Filminera Resources Corporation vs. Commissioner of Internal Revenue

AMENDED DECISION

CASTANEDA, JR., J.:

Before this Court is petitioner's Motion for Reconsideration of the Decision dated 25 September 2014 filed on October 13, 2014 with respondent's Comment (To Petitioner's Motion for Partial Reconsideration of the Decision dated 25 September 2014) filed on November 5, 2014. Petitioner seeks reconsideration of the assailed Decision dated September 25, 2014, the dispositive portion of which reads: "WHEREFORE, premises considered, the instant Petition for Review is hereby DENIED for insufficiency of evidence.

Bureau of Investments (BOI)

registered enterprise enjoying incentives that its revenues from export sales of gold and silver ores are subject to value added tax (VAT) at zero percent.)k:-

Petitioner has attached to the aforesaid motion the Certified True Copy of BOI's Certification and Certified Reproduced Copy of Tax Credit Certificate. The said documents are presented to establish that PGPRC is a BOI registered entity which had exported 100°/o of its total sales volume/value for the fiscal year covering July 1, 2009 to June 30, 2010 and petitioner's administrative claim for the period October 1, 2010 to December 31, 2010 was granted. On the other hand, respondent counter-argues that the Court correctly denied the Petitions for Review for insufficiency of evidence on the ground that petitioner failed to prove by clear and convincing evidence that PGPRC exported 100°/o of the latter's processed gold and silver dore'.

Respondent points out that the documents attached to the abovementioned motion are not newly discovered evidence which warrants reconsideration. Respondent argues that the grant of the administrative claim for refund or the issuance of the Tax Credit Certificate for the period October 1, 2010 to December 31, 2010 is not a judicial notice that the Court can take cognizance. With regard to the Certification issued by the BOI, respondent alleges that the said certification does not prove nor validate that all PGPRC's products from January 1, 2010 to June 30, 2010 were actually exported.

After careful evaluation of the additional evidence submitted, the Court finds petitioner partially entitled to the instant claim. In the assailed Decision, this Court ruled that under Section 112(A) of the NIRC of 1997, as amended, to be entitled to a refund/tax credit of unutilized input VAT, the following requisites must be complied with:

1. the taxpayer must be VAT-registered;

2. the taxpayer must be engaged in sales which are zero- rated or effectively zero-rated;

3. the claim must be filed within two years after the close of the taxable quarter when such sales were made; and tz-- erA CASE NOS. 8528 & 8576

4. the creditable input tax due or paid must be attributable to such sales, except the transitional input tax, to the extent that such input tax has not been applied against the output tax.

As previously found by this Court, petitioner satisfactorily met the first and third requisites. Petitioner is a VAT registered entity¹ and that the administrative and judicial claims were filed within the period prescribed by law²• With regard to the second requisite, Section 106(A)(2)(a)(5) of the NIRC of 1997, as amended, and Section 4.106-5(a)(5) of Revenue Regulations (RR) No. 16-05, as amended, provide as follows:

"SEC. 106. Value-Added Tax on Sale of Goods or Properties. - (A) Rate and Base of Tax. - xxx

XXX

XXX

XXX

2) The following sales by VAT-registered persons shall be subject to zero percent (0°/o) rate:

(a) Export Sales. -The term 'export sales' means:

XXX

XXX

XXX

(5) Those considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987, and other special laws; xxx"~

"SEC. 4.106-5. Zero-Rated Sales of Goods or Properties. - xxx The following sales by VAT-registered persons shall be subject to zero percent (0°/o) rate:

(a) Export Sales.- "Export Sales' shall mean:

XXX

XXX

XXX

(5) Transactions considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, and other special laws.

XXX

XXX

XXX

For purposes of zero-rating, the export sales of registered export traders shall include commission income. The exportation of goods on consignment shall not be deemed export sales until the export products consigned are in fact sold by the consignee; and Provided, finally, that sales of goods, properties or services made by a VAT-registered supplier to a

HOI-registered

manufacturer I producer whose products are 100°/o exported are considered export sales. A certification to this effect must be issued by the Board of Investment (BOI) which shall be good for one year unless subsequently re- issued by the BOI." (Emphasis supplied) Based on the afore-quoted provisions of law and regulations, this Court ruled that petitioner must comply with the following requisites in order for its sales to be considered zero-rated:

1. the taxpayer seller must be VAT-registered;

2. the buyer must be a SOl-registered manufacturer/producer; and

3. the buyer's products must be 100°/o exported as shown by a certification issued by the BOI. 1v Exh.

Pursuant to such requirements, this Court previously held that petitioner failed to prove that its buyer, PGPRC, had exported 100°/o of its products and the PGPRC's BOI Certification merely established that the latter's products were geared for export but not all of its products were actually exported. However, with the supplemental evidence presented by petitioner, the

Court

finds petitioner's sales as zero-rated.

Particularly, the BOI Certification3 dated January 27, 2010 has certified that based on the information given, PGPRC exported 100°/o of its total sales volume for the period January 1 to December 31, 2009, and the same has been issued pursuant to the Guidelines on the issuance of BOI Certification per Revenue Memorandum Order No. 9-2000 entitled "Tax Treatment of Sales of Goods, Properties and Services made by VAT-registered Suppliers to SOl-registered Manufacturers-Exporters with 100°/o Export Sales". In the same certification, it was stated that the same shall be valid from January 1 to December 31, 2010 unless sooner revoked by the BOI. In its Quarterly VAT Returns for the third and fourth quarters of

FY

ending

June

30, 2010, petitioner's declared zero-rated sales/receipts amounted to P1,467,195,511.46, broken down as follows:

Zero-Rated

Exhibit

Period Covered

Sales/Receipts

F

Jan. 1, 2010 to Mar. 31, 2010 p 756,319,274.58

G

Apr. 1, 2010 to June 30, 2010 710,876,236.88 Total p 1,467,195,511.46 However, scrutiny of petitioner's supporting invoices and summaries of sales transactions discloses that the above amount of P1,467,195,511.46 was comprised of petitioner's ore sales to PGPRC in the amount of P1,466,325,511.46 and revenues from lease of land to PGPRC in the amount of P870,000.00, detailed as follows:

Land Lease

Invoice

Ore Sales to PGPRC to PGPRC

Total

No.

Date

In US$

I

In PhP

I Exh.

In PhP

In PhP

3 Exhibit MM, CTA Case No. 8528 docket, val. III, pp. 1469-1470.

"JJ"

"JJ-1"

"JJ-2"

"JJ-3"

"JJ-4"

"JJ-5"

"JJ-6"

"JJ-7"

"JJ-8"

"JJ-9"

"JJ-10"

"JJ-11"

00061 1/31/2010 00062 1/31/2010 5 839,666.80 00063 2/28/2010 00064 2/28/2010 4 884,583.00 00065 3/31/2010 00066 3/31/2010 5 584,136.72

Subtotal

16,308,386.52 00067 4/30/2010 00068 4/30/2010 4 935 943.10 00069 5/31/2010 00070 5/31/2010 5 349 467.20 00071 6/30/2010 00072 6/30/2010 5 161 814.29

Subtotal

15,447,224.59

Total

31,755,611.11 145 000.00 145 000.00 273 657 881.61 nsn 273 657 881.61 145 000.00 145 000.00 228 666 380.10 ''T" 228 666 380.10 145 000.00 145 000.00 253 560 012.87

"U"

253 560 012.87 755 884 274.58 435,000.00 756,319,274.58 145 000.00 145 000.00 220 882 466.54

"V"

220 882 466.54 145 000.00 145 000.00 249 444 585.64

"W"

249 444 585.64 145 000.00 145 000.00 240 114 184.71

"X"

240[11~184.71 710 441 236.88 435,000.00 710,876,236.88 1,466I325,511.46 8701000.00 1,467,1951 511.46 Nevertheless, the amount of P870,000.00 revenues derived by petitioner from its lease of land to PGPRC, cannot be considered as zero-rated export sales of goods under Section 106(A)(2)(a)(S) of the NIRC of 1997, as amended, and Section 4.106-S(a)(S) of RR No. 16-

05. Thus, the same shall be disallowed. Therefore, out of the total amount of P1,467,195,511.46 zero- rated sales/receipts declared by petitioner in its Quarterly VAT Returns for the third and fourth quarters of FY ending June 30, 2010, only the amount of P1,466,325,511.46 representing petitioner's ore sales to PGPRC for the same period is subject to zero percent (0°/o) VAT.

The Court shall now determine whether petitioner incurred input taxes in connection with its zero-rated sales of P1,466,325,511.46 and if such input taxes were not applied against any output VAT liability of petitioner. As reflected in its Quarterly VAT Returns for the third and fourth quarters of FY ending June 30, 2010, petitioner incurred input VAT in the amounts of P58,490,679.34 and P56,764,417.06, respectively, totalling P115,255,096.40, broken down as follows: 3rd Quarter 4th Quarter

Input VAT on:

(Exhibit ''F")

(Exhibit "G")

Total

Domestic Purchases

p 907,344.32 P1,490,493.07 P2,397_L837.39 of Goods other than

Capital Goods

Domestic Purchase of

Services

57,583,335.02 55,273,923.99 112,857,259.01 PS8,490,679.34 PS6, 764,417.06 P115,255,096.40 In support of the aforesaid input VAT, petitioner submitted various suppliers' invoices and official receipts, which were all examined by the Court-commissioned Independent Certified Public Accountant (ICPA), Mr. Clifford E. Chua. In his report dated May 3, 2013, Mr. Chua accounted for petitioner's input VAT claim but in the higher amount of P115,262,920.22 as follows:

Findings

Amount

Exhibit

Third Quarter of Fiscal Year 2010

Purchases with appropriate supporting documents p 56 543,664.46

I to 1-510

Exceptions Noted

Summary of Input VAT on local purchases withoutproper supporting_ documents p 1/618,186.80 1-511 to 1-803 Summary of official receipts where Input VAT on local purchases with supporting documents not containing customer's TIN 46,433.42 1-804 to 1-817 Summary of official receipts where the computation of Input VATon local purchases is erroneous 18,856.27 1-818 to 1-821 Summary of Input VAT outside the period of claim 119,425.63 1-822 to 1-852 Summary of Input VAT amount in words not indicated 126,084.62

I -853 to I -859

Total Exceptions Noted

p 1,928,986.74 Total Input VAT for the 3rd Quarter of FY 2010 PS8,472,651.20

Fourth Quarter of Fiscal Year 2010

Purchases with appropriate supporting documents p 55,292,787.02

J to J-602

Exceptions Noted

Summary of Input VAT on local purchases

J-603 to J-

without proper supporting documents p 1,320,108.09 691 Summary of official receipts where the computation of Input VAT on local purchases is erroneous 6,300.00

J-692

J-693 to J-

Not in the name of the company 49,200.00 694 Summary of Input VAT on local purchases that 14,021.14

J-695 to J-

Exhibit

were disallowed due to noted alterations in the supporting documents Summary of Input VAT outside the period of claim Summary of Input VAT amount in words not indicated

Total Exceptions Noted

Total Input VAT for the 4th Quarter of FY 2010 Total Input VAT for the 3rd & 4th Quarters

of FY 2010

698

J-699 to J-

105,574.27 726

J-727 to J-

2 278.50 730 p 1,497,482.00 P56,790,269.02 ,115,262,920.22 Upon scrutiny of the ICPA's report together with petitioner's supporting documents, the Court finds that aside from the input VAT of P1,928,986.74 and P1,497,482.00 excepted by the ICPA for the third and fourth quarters of FY 2010, the following input taxes in the amounts of P153,232.76 and P29,608.71 for the same taxable quarters, respectively, shall be disallowed for not being properly substantiated by VAT invoices or official receipts in accordance with Sections 110(A) and 113(A) and (B) of the NIRC of 1997, as amended, and as implemented by Sections 4.110-8 and 4.113-1 of RR No. 16-2005, as amended, detailed as follows:

OR/Invoice

Input VAT

No.

Supplier

3rd Quarter 4th Quarter Input VAT on domestic purchases of services supported by documents other than VAT official receipts

I-17

3733/2106

Astron Communication Systems

p 10 232.14 p -

I-18

2057

Astron Communication Systems

71,322.86 -

I-19

2083

Astron Communication Systems

17/830.71 -

I-20

2066

Astron Communication Systems

8,105.36 -

I-22

2106

Astron Communication Systems

1,836.00 -

I-23

2104

Astron Communication Systems

1 260.00 -

PWKOR

I-370

000116951

PLDT

960.00 -

PWKOR

I-371

000116955

PLDT

151.09 -

I-407

1087

Santiago & Sons Metal & Services

6,825.00 -

J-13

2116

Astron Communication Systems

- 5,200.71

J-118

2287

Geotecnica Corporation

- 23 400.00 Subtotal P118,523.16 p 28,600.71 Input VAT on domestic purchases of goods other than capital goods supported by documents other than VAT invoices.

I-24

3734

Astron Communication Systems

p 5,732.14 p -

I-229

I-490

I-508

I-509

I-510

J-411

601

Hexad Sign Specialist

2810

Straight Forward Enterprises

324221

U-Bix Corporation

47701 Wyler Enterprises Inc.

47701 Wyler EnterQrises Inc.

5656 Scuba World, Inc.

830.02 - 520.71 - 972.00 - 8,142.86 - 4,320.00 - - 1,008.00 Subtotal p 20,517.73 p 1,008.00 Input VAT claim is higher than the amount reflected in the official receipt

I-67 to

I-83

118931 First United Travel, Inc.

Input VAT per claim 2,040.00 Input VAT per O.R.

1/320.00

Over-claim

720.00 p 720.00 -

I-175

11510 Full Su_2port Entemrise Input VAT per claim 40,178.57 Input VAT per O.R.

26,974.66

Over-claim

13,203.91 13 203.91 -

I-176

11543

Full Support Enterprise

Input VAT per claim 951.96 Input VAT per O.R.

684.00

Over-claim

267.96 267.96 - Subtotal p 14,191.87 Total Additional Disallowances per this Court's further verification P153,232.76 p 29,608.71 Therefore, out of petitioner's input VAT claim for the third and fourth quarters of FY 2010 in the amount of P115,255,096.40, only the amount of P111,645,786.19 represents petitioner's valid input tax, tabulated herein below:

3rd Quarter 4th Quarter

Total

Input VAT Claimed

p 58,490,679.34 p 56,764,417.06 p 115,255,096.40

Less: Disallowances a) Per ICPA Report

p 1,928,986.74 p 1 497,482.00 p 3,426,468.74 b) Per this Court's 153,232.76 29,608.71 182,841.47 findings p 2,082,219.50 p 1,527,090.71 p 3,609,310.21

Valid Input VAT

P56,408,459.84 PS5,237,326.35 P111,645,786.19 Since petitioner's sales for the third and fourth quarters of FY ending June 30, 2010 were all made to PGPRC, the substantiated input VAT of P111,645,786.19 is entirely attributable thereto. However, as previously stated, petitioner had receipts from lease of,._ land for the same period in the amount of P870,000.00, hence, only the input VAT of P111,579,541.76 can be attributed to petitioner's zero-rated sales of P1,466,325,511.46, computed as follows: 3rd Quarter 4th Quarter

Total

Valid Input VAT

PS6,408,459.84 PSS,237 ,326.35 P111,645,786.19

Allocated to

Zero-Rated Sales

p 755,884,274.58 p 710,441,236.88 P1,466,325,511.46

Lease of Land

435,000.00 435,000.00 870,000.00

Total

p 756,319,274.58 p 710,876,236.88 P1,467,195,511.46

Allocation Factor

Zero-Rated Sales

99.9424846% 99.9388079%

Lease of Land

0.0575154% 0.0611921%

Input VAT Attributable to Zero-Rated Sales

P56,376,016.29 P55,203,525.47 P111,579,541.76 As to whether or not the said input VAT was applied against any output VAT and/or carried over to the succeeding taxable quarter(s), petitioner's Quarterly VAT Returns4 for the subject period of claim showed that petitioner had no output tax liability against which the claimed input VAT may be applied or credited. In addition, petitioner's reported unutilized input taxes for the third and fourth quarters of FY 2010 in the respective amounts of P58,940,679.345 and P56,764,417.066 were deducted as "VAT Refund/TCC claimed" in the Quarterly VAT Returns for the same taxable quarters preventing the carry-over or application of such input taxes in the next taxable quarterjs.

WHEREFORE, petitioner's Motion for Reconsideration of the Decision dated 25 September 2014 is PARTIALLY GRANTED.

Accordingly, the assailed Decision promulgated on September 25, 2014 is hereby AMENDED to read as follows: "WHEREFORE, premises considered, the instant

Petitions

for

Review

are PARTIALLY GRANTED.

Accordingly, respondent is ORDERED TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE in favor of -fz-

petitioner in the amount of P111,579,541.76, representing petitioner's unutilized input VAT attributable to its zero-rated sales for the third and fourth quarters of FY ending June 30, 2010."

WE CONCUR:

~ZC~~~~

fuANrTO C. CASTANED~J'R..

Associate Justice

~ LA.,?~~~~ CAESAR A. CASANOVA AMEiiAR.~COTANGCO-MANALASTAS

Associate Justice

Associate Justice

ATTESTATION

I attest that the conclusions in the above Amended Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. ~~ c.~~c4 .Q tlUANITO C. CASTANEfi'A, JR.

Associate Justice

Chairperson

CfA CASE NOS. 8528 & 8576

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Amended Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.

Presiding Justice