Commissioner of Internal Revenue vs. Aichi Forging Company of Asia, Inc.

DECISION

BAUTISTA, [.:

The Case

Before Us is a Petition for Review1 filed on August 11, 2008, praying for the reversal of:

'Rollo, CTA EB No. 4·16 (C TA Case No. 72TJ), pp. J - 58 with AnnPxes.

cr A EB No. 416 (CT A Case No. 7271)

J.

the Decision dated June 10, 2008 of the Second Division of the Court ("Court in Division") in C.T.A. Case No. 7271, partially granting herein respondent's claim for refund and/ or tax credit certificate in the reduced amount of Three

Million Seven Hundred Ninety Two Thousand Nine

Hundred Seventy ·Pesos

and 77/100 (P3,792,970.77), representing the unutilized input value added taxes ("VAT") attributable to zero-rated sales incurred for the months of April to June 2003; and 2.

the Resolution dated July 22, 2008, denying the "Motion for Partial Reconsideration" of herein petitioner.

Antecedent Facts

As recapitulated by the Ci::ourt in Division, the following facts are

J

undisputed:

"Petitioner2 is duly registered with the Bureau of Internal Revenue as a value-added tax entity, pursuant to Section 107 (now Section 236) of the Tax Code on May 19, 1995. Consequently, it was issued Certificates of Regish·ation, with RDO Control No. 95-570-000481 (BIR Form No. 1556) and OCN IRC 000148499 (BIR Form No. 2303). Petitioner has also registered its products, 'close impression due steel forgings' and ' tool and dies', with the Board of Investments (BOI) as a pioneer status, enjoying the privileges granted by the BOI. As such, it was issued Certificates of Registration Nos. 74-336, DP-92-057 & EP 95- 132 by the Board of Investments. For the period covering April 1, 2003 to June 30, 2003, petitioner allegedly generated and recorded zero-rated sales in the amount of P171,942,121 .15. Said amount was paid to peti tioner in acceptable foreign currency and was inwardly remitted, in accordance with existing ' Herein Respondent.

88 ,I

Cf A El3 No. 416 (Cf A Case No. 7271) regulations of the Cenh·al Bank of the Philippines, pursuant to Section 106 (A) (2) (a) (U (2) and (3) of the Tax Code. Petitioner purportedly incurred and paid VAT input taxes amounting to P5,307,313.37 from domestic purchases of goods, services, capital goods and from importation of goods and capital goods, which were all attributable to its zero rated sales. On June 14, 2005, petitioner filed a claim for refund in the total amount of P5,307,313.37 with respondenV through Revenue District Office 57, San Pedro, Laguna.

For failure of the respondent to act on the request and in order to toll the running of the two-year prescriptive period, on June 21, 2005, petitioner filed the instant Petition for Review. .....

t In her Answer, respondent alleged by way of special and affirmative defenses that:

' Herein Petitioner.

'6.

He reiterates and repleads the preceding paragraphs of this answer as part of his Special and Affirmative Defenses; 7.

Petitioner's alleged claim for refund is subject to administrative i.nvestigation/ examination by the Bureau of Internal Revenue;

8.

Be that as it may, it is imperative for petitioner to prove that it has complied with the following requirements mentioned below, to w it:

(a) The registration requirements of a Value Added Taxpayer ·pursuant to Section 6 (a) & (b) of Revenue Regulations No. 6-97 in relation to Section 4.107-1 (a) of Revenue Regulations No. 7-95.

(b)

That

the

VAT

input taxes of Php5,307,313.37 allegedly paid by petitioner from its importation and purchases of capital goods and other taxable goods and services were attributable to its zero-rated sales and such tax has not been applied against any output tax. (c) That petitioner's claim for tax credit or refund of excess Input Value Added Tax (VAT) was filed within two (2) years after the close of the taxable quarter when the sales were made in accordance with Sechon 4.106-1 (Re: Refunds or Tax Credits of Input Tax) and Section 4.106-2 (Re: Procedures for Clai ming Refunds or Tax

I

I

Cf A EB No. 416 (Cf A Case No. 7271)

Credits of Input Tax) of Revenue Regulations

No. 7-95.

(d) That petitioner's domestic purchases of services were made in the course of its trade or business, properly supported by invoices or receipts and import entry or other equivalent documents showing that it actually paid VAT in pursuance to Section 4.104-5 (a) & (b) of Revenue Reg. No. 7-95. (Re: Substantiation of

I

Claims for Input ~a x Credit). (e) The requirements as enumerated under Section 4.104-2 of the Rev. Reg. 7-95 (Re: Persons who can avail of the Input Tax Credits) (f) That Petitioner has complied with the governing rules and regulations with reference to recovery of tax erroneously or illegally collected as explicitly fow1d in Sections 112 (A) and 229 of the Tax Code as amended.

XXX

XXX.

9.

Furthermore, it is incumbent for petitioner to prove by sufficient evidence that it is entitled to the refund consistent witl1 the well settled principle in taxa tion, that claims for refund are conshued strictly against the claimant as they partake the nature of an exemption from tax and it is incumbent upon petitioner to prove that it is entitled thereto under the law. Failure to prove the same is fatal to its claim for tax refund. Exemptions from taxation are highly disfavored in law and he who claims exemption must be able to justify his claim by the clearest grant of organic or statutory law. An exemption from common burden cannot be permitted to exist upon vague implications (Asia Petroleum Co. vs. Llamas, 49 Phil. 466)' ' Petitioner presented Jesus B. Oliveros, Jr. and Ma. Wencita C. Salvador, as witnesses, and documentary evidence, marked as Exhibits 'A' to 'MM', inclusive of submarkings, which were admitted by the Court, except for Exhibits 'B' and 'P' for failure of petitioner to identify the same during trial and compare the same with their originals. On the other hand, respondent waived her right to present evidence and submitted the case for decision. Thereafter, both parties were ordered to file their simultaneous memoranda, within thirty (30) days from notice. Both parties having complied thereto, the case was deemed submitted for decision on January 18, 2008." 4 (Citations omitted) • Rolin, pp. 29- 32.

I

DECISION

Cl'l\ Ell No. 416 (Cf A Case No. 7271)

PagP 5 of 21

The Ruling of the Court iu Division The following issues were submitted by the parties for resolution by the

Court in Division:

"I

WHETHER

OR

NOT

PETITIONERs

HAS

GENERATED

AND

RECORDED ZERO-RATED SALES AS CONTEMPLATED BY LAW IN

THE AMOUNT OF PHP171,942,121.15 DURING THE PERIOD APRIL 1, 2003 TO JUNE 30, 2003.

II

WHETHER OR NOT THE AMOUNT OF PHP171,942,121.15 WAS PAID FOR TO PETITIONER IN ACCEPTABLE f'OREJGN CURRENCY AND

WAS INWARDLY REMITTED IN ACCORDANCE WITH EXISTING

REGULATIONS OF BSP.

III

WHETHER OR NOT THE PETITIONER INCURRED AND PAID VAT AMOUNTING TO P5,307,313.37 DURING THE PERIOD APRIL 1, 2003 TO JUNE 30, 2003 FROM DOMESTIC PURCHASES OF GOODS, SERVICES AND CAPITAL GOODS, AND FROM IMPORTATION OF GOODS AND CAPITAL GOODS.

I

lV

WHETHER

THE

VAT

PAYMENTS

IN

THE

AMOUNT

OF

PHP5,307,313.37 WERE ATTRIBUTABLE TO THE PETITIONER'S ALLEGED ZERO-RATED SALES OF PHP171,942,121.15. v WHETHER OR NOT THE ALLEGED VAT INPUT TAXES WERE PAID

IN CONNECTION WITH THE TAXPAYER'S TRADE OR BUSINESS

AND WERE DULY SUBSTANTIATED BY VALID RECEIPTS AND/OR

INVOICES IN ACCORDANCE WITH SECTIONS 113 AND 237 OF THE TAX CODE, AS AMENDED.

VI

WHETHER OR NOT THE SAID AMOUNT HAS BEEN APPLIED AGAINST ANY VAT OUTPUT TAX UAl3ILITY OF THE PETITIONER s Herein Respondent.

I

91

CTA EB No. 416 (C fA Case No. 7271)

COVERING THE SAME PERIOD, OR ANY SUCCEEDING PERIOD OR PERIODS.

VII

WHETHER OR NOT PETITIONER IS ENTTTLED TO A REFUND IN

THE

TOTAL

AMOUNT

OF

PHP5,307,313.37

ALLEGEDLY

REPRESENTING VAT INPUT TAXES PAID DURING THE PERIOD

APRIL 1, 2003 TO JUNE 30, 2003.

VIII

WHETHER OR NOT THE ADMINISTRATIVE AND JUDICIAL CLAIMS

FOR TAX REFUND OR ISSUANCE OF TAX CREDIT CERTIFICATE OF

THE PETITIONER WERE FILED

W~HIN THE TWO (2)-YEAR

STATUTORY PERIOD."6 The Court in Division summed up the issues as: whether or not herein respondent is entitled to a refund or issuance of a tax credit certificate in the amount of P5,307.313.37, representing VAT input taxes for the period covering Aprill, 2003 to June 30, 2003.7 It then proceeded to determine whether respondent complied with the four requisites set out in Section 112 (A) of the National Internal Revenue Code of 1997 ("NIRC"), namely: (1) the taxpayer is VAT-registered; (2) the taxpayer is 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 (4) the creditable input tax due or paid must be ath·ibutable to such sales, except the h·ansitional input tax, to the extent that such input tax has not been applied against the output tax. After a careful examination of the evidence, the Court in Division ruled that respondent complied with th~ first three requirements. However, as to the 6 Rollt>, pp. 32 - 34.

7 /d., p. 34.

92

CTA ER No. 416 (CTA Case No. 7271) fourth requirement, it found that some documents and claims of respondent have not been satisfactorily substantiated. The Court in Division excluded several invoices from the total zero-rated sales/receipts, as these invoices were not imprinted with the words "zero-rated." As regards the input VAT for refund, several claims were disallowed because

I

these were outside of the period covered. A number of illegible receipts were also not included. Various sales of services supported by mere invoices were likewise excluded since no official receipts were submitted by respondent. In addition, respondent's claim on its alleged input VAT on capital goods was disallowed as respondent failed to substantiate the same. Since respondent's substantiated input VAT cannot be directly or entirely ath·ibuted to its zero-rated, taxable and exempt sales, the refundable amount of input VAT had to be allocated proportionately to its zero-rated sales on the basis of its volume of sales.

wise:

In view of the foregoing, the Court in Division disposed of the case in this "WHEREFORE, premises considered, the present Petition for Review is PARTIALLY GRANTED. Respondent is hereby ORDERED TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner the reduced amount of THREE MILLION SEVEN HUNDRED

NINETY TWO THOUSAND NINE HUNDRED SEVENTY PESOS

AND 77/100 (P3,792,970.77), representing the unutilized input VAT atb'ibutable to zero-ra ted sales incurred for the months of April to June 2003.

DECISION

0' A EB No. 416 (0' A Case No. 7271)

PageR of 21

On June 30, 2008, herein petitioner filed a "Motion for Partial Reconsideration" 9 to which herein res pondent filed an Opposition.lO On July 22, 2008, the Court in Division denied the "Motion for Partial Reconsideration" for lack of rnerit.11

The Issue

Hence, the instant Petition where petitioner raises the issue of whether or not the Honorable Division erred in holding that respondent is entitled to a refund or issuance of tax credit certificate in the amount of P3,792,970.77.12

Petitioner's Arguments

Petitioner contends that the Court in Division erred in ruling that respondent is entitled to a refund or 1 tax credit for the following reasons: "A.

The Honorable Division failed to discuss and address the arguments of petitioner that respondent filed a pro forma administrative claim for refund that would justify non-entitlement of respondent to the subject claim for refund;

B.

Likewise, the Honorable Division failed to address petitioner's arguments that respondent failed to comply with Section 112 (D) [now (C)] of the 1997 Tax Code, as amended, thus, it adds more reason for the dismissal of the instant judicial claim for refund on the ground of prescription;

C.

Respondent failed to prove compliance with the BOI terms and conditions;

D.

Respondent failed to prove that it had generated zero-rated sales in the amount of P171,942,121.15 during the period 01 April 2003 to 30 June 2003;

• Records, CTA Case No. 7271, pp. 389 - 402. 10 hi., pp. 404- 407.

I

Cf A EB No. 416 (C TA Case No. 7271)

E.

Respondent

also failed to prove that the amount of P171,942,121.15 was paid for in acceptable foreign currency and was inwa rdly remitted in accordance with existing BSP regulations; F.

Respondent failed to substantially prove that it paid VAT in the amount of P3,792,970.77 from domestic p urchases of goods, services and capital goods, and from importa tion of goods and capital goods, and that the same amount were attributable to respondent's alleged zero- rated sales of P171,942,121.15; and G.

Respondent fa iled to discharge its burden of proving entitlement to a refund in all material respec t."J3

Respondent's Counter-Arguments

For its part, respondent counters that the allegations and matters raised by petitioner are mere repetitions, if not reiterations of previously laid down arguments, which have been thoroughly considered and passed upon by the Court in Division in its Decision dated June 10, 2008 and Resolution dated July 22, 2008.

Respondent insists that its adminish·ative and judicial claims were filed within the two (2)-year period. It maintains that it has properly and substantially complied with all the requirements for refund or tax credit and that it has presented documentary and testimonial evidence to support its claim. Regarding the issue of compliance with the terms and conditions of the Board of Investments ("BOI"), respondent points out that it was issued Certificate of Regish·ation No. 74-336, Certificate of Registration No. DP 92-057 and Certificate of Registration Np. EP 95-132 by the BOI. For this reason, respondent claims that it is entitled to the incentives provided for in the Omnibus Inveshnent Code, which includes among others, income tax holiday, "Rollo, p. 9.

I

e r A EB No. 416 (0 A Case No. 7271) additional deduction for labor expense, tax and duty free importation of capital equipment, tax credit on domestic capital equipment, simplified customs procedure, employment of foreign national, unresh·icted use of consigned equipment, access to bonded manufacturing warehouse, exemption from taxes

I

and duties on imported parts on imported equipment, tax credit for taxes and duties on raw materials, exemption from VAT for its export sales, exemption from wharfage dues and any export tax, duty, impost and fees, and unrestricted use of consigned equipment.

The Ruling of tlTe Court En Bane The Petition for Review is bereft of n1.erit. After a careful study of the records and the pleadings submitted by the parties, We find the arguments raised by petitioner w ithout merit. As aptly pointed out by respondent, petitioner's arguments m;e mere reiterations of his previous arguments, which were thoroughly discussed and passed upon by the " ' Court in Division. Nevertheless, in order to clear any lingering doubt on the matter, We shall discuss them hereunder. Respondent's administrative and judicial claims w ere timely filed The fact that the judicial claim for refund was filed by respondent only on June 21, 2005, or barely seven days after it filed its adminish·ative claim for refund on June 14, 2005, does not make the adminish·ative claim pro forma .

I

96

DECISION

c r A FB No. 416 (C f A Case No. 7271)

PagP 11 of 21

A taxpayer-claimant need not wait for the lapse of the 120-day period, provided in Section 112 (D) [now (C)] of the NIRC, as amended,14 before he could seek judicial relief with the Court by way of Petition for Review. Neither is it required that the Commissioner should first act on the claim of a particular taxpayer before the Court may acquire jurisdiction, particularly if the claim is about to prescribe. Hence, a decision of the Commissioner is not a condition or requisite before the taxpayer can resort to the judicial remedy afforded by law.15 Incidentally, a taxpayer cannot be faulted for taking advantage of the full 2-year period set by law for filing his claim for refund for there is no provision in the NTRC requiring the claim for refund to be filed at the earliest instance in order to give the Commissioner an opportunity to rule on it and the Court to review the ruling of the Conunissioner of Internal Revenue on appeal. 16 Thus, when the 2-year pet~iod is about to prescribe and the claim for refund with the Commissioner of Internal Revenue has not been acted upon, for the protection of the interest of the taxpayer, he should file a Petition for Review with this Court within ~he said 2-year period; otherwise, if the decision of the " "SEC 11 2. Refunds or Tax Credits of Input Tax. - (D) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (1 20) days from the dale of submission of complete documents in support of the applica tion filect in accordance with Subsection (A) and (B) hereof.

In case of full or partial denial of the claim for tax refu nd or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expimtion of the one hundred twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals. 15 Commissioner of Internal Revenue v. Mirant Pagbilau Corporation (formerly Southern Energy Quezon, Inc.), CTA. EB No. 251 (CTA Case Nos. 6628 & 6732), May 30, 2007, citing Bm l~ulir~g [DA-489-03] dated December 10, 2003, signed by Deputy Commissioner (Legal nmf Enjorcement Group) jose Mario C 8111/ag. '" Commissioner of Internal Revenue v. Mimnt Pagbilao Corpo 1:ation, supra. note 15, citing Commissio11er of lntemnl Re11enue v. Hitncl1i Computed Products (!\sin) Col]'Ol:ntion, C!\ -C.f< . 51' t\io. 63340, February 7, 2002. 9!

CT A EB No. 416 (CT A Case No. 72~1)

Commissioner is adverse to the taxpayer and it was made after the 2-year period, he can no longer appeal the same to this CourtY In this cmmection, Section 112 (A) of the NIRC, infra, provides that the prescription of claims for excess input VAT is counted from the close of the taxable quarter when the sales were made, which in this case is from June 30, 2003. Considering that respondent filed its adminish·ative claim on June 14, 2005 " and its judicial claim on June 21, 2005, we agree with the ruling of the Court in Division that these claims were filed within the 2-year period.

Respondent

having been registered in accordance with the provtswns of the

Omnibus

Investment Code, is entitled to certain benefits and privileges Records show that respondent was issued the following Certificates of Regish·ation by the BOI: Certificate of Regish·ation No. 74-336 on June 28, 1974 for its closed impression die steel forgings, Certificate of Registration No. DP 92- 057 on April 22, 1992 for its tools and dies, and Certificate of Registration No. EP 95-132 on June 8, 1995 for its closed die impressions and forgings.18 Having been duly registered with the BOI, respondent is en titled to all the incentives provided in the Onmibus Inveshnent Code, within a ten (10)-year period from the date of regish·ation. Hence, for the period of April1, 2003 to June 30, 2003, respondent is entitled to income tax holiday, additional deduction for labor expense, tax credit on domestic capital equipment, sifllplified customs procedure, employment of foreign national, unresh·icted use of consigned equipment, access to bonded 17 Commissioner of Intemal Revenue v. Mirant Pagbilao Corpora tion, supra, note 15, citing Commissioner of lntem al Revemte v. Hitachi Computed Products (Asia) Corporntim1, CA-G.R. SP Nn. 63340, February 7, 2002. ,. Records, p. 253, Exhibit "D." 98

I

DECISION

C r A Ef:l No. 416 (G A Case No. 7271) P~g<" 13 of 21 manufacturing warehouse, exemption from taxes and duties on imported parts on imported equipment, and tax credit for taxes and duties on raw materials under Certificate of Regish·ation No. EP 95 -132.19

I

The contention of petitionar that respondent failed to prove compliance with the terms and conditions of the BOI has no leg to stand on, as there is adequate evidentiary basis to establish that respondent indeed complied with the terms and conditions of the BOI. Respondent's compliance with the terms and conditions of the BOT may be deduced from the Certification dated May 31, 2005 issued by the Department of Trade and Indush·y and the BOI. The Certification states that respondent had regish·ations with the BOI, that it was entitled to several incentives, and that its Certificates of Registration were cancelled on May 5, 2004 in view of its transfer of regish·ation to Philippine Economic Zone Authority ("PEZA"). Had respondent failed to comply with the terms and conditions of the BOI, the Certification would have noted this fact considering that the Certification clearly states that it was issued upon the request of respondent for the purpose of its claim for refund of VAT. 20 Respondent is entitled to a refund or tax credit in the reduced amount of P3, 792,970.77 To validly claim a refund of unutilized input VAT attributable to zero- rated sales, a taxpayer must comply with Section 112 (A) of the NIRC of 1997, as amended, which provides:

'" SIIJ>rn, at note 18.

'" Suprn, at note 18.

99

CT A EB No. 416 (CT A Case No. 7271)

"SEC. 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 exten t that such input tax has not been applied against output tax: xxx" Considering that the timeliness of the filing of respondent's administrative and judicial claims have already been resolved in favor of respondent, the only question left for resolution is whether respondent was able to substantiate its claim for refund or tax credit. Respondent is a VAT-registered entity engaged in zero-rated sales.21 In its Quarterly VAT Return for the second quarter of 2003, respondent declared that it generated and recorded zero-rated export sales m the amount of P171,509,980.39.22 These were mostly export sales to PEZA-registered entities subjected to VAT at 0% rate.23 However, as correctly found by the Court in Division, a total amount of P7,942,138.51 should be disallowed and excluded from the total zero-rated· sales/ receipts as the invoices of these sales failed to comply with the requirements of the law for VAT zero-rating, particularly the imprinting of the words "zero-rated."24 Accordingly, the total amount of zero- rated sales should be reduced to P163,567,841.88.25 In determining the actual amount of input VAT available for refund or tax credit, We fully subscribe to the findings of the Court in Division, to wit: ' ' Rollo, p. 38.

22 /d., p. 42.

21 /d., p. 45.

"Ro/10, pp. 4::\ - 44.

25 /d., p. 51.

DECISION

CTA Ell No. 416 (CT A Case No. 7271)

Page IS of 21

"Substantiation of Input VAT other thau

Capital Goods

After a thorough scrutiny of the evidence on record, the Court finds certain disallowable claims, in addition to the exceptions found by the independent CPA, as they were issued beyond the period covered by petitioner's claim, which will restllt to a discrepancy in the input VAT available for refund, to wit:

utsidt! o the nerio d overed E,'X HIIliTS

COMPANY

lnvoicl• No.

O.R. No.

Datl' of

Date of O R

Total Invoice

Input

..

1 Invoice

Amount

VAT

Y, Y- 1

K Lme Air Sernce

416 42956 3/3/2003 3/3/2003 1100 100 Phils., Inc.

Y-3, Y-4 KLi ne Air Service 448 43102 3/ 12/2003 3/ 12/2003 11 00 100 Phils., Inc.

\'-5, Y-6 KLine A tr Service 49 1 43170 3/26/2003 3/26/2003 11 00 100 Phtls., Inc.

\'-96, Y-97 Ammex M<~ chinc T oo l s 5739 3557 3/3 1/2003 52000 4727.27 Phils.

Y-1 58

Aries Technologies, Inc.

12 1 7/25/2003 88,363.64

Y-159

312 6/25/2003 90000 8181.81

Y- 160

An es Technologtes, Inc.

122 8/ 1/ 2003 156208.25

Y- 161

303 li/ 19/2003 16101 1463.73

Y-162

309 6/23/2003 143000 13000

Y-163

Aries Tech nologies, Inc.

123 8/ 1/ 2003 177123.93

Y- 164

315 6/27/2003 180404 16400.36

I

Y-167

Asia Machine Shop

18592 14<1-1 6/30/2003 8/ 1/ 2003 91602 8327.45

Y-233

Astan T ransmission Corp.

23011i 0710/ 2003 22688.73 \'-234 '11330 11 / 29/ 2001 5416 492.36

Y·235

497 12/ (){l/2002 17272.73 1570.25

Y-236

Assistco Energy & Ind. Corp l h972 6/20/2003 15780

Y-237

18273 3/3 1/2003 15780 1434.55

Y-246

Au trans Phil. Corp 820 no date 93456.05

Y-247

423 3/30/2003 102801.66 9345.61

Y-345

BPI/ MS Insurance Corp

10178()(,2 6/2·1/2003 7/9/2003 262.39 23.85 y -352, y -353 Cairhil l tvletrology Inc.

242 135 6/ 10/2003 7 ( 25/ 2003 13365 12'15

Y-354

CAl International Fo nv c~rd er s 10-1 2/25/2003 3500 318.18 Y-357, Y-358 C <~ rgoh cws. Inc 385107 885575 3/1'/ 2(1(\1 1/ 13/2003 229.46 20.86 Y-359, Y-360 C n gohaus, Inc 39011 9 890335 3/27/2003 3/27/2003 229.35 20.85 y -364, y -365 Ca rgolMus, Inc 385122 88556(, 3/11/2003 3/ 13/ 200.1 413.93 37.63 y -382, y -383 Citsli/lo, Za mora & 9799 250 5/ 19/2003 7/9/2003 14%99 13609 Poblador Law O ffices Z-33, Z-34 Di lL Wo rldwide

LCN121870

42774~ 6/9/ 2003 7/ 4/ 2003 292210.64 26564.6

Express

Z-11 7

Exel Philippines, Inc 8839 3/7/2003 997 90.63

Z- 118

Exel Philippines. Inc 8888 7/ 13/ 2003 997 90.63 Z- 11 9, Z-1 20

FalllOliS Prlciic

l ~ l f' #0 1 6986 41824 3/5/2003 3/6/2003 715 65 Forward ing Ph1ls.

I

Z- 126, Z-127 Femur Phi ls. Corp.

5 1000300 1929 6/20/2003 8/ 1/2003 13750 1250 Z- 137, Z- 138 Filson•cs ELluipment & 11 8 3 1 6/25/2003 9/5/ 2003 12870 11 70

Services Inc

Z- 166

German rech /\s1a 18 10 3/28/ 2003 5/ 16/2003 33000 3000 Pacific, Inc.

Z-204,z-205 G R/\Ilnternational lnc 25933 54144 2/27/200.1 2/28/2003 880 80

Z-243

lntnl Conta iner Terminal Services. Inc. 101786 2/ 28/2003 501.11 45.56

Z-244

lntnl Co ntainer Te rminai SPrvires, Inc. 1 0 1 0~/i 2/28/ 2003 355.03 32.27 101

DECISION

C r A EB No. 416 (G A Case No. 7271) Page 1o of 21

Z-245

lntnl Contc'llnf'r Terminal Services. Inc. Z-293, Z-294 Laguna Internet, Inc.

3ZJ}

Z-303

Liquid Honey, Inc.

1157:l

Z-304

Uqu 1d Honey, Inc.

11 597

Z-305

Liquid Honey, Inc.

11 62 1

Z-306

Liquid Honey, Inc.

11 647

Z-307

Liquid H oney, Inc.

\1662 7-309 Liquid Honey, Inc.

~1 (•71\

Z-3 10

Liquid Honey, Inc.

11690

Z-311

Liqu•d Honey, Inc.

11 709

Z-312

Liquid Honey, Inc.

11 732

Z-3 14

Liquid Honey, Inc.

11 757

Z-315

Liquid Honey, Inc.

11 770

Z-3 16

Liquid Honey. Inc.

11 786 AA-14, AA-

Matsushita Electric

1212139

IS

Phils. Corp

AA-38

Mesco, Inc.

111290

AA-61

Mesco, Inc.

110904

AA-62

Mesco, Inc.

11 0905

AA-63

~ l esco, Inc.

111357 AA-87, AA- MJD & sons, Inc.

4682 88 AA-89, AA- MOF Company, Inc.

15 1910 90

AA-160

PID

4695 CO!llrollers&Conlractors Co rp

AA- 161

PID

4696 Controllers&Co ntractors

Corp

AA-164

PID

4696 Co ntroller~&Contractors

Corp_

AA-206

J~a-Tris General 57

Merchandise

AA-376

Slick Encrg)'

216

Distributors

88-23 Spe~ re man, Inc BB-39, BB-40 Speed way Electronics & " 544

Office Supplies

88-73

Steelworks Industrial

2402

Sales

BB-115, BB- Sun Logistics Tech, Inc.

2048 116 RB-165, 88-

Toyola

2424 166

BB-167

Toyota

BB-181, BB-

Transonenl Container

129534 182

Termmdl Services

88-188 Tri-Link Marketing Co.

2997

SUBTOTAL

1t153-l1R 2/28/2003 2541 231

I 1:<66

6/22/2003 7/2/2003 2707.89 246.1 7 3/ 18/2003 350 31.82 3/19/2003 150 13.64 3/20/2003 200 18.18 3/21/2003 300 27.27 3/22/2003 200 18.18 3/2•1/2003 250 22.73 3/25/2003 250 22.73 3/26/2003 200 18.18 3/27/2003 250 22.73 3/28/2003 250 22.73 3/29/2003 150 13.64 1/31/2003 200 18.18 15227 4/ 1/2003 7/25/2003 9800 890.01 1/23/2003 2336 212.36 1/2/2003 9430 857.27 1/2/2003 18860 1714.55 1n4;2oo3 1658 150.73 I'Y.27 6/20/2003 8/ 1/2003 52900 4809.09 326397 2/2 1/2003 2/24/2003 6751.8 613.8 4176 5/20/2003 2/ 19/2003 54098 4918 4326 5/20/2003 7/ 11 /2003 6688 608 4181 5/20/2003 3/13/2003 3344 304 7/10/2003 3000 272.73 3/31/2003 17290 1571.82 351 7/4/2003 6466.59 587.87 20:<7 ' 7/ l/20!n 7/2/2003 1180 107.27 3/ 10/2003 3405.6 309.6 596 6/0/2003 7/4/2002 23 100 2100 3438 5/26/2001 7/25/2003 11 250 1022.72 97003 7/18/2003 274341 24940.09 83276 3/12/2003 3/12/2003 5110.25 464.56 3/31/2003 22080 2007.27 2336361.03 162,066.37 On the other hand, the Court finds that the following receipts are not legible, such that the Court cannot verify the amounts being claimed: lltwccectablc Receie.ts (not t"cadllb/e-uot raven CTC E.Xllmrrs

CO MPA NY

Invoice No.

O. R. No.

1Jall' of

Date of OR

Total Invoice

Input VAT

Invoice

Amount

Z-218 IO Z-

Integrated Logistics

6610· 4/30/2003 4/30/2003 41 366.71 3760.61 241 Ph1ls. Inc.

6433 2/21/2003 2/21/2003 18362.65 1669.33 6434 3/21/2003 18362.65 1669.33 6466 3/29/2000 18362.65 1669.33 10 2

I

cr A Ell No. 416 (Cf A Case No. 7271)

SUBTOTAL

6478 6566 6551 6641 6667 6749 6753 3/31/2003 4/22/2003 ·4/ 1<1/200:1 5/5/2003 5/<l/2(Xl1 6/4/2003 5/30/2003 52600 4781.82 52600 4781.82 18271.89 1661.27 10939.06 994.46 10939.06 994.46 9827.04 893.37 18422.36 1674.76 24.550.56 While the following sales of service are supported by invoices, in violalion of Section113 of the NTRC of1997, ns nmended: No Official Receipts (Sa le o Services

EXIIIIJITS

COM!' ANY Invoke No.

O.R. No.

Dille of

Oat(' of On

Tota.l Invoice

Input VAT

Invoice

Amount

Y-2

K Line Air Service

607 4/24/2003 1100 100 Phils. lnt:.

Y-363

Cargo llaus 401682 11}-A pr 227.56 20.68

SU8TQTAL

120.68 With regard to the missing documents, as found by the Independent CPA, We adopt her findings during her examination (Annex H.l of the Independent CPA's Report, Exhibit 'LL') based on the evidence presented and the schedule of petitioner submitted to her. However, upon verification, the Court finds that the computation of the total amount is not correct, hence, it i~ hereby recomputed as follows: Na.1ne of V~ndor l nvoi c ~

Date of

No.

Invoice

A!<idn Tcnnir'~<rl ~. Inc.

Aulwn.c; Phil!!., n.no

IR-Jun-m

Cor•.

Aulr.u1 .c; Phil.c; , ll-B l

19-Jun-OJ

Cor'·

Kinf~·s D evl, 57525

Inc

Pn1nc'>'ul lltl D 1tit.,l Sy.c;lcm s, !no.:.

Ro-.ton

9552 1

MiHkclillJj

Co<p.

S1111d vik Philippines, In~..

T OTAL

Substantiation of

Input VAT on Capital Goods

O.R. No.

OaleofO.R.

1115729 flCJSQf

27- Jun- 0~

fiiJR21

27 Jun 0

1072 l (, M ,I)'-0.

Purchase

PUJcha.se Pun· hue of (\mo unt

Input VAT

Tolal lnvoicll!!

of of

Services

Amount

Cll.!'it<tl

Supplies

Good s 5.090 70 22,9-19.50 2.~ 1 95 5,5997R 29,-UinOO fi l ,~C. l 2'\ 2.9-10.(,() 32,l-16.1l5 2~,1) -1 1) 50

IRI R2

2,29-1.95 25,24-1_.18

IR 19

6 / ,C:W )I )() 182 6,601.82

73CLOO

7,751 :n 750() 1,112r..:n ,;,rro ) (,'\ (.4 M<l.OO 7,260.00 ''.420 3..1200 3<12(1} 8 609.32 Moreover, with respect to the claimed input VAT on capital goods amounting to P329,031.42, a careful examination of tho2 records reveals that petitioner failed to present proofs of its purchases of capital goods and the paid input tax on such transactions. Capital guods or properties, as defined in Revenue Regulntions No. 7-95, are' goods Cl nd properties with estimated useful life greater than one year and wl tich are b·eated as depreciable assets under Secti.on 29(/), used directly or indirectly in the production or sale of taxable goods or services." Thus, goods and 103 CfA EB No. 416 (CfA Case No. 7271) properties used by the taxpayer in its VAT-taxable business, subject to depreciation or amortization in accordance with the Tax Code, are considered capital goods. Input VAT on the purchase of such capital goods is creditable against the taxpayer's output VAT. The taxpayer is further given the option to claim refun d of the input VAT on its capital goods, but only to the extent that the said irtput VAT has not been applied to its output VAT.

Conversely, the Court will not allow unsupported claims. Hence, for failure to show proof of substantiation of its claim, We disa llow petitioner's claim on its alleged input VAT paid on capital goods.

R efundable Input VAT The above disallowed claims resulted to a discrepancy in the available input VAT available for refu nd, computed as follows: Input Tax on capital goods Add: Input tax other than capital goods Total Inpu t Tax, per applica tion Less: Total exceptions as found by the Court A. Purchases Other than Capital Goods: Outside of the period covered Unacceptable receipts (fax copy only) No official receipts

Missing ORs/ Invoices

Unlocated Difference per VAT Return &

Schedule of importation B. Purchases of Capital Goods

Unsubstantiated Capital Goods

Substantiated Input Tax

p p 162,066.37 24,550.56 120.68 8,609.32 3,770.00 329,031.42 4 978 281.95 5,307,313.37 199,116.93 329 031.42 ..r..___i,779.165.02 lrtasmuch as petitioner's input tax cannot be directly or entirely attributed to its zero-rated, taxable and exempt sales; the refundable amount of input tax shall be alloca ted proportionately to its zero-rated sales on the basis of its volume of sales, to wit:

Period

Zero-Rated

Exempt

VAT Sales

Total Sa.Jes ·,,, • -~~bstaritiated, ,

Covered

Sales

1\:;.

• ,{;J[ln:'put 'Fi!X'.·. z.

2003

A

B

c

D

E

2nd quarter 163,567,841.88 432,140.76 7,619,710.16 171,619,692.80 4,779,165.02 4,554,941.77 12,034.00 212,189.25 In addition, rela tive to the report of the independent CPA, We agree that in computing the input VAT ava ilable for refund, petitioner 104

I

CrA EB No. 416 (erA Case No. 7271) did not deduct the output VAT for sales subject to VAT in the amount of P761,971.00 (Independent CPA's Report, Exhibit 'LL'). Based on the foregoing, the output tax paya ble must be applied against its substantiated claimed input tax allocated to zero-rated sales, resulting to a refundable input tax of P3,792,970.77 only, computed as follows:

' Total Inpu t tax allocable to zero-rated sales Less: Output Tax that should have been paid

Total Input Tax Available for Refund

p 4,554,941.77 761 971.00 £_____3,792.970.77 Likewise, it is also worthy to note that although petitioner carried- over the claimed input VAT of P5,307,313.37 to the succeeding quarters of 2003, all quarters of 2004 and until the second quarter of 2005, as evidenced by Quarterly VAT Returns for the said taxable periods (Exhibits 'I', '1-1', ']', 'J-1', 'K', 'L','M', 'N','O', nnd 'R'), the same was not applied against any output VAT for the said periods. Moreover, the same was deducted as 'Any VAT Refund/TCC' claimed from the total available input tax of P18,911,940.14, as of the second quarter of 2005. In other words, the subject claim no longer formed part of the excess input VAT of P13,122,121.34, as of the month of July 2005, which was to be carried over/ applied to the succeeding third quarter of 2005. In sum, petitioner has sufficiently proved that it is entitled to a refund or issuance of a tax credit certifica te representing unutilized excess input VAT payments for the period Aprill, 2003 to June 30, 2003, which are attributable to its zero-rated sales for the same period, but in the reduced amow1t of P3,792,970.77." 26 We need not belabor that the question of whether or not the evidence submitted by a party is sufficient to warrant the granting of its prayer lies within the sound discretion and judgment of the Court.27 Thus, in the absence of the Court's abuse or improvident exercise of authority, findings of facts made by the Court in Division, especially if supported by the evidence, must be accorded deference and respect. 28 Such is the situation in the present case. 26 Rollo, pp. 46 - 52.

27 El Greco Shi p Manning and Management Corporation v. Commissioner of Customs, C.T.A. EB No. 172 (C.T.A. Case No. 6618), [\•!arch 14, 2007.

2' Union Refinery Corporation v. Commissionf'r of Customs, C.T.i\ EB NO. 149 (CT. A. Case No. 5917), January 15, 2007. lOS

I

DECISION

CTA EB No. 416 (CTA Cast' No. 7271)

Pnge 20 of 21

All told, We find respondent entitled to a refund or tax credit in the reduced amount of P3,792,970.77. .

WHEREFORE, the instant Petition for Review is hereby DISMISSED. Accordingly, the Decision dated June 10, 2008 and the Resolution dated July 22, 2008 are hereby AFFIRMED.

WE CONCUR:

Q~ Q. o~ ERNESTO D. ACOSTA

I

Presiding Justice

~~~c.

G..rT-a..-:ec6./~ .

JtlANITO C. CASTANEDA, JR.

Associate Justice

E~.UY

Associate Justice

~·

G-et£-~

CAESAR A. CASANOVA

Associate Justice

lOG

OLGA PALANCA-ENRIQUEZ

Associate Justice

..

DECISION

CT A EB No. 416 (CT A Case No. 7271)

Page 2·1 of 21

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the above Decision has been reached in consultation with the members of the Court En Bnnc before the case was assigned to the writer of the opinion of this Court.

107 Q~-k . D~ ERNESTO D. ACOSTA

Presiding Justice