3 04-30-98 10,131,996 .83 6,142,794.00 16,274,790.83 Additional AA, AA-1 to AA-3 06-25-99 230,658.00 230,658.00 1st Qtr. 1998 X, X-1 to X-3 07-16-98 9,756,609.32 9,434,457.00 19,191,066.32

Total

P43,415,115.61 P26,726, 759.00 P70,141,874.61

Petitioner anchored its claims for refund on the provisions of Section 11 2(A) and (B) of the Tax Code, as amended, to quote:

Section 112. Refunds or tax credits of input tax. -

(A)

Zero-rated or Effectively Zero-rated Sales.

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 applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(l ), (2) and (B) and Section 108(B)(l) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko 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 basis of the volume of sales.

(B)

Capital Goods. - A VAT-registered person may apply for the issuance of a tax credit certificate or refund of input taxes paid on capital goods imported or locally purchased, to the extent that such input taxes have not been applied against output taxes. The application may be made only within two (2) years after the close of the taxable quarter when the importation or purchase was made.

XXX

XXX

XXX

Finding petitioner's claims for refund meritorious, the Department of Finance subsequently issued tax credit certificates in the amountofP23 ,501 ,626.36 (p. 350, CTA Records) representing a portion of the input VAT claimed for the second and third quarters of 1997.

Hence, the remaining input VAT of petitioner amounted to P45,709,892.97, computed as follows:

PAG E4

Total input VAT per amended returns

Domestic

P43,390,030.33 1

Importation

25,821,489.00 Less: TCCs received Unrefunded input VAT P69,2 11 ,519.33 23,501,626.36 P45.709.892.97 Since there was no action on the part of the respondent as to the rest of its claim, petitioner was compelled to file the instant petition for review on July 20, 1999 in order to preserve its right to judicially claim for the refund of unutilized input VAT payments. During the pendency of this case, the Department of Finance again processed, approved and caused the issuance of various tax credit certificates in favor of petitioner (Exhibits CC, BB, EE, III and JJJ). Thus, out of the original claim of petitioner in the amount of P70,141 ,874.61 , petitioner reduced its claim for refund or issuance of a tax credit certificate to P 18,960,206.19 representing its unutilized input VAT only for the quarter ended March 31 , 1998.

Therefore, what is left for Us to resolve is whether or not petitioner is still entitled to the remaining amount ofP18,960,206.19.

As a VAT -registered taxpayer whose sales are zero-rated, petitioner is legally entitled to claim for the refund of its unutilized input VAT attributable to the latter's export sales pursuant to the aforequoted Section 112(A) and (B) of the Tax Code, as amended.

Thus, We now determine whether petitioner was able to substantiate its remaining claim.

Due to the voluminous nature of the documents to be presented, petitioner, pursuant to CTA Circular 1-95, as amended, engaged the services of SGV & Company to 1 Should be P43,390,030.52.

PAGES

conduct a special audit and examination of various receipts, mvo1ces and other long accounts relative to the present case. In its amended report dated A ugust 16, 2000, the auditing firm presented to the Court the following findings: (Exhibit " YY" )

Exceptions

1st Quarter

Annex

1998

Purchases of Goods Not Supported

A1

p 2,598.64 by VAT invoices

Purchases of Services Not Supported

A2

17,651.86

by VAT Official Receipts

Purchases of Goods Supported by

81 17,525.46

Non-VAT Invoices Printed After

July31 , 1991

Purchases of Services Supported by

82 3,755.18

Non-VAT Official Receipts Printed

After July 31 , 1991

Purchases of Services Supported by

C1

1,185.37 Non-VAT Official Receipts printed on or before July 31 , 1991

Purchases of Services Supported by

E1

60,000.00

VAT Official Receipts Issued Not in the Company's Name

Purchases of Goods Supported by

F1

1,726.36

Invoices Without 81R Permit

Purchases of Services Supported by

F2

436.36

Official Receipt Without 81R Permit

Purchases of Services Outside the

H1

2,130.00

Period of Claim

Input Taxes Claimed Without Any

11 10,494.32

Supporting Document

Erroneous Computation of Input Tax

J1

8,247.51

on Importation of Goods

Total

p 125,751 .06 After verification of the above report together w ith the evidence on record, the Court finds the sam e to be in order and is hereby adopted. It should be noted though that out of the total input taxes in the amount of P19,191 ,066.32 reflected in the 1997 first quarterly VAT return, only the sum of P 18,960,206.00 was verified to have supporting documents. Thus, the excepted input VAT in the amount of P125,751.06 should be deducted against the amount verified of P 18,960,206.00. In sum, petitioner is entitled to the refund of unutilized input VAT for the first quarter of 1998 in the reduced amount ofP18,825,621.49, computed as follows:

Input Tax Verified

Less: Exceptions Noted

Properly Supported Input Taxes

Less: Output Tax - First Quarter of 1998

Excess Input VAT

P18,960,206.00 125,751.06 P18,834,454.94 8 833.45 p 18.825.621.49 It is also important to note that the input taxes claimed for the first quarter of 1998 in the total amount ofP19,191 ,066.32 (importation and domestic) were already deducted from the accumulated input taxes as of September 30, 1998, as evidenced by the 1998 third quarterly Value-Added Tax (VAT) Return (Exhibits "HH", "HH-1 ", "HH-2", and "HH-3").

WHEREFORE, in view of the foregoing, the instant petition for review is hereby PARTIALLY GRANTED. Respondent is ORDERED to REFUND or, in the alternative, ISSUE a TAX CREDIT CERTIFICATE in the amount of P 18,825,621.49 in favor of petitioner.

Presiding Judge

I CONCUR:

~-f~C2. ~ . 0-t­ q{jANil'o C. CASTANEDA,f.fR.

Associate Judge

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.

k-u<- o~ ERNESTO D. ACOSTA

Presiding Judge